<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997;
REGISTRATION NO. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
NAPRO BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 2833 84-1187753
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
6304 Spine Road, Unit A
Boulder, Colorado 80301
Telephone: (303) 530-3891
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
<TABLE>
<S> <C>
Gordon H. Link, Jr. Copies to:
Chief Financial Officer Francis R. Wheeler, Esq.
6304 Spine Road, Unit A Holme Roberts & Owen LLP
Boulder, Colorado 80301 1700 Lincoln, Suite 4100
Telephone: (303) 530-3891 Denver, Colorado 80203
Telecopier: (303) 530-1296 Telephone: (303) 866-0477
(Name, Address, Including Zip Code, and Telephone Number, Telecopier: (303) 866-0200
Including Area Code, of Agent for Service)
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
__________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Title of each class Proposed maximum Proposed maximum Amount of
of securities to be Amount to be offering price aggregate offering registration fee
registered registered per share price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock par value $.0075/(1)/ 1,000,000 $ 4.9375/(2)/ $4,937,500 $1,456.56
===================================================================================================================
Total 1,000,000 $ 4.9375 $4,937,500 $1,456.56
===================================================================================================================
</TABLE>
(1) Includes (i) up to 675,000 shares of Common Stock to be issued upon
conversion of the Company's Series C Senior Convertible Preferred Stock (the
"Preferred Shares"), (ii) up to 150,000 shares of Common Stock to be issued and
paid in lieu of cash, at the Company's option, as dividends on the Preferred
Shares, 175,000 shares of Common Stock issuable upon the exercise of certain
warrants to purchase Common Stock, and (iv) an indeterminate number of
additional shares of Common Stock as may from time to time become issuable upon
conversion of the Preferred Shares or payment of dividends on the Preferred
Shares, which shares are registered hereunder pursuant to Rule 416 under the
Securities Act.
(2) Estimated solely for purposes of calculating the registration fee, based on
the average of the high and low trading prices for the Common Stock for December
15, 1997, as reported on the Nasdaq Stock Market, pursuant to Rule 457 (c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
<PAGE>
NAPRO BIOTHERAPEUTICS, INC.
1,000,000 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by the person listed herein
under "Selling Stockholder" and "Plan of Distribution" (the "Selling
Stockholder") of a maximum of 1,000,000 shares (collectively, the "Shares") of
common stock, $.0075 par value ("Common Stock"), of NaPro BioTherapeutics, Inc.
(the "Company") consisting of: (i) up to 675,000 shares of Common Stock to be
issued from time to time to the Selling Stockholder upon conversion of the
Company's Series C Senior Convertible Preferred Stock (the "Preferred Shares")
and (ii) up to 175,000 shares of Common Stock to be issued from time to time
upon the exercise of a warrant issued by the Company (the "Warrant") in
connection with the private placement of the Preferred Shares, and (iii) up to
150,000 shares of Common Stock to be issued and paid in lieu of cash, from time
to time and at the Company's option, as dividends on the Preferred Shares. This
Prospectus covers the resale by the Selling Stockholder of up to 1,000,000
Shares, plus, in accordance with Rule 416 under the Securities Act of 1933, as
amended (the "Securities Act"), such presently indeterminate number of
additional Shares as may be issuable upon conversion of the Preferred Shares or
exercise of the Warrant, based upon fluctuations in the conversion price of the
Preferred Shares or exercise price of the Warrant. The Preferred Shares, the
Warrant, and the shares of Common Stock issuable upon conversion have been and
will be issued in transactions exempt from the registration requirements of the
Securities Act. See "Selling Stockholder" and "Plan of Distribution." The
Company will not receive any proceeds from the sale of the Shares covered by
this Prospectus. The Shares are being registered by the Company pursuant to the
terms of a certain Subscription Agreement dated December 8, 1997 by and between
the Company and the individual Selling Stockholder (the "Subscription
Agreement"). See "Selling Stockholder" and "Plan of Distribution."
The sale of the Shares may be effected by the Selling Stockholder from time to
time in transactions on the Nasdaq National Market, in privately negotiated
transactions or in a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing prices or at negotiated prices. The Selling
Stockholder may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they may sell as principals or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Stockholder" and "Plan of Distribution."
The Company has agreed, among other things, to bear certain expenses (other
than fees and expenses of counsel and underwriting discounts and commission and
brokerage commissions and fees) in connection with the registration and sale of
the Shares being offered by the Selling Stockholder. See "Selling Stockholder."
The Common Stock of the Company is quoted on the Nasdaq National Market under
the symbol "NPRO." The last reported sales price of the Company's Common Stock
on the Nasdaq National Market on December 15, 1997 was $4.50 per share.
The Selling Stockholder and any agents, broker-dealers or underwriters that
participate in the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission received by them
and any profit on the resale of the Common Stock purchased by them may be deemed
to be underwriting discounts or commissions under the Act. The Company will not
receive any proceeds from the sale of shares by the Selling Stockholder. The
Company has agreed to indemnify the Selling Stockholder and certain other
persons against certain liabilities, including liabilities under the Act. See
"Selling Stockholder" and "Plan of Distribution."
_______________________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE
PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" STARTING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December __, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information.......................................... 3
Information Incorporated by Reference.......................... 3
Prospectus Summary............................................. 4
Recent Developments............................................ 6
Risk Factors................................................... 7
Use of Proceeds................................................ 18
Selling Stockholder............................................ 18
Plan of Distribution........................................... 19
Legal Matters.................................................. 21
Experts........................................................ 21
NO DEALER, SALESPERSON, OR ANY INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR IN A PROSPECTUS SUPPLEMENT IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDER.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THEREOF. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SHARES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute "forward-looking statements"
within the meaning of the federal securities laws. Such forward-looking
statements may include, among other things, statements concerning the Company's
plans, objectives or future economic prospects, such as matters relative to
availability of raw materials; plant completion and approval; completion of
clinical trials and regulatory filings; prospects for and timing of regulatory
approvals; need for and availability of additional capital; amount and timing of
capital expenditures; timing of product introductions and revenue; prospects for
achieving profitability and other statements of expectations, beliefs, future
plans and strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of the Company to be
materially different from the results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the approval or non-approval of the Paxene/(R)/ NDA, as defined below,
adverse economic and general business conditions; competition from Bristol-Myers
Squibb Company and other existing and new producers of paclitaxel and other
drugs; technological advances relating to cancer treatment and drug development;
ability to obtain rights to technology; ability to obtain taxane-bearing and
other raw materials and scale up manufacturing processes; timing of regulatory
filings relative to those of competitors; effectiveness of commercial
formulations of NBT Paclitaxel (as defined below) in treating disease; results
of research and development activities; business abilities and judgment of
management and other personnel; availability of qualified personnel; changes in
and compliance with governmental regulations; effect of financial market
conditions and other factors on capital availability for the Company and other
biopharmaceutical companies; performance of the Company's strategic partners in
fulfilling obligations under existing agreements; the financial health of the
Company's strategic partners; and other factors discussed under "Risk Factors."
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the public reference
facilities of the Commission's principal office at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the Commission's regional offices at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement under the
Securities Act, with respect to the securities offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits thereto. For further information
with respect to the Company and the securities offered hereby reference is made
to the Registration Statement, including the exhibits thereto, which may be
inspected at, and copies thereof may be obtained at prescribed rates from, the
public reference facilities of the Commission at the addresses set forth above.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission (File No. 0-24320)
and are incorporated in this Prospectus by reference and made a part hereof:
The Company's Annual Report on Form 10-K for the year ended December
31, 1996, as amended by Form 10-K/A filed on June 5, 1997, and Form 10-
K/A2 filed on August 18, 1997; 2. The Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997, as amended by Form 10-Q/A
filed on August 18, 1997; 3. The Company's Current Report on Form 8-K
filed September 19, 1997; 4. The Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997; 5. The Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1997; 6. The
description of the Company's Common Stock included in the Registration
Statement on Form 8-A filed June 17, 1994, as amended on July 27, 1994;
7. The description of the Company's Rights to Purchase Class B Junior
Participating Preferred Stock filed on Form 8-A filed November 26, 1996;
and 8. The Company's Definitive Proxy Statement for its 1997 Annual
Meeting of Stockholders filed May 15, 1997.
All documents filed by the Company following the filing of the Registration
Statement pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act,
after the date of this Prospectus and prior to the termination of the Offering,
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the dates of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon such person's written or oral request, a copy of any and all
of the information that has been incorporated by reference into this Prospectus
(not including exhibits to such information unless such exhibits are
specifically incorporated by reference
3
<PAGE>
into such information). Any such request should be directed to NaPro
BioTherapeutics, Inc., 6304 Spine Road, Unit A, Boulder, Colorado 80301.
Telephone: (303) 530-3891, Attention: Investor Relations.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein. Each
prospective investor is urged to read this Prospectus in its entirety. Special
Note: Certain statements set forth below constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). See "Special Note Regarding Forward-Looking
Statements" on page 2 for additional factors relating to such statements.
THE COMPANY
NaPro BioTherapeutics, Inc. (the "Company") is engaged in the development and
manufacture of paclitaxel (the Company's paclitaxel is referred to herein as
"NBT Paclitaxel"), a naturally occurring cytotoxic agent found in certain
species of yew (Taxus) trees. Bristol-Myers Squibb Company ("BMS") has publicly
announced sales of its formulation of paclitaxel, known as Taxol/(R)//1/, of
approximately $580 million in 1995 and $813 million in 1996. The Company's
strategy is to develop its proprietary extraction, isolation and purification
("EIP/(TM)/") technology in conjunction with proprietary sources of renewable
Taxus biomass to become an established manufacturer of NBT Paclitaxel on a
worldwide basis while partnering with large international pharmaceutical
companies that are responsible for performing clinical trials, filing for
regulatory approvals, and selling, marketing and distributing commercial
formulations of NBT Paclitaxel. To implement this strategy, the Company has
formed strategic alliances through long-term exclusive agreements with each of
F.H. Faulding & Co., Ltd., Australia's largest domestic pharmaceutical company
with 1996 sales of approximately $1.2 billion ("Faulding"), and Baker Norton
Pharmaceuticals, a subsidiary of IVAX Corporation, a diversified international
health care company with 1996 sales of approximately $1.2 billion ("IVAX" and
together with Faulding, the "Strategic Partners"). Under the agreements,
Faulding's territory for the sale of its commercial formulation of NBT
Paclitaxel includes Australia, New Zealand and much of Southeast Asia, and
IVAX's territory includes much of the rest of the world including North America,
Western Europe and Japan.
The Company supplies NBT Paclitaxel to the Strategic Partners who formulate it
into a commercial drug product. IVAX's and Faulding's identical commercial
formulations of NBT Paclitaxel are named Paxene/(R)/ and Anzatax/(TM)/,
respectively. The Strategic Partners have agreed to fund and, with the Company's
input, perform clinical trials and file for regulatory approvals of Paxene/(R)/
and Anzatax/(TM)/ in their respective territories. The Company is responsible
for supplying the Strategic Partners with NBT Paclitaxel for clinical and
commercial purposes. The Company is currently receiving payments from Faulding
and IVAX based on clinical sales and commercial sales in territories where sales
of their respective products have been approved.
Faulding obtained regulatory approval and began marketing Anzatax/(TM)/ as a
pharmaceutical for the treatment of refractory breast and ovarian cancers in
Australia in January 1995, subsequently obtained regulatory approval and began
marketing Anzatax/(TM)/ in China and several countries in the Middle East, and
is seeking approvals to market Anzatax/(TM)/ in other countries in its defined
territory. IVAX currently markets Paxene/(R)/ in two South American countries.
In June 1994, IVAX filed an Investigational New Drug application for Paxene/(R)/
with the United States Food and Drug Administration (the "FDA"). IVAX has
completed pivotal clinical trials of Paxene/(R)/ for three therapeutic
indications, including refractory breast and ovarian cancers and Kaposi's
sarcoma, a cancer typically found in patients with advanced AIDS, and on March
31, 1997, submitted a new drug application (the "Paxene/(R)/ NDA") to the FDA
for Kaposi's sarcoma. BMS submitted a supplemental new drug application (an
"sNDA") for Taxol/(R)/ for the treatment of Kaposi's sarcoma in February 1997,
which was approved by the FDA in August 1997. Such approval resulted in orphan
drug status for the use of Taxol/(R)/ in Kaposi's sarcoma, with the implications
described below in the section entitled "Recent Developments". There can be no
assurance that IVAX will be successful in obtaining any necessary regulatory
approvals or that IVAX will successfully market Paxene/(R)/ even if such
approvals are obtained. See "Risk Factors--Government Regulation; No Assurance
of Regulatory Approval."
- -------------------
/1/ Taxol/(R)/ is a registered trademark of Bristol-Myers Squibb Company for an
anti-cancer pharmaceutical preparation containing paclitaxel.
5
<PAGE>
The Company's EIP/(TM)/ technology is designed to extract, isolate and purify
paclitaxel and other taxanes (compounds structurally similar to paclitaxel that
can be synthesized into paclitaxel) from renewable sources of biomass, such as
needles and limbstock harvested from cultivated yew bushes. In order to have
access to a more consistent and reliable source of Taxus biomass for use in the
production of NBT Paclitaxel, the Company has entered into agreements with,
among others, PRT Biopharms, Inc. ("PRT"), a subsidiary of Pacific Regeneration
Technologies, Inc., one of Canada's largest reforestation companies, and Zelenka
Nursery, Inc. ("Zelenka"), the largest commercial grower of ornamental yew trees
for the horticulture industry in the United States, to grow cloned cultivated
yew trees and bushes on a large scale. The Company is currently constructing a
large-scale commercial EIP/(TM)/ manufacturing facility with planned capacity to
meet the expected commercial needs of the Strategic Partners through 1999. In
addition, in order to increase production yields of NBT Paclitaxel and reduce
manufacturing cost, the Company is developing, and has applied for patent
protection for, a semi-synthetic process for manufacturing NBT Paclitaxel from
certain other taxanes contained in renewable biomass sources. Upon completing
development of this semi-synthetic process, the Company anticipates the filing
of an sNDA for such process. There can be no assurance when or if this sNDA will
be filed, or if filed, whether such sNDA will be approved by the FDA.
The Company was incorporated as a Washington corporation in 1991 and was
reincorporated as a Delaware corporation in 1993. The Company has one material
subsidiary, NaPro BioTherapeutics (Canada), Inc., a British Columbia Company
("NaPro Canada"). All references herein to the "Company" include its
subsidiaries, unless the context requires otherwise.
The Company's principal executive offices are located at 6304 Spine Road, Unit
A, Boulder, Colorado 80301. Its telephone number is (303) 530-3891.
6
<PAGE>
RECENT DEVELOPMENTS
REGULATORY STATUS
At a meeting of the FDA's Oncologic Drugs Advisory Committee (the "ODAC") held
September 19, 1997, the ODAC recommended by a unanimous vote that the
Paxene/(R)/ NDA be approved by the FDA for use "after failure of first-line or
subsequent systemic chemotherapy for the treatment of advanced AIDS-related
Kaposi's sarcoma.'' The FDA often follows the recommendation of its advisory
committees, though it is not bound to do so. There can be no assurance as to
the timing or outcome of the decision of the FDA. If Paxene/(R)/ is approved by
the FDA, the labeled use of Paxene/(R)/ may differ from that recommended by the
ODAC. See "Risk Factors--Potential for Investors to Bear Risk FDA Does Not
Approve the Paxene/(R) / NDA or Delays Action" and "Risk Factors--Government
Regulation; No Assurance of Regulatory Approval."
Under the federal Orphan Drug Act of 1983, as amended, and the regulations
promulgated thereunder (the "Orphan Drug Act"), new drugs developed for the
treatment of rare diseases may receive orphan drug status. Orphan drug status
is granted for new drugs which are intended to treat no more than 200,000 people
per year with a specific indication. The principal benefit of receiving orphan
drug status with respect to a particular drug approval is that upon approval,
the recipient is entitled to be the exclusive marketer in the United States of
the particular product, with respect to the designated disease indication, for
seven years.
Although BMS has been granted orphan drug approval for Taxol/(R)/ for the
treatment of Kaposi's sarcoma, it is possible that IVAX also may be granted
approval for Paxene/(R)/ for Kaposi's sarcoma. The Orphan Drug Act provides
that if another applicant can demonstrate "clinical superiority", as defined in
the Orphan Drug Act, to an approved orphan drug, the second applicant can also
receive FDA approval as an orphan drug for its treatment of the particular
disease. Likewise, a second approval may be granted if there is a definable
subset of the disease for which the drug is effective. The Company believes that
the Paxene/(R)/ NDA contains information demonstrating these differences from
Taxol/(R)/. There can, however, be no assurance that the FDA will conclude that
such differences exist. It is possible that, as a result of the orphan drug
status of BMS's Taxol/(R)/, the Orphan Drug Act will delay, for seven years from
August 4, 1997, approval of the Paxene/(R)/ NDA for the treatment of Kaposi's
sarcoma, even if it is otherwise approvable.
ISSUANCE OF SERIES C SENIOR CONVERTIBLE PREFERRED STOCK
On December 8, 1997, the Company closed a private placement of 5,000 shares of
its Series C Senior Convertible Preferred Stock (the "Preferred Shares"). The
Preferred Shares were sold for $1,000 per share, accrue dividends of $50 per
anum per share (which may be paid, at the option of the Company, in cash or in
shares of Common Stock), and are convertible into Common Stock as follows:
until April 6, 1998, each share of Preferred Stock is convertible at a price per
share (based upon the $1,000 value of each Preferred Share) of $10.00;
thereafter, each Preferred Share, together with accrued and unpaid dividends, is
convertible at a price per share of Common Stock at a discount of 5% from the
market price of the Common Stock computed from selected dates prior to the
conversion. If not converted into shares of Common Stock prior to December 8,
2000, at the Company's option, the Preferred Shares may be redeemed either
7
<PAGE>
for cash or for a Redemption Price Note, issued in the amount of the number of
Preferred Shares then outstanding times the sum of: (a) $1,000 and (b) the
amount of accrued and unpaid dividends (including interest in arrears on such
unpaid dividends). Such Redemption Price Note would bear interest at a rate of
13.75% per annum.
8
<PAGE>
RISK FACTORS
In addition to the other information in this Memorandum, the following factors
should be considered carefully by potential investors in evaluating an
investment in the shares of Common Stock offered hereby. Special Note: Certain
statements set forth below constitute "forward-looking statements" within the
meaning of the federal securities laws. See "Special Note Regarding Forward-
Looking Statements" on page v and vi for additional factors relating to such
statements.
Early Stage of Product Development; Dependence on Paclitaxel. The Company has
a limited relevant operating history upon which an evaluation of its prospects
can be made. Such prospects must be considered in light of the risks, expenses
and difficulties frequently encountered in establishing a business in the
evolving, heavily regulated pharmaceutical industry, which is characterized by
an increasing number of market entrants, intense competition and a high failure
rate. In addition, significant challenges are often encountered in shifting from
development to commercialization of new products. Since its inception, the
Company has devoted its efforts almost entirely to the development and
implementation of its EIP/(TM)/ and semi-synthetic technology processes for
producing NBT Paclitaxel. The Company currently has no other drugs in clinical
trials and has conducted very limited investigation into additional product
possibilities. The Company cannot predict when, if ever, it will identify or
successfully develop any additional product candidates or any additional
products. The Company is exclusively dependent on the sales by the Strategic
Partners of their respective formulations of NBT Paclitaxel for revenue for the
foreseeable future. The Company's production of NBT Paclitaxel continues to be
limited to small-scale production for use by the Strategic Partners for research
and development, use in clinical trials and limited commercial sales. The
Company's future growth and profitability will depend upon, among other things,
the ability of the Company to complete development of its EIP/(TM)/ technology,
develop large-scale commercial manufacturing capacity sufficient to meet the
requirements of the Strategic Partners, operate without infringing on the patent
or proprietary rights of others, obtain regulatory approval for its
manufacturing processes, including using biomass sources other than the bark of
the wild Pacific yew for the production of NBT Paclitaxel, and develop and
obtain regulatory approval for the formulation of its semi-synthetic paclitaxel,
of which there can be no assurance. The Company's growth and profitability is
also dependent on the success of the Strategic Partners in advancing their
respective formulations of NBT Paclitaxel through regulatory processes in the
United States and other countries around the world, and in fostering commercial
acceptance of their formulations of NBT Paclitaxel in the oncological market as
a form of chemotherapy. This will require substantial additional clinical
testing and marketing efforts and the expenditure of significant funds by the
Strategic Partners. Although Anzatax/(TM)/ is currently approved for commercial
sale in Australia, China and several countries in the Middle East and
Paxene/(R)/ is currently approved for commercial sale in two South American
countries, the Strategic Partners have not received regulatory approval in other
countries, including the United States. Such approval from other countries,
including the United States, may or may not be received in the near future.
Clinical testing of the safety and efficacy of new drugs takes several years,
and the time required to commercialize new drugs cannot be predicted with
accuracy. Product development of pharmaceuticals is highly uncertain, and
unanticipated developments, clinical or regulatory delays, unexpected adverse
side effects, inadequate therapeutic efficacy or competitive and technological
developments could slow or prevent the product development efforts of the
Company and the Strategic Partners and have a material adverse effect on the
Company. There can be no assurance that the Strategic Partners' formulations of
NBT Paclitaxel will receive the necessary regulatory approvals, prove safe and
effective, be capable of being produced in commercial quantities at acceptable
cost or be successfully marketed by the Strategic Partners in the oncological
market. The failure of the Strategic Partners' formulations of NBT Paclitaxel to
achieve any of the foregoing would have a material adverse effect on the Company
and could result in the Company being forced to discontinue operations. See
"Risk Factors--Government Regulation; No Assurance of Regulatory Approval."
Dependence on Strategic Alliance Partners. The Company has entered into long-
term agreements with the Strategic Partners pursuant to which the Strategic
Partners have assumed control of the clinical development and commercialization
of their formulations of NBT Paclitaxel in their respective territories,
including conducting clinical trials and preparing and filing regulatory
submissions. The Company is responsible for the manufacture of NBT Paclitaxel
as a pharmaceutical under current good manufacturing practices ("cGMP") to
satisfy the Strategic Partners' clinical and commercial needs. The Company has
limited independent clinical testing and marketing capabilities and experience.
In the event that either of the agreements with the Strategic Partners were to
be terminated, there can be no assurance that the Company would be able to enter
into new, comparable agreements, or establish its own marketing and sales force
to market a commercial formulation of NBT Paclitaxel effectively on a global
basis and compete with BMS
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and others, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Sales of NBT Paclitaxel
to the Strategic Partners constituted substantially all of the Company's revenue
during the year ended December 31, 1996 and the nine months ended September 30,
1997, and the Company expects that sales to the Strategic Partners will continue
to constitute substantially all of the Company's revenue for the foreseeable
future.
There can be no assurance that the Strategic Partners will perform their
respective obligations under these agreements, that they will be successful in
their clinical trials or in receiving the necessary regulatory approvals for
their commercial formulations of NBT Paclitaxel, or that they will be successful
in marketing and distributing their commercial formulations of NBT Paclitaxel if
regulatory approvals are received. The failure of the Strategic Partners to
perform any such obligations or to be successful in marketing their commercial
formulations of NBT Paclitaxel would have a material adverse effect on the
Company. Furthermore, there can be no assurance that business conflicts will
not arise between the Strategic Partners or between the Company and the
Strategic Partners over paclitaxel or non-paclitaxel anti-cancer drugs that may
be produced by the Strategic Partners. In addition, the agreements with the
Strategic Partners are subject to termination under various circumstances.
Faulding may terminate its agreement with the Company upon the occurrence of
certain events, including the following: (i) if Faulding becomes controlled by
a pharmaceutical company that sells paclitaxel in the Faulding territory; (ii)
if the Company becomes controlled by IVAX or BMS; (iii) if the Company is
purchased by a pharmaceutical company which sells paclitaxel in the Faulding
territory and that company refuses to be bound by the terms of the Faulding
agreement; or (iv) if the Company is unable to meet the paclitaxel supply
requirements of Faulding as defined under the agreement. IVAX may terminate its
agreement if the Company materially breaches the agreement. Pursuant to the
agreement, a material breach includes the Company's failure to meet the supply
requirements of IVAX for a continuing three-year period. In addition, if the
Company is unable to meet at least 75% of its supply obligations to IVAX for a
continuing period of 90 days, IVAX may have the right to obtain certain
confidential manufacturing information and to have paclitaxel manufactured by a
third party. Termination of the agreements under certain of the circumstances
set forth above could prevent the Company from selling NBT Paclitaxel in the
Faulding and IVAX territories for two years and three years following
termination, respectively. If either of the Strategic Partners terminates or
breaches its agreement, such termination or breach could have a material adverse
effect on the Company and could result in the Company being forced to
discontinue operations.
Under the agreement with Faulding, the Company is paid a fixed sum for NBT
Paclitaxel supplied for non-commercial uses, and a fixed percentage of
Faulding's sales price for NBT Paclitaxel supplied for commercial use. Title to
the NBT Paclitaxel and risk of loss pass upon shipment by the Company; the sales
are unconditional other than for the failure of product to meet specifications.
The Company recognizes the corresponding revenue at the time of shipment of NBT
Paclitaxel to Faulding, based upon the forecast allocations of sales and
estimated prices submitted by Faulding. Consideration is given to amounts
intended for commercial and non-commercial use. For commercial use sales
calculations, further consideration is given to sales quantities and price by
respective country in the Faulding territory. However, Faulding may or may not
use the NBT Paclitaxel in accordance with the original intent indicated on its
purchase orders. Additionally, Faulding's actual selling price may differ from
the amounts originally budgeted and indicated to the Company. For each year
ended March 31, Faulding reports to the Company the final amount of sales, the
actual end use of product supplied by the Company and the actual sales price per
gram for commercial use sales. The Company calculates an adjustment, which may
either increase or decrease the Company's revenue from sales of products to
Faulding during the prior twelve months. The adjustment is invoiced or remitted
to Faulding. In that both Faulding and the Company share the risks and benefits
of price changes, both Faulding and the Company bear the risk of loss in the
event of a decline in the market value of the goods. Although price adjustments
are outside the control of the Company, management does not expect the
adjustments to be material to the financial statements because the Company uses
a projection prepared by Faulding to price the invoice, the customer has an
absolute contractual obligation to pay the invoice, and historical data have
shown that the estimates have been materially accurate when compared to the
final pricing.
Government Regulation; No Assurance of Regulatory Approval. The research and
development, manufacture, preclinical and clinical testing, distribution and
marketing of pharmaceutical products, including NBT Paclitaxel and formulations
of NBT Paclitaxel, are subject to extensive regulation by numerous governmental
authorities in the United States and other countries. The process of obtaining
regulatory approval by the FDA and other required regulatory approvals is
lengthy, expensive and uncertain. Prior to marketing in the United States,
product candidates, including Paxene/(R)/, must undergo extensive preclinical
and clinical testing to satisfy the FDA that they are safe and efficacious in
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each clinical indication (the specific condition intended to be treated),
dosage, dose schedule and route of administration for which approval for use is
sought. In addition, approval by analogous regulatory authorities in other
countries must be obtained prior to commencing marketing of pharmaceutical
products in those countries. The approval process varies from country to
country and approval for sale in one country may facilitate, but does not
ensure, approval in other countries. Delays in obtaining regulatory approvals
would adversely affect the development, testing and marketing of Paxene/(R)/ and
Anzatax/(TM)/ and the ability of the Company to generate revenue from the sales
of such products. While certain of the Company's employees have some experience
in conducting and managing the preclinical and clinical testing and regulatory
processes necessary to obtain regulatory approval, the Company is relying almost
exclusively on the Strategic Partners to manage the process of taking their
commercial formulations of NBT Paclitaxel through the numerous clinical tests
and regulatory processes necessary to gain approval for use in those countries
that Faulding or IVAX are targeting for commercial sales of Paxene/(R)/ and
Anzatax/(TM)/. There can be no assurance that NBT Paclitaxel, or any other
product candidate developed by the Company, will prove to be safe and effective
in clinical trials or that the Strategic Partners will obtain regulatory
approvals for their commercial formulations of NBT Paclitaxel in a timely
manner, or at all. Even if regulatory clearance is obtained, such commercial
formulations are subject to continual review, and later discovery of previously
unknown defects or failure to comply with the applicable regulatory requirements
may result in restrictions on marketing or withdrawal from the market as well as
possible civil or criminal sanctions.
Before receiving regulatory approval to market Paxene/(R)/ and Anzatax/(TM)/,
the Company and the Strategic Partners will have to demonstrate that Paxene/(R)/
and Anzatax/(TM)/ represent a safe and effective therapy. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent regulatory approvals. In addition, delays or
rejections may be encountered based upon additional government regulation from
future legislation or administrative action or changes in FDA policy during the
period of product development, preclinical and clinical trials, and FDA
regulatory review. If regulatory approval of Paxene/(R)/ and Anzatax/(TM)/ is
granted, such approval will be limited to those disease indications for which
the product is, as demonstrated through clinical studies, safe and effective.
Furthermore, approval may entail ongoing requirements for post-marketing
studies. In order for regulatory approval to be obtained, manufacturers of
therapeutic products sold in the United States are required to satisfy the FDA
that their manufacturing facilities and processes adhere to applicable
standards, including cGMP, and to engage in extensive record-keeping and
reporting. Failure to comply with cGMP regulations may result in restrictions on
Paxene/(R)/'s marketing or manufacture and may result in product seizures,
product recalls or withdrawal of the product from the market. Compliance with
such regulations is costly and requires substantial time and attention.
Following an inspection of the Company's manufacturing facilities in Canada and
the United States by an auditor of the Australian Therapeutic Goods
Administration ("TGA"), Australia's equivalent of the FDA, the TGA issued
approvals to the Company as an Australian cGMP compliant paclitaxel
manufacturer. The Company's current United States manufacturing facilities have
been inspected by the FDA, but there can be no assurance that the Company will
receive approval from the FDA.
The majority of clinical trials performed with NBT Paclitaxel utilized product
manufactured from the Company's inventory of bark from the wild Pacific yew
tree. The Company has, however, included product manufactured from needles and
limbstock harvested from cultivated yew trees and bushes in its Drug Master File
("DMF") which the Company filed in support of the Paxene/(R)/ NDA. Furthermore,
product manufactured from needles and limbstock harvested from the Company's
plantation has been demonstrated to be equivalent to product derived from bark,
and the resulting data have been filed in the Paxene/(R)/ NDA. United States
regulatory approval by the FDA is required to make this change in biomass
source. It has been necessary to demonstrate that paclitaxel extracted from a
different species is equivalent to a reference material which has been
previously characterized and tested. Similarly, the same type of demonstration
will have to be made for NBT Paclitaxel produced using the Company's planned
semi-synthetic manufacturing process. The production of NBT Paclitaxel semi-
synthetically was not submitted for approval in the initial NDA filing. The
Company anticipates that the semi-synthetic process will be included in an sNDA
to be filed after the initial approval of Paxene/(R)/. There can be no
assurance that regulatory approval will be received on a timely basis, if at
all. Failure to receive such approval would have a material adverse effect on
the Company's business, financial condition and results of operations, and could
result in the Company being forced to discontinue operations.
The Orphan Drug Act generally provides incentives to manufacturers to
undertake development and marketing of products to treat relatively rare
diseases or diseases where fewer than 200,000 persons in the United States would
be likely to receive the treatment. A drug that receives orphan drug
designation by the FDA and is the first product to receive FDA marketing
approval for its product claim is entitled to a seven-year exclusive marketing
period in the United
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States for that product claim. A drug that is considered by the FDA to be
different than a particular orphan drug is not barred from sale in the United
States during such seven-year exclusive marketing period. BMS's Taxol/(R)/ has
been granted orphan status for the treatment of Kaposi's sarcoma. IVAX's
Paxene/(R)/ can also receive approval as an orphan drug for Kaposi's sarcoma.
The Orphan Drug Act provides that if another applicant can demonstrate "clinical
superiority", as defined in the Orphan Drug Act, to an approved orphan drug, the
second applicant can also receive FDA approval as an orphan drug for its
treatment of the particular disease. Likewise, a second approval may be granted
if there is a definable subset of the disease for which the second drug is
effective. The Company believes that the Paxene/(R)/ NDA contains information
demonstrating such differences from Taxol/(R)/. There can, however, be no
assurance that the FDA will conclude that such differences exist. It is possible
that, as a result of the orphan status of BMS's Taxol/(R)/, the Orphan Drug Act
will delay, for seven years from August 4, 1997, approval of the Paxene/(R)/
NDA, even if it is otherwise approvable. See "Recent Developments."
The Company is subject to United States laws and regulations applicable to
exporting drugs. On April 26, 1996, the export provisions in the Food, Drug and
Cosmetic Act (the "FDC Act") were amended in Chapter 1A of Title II,
Supplemental Appropriations For The Fiscal Year Ending September 30, 1996, in
the "FDA Export Reform and Enhancement Act of 1996" to authorize the export of a
drug before marketing approval is obtained in the United States, to any country,
if the drug (i) complies with the laws of the importing country and (ii) has
valid marketing authorization by the appropriate authority in a country listed
by the statute, one of which is Australia. The Company has received valid
marketing authorization from Australia. Thus, if the other statutory conditions
are met, the Company believes that future exports from the United States of NBT
Paclitaxel labeled in accordance with the laws of Australia and, for countries
other than Australia, the laws of the importing country, should be permissible
without an FDA permit or other FDA approval, although no such assurance can be
given.
The Company is also subject to, among others, the regulations of Canada, the
Province of British Columbia, the United States Environmental Protection Agency,
the Department of Interior (United States Fish and Wildlife Services and the
Bureau of Land Management), the Department of Agriculture (United States Forest
Service) and other countries and regulatory agencies. Pursuant to the National
Environmental Policy Act, the Company, in connection with the NDA submission,
has prepared an Environmental Assessment that addresses the potential
environmental impacts of the Company's operations. Such Environmental
Assessment includes discussion of the Company's procurement of wild harvested
biomass obtained from the Pacific yew tree which was used in the Company's
production of NBT Paclitaxel. Although the Company ceased harvesting bark in
August 1994, and does not currently utilize the Pacific yew in the manufacture
of NBT Paclitaxel, there can be no assurance that the FDA will find that the
Company's present or past activities do not create a significant impact on the
environment. If the FDA concludes that a significant environmental impact
exists, this finding could lead to a delay in or possibly a bar to regulatory
approval of Paxene/(R)/. The Company is also subject to federal, state and
local laws and regulations governing the use and disposal of hazardous materials
as well as regulations imposed by the Occupational Safety and Health
Administration governing worker safety. There can be no assurance that the
Company is at all times in complete compliance with all such requirements. The
Company has made and will continue to make expenditures to comply with
environmental requirements. Compliance with these regulations is time-consuming
and expensive. The failure to comply with these regulations, however, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The adoption by federal, state, local or foreign governments of significant
new laws or regulations or a change in the interpretation or implementation of
existing laws or regulations relating to environmental or other regulatory
matters, including FDA requirements, could increase the cost of producing NBT
Paclitaxel, delay regulatory approval, preclude continued marketing or otherwise
adversely affect the Company's ability to produce or sell NBT Paclitaxel.
