<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 of the
Securities Exchange Act of 1934
QUARTER ENDED JUNE 30, 1997
Commission File Number 0-24320
NAPRO BIOTHERAPEUTICS, INC.
Incorporated in Delaware IRS ID No. 84-1187753
6304 Spine Road, Unit A
Boulder, CO 80301
(303) 530-3891
NaPro BioTherapeutics, Inc. ("NaPro" or "the Company") (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
The number of shares outstanding of each of the issuer's classes of common stock
as of July 15, 1997:
Common Stock, $.0075 par value 12,007,320
Non-voting Common Stock, $.0075 par value 395,000
Total number of pages in document--14
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NaPro BioTherapeutics, Inc.
Table of Contents
Part I Financial Information Page
Consolidated Financial Statements
Balance Sheet 3
Statement of Operations 5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Quantitative and Qualitative Disclosures about Market Risk 11
Part II Other Information
Legal Proceedings 11
Changes in Securities 12
Defaults Upon Senior Securities 12
Submission of Matters to a Vote of Security Holders 12
Other Information 12
Exhibits and Reports on Form 8-K 13
Signatures 14
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Part I. Financial Information
Item 1. Consolidated Financial Statements
NaPro BioTherapeutics, Inc.
Balance Sheet
Assets
June 30, December 31,
1997 1996
------------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 2,150,000 $ 9,531,000
Securities available for sale 1,189,000 2,669,000
Securities held to maturity 1,073,000 2,567,000
Restricted cash 7,210,000 --
Accounts receivable 201,000 662,000
Notes receivable 566,000 --
Inventory 3,164,000 2,281,000
Prepaid expense and other 481,000 500,000
----------- -----------
Total current assets 16,034,000 18,210,000
Property and equipment, net 12,828,000 6,012,000
Restricted cash 327,000 415,000
Receivable from related party 18,000 18,000
Other assets 1,183,000 366,000
----------- -----------
Total assets $30,390,000 $25,021,000
=========== ===========
See accompanying notes
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NaPro BioTherapeutics, Inc.
Balance Sheet
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
(unaudited)
Current liabilities:
<S> <C> <C>
Accounts payable $ 3,487,000 $ 1,763,000
Payroll and payroll taxes 450,000 519,000
Long term debt--current portion 1,885,000 1,669,000
Deferred revenue 35,000 35,000
------------ ------------
Total current liabilities 5,857,000 3,986,000
Senior convertible debt 9,161,000 --
Other long term debt 786,000 751,000
------------ ------------
Total liabilities 15,804,000 4,737,000
Minority interest 3,715,000 3,715,000
Stockholders' equity
Preferred stock, $.001 par value:
Authorized shares--2,000,000
Series A:
Issued and outstanding shares--125,000
in 1997 (unaudited) and 1996
(preference in liquidation $1,000,000) -- --
Non-voting common stock, convertible on disposition
into voting common stock, $.0075 par value:
Authorized shares--1,000,000 shares
Issued and outstanding shares--395,000 in 1997
(unaudited) and 595,000 in 1996 3,000 4,000
Common stock, $.0075 par value:
19,000,000 authorized
12,226,158 shares issued in 1997 (unaudited),
and 11,986,089 in 1996 92,000 89,000
Additional paid-in capital 46,043,000 44,670,000
Notes receivable from stockholders -- (985,000)
Deficit (32,593,000) (25,525,000)
Treasury stock--218,838 shares in 1997 (unaudited) and
144,288 in 1996 (2,674,000) (1,684,000)
------------ ------------
Total stockholders' equity 10,871,000 16,569,000
------------ ------------
Total liabilities and stockholders' equity $ 30,390,000 $ 25,021,000
============ ============
</TABLE>
See accompanying notes
4
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NaPro BioTherapeutics, Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales:
To affiliate $ -- $ 161,000 $ -- $ 366,000
Other sales 91,000 609,000 1,099,000 1,095,000
----------- ----------- ----------- ------------
91,000 770,000 1,099,000 1,461,000
Expense:
Research, development and cost
of products sold 2,622,000 1,404,000 5,027,000 3,190,000
General and administrative 1,759,000 958,000 3,272,000 1,647,000
(Gain)/loss on retirement of
assets (218,000) -- (218,000) 15,000
----------- ----------- ----------- ------------
4,163,000 2,362,000 8,081,000 4,852,000
----------- ----------- ----------- ------------
Operating loss (4,072,000) (1,592,000) (6,982,000) (3,391,000)
Other income/(expense):
Interest and other income 122,000 106,000 288,000 206,000
Interest and other expense (292,000) ( 82,000) (374,000) (143,000)
----------- ----------- ----------- ------------
Net loss $(4,242,000) $(1,568,000) $(7,068,000) $( 3,328,000)
=========== =========== =========== ============
Loss per common share $ (0.35) $ (0.18) $ (0.59) $ (0.39)
=========== =========== =========== ============
Weighted average shares outstanding 11,978,530 8,514,093 11,964,109 8,448,213
=========== =========== =========== ============
</TABLE>
See accompanying notes.
5
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NaPro BioTherapeutics, Inc.
Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1997 1996
------------- ------------
Operating activities
Net loss $ (7,068,000) $(3,328,000)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 623,000 291,000
Compensation for common stock and options -- 9,000
(Gain)/loss on retirement of assets (218,000) 15,000
Changes in operating assets and liabilities:
Accounts receivable 461,000 (649,000)
Inventory (882,000) (477,000)
Prepaid expense and other assets (1,158,000) (113,000)
Accounts payable 1,724,000 291,000
Accrued liabilities (34,000) (179,000)
Deferred revenue -- (36,000)
------------ -----------
Net cash used by operating activities (6,552,000) (4,176,000)
Investing activities
Transfer of restricted cash (7,210,000) 124,000
Additions to property and equipment (7,235,000) (1,641,000)
Purchase of securities held to maturity (3,500,000) --
Proceeds from securities available for sale 1,462,000 --
Proceeds from securities held to maturity 5,076,000 --
------------ -----------
Net cash used by investing activities (11,407,000) (1,517,000)
Financing activities
Proceeds from notes payable 10,879,000 407,000
Payments under notes payable (344,000) (175,000)
Proceeds from sale of common stock 43,000 3,178,000
------------ -----------
Net cash provided by financing activities 10,578,000 3,410,000
------------ -----------
Net decrease in cash and cash equivalents (7,381,000) (2,283,000)
Cash and cash equivalents at beginning of period 9,531,000 7,133,000
------------ -----------
Cash and cash equivalents at end of period $ 2,150,000 $ 4,850,000
============ ===========
See accompanying notes.
6
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NaPro BioTherapeutics, Inc.
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are unaudited. However, in the opinion of
management, the accompanying financial statements reflect all adjustments,
consisting of only normal recurring adjustments, necessary for fair
presentation. Interim results of operations are not indicative of results for
the full year. These financial statements should be read in conjunction with the
NaPro Annual Report on Form 10-K for the year ended December 31, 1996. Certain
reclassifications have been made to the 1996 financial statements to conform
with the 1997 financial statement presentation.
2. Inventory June 30, December 31,
1997 1996
---------- -----------
Raw materials $ 647,000 $ 495,000
Work-in-process 350,000 449,000
Finished goods 2,167,000 1,337,000
---------- -----------
$3,164,000 $2,281,000
========== ===========
3. Cash Flow Supplemental Disclosures
Six Months Ended
June 30,
1997 1996
----------- -----------
Interest paid $ 149,000 $ 41,000
Noncash transactions:
Repurchase of common stock into treasury 990,000 --
Notes and related interest receivable from stockholders -- 16,000
Issuance of common stock for compensation previously
accrued 40,000 --
4. Senior Convertible Debt
In June 1997 NaPro privately issued $10.3 million of senior convertible notes.
The notes mature in June 2000 and bear interest at a rate of 5% per year.
Interest on the notes may be paid in common stock or cash at NaPro's option.
Initially, 50% of the notes are convertible into NaPro common stock at a price
of $10.00 per share. Starting in October 1997, the notes are convertible into
common stock at a discount (ranging from 5% to 10%) from the market price of the
common stock during specified periods prior to the conversion. If not converted
into common stock, upon maturity in June 2000, the notes will be exchanged for
13.75% 5-year debentures. As part of this transaction, NaPro has issued warrants
to purchase up to 323,700 shares of common stock at $10.00, including warrants
to purchase 33,700 shares of common stock that were issued to the placement
agent. NaPro has filed a registration statement with the SEC for the resale of
shares acquired on conversion of notes and exercise of warrants. The net
proceeds of the notes totalled $9.6 million after the placement agent's fees,
warrants and other offering cost. $7.2 million of the proceeds are restricted.
The restricted amounts are released periodically between September 1 and
December 31, 1997.
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NaPro has accounted for the notes and the warrants in conformance with the
guidelines of Discussion Matter D-60 of the FASB Emerging Issues Task Force. Of
the notes issued, $300,000 were issued to the placement agent as half of the
placement fee. The remaining half of the fee was paid in cash. The $600,000
placement fee has been capitalized in other assets as deferred issuance cost and
is being amortized to interest expense over the life of the notes. A total of
$1.1 million of the proceeds of the sale of the notes has been allocated to the
conversion rights and credited to additional paid-in capital, resulting in a
discount on the notes. The note discount is being amortized to interest expense
over 180 days beginning June 4, 1997, the date of sale of the notes. The
amortization period is based on the number of days until the investors are
entitled to use a 10% discount upon conversion, the conversion rate most
favorable to them.
The value of the 323,700 warrants issued in the transaction was estimated at
$179,000. The amount was credited to additional paid-in capital and charged to a
discount on the notes. This note discount is amortized to interest expense over
the three-year life of the notes.
5. Common Stock
In May 1997, a former NaPro consultant exercised its warrants to purchase 33,333
shares of voting common stock.
6. Loss per Share
In February 1997, The Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, NaPro will be required to change the method currently used to
compute loss per share and to restate all prior periods presented. Under the new
requirements for calculating basic loss per share, stock options will continue
to be excluded. The expected impact of Statement No. 128 on these periods is not
expected to be material.
7. Early Sale of Investment
In December 1996 NaPro purchased a $500,000 debt security that matured in June
1997 and was classified as hold-to-maturity. NaPro sold that security in April
1997 to meet current cash requirements. There was no material gain or loss
on the early sale of the security.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis provide information which NaPro's
management believes is relevant to an assessment and understanding of NaPro's
results of operations and financial condition. This discussion should be read
in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere herein as well as with the consolidated financial
statements, notes thereto and the related management's discussion and analysis
of financial condition and results of operations included in NaPro's Annual
Report on Form 10-K for the year ended December 31, 1996.
General
NaPro is a natural product pharmaceutical company which is focusing primarily on
the development, manufacture and commercialization of paclitaxel, a naturally-
occurring anti-cancer agent found in certain species of yew (Taxus) trees. The
Company's paclitaxel is referred to herein as "NBT Paclitaxel."
NaPro has devoted its efforts primarily to the development and implementation of
its proprietary extraction, isolation and purification (EIP/TM/) technology for
producing NBT paclitaxel. NaPro is currently
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dependent exclusively on sales of NBT paclitaxel for revenue. To advance the
development and commercialization of NBT Paclitaxel, NaPro has entered into 20-
year, exclusive agreements with each of F.H. Faulding & Co., Ltd. ("Faulding")
and Baker Norton Pharmaceuticals, a subsidiary of IVAX Corporation ("IVAX" and
together with Faulding, the "Strategic Partners") for the clinical development,
sales, marketing and distribution of NBT Paclitaxel. Through June 30, 1997,
NaPro's production of NBT paclitaxel was limited primarily to research and
pilot-scale production, and much of NaPro's product sales were for use in
clinical trials and for research and development purposes. Accordingly, NaPro
has generated only limited revenue from such activities and has incurred
significant operating losses, including operating losses of approximately $6
million, $4.3 million and $7.1 million for the years ended December 31, 1994,
1995 and 1996, respectively, and $7.1 million for the six months ended June 30,
1997, resulting in an accumulated deficit of $32.6 million as of June 30, 1997.
NaPro expects that it will continue to have a high level of operating expense
and will be required to make significant up-front expenditures in connection
with its biomass procurement, product development and research-and-development
activities. NaPro anticipates that operating losses will continue until such
time, if ever, as NaPro is able to generate sufficient revenue to support its
operations. NaPro believes that its ability to generate such revenue depends
primarily on the ability of IVAX to obtain regulatory approval in the U.S. for
the commercial sale of NBT paclitaxel, on NaPro's ability to obtain regulatory
approval for its manufacturing facilities and on NaPro's ability to construct
manufacturing facilities that produce quantities of NBT paclitaxel sufficient to
supply the Strategic Partners' requirements for commercial sales. Moreover,
NaPro's future growth and profitability will depend on the success of the
Strategic Partners in fostering acceptance in the oncological market for NBT
paclitaxel as a preferred form of chemotherapy to be used alone or in
combination with other chemotherapeutic agents.
Results of Operations
Three months ended June 30, 1997 compared to the three months ended June 30,
- ----------------------------------------------------------------------------
1996
- ----
There were no sales to affiliate for the three months ended June 30, 1997. Such
sales for the prior period were $200,000. Sales to affiliate were to IVAX, which
was not an affiliate in the 1997 period. Other sales for the three months ended
June 30, 1997 were $100,000 representing a decrease of $500,000 from the three
months ended June 30, 1996 which related primarily to the timing of product
shipments. Shipments to the Strategic Partners may vary significantly on a
quarter to quarter basis depending on a number of factors, including the timing
and size of any clinical trials conducted by either company and changes in
approved markets. This quarter to quarter variability will continue until stable
commercial demand has been established for the product in one of NaPro's major
markets.
Research, development, and cost of products sold expense for the three months
ended June 30, 1997 was $2.6 million, representing an increase of $1.2 million
from the three months ended June 30, 1996. The increase resulted primarily from
expansion of NaPro's research and development operations in anticipation of the
commencement of commercial production if the New Drug Application filed with the
FDA is approved.
General and administrative expense for the three months ended June 30, 1997 was
$1.8 million, an increase of $800,000 from the three months ended June 30, 1996.
The increase is primarily attributable to an increases of $200,000 in
administrative and support staff, $400,000 in accrued legal expense related to
intellectual property matters (See "Legal Proceedings", Part II, Item 1) and
$100,000 in consulting expense.
9
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Interest income for the three months ended June 30, 1997 was $100,000,
approximately unchanged from the three months ended June 30, 1996.
Interest and other expense for the three months ended June 30, 1997 was
$300,000, representing an increase of $200,000 from the three months ended June
30, 1996. The increase is attributable to interest and increased borrowings on
equipment financing.
Six months ended June 30, 1997 compared to the six months ended June 30, 1996
- ------------------------------------------------------------------------------
There were no sales to affiliate for the six months ended June 30, 1997. Such
sales for the prior period were $400,000. Sales to affiliate were to IVAX, which
was not an affiliate in the 1997 period. Other sales for the six months ended
June 30, 1997 were $1.1 million substantially unchanged from the six months
ended June 30, 1996.
Research, development, and cost of products sold expense for the six months
ended June 30, 1997 was $5 million, representing an increase of $1.8 million
from the six months ended June 30, 1996. The increase resulted primarily from
expansion of NaPro's research and development operations in anticipation of
possible approval of the New Drug Application filed with the FDA.