Adverse governmental regulations which might arise from future legislative or
administrative regulations or other actions cannot be predicted. In addition,
the Company's activities have been opposed by the Oregon Natural Resources
Council ("ONRC") because of its concern over wild Pacific yew in old growth
forests. Even though the Company no longer harvests biomass from the bark of
the wild Pacific yew and does not intend to do so in the future, there can be no
assurance that the ONRC and other environmental activist groups will not oppose
other activities of the Company, which may have the effect of delaying or
halting production of NBT Paclitaxel, each of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Limited Product Sales; History of Significant Operating Losses; Anticipated
Future Losses. Since its inception, substantially all of the Company's revenue
has come from sales of NBT Paclitaxel to the Strategic Partners for clinical
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trials and limited commercial sales. The Company has generated only limited
revenue and has incurred significant operating losses, including operating
losses of approximately $6.0 million, $4.3 million and $7.1 million for the
years ended December 31, 1994, 1995 and 1996, respectively, resulting in an
accumulated deficit of $25.5 million as of December 31, 1996. For the nine
months ended September 30, 1997, operating losses were approximately $11.0
million (unaudited) and as of September 30, 1997, the accumulated deficit was
$36.5 million (unaudited). In addition, losses are continuing and will continue
until such time, if ever, that the Company is able to generate sufficient
revenue from sales of NBT Paclitaxel to cover its expense. The Company expects
to incur significant operating losses at least through 1997 and the third
quarter of 1998, if not longer, as the Company scales up its manufacturing
capabilities and develops and secures new sources of biomass to produce NBT
Paclitaxel. Furthermore, the Company's ability to achieve profitability depends
on the ability of the Strategic Partners to obtain required regulatory approvals
in the United States, among other places, and successfully market their
commercial formulations of NBT Paclitaxel as well as to operate in a competitive
environment. The Company's profitability will also depend on its ability to
establish and operate FDA-approved manufacturing facilities that produce NBT
Paclitaxel in sufficient quantities on a timely basis to supply the Strategic
Partners' requirements and to operate without infringing on the patents and
proprietary rights of others. There can be no assurance that any of such events
will occur, that the Company's revenue will increase or that the Company will
ever achieve profitable operations.
Potential Limitations on the Availability of Raw Materials. Through August
1994, the Company harvested bark of the wild Pacific yew tree as the primary raw
material used in the Company's production of NBT Paclitaxel. Harvesting the
bark from Pacific yew trees generally requires cutting down the trees. This
practice has been the subject of environmental controversy between
pharmaceutical companies, governmental agencies regulating public lands and
environmental activist groups due to the prevalence of some wild Pacific yew
trees located in old growth forests which are frequently the habitat of the
spotted owl and other endangered species. As such, there can be no assurance
that the bark of the wild Pacific yew tree will be available for the production
of NBT Paclitaxel in the future. The Company has developed its EIP/(TM)/
technology to extract paclitaxel and other taxanes from non-bark sources of yew
bushes. The use of non-bark sources for paclitaxel may require additional
regulatory approval, of which there can be no assurance. See "Risk Factors--
Government Regulation; No Assurance of Regulatory Approval."
To improve its access to raw materials for the production of NBT Paclitaxel
and to help avoid environmental issues, the Company is implementing a plantation
strategy pursuant to which it grows cultivated yew bushes which it believes may
provide it with a renewable source of biomass. The Company has entered into
agreements with PRT and Zelenka pursuant to which PRT and Zelenka, respectively,
grow and harvest cultivated yew bushes for the Company. The Company also is
supplementing its supply of biomass obtained from PRT and Zelenka by entering
into additional agreements to purchase biomass and mature yew bushes from
commercial growers and, if economical, to develop its own plantations. There
can be no assurance that the Company will be able to enter into additional
agreements on acceptable terms or at all or that the Company will be successful
in developing its own plantations. In addition, there can be no assurance that
the arrangements with PRT and Zelenka will prove successful in supplying biomass
in adequate quantities or of sufficient quality to satisfy the Strategic
Partners' commercial requirements, or that alternate sources of biomass will be
available to the Company, if necessary for its operations, on commercially
reasonable terms, in sufficient quantities. The biomass used for NBT Paclitaxel
may also be difficult to obtain in the future due to many other factors,
including environmental regulation and litigation, geographic location, weather
patterns, scarcity, destruction by insects, vandalism, fire and other natural
disasters. Moreover, yew biomass is subject to a very long product cycle
(between four and five years) between the planting of the yew trees and bushes
and harvesting, and accordingly, mature yew trees and bushes, if destroyed or
damaged, cannot be replaced on a timely basis. The paclitaxel content of the
biomass obtained by the Company may also vary as a result of fluctuations in
temperature, humidity, soil content and age of the biomass source as well as
geographical area. Failure to obtain an adequate supply of quality biomass on a
timely basis would limit or preclude the Company's ability to manufacture NBT
Paclitaxel and would have a material adverse effect on the Company's business,
financial condition and results of operations.
Limited Manufacturing Experience; Dependence on a Commercial-Scale Paclitaxel
Manufacturing Facility; Technological Challenges. Although the Company has
constructed and currently operates small-scale manufacturing facilities in the
United States and Canada, the Company has limited experience in producing NBT
Paclitaxel in large-scale commercial quantities adequate to support sales in a
major market. Since its inception, the Company has produced NBT Paclitaxel only
in quantities necessary for research and clinical trials and limited commercial
sales. The Company does not currently have the facilities necessary to
manufacture NBT Paclitaxel in large-scale commercial
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quantities. The Company is currently in the process of constructing a
large-scale commercial EIP/(TM)/ manufacturing facility in Boulder, Colorado
with the expected capacity to produce a sufficient volume of NBT Paclitaxel to
meet the Strategic Partners' expected needs through 1999. In order to increase
its capacity to manufacture NBT Paclitaxel, the Company is currently developing
a semi-synthetic process. If the Company successfully develops a semi-synthetic
process and receives the required regulatory approvals, the Company intends to
either expand its current facility under construction to accommodate semi-
synthetic manufacturing or construct a separate semi-synthetic manufacturing
facility. There can be no assurance, however, that the proposed large-scale
commercial EIP/(TM)/ manufacturing facility or semi-synthetic manufacturing
facility will be completed, or, if completed, be adequate to supply the
Strategic Partners' commercial long-term needs. In addition, there can be no
assurance that the Company will receive the necessary regulatory approvals for
its manufacturing facilities or processes. The success of the Company's
manufacturing facilities will depend upon its ability to successfully adapt its
EIP/(TM)/ technology for large-scale commercial production of NBT Paclitaxel.
The adaptation of such technologies to accommodate increased production volumes
may result in significant expense and is subject to numerous risks, including
unanticipated problems and delays. There can be no assurance that the Company
will successfully scale up its EIP/(TM)/ technology to large-scale commercial
production on a timely basis, if at all. There also can be no assurance that the
Company will be able to achieve at any facility the product yields and operating
efficiencies necessary to produce NBT Paclitaxel at a competitive cost. The
Company's failure to adapt its technology for large-scale commercial production
and to establish and successfully operate large-scale commercial manufacturing
facilities at a competitive cost would have a material adverse effect on the
Company. In addition, although the Company performs its own procedures for
isolation and purification of paclitaxel and other taxanes, the Company
currently has a contract with a third party for the extraction of crude
paclitaxel and other taxanes from yew biomass. This contract provides for less
capacity than the EIP/(TM)/ facility currently under construction. Accordingly,
to meet the expected increase in demand and to provide for an alternative source
of supply for NBT Paclitaxel if regulatory approvals are obtained, the Company
must either contract out its large-scale extraction requirements or build an
extraction facility. There can be no assurance that such a contract can be
obtained on commercially reasonable terms, if at all, or that an extraction
facility can be constructed in a timely fashion and receive the necessary
regulatory approvals. The failure of the Company to secure a large-scale
extraction contract or to construct a regulatory-approved extraction facility on
a timely basis in order to meet its supply obligations to the Strategic Partners
could have a material adverse effect on the Company.
Rapid Technological Change; Intense Competition. The biopharmaceutical
industry is subject to rapid and significant technological change. The Company
competes with all entities developing and producing therapeutic agents for
cancer treatment or other diseases which may be the subject of future product
development efforts of the Company. These entities include numerous academic and
research organizations and pharmaceutical and biotechnology companies pursuing
production of, among other things, genetically engineered drugs, drugs
manufactured through chemical synthesis and cell-tissue growth, as well as
companies specifically pursuing the production of paclitaxel for commercial sale
from natural product extraction techniques. The Company's competitors may
succeed in developing technologies, products and processes that render the
Company's processes and/or products obsolete or non-competitive and which may
have a material adverse effect on the Company's business, financial condition
and results of operations. Many companies and research institutions are seeking
means to obtain paclitaxel and other taxanes from renewable biomass components
of yew trees and other sources in order to increase potential paclitaxel yields,
avoid environmental concerns and reduce the cost of biomass. Although the
Company has engineered a technology for the extraction, isolation and
purification of NBT Paclitaxel from bark and renewable parts of yew trees and
bushes, the development by others of manufacturing methods for paclitaxel-
containing biomass sources that are significantly less costly than the Company's
could have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, the Company is aware of several potential competitors that have
developed and patented or are developing various processes for producing
paclitaxel and paclitaxel-related substances semi-synthetically and through
other processes and which have resulted or may result in products that are as
effective or more effective than paclitaxel extracted from the bark of yew
trees. Although the Company is currently conducting research to increase
product yield through a semi-synthetic process incorporating its proprietary and
licensed technology, no assurance can be given that technical problems will not
be encountered in developing such technology for clinical or commercial use or
that any semi-synthetic process that may be developed by the Company will not be
deemed to infringe on the proprietary rights of others or will itself be
protectable by patents. In addition, although the Company believes the
production of total synthetic paclitaxel is not currently commercially viable,
the discovery by a third party of a cost-effective means to totally synthesize
paclitaxel in commercial quantities or the manufacture of taxane derivatives or
analogs that are more
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efficacious than NBT Paclitaxel in treating cancer would have a material adverse
effect on the Company's business, financial condition and results of operations.
Moreover, many of these competitors, including BMS which currently dominates the
paclitaxel market, have substantially greater capital resources, research and
development capabilities, manufacturing and marketing resources and experience
than the Company. The Company expects BMS to compete intensely to maintain its
dominance of the paclitaxel market, including through pursuit of an aggressive
patent strategy. The Company's competitors may succeed in obtaining patents
which limit or preclude the Company from producing NBT Paclitaxel or in
developing products that are more effective or less costly than any that may be
developed by the Company, including NBT Paclitaxel, or that gain regulatory
approval prior to, or that are marketed more successfully than, the Company's
products, any of which would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk Factors--
Uncertainty of Protection of Patents and Proprietary Technology; Reliance on
Trade Secrets" and "Risk Factors--Uncertainty Related to Patent Proceedings."
BMS is already marketing paclitaxel commercially in the United States,
Australia, Canada, Europe and certain other territories, and Rhone-Poulenc Rorer
("RPR"), a large multinational pharmaceutical company, has developed a
proprietary analog of paclitaxel called docetaxel, which has a microtubule
binding mechanism of action similar to that of paclitaxel. In May 1996,
docetaxel, which is marketed by RPR under the trademark Taxotere/(R)/, was
approved by the FDA for treatment of anthracycline-resistant breast cancer in
patients without impaired liver function. In addition, upon expiration in
December 1997 of the marketing protection from generic competition currently
afforded to BMS's paclitaxel compound under the 1984 Waxman-Hatch Amendment to
the FDC Act, NBT Paclitaxel, if approved, may be subject to competition from
generic paclitaxel pharmaceuticals in the United States. In Europe, a similar
exclusivity period extends for ten years from approval. The Company is aware
that Yew Tree Pharmaceuticals B.V., a Netherlands company, sells generic
paclitaxel in the Netherlands. Immunex Corporation has received approval to
sell generic paclitaxel in Canada. Mylan Pharmaceuticals, Inc. has entered into
an exclusive licensing agreement with Phytogen International LLC to develop,
manufacture and market generic paclitaxel in the United States, Canada and
Mexico. The success of competitors, including generic manufacturers, in
entering the paclitaxel market may limit or foreclose the Company's market
opportunity.
Uncertainty of Protection of Patents and Proprietary Technology; Reliance on
Trade Secrets. The Company's success depends, in part, on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. Where appropriate, the Company seeks
protection of its proprietary technology by applying for patents in the United
States and abroad. The Company owns several United States patents and has
several United States patent applications pending. The Company has filed patent
applications in certain other areas of the world and expects to make additional
filings as it believes appropriate. In addition, the Company has obtained
licenses from third parties to use their proprietary technology, for which
patent applications have been filed in the United States and in certain other
areas of the world. There can be no assurance that either the Company's or its
licensors' existing patent applications will become issued patents or, if
issued, that the coverage claimed in the applications will not be significantly
reduced prior to issuance, or that the Company will be able to obtain any
necessary or desired additional licenses to patents or technologies of others or
that the Company will be able to develop its own additional patentable
technologies. There can be no assurance that any future patents issued to the
Company, if any, will provide it with competitive advantages or that products or
processes covered by any such patents will not be challenged as infringing upon
the patents or proprietary rights of others, or that any such patents will not
be invalidated, or that the patents or proprietary rights of others will not
have a material adverse effect on the ability of the Company to do business.
Patent applications in the United States are maintained in secrecy until patents
are issued, and patent applications in certain other countries generally are not
published until more than 18 months after they are filed. In addition,
publication of scientific or patent literature often lags behind actual
discoveries. As a result, the Company cannot be certain it, or any of its
licensors, was the first creator of inventions covered by the Company's or its
licensors' pending patent applications or that the Company or its licensors were
the first to file such applications. Furthermore, there can be no assurance
that others will not independently develop similar technology or, if patents are
issued to the Company, that others will not design technology to circumvent the
Company's patents or proprietary rights.
A substantial majority of the Company's proprietary technology is not
protected by patents and is held by the Company as trade secrets, including much
of its EIP/(TM)/ technology. The Company's success will depend in part on its
ability to protect trade secrets for extracting, isolating and purifying
paclitaxel and other technology. The Company
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relies on proprietary know-how and confidential information and employs various
methods, such as entering into confidentiality and non-compete agreements with
its current employees and consultants and with third parties to whom it divulges
proprietary information, to protect the processes, concepts, ideas and
documentation associated with its technologies, including its NBT Paclitaxel
production process. Such methods may afford incomplete protection, and there can
be no assurance that the Company will be able to adequately protect its trade
secrets or that other companies will not acquire or independently develop
information which the Company considers to be proprietary. In addition, if the
Company is unable to fulfill its contractual obligations to IVAX relating to its
supply of NBT Paclitaxel, the Company may, under certain circumstances, be
contractually obligated to disclose proprietary manufacturing information to
IVAX. The inability to maintain its trade secrets for its exclusive use could
have a material adverse effect on the Company.
The patent position of pharmaceutical companies generally is highly uncertain
and involves complex legal and factual questions. Paclitaxel is an
unpatentable, naturally occurring compound. A large number of compositions
containing paclitaxel, as well as processes and other technologies, including
those relating to processing paclitaxel and other taxanes and preparing the drug
for finished formulation and administration, are or may be patented. Certain of
these patents are owned by BMS and RPR, two of the Company's primary
competitors. The Company is aware of competitors and potential competitors who
are pursuing patent protection for various aspects of the extraction,
preparation and production of natural and semi-synthetic paclitaxel. In the
event that the Company's technology, products or activities are deemed to
infringe upon the rights of others, including but not limited to BMS and RPR,
the Company could be subject to damages or enjoined from using such technology,
or the Company could be required to obtain licenses to utilize such technology.
No assurance can be given that any such licenses would be made available on
terms acceptable to the Company, or at all. If the Company were unable to
obtain such licenses, it could encounter significant delays in product market
introductions while it attempted to design around the patents or rights
infringed upon, or could find the development, manufacture or sale of products
requiring such licenses to be foreclosed. In addition, the Company could
experience a loss of revenue and may incur substantial cost in defending itself
and indemnifying the Strategic Partners in patent infringement or proprietary
rights violation actions brought against it or either of the Strategic Partners.
The Company could also incur substantial cost in the event it finds it necessary
to assert claims against third parties to prevent the infringement of its
patents and proprietary rights by others. Participation in such infringement
proceedings could have a material adverse effect on the Company, even if the
eventual outcome were favorable.
Uncertainty Related to Patent Proceedings. On May 14, 1997, BMS was issued a
European Patent. The claims of this European Patent relate to certain methods
of treatment with paclitaxel. On the same day, the Company instituted
revocation proceedings in the United Kingdom against this European Patent as
issued in the U.K. and a separate but related British Patent also owned by BMS.
On November 26, 1997, the Company and Baker Norton Pharmaceuticals, a subsidiary
of IVAX were served with a writ, alleging infringement of these U.K. patents.
the Company has been advised by counsel in the U.K. that it is likely that the
revocation and infringement actions will be consolidated and tried in May of
1998. Because of the early stage of the revocation proceedings, and issues
regarding the scope and validity of these patents, the Company cannot assess the
impact which these patents may have on the Company's business. If such patents
are upheld, and either the Company or IVAX is determined to infringe such
patents, such events may have a material adverse impact on the Company.
In September 1993 and August 1994, BMS received two Australian petty patents
claiming certain methods of administering paclitaxel. Australian petty patents
have a maximum term of six years, are allowed to contain only three claims (one
independent and two dependent) and are granted on the basis of a prior art
search which is significantly more limited in scope than the searches done prior
to issuance of standard patents. Following publication of these patents,
Faulding instituted legal action to revoke these patents on the grounds that the
patent claims are invalid and that the subject matter claimed in the patents was
already known prior to the claimed date of invention. In February 1995, BMS
brought legal action against Faulding seeking an injunction to prevent Faulding
from marketing NBT Paclitaxel pursuant to Faulding's generic approval. In March
1995, the Australian court denied BMS's request to enjoin Faulding from
marketing Anzatax/(TM)/. The Company has been advised by Faulding that the legal
actions brought by Faulding and BMS have been joined. Thus, BMS's claims will
likely be resolved in conjunction with Faulding's revocation action. No
assurance can be given, however, as to when this matter will be resolved, or
that BMS will not obtain an injunction against Faulding which could prevent
Faulding from marketing Anzatax/(TM)/ in Australia. If
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<PAGE>
Faulding were prevented from marketing Anzatax/(TM)/ in Australia pursuant to
its generic approval, Faulding would be unable to market Anzatax/(TM)/ for
commercial sale in Australia until such time as Faulding obtains its own non-
generic approval which would require substantial clinical trials and a lengthy
regulatory approval process. There can be no assurance that Faulding would be
able to obtain its own non-generic approval in such circumstances. If BMS is
successful in enforcing its patent claims against Faulding such that Faulding is
unable to sell Anzatax/(TM)/ in Australia, such a result could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company has received a South African patent relating to a paclitaxel
formulation. In 1997, Yew Tree Pharmaceuticals B.V., a Netherlands company,
filed an action in South Africa opposing such patent. Because of the early
stage of the proceedings, the Company cannot assess the impact which such action
may have on the Company's business.
Uncertain Efficacy of Paclitaxel; Adverse Side Effects Associated With Use of
Paclitaxel. Paclitaxel is not considered to be a long-term cure for cancer.
Safety and efficacy trials completed by BMS, however, have demonstrated to the
satisfaction of the FDA that paclitaxel is efficacious in treating refractory
ovarian and breast cancers in accordance with their guidelines. The Company
understands that other clinical trials have indicated that paclitaxel,
individually and in combination with other chemotherapeutic agents, may be
effective in treating other forms of cancer. Such trials are ongoing, however,
and, accordingly, there is no conclusive evidence of paclitaxel's effectiveness
in treating other forms of cancer. It may take several years to obtain the
final results of such trials, and there can be no assurance that paclitaxel will
demonstrate efficacy as a broad-spectrum anti-cancer agent or that it will prove
to be more efficacious than other chemotherapeutic agents as a single agent
therapy in treating any form of cancer. Like chemotherapy agents in general,
the present formulation for administering paclitaxel is believed to cause
adverse side effects, which, in some patients, are extensive. These side
effects include hypersensitivity (allergic) reactions, which require the use of
various premedications to minimize the side effects. In addition, paclitaxel
has been shown to produce peripheral neuropathy (loss of sensation or pain and
tingling in the extremities) and neutropenia (low white blood cell counts)
which, as a result, may limit its use in certain cases. There can be no
assurance that such side effects or other unintended and/or toxic side effects
will not adversely affect the ability of the Strategic Partners to obtain
regulatory approval for, or to market their commercial formulations of, NBT
Paclitaxel.
Future Capital Needs; Uncertainty of Additional Funding. The Company has
incurred negative earnings and cash flow from operations since its inception.
Substantial expenditures will be required to enable the Company to scale-up its
manufacturing capabilities, acquire biomass and continue its research and
development activities. The Company anticipates a significant increase in
capital expenditures and operations if the Paxene/(R)/ NDA is approved. The
Company's actual future capital needs will also depend upon many factors,
including the cost and progress of its process and technology development
activities, the cost and success of the Company's plantation strategy, the
progress of the Strategic Partners' clinical development in their commercial
formulation of NBT Paclitaxel, the timing and receipt of regulatory approvals,
the cost involved in preparing, filing, prosecuting, maintaining, enforcing and
defending patent claims and other intellectual property rights, developments
related to regulatory and reimbursement matters, competing technological and
market developments, changes in or terminations of existing strategic alliances
and the cost, timing and success of manufacturing scale-up, including
construction of a large-scale commercial EIP/(TM)/ manufacturing facility.
Depending on the factors described above, the Company may need to raise
substantial additional funds. If additional funds are raised by issuing equity
securities, further dilution to stockholders will result. Debt financing, if
available, may involve restrictive covenants. If adequate funds are not
available, the Company may obtain funds through arrangements with strategic
partners or others that may require the Company to relinquish rights to certain
of its technologies, any one of which could have a material adverse effect on
the Company's operations. The failure of the Company to raise capital when
needed would have a material adverse effect on the Company's business, financial
condition and results of operations, and could result in the Company being
forced to reduce or discontinue its operations.
Reliance on Foreign Sales. For the year ended December 31, 1996, sales of
commercial formulations of NBT Paclitaxel into foreign markets accounted for
approximately 72% of the Company's revenue. The Company anticipates that a
significant portion of its revenue will continue to be derived from sales of its
products in foreign markets until such time, if ever, as approval for commercial
sale of Paxene/(R)/ in the United States has been received. A substantial
portion of the Company's revenue and operations will thus continue to be subject
to the risks associated with foreign business,
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<PAGE>
including economic or political instability, shipping delays, changes in foreign
regulatory laws governing the sale of drugs, fluctuations in foreign currency
exchange rates and various trade restrictions, all of which could have a
significant impact on the Company's ability to deliver products on a competitive
and timely basis. Future imposition of, or significant increases in, the level
of customs duties, export quotas, drug regulatory restrictions or other
regulatory or trade restrictions could have a material adverse effect on the
Company.
Uncertainty of Third-Party Reimbursement. There is significant national
concern today about the availability and rising cost of health care in the
United States. It is anticipated that new federal and/or state legislation will
be proposed to attempt to provide broader and better health care and to manage
and contain its cost. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted or the effect such proposals
may have on its business, the pendency or adoption of such proposals could have
a material adverse effect on the Company, including its ability to raise
capital, or on the market value of the Common Stock.
In both domestic and foreign markets, sales of the Company's product
candidates will depend in part on the availability of reimbursement from third-
party payors, such as government health administration authorities, private
health insurers and other organizations. Third-party payors are increasingly
challenging the price and cost-effectiveness of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products. There can be no assurance that either Paxene/(R)/ or
Anzatax/(TM)/ will be considered cost-effective or that adequate third-party
reimbursement will be available to enable the Company to maintain price levels
sufficient to realize an appropriate return on its investment in product
development. Failure to achieve sufficient price levels for such commercial
versions of NBT Paclitaxel would have a material adverse effect on the Company's
business, results of operations and financial condition. Legislation and
regulations affecting the pricing of pharmaceuticals may change before
Paxene/(R)/ is approved for marketing. Adoption of such legislation or
regulations could further limit reimbursement for medical products and services.
Risk of Product Liability; Limited Insurance. The Company's business exposes
it to potential product liability risks which are inherent in the testing,
manufacturing, marketing and sale of therapeutic products. While the Company
will continue to take precautions it deems appropriate, there can be no
assurance that it will be able to avoid significant product liability exposure.
Pursuant to the agreements with the Strategic Partners, the Company is required
to indemnify the Strategic Partners for any defect in the NBT Paclitaxel that is
shipped to Faulding or IVAX. Under such agreements, the Company will be
indemnified by the Strategic Partners against certain product liability claims
brought against the Company to the extent such liability is a result of actions
by the Strategic Partners once they receive NBT Paclitaxel from the Company.
The Company currently maintains product liability insurance in the amount of
$5.0 million per policy year. Product liability insurance for the
pharmaceutical industry, however, generally is expensive, to the extent it is
available at all. There can be no assurance that the Company will be able to
maintain such insurance on acceptable terms, that it will be able to secure
increased coverage as the commercial approval process for NBT Paclitaxel
progresses or that its insurance policy will provide adequate protection against
potential claims. A successful claim brought against the Company in excess of
the Company's insurance coverage or a product recall could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Dependence on Management and Key Personnel; Ability to Manage Growth. The
Company is highly dependent upon the services of its senior executives and
certain key scientific personnel, particularly its Chairman, Leonard P. Shaykin,
and its President and Chief Executive Officer, Sterling K. Ainsworth. The
Company maintains a key-man life insurance policy on the life of Dr. Ainsworth
in the amount of $3.0 million. Although the Company has entered into employment
contracts with Mr. Shaykin, Dr. Ainsworth and Dr. Patricia A. Pilia, the
Company's Vice President, BioResearch and Toxicology (collectively, the "Senior
Executives"), which expire in June 1998 (collectively, the "Executive
Agreements"), the loss of the services of any of the Senior Executives or other
of the Company's key employees could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
Mr. Shaykin serves the Company on a part-time basis and has obligations which
could divert his attention from the Company's affairs to the Company's
detriment. The Company's move to large-scale commercial operations will depend
upon, among other things, the successful recruiting of highly skilled managerial
and technical personnel with experience in business activities such as those
contemplated by the Company. Although the Company has hired a number of
individuals whom the Company believes have the requisite skills and experience
to allow the Company to expand its operations to a commercial scale, competition
for the type of highly skilled individuals required by the Company is intense
among pharmaceutical companies, health care companies, government agencies,
academic institutions and other
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organizations. There can be no assurance that the Company will be able to retain
existing employees or that it will be able to find, attract and retain other
skilled personnel on acceptable terms to help the Company manage its growth.
Continuing Control by Existing Stockholders; Conflict of Interest. The
Company's executive officers and directors beneficially own approximately 22% of
the Common Stock. In addition, IVAX, one of the Strategic Partners,
beneficially owns approximately 9% of the Common Stock. In the event that such
stockholders were to act in concert with respect to the Company's operations,
they would be in a position to substantially influence the affairs of the
Company. In addition, Richard C. Pfenniger, Jr., a director of the Company,
formerly served as President of the IVAX Health Care Group. There can be no
assurance that conflicts of interest will not arise with respect to the
foregoing or that such conflicts will be resolved in a manner favorable to the
Company. See "Risk Factors--Dependence on Strategic Alliance Partners."
Anti-Takeover Considerations; Authorization of Preferred Stock. Certain
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation"), Bylaws (the "Bylaws") and Section 203 of
the Delaware General Corporation Law (the "DGCL") could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. The Company's board of directors, without further stockholder
approval, may issue blank check preferred stock that could have the effect of
delaying or preventing a rapid change in control of the Company as well as
adversely affecting the voting power of the holders of Common Stock, including
the loss of voting control to others. In addition, the Certificate of
Incorporation and Bylaws provide for a classified board of directors consisting
of three classes of directors serving staggered terms. The Company's directors
may be removed only for cause by stockholders holding not less than 80% of the
shares entitled to elect the director or directors whose removal is sought.
The Company has adopted a stockholder rights plan having both "flip-in" and
"flip-over" provisions. Existing stockholders as of November 26, 1996 received
the right (a "Right") to purchase a fractional share of preferred stock at a
purchase price of $60 for each share of Common Stock held. In addition, until
the Rights become exercisable as described below and in certain limited
circumstances thereafter, the Company has issued and will issue one Right for
each share of Common Stock issued after November 26, 1996. For the "flip-in
provision," the Rights would become exercisable only if a person or group
acquires beneficial ownership of 20% (the "Threshold Percentage") or more of the
outstanding Common Stock. In that event, all holders of Rights other than the
person or group who acquired the Threshold Percentage would be entitled to
purchase shares of Common Stock at a substantial discount to the then current
market price. This right to purchase Common Stock at a discount would be
triggered as of a specified number of days following the passing of the
Threshold Percentage. For the "flip-over" provision, if the Company was
acquired in a merger or other business combination or transaction, the holders
of such Rights would be entitled to purchase shares of the acquiror's common
stock at a substantial discount.
In addition, the Executive Agreements provide for continuation of salary and
other benefits in the event employment is terminated under certain
circumstances, including a change of control of the Company. Furthermore, in
connection with its equity investment in the Company, IVAX agreed that for a
period ending in June 2000, neither it nor any affiliate will, without the
approval of a majority of disinterested directors, among other things: (i)
acquire, in the aggregate, more than 20% of the Common Stock, (ii) seek control
of the board of directors, or (iii) propose an acquisition of all or
substantially all of the Company's assets, a merger or other business
combination, or a tender offer for the Common Stock.
Dilution. The current market price for the Common Stock is substantially
higher than the current adjusted net tangible book value per share of Common
Stock. Therefore, investors purchasing Shares (at the current tangible net book
value and at current market prices) will incur immediate and substantial
dilution.
Absence of Dividends. The Company has never paid cash dividends on its Common
Stock. It is the Company's intention to retain earnings, if any, to finance the
operation and expansion of its business and, therefore, it does not expect to
pay cash dividends in the foreseeable future. In addition, future credit
facilities may restrict dividend payments.
Volatility of Stock Price. The market price of the Common Stock has been, and
will likely continue to be, volatile. Factors such as the approval or non-
approval of the Paxene/(R)/ NDA, the Company's financial results, introduction
of new products by the Company or its competitors, results of clinical trials,
government regulations, changes in reimbursement
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<PAGE>
policies, developments in patent and other proprietary rights, developments in
the Company's relationships with the Strategic Partners, public concern as to
the safety and efficacy of paclitaxel and various factors affecting the
biotechnology or pharmaceutical industries generally, may have a significant
impact on the market price of the Common Stock. Additionally, in recent years,
the stock market has experienced a high level of price and volume volatility and
market prices for the stock of many companies have experienced wide price
fluctuations which have not necessarily been related to the operating
performance of such companies. An increase in the number of shares of Common
Stock that may become available for sale in the public market may adversely
affect the market price prevailing from time to time of the Common Stock in the
public market and could impair the Company's ability to raise additional capital
through the sale of its equity securities.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholder.
SELLING STOCKHOLDER
The Shares being offered hereby by the Selling Stockholder may be acquired
from time to time, upon: (i) the conversion of the Preferred Shares, which were
acquired from the Company in a private placement transaction pursuant to a
Subscription Agreement, dated as of December 8, 1997 (the "Subscription
Agreement"), (ii) upon the payment of dividends on the Preferred Shares by the
Company, and (iii) exercise of Warrants granted to the Selling Stockholder in
connection with the private placement. This Prospectus covers the resale by the
Selling Stockholder of up to 1,000,000 Shares, plus, in accordance with Rule 416
under the Securities Act, such presently indeterminate number of additional
Shares as may be issuable upon conversion of the Preferred Shares or payment of
dividends on the Preferred Shares, based upon fluctuations in the conversion
price of the Preferred Shares.
The Preferred Stock quarterly accrues dividends in the amount of 5% per annum.
The Preferred Shares are convertible into Common Stock as follows: during the
period from the December 9, 1997 to April 6, 1998, the Preferred Shares,
together with accrued and unpaid dividends, may be converted into Common Stock
at a conversion price of $10 per share (based upon the $1,000 value of each
Preferred Share). Thereafter, each Preferred Share, together with accrued and
unpaid dividends, is convertible at a price per share of Common Stock at a
discount of 5% from the market price of the Common Stock computed from selected
dates prior to the conversion. Pursuant to the terms of the Certificate of
Designations for the Preferred Shares, no holder can convert such holder's
Preferred Shares if such conversion would cause its beneficial ownership of
Common Stock (other than shares so owned through ownership of the Preferred
Shares) to exceed 4.9%. If not converted into shares of Common Stock prior to
December 8, 2000, at the Company's option, the Preferred Shares may be redeemed
for a Redemption Price Note, issued in the amount of the number of Preferred
Shares then outstanding times the sum of: (a) $1,000 and (b) the amount of
accrued and unpaid dividends (including interest in arrears on such unpaid
dividends). Such Redemption Price Note would bear interest at a rate of 13.75%
per annum.
Pursuant to the Subscription Agreement, the Selling Stockholder has
represented that it acquired the Preferred Shares for investment and with no
present intention of distributing the Preferred Shares. The Company agreed, in
such Subscription Agreement, to prepare and file a registration statement as
soon as practicable and to bear all expenses other than fees and expenses of
counsel for the Selling Stockholder and underwriting discounts and commissions
and brokerage commissions and fees. In addition, and in recognition of the fact
that the Selling Stockholder, even though purchasing the Preferred Shares
without a view to distribution, may wish to be legally permitted to sell the
Shares received upon conversion of such Preferred Shares when it deems
appropriate, the Company filed with the Commission a Registration Statement on
Form S-3, of which this Prospectus forms a part, with respect to, among other
things, the resale of the Shares from time to time at prevailing prices in the
over-the-counter market or in privately-negotiated transactions and has agreed
to prepare and file such amendments and supplements to the Registration
Statement as may be necessary to keep the Registration Statement effective until
all Shares offered hereby have been sold pursuant thereto or until such Shares
are no longer, by reason of Rule 144(k) under the Securities Act or any other
rule of similar effect, required to be registered for the sale thereof by the
Selling Stockholder.
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The Selling Stockholder has had no material relationship with the Company
within the past three years except as a result of the ownership of the Shares or
other securities of the Company.
The following table sets forth the name of the Selling Stockholder, the number
of shares of Common Stock owned beneficially by the Selling Stockholder as of
December 8, 1997 and the number of shares which may be offered pursuant to this
Prospectus. The number of Shares shown in the table as being offered by the
Selling Stockholders does not include such presently indeterminate number of
shares of Common Stock as may be issuable upon conversion of the Preferred
Shares or payment of dividends on the Preferred Shares pursuant to the
provisions thereof regarding determination of the applicable conversion price
but which shares are, in accordance with Rule 416 under the Securities Act,
included in the Registration Statement of which this Prospectus forms a part.
This information is based upon information provided by the Selling Stockholder.
There are currently no agreements, arrangements or understandings with respect
to the sale of any of the Shares. The Shares are being registered to permit
public secondary trading of the Shares, and the Selling Stockholder may offer
the Shares for resale from time to time.
<TABLE>
<CAPTION>
Number of Shares Owned Number of Shares Number of Shares Owned
Name Prior to the Offering Offered Herein After the Offering
---- ---------------------- -------------- ----------------------
<S> <C> <C> <C>
Advantage Fund II, Ltd. 0 1,000,000* 0
</TABLE>
* Includes (i) 150,000 shares of Common Stock issuable by the Company as
dividends on the Preferred Shares and (ii) Warrants to purchase 175,000 shares
of Common Stock both amounts offered hereby on behalf of the Selling
Stockholder.
The Selling Stockholder has had no material relationship with the Company
during the last three years.
PLAN OF DISTRIBUTION
The Shares offered hereunder may be offered and sold from time to time by the
Selling Stockholder, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market or in the over-
the-counter market or otherwise, at prices and on terms then prevailing or
related to the then-current market price, or in negotiated transactions. The
Shares may be sold to or through one or more of the following methods,
including, without limitation, broker-dealers, acting as agent or principal, in
underwritten offerings, block trades, agency placements, exchange distributions,
brokerage transactions or otherwise, or in any combination of transactions.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Company's Common Stock for a period
of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of Common Stock
by the Selling Stockholder.
At the time a particular offer of Shares is made, to the extent required, a
supplemental prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by an
underwriter for the Shares purchased from the Selling Stockholder and any
discounts, concessions or commissions allowed or reallowed or paid to dealers.
In connection with any transaction involving the Shares, broker-dealers or
others may receive from the Selling Stockholder, and/or the purchasers of the
Shares for whom such broker-dealers act as agents or to whom they may sell as
principals or both, compensation in the form of discounts, concessions or
commissions in amounts to be negotiated at the time (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
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Broker-dealers and any other persons participating in a distribution of the
Shares may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such discounts, concessions or
commissions may be deemed to be underwriting discounts or commissions under the
Act. From time to time, the Selling Stockholder may pledge, hypothecate or grant
a security interest in some or all of the Shares owned by them, and the
pledgees, secured parties or persons to whom such securities have been
hypothecated shall, upon foreclosure in the event of default, be deemed to be
Selling Stockholders hereunder. In addition, the Selling Stockholder may, from
time to time, sell short the Common Stock of the Company, and in such instances,
this Prospectus may be delivered in connection with such short sales and the
Shares offered hereby may be used to cover such short sales.
Any or all of the sales or other transactions involving the Shares described
above, whether effected by the Selling Stockholder, any broker-dealer or others,
may be made pursuant to this Prospectus. In addition, any Shares that qualify
for sale pursuant to Rule 144 under the Act may be sold under Rule 144 rather
than pursuant to this Prospectus. The Selling Stockholder's Shares may also be
offered in one or more underwritten offerings, on a firm commitment or best
efforts basis. The Company will receive no proceeds from the sale of the
Selling Stockholder's Shares by the Selling Stockholder. The Shares may be sold
from time to time in one or more transactions at a fixed offering price, which
may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the Selling Stockholder or
by agreement between the Selling Stockholder and its underwriters, dealers,
brokers or agents.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholder's Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the Shares may receive compensation
in the form of underwriting discounts, concessions, commissions or fees from a
Selling Stockholder and/or purchasers of Selling Stockholder's Shares, for whom
they may act. In addition, sellers of Selling Stockholder's Shares may be
deemed to be underwriters under the Securities Act and any profits on the sale
of Selling Stockholder's Shares by them may be deemed to be discount commissions
under the Securities Act. The Selling Stockholder may have other business
relationships with the Company and its subsidiaries or affiliates in the
ordinary course of business.
From time to time the Selling Stockholder may transfer, pledge, donate or
assign Selling Stockholder's Shares to lenders, family members and others and
each of such persons will be deemed to be a "Selling Stockholder" for purposes
of this Prospectus. The number of Selling Stockholder's Shares beneficially
owned by the Selling Stockholder who so transfer, pledge, donate or assign
Selling Stockholder's Shares will decrease as and when they take such actions.
The plan of distribution for Selling Stockholder's Shares sold hereunder will
otherwise remain unchanged, except that the transferees, pledgees, donees or
other successors will be Selling Stockholders hereunder.
Including and without limiting the foregoing, in connection with distributions
of the Common Stock, the Selling Stockholder may enter into hedging transactions
with broker-dealers and the broker-dealers may engage in short sales of the
Common Stock in the course of hedging the positions they assume with the Selling
Stockholder. The Selling Stockholder may also enter into option or other
transactions with broker-dealers that involve the delivery of the Common Stock
to the broker-dealers, who may then resell or otherwise transfer such Common
Stock. The Selling Stockholder may also loan or pledge the Common Stock to a
broker-dealer and the broker-dealer may sell the Common Stock so loaned or upon
a default may sell or otherwise transfer the pledged Common Stock.
In order to comply with the securities laws of certain states, if applicable,
the Stocks may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the Shares may not be sold
unless the Shares have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
All cost associated with this offering, other than fees and expense of counsel
for the Selling Stockholder and underwriting discounts and commissions and
brokerage commissions and fees, will be paid by the Company. The Company has
agreed to indemnify the Selling Stockholder against certain liabilities in
connection with any offering of the Shares pursuant to this Prospectus,
including liabilities arising under the Securities Act.
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LEGAL MATTERS
The validity of the Common Stock being registered has been passed upon by
Holme Roberts & Owen LLP, Denver, Colorado, as counsel for the Company.
EXPERTS
The consolidated financial statements of NaPro BioTherapeutics, Inc. appearing
in NaPro BioTherapeutics, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated by reference
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered under this Registration Statement are
estimated to be as follows:
Legal fees and expenses.......................... $15,000
Accounting fees and expenses..................... 6,000
Filing Fees...................................... 1,456
Miscellaneous.................................... 4,000
-------
Total........................................ $ 26,456
========
ITEM 16. EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
Exhibit
Number Description of Exhibit
- ------ ----------------------
4.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended August 2, 1996 (1)
4.2 Certificate of Designation for the Series B Junior Participating
Preferred Stock of the Registrant (2)
4.3 Bylaws of the Registrant (3)
4.4 Form of Common Stock Certificate (3)
4.5 Certificate of Designations for the Series C Senior Convertible
Preferred Stock of the Registrant
4.6 Form of Subscription Agreement dated December 8, 1997
4.7 Form of Common Stock Purchase Warrant
5.1 Opinion of Holme Roberts & Owen LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit 5.1)
24.1 Powers of Attorney
________________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 0-24320).
(2) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 8, 1996 (File No. 0-24320).
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, filed on July 24, 1994 (File No. 33-78016).
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other that the payment by the registrant of expenses
incurred or paid by a director, officers or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boulder,
State of Colorado, as of December 16, 1997.
NaPro BioTherapeutics, Inc.
By: /s/ Gordon H. Link, Jr.
-----------------------
Gordon H. Link, Jr.
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Sterling K. Ainsworth, Ph.D. President and Chief Executive Officer; December __, 1997
- -------------------------------- Director (Principal Executive Officer)
Sterling K. Ainsworth, Ph.D.
Chairman of the Board of Directors December __, 1997
- --------------------------------
Leonard P. Shaykin
/s/ Gordon H. Link, Jr. Vice President, Chief Financial Officer December 15, 1997
- -------------------------------- (Principal Financial Officer)
Gordon H. Link, Jr.
/s/ Robert L. Poley Controller (Principal Accounting Officer) December 15, 1997
- --------------------------------
Robert L. Poley
/s/ Patricia A. Pilia, Ph.D Director December 16, 1997
- --------------------------------
Patricia A. Pilia, Ph.D.
Director December __, 1997
- --------------------------------
E. Garrett Bewkes, Jr.
Director December __, 1997
- --------------------------------
Richard C. Pfenniger, Jr.
* Director December __, 1997
- --------------------------------
Arthur H. Hayes, Jr. M.D.
* Director December 16, 1997
- --------------------------------
Mark B. Hacken
* Director December 16, 1997
- --------------------------------
Vaughn D. Bryson
* By: /s/ Gordon H. Link, Jr.
--------------------------------- December 16, 1997
Gordon H. Link, Jr., Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
4.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended August 2, 1996 (1)
4.2 Certificate of Designation for the Series B Junior Participating
Preferred Stock of the Registrant (2)
4.3 Bylaws of the Registrant (3)
4.4 Form of Common Stock Certificate (3)
4.5 Certificate of Designations for the Series C Senior Convertible
Preferred Stock of the Registrant
4.6 Form of Subscription Agreement dated December 8, 1997
4.7 Form of Common Stock Purchase Warrant
5.1 Opinion of Holme Roberts & Owen LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit 5.1)
24.1 Powers of Attorney
________________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 0-24320).
(2) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 8, 1996 (File No. 0-24320).
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, filed on July 24, 1994 (File No. 33-78016).
<PAGE>
EXHIBIT 4.5
CERTIFICATE OF DESIGNATIONS
FOR THE SERIES C
SENIOR CONVERTIBLE PREFERRED
STOCK OF THE REGISTRANT
NAPRO BIOTHERAPEUTICS, INC.
CERTIFICATE OF DESIGNATIONS
OF
SERIES C SENIOR
CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
______________
NaPro BioTherapeutics, Inc., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, at a
meeting duly called and held on December 3, 1997, adopted a resolution providing
for the creation of a series of the Corporation's Preferred Stock, $.001 par
value, which series is designated "Series C Senior Convertible Preferred Stock",
which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of Directors
by the Certificate of Incorporation, as amended, the Board of Directors does
hereby provide for the creation of a series of the Preferred Stock, $.001 par
value (hereafter called the "Preferred Stock"), of the Corporation, and to the
extent that the voting powers and the designations, preferences and relative,
participating, optional or other special rights thereof and the qualifications,
limitations or restrictions of such rights have not been set forth in the
Amended and Restated Certificate of Incorporation, as amended, of the
Corporation, does hereby fix the same as follows:
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK
SECTION 1. CERTAIN DEFINED TERMS. (a) All the agreements or
---------------------
instruments defined in this Certificate of Designations shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Certificate of Designations.
4.5-1
<PAGE>
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Adjustment Event" means any of
(1) the failure by the Corporation to file the Registration Statement
with the SEC within 15 days after the Issuance Date;
(2) the Corporation shall have failed to request acceleration of the
Registration Statement as and when required by Section 8(b)(1) of the
Subscription Agreement;
(3) the Registration Statement shall not be declared effective by the
SEC on or before the date which is 120 days after the Issuance Date;
(4) at any time after the Registration Statement is declared effective
by the SEC and prior to the expiration of the Registration Period, the
Registration Statement shall cease to be effective or shall cease to be
available for use by any holder of shares of Series C Preferred Stock who
is named therein as a selling stockholder, other than (A) by reason of a
change in information concerning a holder of Series C Preferred Stock who
is named as a selling stockholder in the Registration Statement or in such
holder's plan of distribution, so long as, and only so long as, the
Corporation is in compliance with Section 8(b)(5) of the Subscription
Agreement with respect to such change and (B) any period during which such
lack of effectiveness or availability would not exceed the limitations
based on numbers of Trading Days in clause (5) of the definition of
Optional Redemption Event; or
(5) the right of any holder of shares of Series C Preferred Stock to
convert such shares in accordance with the terms of this Certificate of
Designations and the Transfer Agent Instruction is suspended or revoked for
any reason (other than by reason of the Corporation's failure to deliver
shares of Common Stock as and when required by Section 10 upon any
particular conversion of shares of Series C Preferred Stock for which an
adjustment in the Conversion Price applicable to such conversion is made
pursuant to Section 10(b)(7)).
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate," the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or to cause the direction of the management and
policies of a Person, whether through the ownership of securities, by contract
or otherwise.
"Aggregated Person" means, with respect to any holder of shares of
Series C Preferred Stock, any Person whose beneficial ownership of shares of
Common Stock would be aggregated with such holder's beneficial ownership of
shares of Common Stock for purposes of Section 13(d) of the 1934 Act and
Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
4.5-2
<PAGE>
"Arrearage Interest" means interest at the rate of 12% per annum on
any dividend not paid on or before the third Trading Day after the applicable
Dividend Payment Date, whether or not declared, from such Dividend Payment Date.
"Board of Directors" or "Board" means the Board of Directors of the
Corporation.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
"Cash and Cash Equivalent Balances" at any date shall be determined
from the Corporation's books maintained in accordance with Generally Accepted
Accounting Principles, and means, without duplication, the sum of (1) the cash
held by the Corporation on such date and available for use by the Corporation on
such date, (2) all assets which would, on a balance sheet of the Corporation
prepared as of such date in accordance with Generally Accepted Accounting
Principles, be classified as cash or cash equivalents and (3) cash available to
the Corporation pursuant to unused credit facilities.
"Common Stock" means the Common Stock, $.0075 par value, of the
Corporation, together with the related Preferred Stock Purchase Rights or
similar rights of the Corporation or any shares of capital stock and the related
rights into which such stock shall be changed or reclassified after the Issuance
Date.
"Computed Price" for any date means 95% of the lowest Two-Day Average
Trading Price during the Measurement Period for the applicable Dividend Payment
Date; provided, however, that on any date on or after the 270th day after the
Issuance Date, the Computed Price shall not be greater than 110% of the
arithmetic average of the Trading Prices of the Common Stock for the 30
consecutive Trading Days ending on the Trading Day prior to the 270th day after
the Issuance Date (subject, in the case of the amount determined pursuant to
this proviso, to equitable adjustments from time to time on terms reasonably
acceptable to the Corporation and the Majority Holders for (1) stock splits, (2)
stock dividends, (3) combinations, (4) capital reorganizations (5) issuance to
all holders of Common Stock rights or warrants to purchase shares of Common
Stock, (6) the distribution by the Corporation to all holders of Common Stock of
evidences of indebtedness of the Corporation or cash (other than regular
quarterly cash dividends), (7) Tender Offers by the Corporation or any
Subsidiary for, or other repurchases of shares of, Common Stock in one or more
transactions which, individually or in the aggregate, result in the purchase of
more than ten percent of the Common Stock outstanding and (8) similar events
relating to the Common Stock, in each such case which occur, or with respect to
which "ex-" trading of the Common Stock begins, on or after the date which is
270 days after the Issuance Date and on or before the applicable Conversion
Date, in each case on a basis consistent with the adjustments set forth in the
definition of Trading Price); and provided further, however, that if an
Adjustment Event occurs, then the Computed Price in effect on any date after
such Adjustment Event occurs (and whether or not such Adjustment Event
continues) shall be adjusted to each date on which the Computed Price is being
determined as follows: (x) in the case of the Computed Price based on the Two-
Day Average Trading Price, the percentage used in computing such Computed Price
shall be reduced at the rate of 2.5
4.5-3
<PAGE>
percentage points for each 30 days that such Adjustment Event continues (pro
rated for any period of less than 30 days), and (y) in the case of the Computed
Price provided in the first proviso to this definition, the Computed Price
determined in accordance therewith shall be reduced at the rate of 2.5% of such
Computed Price (computed on the basis of the amount such Computed Price would
otherwise be without regard to any adjustment therein pursuant to this clause
(y)) for each 30 days on or after the 270th day after the Issuance Date that
such Adjustment Event continues (pro rated for any period of less than 30 days).
"Conversion Agent" means American Stock Transfer & Trust Company or
its duly appointed successor who shall be serving as transfer agent and
registrar for the Common Stock and who shall have been authorized by the
Corporation to act as conversion agent for the Series C Preferred Stock in
accordance with the Transfer Agent Instruction and the name, address and
telephone number of which shall have been given to the holder of the Series C
Preferred Stock by notice from the Corporation.
"Conversion Date" means the date on which a Conversion Notice is
actually received by the Conversion Agent, whether by mail, courier, personal
service, telephone line facsimile transmission or other means, in case of a
conversion at the option of a holder of shares of Series C Preferred Stock
pursuant to Section 10(a).
"Conversion Notice" means a Notice of Conversion of Series C Senior
Convertible Preferred Stock substantially in the form set forth in Section
14(a).
"Conversion Price" for any Conversion Date
(1) during the period commencing on the Issuance Date and ending on
the date which is 119 days after the Issuance Date, means $10.00 (subject
to equitable adjustment from time to time on terms reasonably acceptable to
the Corporation and the Majority Holders for (1) stock splits, (2) stock
dividends, (3) combinations, (4) capital reorganizations, (5) issuance to
all holders of Common Stock of rights or warrants to purchase shares of
Common Stock, (6) the distribution by the Corporation to all holders of
Common Stock of evidences of indebtedness of the Corporation or cash (other
than regular quarterly cash dividends), (7) Tender Offers by the
Corporation or any Subsidiary for, or other repurchases of shares of,
Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than ten percent of the Common
Stock outstanding and (8) similar events relating to the Common Stock, in
each such case which occur, or with respect to which "ex-" trading of the
Common Stock begins, on or after the date this Certificate of Designations
is filed with the Secretary of State of Delaware and on or before the
applicable Conversion Date, in each case on a basis consistent with the
adjustments set forth in the definition of Trading Price); and
(2) on and after the date which is 120 days after the Issuance Date,
means 95% of the lowest Two-Day Average Trading Price during the
Measurement Period for the applicable Conversion Date;
provided, however, that on any date on or after the 270th day after the Issuance
Date, the Conversion Price shall not be greater than 110% of the arithmetic
average of the Trading
4.5-4
<PAGE>
Prices of the Common Stock for the 30 consecutive Trading Days (subject, in the
case of the amount determined in accordance with this proviso, to equitable
adjustments from time to time on terms reasonably acceptable to the Corporation
and the Majority Holders for (1) stock splits, (2) stock dividends, (3)
combinations, (4) capital reorganizations (5) issuance to all holders of Common
Stock rights or warrants to purchase shares of Common Stock, (6) the
distribution by the Corporation to all holders of Common Stock of evidences of
indebtedness of the Corporation or cash (other than regular quarterly cash
dividends), (7) Tender Offers by the Corporation or any Subsidiary for, or other
repurchases of shares of, Common Stock in one or more transactions which,
individually or in the aggregate, result in the purchase of more than ten
percent of the Common Stock outstanding and (8) similar events relating to the
Common Stock, in each such case which occur, or with respect to which "ex-"
trading of the Common Stock begins, on or after the date which is 270 days after
the Issuance Date and on or before the applicable Conversion Date, in each case
on a basis consistent with the adjustments set forth in the definition of
Trading Price); and provided further, however, that if an Adjustment Event
occurs, then the Conversion Price in effect on any date after such Adjustment
Event occurs (and whether or not such Adjustment Event continues) shall be
adjusted to each date on which the Conversion Price is being determined as
follows: (x) in the case of the Conversion Price provided in clause (1) of this
definition, the Conversion Price stated therein shall be reduced at the rate of
2.5% of such Conversion Price (computed on the basis of the amount such
Conversion Price would otherwise be without regard to any adjustment therein
pursuant to this clause (x)) for each 30 days that such Adjustment Event
continues (pro rated for any period of less than 30 days), (y) in the case of
the Conversion Price provided in clause (2) of this definition, the percentage
used in computing such Conversion Price shall be reduced at the rate of 2.5
percentage points for each 30 days that such Adjustment Event continues (pro
rated for any period of less than 30 days), and (z) in the case of the
Conversion Price provided in the first proviso to this definition, the
Conversion Price determined in accordance therewith shall be reduced at the rate
of 2.5% of such Conversion Price (computed on the basis of the amount such
Conversion Price would otherwise be without regard to any adjustment therein
pursuant to this clause (z)) for each 30 days on or after the 270th day after
the Issuance Date that such Adjustment Event continues (pro rated for any period
of less than 30 days).
"Corporation Notice" means a Corporation Notice substantially in the
form set forth in Section 14(g).
"Dividend Payment Date" means March 15, June 15, September 15 and
December 15.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"Holder Notice" means a Holder Notice substantially in the form set
forth in Section 14(h).
"Inconvertibility Day" means any Trading Day on which the Corporation
would not have been required to convert in accordance with Section 10(a) any
shares of Series C Preferred Stock of any holder of shares of Series C Preferred
Stock as a
4.5-5
<PAGE>
consequence of the limitations set forth in Section 7(a)(1) had all outstanding
shares of Series C Preferred Stock held by such holder on such Trading Day been
converted into Common Stock on such Trading Day, determined at the Conversion
Price applicable on such Trading Day and without regard to the limitation, if
any on such holder contained in the second sentence of Section 10(a).
"Inconvertibility Notice" means a notice from the Corporation to a
holder of shares of Series C Preferred Stock in the form set forth in Section
14(b) or a notice from a holder of shares of Series C Preferred Stock to the
Corporation in the form set forth in Section 14(c).
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such Person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such Person, although such Person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such Person.
"Issuance Date" means the first date of original issuance of any
shares of Series C Preferred Stock.
"Junior Dividend Stock" means, collectively, the Common Stock and any
other class or series of capital stock of the Corporation ranking junior as to
dividends to the Series C Preferred Stock.
"Junior Liquidation Stock" means, collectively, the Common Stock and
any other class or series of capital stock of the Corporation ranking junior as
to liquidation rights to the Series C Preferred Stock.
"Liquidation Preference" means, for each share of Series C Preferred
Stock, the sum of (i) all dividends accrued and unpaid thereon to the date of
final distribution to the holders of shares of Series C Preferred Stock in
connection with the liquidation, dissolution or winding up of the Corporation,
(ii) accrued and unpaid Arrearage Interest on dividends in arrears (computed in
accordance with Section 5(a)) on the amount referred to in the preceding clause
(ii) to the date of such distribution, and (iii) $1,000.
"Majority Holders" means at any time the holders of shares of Series C
Preferred Stock which shares constitute a majority of the outstanding shares of
Series C Preferred Stock.
"Mandatory Redemption Waiver" means an agreement of the Corporation
and a holder of shares of Series C Preferred Stock in the form set forth in
Section 14(e).
4.5-6
<PAGE>
"Market Price" of any security on any date means the last sale price
(regular way) of such security on such date on the securities exchange or other
market on which such security is listed for trading which constitutes the
principal securities market for such security, as reported by Bloomberg, L.P.
"Maximum Share Amount" means 2,506,739 shares, or such greater number
as permitted by the rules of Nasdaq (such amount to be subject to equitable
adjustment from time to time on terms reasonably acceptable to the Corporation
and the Majority Holders for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring on or after the date of filing this Certificate of Designations with
the Secretary of State of the State of Delaware), of Common Stock.
"Maximum Share Amount Inconvertibility" means the occurrence of five
or more Inconvertibility Days ending on or after the fifth Trading Day after the
Issuance Date within any period of ten consecutive Trading Days.
"Measurement Period" means with respect to any date, the period of 15
consecutive Trading Days ending on the Trading Day immediately preceding such
date.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"NYSE" means the New York Stock Exchange, Inc.
"Optional Redemption Date" means the date on which the Corporation
makes payment of the Optional Redemption Price for any shares of Series C
Preferred Stock to be redeemed in accordance with Sections 11(a) and 11(b).
"Optional Redemption Event" means any one of the following events:
(1) For any period of five consecutive Trading Days following the
Issuance Date there shall be no reported sale price of the Common Stock on
any of the AMEX, the Nasdaq or the NYSE;
(2) The Common Stock ceases to be listed for trading on the AMEX, the
Nasdaq or the NYSE;
(3) Any consolidation or merger of the Corporation or any Subsidiary
with or into another entity (other than a merger or consolidation of a
subsidiary of the Corporation into the Corporation or a wholly-owned
Subsidiary) where the stockholders of the Corporation immediately prior to
such transaction do not collectively own at least 51% of the outstanding
voting securities of the surviving corporation of such consolidation or
merger immediately following such transaction or the common stock of such
surviving corporation is not listed for trading on the
4.5-7
<PAGE>
NYSE, the AMEX or the Nasdaq; or the sale of all or substantially all of
the assets of the Corporation and its Subsidiaries;
(4) The taking of any action, including any amendment to the
Certificate of Incorporation of the Corporation (other than any certificate
designating a series of preferred stock of the Corporation) which
materially and adversely affects the rights of the holders of shares of
Series C Preferred Stock;
(5) The inability of any holder of shares of Series C Preferred Stock
for (x) 20 Trading Days (whether or not consecutive) occurring on or after
the SEC Effective Date and ending on the first anniversary of the Issuance
Date, or (y) 40 Trading Days (whether or not consecutive) during the period
from the SEC Effective Date to the second anniversary of the Issuance Date,
in either the case of clause (x) or clause (y) to sell shares of Common
Stock issued upon conversion of shares of Series C Preferred Stock pursuant
to the Registration Statement (1) by reason of the requirements of the 1933
Act, the 1934 Act or any of the rules or regulations under either thereof
or (2) due to the Registration Statement containing any untrue statement of
material fact or omitting to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or any
other failure of the Registration Statement to comply with the rules and
regulations of the SEC; or
(6) The Corporation shall fail or default in the timely performance of
any material obligation to a holder of shares of Series C Preferred Stock
under the terms of this Certificate of Designations or under the
Subscription Agreement or any other agreement or document entered into in
connection with the issuance of shares of Series C Preferred Stock, as such
agreements and instruments may be amended from time to time, if such
failure or default shall have continued for 15 days after notice thereof to
the Corporation from any holder of shares of Series C Preferred Stock.
"Optional Redemption Percentage" means, with respect to each Optional
Redemption Date, the applicable percentage determined with respect to such date
as follows:
<TABLE>
<CAPTION>
Optional Redemption
Optional Redemption Payment Date Percentage
-------------------------------- ---------------------------
<S> <C>
Issuance Date through 180th day thereafter 115.0%
181st Day after Issuance Date and thereafter 125.0%
</TABLE>
"Optional Redemption Price" means an amount in cash equal to the sum
of (1) the product obtained by multiplying (a) the sum of (i) $1,000 plus (ii)
an amount equal to the accrued but unpaid dividends on the share of Series C
Preferred Stock to be redeemed to the applicable Optional Redemption Date times
(b) the Optional Redemption Percentage for the applicable Optional Redemption
Date, plus (2) an amount equal to accrued and unpaid Arrearage Interest on
dividends in arrears on such share of Series C Preferred Stock (determined in
accordance with Section 5(a)) to the applicable Optional
4.5-8
<PAGE>
Redemption Date; provided, however, that in the case of any Optional Redemption
Date that is on or after the date which is 270 days after the Issuance Date,
"Optional Redemption Price" means the greater of (i) the amount determined as
aforesaid in this definition and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for
redemption pursuant to Sections 11(a) and 11(b), be issuable on conversion in
accordance with Section 10(a) of one share of Series C Preferred Stock on the
applicable Optional Redemption Date (determined without regard to any limitation
on conversion contained in the second sentence of Section 10(a)) times (y) the
arithmetic average of the Market Price of the Common Stock for the five Trading
Days ending on the Trading Day immediately preceding such Optional Redemption
Date.
"Option Share Surrender" means the surrender of shares of Common Stock
to the Corporation in payment of the exercise price or tax obligations incurred
in connection with the exercise of a stock option granted by the Corporation to
any of its employees, directors or consultants.
"Parity Dividend Stock" means any class or series or the Corporation's
capital stock ranking, as to dividends, on a parity with the Series C Preferred
Stock.
"Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series C Preferred Stock.
"Person" means an individual, partnership, corporation, limited
liability company, trust, incorporated organization, or unincorporated
association or a government, governmental agency or any political subdivision of
any thereof.
"Preferred Stock Purchase Rights" means the Preferred Stock Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar
rights hereafter issued by the Corporation with respect to the Common Stock).
"Redemption Date" means each date on which the Corporation is required
to redeem shares of Series C Preferred Stock by reason of the exercise of its
option to do so in accordance with Section 9(a).
"Redemption Election" means (1) a notice by a holder of Series C
Preferred Stock to the Corporation substantially in the form set forth in
Section 14(d) or (2) a notice by a holder of Series C Preferred Stock to the
Corporation included in paragraph 3 of the form of Inconvertibility Notice set
forth in Section 14(c).
"Redemption Election Period" means, with respect to a particular
Maximum Share Amount Inconvertibility or Registration Restriction
Inconvertibility, the period of ten Business Days after the later of (x) the
date an Inconvertibility Notice with respect to such Maximum Share Amount
Inconvertibility or Registration Restriction Inconvertibility is given or (y)
the date such Inconvertibility Notice was required to have been given by the
Corporation.
"Redemption Notice" means a Redemption Notice substantially in the
form set forth in Section 14(f).
4.5-9
<PAGE>
"Redemption Price" means
(1) with respect to any Redemption Date that is prior to the date
which is three years after the Issuance Date, an amount in cash equal to
the greater of (1) the sum of (a) the product obtained by multiplying (i)
the sum of (A) $1,000 plus (B) an amount equal to the accrued but unpaid
dividends on the share of Series C Preferred Stock to be redeemed to the
date of payment of the Redemption Price times (ii) 115% plus (b) an amount
equal to accrued and unpaid Arrearage Interest on dividends in arrears on
such share of Series C Preferred Stock (determined in accordance with
Section 5(a)) to the Redemption Date and (2) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which
would, but for the redemption pursuant to Section 9(a), be issuable on
conversion in accordance with Section 10(a) of one share of Series C
Preferred Stock and any accrued and unpaid dividends thereon and any
accrued and unpaid Arrearage Interest if a Conversion Notice were given by
the holder of such share of Series C Preferred Stock on the Redemption Date
(determined without regard to any limitation on conversion contained in the
second sentence of Section 10(a)) times (y) the arithmetic average of the
Market Price of the Common Stock for the five Trading Days ending on the
Trading Day immediately preceding the Redemption Date; and
(2) with respect to any Redemption Date that is on or after the date
which is three years after the Issuance Date, an amount, payable in cash or
Redemption Price Note, equal to the sum of (A) $1,000 plus (B) accrued and
unpaid dividends on the share of Series C Preferred Stock to be redeemed to
the date of payment of the applicable Redemption Price plus (C) an amount
equal to accrued and unpaid Arrearage Interest on dividends in arrears on
such share of Series C Preferred Stock (determined in accordance with
Section 5(a)) to the date of payment of the applicable Redemption Price.
"Redemption Price Note" means a Redemption Price Note, in the form set
forth in Section 14(i), issued by the Corporation pursuant to Section 9(b).
"Registrable Securities" means the shares of Common Stock issuable
upon conversion of shares of Series C Preferred Stock and the shares of Common
Stock issuable as dividends on the Series C Preferred Stock, and any stock or
other securities into which or for which the Common Stock may hereafter be
changed, converted or exchanged by the Corporation or its successor, as the case
may be, and any other securities issued to holders of such Common Stock (or such
shares into which or for which such shares are so changed, converted or
exchanged) upon any reclassification, share combination, share subdivision,
share dividend, merger, consolidation or similar transaction or event.
"Registration Period" means the period from the SEC Effective Date to
the earlier of (i) the date which is two years after the Issuance Date and (ii)
the date on which all holders of shares of Series C Preferred Stock who are
entitled to registration rights under the Subscription Agreement no longer own
or have any right to acquire shares of Common Stock on conversion of shares of
Series C Preferred Stock.
4.5-10
<PAGE>
"Registration Restriction Inconvertibility" means that,
notwithstanding Rule 416 under the 1933 Act or the provisions of Section 8(b) of
the Subscription Agreements, the Registration Statement is not deemed to cover
such indeterminate number of additional shares of Common Stock as shall be
issuable upon conversion of the shares of Series C Preferred Stock held by any
holder of shares of Series C Preferred Stock based on changes from time to time
in the Conversion Price, and on any five Trading Days ending on or after the SEC
Effective Date within any period of ten consecutive Trading Days the number of
shares of Common Stock issuable upon conversion of all shares of Series C
Preferred Stock held by any holder of shares of Series C Preferred Stock had all
shares of Series C Preferred Stock held by such holder been converted in full
into Common Stock on each such Trading Day, determined at the Conversion Price
applicable on each such Trading Day and without regard to the limitation, if
any, on such holder contained in the second sentence of Section 10(a), would
exceed the number of shares of Common Stock covered by the Registration
Statement and available for sale by such holder pursuant to the Registration
Statement.
"Registration Statement" means the Registration Statement required to
be filed by the Corporation with the SEC pursuant to Section 8 of the
Subscription Agreement.
"Rights Agreement" means the Rights Agreement, dated as of November 8,
1996, by and between the Corporation and American Stock Transfer & Trust
Company, as Rights Agent.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date on which the Registration
Statement is first declared effective by the SEC.
"Securities" shall have the meaning, for purposes of the definition of
the term Trading Price, set forth in clause (iv) of the first proviso to the
definition of the term Trading Price.
"Senior Dividend Stock" means any class or series of capital stock of
the Corporation ranking senior as to dividends to the Series C Preferred Stock.
"Senior Liquidation Stock" means any class or series of capital stock
of the Corporation ranking senior as to liquidation rights to the Series C
Preferred Stock.
"Series C Preferred Stock" means the Series C Senior Convertible
Preferred Stock of the Corporation.
"Share Limitation Redemption Date" means each date on which the
Corporation is required to redeem shares of Series C Preferred Stock as provided
in Section 7(a).
"Share Limitation Redemption Price" means an amount in cash equal to
the sum of (1) the product obtained by multiplying (a) the sum of (i) $1,000
plus (ii) an amount equal to the accrued but unpaid dividends on the share of
Series C Preferred Stock to be redeemed to the applicable Share Limitation
Redemption Date times (b) 115% plus (2) an amount equal to accrued and unpaid
Arrearage Interest on dividends in arrears on such
4.5-11
<PAGE>
share of Series C Preferred Stock (determined as provided in Section 5(a)) to
the applicable Share Limitation Redemption Date; provided, however, that in the
case of any Share Limitation Redemption Date that is on or after the date which
is 270 days after the Issuance Date, "Share Limitation Redemption Price" means
the greater of (i) the amount determined as aforesaid in this definition and
(ii) an amount equal to the product obtained by multiplying (x) the number of
shares of Common Stock which would, but for redemption pursuant to Section 7(a),
be issuable on conversion in accordance with Section 10(a) of one share of
Series C Preferred Stock on the applicable Share Limitation Redemption Date
(determined without regard to any limitation on conversion contained in the
second sentence of Section 10(a)) times (y) the arithmetic average of the Market
Price of the Common Stock for the five Trading Days ending on the Trading Day
immediately preceding such Share Limitation Redemption Date.
"Stockholder Approval" means the approval by a majority of the votes
cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of the
Common Stock on conversion of the Series C Preferred Stock, as and to the extent
required under Section 4460(i) of the rules of the NASD as in effect from time
to time, or any successor or replacement provision.
"Subscription Agreement" means the Subscription Agreement, dated as of
December 8, 1997, between the Corporation and the original holder of shares of
Series C Preferred Stock pursuant to which the shares of Series C Preferred
Stock were issued.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the
Corporation.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (x) the national securities
exchange or (y) the Nasdaq which at the time constitutes the principal
securities market for the Common Stock is open for general trading.