General and administrative expense for the six months ended June 30, 1997 was
$3.3 million, an increase of $1.6 million from the six months ended June 30,
1996. The increase is primarily attributable to increases of $400,000 in
administrative and support staff, $800,000 of accrued legal expense related to
intellectual property matters ("Legal Proceedings", Part II, Item 1) and
$300,000 in consulting expense.
Interest income for the six months ended June 30, 1997 was $300,000,
representing an increase of $100,000 from the six months ended June 30, 1996.
The increase is attributable to increased cash balances associated with the
completion of NaPro's offering of common stock in August 1996 and its warrant
call completed in June 1996 (See Liquidity and Capital Resources).
Interest and other expense for the six months ended June 30, 1997 was $400,000,
representing an increase of $200,000 from the six months ended June 30, 1996.
The increase is attributable to interest on the senior convertible debt (see
financial statement note 4) and increased borrowing on an equipment financing
arrangement. (See Liquidity and Capital Resources).
Liquidity and Capital Resources
NaPro's capital requirements have been and will continue to be significant. At
June 30, 1997, NaPro had working capital of $10.2 million. This compared to a
working capital balance of $14.2 million as of December 31, 1996. To date, the
funding of NaPro's capital requirements has been dependent primarily on the net
proceeds of public offerings of its common stock of approximately $21.1 million,
on private placements of its equity securities of approximately $22.8 million,
on net borrowings of $11.8 million, on the exercise of warrants and options of
$4.3 million, and on capital leases, loans and advances from its stockholders
and the Strategic Partners.
Cash and cash equivalents totaled $2.2 million at June 30, 1997. During the
first six months of 1997, cash provided by financing activities totaled $10.6
million, while cash used by operating and investing activities totaled $6.5
million and $11.4 million, respectively. In addition, NaPro had securities held
to maturity of
10
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$1.1 million, with maturity dates of July 1997, and securities available for
sale of $1.2 million, with maturity dates ranging from December 1997 to March
1998.
In May 1997 NaPro exercised an option on land located in Boulder County,
Colorado. Simultaneously, NaPro sold the land, resulting in a gain of $200,000
on the combined transaction.
In June 1997 NaPro issued $10.3 million of senior convertible notes and warrants
to purchase 323,700 shares of Common Stock. See financial statement note 4.
NaPro expended $7.2 million for capital projects during the first six months of
1997. For the entire year, NaPro expects to spend up to a total of $12.0 million
in property, plant, and equipment, primarily to expand its plantation operations
by up to $2 million, for work on the large scale commercial EIP/TM/
manufacturing facility in Boulder of up to $9 million and to upgrade and expand
its extraction manufacturing capabilities by up to $1 million. These amounts
have been reduced from amounts planned earlier in the year because of delays
caused by changes in the competitive environment for future paclitaxel sales as
a result of the filing by Bristol-Myers Squibb Company of a Supplemental New
Drug Application for Kaposis Sarcoma and subsequent approval by the FDA, and the
effects of such changes on the timing and availability of additional capital
resources.
NaPro anticipates significant capital expenditures in the next twelve months in
anticipation of possible approval of the New Drug Application filed with the
FDA. Therefore, to the extent cash from operations is inadequate to fund these
expenditures NaPro will need to obtain additional capital during the next twelve
months in the form of debt, equity, corporate partnering or some combination
thereof. If NaPro is not successful in attracting capital, it will need to
reduce significantly the scope of capital expenditures and operations.
The amount and timing of future capital expenditures will depend upon numerous
factors, including the approval or non-approval of the New Drug Application
filed with the FDA and the timing of such approval, differences between actual
and projected demand, the progress of NaPro's research and development programs,
the magnitude and scope of these activities, the cost of preparing, filing,
prosecuting, maintaining and enforcing patent claims and other intellectual
property rights, competing technological and marketing developments, changes in
or terminations of existing strategic partnerships, the establishment of
additional strategic relationships and the cost of manufacturing scale-up.
Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not
applicable.
Part II--Other Information
Item 1. Legal Proceedings.
On May 14, 1997, the Bristol-Myers Squibb Company was issued a European Patent.
The claims of this European Patent relate to certain methods of treatment with
paclitaxel. On the same day, NaPro
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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 Bristol-Myers Squibb. The revocation action was not in response to any
lawsuit or allegations of infringement against NaPro relating to these patents.
Because of the early stage of the revocation proceedings, and issues regarding
the scope and validity of these patents, NaPro cannot assess the impact which
these patents may have on the Company's business.
Item 2. Changes in Securities
In June 1997 NaPro issued $10.3 million of senior notes convertible into NaPro
common stock and warrants to purchase an aggregate of up to 323,700 shares of
common stock at $10.00. See financial statement note 4. The notes were issued in
reliance on an exemption from registration in accordance with Regulation D under
the Securities Act of 1933.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Securities Holders.
At the Annual Meeting of Stockholders held on June 10, 1997 (the "Annual
Meeting"), the following proposals were adopted by the margins indicated:
1. For re-election to the Board of Directors to hold office until the 2000
annual meeting of stockholders:
NUMBER OF SHARES
NOMINEE FOR WITHHELD
Leonard P. Shaykin 6,095,213 1,150
Arthur H. Hayes 6,095,213 1,150
In addition, the terms for the following members of the Board of Directors
continued after the Annual Meeting: Patricia A. Pilia, Ph.D., E. Garrett Bewkes,
Jr., Vaughn D. Bryson, Sterling K. Ainsworth, Ph.D., Richard C. Pfenniger, Jr.,
and Mark B. Hacken.