"Trading Price" of the Common Stock on any date means the last sale
price (regular way) for one share of Common Stock on such date on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed if such exchange constitutes the principal
securities market for the Common Stock or (b) the Nasdaq, in either such case as
reported by Bloomberg, L.P.; provided, however, that if during any Measurement
Period:
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Trading
Price of the Common Stock for each day in such Measurement Period prior to
the date on which
4.5-12
<PAGE>
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins shall be reduced by multiplying the Trading Price
(determined without regard to this proviso) for each such day in such
Measurement Period 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
on which ex-dividend trading in the Common Stock with respect to such
dividend or distribution begins and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, or fix a record date for such
issuance, which rights or warrants entitle such holders (for a period
expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Trading Price (determined without regard to this proviso) for
any day in such Measurement Period which is prior to the end of such 45-day
period, then the Trading Price for such day shall be reduced so that the
same shall equal the price determined by multiplying the Trading Price
(determined without regard to this proviso) by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the record date fixed for the determination of
stockholders entitled to receive such rights or warrants plus the number of
shares which the aggregate offering price of the total number of shares so
offered would purchase at such Trading Price, and of which the denominator
shall be the number of shares of Common Stock outstanding on the close of
business on such record date plus the total number of additional shares of
Common Stock so offered for subscription or purchase. In determining
whether any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than the Trading Price (determined
without regard to this proviso), and in determining the aggregate offering
price of such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Trading Price of the Common Stock for
each day in such Measurement Period prior to the date on which ex-dividend
trading in the Common Stock with respect to such subdivision begins shall
be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock shall be combined into a smaller number of shares of Common
Stock, the Trading Price for each day in such Measurement Period prior to
the date on which trading in the Common Stock on a basis which gives effect
to such combination begins, shall be proportionately increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i)
of this proviso applies) or evidences of its indebtedness, cash or other
assets (including securities, but
4.5-13
<PAGE>
excluding any rights or warrants referred to in clause (ii) of this proviso
and dividends and distributions paid exclusively in cash and excluding any
capital stock, evidences of indebtedness, cash or assets distributed upon a
merger or consolidation) (the foregoing hereinafter in this clause (iv) of
this proviso called the "Securities"), or fix a record date for any such
distribution, then, in each such case, the Trading Price for any day in
such Measurement Period prior to the date on which ex-dividend trading in
the Common Stock with respect to such distribution begins shall be reduced
so that the same shall be equal to the price determined by multiplying the
Trading Price (determined without regard to this proviso) by a fraction of
which the numerator shall be the Trading Price (determined without regard
to this proviso) on such date less the fair market value (as determined in
good faith by resolution of the Board of Directors of the Corporation) on
such date of the portion of the Securities so distributed or to be
distributed applicable to one share of Common Stock and the denominator
shall be the Trading Price (determined without regard to this proviso);
provided, however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable to
one share of Common Stock is equal to or greater than the Trading Price
(determined without regard to this clause (iv) of this proviso) on any such
day, in lieu of the foregoing adjustment, adequate provision shall be made
so that the holders of shares of Series C Preferred Stock shall have the
right to receive in payment of dividends on the shares of Series C
Preferred Stock or upon conversion of the shares of Series C Preferred
Stock, as the case may be, the amount of Securities the holders of shares
of Series C Preferred Stock would have received had the number of shares of
Common Stock to be issued in payment of such dividends on the shares of
Series C Preferred Stock, or the number of shares of Common Stock to be
issued upon such conversion of shares of Series C Preferred Stock, in
either such case, been issued immediately prior to the record date for such
distribution. If the Board of Directors of the Corporation determines the
fair market value of any distribution for purposes of this clause (iv) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider
the prices in such market on the same day for which an adjustment in the
Trading Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this proviso,
any dividend or distribution to which this clause (iv) is applicable that
also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which clause (i) or (ii) of this
proviso applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights
or warrants to which clause (ii) of this proviso applies (and any Trading
Price reduction required by this clause (iv) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a dividend
or distribution of such shares of Common Stock or such rights or warrants
(and any further Trading Price reduction required by clauses (i) and (ii)
of this proviso with respect to such dividend or distribution shall then be
made), except that any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on
the date fixed for such determination" within the meaning of clause (i) of
this proviso;
4.5-14
<PAGE>
(v) The Corporation or any Subsidiary shall (x) by dividend or otherwise,
distribute to all holders of its Common Stock cash in (or fix any record date
for any such distribution), or (y) repurchase or reacquire shares of its Common
Stock (other than an Option Share Surrender) for, in either case, an aggregate
amount that, combined with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash after
the Issuance Date and within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no adjustment pursuant to
this clause (v) has been made, (2) the aggregate amount of any cash plus the
fair market value (as determined in good faith by a resolution of the Board of
Directors of the Corporation) of consideration paid in respect of any repurchase
or other reacquisition by the Corporation or any Subsidiary of any shares of
Common Stock (other than an Option Share Surrender) made after the Issuance Date
and within the twelve (12) months preceding the date of payment of such
distribution or making of such repurchase or reacquisition, as the case may be,
and in respect of which no adjustment pursuant to this clause (v) has been made,
and (3) the aggregate of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Corporation) of
consideration payable in respect of any Tender Offer by the Corporation or any
Subsidiary for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution or
completion of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to clause (vi) of this proviso has been
made, exceeds 10% of the product of the Trading Price (determined without regard
to this proviso) on any day in such Measurement Period prior to the date on
which ex-dividend trading in the Common Stock with respect to such distribution
begins or the date of such repurchase or reacquisition, as the case may be,
times the number of shares of Common Stock outstanding on such date, then, and
in each such case, the Trading Price for such day shall be reduced so that the
same shall equal the price determined by multiplying the Trading Price
(determined without regard to this proviso) for such day by a fraction (i) the
numerator of which shall be equal to the Trading Price (determined without
regard to this proviso) for such day less an amount equal to the quotient of (x)
the excess of such combined amount over such 10% and (y) the number of shares of
Common Stock outstanding on such day and (ii) the denominator of which shall be
equal to the Trading Price (determined without regard to this proviso) on such
day; provided, however, that in the event the portion of the cash so distributed
or paid for the repurchase or reacquisition of shares (determined per share
based on the number of shares of Common Stock outstanding) applicable to one
share of Common Stock is equal to or greater than the Trading Price (determined
without regard to this clause (v) of this proviso) of the Common Stock on any
such day, in lieu of the foregoing adjustment, adequate provision shall be made
so that the holders of shares of Series C Preferred Stock shall have the right
to receive in payment of dividends on shares of Series C Preferred Stock or upon
conversion of shares of Series C Preferred Stock, as the case may be, the amount
of cash the holders of shares of Series C Preferred Stock would have received
had the number of shares of Common Stock to be issued in payment of such
dividends on shares of Series C Preferred Stock, or the number of shares of
Common Stock to be issued upon such conversion of shares of Series C Preferred
Stock, in either such case, been issued immediately prior to the record date for
such distribution or the payment date of such repurchase, as applicable; or
4.5-15
<PAGE>
(vi) A Tender Offer made by the Corporation or any Subsidiary for all
or any portion of the Common Stock shall expire and such Tender Offer (as
amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the Tender Offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Corporation) that
combined together with (1) the aggregate of the cash plus the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Corporation), as of the expiration of such Tender Offer,
of consideration payable in respect of any other Tender Offers, by the
Corporation or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of
such Tender Offer and in respect of which no adjustment pursuant to this
clause (vi) has been made, (2) the aggregate amount of any cash plus the
fair market value (as determined in good faith by a resolution of the Board
of Directors of the Corporation) of consideration paid in respect of any
repurchase or other reacquisition by the Corporation or any Subsidiary of
any shares of Common Stock (other than an Option Share Surrender) made
after the Issuance Date and within the twelve (12) months preceding the
expiration of such Tender Offer and in respect of which no adjustment
pursuant to clause (v) of this proviso has been made, and (3) the aggregate
amount of any distributions to all holders of Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to clause (v) of this
proviso has been made, exceeds 10% of the product of the Trading Price
(determined without regard to this proviso) on any day in such period times
the number of shares of Common Stock outstanding on such day, then, and in
each such case, the Trading Price for such day shall be reduced so that the
same shall equal the price determined by multiplying the Trading Price
(determined without regard to this proviso) for such day by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding on such day multiplied by the Trading Price (determined without
regard to this proviso) for such day and the denominator shall be the sum
of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of all shares validly
tendered and not withdrawn as of the last time tenders could have been made
pursuant to such Tender Offer (the "Expiration Time") (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on such day and the Trading Price
(determined without regard to this proviso) of the Common Stock on the
Trading Day next succeeding the Expiration Time. If the application of this
clause (vi) to any Tender Offer would result in an increase in the Trading
Price (determined without regard to this proviso) for any day, no
adjustment shall be made for such Tender Offer under this clause (vi) for
such day;
provided further, however, that if on any date there shall be no such reported
last sale price (regular way) of the Common Stock, the "Trading Price" on such
date shall be the last sale price (regular way) of the Common Stock on the date
next preceding such date on which a last sale price (regular way) for the Common
Stock has been so reported.
4.5-16
<PAGE>
"Transfer Agent" means American Stock Transfer & Trust Company or its
duly appointed successor who shall be serving as transfer agent and registrar
for the Common Stock and who shall have been authorized by the Corporation to
act as conversion agent for the Series C Preferred Stock in accordance with the
Transfer Agent Instruction and the name, address and telephone number of which
shall have been given to the holder of the Series C Preferred Stock by notice
from the Corporation.
"Transfer Agent Instruction" means the irrevocable Transfer Agent
Instruction, dated December 8, 1997, from the Corporation to the Transfer Agent
for the benefit of the holders from time to time of shares of Series C Preferred
Stock.
"Two-Day Average Trading Price" means, during any period, the
arithmetic average of the two lowest Trading Prices during such period.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series shall
----------------------
be designated as "Series C Senior Convertible Preferred Stock", and the number
of shares constituting the Series C Preferred Stock shall be 5,000, and shall
not be subject to increase except in accordance with Section 12(b).
SECTION 3. SERIES C PREFERRED STOCK CAPITAL ACCOUNT. The amount to
----------------------------------------
be represented in Series C Preferred Stock capital on the Issuance Date for each
share of Series C Preferred Stock shall be an amount equal to the sum of (a) the
product obtained by multiplying (1) the sum of (A) $1,000 plus (B) the amount of
accrued but unpaid dividends on such share of Series C Preferred Stock to the
date of determination times (2) the Optional Redemption Percentage which would
be applicable to a redemption of one share of Series C Preferred Stock pursuant
to Sections 11(a) and 11(b) on the date of determination if such share were
required to be redeemed by the Corporation pursuant to Sections 11(a) and 11(b)
on such date plus (b) an amount equal to the accrued and unpaid Arrearage
Interest on dividends in arrears (as provided in Section 5) on such share of
Series C Preferred Stock to the date of determination. After the Issuance Date,
to the extent available under applicable law, the Corporation shall at all time
have represented in Series C Preferred Stock capital for each share of Series C
Preferred Stock such amount greater than that provided in the first sentence of
this Section as shall be determined by recomputation from time to time of the
amount thereof specified pursuant to the calculation in the first sentence of
this Section; provided, however, that on and after the date which is 270 days
after the Issuance Date, to the extent available under applicable law, the
amount to be represented in Series C Preferred Stock capital at all times for
each share of Series C Preferred Stock shall be the greater of (i) the amount
determined as aforesaid in this Section and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would be
issuable on conversion in accordance with Section 10(a) of all outstanding
shares of Series C Preferred Stock (determined without regard to any limitation
on conversion contained in the second sentence of Section 10(a)) times (y) the
arithmetic average of the Market Price of the Common Stock for the five Trading
Days ending on the Trading Day immediately preceding the date of determination
pursuant hereto. Upon issuance of shares of Series C Preferred Stock, and
thereafter from time to time as required by this Section 3, subject to the
limitations in Section 154 of the General Corporation Law of the State of
Delaware, the Corporation shall transfer to the capital
4.5-17
<PAGE>
account for the Series C Preferred Stock so much of the net assets of the
Corporation as necessary to comply with this Section 3.
SECTION 4. RANK. Except if approved by the affirmative vote or
----
written consent of the holders of a majority of the outstanding shares of Series
C Preferred Stock pursuant to Section 12(b), the shares of Series C Preferred
Stock shall rank senior to the Common Stock and any shares of any other series
of Preferred Stock or any shares of any other class of preferred stock of the
Corporation, now or hereafter issued, as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) (1) The holders of
---------------------------
shares of Series C Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $50 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest (except as otherwise
provided herein as to dividends in arrears) from the date of original issuance
and shall be payable quarterly on each Dividend Payment Date of each year
commencing March 15, 1998 (except that if any such date is a Saturday, Sunday,
or legal holiday, then such dividend shall be payable on the next succeeding day
that is not a Saturday, Sunday, or legal holiday) to holders of record as they
appear on the stock books of the Corporation on such record dates, not more than
ten nor less than five days preceding the payment dates for such dividends, as
shall be fixed by the Board. Dividends on the Series C Preferred Stock shall be
paid in cash or, subject to the limitations in Section 5(b), shares of Common
Stock of the Corporation or any combination of cash and shares of Common Stock,
at the option of the Corporation as hereinafter provided. The amount of the
dividends payable per share of Series C Preferred Stock for each quarterly
dividend period shall be computed by dividing the annual dividend amount by
four. The amount of dividends payable for the initial dividend period and any
period shorter than a full quarterly dividend period shall be computed on the
basis of a 360-day year of twelve 30-day months. Dividends not paid within
three Trading Days after a Dividend Payment Date, whether or not such dividends
have been declared, will bear Arrearage Interest from such Dividend Payment Date
until paid. No dividends or other distributions, other than dividends payable
solely in shares of any Junior Dividend Stock, shall be paid or set apart for
payment on any shares of Junior Dividend Stock, and no purchase, redemption, or
other acquisition shall be made by the Corporation of any shares of Junior
Dividend Stock unless and until all accrued and unpaid dividends on the Series C
Preferred Stock and Arrearage Interest on dividends in arrears at the rate
specified herein shall have been paid or declared and set apart for payment.
(2) Notwithstanding any other provision of this Certificate of
Designations, if a holder of shares of Series C Preferred Stock shall give a
Conversion Notice in accordance with Section 10, the Corporation shall have the
right, exercisable by written notice (by telephone line facsimile transmission
at such number as such holder of shares of Series C Preferred Stock has
specified in writing to the Corporation for such purposes or, if such holder of
shares of Series C Preferred Stock shall not have specified any such number, by
prepaid overnight courier at such holder's address as it appears on the stock
books of the Corporation) to such holder given within one Trading Day after such
Conversion Notice is given by such holder, in lieu of including the amount of
accrued and unpaid dividends on, and Arrearage Interest with respect to, the
shares of Series C
4.5-18
<PAGE>
Preferred Stock being converted in the calculation of the number of shares of
Common Stock issuable by reason of such conversion, to pay in cash all or any
amount of such accrued and unpaid dividends and Arrearage Interest. If the
Corporation exercises such right, the Corporation shall declare and pay any such
accrued and unpaid dividend and Arrearage Interest to be paid in cash in
accordance with applicable law and shall make payment thereof in cash to such
holder, not later than three Trading Days after such Conversion Notice is given
by such holder, by wire transfer of immediately available funds to such account
as shall be specified by such holder. If the Corporation shall fail to make
timely payment in cash of such accrued and unpaid dividends or Arrearage
Interest in connection with such conversion, then the amount thereof shall be
taken into account in determining the number of shares of Common Stock issuable
upon such conversion.
(3) If at any time any dividend on any Senior Dividend Stock shall be
in default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series C Preferred Stock unless and until all accrued
and unpaid dividends with respect to the Senior Dividend Stock, including the
full dividends for the then current dividend period, shall have been paid or
declared and set apart for payment, without interest. No full dividends shall
be paid or declared and set apart for payment on any Parity Dividend Stock for
any period unless all accrued but unpaid dividends (and Arrearage Interest on
dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series C Preferred Stock. No full dividends shall be paid or declared and set
apart for payment on the Series C Preferred Stock for any period unless all
accrued but unpaid dividends have been, or contemporaneously are, paid or
declared and set apart for payment on the Parity Dividend Stock for all dividend
periods terminating on or prior to the date of payment of such full dividends.
When dividends are not paid in full upon the Series C Preferred Stock and the
Parity Dividend Stock, all dividends paid or declared and set apart for payment
upon shares of Series C Preferred Stock (and Arrearage Interest on dividends in
arrears at the rate specified herein) and the Parity Dividend Stock shall be
paid or declared and set apart for payment pro rata, so that the amount of
dividends paid or declared and set apart for payment per share on the Series C
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Series C Preferred Stock and the Parity Dividend Stock bear to each other.
(4) Any references to "distribution" contained in this Section 5 shall
not be deemed to include any stock dividend or distributions made in connection
with any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole discretion
to issue shares of Common Stock in payment of dividends on the Series C
Preferred Stock, the Corporation shall issue and dispatch, or cause to be issued
and dispatched, by the third Trading Day after such Dividend Payment Date to
each holder of such shares a certificate representing the number of whole shares
of Common Stock arrived at by dividing the per share Computed Price of such
shares of Common Stock into the total amount of cash dividends such holder would
be entitled to receive if the aggregate dividends on the Series C Preferred
Stock held by such holder which are being paid in shares of Common Stock were
being paid in cash; provided, however, that if certificates representing shares
of Common Stock are delivered to holders of Series C Preferred Stock subsequent
to the third
4.5-19
<PAGE>
Trading Day after a Dividend Payment Date, the percentage used to calculate the
Computed Price will be reduced by one for each Trading Day after the third
Trading Day following such Dividend Payment Date to the date of delivery of
shares of Common Stock. No fractional shares of Common Stock shall be issued in
payment of dividends. In lieu thereof, the Corporation shall pay cash in an
amount equal to the product of (x) the Market Price of the Common Stock on the
applicable Dividend Payment Date times (y) the fraction of a share of Common
Stock which would otherwise be issuable by the Corporation; provided, however,
that, to the extent permitted by applicable law, the Corporation may round such
fractional share to a whole share of Common Stock in lieu of such cash payment.
The Corporation shall not exercise its right to issue shares of Common Stock in
payment of dividends on Series C Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid
in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) trading in the Common Stock shall not have occurred on any of
Nasdaq, the AMEX or the NYSE on any Trading Day in the Measurement Period
for the applicable Dividend Payment Date;
(iv) the Computed Price is less than the par value of one share of
Common Stock;
(v) the shares of Common Stock to be issued as a dividend (A) cannot
be sold or transferred without restriction by holders of shares of Series C
Preferred Stock who receive such shares of Common Stock as a dividend
payment and who are not Affiliates of the Corporation or (B) are not listed
on the AMEX, the Nasdaq, the Nasdaq SmallCap Market or the NYSE;
(vi) the issuance of shares of Common Stock in payment of dividends on
Series C Preferred Stock held by any holder of shares of Series C Preferred
Stock would result in such holder (including all Aggregated Persons of such
holder) beneficially owning more than 4.9% of the Common Stock, determined
as provided in the proviso to the second sentence of Section 10(a) hereof
if such holder has notified the Corporation in accordance with the last
paragraph of this Section 5(b) as to the limitation on beneficial ownership
of shares of Common Stock by such holder and a limitation on such
beneficial ownership by such holder shall exist on the date of payment of
such dividend; or
(vii) an Optional Redemption Event shall have occurred and any holder
of shares of Series C Preferred Stock shall at the time of payment of such
dividend be entitled to exercise optional redemption rights under Section
11 by reason of such Optional Redemption Event or the Corporation shall not
have paid the Optional
4.5-20
<PAGE>
Redemption Price of any shares of Series C Preferred Stock as to which any
holder has exercised such optional redemption rights.
Shares of Common Stock issued in payment of dividends on Series C
Preferred Stock pursuant to this Section shall be, and for all purposes shall be
deemed to be, validly issued, fully paid and nonassessable shares of Common
Stock of the Corporation; the issuance and delivery thereof is hereby
authorized; and the dispatch thereof will be, and for all purposes shall be
deemed to be, payment in full of the cumulative dividends to which holders are
entitled on the applicable Dividend Payment Date.
If on the date which is 20 days prior to any Dividend Payment Date a
holder of shares of Series C Preferred Stock estimates that the payment in full
of the dividend payable on such Dividend Payment Date in shares of Common Stock
held by such holder would not be permissible pursuant to the preceding clause
(vi) of this Section 5(b), then such holder shall use reasonable efforts to
inform the Corporation before such Dividend Payment Date of such fact. Each
holder of shares of Series C Preferred Stock will, upon request of the
Corporation at the time of each Dividend Payment Date, inform the Corporation of
as to whether payment of a dividend on such holder's shares of Series C
Preferred Stock in shares of Common Stock would be permissible under the
preceding clause (vi) of this Section 5(b).
(c) Neither the Corporation nor any Subsidiary shall redeem,
repurchase or otherwise acquire in any one transaction or series of related
transactions any shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock if the number of shares so repurchased, redeemed or otherwise
acquired in such transaction or series of related transactions (excluding any
Option Share Surrender) is more than either (x) 5.0% of the number of shares of
Common Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may
be, outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one Person or group of affiliated
Persons, unless (x) at the time of such redemption, repurchase or acquisition
the Registration Statement is effective and available for use by the holders of
shares of Series C Preferred Stock named as selling stockholders in the
Registration Statement, (y) at the time of such redemption, repurchase or
acquisition, no Optional Redemption Event shall have occurred with respect to
which any holder of shares of Series C Preferred Stock shall at such time be
entitled to exercise optional redemption rights under Section 11 or the
Corporation shall have failed to pay the Optional Redemption Price of any shares
of Series C Preferred Stock as to which any holder has exercised such optional
redemption rights and (z) the Corporation or such Subsidiary offers to purchase
for cash from each holder of shares of Series C Preferred Stock at the time of
such redemption, repurchase or acquisition the same percentage of such holder's
shares of Series C Preferred Stock as the percentage of the number of
outstanding shares of Common Stock, Junior Dividend Stock or Junior Liquidation
Stock, as the case may be, to be so redeemed, repurchased or acquired at a
purchase price per share of Series C Preferred Stock equal to the sum of (a) the
product obtained by multiplying (1) the sum of (A) $1,000 plus (B) the amount
of accrued but unpaid dividends on such share of Series C Preferred Stock to the
date of repurchase pursuant to Section 5(c) times (2) the Optional
4.5-21
<PAGE>
Redemption Percentage which would be applicable to a redemption of a share of
Series C Preferred Stock pursuant to Sections 11(a) and 11(b) on the date of
repurchase pursuant to this Section 5(c) if such share were required to be
redeemed by the Corporation pursuant to Sections 11(a) and 11(b) on the date of
repurchase pursuant to this Section 5(c), plus (b) an amount equal to the
accrued and unpaid Arrearage Interest on dividends in arrears (as provided in
Section 5) on such share of Series C Preferred Stock to the date of repurchase
pursuant to this Section 5(c).
(d) Neither the Corporation nor any Subsidiary shall (1) make any
Tender Offer for outstanding shares of Common Stock, unless the Corporation
contemporaneously therewith makes an offer, or (2) enter into an agreement
regarding a Tender Offer for outstanding shares of Common Stock by any Person
other than the Corporation or any Subsidiary of the Corporation, unless such
Person agrees with the Corporation to make an offer, in either such case to each
holder of outstanding shares of Series C Preferred Stock to purchase for cash at
the time of purchase in such Tender Offer the same percentage of shares of
Series C Preferred Stock held by such holder as the percentage of outstanding
shares of Common Stock offered to be purchased in such Tender Offer at a price
per share of Series C Preferred Stock equal to the greater of (i) the quotient
obtained by dividing (a) the sum of (1) $1,000, (2) an amount equal to the
accrued but unpaid dividends on such share of Series C Preferred Stock to the
date of purchase pursuant to this Section 5, and (3) an amount equal to the
accrued and unpaid Arrearage Interest (determined as provided in Section 5) to
the date of purchase pursuant to this Section 5(d) by the Optional Redemption
Percentage which would be applicable to a redemption of shares of Series C
Preferred Stock pursuant to Sections 11(a) and 11(b) on the date of purchase
pursuant to this Section 5(d) if shares of Series C Preferred Stock were
required to be redeemed pursuant to Sections 11(a) and 11(b) on such date and
(ii) an amount equal to the product obtained by multiplying (x) the number of
shares of Common Stock which would, but for the purchase pursuant to such Tender
Offer, be issuable on conversion in accordance with Section 10(a) of one share
of Series C Preferred Stock and any accrued and unpaid dividends thereon and any
accrued and unpaid Arrearage Interest if a Conversion Notice were given by the
holder of such share of Series C Preferred Stock on the date of purchase
pursuant to such Tender Offer (determined without regard to any limitation on
conversion contained in the second sentence of Section 10(a)) times (y) the
price per share of Common Stock offered in such Tender Offer.
SECTION 6. LIQUIDATION PREFERENCE. In the event of a liquidation,
----------------------
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series C Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets constitute stated capital or
surplus of any nature, an amount per share of Series C Preferred Stock equal to
the Liquidation Preference, and no more, before any payment shall be made or any
assets distributed to the holders of Junior Liquidation Stock; provided,
however, that such rights shall accrue to the holders of Series C Preferred
Stock only in the event that the Corporation's payments with respect to the
liquidation preference of the holders of Senior Liquidation Stock are fully met.
After the liquidation preferences of the Senior Liquidation Stock are fully met,
the entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Series C Preferred Stock and any
Parity Liquidation Stock in proportion to the respective preferential amounts to
which each is entitled (but only to the extent of such preferential amounts).
After payment in full of the liquidation price of the shares of the Series C
Preferred Stock and the Parity
4.5-22
<PAGE>
Liquidation Stock, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities, or
other property in and of itself will be considered a liquidation, dissolution,
or winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION.
--------------------
(A) MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT. (1) (A)
--------------------------------------------------
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
Nasdaq, the Corporation shall not be required to issue upon conversion of shares
of Series C Preferred Stock pursuant to Section 10 more than the Maximum Share
Amount, less the aggregate number of shares of Common Stock issued by the
Corporation pursuant to Section 5 as dividends on the Series C Preferred Stock.
The Maximum Share Amount shall be allocated among the shares of Series C
Preferred Stock at the time of initial issuance thereof pro rata based on the
total number of authorized shares of Series C Preferred Stock provided in
Section 2. Each certificate for shares of Series C Preferred Stock initially
issued shall bear a notation as to the number of shares constituting the portion
of the Maximum Share Amount allocated to the shares of Series C Preferred Stock
represented by such certificate for purposes of conversion thereof. The
Corporation shall maintain records which show the number of shares of Common
Stock issued by the Corporation pursuant to Section 5 as dividends on the shares
of Series C Preferred Stock represented by each certificate, which records shall
be controlling in the absence of manifest error.
(B) Upon surrender of any certificate for shares of Series C Preferred
Stock for transfer or re-registration thereof (or, at the option of the holder
of such certificate, for conversion pursuant to Section 10(a) of less than all
of the shares of Series C Preferred Stock represented thereby), the Corporation
shall make a notation on the new certificate issued upon such transfer or re-
registration or evidencing such unconverted shares, as the case may be, as to
the number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series C Preferred Stock evidenced by
such new certificate (including, without limitation, by taking into account the
number of shares of Common Stock issued by the Corporation pursuant to Section 5
as a dividend on the shares of Series C Preferred Stock represented by the
certificate so surrendered and not previously reflected on the certificate so
surrendered, as shown on the records maintained by the Corporation). If any
certificate for shares of Series C Preferred Stock is surrendered for split-up
into two or more certificates representing an aggregate number of shares of
Series C Preferred Stock equal to the number of shares of Series C Preferred
Stock represented by the certificate so surrendered (as reduced by any
contemporaneous conversion of shares of Series C Preferred Stock represented by
the certificate so surrendered), each certificate issued on such split-up shall
bear a notation of the portion of the Maximum Share Amount allocated thereto
determined by pro rata allocation of the remaining portion of the Maximum Share
Amount allocated to the certificate so surrendered. If any shares of Series C
Preferred Stock represented by a single certificate are converted in full
pursuant to Section 10, all of the portion of the Maximum Share Amount allocated
to such shares of Series C Preferred Stock which remains unissued after such
conversion shall be re-allocated pro rata to the outstanding shares of Series C
Preferred Stock held of record by the holder of record at the close of business
on the date
4.5-23
<PAGE>
of such conversion of the shares of Series C Preferred Stock so converted, and
if there shall be no other shares of Series C Preferred Stock held of record by
such holder at the close of business on such date, then such portion of the
Maximum Share Amount shall be allocated pro rata among the shares of Series C
Preferred Stock outstanding at the close of business on such date.
(2) (A) If a Maximum Share Amount Inconvertibility or a Registration
Restriction Inconvertibility occurs, then the Corporation shall promptly, but in
no event later than five Business Days after each such occurrence, give an
Inconvertibility Notice to each holder of shares of Series C Preferred Stock (by
telephone line facsimile transmission at such number as such holder of shares of
Series C Preferred Stock shall have specified in writing to the Corporation for
such purposes or, if such holder of shares of Series C Preferred Stock shall not
have specified any such number, by overnight courier or first class mail,
postage prepaid, at such holder's address as the same appears on the stock books
of the Corporation) and any holder of shares of Series C Preferred Stock may at
any time after such occurrence give an Inconvertibility Notice to the
Corporation. If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder of Series C Preferred Stock shall have
given any Inconvertibility Notice, then within the applicable Redemption
Election Period the holder receiving or giving or entitled to receive, as the
case may be, such Inconvertibility Notice shall have the right by a Redemption
Election given to the Corporation (which may be contained in the
Inconvertibility Notice given by such holder) to direct the Corporation to
redeem the portion of such holder's outstanding shares of Series C Preferred
Stock (which, if applicable, shall be all of such holder's outstanding shares of
Series C Preferred Stock) as shall not, on the Business Day prior to the date of
such redemption, (x) be convertible into shares of Common Stock by reason of a
Maximum Share Amount Inconvertibility or (y) be convertible into shares of
Common Stock which are covered by the Registration Statement and available for
sale by such holder pursuant to the Registration Statement by reason of a
Registration Restriction Inconvertibility, in each such case, within five
Business Days after such holder gives a Redemption Election to the Corporation,
at a price per share equal to the Share Limitation Redemption Price; provided,
however, that no such redemption shall be made with respect to a Registration
Restriction Inconvertibility if, prior to the expiration of the applicable
Redemption Election Period, the Corporation and such holder shall, by a
Mandatory Redemption Waiver, waive the Corporation's obligation to make such
redemption. If a holder of shares of Series C Preferred Stock gives a
Redemption Election to the Corporation by reason of a Maximum Share Amount
Inconvertibility and, prior to the date the Corporation is required to redeem
such holder's shares of Series C Preferred Stock, the Corporation would have
been able, within the limitations set forth in Section 7(a)(1), to convert all
of such holder's outstanding shares of Series C Preferred Stock (determined
without regard to the limitation, if any, on such holder contained in the second
sentence of Section 10(a)) on any two Trading Days within any period of three
consecutive Trading Days commencing after the period of ten consecutive Trading
Days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series C Preferred Stock, as the case
may be, had such holder given a Conversion Notice for all of such holder's
outstanding shares of Series C Preferred Stock on each of such two Trading Days
within such three-Trading Day period, then the Corporation shall not be required
to redeem any shares of Series C Preferred Stock held by such holder by reason
of such Inconvertibility Notice.
4.5-24
<PAGE>
(B) An Inconvertibility Notice or a Redemption Election given by a
holder of shares of Series C Preferred Stock shall be deemed for all purposes to
be in proper form unless the Corporation notifies such holder in writing within
one Business Day after an Inconvertibility Notice or a Redemption Election has
been given (which notice shall specify all defects in the Inconvertibility
Notice or Redemption Election), and any Inconvertibility Notice or Redemption
Election containing any such defect shall nonetheless be effective on the date
given if such holder promptly undertakes in writing to correct all such defects.
Whether or not a holder gives such undertaking, no such claim of error shall
limit or delay performance of the Corporation's obligation to redeem all
inconvertible shares of Series C Preferred Stock as to which a Redemption
Election has been given and which shares are not in dispute.
(3) Notwithstanding the giving of any Inconvertibility Notice by the
Corporation to one or more holders of Series C Preferred Stock or the giving or
the absence of any Inconvertibility Notice or Redemption Election by one or more
holders of the Series C Preferred Stock or any redemption of shares of Series C
Preferred Stock pursuant to Section 7(a)(2), thereafter the provisions of
Section 7(a)(2) shall continue to be applicable on any occasion unless, in the
case of a Maximum Share Amount Inconvertibility, the Stockholder Approval shall
have been obtained or waived by Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation shall
make payment in immediately available funds of the applicable Share Limitation
Redemption Price to the holder of shares of Series C Preferred Stock to be
redeemed to or upon the order of such holder as specified by such holder in
writing to the Corporation at least one Business Day prior to such Share
Limitation Redemption Date. If the Corporation is required to redeem all or any
portion of a holder's outstanding shares of Series C Preferred Stock pursuant to
this Section 7(a), the Corporation shall make payment to such holder of the
shares of Series C Preferred Stock to be redeemed in respect of each share of
Series C Preferred Stock to be redeemed of an amount equal to the Share
Limitation Redemption Price. Upon redemption of less than all of the shares of
Series C Preferred Stock evidenced by a particular certificate, promptly, but in
no event later than three Business Days after surrender of such certificate to
the Corporation, the Corporation shall issue a replacement certificate for the
shares of Series C Preferred Stock evidenced by such certificate which have not
been redeemed. Only whole shares of Series C Preferred Stock may be redeemed.
If the Corporation shall fail to pay the Share Limitation Redemption Price of
any shares of Series C Preferred Stock in full when due, then the amount thereof
shall bear interest at the rate of 12% per annum until paid.
(5) If the Corporation shall have failed to pay in full the Share
Limitation Redemption Price (other than by reason of a Maximum Share Amount
Inconvertibility), the Optional Redemption Price or the Registration Redemption
Price for any share of Series C Preferred Stock when the same is due and
payable, without in any way relieving the Corporation of its obligation to pay
such amount, the holder of such share of Series C Preferred Stock shall have the
right to convert such share of Series C Preferred Stock into Common Stock in
accordance with Section 10(a) (subject to the numerical limit contained in the
second sentence of Section (10(a)); provided, however, that the shares of Common
Stock received by the holder upon any such conversion in certain circumstances
may be subject to restrictions on resale by such holder arising under applicable
securities laws to the extent not registered for resale by the holder pursuant
to the Registration Statement.
4.5-25
<PAGE>
(6) If the Corporation shall have failed to pay in full the Share
Limitation Redemption Price for any portion (which, if applicable, may be all)
of any holder's shares of Series C Preferred Stock when the same is due and
payable by reason of a Maximum Share Amount Inconvertibility and the Stockholder
Approval shall not have been obtained, without in any way relieving the
Corporation of its obligation to pay such amount in accordance with Sections
7(a)(2) and 7(a)(4), upon the written request of the Majority Holders, the
Corporation shall use its best efforts to obtain a waiver from Nasdaq of the
requirement for Stockholder Approval for issuance of all shares of Common Stock
issuable upon conversion of the Series C Preferred Stock. If such waiver, in
form reasonably satisfactory to the Majority Holders, is not obtained within 15
days after the Corporation's receipt of such request from the Majority Holders,
then the Corporation promptly shall call a special meeting of its stockholders,
to be held not later than 60 days after the expiration of the foregoing 15-day
period, to seek the Stockholder Approval for issuance of all shares of Common
Stock issuable upon conversion of the Series C Preferred Stock in accordance
with Section 10.
(7) If a holder of shares of Series C Preferred Stock converts all or
any portion of such holder's shares of Series C Preferred Stock pursuant to
Section 7(a)(5), the amount of the Share Limitation Redemption Price or the
Optional Redemption Price, as the case may be, due to such holder with respect
to the number of shares of Series C Preferred Stock so converted shall be
reduced by $1,000 (plus accrued and unpaid dividends and Arrearage Interest
thereon) for each share of Series C Preferred Stock so converted.
(B) NO OTHER MANDATORY REDEMPTION. The shares of Series C Preferred
-----------------------------
Stock shall not be subject to mandatory redemption by the Corporation except as
provided in this Section 7 and in Section 11.
SECTION 8. SINKING FUND. There shall be no sinking fund for the
------------
redemption or repurchase of shares of Series C Preferred Stock.
SECTION 9. REDEMPTION AT OPTION OF CORPORATION.
-----------------------------------
(A) OPTIONAL REDEMPTION. (1) So long as (w) the Corporation shall be
-------------------
in compliance in all material respects with its obligations to the holders of
the Series C Preferred Stock (including its obligations under the Subscription
Agreement and the provisions of this Certificate of Designations), (x) the
Registration Statement shall be effective on the date the Corporation gives the
Redemption Notice and on the Redemption Date, (y) on the date the Corporation
gives the Redemption Notice and on the Redemption Date no Optional Redemption
Event shall have occurred with respect to which any holder of shares of Series C
Preferred Stock shall be entitled at such time to exercise optional redemption
rights under Section 11 or the Corporation shall have failed to pay the Optional
Redemption Price of any shares of Series C Preferred Stock as to which any
holder has exercised such optional redemption rights and (z) in the case of a
redemption for which the Redemption Price is the amount determined in accordance
with clause (1) of the definition of Redemption Price, on the date the
Corporation gives the Redemption Notice and on the Redemption Date, the
Corporation has Cash and Cash Equivalent Balances (excluding investment
securities) which are sufficient, after taking into account the Corporation's
cash requirements during the period from the date the Redemption Notice is given
to the
4.5-26
<PAGE>
Redemption Date, to pay the Redemption Price of the shares of Series C Preferred
Stock to be redeemed, the Corporation shall have the right to redeem all or any
part of the outstanding shares of Series C Preferred Stock (other than any
shares of Series C Preferred Stock which, at the time of such redemption (i)
shall be inconvertible as provided in Section 7(a) or (ii) the holder has
exercised redemption rights pursuant to Sections 11(a) and 11(b)) pursuant to
this Section 9(a) at the Redemption Price. In order to exercise it right of
redemption under this Section 9(a), the Corporation shall give a Redemption
Notice to the holders of shares of Series C Preferred Stock not less than 20 or
more than 60 days prior to the Redemption Date. Each holder of shares of Series
C Preferred Stock shall surrender the certificates for the shares of Series C
Preferred Stock to the Corporation prior to payment of the Redemption Price by
the Corporation to such holder. On the Redemption Date (or such later date as a
holder of shares of Series C Preferred Stock shall surrender the certificate
therefor to the Corporation), the Corporation shall pay to or upon the order of
each holder of shares of Series C Preferred Stock by wire transfer of
immediately available funds to such account as shall be specified for such
purpose by such holder in an amount equal to the Redemption Price of all of such
holder's shares of Series C Preferred Stock to be redeemed.
(2) Notwithstanding the giving of a Redemption Notice, each holder of
shares of Series C Preferred Stock shall be entitled to convert in accordance
with Section 10 any shares of Series C Preferred Stock which are to be redeemed
at any time prior (1) the Redemption Date or (2) if the Corporation fails to pay
the Redemption Price in full to such holder on the Redemption Date, the date on
which the Corporation pays the Redemption Price in full to such holder for all
shares of Series C Preferred Stock to be redeemed from such holder.
(3) Any redemption of shares of Series C Preferred Stock pursuant to
this Section 9(a) shall be made as nearly as practical pro rata from all holders
of shares of Series C Preferred Stock outstanding.
(4) Upon receipt by the Corporation from a holder of shares of Series
C Preferred Stock of certificates for shares of Series C Preferred Stock
evidencing a greater number of shares of Series C Preferred Stock than the
number of shares of Series C Preferred Stock to be redeemed in accordance with
this Section 9(a), the Corporation shall issue and, within three Trading Days
after such surrender, deliver to or upon the order of such holder a new
certificate for the balance of shares of Series C Preferred Stock, if any.
(B) ISSUANCE OF REDEMPTION PRICE NOTE. In the case of any redemption
---------------------------------
of shares of Series C Preferred Stock pursuant to Section 9(c) for which the
Redemption Date is on or after the date which is three years after the Issuance
Date, the Corporation shall have the right, exercisable at any time after the
applicable Redemption Notice is given and on or prior to such Redemption Date,
in lieu of payment in cash of the applicable Redemption Price of any share of
Series C Preferred Stock to be redeemed to pay such Redemption Price by issuing
to the holder of such share of Series C Preferred Stock a Redemption Price Note
in the principal amount herein provided. The principal amount of the Redemption
Price Note issued to any holder of shares of Series C Preferred Stock in
connection with any redemption to which this Section 9(b) applies shall be equal
to the product obtained by multiplying (a) the sum of (1) $1,000, (2) the amount
of accrued and unpaid dividends on the share of Series C Preferred Stock to be
redeemed to the applicable
4.5-27
<PAGE>
Redemption Date plus (3) the amount of Arrearage Interest, if any, on the amount
referred to in the immediately preceding clause (2) to the applicable Redemption
Date times (b) the number of shares of Series C Preferred Stock held by such
holder in respect of which the Redemption Price is being paid on the applicable
Redemption Date by such issuance of a Redemption Price Note. Notwithstanding the
issuance of a Redemption Price Note to any holder of shares of Series C
Preferred Stock, the Corporation shall remain liable for payment of all unpaid
amounts due to any holder of shares of Series C Preferred Stock which are not
included in computing the principal amount of the Redemption Price Note issued
to such holder, including, without limitation, any Optional Redemption Price,
Redemption Price and Share Limitation Redemption Price.
(C) NO OTHER REDEMPTION AT THE OPTION OF THE CORPORATION. Except as
----------------------------------------------------
otherwise specifically provided in Section 9(a), the Corporation shall not have
any right to redeem any shares of Series C Preferred Stock at the option of the
Corporation.
SECTION 10. CONVERSION.
----------
(A) CONVERSION AT OPTION OF HOLDER. The holders of the Series C
------------------------------
Preferred Stock may convert at any time all or from time to time any part of
their outstanding shares of Series C Preferred Stock into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided. Commencing on the Issuance Date, and at any time
thereafter, each share of Series C Preferred Stock may be converted at the
office of the Conversion Agent or at such other additional office or offices, if
any, as the Board of Directors may designate, into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) $1,000,
(ii) the amount of accrued but unpaid dividends to the applicable Conversion
Date on the share of Series C Preferred Stock being converted (unless the amount
thereof is paid in cash by the Corporation as provided in Section 5(a)(2)), and
(iii) the amount of accrued but unpaid Arrearage Interest on the dividends on
the share of Series C Preferred Stock being converted in arrears to the
applicable Conversion Date (unless the amount thereof is paid in cash by the
Corporation as provided in Section 5(a)(2)), at the rate provided in Section
5(a), by (y) the Conversion Price on the applicable Conversion Date; provided,
however, that in no event shall any holder of shares of Series C Preferred Stock
be entitled to convert any shares of Series C Preferred Stock in excess of that
number of shares of Series C Preferred Stock upon conversion of which the sum of
(1) the number of shares of Common Stock beneficially owned by such holder
(including shares of Common Stock beneficially owned by all Aggregated Persons
of such holder) (other than shares of Common Stock deemed beneficially owned by
such holder or any Aggregated Person of such holder through the ownership of (x)
unconverted shares of Series C Preferred Stock and (y) the unconverted or
unexercised portion of any instrument which contains limitations similar to
those set forth in this sentence) and (2) the number of shares of Common Stock
issuable upon the conversion of the number of shares of Series C Preferred Stock
with respect to which the determination in this proviso is being made, would
result in beneficial ownership by such holder and all Aggregated Persons of such
holder of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the proviso to the immediately preceding sentence. For purposes
4.5-28
<PAGE>
of the proviso to the second preceding sentence, the Corporation shall be
entitled to rely, and shall be fully protected in relying, on any statement or
representation made by a holder of shares of Series C Preferred Stock to the
Corporation in connection with a particular conversion, without any obligation
on the part of the Corporation to make any inquiry or investigation or to
examine its records or the records of any transfer agent for the Common Stock
and without any liability of the Corporation with respect thereto.
(B) OTHER PROVISIONS. (1) The holders of shares of Series C Preferred
----------------
Stock at the close of business on the record date for any dividend payment to
holders of Series C Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof after record date for such Dividend
Payment Date or the Corporation's default in payment of the dividend due on such
Dividend Payment Date; provided, however, that the holder of shares of Series C
Preferred Stock converted during the period between the close of business on any
record date for a dividend payment and the opening of business on the
corresponding Dividend Payment Date must pay to the Corporation, within five
days after receipt by such holder, an amount equal to the dividend payable on
such shares on such Dividend Payment Date if such dividend is paid by the
Corporation to such holder. A holder of shares of Series C Preferred Stock on a
record date for a dividend payment who (or whose transferee) converts any of
such shares into shares of Common Stock on or after such Dividend Payment Date
will receive the dividend payable by the Corporation on such shares of Series C
Preferred Stock on such date, and the converting holder need not make any
payment of the amount of such dividend in connection with such conversion of
shares of Series C Preferred Stock. Except as provided above, no adjustment
shall be made in respect of cash dividends on Common Stock or Series C Preferred
Stock that may be accrued and unpaid at the date of conversion of shares of
Series C Preferred Stock.
(2) The right of the holders of Series C Preferred Stock to convert
their shares shall be exercised by delivering (which may be made by telephone
line facsimile transmission) a Conversion Notice to the Conversion Agent at the
address or telephone line facsimile transmission number provided in or pursuant
to the Transfer Agent Instruction. The number of shares of Common Stock to be
issued upon each conversion of shares of Series C Preferred Stock shall be the
number set forth in the applicable Conversion Notice, which number shall be
conclusive absent manifest error. The Corporation shall notify a holder who has
given a Conversion Notice of any claim of manifest error within one Trading Day
after such holder gives such Conversion Notice, and no such claim of error shall
limit or delay performance of the Corporation's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Corporation notifies a holder of shares of Series C Preferred Stock being
converted within one Trading Day after a Conversion Notice has been given (which
notice shall specify all defects in such Conversion Notice), and any Conversion
Notice containing any such defect shall nonetheless be effective on the date
given if the converting holder promptly undertakes in writing to correct all
such defects promptly.
(3) If a holder of Series C Preferred Stock elects to convert any
shares of Series C Preferred Stock in accordance with Section 10(a), such holder
shall not be required to surrender the certificate(s) representing such shares
of Series C Preferred Stock physically to the Corporation unless all of the
shares of Series C Preferred Stock
4.5-29
<PAGE>
represented thereby are so converted. Each holder of shares of Series C
Preferred Stock and the Corporation shall maintain records showing the number of
shares so converted and the dates of such conversions or shall use such other
method, satisfactory to such holder and the Corporation, so as to not require
physical surrender of such certificates upon each such conversion. In the event
of any dispute or discrepancy, such records of the Corporation shall be
controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any shares of Series C Preferred Stock evidenced by a
particular certificate therefor are converted as aforesaid, the holder of Series
C Preferred Stock may not transfer the certificate(s) representing such shares
of Series C Preferred Stock unless such holder first physically surrenders such
certificate(s) to the Corporation, whereupon the Corporation will forthwith
issue and deliver upon the order of such holder of shares of Series C Preferred
Stock new certificate(s) of like tenor, registered as such holder of shares of
Series C Preferred Stock (upon payment by such holder of shares of Series C
Preferred Stock of any applicable transfer taxes) may request, representing in
the aggregate the remaining number of shares of Series C Preferred Stock
represented by such certificate(s). Each holder of shares of Series C Preferred
Stock, by acceptance of a certificate for such shares, acknowledges and agrees
that (1) by reason of the provisions of this paragraph, following conversion of
any shares of Series C Preferred Stock represented by such certificate, the
number of shares of Series C Preferred Stock represented by such certificate may
be less than the number of shares stated on such certificate and by reason of
Section 7(a), the number of shares of Common Stock from the Maximum Share Amount
allocated to the shares of Series C Preferred Stock represented by such
certificate for purposes of conversion of such shares may be less than the
number thereof stated on such certificate and (2) the Corporation may place one
or more legends on the certificates for shares of Series C Preferred Stock which
refers to or describes the provisions of this paragraph and Section 7(a).
(4) The Corporation shall pay any transfer tax arising in connection
with any conversion of shares of Series C Preferred Stock except that the
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery upon conversion of
shares of Common Stock or other securities or property in a name other than that
of the holder of the shares of the Series C Preferred Stock being converted, and
the Corporation shall not be required to issue or deliver any such shares or
other securities or property unless and until the Person or Persons requesting
the issuance thereof shall have paid to the Corporation the amount of any such
tax or shall have established to the satisfaction of the Corporation that such
tax has been paid.
(5) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series C Preferred Stock
outstanding upon the basis hereinbefore provided are at all times reserved by
the Corporation (or any successor corporation), free from preemptive rights, for
such conversion, subject to the provisions of the next succeeding paragraph. If
the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series C Preferred Stock shall be convertible as herein
provided, the Corporation shall at the same time also make proper provision so
that thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from
4.5-30
<PAGE>
preemptive rights, for conversion of the outstanding Series C Preferred Stock on
the new basis. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all of the
outstanding shares of Series C Preferred Stock, the Corporation promptly shall
seek such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(6) (A) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned Subsidiary) in which the
Corporation is not the surviving corporation, or in case of any sale or transfer
of all or substantially all of the assets of the Corporation, or in the case of
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property, the Corporation shall
make appropriate provision or cause appropriate provision to be made so that
each holder of shares of Series C Preferred Stock then outstanding shall have
the right thereafter to convert such shares of Series C Preferred Stock into the
kind of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or share exchange by a holder of shares
of Common Stock into which such shares of Series C Preferred Stock could have
been converted immediately prior to the effective date of such consolidation,
merger, sale, transfer, or share exchange and on a basis which preserves the
economic benefits of the conversion rights of the holders of shares of Series C
Preferred Stock on a basis as nearly as practical as such rights exist hereunder
prior thereto. If, in connection with any such consolidation, merger, sale,
transfer, or share exchange, each holder of shares of Common Stock is entitled
to elect to receive securities, cash, or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series C Preferred Stock the right to elect the securities, cash, or
other assets into which the Series C Preferred Stock held by such holder shall
be convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made, and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless it shall have complied with the provisions of this paragraph. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, or share exchanges.
(B) Whenever the Corporation shall propose to take any of the actions
specified in this Section 10(b)(6), the Corporation shall cause a notice to be
mailed at least 20 days prior to the date on which the books of the Corporation
will close or on which the security holders entitled to participate in such
transaction will be determined, to the holders of record of the outstanding
Series C Preferred Stock on the date of such notice. Such notice shall specify
the action proposed to be taken by the Corporation and the date as of which
holders of record of the Common Stock shall participate in any such actions or
be entitled to exchange their Common Stock for securities or other property, as
the case may be.
(7) Upon receipt by the Conversion Agent from a holder of shares of
Series C Preferred Stock of a Conversion Notice, the Corporation shall issue and
deliver or cause to be issued and delivered to or upon the order of such holder
certificates for the Common Stock issuable upon such conversion by the close of
business on the third Trading Day after such Conversion Notice is received, and
as of the close of business on the date
4.5-31
<PAGE>
of such receipt such holder (or such holder's assignee) shall be deemed to be
the holder of record of the Common Stock issuable upon such conversion, and all
rights with respect to the shares of Series C Preferred Stock so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash, or other assets, as herein provided, on such conversion. If a
holder of Series C Preferred Stock shall have given a Conversion Notice as
provided herein, the Corporation's obligation to issue and deliver the
certificates for Common Stock shall be absolute and unconditional, irrespective
of any action or inaction by the converting holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any Person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Corporation to the
holder of record, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the holder or any other Person
of any obligation to the Corporation, or any violation or alleged violation of
law by such holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Corporation to
such holder in connection with such conversion. If the Corporation fails to
issue and deliver the certificates for the Common Stock to the holder converting
shares of Series C Preferred Stock as and when required to do so, in addition to
any other liabilities the Corporation may have hereunder and under applicable
law (1) the Corporation shall pay or reimburse such holder on demand for all
out-of-pocket expenses, including, without limitation, reasonable fees and
expenses of legal counsel incurred by such holder as a result of such failure,
(2) the percentage used to calculate the Conversion Price applicable to such
conversion shall be reduced by 2.5 percentage points from the percentage
otherwise used to calculate the Conversion Price applicable to such conversion
(or, in the case of a conversion for which the Conversion Price is based on
clause (1) of, or the first proviso to, the definition of the term Conversion
Price, such Conversion Price applicable to such conversion shall be reduced by
2.5 percent of the Conversion Price otherwise set forth in such clause (1) or
proviso, as the case may be) and (3) such holder may by written notice (which
may be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing) given at any time
prior to delivery to such holder of the certificates for the shares of Common
Stock issuable upon such conversion of shares of Series C Preferred Stock,
rescind such conversion, whereupon such holder shall have the right to convert
such shares of Series C Preferred Stock thereafter in accordance herewith.
(8) No fractional shares of Common Stock shall be issued upon
conversion of Series C Preferred Stock but, in lieu of any fraction of a share
of Common Stock and the related Right which would otherwise be issuable in
respect of the aggregate number of shares of Series C Preferred Stock
surrendered for conversion at one time by the same holder, the Corporation shall
pay in cash to such holder at the time of issuance of shares of Common Stock in
connection with such conversion an amount equal to the product of (i) the
arithmetic average of the Market Price of a share of Common Stock on the three
consecutive Trading Days ending on the Trading Day immediately preceding the
Conversion Date times (ii) such fraction of a share of Common Stock; provided,
however, that, to the extent permitted by applicable law, the Corporation may
round such fractional share to a whole share of Common Stock in lieu of such
cash payment.
SECTION 11. REDEMPTION UPON AN OPTIONAL REDEMPTION EVENT.
--------------------------------------------
4.5-32
<PAGE>
(A) REDEMPTION RIGHT UPON OPTIONAL REDEMPTION EVENT. If an Optional
-----------------------------------------------
Redemption Event occurs, then each holder of shares of Series C Preferred Stock
shall have the right, at such holder's option, to require the Corporation to
redeem all of such holder's shares of Series C Preferred Stock, or any portion
thereof, on the date that is three Business Days after the date of the Holder
Notice given with respect to such Optional Redemption Event. Each holder of
shares of Series C Preferred Stock shall have the right to require the
Corporation to redeem all or any such portion of such holder's shares of Series
C Preferred Stock if an Optional Redemption Event occurs at any time while any
of such holder's shares of Series C Preferred Stock are outstanding at a price
equal to the Optional Redemption Price.
(B) NOTICES; METHOD OF EXERCISING OPTIONAL REDEMPTION RIGHTS, ETC.
-------------------------------------------------------------
(1) On or before the fifth Business Day after the occurrence of an Optional
Redemption Event, the Corporation shall give to each holder of outstanding
shares of Series C Preferred Stock a Corporation Notice of the occurrence of
such Optional Redemption Event and of the redemption right set forth herein
arising as a result thereof. The Corporation Notice shall set forth:
(i) the date by which the optional redemption right must be
exercised, and
(ii) a description of the procedure (set forth below) which each such
holder must follow to exercise such holder's optional redemption right.
No failure of the Corporation to give a Corporation Notice or defect therein
shall limit the right of any holder of shares of Series C Preferred Stock to
exercise the optional redemption right or affect the validity of the proceedings
for the redemption of such holder's shares of Series C Preferred Stock.
(2) To exercise its optional redemption right, each holder of
outstanding shares of Series C Preferred Stock shall deliver to the Corporation
on or before the thirtieth day after a Corporation Notice is given to such
holder (or if no Corporation Notice has been given to such holder, within forty
days after such holder first learns of the Optional Redemption Event) a Holder
Notice to the Corporation setting forth the name of such holder, and member of
such holder's shares of Series C Preferred Stock to be redeemed. A Holder Notice
may be revoked by such holder giving such Holder Notice by giving notice of such
revocation to the Corporation at any time prior to the time the Corporation pays
the Optional Redemption Price to such holder.
(C) OTHER. (1) If the Corporation fails to redeem on the applicable
-----
Redemption Date a holder's shares of Series C Preferred Stock (or portion
hereof) as to which the redemption right has been properly exercised pursuant to
this Section 11, then the Optional Redemption Price for the number of shares of
Series C Preferred Stock specified in the Holder Notice shall bear interest to
the extent not prohibited by applicable law from the applicable Redemption Date
until paid at the rate of 12% per annum.
(2) Upon redemption pursuant to this Section 11 of less than all of
the shares of Series C Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three Business Days after surrender of such
certificate to the Corporation,
4.5-33
<PAGE>
the Corporation shall issue and deliver to such holder a replacement certificate
for the shares of Series C Preferred Stock evidenced by such certificate which
have not been redeemed.
(3) A Holder Notice given by a holder of shares of Series C Preferred
Stock shall be deemed for all purposes to be in proper form unless the
Corporation notifies such holder in writing within three Business Days after
such Holder Notice has been given (which notice shall specify all defects in the
Holder Notice), and any Holder Notice containing any such defect shall
nonetheless be effective on the date given if such holder promptly undertakes to
correct all such defects. No such claim of error shall limit or delay
performance of the Corporation's obligation to redeem all shares of Series C
Preferred Stock not in dispute.
SECTION 12. VOTING RIGHTS; CERTAIN RESTRICTIONS.
-----------------------------------
(A) VOTING RIGHTS; CONSENTS AND WAIVERS. Except as otherwise required
------------------------------------
by law or expressly provided herein, shares of Series C Preferred Stock shall
not be entitled to vote on any matter. The Majority Holders may, by written
instrument signed by the Majority Holders, waive (1) any right of the holders of
shares of Series C Preferred Stock under this Certificate of Designations or, to
the extent permitted by applicable law, under applicable law and (2) compliance
by the Corporation with any of its obligations under this Certificate of
Designations.
(B) CERTIFICATE OF INCORPORATION; CERTAIN STOCK. The affirmative vote
-------------------------------------------
or consent of the holders of a majority of the outstanding shares of the Series
C Preferred Stock, voting separately as a class, will be required for (1) any
amendment, whether in connection with a merger or consolidation or otherwise, of
the Corporation's Certificate of Incorporation, as amended, if the amendment
would increase or decrease the aggregate number of authorized shares of Series C
Preferred Stock, increase or decrease the par value of the shares of Series C
Preferred Stock, or alter or change the powers, preferences, or special rights
of the shares of Series C Preferred Stock so as to affect them adversely, or (2)
the creation and issuance of any Senior Dividend Stock, Senior Liquidation
Stock, Parity Dividend Stock or Parity Liquidation Stock; provided, however,
that any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and adversely
such powers, preferences, or special rights and any such increase or creation
and issuance may be made without any such vote by the holders of Series C
Preferred Stock except as otherwise required by law.
(C) REPURCHASES OF SERIES C PREFERRED STOCK. The Corporation shall
---------------------------------------
not repurchase or otherwise acquire any shares of Series C Preferred Stock
(other than pursuant to Section 7(a), Section 9(a) or Section 11) unless the
Corporation offers to repurchase or otherwise acquire simultaneously a pro rata
portion of each holder's shares of Series C Preferred Stock for cash at the same
price per share.
(D) OTHER. So long as any shares of Series C Preferred Stock are
-----
outstanding:
4.5-34
<PAGE>
(1) PAYMENT OF OBLIGATIONS. The Corporation will pay and discharge,
----------------------
and will cause each Subsidiary to pay and discharge, all their respective
material obligations and liabilities, including, without limitation, tax
liabilities, except where the same may be contested in good faith by appropriate
proceedings.
(2) MAINTENANCE OF PROPERTY; INSURANCE. (A) The Corporation will
----------------------------------
keep, and will cause each Subsidiary to keep, all material property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(B) The Corporation will maintain, and will cause each Subsidiary to
maintain, with financially sound and responsible insurance companies, insurance
in at least such amounts and against such risks as are usually insured against
in the same geographic region by companies of comparable size that are engaged
in the same or a similar business, subject to customary deductibles.
(3) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Corporation
------------------------------------------------
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as conducted by the Corporation and the Subsidiaries at
the time this Certificate of Designations is filed with the Secretary of State
of the State of Delaware, and will preserve, renew and keep in full force and
effect, and will cause each Subsidiary to preserve, renew and keep in full force
and effect, their respective corporate existence and their respective material
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided, however, that nothing in this Section 12(d)(3) shall
prohibit (w) the Corporation from merging or consolidating with a Subsidiary,
(x) liquidation of any Subsidiary, (y) any merger or consolidation solely
between or among Subsidiaries, or (z) a consolidation, merger, sale or transfer
of assets or share exchange permitted by Section 10(b)(6) in connection with
which the Corporation complies with Section 10(b)(6).
(4) COMPLIANCE WITH LAWS. The Corporation will comply, and will cause
--------------------
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, decisions, orders and requirements of
governmental authorities and courts (including, without limitation,
environmental laws) except (i) where compliance therewith is contested in good
faith by appropriate proceedings or (ii) where non-compliance therewith could
not reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Corporation and Subsidiaries taken as a whole.
(5) INVESTMENT COMPANY ACT. The Corporation will not be or become an
----------------------
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended, or any successor provision.
(6) TRANSACTIONS WITH AFFILIATES. The Corporation will not, and will
----------------------------
not permit any Subsidiary, directly or indirectly, to pay any funds to or for
the account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
4.5-35
<PAGE>
connection with, any joint enterprise or other joint arrangement with, any
Affiliate of the Corporation, except, on terms to the Corporation or such
Subsidiary no less favorable than terms that could be obtained by the
Corporation or such Subsidiary from a Person that is not an Affiliate of the
Corporation, as determined in good faith by the Board of Directors.
SECTION 13. OUTSTANDING SHARES. For purposes of this Certificate of
------------------
Designations, all shares of Series C Preferred Stock shall be deemed outstanding
except (i) from the date a Conversion Notice is given by a holder of Series C
Preferred Stock, all shares of Series C Preferred Stock converted into Common
Stock (unless the Corporation shall default in its obligation to issue and
deliver shares of Common Stock upon such conversion); (ii) from the date of
registration of transfer, all shares of Series C Preferred Stock held of record
by the Corporation or any Subsidiary or Affiliate (as defined herein) of the
Corporation (other than any original holder of shares of Series C Preferred
Stock) and (iii) from the Share Limitation Redemption Date or Optional
Redemption Date all shares of Series C Preferred Stock which are redeemed, so
long as in each case the Share Limitation Redemption Price or the Optional
Redemption Price, as the case may be, of such shares of Series C Preferred Stock
shall have been paid by the Corporation as and when required hereby.
SECTION 14. FORMS OF NOTICES.
----------------
(A) FORM OF NOTICE OF CONVERSION OF SERIES C SENIOR CONVERTIBLE
-----------------------------------------------------------
PREFERRED STOCK.
- ---------------
NOTICE OF CONVERSION
OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK
OF
NAPRO BIOTHERAPEUTICS, INC.
TO: American Stock Transfer & Trust Company,
as Conversion Agent
40 Wall Street
New York, New York 10005
Attention: Ms. Paula Caripoli
Facsimile No.: (718) 921-8336
With a copy to:
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, Colorado 80301
Attention: Vice President and Chief Financial Officer
Facsimile No.: (303) 530-1296
4.5-36
<PAGE>
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock"), of NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Corporation"), the undersigned hereby elects to convert
____________________________ shares of the Preferred Stock together with accrued
and unpaid dividends thereon in the amount of $______________________________
(unless the Corporation pays the amount thereof in cash) and Arrearage Interest
in the amount of $______________________________ into shares of Common Stock,
$.0075 par value (the "Common Stock"), of the Corporation, at a Conversion Price
per share of Common Stock of $______________________________ or such other
securities into which the Preferred Stock is currently convertible. Capitalized
terms used in this Notice and not otherwise defined herein have the respective
meanings provided in the Certificate of Designations of the Preferred Stock.
(2) Please issue certificates for the number of shares of Common Stock
or other securities into which such number of shares of Preferred Stock is
convertible in the name(s) specified immediately below or, if additional space
is necessary, on an attachment hereto:
______________________ ____________________
Name Name
______________________ ____________________
Address Address
______________________ ____________________
SS or Tax ID Number SS or Tax ID Number
(3) The undersigned hereby represents to the Corporation that the
exercise of conversion rights contained in this Notice does not violate the
provisions of Section 10(a) of the Certificate of Designations relating to
beneficial ownership in excess of 4.9% of the Common Stock.
(4) If the shares of Common Stock issuable upon conversion of the
Preferred Stock have not been registered for resale under the 1933 Act, as
amended (the "Act"), the undersigned represents and warrants that (i) the shares
of Common Stock not so registered are being acquired for the account of the
undersigned for investment, and not with a view to, or for resale in connection
with, the public distribution thereof other than pursuant to registration under
the 1933 Act or an exemption from registration under the 1933 Act, and that the
undersigned has no present intention of distributing or reselling the shares of
Common Stock not so registered other than pursuant to registration under the
1933 Act or an exemption from registration under the 1933 Act and (ii) the
undersigned is an "accredited investor" as defined in Regulation D under the
1933 Act. The undersigned further agrees that (A) the shares of Common Stock
not so registered shall not be sold or transferred unless either (i) they first
shall have been registered under the 1933 Act or (ii) the Corporation first
shall have been furnished with an opinion of legal counsel reasonably
satisfactory to the Corporation to the effect that such sale or transfer is
exempt from the registration requirements of the 1933 Act and (B) the
Corporation may place a legend on
4.5-37
<PAGE>
the certificate(s) for the shares of Common Stock not so registered to that
effect and place a stop-transfer restriction in its records relating to the
shares of Common Stock not so registered, all in accordance with the
Subscription Agreement.
Date _________________________ ____________________________________
Signature of Holder
(Must be signed exactly as name
appears on the Preferred Stock
Certificate.)
(B) FORM OF CORPORATION INCONVERTIBILITY NOTICE.
-------------------------------------------
CORPORATION INCONVERTIBILITY NOTICE
(SECTION 7(A)(2) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
TO: ____________________________
(Name of Holder)
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock"), NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Corporation"), hereby notifies the above-named Holder:
(a) On ___________________ (fill in date) five Inconvertibility Days
had occurred in a period of ten Trading Days and on such date
_______________ (fill in number) shares of Preferred Stock and the related
accrued and unpaid dividends and Arrearage Interest on dividends, if any,
became inconvertible by reason of the occurrence of five Inconvertibility
Days within a period of ten consecutive Trading Days.
(b) The five Inconvertibility Days covered by this Notice and the
applicable Conversion Price on each such day are as follows:
____________________, 199__ $_____________
____________________, 199__ $_____________
____________________, 199__ $_____________
____________________, 199__ $_____________
____________________, 199__ $_____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
4.5-38
<PAGE>
[_] (a) Maximum Share Amount Inconvertibility
(b) Registration Restriction Inconvertibility
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations for the
Preferred Stock.
Date _________________________ NAPRO BIOTHERAPEUTICS, INC.
By______________________________
Title:
(C) FORM OF HOLDER INCONVERTIBILITY NOTICE.
--------------------------------------
HOLDER INCONVERTIBILITY NOTICE
(SECTION 7(A)(2) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock"), the undersigned (the "Holder"), hereby notifies
NaPro BioTherapeutics, Inc., a Delaware corporation (the "Corporation"):
(a) On __________________ (fill in date) five Inconvertibility Days
had occurred in a period of ten Trading Days and on such date
_______________ (fill in number) shares of Preferred Stock and the related
accrued and unpaid dividends and Arrearage Interest, if any, became
inconvertible by reason of the occurrence of five Inconvertibility Days
within a period of ten consecutive Trading Days.
(b) The five Inconvertibility Days covered by this Notice and the
applicable Conversion Price on each such day are as follows:
____________________, 199__ $_____________
____________________, 199__ $_____________
____________________, 199__ $_____________
____________________, 199__ $_____________
4.5-39
<PAGE>
____________________, 199__ $_____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
(a) Maximum Share Amount Inconvertibility
(b) Registration Restriction Inconvertibility
(3) If the following date and amounts are completed in this Notice,
the Holder hereby directs the Corporation to redeem the number of shares of
Preferred Stock set forth below in accordance with Section 7(a) of the
Certificate of Designations as set forth below:
(a) Number of shares of Preferred Stock to be redeemed:
____________________ (fill in)
(b) On ______________________ (fill in Share Limitation Redemption
Date), the Corporation shall pay the Holder the Share Limitation Redemption
Price per share of Preferred Stock to be redeemed. Check (I) or (II):
(I) The Share Limitation Redemption Price per share is
$___________________. The Share Limitation Redemption Price is
equal to the sum of (1) the product obtained by multiplying
(A)(i) $1,000.00 plus (ii) $___________________ of accrued and
unpaid dividends on such share to such Share Limitation
Redemption Date times (B) 115% plus (2) $__________________ of
accrued and unpaid Arrearage Interest to such Share Limitation
Redemption Date.
(II) The Share Limitation Redemption Price is based on the proviso in
the definition of that term in the Certificate of Designations.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations for the
Preferred Stock.
Date _________________________ NAME OF HOLDER:
________________________________
By______________________________
Title:
(D) FORM OF REDEMPTION ELECTION.
---------------------------
HOLDER REDEMPTION NOTICE
4.5-40
<PAGE>
(SECTION 7(A)(2) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock"), the undersigned (the "Holder") hereby notifies
NaPro BioTherapeutics, Inc., a Delaware corporation (the "Corporation"), that
the Holder is exercising its right to require the Corporation to redeem
________________ shares of Preferred Stock in accordance with Section 7(a) of
the Certificate of Designations of the Preferred Stock. On
______________________ (fill in Share Limitation Redemption Date), the
Corporation shall pay the Holder the Share Limitation Redemption Price per share
of Preferred Stock to be redeemed. Check (a) or (b):
(a) The Share Limitation Redemption Price per share is
$___________________. The Share Limitation Redemption Price is
equal to the sum of (1) the product obtained by multiplying (A)
(i) $1,000.00 plus (ii) $___________________ of accrued and unpaid
dividends on such share to such Share Limitation Redemption Date
times (B) 115% plus (2) $___________________ of accrued and unpaid
Arrearage Interest to such Share Limitation Redemption Date.