2. The ratification of the selection by the Board of Directors of Ernst &
Young LLP as NaPro's independent auditors for the year ending December
31, 1997.
NUMBER OF SHARES
FOR 6,095,113
AGAINST 1,250
ABSTAIN 0
Item 5. Other Information.
Special Note Regarding Forward-looking Statements.
Certain statements in this report constitute "forward-looking statements" within
the meaning of the federal securities laws. In addition, NaPro or persons
acting on its behalf sometimes may make forward-looking statements in other
written and oral communications. Such forward-looking statements may include,
among other things, statements concerning NaPro's plans, objectives or future
economic prospects, such as matters relative to 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; plant completion and approval; timing of product introductions and
revenue; availability of raw materials; prospects for breaking even 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 NaPro to be materially different from the
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among other things, adverse economic
and general business conditions; timing of
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regulatory filings and approvals relative to those of competitors; competition
from Bristol-Myers Squibb Company and other existing and new producers of
paclitaxel and other drugs; technological advances to cancer treatment and drug
development; ability to obtain rights to technology; ability to obtain raw
materials and commercialize manufacturing processes; effectiveness of NBT
Paclitaxel and other pharmaceuticals developed by NaPro 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 NaPro and other
biopharmaceutical companies; performance of NaPro's strategic partners of
obligations under existing agreements; the financial health of NaPro's strategic
partners; and other factors referred to as risk factors in NaPro's August 1,
1996 Prospectus.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this report.
Exhibit
Number Description of Exhibit
- ------ ----------------------
10.1 Form of Note Purchase Agreement dated as of June 4, 1997 between NaPro
and each of the Selling Stockholders
10.2 Form of 5% Senior Convertible Note
10.3 Form of Common Stock Purchase Warrant
10.4 Pledge and Security Agreement dated as of June 4, 1997 between NaPro and
First Trust of New York, National Association, as Collateral Agent
27.1 Financial Data Schedule
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, NaPro has
duly caused this report to be signed on its behalf.
NaPro BioTherapeutics, Inc.
/s/ Sterling K. Ainsworth
-----------------------------------------
August 13, 1997 Sterling K. Ainsworth
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Gordon Link
-----------------------------------------
August 13, 1997 Gordon Link
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Robert L. Poley
-----------------------------------------
August 13, 1997 Robert L. Poley
Controller
(Principal Accounting Officer)
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EXHIBIT 10.1
FORM OF NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of May 30, 1997 (this
"Agreement"), by and between NAPRO BIOTHERAPEUTICS, INC., a Delaware
corporation, with headquarters located at 6304 Spine Road, Unit A, Boulder,
Colorado 80301 (the "Company"), and _______________________________, a
________________________ corporation (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer wishes to purchase from the Company and the Company
wishes to sell to the Buyer, upon the terms and subject to the conditions of
this Agreement, a promissory note of the Company having the aggregate principal
amount set forth on the signature page of this Agreement and which will be
convertible into shares of Common Stock (such term and all other capitalized
terms used in this Agreement having the meanings provided in Section 1) and in
connection therewith the Company is to issue to the Buyer warrants to purchase
shares of Common Stock; and
WHEREAS, on the Closing Date, the Company and the Collateral Agent (as
defined herein), shall execute and deliver, one to the other, a Security
Agreement (as defined herein), in the form referred to herein which provides for
the grant to the Collateral Agent of a first priority perfected security
interest in certain collateral upon the terms and with the effect provided as
described therein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. 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):
-1-
<PAGE>
"Claims" means any losses, claims, damages, liabilities or expenses
(joint or several), incurred by a person or entity.
"Closing Date" means 12:00 noon, New York City time, on June 4, 1997
or such other mutually agreed to time.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder and published interpretations thereof.
"Collateral" shall have the meaning provided in the Security
Agreement.
"Collateral Agent" means First Trust National Association.
"Common Stock" means the Common Stock, par value $.0075 per share, of
the Company.
"Conversion Notice" means a Notice of Conversion substantially in the
form of Exhibit A to the Note.
"Conversion Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable upon conversion of the Note.
"Disclosure Statement" means the Disclosure Statement prepared by the
Company and attached hereto as EXHIBIT A.
"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.
"Event of Default" shall have the meaning provided in the Note.
"Final Maturity Note" means the note of the Company issuable on the
maturity date of the Note in the form attached as Exhibit K to ANNEX I hereto.
"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 securities pursuant to the
Registration Statement or any of its directors or officers or any person
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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 any prospectus included in the Registration
Statement, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act .
"Inspectors" means any attorney, accountant or other agent retained by
an Investor for the purposes provided in Section 8(b)(9).
"Interest Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable in payment of interest on the Note.
"Investor" means the Buyer and any permitted transferee or assignee
who agrees to become bound by the provisions of Section 8 of this Agreement .
"Joint Escrow Instructions" means the Joint Escrow Instructions
attached hereto as ANNEX II.
"Maturity Date" shall have the meaning provided in the Note.