(b) The Share Limitation Redemption Price is based on the proviso in
the definition of that term in the Certificate of Designations.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date _________________________ NAME OF HOLDER:
_________________________________
By _____________________________
(E) FORM OF MANDATORY REDEMPTION WAIVER.
-----------------------------------
MANDATORY REDEMPTION WAIVER
(SECTION 7(A)(2) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
NaPro BioTherapeutics, Inc., a Delaware corporation (the
"Corporation"), and the undersigned holder (the "Holder") of shares of the
Corporation's Series C Senior Convertible Preferred Stock (the "Preferred
Stock") hereby agree as follows:
4.5-41
<PAGE>
1. The Corporation's or the Holder's Inconvertibility Notice given on
__________________ (the "Waiver Commencement Date"), if any, is hereby
rescinded and the Holder's shares of Preferred Stock shall not be redeemed
pursuant to Section 7(a) of the Certificate of Designations of the Preferred
Stock by reason of such Inconvertibility Notice or any inconvertibility of any
of the Holders' shares of Preferred Stock which may arise pursuant to Section
7(a) of the Certificate of Designations of the Preferred Stock during the period
ending on the date set forth below in this Section 1 (the "Waiver Period").
Date for end of Waiver Period: ______________, 199__
2. If this Mandatory Redemption Waiver is given in connection with a
Registration Restriction Inconvertibility, promptly, but in no event later than
the date which is 15 days after the date of this Mandatory Redemption Waiver,
the Corporation shall file a Registration Statement with the SEC relating to the
resale by the Holder of the number of Registrable Securities (as defined in the
Holder's Subscription Agreement) set forth below in this Section 2, which
Registration Statement may be constituted in any manner which does not have the
effect of suspending or terminating the effectiveness of any and all
Registration Statements filed by the Corporation pursuant to Section 8(b)(1) of
the Subscription Agreement or otherwise with respect to the Registrable
Securities which names the Holder as a selling stockholder, and shall thereafter
use its best efforts to obtain effectiveness of such Registration Statement.
Such Registration Statement shall in all respects be deemed a Registration
Statement (as defined in the Certificate of Designations of the Preferred
Stock).
Number of Registrable Securities: ______________________________
3. If the Corporation shall default in the performance of its
obligations set forth herein, this Mandatory Redemption Waiver shall cease to be
of further force and effect and the rights, liabilities and obligations of the
parties shall be restored to those which would have existed in the absence of
this Mandatory Redemption Waiver.
4. This Agreement shall be governed by the laws of the State of New
York. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings provided in the Certificate of Designations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers or other representatives thereunto
duly authorized as of the respective dates set forth below.
NAPRO BIOTHERAPEUTICS, INC.
By______________________________
Title:
Date:
NAME OF HOLDER:
4.5-42
<PAGE>
By
Title:
Date:
(F) FORM OF REDEMPTION NOTICE.
-------------------------
REDEMPTION NOTICE
(SECTION 9(A) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
TO: ____________________________________________________
(Name of Holder)
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock"), NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Corporation"), hereby notifies the above-named holder (the
"Holder") that the Corporation is exercising its right to redeem
________________ shares of Preferred Stock held by the Holder in accordance with
Section 9(a) of the Certificate of Designations of the Preferred Stock. On
______________________ (fill in Redemption Date), the Corporation shall pay the
Holder the Redemption Price per share of Preferred Stock to be redeemed. Check
(a) or (b):
(a) The Redemption Price per share is $___________________. The
Redemption Price is equal to the sum of (1) the product obtained
by multiplying (A) (i) $1,000.00 plus (ii) $___________________ of
accrued and unpaid dividends on such share to such Share
Limitation Redemption Date times (B) 115% plus (2)
$___________________ of accrued and unpaid Arrearage Interest to
such Redemption Date.
(b) The Redemption Price is $1,000 per share of Preferred Stock.
(2) Upon surrender to the Corporation of certificate for the shares of
Preferred Stock to be redeemed (but in no event earlier than the Redemption
Date), the Corporation will make payment of the applicable Redemption Price in
accordance with the Certificate of Designations.
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
NAPRO BIOTHERAPEUTICS, INC.
4.5-43
<PAGE>
By _____________________________
Title:
(G) FORM OF CORPORATION NOTICE.
--------------------------
CORPORATION NOTICE
(SECTION 11(B)(1) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
TO: ______________________________________________________
(Name of Holder)
(1) An Optional Redemption Event described in the Certificate of
Designations of the Series C Senior Convertible Preferred Stock (the "Preferred
Stock") of NaPro BioTherapeutics, Inc., a Delaware corporation (the
"Corporation"), occurred on ____________________, ______. As a result of such
Optional Redemption Event, the above-named holder (the "Holder") is entitled to
exercise its optional redemption rights pursuant to Section 11(b)(2) of the
Certificate of Designations.
(2) The Holder's optional redemption right must be exercised on or
before ______________, _______.
(3) At or before the date set forth in the preceding paragraph (2),
the Holder must deliver to the Corporation:
(a) a Holder Notice, in the form set forth in Section 14(h) of the
Certificate of Designations; and
(b) the certificates for the shares of Preferred Stock to be redeemed,
duly endorsed for transfer to the Corporation the shares to be redeemed.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date _________________________ NAPRO BIOTHERAPEUTICS, INC.
By______________________________
Title:
(H) FORM OF HOLDER NOTICE.
---------------------
HOLDER NOTICE
(SECTION 11(B)(2) OF CERTIFICATE OF DESIGNATIONS OF
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK)
4.5-44
<PAGE>
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Series C Senior Convertible Preferred
Stock (the "Preferred Stock") of NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Corporation"), the undersigned hereby elects to exercise its
right to require redemption by the Corporation pursuant to Sections 11(a) and
11(b) of ____________ shares of Preferred Stock. Check (a) or (b):
(a) The Optional Redemption Price per share is equal to an amount in
cash equal to the sum of (1) the product obtained by multiplying
(a) the sum of (i) $1,000 plus (ii) an amount equal to
$______________ of accrued but unpaid dividends on each share of
Series C Preferred Stock to be redeemed to the date of redemption
times (b) the _______________% (fill in applicable Optional
Redemption Percentage), plus (2) an amount equal to
$______________ of accrued and unpaid Arrearage Interest on
dividends in arrears on each share of Series C Preferred Stock
(determined in accordance with Section 5(a)) to the date of
redemption pursuant to Section 11. The aggregate Optional
Redemption Price of all shares of Preferred Stock to be redeemed
is $___________________.
(b) The Optional Redemption Price is based on the proviso in the
definition of that term in the Certificate of Designations.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date: NAME OF HOLDER:
By __________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears on the stock certificate.)
(I) FORM OF REDEMPTION PRICE NOTE.
-----------------------------
THIS REDEMPTION PRICE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS REDEMPTION
PRICE NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE
4.5-45
<PAGE>
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. THIS REDEMPTION PRICE NOTE
MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3.7.
NAPRO BIOTHERAPEUTICS, INC.
REDEMPTION PRICE NOTE
---------------------
New York, New York $_____________
, 200_
FOR VALUE RECEIVED, NAPRO BIOTHERAPEUTICS, INC., a Delaware
corporation (hereinafter called the "Corporation"), hereby promises to pay to
____________________________, [Address], or registered assigns (the "Holder") or
order, the sum of ____________________________________ Dollars ($_____________),
on December 5, 2005, and to pay interest on the unpaid principal balance hereof
at the rate of thirteen and three quarters percent (13.75%) per annum from the
date hereof, until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. Any amount of principal of or
interest on this Redemption Price Note which is not paid when due shall bear
interest at the rate of twenty percent (20%) per annum from the due date thereof
until the same is paid ("Default Interest"). Interest shall be payable on the
1st day of each June and December, commencing on the first of such dates
following the issuance of this Redemption Price Note, and at maturity (the
"Interest Payment Dates"). Interest on this Redemption Price Note shall be
computed on the basis of a 360-day year of twelve months of thirty days each and
actual days elapsed.
All payments of principal of and interest on this Redemption Price
Note shall be made in lawful money of the United States of America, or, at the
option of the Corporation and subject to the provisions of this Redemption Price
Note, interest payable on the Interest Payment Dates may be paid in whole or in
part in fully paid and nonassessable shares of Common Stock, $.0075 par value,
and the related Preferred Share Purchase Rights or any shares of capital stock
and related rights of the Corporation into which such stock shall hereafter be
changed or reclassified (the "Common Stock"). All cash payments shall be made
by wire transfer of immediately available funds to such account as the Holder
may from time to time designate by notice to the Corporation in accordance with
the provisions of this Redemption Price Note. Whenever any amount expressed to
be due by the terms of this Redemption Price Note is due on any day which is not
a business day, the same shall instead be due on the next succeeding day which
is not a business day and, in the case of any Interest Payment Date which is not
the date on which this Redemption Price Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Redemption Price Note,
the term "business day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or required
by law or executive order to remain closed.
The obligations of the Corporation under this Redemption Price Note
shall rank in right of payment on a parity with all other unsubordinated
obligations of the Corporation for indebtedness for borrowed money or the
purchase price of property. This
4.5-46
<PAGE>
Redemption Price Note is issued pursuant to the terms of the Series C Senior
Convertible Preferred Stock, $.001 par value (the "Series C Preferred Stock"),
issued by the Corporation.
The following terms shall apply to this Redemption Price Note:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 PREPAYMENT. The Corporation shall have the right to prepay this
----------
Redemption Price Note in whole at any time or in any part from time to time.
1.2 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If the
-------------------------------------------------
Corporation exercises its option to make a payment of interest on this
Redemption Price Note wholly or partly in shares of Common Stock (herein
sometimes called the "Stock Payment Option"), the issuance of shares of Common
Stock upon such exercise of the Stock Payment Option shall have been authorized
by the Board of Directors of the Corporation.
(b) The Corporation shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Redemption Price
Note if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held in the
Corporation's treasury, is insufficient to pay the portion of such interest
to be paid in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock pursuant
to the Stock Payment Option or the public resale of such shares by the
Holder would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) the shares of Common Stock to be issued upon exercise of
the Stock Payment Option have not been authorized for listing, upon
official notice of issuance, on the principal securities exchange on which
the Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of the Common
Stock;
(v) an Event of Default (as defined herein) has occurred and is
continuing; or
(vi) the Common Stock is neither (i) listed or admitted for
trading on a national securities exchange nor (ii) quoted on the Nasdaq
National Market.
(c) If the Stock Payment Option is elected, the Corporation shall
issue and dispatch or cause to be dispatched to the Holder one or more
certificates for the aggregate
4.5-47
<PAGE>
number of whole shares of Common Stock determined by dividing the per share
Computed Price of the Common Stock on the applicable Interest Payment Date into
the total amount of lawful money of the United States of America which the
Holder would receive if the aggregate amount of interest on this Redemption
Price Note which is being paid in shares of Common Stock were being paid in such
lawful money; provided, however, that if in connection with any such election
-------- -------
the Corporation shall have failed to deliver the appropriate number of shares of
Common Stock to the Holder within three business days after the applicable
Interest Payment Date, then the Corporation shall not be entitled to use the
Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Corporation shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in this Note, from such Interest Payment Date until paid. No
fractional shares will be issued in payment of interest on this Redemption Price
Note. In lieu thereof, the Corporation may issue a number of shares of Common
Stock which reflects a rounding up to the next whole number or may pay lawful
money of the United States of America. The shares of Common Stock issued or to
be issued by the Corporation in payment of interest on this Redemption Price
Note are sometimes referred to herein as the "Payment Shares."
(d) If the Corporation exercises the Stock Payment Option with respect
to a payment of interest on this Redemption Price Note, the Corporation shall
deliver to the Holder, on or prior to the date on which Payment Shares for such
payment of interest on this Redemption Price Note are to be received by the
Holder, a Corporation Certificate setting forth (i) the total amount of the
interest payment to which the Holder is entitled, (ii) the portion of the
interest payment being made in Payment Shares, (iii) the number of Payment
Shares allocable to such payment, as calculated pursuant to this Section 1.2,
(iv) any rounding adjustment to such number or any payment necessary to be made
pursuant to Section 1.2(c), (v) a brief statement of the facts requiring such
adjustment, (vi) the number of Payment Shares issuable with respect to each $100
of interest on this Redemption Price Note after such adjustment and (vii) a
brief statement that none of the conditions set forth in Section 1.2(b) has
occurred and is existing. Such Corporation Certificate shall be accompanied by
the certificates, each duly issued in the name of the Holder, representing the
Payment Shares. Such Corporation Certificate shall be conclusive evidence of
the correctness of the calculation of the number of Payment Shares allocable to
the payments to which such Corporation Certificate relates and of any
adjustments to such number made pursuant to this Section 1.2 in the absence of
manifest error. In addition, on or before the pertinent payment date, the
Corporation shall cause the transfer agent for the Common Stock to prepare and
issue the certificates representing the Payment Shares in the name of the Holder
before being so delivered by the Corporation.
(e) The Payment Shares, when issued pursuant to and in compliance with
this Section 1.2, shall be, and for all purposes shall be deemed to be, validly
issued, fully paid and nonassessable shares of Common Stock; the issuance and
delivery thereof is in all respects hereby authorized; and the issuance thereof,
together with lawful money of the United States of America, if any, paid in lieu
of fractional shares of such Common Stock, will be, and for all purposes shall
be deemed to be, in full discharge and satisfaction of the Corporation's
obligation to pay the interest on this Redemption Price Note to which such
Payment Shares relate.
4.5-48
<PAGE>
(f) As used in this Redemption Price Note, the following terms shall
have the meanings provided herein:
"Certificate of Designations" means the Certificate of Designations of
Series C Senior Convertible Preferred Stock of the Corporation.
"Corporation Certificate" means a certificate of the Corporation
signed by an Officer.
"Computed Price" for any date means arithmetic average of the per
share Trading Price during the Measurement Period with respect to such
date.
"Measurement Period" means, with respect to any date, the period of
five consecutive Trading Days ending three Trading Days prior to such date.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer or the Chief Financial
Officer of the Corporation.
"Subscription Agreement" means the Subscription Agreement, dated as of
December 8, 1997, by and between the Corporation and the original holder of
the Series C Preferred Stock.
"Trading Day" means a day on whichever of (x) the national securities
exchange or (y) the Nasdaq, in either such case which at the time
constitutes the principal securities market for the Common Stock, is open
for general trading.
"Trading Price" on any date means the last sale price (regular way)
for one share of the Common Stock on such date, on the first applicable
among the following: (a) the national securities exchange on which the
shares of Common Stock are listed which constitutes the principal
securities market for the Common Stock or (b) the Nasdaq National Market,
in either case as reported by Bloomberg, L.P. (subject to equitable
adjustment from time to time on terms reasonably acceptable to the
Corporation and the Holder for (i) stock splits, (ii) stock dividends,
(iii) combinations, (iv) capital reorganizations, (v) issuance to all
holders of Common Stock of rights or warrants to purchase shares of Common
Stock at a price per share less than the Trading Price which would
otherwise be applicable, (vi) the distribution by the Corporation to all
holders of Common Stock of evidences of indebtedness of the Corporation or
cash (other than regular quarterly cash dividends), (vii) tender offers by
the Corporation or any subsidiary of the Corporation or other repurchases
of shares of Common Stock in one or more transactions which, individually
or in the aggregate, result in the purchase of more than ten percent of the
Common Stock outstanding and (viii) similar events relating to the Common
Stock, in each such case which occur during a particular Measurement Period
and on a basis consistent with the adjustments provided in the definition
of Trading Price in the Certificate of Designations).
4.5-49
<PAGE>
(9) "Transaction Documents" means this Redemption Price Note, the
Certificate of Designations, the Subscription Agreement and the other
agreements, instruments and documents contemplated hereby and thereby.
ARTICLE II
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
2.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Corporation fails (a)
------------------------------------
to pay the principal hereof when due, whether at maturity, upon redemption, upon
acceleration or otherwise or (b) to pay any installment of interest hereon when
due and, in the case of this clause (b) of this Section 2.1 only, such failure
continues for a period of ten (10) days after the due date thereof;
2.2 BREACH OF COVENANT. The Corporation breaches any material
------------------
covenant or other material term or condition of this Redemption Price Note
(other than as specifically provided in Section 2.1 hereof), and such breach
continues for a period of twenty (20) days after written notice thereof to the
Corporation from the Holder or within 60 days after delivery of such notice if
and only if, such default is reasonably capable of cure and during such 60-day
period, the Corporation has been diligently taking action to cure such default
and such cure cannot be completed within such 20-day period;
2.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Corporation made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Subscription Agreement) shall be false or
misleading in any material respect when made;
2.4 CERTAIN VOLUNTARY PROCEEDINGS. The Corporation or any material
-----------------------------
subsidiary of the Corporation shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due or shall admit in writing its inability generally to pay its debts as they
become due;
2.5 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
-------------------------------
proceeding shall be commenced against the Corporation or any material subsidiary
of the Corporation seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or
4.5-50
<PAGE>
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
consecutive days;
2.6 JUDGMENTS. Any court of competent jurisdiction shall enter one
---------
or more final judgments against the Corporation or any subsidiary of the
Corporation or any of their respective properties or other assets in an
aggregate amount in excess of $500,000, which is not vacated, bonded, stayed,
discharged, satisfied or waived for a period of thirty (30) consecutive days; or
2.7 DEFAULT UNDER OTHER AGREEMENTS. (a) The Corporation or any
------------------------------
subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Redemption Price Note) which indebtedness has an
outstanding principal amount in excess of $750,000 individually or $1,500,000 in
the aggregate for the Corporation and its subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created or (ii) default in the observance or performance of any
agreement, covenant or condition relating to any such indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any such indebtedness of the Corporation or any of its subsidiaries
shall, in accordance with its terms, be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled or required payment
prior to the stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Corporation shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Corporation shall, pay to the Holder an amount equal to
the sum of (A) the outstanding principal amount of this Redemption Price Note
plus (B) accrued and unpaid interest on such principal amount to the date of
- ----
payment plus (C) accrued and unpaid Default Interest, if any, on the amount
----
referred to in the immediately preceding clause (B) at the rate provided in this
Redemption Price Note to the date of payment and all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity.
ARTICLE III
MISCELLANEOUS
3.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
--------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege
4.5-51
<PAGE>
preclude other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
3.2 NOTICES. Any notice herein required or permitted to be given
-------
shall be in writing and may be personally served, sent by telephone line
facsimile transmission or delivered by courier or sent by United States mail and
shall be deemed to have been given upon receipt if personally served, sent by
telephone line facsimile transmission or sent by courier or three (3) days after
being deposited in the United States mail, certified, with postage pre-paid and
properly addressed, if sent by mail. For the purposes hereof, the address of
the Holder shall be as shown on the records of the Corporation (telephone line
facsimile transmission number (___) ___-____); and the address of the
Corporation shall be 6304 Spine Road, Unit A, Boulder, Colorado 80301,
Attention: Vice President and Chief Financial Officer (telephone line facsimile
transmission number (303) 530-1296). Both the Holder and the Corporation may
change the address for service by service of written notice to the other as
herein provided.
3.3 AMENDMENT PROVISION. The term "Redemption Price Note" and all
-------------------
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
3.4 ASSIGNABILITY. This Redemption Price Note shall be binding upon
-------------
the Corporation and its successors and assigns, and shall inure to the benefit
of and be binding upon the Holder and its successors and permitted assigns.
3.5 CERTAIN EXPENSES. The Corporation shall pay on demand all
----------------
expenses incurred by the Holder, including reasonable attorneys' fees and
expenses, as a consequence of, or in connection with, (x) the negotiation,
preparation or execution of any amendment or modification of the Transaction
Documents, (y) any default or breach of any of the Corporation's obligations set
forth in the Transaction Documents and (z) the enforcement or restructuring of
any right of, including the collection of any payments due, the Holder under the
Transaction Documents, including any action or proceeding relating to such
enforcement or any order, injunction or other process seeking to restrain the
Corporation from paying any amount due the Holder.
3.6 GOVERNING LAW. This Redemption Price Note shall be governed by
-------------
the internal laws of the State of New York, without regard to the principles of
conflict of laws.
3.7 TRANSFER OF REDEMPTION PRICE NOTE. This Redemption Price Note
---------------------------------
has not been and is not being registered under the provisions of the Act or any
state securities laws and this Redemption Price Note may not be sold,
transferred, pledged or hypothecated unless (1) the transferee is a person who
is an "accredited investor" as defined in Regulation D under the Act and (2) the
Holder shall have delivered to the Corporation an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Corporation, to the effect that
this Redemption Price Note may be sold, transferred, pledged or hypothecated
pursuant to an exemption from such registration. Prior to any such transfer,
the transferee shall (x) have made written representations and warranties to
4.5-52
<PAGE>
the Corporation with respect to such transferee in the form of Sections 3(a) and
3(c) of the Note Purchase Agreement and (y) shall have further represented in
writing to the Corporation that such transferee has requested and received from
the Corporation all information relating to the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Corporation deemed relevant by such transferee; that such transferee has
been afforded the opportunity to ask questions of the Corporation concerning the
foregoing and has had the opportunity to obtain and review the Registration
Statement and the prospectus included therein, each as amended or supplemented
to the date of transfer to such transferee, and the reports and other
information concerning the Corporation which at the time of such transfer have
been filed by the Corporation with the SEC pursuant to the 1934 Act and which
are incorporated by reference in such prospectus as of the date of such
transfer.
IN WITNESS WHEREOF, the Corporation has caused this Redemption Price
Note to be signed in its name by its duly authorized officer on the day and in
the year first above written.
NAPRO BIOTHERAPEUTICS, INC.
By
Name:
Title:
[END OF REDEMPTION PRICE NOTE]
4.5-53
<PAGE>
IN WITNESS WHEREOF, NaPro BioTherapeutics, Inc. has caused this
certificate to be signed by Gordon H. Link, its Chief Financial Officer, as of
the 8th day of December, 1997.
NAPRO BIOTHERAPEUTICS, INC.
By /s/ Gordon H. Link
4.5-54
<PAGE>
EXHIBIT 4.6
FORM OF SUBSCRIPTION AGREEMENT
DATED DECEMBER 8, 1997
SUBSCRIPTION AGREEMENT
DATED AS OF DECEMBER 8, 1997
BY AND BETWEEN
NAPRO BIOTHERAPEUTICS, INC.
AND
ADVANTAGE FUND II, LTD.
___________________
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK
<PAGE>
SUBSCRIPTION AGREEMENT
SERIES C SENIOR CONVERTIBLE PREFERRED STOCK
NAPRO BIOTHERAPEUTICS, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS..................................................... 1
2. AGREEMENT TO SUBSCRIBE.......................................... 6
(a) Subscription............................................. 6
(b) Form of Payment.......................................... 6
(c) Closing.................................................. 6
3. BUYER'S REPRESENTATIONS, WARRANTIES, ETC........................ 6
(a) Purchase for Investment.................................. 6
(b) Accredited Investor...................................... 6
(c) Reoffers and Resales..................................... 7
(d) Company Reliance......................................... 7
(e) Information Provided..................................... 7
(f) Absence of Approvals..................................... 7
(g) Subscription Agreement................................... 7
4. COMPANY'S REPRESENTATIONS, WARRANTIES, ETC...................... 8
(a) Organization and Authority............................... 8
(b) Qualifications........................................... 8
(c) Capitalization........................................... 8
(d) Material Losses.......................................... 9
(e) Concerning the Shares and the Common Stock............... 9
(f) Corporate Authorization.................................. 9
(g) Non-contravention........................................ 10
(h) Approvals................................................ 10
(i) Information Provided..................................... 10
(j) Conduct of Business...................................... 10
(k) SEC Filings.............................................. 11
(l) Absence of Certain Proceedings........................... 11
(m) Liabilities.............................................. 11
(n) Absence of Certain Changes............................... 11
(o) Intellectual Property.................................... 12
(p) Internal Accounting Controls............................. 12
(q) Compliance with Law...................................... 12
(r) Properties............................................... 13
(s) Labor Relations.......................................... 13
(t) Insurance................................................ 13
(u) ERISA Compliance......................................... 13
(v) Tax Matters.............................................. 13
(w) Investment Company....................................... 13
(x) Absence of Brokers, Finders, Etc......................... 13
(y) No Solicitation.......................................... 14
</TABLE>
-4.6-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(z) Certain Issuances of Securities.......................... 14
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS........................... 14
(a) Transfer Restrictions.................................... 14
(b) Restrictive Legends...................................... 15
(c) Transfer Agent Instructions.............................. 16
(d) Nasdaq Listing........................................... 16
(e) Form D................................................... 16
(f) State Securities Laws.................................... 17
(g) Future Financings and Related Actions.................... 17
(h) Limitation on Certain Actions............................ 17
(i) Use of Proceeds.......................................... 17
(j) Best Efforts............................................. 18
(k) Preferred Stock.......................................... 18
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE........ 18
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE................ 18
8. REGISTRATION RIGHTS............................................. 20
(a) Mandatory Registration................................... 20
(b) Obligations of the Company............................... 20
(c) Obligations of the Buyer and other Investors............. 23
(d) Expenses of Registration................................. 24
(e) Reports under 1934 Act................................... 24
9. INDEMNIFICATION AND CONTRIBUTION................................ 25
(a) Indemnification.......................................... 25
(b) Contribution............................................. 26
10. MISCELLANEOUS................................................... 26
(a) Governing Law............................................ 26
(b) Headings................................................. 26
(c) Severability............................................. 26
(d) Notices.................................................. 27
(e) Counterparts............................................. 27
(f) Entire Agreement......................................... 27
(g) Waiver................................................... 27
(h) Amendment................................................ 27
(i) Further Assurances....................................... 27
(j) Assignment of Registration Rights........................ 28
(k) Expenses................................................. 28
(l) Termination.............................................. 28
(m) Survival................................................. 29
(n) Public Statements, Press Releases, Etc................... 29
(o) Construction............................................. 29
</TABLE>
EXHIBITS
Exhibit A Disclosure Statement
-4.6-3-
<PAGE>
ANNEXES
Annex I Form of Certificate of Designations
Annex II Joint Escrow Instructions
Annex III Form of Transfer Agent Instruction
Annex IV Form of Common Stock Purchase Warrants
Annex V Form of Opinion of Company General Counsel to Be Delivered on
Closing Date
Annex VI Form of Opinion of Company General Counsel to be Delivered on
Closing Date
Annex VII Form of Irrevocable Instruction to Be Given by the Company to
the Transfer Agent Upon Effectiveness of SEC Registration
Annex VIII Form of Opinion of Counsel to Be Delivered to Transfer Agent
Upon Effectiveness of SEC Registration
-4.6-4-
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 8, 1997 (this
"Agreement"), by and between NAPRO BIOTHERAPEUTICS, INC., a Delaware corporation
(the "Company"), with headquarters located at 6304 Spine Road, Unit A, Boulder,
Colorado 80301, and ADVANTAGE FUND II, LTD., a British Virgin Islands
corporation (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of non-voting Series C Senior
Convertible Preferred Stock of the Company which will be convertible into shares
of Common Stock (such capitalized term and all other capitalized terms used in
this Agreement having the respective meanings provided in Section 1); and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) As used in this Agreement, the terms "Agreement", "Buyer" and
"Company" shall have the respective meanings assigned to such terms in the
introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Agreement.
(c) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
"Certificate of Designations" means the Certificate of Designations of
the Series C Senior Convertible Preferred Stock in the form attached hereto as
ANNEX I, as the same is filed with the Secretary of State of the State of
Delaware.
"Claims" means any losses, claims, damages, liabilities or expenses
(joint or several), incurred by a Person or entity.
<PAGE>
"Closing Date" means 12:00 noon, New York City time, on December 8,
1997 or such other time as is mutually agreed between the Company and the Buyer.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder and published interpretations thereof.
"Common Shares" means the Conversion Shares, the Dividend Shares and
the Warrant Shares.
"Common Stock" means the Common Stock, par value $.0075 per share, of
the Company.
"Company Proprietary Rights" means all patents, patent applications,
inventions, trademarks, trade names, applications for registration of
trademarks, service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
businesses of the Company and the Subsidiaries as now conducted, as proposed to
be conducted or as described in this Agreement.
"Conversion Notice" means the Notice of Conversion substantially in
the form of Section 15(a) of the Certificate of Designations.
"Conversion Price" shall have the meaning provided in the Certificate
of Designations.
"Conversion Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable upon conversion of the Preferred
Shares.
"Disclosure Statement" means the Disclosure Statement prepared by the
Company and attached hereto as EXHIBIT A which relates to the representations,
warranties, covenants and agreements of the Company set forth in Section 4 and
which refers to the section and subsection numbers of this Agreement to which
the information set forth in the Disclosure Statement relates.
"Dividend Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable in payment of dividends on the
Preferred Shares.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder and published interpretations thereof.
"Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions.
"Equity Securities" means Common Stock or securities convertible into,
exchangeable for, or otherwise entitling the holder to acquire, any Common
Stock.
"Indemnified Party" means the Company, each of its directors, each of
its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling
<PAGE>
securities pursuant to the Registration Statement or any of its directors or
officers or any Person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act.
"Indemnified Person" means each Investor who holds Registrable
Securities and each Investor who sells such Registrable Securities in the manner
permitted under this Agreement, the directors, if any, of such Investor, the
officers, if any, of such Investor, each Person, if any, who controls any
Investor within the meaning of the 1933 Act or the 1934 Act, any underwriter (as
defined in the 1933 Act) acting on behalf of an Investor who participates in the
offering of Registrable Securities of such Investor in accordance with the plan
of distribution contained in the Prospectus, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each Person, if
any, who controls any such underwriter within the meaning of the 1933 Act or the
1934 Act.
"Inspector" means any attorney, accountant or other agent retained by
an Investor for the purposes provided in Section 8(b)(9).
"Investor" means the Buyer and any permitted transferee or assignee
who agrees to become bound by the provisions of Sections 5(a), 8 and 9 of this
Agreement.
"Joint Escrow Instructions" means the Joint Escrow Instructions
attached hereto as ANNEX II.
"Margin Stock" shall have the meaning provided in Regulation G of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 207).
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"1996 10-K" means the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Non-Responsive Investor" means an Investor who does not provide the
Requested Information to the Company at least one (1) Business Day prior to the
filing of the Registration Statement.
"Optional Redemption Event" shall have the meaning provided in Section
1 of the Certificate of Designations.
"Person" means an individual, partnership, corporation, limited
liability company, trust, incorporated organization, or unincorporated
association or a government, governmental agency or any political subdivision of
either thereof.
<PAGE>
"Preferred Shares" means the shares of Preferred Stock to be purchased
by the Buyer pursuant to this Agreement, as set forth on the signature page of
this Agreement.
"Preferred Stock" shall mean the Series C Senior Convertible Preferred
Stock, $.001 par value, of the Company.
"Preferred Stock Purchase Rights" means the Preferred Stock Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar
rights hereafter issued by the Company with respect to the Common Stock).
"Prospectus" means the prospectus, including any preliminary
prospectus, used in connection with the Registration Statement and any amendment
or supplement thereto.
"Purchase Price" means the aggregate purchase price for the Preferred
Shares set forth on the signature page of this Agreement.
"Questionnaire" means the Prospective Purchaser Questionnaire
completed by the Buyer and furnished to the Company.
"Record" shall mean all pertinent financial and other records,
pertinent corporate documents and properties of the Company and the Subsidiaries
subject to inspection for the purposes provided in Section 8(b)(9).
"Redemption Price Note" Means a Redemption Price Note , in the form
set forth in Section 14(i) of the Certificate of Designations, issued by the
Company pursuant to Section 9(a) of the Certificate of Designations.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415, and the declaration or
ordering of effectiveness of such Registration Statement by the SEC.
"Registrable Securities" means the Conversion Shares and the Dividend
Shares and any stock or other securities into which or for which the Common
Stock may hereafter be changed, converted or exchanged by the Company or its
successor, as the case may be, and any other securities issued to holders of
such Common Stock (or such shares into which or for which such shares are so
changed, converted or exchanged) upon any reclassification, share combination,
share subdivision, share dividend, merger, consolidation or similar transaction
or event.
"Registration Period" means the period from the SEC Effective Date to
the earlier of (i) the date which is two years after the Closing Date and (ii)
the date on which the Investors no longer own or have any right to acquire any
Registrable Securities.
"Registration Statement" means a registration statement on Form S-3 of
the Company under the 1933 Act, including any amendment thereto, which names the
Investors as selling stockholders.
"Regulation D" means Regulation D promulgated by the SEC under the
1933 Act.
<PAGE>
"Requested Information" means the information the Company requires
from each Investor in connection with the preparation of the Registration
Statement.
"Rights Agreement" means the Rights Agreement, dated as of November 8,
1996, by and between the Company and American Stock Transfer & Trust Company, as
Rights Agent.
"Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a delayed or continuous basis.
"Rule 144" means Rule 144 promulgated by the SEC under the 1933 Act or
any other similar rule or regulation of the SEC that may at any time permit a
holder of any securities to sell such securities to the public without
registration under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
declared effective by the SEC.
"SEC Reports" means the 1996 10-K, the Company's Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, the Company's definitive proxy statement for its 1997 Annual
Meeting of Stockholders and the Company's Current Report on Form 8-K, dated
September 18, 1997.
"Securities" means, collectively, the Shares, the Redemption Price
Notes and the Warrants.
"Shares" means the Preferred Shares and the Common Shares.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Transaction Documents" means, individually or collectively, this
Agreement, the Certificate of Designations, the Warrants, the Transfer Agent
Instruction, the Redemption Price Notes and the other agreements, instruments
and documents contemplated hereby and thereby.
"Transfer Agent" means American Stock Transfer & Trust Company, or any
successor thereof, serving as transfer agent and registrar for the Common Stock,
conversion agent for the Preferred Stock and exercise agent for the Warrants.
"Transfer Agent Instruction" means the irrevocable Transfer Agent
Instruction from the Company to the Transfer Agent for the benefit of the
holders from time to time of the Preferred Stock, in substantially the form
attached hereto as ANNEX III.
"Violation" means
<PAGE>
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any post-effective amendment
thereof or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act, any state securities law or any rule or regulation under the
1933 Act, the 1934 Act or any state securities law, or any common law fraud or
negligent misrepresentation or alleged common law fraud or negligent
misrepresentation, or
(iv) any breach or alleged breach by any Person of any
representation, warranty, covenant, agreement or other term of any of the
Transaction Documents.
"Warrants" means Common Stock Purchase Warrants in the form attached
hereto as ANNEX IV, in the amount specified in Section 2.
"Warrant Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable upon exercise of the Warrants.
2. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(A) SUBSCRIPTION. The Buyer hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to the Buyer, on the Closing
Date, the number of Preferred Shares set forth on the signature page of this
Agreement, having the terms and conditions as set forth in the form of
Certificate of Designations attached hereto as ANNEX I, at the price per share
set forth on the signature page of this Agreement and for the Purchase Price.
The Purchase Price shall be payable in United States Dollars. In connection
with the purchase of the Preferred Shares by the Buyer, the Company shall issue
to the Buyer at the closing on the Closing Date Warrants to purchase the number
of shares of Common Stock shown on the signature page of this Agreement.
(B) FORM OF PAYMENT. Within three Business Days after the date the
Company and the Buyer execute and deliver this Agreement, one to the other, the
Buyer shall deposit an amount equal to the Purchase Price in escrow by
delivering funds in United States Dollars in the amount of the Purchase Price to
the Escrow Agent identified in the Joint Escrow Instructions against delivery by
the Company of the certificates for the Preferred Shares registered in the name
of the Buyer. Payment of the Purchase Price shall be made by wire transfer of
funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
<PAGE>
For credit to Account #3717 9446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: Advantage/NaPro
Promptly following payment by the Buyer to the Escrow Agent of the Purchase
Price, but in no event later than two Business Days after such payment and in
any event prior to the Closing Date, the Company shall deliver certificates for
the Preferred Shares and the Warrants, registered in the name of the Buyer, to
the Escrow Agent against payment therefor on the Closing Date at the closing.
By signing this Agreement, each of the Buyer and the Company agrees to all of
the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
(C) CLOSING. The issuance and sale of the Preferred Shares and the
issuance of the Warrants shall occur on the Closing Date at the Law Offices of
Brian W Pusch, Penthouse Suite, 29 West 57th Street, New York, New York.
3. BUYER'S REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(B) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3) thereof;
(C) REOFFERS AND RESALES. All subsequent offers and sales of the
Shares by the Buyer shall be made pursuant to registration of the Shares being
offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(D) COMPANY RELIANCE. The Buyer understands that (1) the Preferred
Shares are being offered and sold and the Warrants are being issued to the
Buyer, (2) the Common Shares and the Redemption Price Notes are being offered to
the Buyer, (3) upon conversion of the Preferred Shares, the Conversion Shares
will be issued to the Buyer, (4) upon payment of any dividends on the Preferred
Shares in shares of Common Stock, the Dividend Shares will be issued to the
Buyer, and (5) upon exercise of the Warrants, the Warrant Shares will be sold to
the Buyer, in each such case in reliance on one or more exemptions from the
registration requirements of the 1933 Act, including, without limitation,
Regulation D, and exemptions from state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein and in the Questionnaire, a true and accurate copy of
which has been delivered by the Buyer to the Company, in order to determine the
availability of such exemptions and the
<PAGE>
eligibility of the Buyer to acquire the Shares; and the information with respect
to the Buyer set forth in the Questionnaire is accurate and complete in all
material respects;
(E) INFORMATION PROVIDED. The Buyer and its advisors, if any, have
requested, received and considered all information relating to the business,
properties, operations, condition (financial or other), results of operations
and prospects of the Company and the Subsidiaries and information relating to
the offer and sale of the Preferred Shares and the offer and, upon conversion of
the Preferred Shares or exercise of the Warrants, sale of the Common Shares and
the offer of the Redemption Price Notes deemed relevant by them; the Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company concerning the terms of the Securities and the business, properties,
operations, condition (financial or other), results of operations and prospects
of the Company and the Subsidiaries and have received satisfactory answers to
any such inquiries; without limiting the generality of the foregoing, the Buyer
has had the opportunity to obtain and to review the SEC Reports and the
Disclosure Statement; the Buyer has, in connection with its decision to purchase
the Preferred Shares, relied solely upon the SEC Reports, the Disclosure
Statement, the representations, warranties, covenants and agreements of the
Company set forth in this Agreement and to be contained in the other Transaction
Documents, as well as any investigation of the Company completed by the Buyer or
its advisors; the Buyer understands that its investment in the Securities
involves a high degree of risk;
(F) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities; and
(G) SUBSCRIPTION AGREEMENT. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed or to be
executed by the Buyer in connection herewith and to consummate the transactions
contemplated hereby and thereby; and this Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and, assuming due
execution and delivery by the Company, is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, except as the enforceability
hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law.
4. COMPANY'S REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that, except as set forth in the Disclosure Statement:
(A) ORGANIZATION AND AUTHORITY. The Company and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to (i) own, lease and operate its properties and to carry on its
business as described in the SEC Reports and as currently conducted, and (ii) to
execute, deliver and perform its obligations under this Agreement, the
Certificate of Designations, the Warrants, the Transfer Agent Instruction, and
the other agreements executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby;
and the Company does not have any equity
<PAGE>
investment in any other Person other than the Subsidiaries listed in Exhibit
21.1 to the 1996 10-K and NBT, Ltd., a Cayman Islands corporation.
(B) QUALIFICATIONS. The Company and each of its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or, to the
best of the Company's knowledge, prospects of the Company and the Subsidiaries
taken as a whole.
(C) CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 19,000,000 shares of Common Stock of which 12,533,699 shares
were outstanding as of the close of business on December 1, 1997, all of which
are fully paid and nonassessable; (b) 1,000,000 shares of Nonvoting Common
Stock, $.0075 par value, of which 395,000 shares were outstanding on December 1,
1997; and (c) 2,000,000 shares of Preferred Stock, $.001 par value, 700,000 of
which were originally designated Convertible Preferred Stock, Series A, none of
which are outstanding; 190,000 shares have been designated Series B Junior
Participating Preferred Stock, none of which is outstanding; and of which 5,000
shares will be designated as Series C Senior Convertible Preferred Stock and
issued pursuant to this Agreement; from December 1, 1997 to the Closing Date
there will be (x) no material increase in the number of shares of Common Stock
outstanding (except for shares issued upon exercise of options and warrants
outstanding on the date hereof or options or similar rights granted subsequent
to the date of this Agreement pursuant to the Company's stock option plans in
effect on the date of this Agreement) and (y) no issuance of shares of preferred
stock of the Company other than pursuant to this Agreement. The 1996 10-K
discloses as of December 31, 1996 all outstanding options or warrants for the
purchase of, or other rights to purchase or subscribe for, or securities
convertible into or exchangeable for, Common Stock or other capital stock of the
Company, or any contracts or commitments to issue or sell Common Stock or other
capital stock of the Company or any such options, warrants, rights or other
securities; and except as disclosed in the SEC Reports, from such date to the
date hereof there has been, and to the Closing Date there will be, no material
change in the amount or terms of any of the foregoing except for the grant of
options to purchase shares of Common Stock pursuant to the Company's stock
option plans in effect on the date of this Agreement. The Company has duly
reserved from its authorized and unissued shares of Common Stock the full number
of shares required for (a) all options, warrants, convertible securities and
other rights to acquire shares of Common Stock which are outstanding, (b) the
shares of Exchangeable Preferred Stock, Series A of NaPro BioTherapeutics
(Canada), Inc. which were outstanding and exchangeable for Common Stock on
December 1, 1997 and (c) all shares of Common Stock and options and other rights
to acquire shares of Common Stock which may be issued or granted under the stock
option and similar plans which have been adopted by the Company or any
Subsidiary; and, immediately following the Closing Date, after giving effect to
any antidilution or similar adjustment arising by reason of issuance of the
Preferred Shares and the Warrants, the total number of shares of Common Stock
reserved and required to be reserved from the authorized and unissued shares of
Common Stock for purposes of all such options, warrants, convertible securities,
other rights and stock option and similar plans (excluding the Preferred Shares
and the Warrants) will be 4,943,012. Each outstanding class or series of
securities for which any such antidilution adjustment will occur is identified
on the Disclosure Statement attached hereto, together with the amount of such
antidilution adjustment for each such class or series. The outstanding shares
of capital stock of the Company have been duly authorized
<PAGE>
and validly issued. None of such outstanding shares of capital stock of the
Company has been issued in violation of the preemptive rights of any
securityholder of the Company. The offers and sales of the outstanding shares of
capital stock of the Company and options, warrants and other rights to acquire
Common Stock were at all relevant times either registered under the 1933 Act and
applicable state securities laws or exempt from such requirements. Except as set
forth in the Disclosure Statement, no holder of any of the Company's securities
has any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement; and prior to the Closing Date the Company shall obtain
written waivers from such Persons.
(D) MATERIAL LOSSES. Except as set forth in the SEC Reports, since
December 31, 1996, neither the Company nor any Subsidiary has sustained any loss
or interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, which loss or
interference could be material to the business, properties, operations,
condition (financial or other), results of operations or, to the best of the
Company's knowledge after due inquiry, prospects of the Company and the
Subsidiaries taken as a whole.
(E) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares have been
duly authorized and the Preferred Shares, when issued and paid for in accordance
with this Agreement, and the Conversion Shares, when issued upon conversion of
the Preferred Shares, and the Dividend Shares, when issued in payment of
dividends thereon, and the Warrant Shares, when issued upon exercise of the
Warrants, as the case may be, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. Except as set forth on the Disclosure Statement,
there are no preemptive or similar rights of any stockholder of the Company or
any other Person to acquire any of the Shares and, prior to the Closing Date,
the Company shall obtain written waivers from such Persons. The Company has
duly reserved 1,250,000 shares of Common Stock as the Conversion Shares and
175,000 shares of Common Stock as the Warrant Shares, and such shares shall
remain so reserved (subject to reduction from time to time for shares of Common
Stock issued upon conversion of Preferred Shares and exercise of the Warrant),
and the Company shall from time to time reserve such additional shares of Common
Stock as shall be required to be reserved pursuant to the Certificate of
Designations, as long as the Preferred Shares are convertible, and pursuant to
the Warrants, so long as the Warrants are exercisable. The Common Stock is
listed for trading on Nasdaq and (1) the Company and the Common Stock meet the
criteria for continued listing and trading on Nasdaq; (2) the Company has not
been notified since January 1, 1995 by the NASD of any failure or potential
failure to meet the criteria for continued listing and trading on Nasdaq and (3)
no suspension of trading in the Common Stock is in effect. The Company knows of
no reason that the Common Shares will not be eligible for listing on Nasdaq.
(F) CORPORATE AUTHORIZATION. The Transaction Documents have been duly
and validly authorized by the Company, this Agreement has been duly executed and
delivered on behalf of the Company and this Agreement is, the Certificate of
Designations, when executed by the Company and filed with the Secretary of State
of the State of Delaware, will be, and the Transfer Agent Instruction and the
Warrants, when executed and delivered by the Company, and each Redemption Price
Note, when executed by the Company and issued in payment of the redemption price
of Preferred Shares in accordance with the Certificate of Designations will be,
valid and binding obligations of the Company enforceable in accordance with
their respective
<PAGE>
terms, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law.
(G) NON-CONTRAVENTION. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the issuance of
the Preferred Shares, the Warrants and the Redemption Price Notes as
contemplated by this Agreement and the other transactions contemplated by the
Transaction Documents do not and will not, with or without the giving of notice
or the lapse of time, or both, (i) result in any violation of any term of the
certificate of incorporation or by-laws of the Company or any Subsidiary, (ii)
conflict with or result in a breach by the Company or any Subsidiary of any of
the terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of their respective properties
or assets are bound or affected, (iii) violate or contravene any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any Subsidiary or any
of their respective properties or assets or (iv) have any material adverse
effect on any permit, certification, registration, approval, consent, license or
franchise necessary for the Company or any Subsidiary to own or lease and
operate any of their respective properties and to conduct any of their
respective businesses or the ability of the Company or any Subsidiary to make
use thereof.
(H) APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company or any Subsidiary for (1) the execution, delivery and performance
by the Company of the Transaction Documents, (2) the issuance and sale of
shares of Common Shares upon conversion of, or in payment of dividends on, the
Preferred Shares and upon exercise of the Warrants as contemplated by this
Agreement, the Certificate of Designations and the Warrants, (3) the issuance of
Redemption Price Notes pursuant to the Certificate of Designations and (4) the
performance by the Company of its other obligations under the Transaction
Documents, other than (1) listing of the Common Shares on Nasdaq, (2)
registration of the resale of the Common Shares under the 1933 Act as
contemplated by Section 8, (3) as may be required under applicable state
securities or "blue sky" laws, (4) consent of the holders of the Company's
Senior Convertible Notes issued on June 4, 1997 and (5) filing of one or more
Forms D with respect to the Securities as required under Regulation D.
(I) INFORMATION PROVIDED. The information provided by or on behalf of
the Company to the Buyer and referred to in Section 3(e) of this Agreement does
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading, it being understood
that for purposes of this Section 4(i), any statement contained in such
information shall be deemed to be modified or superseded for purposes of this
Section 4(i) to the extent that a statement in any document included in such
information which was prepared
<PAGE>
or filed with the SEC on a later date modifies or replaces such statement,
whether or not such later prepared or filed statement so states.
(J) CONDUCT OF BUSINESS. Except as set forth in the SEC Reports,
since December 31, 1996, neither the Company nor any Subsidiary has (i) incurred
any material obligation or liability (absolute or contingent) other than in the
ordinary course of business; (ii) canceled, without payment in full, any
material notes, loans or other obligations receivable or other debts or Claims
held by it other than in the ordinary course of business; (iii) sold, assigned,
transferred, abandoned, mortgaged, pledged or subjected to lien any of its
material properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement; (iv) conducted its
business in a manner materially different from its business as conducted on such
date; (v) declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any agreement with respect to, any transaction or event which would
constitute an Optional Redemption Event. Except as disclosed in the SEC Reports,
the Company and the Subsidiaries own, possess or have obtained all governmental,
administrative and third party licenses, permits, certificates, registrations,
approvals, consents and other authorizations necessary to own or lease (as the
case may be) and operate their respective properties, whether tangible or
intangible, and to conduct their respective businesses or operations as
currently conducted, except such licenses, permits, certificates,
registrations, approvals, consents and authorizations the failure of which to
obtain would not have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or, to the
best of the Company's knowledge after due inquiry, prospects of the Company and
the Subsidiaries taken as a whole.
(K) SEC FILINGS. The Company has timely filed all reports required to
be filed under the 1934 Act and any other material reports or documents required
to be filed with the SEC since January 1, 1994. All of such reports and
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act. The Company meets the
requirements for the use of Form S-3 for the registration of the resale of the
Common Shares by the Buyer. The Company has not filed any reports with the SEC
under the 1934 Act since December 31, 1996 other than the SEC Reports.
(L) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the SEC
Reports or in the Disclosure Statement, there is no action, suit, proceeding,
inquiry or, to the knowledge of the Company or any Subsidiary, investigation
before or by any court, public board or body pending or threatened against the
Company or any Subsidiary, wherein an unfavorable decision, ruling or finding
could have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or, to the best of the
Company's knowledge after due inquiry, prospects of the Company and the
Subsidiaries taken as a whole or the transactions contemplated by the
Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, the Transaction Documents; the Company does not have pending
before the SEC any request for confidential treatment of information and to the
best of the Company's knowledge no such request will be made by the Company
prior to the SEC Effective Date; and to the best of the Company's knowledge
there is not pending or contemplated, and there has been no, investigation by
the SEC involving the Company or any director or officer of the Company.
<PAGE>
(M) LIABILITIES. Except as and to the extent disclosed, reflected or
reserved against in the financial statements of the Company and the notes
thereto included in the SEC Reports, neither the Company nor any Subsidiary has
any material (individually or in the aggregate) liabilities, debts or
obligations whether accrued, absolute, contingent or otherwise, and whether due
or to become due. Subsequent to December 31, 1996, neither the Company nor any
Subsidiary has incurred any liabilities, debts or obligations of any nature
whatsoever which are individually or in the aggregate material to the Company
and the Subsidiaries taken as a whole, other than those incurred in the ordinary
course of their respective businesses or disclosed in the SEC Reports.
(N) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or, to the best of the Company's knowledge after due inquiry,
prospects of the Company or any Subsidiary, except as disclosed in the SEC
Reports.
(O) INTELLECTUAL PROPERTY. To the best of the Company's knowledge,
the Company and the Subsidiaries own or are licensed to use all Company
Proprietary Rights. Except as disclosed in the Disclosure Statement, the
Company does not have any knowledge of, and the Company has not given or
received any notice of, any pending conflicts with or infringement of the rights
of others with respect to any Company Proprietary Rights or with respect to any
license of Company Proprietary Rights. Except as disclosed in the Disclosure
Statement, no action, suit, arbitration, or legal, administrative or other
proceeding, or investigation is pending, or, to the best knowledge of the
Company, threatened, which involves any Company Proprietary Rights. Neither the
Company nor any Subsidiary is subject to any judgment, order, writ, injunction
or decree of any court or any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any arbitrator, or has entered into or is a party to any
contract which restricts or impairs the use of any such Company Proprietary
Rights in a manner which would have a material adverse effect on the use by the
Company or any Subsidiaries of any of the Company Proprietary Rights. To the
best knowledge of the Company, no Company Proprietary Rights and no services or
products sold by the Company or any Subsidiary, conflict with or infringe upon
any proprietary rights available to any third party. Neither the Company nor
any Subsidiary has received written notice of any pending conflict with or
infringement upon such third-party proprietary rights. Neither the Company nor
any Subsidiary has entered into any consent, indemnification, forbearance to sue
or settlement agreement with respect to Company Proprietary Rights other than in
the ordinary course of business. Except as disclosed in the Disclosure
Statement, no claims have been asserted by any person with respect to the
validity of the Company's or any Subsidiary's ownership or right to use the
Company Proprietary Rights and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. To the best knowledge
of the Company, the Company Proprietary Rights are valid and enforceable. No
registration relating to the Company Proprietary Rights has lapsed, expired or
been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and are in
good standing, except as disclosed in the Disclosure Statement and except for
such lapses, expirations, abandonments, cancellations, adversarial proceedings
or failures to be in good standing which would not, singly or in the aggregate,
have a material adverse effect on the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company and the Subsidiaries taken as a whole. The Company and the
<PAGE>
Subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Company Proprietary
Rights used pursuant to licenses. Except as disclosed in the Disclosure
Statement, to the best knowledge of the Company, no person is infringing on or
violating the Company Proprietary Rights.
(P) INTERNAL ACCOUNTING CONTROLS. The Company and the Subsidiaries
maintain a system of internal accounting controls meeting the requirements of
Section 13(b)(2) of the 1934 Act in all material respects.
(Q) COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary is in
violation of any statute, law, rule, regulation, ordinance, decision or order of
any governmental agency or body or any court, domestic or foreign, including,
without limitation, those relating to the use, operation, handling,
transportation, disposal or release of hazardous or toxic substances or wastes
or relating to the protection or restoration of the environment or human
exposure to hazardous or toxic substances or wastes, except where such violation
would not individually or in the aggregate have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or, to the best of the Company's knowledge after due inquiry,
prospects of the Company and the Subsidiaries taken as a whole; and neither the
Company nor any Subsidiary is aware of any pending investigation which would
reasonably be expected to lead to such a claim.
(R) PROPERTIES. Except as disclosed in the Disclosure Statement, the
Company and each Subsidiary has good title to all property real and personal
(tangible and intangible) and other assets owned by it, free and clear of all
security interests, charges, mortgages, liens or other encumbrances, except such
as are described in the SEC Reports or the Disclosure Statement or such as do
not materially interfere with the use of such property made, or proposed to be
made, by the Company or such Subsidiary. The leases, licenses or other
contracts or instruments under which the Company and each Subsidiary leases,
holds or is entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company or such Subsidiary. Neither the Company nor any Subsidiary has received
notice of any material violation of any applicable law, ordinance, regulation,
order or requirement relating to its owned or leased properties.
(S) LABOR RELATIONS. No material labor problem exists or, to the
knowledge of the Company or any Subsidiary, is imminent with respect to any of
the employees of the Company or any Subsidiary.
(T) INSURANCE. The Company and the Subsidiaries maintain insurance
against loss or damage by fire or other casualty and such other insurance,
including but not limited to, product liability insurance, in such amounts and
covering such risks as is customarily maintained by companies of comparable size
engaged in the same or a similar business and in the same geographic region as
the Company and the Subsidiaries.
(U) ERISA COMPLIANCE. The Company and each Subsidiary is in
compliance in all material respects with all presently applicable provisions of
ERISA; no "reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company or any Subsidiary
would have any liability; neither the Company nor any
<PAGE>
Subsidiary has incurred or expects to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Code; and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(V) TAX MATTERS. Except as disclosed in the Disclosure Statement, the
Company and each Subsidiary has filed all federal, state and local income and
franchise tax returns required to be filed and has paid all taxes shown by such
returns to be due, and no tax deficiency has been determined adversely to the
Company or any Subsidiary which has had (nor does the Company or any Subsidiary
have any knowledge of any tax deficiency which, if determined adversely to the
Company or any Subsidiary might have) a material adverse effect on the business,
properties, operations, conditions (financial or other), results of operations
or, to the best of the Company's knowledge after due inquiry, prospects of the
Company and the Subsidiaries taken as a whole.
(W) INVESTMENT COMPANY. Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended and the rules and regulations of the SEC
thereunder.
(X) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar
Person is entitled to any commission, fee or other compensation by reason of the
transactions contemplated by this Agreement, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
any Person for any such commission, fee or other compensation.
(Y) NO SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
Person acting on behalf of the Company, in respect of the Securities or in
connection with the offer and sale of the Shares. Neither the Company nor, to
its knowledge, any Person acting on behalf of the Company has, either directly
or indirectly, sold or offered for sale to any Person any of the Preferred
Shares or, within the six months prior to the date hereof, any other similar
security of the Company except as contemplated by this Agreement; and neither
the Company nor any Person authorized to act on its behalf will sell or offer
for sale any shares of Preferred Stock, shares of Common Stock or the Warrants,
or solicit any offers to buy any shares of Preferred Stock, shares of Common
Stock or the Warrants so as thereby to cause the issuance or sale of any of the
Shares to be in violation of Section 5 of the 1933 Act.
(Z) CERTAIN ISSUANCES OF SECURITIES. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Common Stock which are subject to Section 4460(i)(1)(D) of
the rules of the NASD (or any successor or replacement provision thereof) and
which would be integrated with the sale of the Preferred Shares to the Buyer or
the issuance of Conversion Shares upon conversion thereof, Dividend Shares in
payment of dividends thereon or Warrant Shares issuable upon exercise of the
Warrants, for purposes of such Section 4460(i)(1)(D) (or any successor or
replacement provision thereof).
<PAGE>
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(A) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees that
(1) the Preferred Shares and the Warrants to be issued to it hereunder and the
Redemption Price Notes which may be issued pursuant to the Certificate of
Designations have not been and are not being registered under the provisions of
the 1933 Act or any state securities laws and, except as provided in Section 8,
the Common Shares have not been and are not being registered under the 1933 Act
or any state securities laws, and that the Preferred Shares, the Warrants and
the Redemption Price Notes may not be transferred unless the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Preferred Shares, the
Warrants or the Redemption Price Notes to be transferred may be transferred
without such registration; (2) no sale, assignment or other transfer of the
Preferred Shares, the Warrants or the Redemption Price Notes or any interest
therein may be made except in accordance with the terms hereof; (3) the Common
Shares may not be resold by the Buyer unless the resale has been registered
under the 1933 Act or is made pursuant to an exemption from such registration;
(4) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if the exemption provided by
Rule 144 is not available, any resale of the Securities under circumstances in
which the seller, or the Person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (5) the Company is under no obligation to register the
Securities (other than registration of the resale of the Common Shares in
accordance with Section 8) under the 1933 Act or, except as provided in Section
8, to comply with the terms and conditions of any exemption thereunder. The
Buyer may not transfer the Common Shares in a transaction which does not
constitute a transfer thereof pursuant to the Registration Statement in
accordance with the plan of distribution set forth therein or in any supplement
to the Prospectus forming part of the Registration Statement unless the Buyer
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, that such Common
Shares may be transferred without registration under the 1933 Act.
(B) RESTRICTIVE LEGENDS. (1) The Buyer acknowledges and agrees that
the certificates for the Preferred Shares shall bear restrictive legends in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
These securities have not been registered under the Securities Act of 1933,
as amended (the "Act"). The sale to the holder of these securities of the
shares of common stock issuable upon conversion of these securities and in
payment of dividends on these securities are not covered by a registration
statement under the Act. These securities have been acquired, and such
shares of common stock must be acquired, for investment and may not be
resold, transferred or assigned in the absence of an effective registration
statement under the Act or an opinion of counsel reasonably satisfactory in
form, scope and substance to the Company that registration is not required
under the Act.
The number of shares constituting the portion of the Maximum Share Amount,
as defined in the Certificate of Designations of Rights and Preferences (the
"Certificate of Designations") of the Series C Convertible Preferred Stock
(the "Series C Shares"), allocated to the Series C Shares represented by
this certificate for purposes of conversion thereof is 2,506,739.
<PAGE>
Section 10(b)(3)(A) of the Certificate of Designations permits a holder of
the securities represented by this certificate to convert such securities in
accordance with the Certificate of Designations without being required to
physically surrender this certificate to the Company unless all of the
securities represented hereby are so converted. Consequently, following
conversion of any of the securities represented by this certificate, the
number of shares represented by this certificate may be less than the number
of shares stated hereon.
(2) The Buyer acknowledges and agrees that the Warrants shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
(3) The Buyer acknowledges and agrees that until such time as the
Common Shares have been registered for resale under the 1933 Act as contemplated
by Section 8, the certificates for the Common Shares may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
have been acquired for investment and may not be resold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel reasonably satisfactory
in form, scope and substance to the Company that registration is not
required under the Act.
(4) Once the Registration Statement required to be filed by the
Company pursuant to Section 8 has been declared effective, thereafter (1) upon
request of the Buyer the Company will substitute certificates without
restrictive legend for certificates for any Common Shares issued prior to the
SEC Effective Date which bear such restrictive legend and remove any stop-
transfer restriction relating thereto promptly, but in no event later than three
days after surrender of such certificates by the Buyer and (2) the Company shall
not place any restrictive legend on certificates for Conversion Shares issued on
conversion of the Preferred Shares or Dividend Shares issued as a dividend on
the Preferred Shares or on any Warrant Shares issued upon exercise of the
Warrants or impose any stop-transfer restriction thereon.
(C) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by
the Buyer of the Purchase Price for the Preferred Shares in accordance with
Section 2(b) hereof, and in any event prior to the closing, the Company will (1)
irrevocably instruct the Transfer Agent pursuant to the Transfer Agent
Instruction substantially in the form attached hereto as ANNEX III, to issue
certificates for the Conversion Shares from time to time upon conversion of the
Preferred Shares and Warrant Shares from time to time upon exercise of the
Warrants in such amounts as specified from time to time to the Transfer Agent in
the Conversion Notices surrendered in
<PAGE>
connection with such conversions and the Form of Subscription in the form
attached to the Warrants and (2) appoint the Transfer Agent the conversion agent
for the Preferred Stock and the exercise agent for the Warrants. The
certificates for the Common Shares may bear the restrictive legend specified in
Section 5(b) of this Agreement prior to registration of the resale of the Common
Shares under the 1933 Act. The certificates for the Conversion Shares and the
Warrant Shares shall be registered in the name of the Buyer or its nominee and
in such denominations to be specified by the Buyer in connection with each
conversion of Preferred Shares and exercise of Warrants. The Company warrants
that no instruction other than (x) such instructions referred to in this Section
5(c), (y) stop transfer instructions to give effect to Section 5(a) hereof prior
to registration of the resale of the Common Shares under the 1933 Act and (z)
the instructions required by Section 8(b)(12) hereof will be given by the
Company to the Transfer Agent and that the Common Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Warrants. If the Transfer Agent seeks the
Company's concurrence in connection with a notice of conversion or warrant
exercise, the Company will immediately give such concurrence except to the
extent the Company notifies the Transfer Agent and the Buyer of manifest error
in such notice of conversion or warrant exercise in accordance with the
Certificate of Designations, the Warrants, and the Transfer Agent Instructions.
If the Buyer provides the Company with an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that registration of a
resale by the Buyer of any of the Common Shares in accordance with the last
sentence of Section 5(a) of this Agreement is not required under the 1933 Act,
the Company shall permit the transfer of such Common Shares and promptly, but in
no event later than three days after receipt of such opinion, instruct the
Transfer Agent to issue upon transfer one or more share certificates in such
name and in such denominations as specified by the Buyer. Nothing in this
Section 5(c) shall limit the obligations of the Company under Section 8 of this
Agreement.
(D) NASDAQ LISTING; REPORTING STATUS. On or prior to the Closing
Date, the Company shall file with Nasdaq an application or other document
required by Nasdaq for listing of the Common Shares with Nasdaq (which need not
for purposes of this Agreement be accompanied by the applicable fees of Nasdaq)
and shall provide evidence of such filing to the Buyer. So long as the Buyer
beneficially owns any Preferred Shares, Warrants or Common Shares, the Company
will use its best efforts to maintain the listing of the Common Stock on the
Nasdaq or another national securities exchange. So long as the Company is
required to maintain effectiveness of the Registration Statement in accordance
with Section 8 and its shares of Common Stock are publicly traded, the Company
shall timely file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, and the Company shall not, during the
period the Company is required to keep the Registration Statement effective
pursuant to Section 8(b), terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination.
(E) FORM D. The Company agrees to file one or more Forms D with
respect to the Securities as required under Regulation D to claim the exemption
provided by Rule 506 of Regulation D and to provide a copy thereof to the Buyer
promptly after such filing.
(F) STATE SECURITIES LAWS. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Preferred Shares for sale to the Buyer pursuant to this
Agreement, the Warrants for issuance to the Buyer pursuant to this Agreement,
the Conversion Shares for issuance to the Buyer on conversion of the
<PAGE>
Preferred Shares and the Warrant Shares for issuance to the Buyer on exercise of
the Warrants under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Preferred Shares and issuance of the
Warrants to the Buyer pursuant to this Agreement and the issuance to the Buyer
of Conversion Shares on conversion of the Preferred Shares or Warrant Shares on
exercise of the Warrants, as the case may be. Prior to the issuance of the
Redemption Price Notes, the Company shall take such actions under applicable
state securities laws as shall be necessary to qualify, or to obtain exemption
for the Redemption Price Notes under such laws. In connection with the foregoing
obligations of the Company in this Section 5(f), the Company shall not be
required (1) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(f), (2) to subject
itself to general taxation in any such jurisdiction, (3) to file a general
consent to service of process in any such jurisdiction, (4) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(5) to make any change in its charter or by-laws which the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders. The Company shall furnish copies of all filings, applications,
orders and grants or confirmations of exemptions relating to such securities or
"blue sky" laws on or prior to the Closing Date.
(G) FUTURE FINANCINGS AND RELATED ACTIONS. (1) The Company shall not
issue any Equity Securities which would, for the purposes of Section
4460(i)(1)(D) of the rules of the NASD (or any successor or replacement
provision thereof), be integrated with the sale of the Preferred Shares and
issuance of the Warrants to the Buyer or the issuance of Conversion Shares on
conversion of Preferred Shares or Warrant Shares on exercise of the Warrants.
(2) The Company shall not offer, sell, contract to sell or issue (or
engage any Person to assist the Company in taking any such action) any Equity
Securities at a price below the market price of the Common Stock during the
period from the date of this Agreement to the date on which the Registration
Statement shall have been effective with the SEC and available for use by the
selling stockholders named therein for 90 consecutive days; provided, however,
that nothing in this Section 5(g)(2) shall prohibit the Company from issuing
securities (x) pursuant to compensation plans for employees, directors,
officers, advisers or consultants of the Company and in accordance with the
terms of such plans as in effect as of the date of this Agreement, (y) upon
exercise of conversion, exchange, purchase or similar rights issued, granted or
given by the Company and outstanding as of the date of this Agreement or the
payment of dividends or interest thereon in shares of stock in accordance with
the terms of such instruments or (z) pursuant to a public offering underwritten
on a firm commitment basis and registered under the 1933 Act or pursuant to an
offering of shares of Common Stock directly to institutional investors which is
registered under the 1933 Act.
(H) LIMITATION ON CERTAIN ACTIONS. From the date of execution and
delivery of this Agreement by the parties hereto to the date of issuance of the
Preferred Shares, the Company (1) shall comply with Sections 5 and 12 of the
Certificate of Designations as if the Preferred Shares were outstanding, (2)
shall not take any action which, if the Preferred Shares were outstanding, would
constitute an Optional Redemption Event or, with the giving of notice or the
passage of time or both, would constitute an Optional Redemption Event.
(I) USE OF PROCEEDS. The Company represents, warrants, covenants and
agrees that: (1) it does not own or have any present intention of acquiring any
Margin Stock; (2) the proceeds of sale of the Preferred Shares will be used for
general working capital purposes and
<PAGE>
in the operation of the Company's business; (3) none of such proceeds will be
used, directly or indirectly (A) to make any loan to or investment in any other
Person (other than a Subsidiary) or (B) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a Margin
Stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System; and (4)
neither the Company nor any agent acting on its behalf has taken or will take
any action which might cause this Agreement or the transactions contemplated
hereby to violate Regulation G, Regulation T or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the 1934 Act, in
each case as in effect now or as the same may hereafter be in effect.
(J) BEST EFFORTS. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares and issue the Warrants set forth in
Section 6 or 7, as the case may be, of this Agreement on or before the Closing
Date.
(K) PREFERRED STOCK. So long as the Preferred Shares are
outstanding, the company shall cause its books, records and financial statements
to reflect the Preferred Stock as valid senior preferred stock of the Company.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares and issue the Warrants to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) Delivery by the Buyer to the Escrow Agent of good funds in an
amount equal to the Purchase Price;
(b) On the Closing Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement; and
(c) The representations and warranties of the Buyer contained in this
Agreement shall be true and correct on the Closing Date as if made on the
Closing Date and the Buyer shall have performed on or before the Closing Date
all covenants and agreements of the Buyer required to be performed on or before
the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and acquire the Warrants on the Closing Date is conditioned
upon the satisfaction of the
<PAGE>
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the certificates
for the Preferred Shares and the Warrants in accordance with this Agreement;
(b) The Transfer Agent shall have acknowledged in writing the Transfer
Agent Instruction on terms acceptable to the Buyer;
(c) On the Closing Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(d) The representations and warranties of the Company contained in
this Agreement and each other agreement or instrument executed and delivered by
the Company in connection with this Agreement shall be true and correct on the
Closing Date as if made on the Closing Date; and on or before the Closing Date
the Company shall have performed all covenants and agreements of the Company
contained herein required to be performed by the Company on or before the
Closing Date;
(e) No event which, if the Preferred Shares were outstanding, would
constitute an Optional Redemption Event or, with the giving of notice or the
lapse of time, or both, would constitute an Optional Redemption Event shall have
occurred and be continuing;
(f) The Company shall have delivered to the Buyer its certificate,
dated the Closing Date, duly executed by its Chief Financial Officer to the
effect set forth in subparagraphs (c), (d), and (e) of this Section 7;
(g) The Buyer shall have received satisfactory confirmation of the
filing with the Secretary of State of the State of Delaware of the Certificate
of Designations;
(h) The Company shall have filed the appropriate application or form
with Nasdaq for the listing of the Common Shares on Nasdaq (which need not be
accompanied by the applicable fees of Nasdaq) and the Buyer shall have received
written evidence of such filing;
(i) The Company shall have received (and furnished a copy to the
Buyer) written confirmation, on terms acceptable to the Buyer, from the Nasdaq
that, for purposes of Section 4460(i) of the rules of the NASD, the issuance of
the Preferred Shares and the Warrants, and the issuance of Common Shares upon
conversion of Preferred Shares and in payment of dividends thereon and on
exercise of the Warrants will not be integrated with the issuance on June 4,
1997 of the Company's Senior Convertible Notes and Common Stock Purchase
Warrants, or the issuance of shares of Common Stock upon conversion and exercise
thereof;
(j) The Buyer shall have received a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(3) such other matters as reasonably requested by the Buyer;
<PAGE>
(k) The Buyer shall have received on the Closing Date (1) an opinion
of Holme Roberts & Owen LLP, dated the Closing Date, addressed to the Buyer, in
form, scope and substance reasonably satisfactory to the Buyer, to the effect
set forth in ANNEX V attached hereto and (2) an opinion of Kai Larson, Esq.,
Director, Legal Affairs of the Company, dated the Closing Date, addressed to the
Buyer, in form, scope and substance reasonably satisfactory to the Buyer, to the
effect set forth in ANNEX VI attached hereto;
(l) On the Closing Date, (i) trading in securities on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not have
been suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of Colorado or the State of New York shall not
have been declared by either federal or state authorities; and
(m) The Company shall have obtained (1) written waivers, in form and
substance reasonably satisfactory to the Buyer, (A) by D&N Holding Company
("D&N") of the rights under the Subscription Agreement, dated as of June 7,
1993, between the Company and D&N, with respect to the purchase of certain
securities by D&N, and shall have furnished a copy of such waiver to the Buyer
and (B) by all Persons listed on the Disclosure Statement by reason of the last
sentence of Section 4(c) and (2) written consents, in form and substance
reasonably satisfactory to the Buyer, of the holders of the Company's Senior
Convertible Notes issued on June 4, 1997.