"Nasdaq" means the Nasdaq National Market.
"NASD" means the National Association of Securities Dealers, Inc.
"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.
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"Note" means the Senior Convertible Note of the Company in the form of
ANNEX I to this Agreement.
"Other Notes" shall have the meaning provided in the Note.
"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" shall mean the prospectus, including any preliminary
prospectus, forming part of the Registration Statement and any amendment or
supplement thereto.
"Purchase Price" means the purchase price for the Note set forth on
the signature page of this Agreement.
"Questionnaire" means the Prospective Purchaser Questionnaire
completed by the Buyer.
"Record" shall mean all pertinent financial and other records,
pertinent corporate documents and properties of the Company subject to
inspection for the purposes provided in Section 8(b)(9).
"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 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 three years after the Closing Date and (ii)
the date on which the Investors no longer own any Registrable Securities.
"Registration Statement" means a registration statement on Form S-3 of
the
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Company under the 1933 Act which names the Investors as selling stockholders.
"Regulation D" means Regulation D under the 1933 Act.
"Repurchase Event" shall have the meaning provided in the Note.
"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 under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit a holder of
any securities to sell securities of the Company to the public without
registration 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 definitive Proxy
Statement for its 1997 Annual Meeting of Stockholders, and all other periodic
and other reports filed by the Company with the SEC pursuant to the 1934 Act
subsequent to December 31, 1996 and prior to the date hereof, in each case as
filed with the SEC and including the documents incorporated therein by
reference.
"Securities" means, collectively, the Note, the Final Maturity Note,
the Shares and the Warrants.
"Security Agreement" means the Pledge and Security Agreement between
the Company and the Collateral Agent in the form attached hereto as ANNEX III.
"Series A Preferred Stock" means the Series A Convertible Preferred A
Stock, $.001 par value, of the Company.
"Shares" means the Conversion Shares, the Interest Shares and the
Warrant Shares.
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"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.
"Trading Price" shall have the meaning provided in the Note.
"Transaction Documents" means, collectively, this Agreement, the
Security Agreement, the Securities 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 Note and exercise agent for the Warrants.
"Transfer Agent Instruction" means the instruction from the Company to
the Transfer Agent for the benefit of the Buyer, and the purchasers of the Other
Notes, in substantially the form attached hereto as ANNEX IV.
"Violations" shall mean the matters described in clauses (i), (ii),
(iii) and (iv) of Section 9(a)(1).
"Warrants" means Common Stock Purchase Warrants in the form attached
hereto as ANNEX V in the amount specified in Section 2(a).
"Warrant Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable upon exercise of the Warrants.
2. PURCHASE AND SALE; PURCHASE PRICE.
(A) PURCHASE. The Buyer hereby agrees to purchase, and the Company
hereby agrees to sell to the Buyer, on the Closing Date, the Note in the
principal amount set forth on the signature page of this Agreement and having
the terms and conditions as set forth in the form of the Note attached hereto as
ANNEX I for the Purchase Price. In connection with the purchase of the Note by
the Buyer, the Company shall issue to the Buyer at the closing on the Closing
Date a number of Warrants equal to 2.9 Warrants for each $100 principal amount
of the Note.
(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
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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 Note and the Warrants, each duly executed on behalf of the Company, to the
Escrow Agent. By signing this Agreement, the Buyer and the Company agree to all
of the terms and conditions of, and become parties to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
(C) The issuance and sale of the Note 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. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Note and
acquiring the Warrants for its own account for investment 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 Regulation D by reason of Rule 501(a)(3)
thereof;
(C) REOFFERS AND RESALES. The Buyer will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
except if registered under the 1933 Act, pursuant to an exemption from
registration under the 1933 Act or in a transaction not requiring registration
under the 1933 Act;
(D) COMPANY RELIANCE. The Buyer understands that (1) the Note is
being offered and sold and the Warrants are being issued to the Buyer, (2) the
Shares and the Final Maturity Note are being offered to the Buyer, (3) upon
conversion of the Note, the Conversion Shares will be issued to the Buyer, (4)
the Interest 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
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<PAGE>
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 eligibility of the Buyer to acquire the Securities; and the
information with respect to the Buyer set forth in the Questionnaire is accurate
and complete in all material respects;
(E) INFORMATION PROVIDED. The Buyer and its advisors have requested,
received and considered all information relating to the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and information relating to the offer and sale of the Note and
the offer and, upon exercise of the Note, sale of the Shares deemed relevant by
them; the Buyer and its advisors have been afforded the opportunity to ask
questions of the Company concerning the terms of the Securities and the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and have received 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 Note and to acquire the Warrants, 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 Note, the
Warrants, the Security Agreement and the Transfer Agent Instructions, as well as
any investigation of the Company completed by the Buyer or its advisors; the
Buyer understands that its investment in the Securities involves a high degree
of risk; and the Buyer understands that the offering of the Note is being made
to the Buyer as part of an offering without any minimum or maximum amount of the
offering (subject, however, to the right of the Company at any time prior to
execution and delivery of this Agreement by the Company, in its sole discretion,
to accept or reject an offer by the Buyer to purchase the Note and to acquire
the Warrants);
(F) ABSENCE OF APPROVALS. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities; and
(G) NOTE PURCHASE AGREEMENT. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the Buyer
in connection herewith and to consummate the transactions contemplated hereby
and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by
the Company, is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
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whether enforcement is considered in a proceeding in equity or at law.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(A) ORGANIZATION AND AUTHORITY. The Company and each of its
Subsidiaries 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 Note, the Warrants and the other agreements executed
and delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. The Company has no equity
investment in any other person other than the Subsidiaries listed in Exhibit
21.1 to the 1996 10-K.
(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 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, after due inquiry,
prospects of the Company and its Subsidiaries taken as a whole.
(C) CAPITALIZATION. The authorized capital of the Company consists of
(a) 19,000,000 shares of Common Stock, of which 11,973,985 shares were
outstanding on May 15, 1997, (b) 1,000,000 shares of Nonvoting Common Stock,
$.0075 par value, of which 395,000 shares were outstanding on May 15, 1997, and
(c) 2,000,000 shares of Preferred Stock, $.001 par value, of which 125,000
shares have been designated Convertible Preferred Stock, Series A, of which
125,000 shares were outstanding on May 15, 1997, and 190,000 shares have been
designated Series B Junior Participating Preferred Stock, none of which is
outstanding; from May 15, 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 increase in the number of shares of preferred stock
outstanding. 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
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<PAGE>
Common Stock or other capital stock of the Company or any such options,
warrants, rights or other securities; and from such date to the date hereof
there has been, 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 May 15, 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 of its Subsidiaries; and,
immediately following the Closing, after giving effect to any antidilution or
similar adjustment arising by reason of issuance of the Note and the Other Notes
(all of which are disclosed on the Disclosure Statement), 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 Note and the Other Notes) will be 2,876,136. The outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and all of such options, warrants
and other rights have been duly authorized by the Company. None of the holders
of such outstanding shares of capital stock is subject to personal liability
solely by reason of being such a holder. None of the outstanding shares of
capital stock and options, warrants and other rights to acquire Common Stock has
been issued in violation of the preemptive rights of any security holder 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 the Company shall obtain written waivers of
such rights from such persons.
(D) MATERIAL LOSSES. Since December 31, 1996, neither the Company nor
any of its Subsidiaries 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 would 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 its Subsidiaries taken as a whole.
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(E) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares have been
duly authorized and the Conversion Shares, when issued upon conversion of the
Note, the Interest Shares, when issued in payment of interest on the Note, and
the Warrant Shares, when issued upon exercise of the Warrants, 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 in the Disclosure Statement, no holders of outstanding shares of capital
stock of the Company are entitled to preemptive or other rights to subscribe for
the Shares, the Note or the Warrants, and prior to the Closing the Company shall
obtain written waivers of such rights from such persons. The Company has duly
reserved 334,000 shares of Common Stock as the Warrant Shares and 1,133,000
shares of Common Stock as the Conversion Shares, and such shares shall remain so
reserved, 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 Note, as
long as the Note may be converted. 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 why
the Shares will not be eligible for listing on Nasdaq.
(F) CORPORATE AUTHORIZATION. This Agreement, the Security Agreement,
the Transfer Agent Instructions, the Note, the Final Maturity Notes and the
Warrants have been duly and validly authorized by the Company; this Agreement
has been duly executed and delivered by the Company and, assuming due execution
and delivery by the Buyer, this Agreement is, the Security Agreement will be,
when executed and delivered by the Company and the Collateral Agent, and the
Transfer Agent Instructions will be, when duly executed and delivered by the
Company, and the Note, the Final Maturity Note and the Warrants will be, when
executed and delivered by the Company, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law.
(G) NON-CONTRAVENTION. The execution and delivery of this Agreement,
the Security Agreement, the Transfer Agent Instructions, the Note, the Final
Maturity Note and the Warrants by the Company and the consummation by the
Company of the issuance of the Securities and the other transactions
contemplated by this Agreement, the Security Agreement, the Transfer Agent
Instructions, the Note, the Final Maturity Note and the Warrants 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 of its Subsidiaries, (ii)
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conflict with or result in a breach by the Company or any of its Subsidiaries of
any of the terms or provisions of, or constitute a default under, or result in
the modification of, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company or any of its Subsidiaries pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets are bound or affected or (iii)
violate or contravene any applicable law, rule or regulation or any applicable
decree, judgment or order of any court, United States federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its Subsidiaries or any of their
respective properties or assets or (iv) have any material adverse effect on any
permit, certification, registration, approval, consent, license or franchise
necessary for the Company or any of its Subsidiaries to own or lease and operate
any of their respective properties and to conduct any of their respective
businesses or the ability of the Company or any of the Subsidiaries to make use
thereof.