8. REGISTRATION RIGHTS.
(A) MANDATORY REGISTRATION. (1) The Company shall prepare and, on or
prior to the date which is 15 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3 covering the resale by the Buyer of a number
of shares of Common Stock equal to at least the number of Conversion Shares
issuable to the Buyer upon conversion of the Preferred Shares, determined at the
Conversion Price which is applicable on the day the Registration Statement is
filed with the SEC (and determined without regard to the limitation on
beneficial ownership contained in the second sentence of Section 10(a) of the
Certificate of Designations), and Warrant Shares issuable upon exercise of the
Warrants, and such additional number of shares of Common Stock as the Company
shall in its discretion determine to register in connection with the issuance of
shares of Common Stock as a dividend on the Preferred Shares and which
Registration Statement shall state that, in accordance with Rule 416 under the
1933 Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Preferred Shares to prevent dilution resulting from stock splits, stock
dividends or similar transactions. If, notwithstanding Rule 416 under the 1933
Act, the Registration Statement is not deemed to cover such indeterminate number
of shares of Common Stock as shall be issuable upon conversion of the Preferred
Shares based on changes from time to time in the Conversion Price such that at
any time the number of shares of Common Stock included in the Registration
Statement required to be filed as provided in the first sentence of this Section
8(a) shall be insufficient to cover the number of shares of Common Stock
issuable on conversion in full of the unconverted Preferred Shares, then
promptly, but in no event later than 15 days after such insufficiency shall
occur, the Company shall file with the SEC an additional Registration Statement
on Form S-3 (which shall not constitute a post-effective amendment to the
Registration Statement filed pursuant to the first sentence of this Section
8(a)) covering such number of shares of Common Stock as shall be sufficient to
permit such conversion; provided, however, that nothing in this Section 8(a)
shall limit the rights of the holder of the
<PAGE>
Preferred Shares to have all or a portion of the Preferred Shares redeemed
pursuant to Section 12 of the Certificate of Designations. For all purposes of
this Agreement such additional Registration Statement shall be deemed to be the
Registration Statement required to be filed by the Company pursuant to this
Section 8(a), and the Company and the Investors shall have the same rights and
obligations with respect to such additional Registration Statement as they shall
have with respect to the initial Registration Statement required to be filed by
the Company pursuant to this Section 8(a).
(2) Prior to the SEC Effective Date or during any time subsequent to
the SEC Effective Date when the Registration Statement for any reason is not
available for use by any Investor for the resale of any of Registrable
Securities, the Company shall not file any other registration statement or any
amendment thereto with the SEC under the 1933 Act or request the acceleration of
the effectiveness of any other registration statement previously filed with the
SEC, other than any registration statement on Form S-8.
(B) OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall:
(1) use its best efforts to cause the Registration Statement referred
to in the first sentence of Section 8(a)(1) to become effective as promptly as
possible after the execution and delivery of this Agreement by the parties
hereto, and keep the Registration Statement effective pursuant to Rule 415 at
all times during the Registration Period. The Company shall submit to the SEC,
within three Business Days after the Company learns that no review of the
Registration Statement will be made by the staff of the SEC or that the staff of
the SEC has no further comments on the Registration Statement, as the case may
be, a request for acceleration of effectiveness of the Registration Statement to
a time and date not later than 48 hours after the submission of such request.
The Company represents and warrants to the Investors that (a) the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it is first filed with the SEC, at the time it
is ordered effective by the SEC and at all times during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (b) the Prospectus, at the time the Registration Statement is
declared effective by the SEC and at all times that the Prospectus is required
by this Agreement to be available for use by any Investor, shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(2) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement effective, and
the Prospectus current, at all times during the Registration Period, and, during
the Registration Period, comply with the provisions of the 1933 Act applicable
to the Company in order to permit the disposition by the Investors of all
Registrable Securities covered by the Registration Statement;
<PAGE>
(3) furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel, (1) promptly after the same
is prepared and publicly distributed, filed with the SEC or received by the
Company, five copies of the Registration Statement and any amendment thereto,
each Prospectus and each amendment or supplement thereto, (2) one copy of each
letter written by or on behalf of the Company to the SEC or the staff of the SEC
and each item of correspondence from the SEC or the staff of the SEC relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
each of which the Company hereby determines to be confidential information and
which the Buyer hereby agrees to keep confidential as a confidential Record in
accordance with Section 8(b)(9) and (3) such number of copies of a Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(4) use its best efforts to (i) to register and qualify the
Registrable Securities covered by the Registration Statement under the
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities reasonably request, (ii) to
prepare and to file in those jurisdictions such amendments (including post-
effective amendments) and supplements to such registrations and qualifications
as may be necessary to maintain the effectiveness thereof at all times during
the Registration Period and (iii) to take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale by the Investors in
such jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto (I) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 8(b)(4), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its charter or by-
laws which the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;
(5) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the Prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or which would require any supplement or
amendment to the Registration Statement or the Prospectus, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement and Prospectus to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each Investor as
such Investor may reasonably request;
(6) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold of the issuance
by the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
(7) permit the Investors who hold Registrable Securities being
included in the Registration Statement and a single firm of counsel designated
as selling stockholders' counsel by the Investors who hold a majority in
interest of the Registrable Securities being sold to review at
<PAGE>
such Investors' expense the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC and shall not file any document in a form to which any Investor or such
counsel reasonably objects;
(8) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(9) make available for inspection by any Investor and any Inspector
retained by any such Investor at such Investor's sole expense, all Records as
shall be reasonably necessary to enable each Investor to exercise its due
diligence responsibility and cause the Company's and the Subsidiaries' officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Records or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements with the Company with respect thereto, with
substantially the same requirements as this Section 8(b)(9). Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to this Agreement unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor and
allow such Investor, at such Investor's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such information;
(10) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement to be listed on Nasdaq prior to the
Closing Date or such other principal securities market on which securities of
the same class or series issued by the Company are then listed or traded;
<PAGE>
(11) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the SEC Effective Date;
(12) cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates to
be in such denominations or amounts as the Investors may reasonably request and
registered in such names as the Investors may request; and, not later than the
SEC Effective Date, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, (i) to the Transfer Agent (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as ANNEX VII
and (ii) to the Investors whose Registrable Securities are included in such
Registration Statement and to the Transfer Agent an opinion of such counsel, in
the form attached hereto as ANNEX VIII;
(13) during the Registration Period, the Company shall not bid for or
purchase any Common Stock or any right to purchase Common Stock or attempt to
induce any Person to purchase any such security or right if such bid, purchase
or attempt would in any way limit the right of the Investors to sell Registrable
Securities by reason of the limitations set forth in Regulation M under the 1934
Act; and
(14) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
(C) OBLIGATIONS OF THE BUYER AND OTHER INVESTORS. In connection with
the registration of the Registrable Securities, the Investors shall have the
following obligations:
(1) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
Business Days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the Requested Information
if any of such Investor's Registrable Securities are eligible for inclusion in
the Registration Statement. If at least one (1) Business Day prior to the
filing date the Company has not received the Requested Information from an
Investor, then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor;
(2) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(3) Each Investor agrees that it will not effect any disposition of
the Registrable Securities except as contemplated in the Registration Statement
or as shall otherwise be in
<PAGE>
compliance with the registration requirements of applicable securities laws and
that it will promptly notify the Company of any material changes in the
information set forth in the Registration Statement regarding such Investor or
its plan of distribution; each Investor agrees (a) to notify the Company in
writing in the event that such Investor enters into any material agreement with
a broker or a dealer for the sale of the Registrable Securities through a block
trade, special offering, exchange distribution or a purchase by a broker or
dealer and (b) in connection with such agreement, to provide to the Company in
writing the information necessary to prepare any supplemental prospectus
pursuant to Rule 424(c) under the 1933 Act which is required with respect to
such transaction;
(4) Each Investor acknowledges that there may occasionally be times as
specified in Section 8(b)(5) or 8(b)(6) when the Company must suspend the use of
the Prospectus until such time as an amendment to the Registration Statement has
been filed by the Company and declared effective by the SEC, the Company has
prepared a supplement to the Prospectus or the Company has filed an appropriate
report with the SEC pursuant to the 1934 Act. Each Investor hereby covenants
that it will not sell any Registrable Securities pursuant to said Prospectus
during the period commencing at the time at which the Company gives such
Investor notice of the suspension of the use of said Prospectus in accordance
with Section 8(b)(5) or 8(b)(6) and ending at the time the Company gives such
Investor notice that such Investor may thereafter effect sales pursuant to the
Prospectus, or until the Company delivers to such Investor an amended or
supplemented Prospectus;
(5) In connection with any sale of Registrable Securities which is
made pursuant to the Registration Statement through a broker, each Investor
shall instruct its broker or brokers to deliver the Prospectus to the purchaser
or purchasers in connection with such sale, shall supply copies of such
Prospectus to such broker or brokers and shall otherwise use its reasonable best
efforts to comply with the prospectus delivery requirements of the 1933 Act.
(D) EXPENSES OF REGISTRATION. All reasonable expenses incurred in
connection with registrations, filings or qualifications pursuant to this
Agreement shall be paid by the Company, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company and the Investors, but
excluding (1) fees and expenses of investment bankers retained by any Investor,
(2) brokerage commissions incurred by any Investor and (3) any other such
expenses incurred by an Investor which are expressly provided in this Agreement
to be payable by such Investor.
(E) REPORTS UNDER 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
(1) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (A) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (B) such information as may be necessary to permit the Investors
to sell their Registrable Securities pursuant to Rule 144 without registration;
and
(2) if at any time the Company is not required to file such reports
with the SEC, use its best efforts to, upon the request of an Investor, make
publicly available other information
<PAGE>
so long as is necessary to permit publication by brokers and dealers of
quotations for the Common Stock and sales of the Registrable Securities in
accordance with Rule 15c2-11 under the 1934 Act.
9. INDEMNIFICATION AND CONTRIBUTION.
(A) INDEMNIFICATION. (1) To the extent not prohibited by applicable
law, the Company will indemnify and hold harmless each Indemnified Person
against any Claims to which any of them may become subject under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any Violation. Subject to the restrictions set forth in Section 9(a)(3)
with respect to the number of legal counsel, the Company shall reimburse the
Investors and each such controlling Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9(a)(1): shall not apply to
(I) a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information relating to an Indemnified Person
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such Prospectus was timely made available by the Company pursuant to Section
8(b)(3) hereof or such amendment or supplement was timely made available by the
Company pursuant to Section 8(b)(5); and (II) amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
10(j).
(2) In connection with the Registration Statement, each Investor
agrees to indemnify and hold harmless, to the same extent and in the same manner
set forth in Section 9(a)(1), each Indemnified Party against any Claim to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and
such Investor will reimburse any legal or other expenses reasonable incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 9(a)(2) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Section 9(a)(2) for only that amount of a Claim as
does not exceed the amount by which the proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement
exceeds the amount paid by such Investor for such Registrable Securities. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 9(a)(2) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely
basis in the Prospectus, as then amended or supplemented.
<PAGE>
(3) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 9(a) of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 9(a), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 9(a), except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 9(a) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
(B) CONTRIBUTION. To the extent any indemnification by an
indemnifying party as set forth in Section 9(a) above is applicable by its terms
but is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 9(a) to the fullest extent permitted by law. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative fault of each party, the
parties' relative knowledge of and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations
appropriate under the circumstances; provided, however, that (a) no contribution
shall be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 9(a), (b) no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any other Person
who was not guilty of such fraudulent misrepresentation and (c) contribution by
any Investor shall be limited to the amount by which the proceeds received by
such Investor from the sale of such Registrable Securities exceeds the amount
paid by such Investor for such Registrable Securities.
10. MISCELLANEOUS.
(A) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado.
(B) HEADINGS. The headings, captions and footers of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
<PAGE>
(C) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(D) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally (which
shall include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in the case of the Company addressed to
the Company at its address shown in the introductory paragraph of this
Agreement, Attention: Vice President and Chief Financial Officer (telephone
line facsimile transmission number (303) 530-1296) or, in the case of the Buyer,
at its address or telephone line facsimile transmission number shown on the
signature page of this Agreement with a copy to Genesee International, Inc.,
10500 N.E. 8th Street, Suite 1920, Bellevue, Washington 98004-4332 (telephone
line facsimile transmission number (425) 462-4645) or such other address as a
party shall have provided by notice to the other party in accordance with this
provision. The Buyer hereby designates as its address for any notice required
or permitted to be given to the Buyer pursuant to the Certificate of
Designations the address shown on the signature page of this Agreement, with a
copy to: Genesee International, Inc., 10500 N.E. 8th Street, Suite 1920,
Bellevue, Washington 98004-4332 (telephone line facsimile transmission number
(425) 462-4645), until the Buyer shall designate another address for such
purpose.
(E) COUNTERPARTS. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(F) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the Annexes
and Exhibits hereto, constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein.
This Agreement, including the Annexes and Exhibits hereto, supersedes all prior
agreements and understandings, whether written or oral among the parties hereto
with respect to the subject matter hereof. This Agreement and the terms and
provisions hereof are for the sole benefit of the Company, the Buyer and their
respective successors and permitted assigns.
(G) WAIVER. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(H) AMENDMENT. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific
<PAGE>
instance and for the purpose for which given. No course of dealing between the
parties hereto shall operate as an amendment of this Agreement.
(I) FURTHER ASSURANCES. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(J) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Buyer or any
other Investor under Sections 5, 8 and 9 of this Agreement shall be
automatically assigned by such Investor to any transferee of all or any portion
of such Investor's Registrable Securities (or all or any portion of the
Preferred Shares or Warrants) only if: (1) such Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (2)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned, (3) immediately following such transfer or
assignment the further disposition of Registrable Securities by the transferee
or assignee is restricted under the 1933 Act and applicable state securities
laws, and (4) at or before the time the Company received the written notice
contemplated by clause (2) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained in
Sections 5(a), 5(b), 8 and 9 hereof. Upon any such assignment, the Company
shall be obligated to such transferee to perform all of its covenants under
Sections 5, 8 and 9 of this Agreement as if such transferee were the Buyer and,
if the transferee or assignee is an affiliate of the Buyer or has the same
investment advisor as the Buyer, then the Company hereby makes to such
transferee or assignee all of the representations, warranties, covenants and
agreements set forth in Section 4 as of the date made or deemed to be made to
the Buyer pursuant to this Agreement. In connection with any such transfer the
Company shall, at its sole cost and expense, promptly after such assignment take
such actions as shall be reasonably acceptable to the Buyer or other Investor
and such transferee to assure that the Registration Statement and related
Prospectus are available for use by such transferee for sales of the Registrable
Securities in respect of which the rights to registration have been so assigned.
(K) EXPENSES. Whether or not the closing under this Agreement occurs,
the Company shall pay or reimburse the Buyer for the fees and expenses of its
legal counsel for the preparation and negotiation of the Transaction Documents
and in connection with the closing hereunder; provided, however, that if the
Buyer terminates this Agreement pursuant to Section 10(l), the amount payable by
the Company shall be limited to the actual amount of such fees and expenses not
to exceed $50,000; and provided further, however, that if the closing occurs the
amount so payable by the Company for such legal fees and expenses shall be as
previously agreed by the Company and such counsel. The Company shall pay on
demand all expenses incurred by the Buyer, including reasonable attorneys' fees
and expenses, as a consequence of, or in connection with, (1) the negotiation,
preparation or execution of any amendment, modification or waiver of the
Transaction Documents, (2) any default or breach of any of the Company's
obligations set forth in the Transaction Documents and (3) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Buyer under the Transaction Documents, including any action or proceeding
relating to such enforcement or any order, injunction or other process seeking
to restrain the Company from paying any amount due the
<PAGE>
Buyer. Except as provided in Section 8(d) and in this Section 10(k), each of the
Company and the Buyer shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
(L) TERMINATION. The Buyer shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(1) the Company shall have failed, refused, or been unable at or prior
to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or before
December 31, 1997, other than solely by reason of a breach of this Agreement
by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(M) SURVIVAL. The respective representations, warranties, covenants
and agreements of the Buyer and the Company contained in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement shall survive
the execution and delivery of this Agreement, the delivery of and payment for
the Preferred Shares and any sale or transfer of the Shares and shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Buyer or any Person controlling or acting on behalf of the Buyer or by the
Company or any Person controlling or acting on behalf of the Company.
(N) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer
shall have the right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
(O) CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto by their respective officers thereunto duly authorized as of the
date first set forth above.
NUMBER OF SHARES: 5,000
PRICE PER SHARE: $1,000.00
PURCHASE PRICE: $5,000,000.00
NUMBER OF SHARES UNDERLYING
WARRANTS: 175,000
ADVANTAGE FUND II LTD.
By /s/ A. P. de Groot
-------------------------------
Title: President
Address:
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile No: 011-599-9732-2008
NAPRO BIOTHERAPEUTICS, INC.
By: /s/ Gordon H. Link, Jr.
------------------------------
Title: Chief Financial Officer
<PAGE>
EXHIBIT 4.7
FORM OF COMMON STOCK
PURCHASE WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
No. W- Right to Purchase 175,000 Shares of Common Stock of NaPro
BioTherapeutics, Inc.
NAPRO BIOTHERAPEUTICS, INC.
(FORM OF)
COMMON STOCK PURCHASE WARRANT
NAPRO BIOTHERAPEUTICS, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, ADVANTAGE FUND II, LTD. or registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date
hereof, and before 5:00 p.m., New York City time, on the Expiration Date (as
hereinafter defined), 175,000 fully paid and nonassessable shares of Common
Stock at a purchase price per share equal to the Purchase Price (as hereinafter
defined). The number of such shares of Common Stock and the Purchase Price are
subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Common Stock" includes the Company's Common Stock, $.0075 par value
per share, and the related Preferred Stock Purchase Rights (and any similar
rights issued with respect to the Common Stock) as authorized on the date
hereof, and any other securities into which or for which the Common Stock
or the related Preferred Stock Purchase Rights (and any similar rights
issued with respect to the Common Stock) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger,
amalgamation, sale of assets or otherwise.
"Company" shall include NaPro BioTherapeutics, Inc. and any
corporation that shall succeed to or assume the obligation of NaPro
BioTherapeutics, Inc. hereunder in accordance with the terms hereof.
"Expiration Date" refers to December 8, 2001.
"Other Securities" refers to any stock (other than Common Stock) and
other securities of the Company or any other person (corporate or
otherwise) which the Holder
4.7-1
<PAGE>
at any time shall be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to
Section 4.
"Preferred Stock Purchase Rights" means the Preferred Stock Purchase
Rights issued or issuable pursuant to the Rights Agreement.
"Purchase Price" shall mean $10.00, subject to adjustment as provided
in this Warrant.
"Registration Statement" has the meaning provided in the Subscription
Agreement.
"Rights Agreement" means the Rights Agreement, dated as of November 8,
1996, by and between the Company and American Stock Transfer & Trust
Company, as Rights Agent, as amended from time to time in accordance with
its terms.
"Subscription Agreement" means the Subscription Agreement by and
between the Company and the original Holder of this Warrant.
"Trading Day" as used herein shall mean a day on which the New York
Stock Exchange is open for trading.
1. EXERCISE OF WARRANT.
-------------------
1.1 EXERCISE. (a) This Warrant may be exercised by the Holder hereof
--------
in full or in part at any time or from time to time during the exercise period
specified in the first paragraph hereof until the Expiration Date by surrender
of this Warrant and the subscription form annexed hereto (duly executed by the
Holder), to the Company's transfer agent and registrar for the Common Stock, and
by making payment, in cash or by certified or official bank check payable to the
order of the Company, in the amount obtained by multiplying (a) the number of
shares of Common Stock designated by the Holder in the subscription form by (b)
the Purchase Price then in effect. On any partial exercise the Company will
forthwith issue and deliver to or upon the order of the Holder hereof a new
Warrant or Warrants of like tenor, in the name of the Holder hereof or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in no event
shall the Holder be entitled at any time to purchase a number of shares of
Common Stock on exercise of this Warrant in excess of that number of shares upon
purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation
13D-G thereunder (each such person other than the Holder an "Aggregated Person"
and all such persons other than the Holder, collectively, the "Aggregated
Persons") (other than shares of Common Stock deemed beneficially owned through
the ownership of the unexercised portion of this Warrant and any of the
Company's Series C Senior Convertible Preferred Stock by the Holder and all
Aggregated Persons) and (2)
4.7-2
<PAGE>
the number of shares of Common Stock issuable upon exercise of the portion of
this Warrant with respect to which the determination in this sentence is being
made, would result in beneficial ownership by the Holder and all Aggregated
Persons of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and Regulation
13D-G thereunder, except as otherwise provided in clause (1) of the immediately
preceding sentence. For purposes of the second preceding sentence, the Company
shall be entitled to rely, and shall be fully protected in relying, on any
statement or representation made by the Holder to the Company in connection with
a particular exercise of this Warrant, without any obligation on the part of the
Company to make any inquiry or investigation or to examine its records or the
records of any transfer agent for the Common Stock.
1.2 NET ISSUANCE. Notwithstanding anything to the contrary contained
------------
in Section 1.1, the Holder may elect to exercise this Warrant in whole or in
part by receiving shares of Common Stock equal to the net issuance value (as
determined below) of this Warrant, or any part hereof, upon surrender of this
Warrant to the Company's transfer agent and registrar for the Common Stock
together with the subscription form annexed hereto (duly executed by the
Holder), in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock as to which this
Warrant is to be exercised
A = the current fair market value of one share of Common Stock
calculated as of the last trading day immediately preceding
the exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the
arithmetic average of the closing sale price of the Common Stock on the
principal securities market on which the Common Stock may at the time be listed
or, if there have been no sales on any such exchange on such day, the arithmetic
average of the highest bid and lowest asked prices on the principal securities
market at the end of such day, or, if on such day the Common Stock is not so
listed, the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 p.m., New York City time, or, if on such day the Common
Stock is not quoted in the Nasdaq System, the arithmetic average of the highest
bid and lowest asked price on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case over a period of five consecutive
Trading Days consisting of the day as of which the current fair market value of
a share of Common Stock is being determined (or if such day is not a Trading
Day, the Trading Day next preceding such day) and the four consecutive Trading
Days prior to such day. If on the date for which current fair market value is to
be determined the Common Stock is not listed on any securities exchange or
quoted in the
4.7-3
<PAGE>
Nasdaq System or the over-the-counter market, the current fair market value of
Common Stock shall be the highest price per share which the Company could then
obtain from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by the Board of Directors of the Company, unless prior
to such date the Company has become subject to a merger, acquisition,
amalgamation or other consolidation pursuant to which the Company is not the
surviving party, in which case the current fair market value of the Common Stock
shall be deemed to be the value received by the holders of the Company's Common
Stock for each share thereof pursuant to the Company's acquisition.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
-------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder, or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for shares of Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with such
exercise. If the Company fails to issue and deliver the certificates for the
shares of Common Stock to the Holder pursuant to the first sentence of this
paragraph as and when required to do so, in addition to any other liabilities
the Company may have hereunder and under applicable law, the Company shall pay
or reimburse the Holder on demand for all out-of-pocket expenses including,
without limitation, fees and expenses of legal counsel incurred by the Holder as
a result of such failure.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
--------------------------------------------------------
RECLASSIFICATION, ETC. In case at any time or from time to time, all the
- ---------------------
holders of Common Stock (or Other Securities) shall have received, or (on or
after the record date fixed for the determination of stockholders eligible to
receive) shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
4.7-4
<PAGE>
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date of the event listed in subdivisions (a)
through (c) the Holder had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and other securities
and property (including cash in the case referred to in subdivisions (b) and (c)
of this Section 3) receivable by the Holder as aforesaid during such period.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
--------------------------------------------------------
case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate or amalgamate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, as a condition of such reorganization,
consolidation, amalgamation, merger, sale or conveyance, the Company shall give
at least 30 days notice to the Holder of such pending transaction whereby the
Holder shall have the right to exercise this Warrant prior to any such
reorganization, consolidation, amalgamation, merger, sale or conveyance. Any
exercise of this Warrant pursuant to notice under this Section shall be
conditioned upon the closing of such reorganization, consolidation,
amalgamation, merger, sale or conveyance which is the subject of the notice and
the exercise of this Warrant shall not be deemed to have occurred until
immediately prior to the closing of such transaction.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
-----------------------------------
Company shall (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the Purchase Price in effect immediately prior
to such event by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 5. The Holder shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would be issuable on such exercise immediately prior to such
issuance by a fraction of which (i) the numerator is the Purchase Price in
effect immediately prior to such issuance and (ii) the denominator is the
Purchase Price in effect on the date of such exercise.
6. FURTHER ASSURANCES. The Company will take all action that may be
------------------
necessary or appropriate in order that the Company may validly and legally issue
fully paid and
4.7-5
<PAGE>
nonassessable shares of stock, free from all taxes, liens and charges with
respect to the issue thereof, on the exercise of all or any portion of this
Warrant from time to time outstanding.
7. NOTICES OF RECORD DATE, ETC. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all of the assets of the Company to or consolidation,
amalgamation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, amalgamation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
amalgamation, merger, dissolution, liquidation or winding-up, and (iii) the
amount and character of any stock or other securities, or rights or options with
respect thereto, proposed to be issued or granted, the date of such proposed
issue or grant and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall also state that the action
in question or the record date is subject to the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or a favorable vote of stockholders if either is required. Such notice shall be
mailed at least ten days prior to the date specified in such notice on which any
such action is to be taken or the record date, whichever is earlier.
8. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS.
------------------------------------------------------------
The Company will at all times reserve and keep available out of its authorized
but unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company
exerciseable for, convertible into, exchangeable for or otherwise entitling the
Holder to acquire shares of Common Stock (or Other Securities), and if at any
time the number of authorized but unissued shares of Common Stock (or Other
Securities) shall not be sufficient to effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock (or Other Securities) to such
number as shall be sufficient for such purposes.
4.7-6
<PAGE>
9. TRANSFER OF WARRANT. This Warrant shall inure to the benefit of
-------------------
the successors to and assigns of the Holder. This Warrant and all rights
hereunder, in whole or in part, are registrable at the office or agency of the
Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. REGISTER OF WARRANTS. The Company shall maintain, at the
--------------------
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon the
-------------------
surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
4.7-7
<PAGE>
13. WARRANT AGENT. The Company may, by written notice to the Holder,
-------------
appoint an agent having an office in the United States of America, for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 11,
and replacing this Warrant pursuant to Section 12, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law of the
--------
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall
-----------------------------------------
not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the Purchase Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
16. NOTICES, ETC. All notices and other communications from the
------------
Company to the registered Holder shall be in writing and shall be mailed by
first class certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by the Holder or at the address shown for
the Holder on the register of Warrants referred to in Section 10.
17. TRANSFER RESTRICTIONS. By acceptance of this Warrant, the Holder
---------------------
represents to the Company that this Warrant is being acquired for the Holder's
own account and for the purpose of investment and not with a view to, or for
sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise of the Warrant. The Holder acknowledges and agrees that this
Warrant and, except as otherwise provided in the Subscription Agreement, the
Common Stock issuable upon exercise of this Warrant (if any) have not been (and
at the time of acquisition by the Holder, will not have been or will not be),
registered under the Securities Act or under the securities laws of any state,
in reliance upon certain exemptive provisions of such statutes. The Holder
further recognizes and acknowledges that because this Warrant and, except as
provided in the Subscription Agreement, the Common Stock issuable upon exercise
of this Warrant (if any) are unregistered, they may not be eligible for resale,
and may only be resold in the future pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws, or
pursuant to a valid exemption from such registration requirements. Unless the
shares of Common Stock issuable upon exercise of this Warrant have theretofore
been registered for resale under the Securities Act, the Company may require, as
a condition to the issuance of Common Stock upon the exercise of this Warrant
(i) in the case of an exercise in accordance with Section 1.1 hereof, a
confirmation as of the date of exercise of the Holder's representations pursuant
to this Section 17, or (ii) in the case of an exercise in accordance with
Section 1.2 hereof, an opinion of counsel reasonably satisfactory to the Company
that the shares of Common Stock to be issued upon such exercise may be issued
without registration
4.7-8
<PAGE>
under the Securities Act. The Holder agrees not to transfer the shares of Common
Stock issued upon exercise of this Warrant in a transaction which does not
constitute a transfer thereof pursuant to the Registration Statement in
accordance with the plan of distribution set forth therein or in any supplement
to the Prospectus forming part of the Registration Statement unless the Buyer
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, that such shares of
Common Stock may be transferred without registration under the 1933 Act.
18. LEGEND. Unless theretofore registered for resale under the
------
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
19. MISCELLANEOUS. This Warrant and any terms hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
4.7-9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
Dated: December ___, 1997 NAPRO BIOTHERAPEUTICS, INC.
By:__________________________________________
Title:_______________________________________
4.7-10
<PAGE>
FORM OF SUBSCRIPTION
NAPRO BIOTHERAPEUTICS, INC.
(To be signed only on exercise of Warrant)
TO: AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Exercise Agent
6201 15th Avenue, 3rd Floor
Brooklyn, New York 11219
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of NaPro
BioTherapeutics, Inc., a Delaware Corporation (the "Company").
2. The undersigned Holder (check one):
o (a) elects to pay the aggregate purchase price for such shares of Common
Stock (the "Exercise Shares") (i) by lawful money of the United States
or the enclosed certified or official bank check payable in United
States dollars to the order of the Company in the amount of
$___________, or (ii) by wire transfer of United States funds to the
account of the Company in the amount of $____________, which transfer
has been made before or simultaneously with the delivery of this Form
of Subscription pursuant to the instructions of the Company;
or
o (b) elects to receive shares of Common Stock having a value equal to the
value of the Warrant calculated in accordance with Section 1.2 of the
Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
4. The undersigned Holder hereby represents to the Company that the
exercise of the Warrant elected hereby does not violate Section 1.1(b) of the
Warrant.
Name:_____________________________________
Address:_____________________________________
4.7-11
<PAGE>
_____________________________________
Dated:____________ ___, ____ _____________________________
(Signature must conform to name of Holder
as specified on the face of the Warrant)
____________________________
____________________________
(Address)
4.7-12
<PAGE>
EXHIBIT 5.1
OPINION OF HOLME
ROBERTS & OWEN LLP
December 16, 1997
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, Colorado 80301
Re: NaPro BioTherapeutics, Inc.
Form S-3 Registration Statement
Dear Sir or Madam:
We have acted as counsel for NaPro BioTherapeutics, Inc., a Delaware corporation
(the "Company"), in connection with certain transactions involving the private
placement of 1,000 shares of the Company's Series C Senior Convertible Preferred
Stock (the "Preferred Stock") and warrants (the "Warrants"). The Preferred Stock
(i) accrues a dividend of 5% per annum, which dividend may, at the Company's
option, be payable in shares of the company's Common Stock, par value $0.0075
per share (the "Shares"), and (ii) is convertible into Shares. The Warrants may
be exercised to purchase Shares.
In connection with the preparation and filing of a registration statement on
form S-3 (the "Registration Statement"), under the Securities Act of 1933, we
have reviewed the Company's certificate of incorporation and bylaws and the
record of its corporate proceedings and have made such other investigations as
we deemed necessary in order to express the opinions set forth below. Based on
the foregoing, it is our opinion that the Shares issuable as dividends, upon
conversion of the Preferred Stock or exercise of the Warrants will, upon proper
exercise of the conversion or exercise rights provided therefor, be duly and
validly issued, fully paid and nonassessable.
We hereby consent to all references to us in the Registration Statement and all
amendments thereto. We further consent to the use of this opinion as an exhibit
to the Registration Statement. We express no opinion as to any matters not
expressly set forth herein.
HOLME ROBERTS & OWEN LLP
By: /s/ Francis R. Wheeler
------------------
Francis R. Wheeler, Partner
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of NaPro
BioTherapeutics, Inc. for the registration of 1,000,000 shares of common stock
and to the incorporation by reference therein of our report dated January 26,
1997, with respect to the consolidated financial statements of NaPro
BioTherapeutics, Inc. included in its Annual Report on Form 10-K for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
\s\
ERNST & YOUNG LLP
Denver, Colorado
December 12, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Sterling K. Ainsworth, Gordon H. Link, Jr. and
Kai Larson, and each of them, his attorneys-in-fact, with full power of
substitution, for him in any and all capacities, to sign a registration
statement to be filed with the Securities and Exchange Commission (the
"Commission") on Form S-3 in connection with the registration by NaPro
BioTherapeutics, Inc. a Delaware corporation (the "Company"), of securities
("Securities") on behalf of certain Selling Stockholder, and all amendments
(including post-effective amendments) thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission; and to sign all documents in connection with the qualification and
sale of the Securities with Blue Sky authorities and with the National
Association of Securities Dealers, Inc.; granting unto said attorneys-in-fact
full power and authority to perform any other act on behalf of the undersigned
required to be done in the premises, hereby ratifying and confirming all that
said attorneys-in-fact may lawfully do or cause to be done by virtue hereof.
Signatures Date
---------- ----
____________________________ December __, 1997
Sterling K. Ainsworth, Ph.D.
____________________________ December __, 1997
Leonard P. Shaykin
____________________________ December __, 1997
Gordon H. Link, Jr.
____________________________ December __, 1997
Robert L. Poley
____________________________ December __, 1997
Patricia A. Pilia, Ph.D.
____________________________ December __, 1997
E. Garrett Bewkes, Jr.
____________________________ December __, 1997
Richard C. Pfenniger, Jr.
\s\ Arthur H. Hayes, Jr. M.D. December 3, 1997
- -----------------------------
Arthur H. Hayes, Jr. M.D.
\s\ Mark B. Hacken December 3, 1997
- ------------------
Mark B. Hacken
\s\ Vaughn D. Bryson December 15, 1997
- --------------------
Vaughn D. Bryson