(H) APPROVALS. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company or any of its Subsidiaries in
connection with the execution, delivery and performance of this Agreement, the
Security Agreement, the Transfer Agent Instructions, the Note, the Final
Maturity Note and the Warrants and the issuance and sale of the Securities as
contemplated by this Agreement and the terms of the Note and the Warrants, other
than (1) listing of the Shares on Nasdaq, (2) registration of the resale of the
Shares under the 1933 Act as contemplated by Section 8, (3) as may be required
under applicable state securities or "blue sky" laws, (4) the filing of
appropriate financing statements under the Uniform Commercial Code relating to
the Collateral 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 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
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December 31, 1996, neither the Company nor any of its Subsidiaries has (i)
incurred any material obligation or liability (absolute or contingent) other
than in the ordinary course of business; (ii) canceled, without payment in full,
any material notes, loans or other obligations receivable or other debts or
claims held by it other than in the ordinary course of business; (iii) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of
its material properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement; (iv) conducted its
business in a manner materially different from its business as conducted on such
date; (v) declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any agreement with respect to, any transaction or event which would
constitute a Repurchase Event. Except as disclosed in the SEC Reports, the
Company and its 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 its properties, whether tangible or intangible, and to
conduct its business or operations as currently conducted, except such licenses,
permits, certificates, registrations, approvals, consents and authorizations the
failure of which to obtain would not have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or, to the best of the Company's knowledge after due inquiry,
prospects of the Company and its 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
Shares by the Buyer and any other Investor.
(L) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries 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 its
Subsidiaries taken as a whole or the transactions contemplated by this
Agreement, the Security Agreement, the Note, the Final Maturity Note, the
Warrants or any of the documents contemplated thereby or which could adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement, the Security
Agreement, the Note, the Final Maturity Note, the Warrants or any of such other
documents; the Company does not have pending before the SEC any request
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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.
(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 1996 10-K, neither the Company nor any of its
Subsidiaries 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 of its Subsidiaries has incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company and its Subsidiaries taken as a whole, other than those
incurred in the ordinary course of its business.
(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 of its Subsidiaries, except as disclosed in the
SEC Reports.
(O) INTELLECTUAL PROPERTY. Except as disclosed in the SEC Reports or
the Disclosure Statement, the Company and its Subsidiaries own, or possess
adequate rights to use, all patents, patent rights, inventions, trade secrets,
know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights described or referred to
in the SEC Reports or owned or used by them or which are necessary for the
conduct of their respective businesses as presently conducted, or as proposed by
the Company to be conducted, and neither the Company nor any of its Subsidiaries
is aware of any claim to the contrary or any challenge by any person to the
rights of the Company or any of its Subsidiaries with respect to the foregoing.
(P) INTERNAL ACCOUNTING CONTROLS. The Company and its 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. The Company is not 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
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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
its Subsidiaries taken as a whole; and neither the Company nor any of its
Subsidiaries 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 its Subsidiaries have good title to all property real and personal
(tangible and intangible) and other assets owned by them, free and clear of all
security interests, charges, mortgages, liens or other encumbrances, except such
as are described in the SEC Reports or such as do not materially interfere with
the use of such property made, or proposed to be made, by the Company and its
Subsidiaries. The leases, licenses or other contracts or instruments under
which the Company and its Subsidiaries lease, hold or are 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 and its Subsidiaries. Neither the Company
nor any of its Subsidiaries 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 of its Subsidiaries, is imminent with respect to
any of the employees of the Company or any of its Subsidiaries.
(T) INSURANCE. The Company and its 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 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 its Subsidiaries.
(U) ERISA COMPLIANCE. The Company and each of its Subsidiaries 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 of its
Subsidiaries would have any liability; neither the Company nor any of its
Subsidiaries has incurred and does not expect 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 of its Subsidiaries 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.
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(V) TAX MATTERS. The Company and each of its Subsidiaries 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 of its
Subsidiaries which has had (nor does the Company have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
Subsidiaries, 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
its Subsidiaries taken as a whole.
(W) INVESTMENT COMPANY. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of such term under
the Investment Company Act of 1940 and the rules and regulations of the
Commission 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 other than Diaz & Altschul
Capital, LLC, and the Company shall pay, and indemnify and hold harmless the
Buyer from, any claim made against the Buyer by such entity or any other 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 Securities. 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 Notes
(other than Diaz & Altschul Capital, LLC with respect to the Notes) or, within
the six months prior to the date hereof, any other similar security of the
Company except as contemplated by this Agreement, and the Company represents
that neither the Company nor any person authorized to act on its behalf will
sell or offer for sale any such security to, or solicit any offers to buy any
such security from, or otherwise approach or negotiate in respect thereof with,
any person or persons so as thereby to cause the issuance or sale of any of the
Securities to be in violation of any of the provisions 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 and which would be integrated with the sale of the Note to
the Buyer or the issuance of Conversion Shares upon conversion thereof or the
issuance of the Interest Shares in payment of interest thereon for purposes of
such Section
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4460(i)(1)(D).
5. CERTAIN COVENANTS.
(A) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees that (1)
the Note and the Warrants to be issued to it hereunder and the Final Maturity
Note which may be issued pursuant to the Note have not been and are not being
registered under the provisions of the 1933 Act or any state securities laws
and, except as provided in Section 8, the Shares have not been and are not being
registered under the 1933 Act or any state securities laws, and that the Note,
the Warrants and the Final Maturity Note may not be transferred unless the Buyer
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Note, the Warrants or the Final Maturity Note to be transferred may be
transferred without such registration; (2) no sale, assignment or other transfer
of the Note, the Warrants or the Final Maturity Note or any interest therein may
be made except in accordance with the terms thereof; (3) the 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 said Rule and further, if the exemption provided by Rule 144 is not
available, any resale of the Securities under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (5) the Company is under no obligation to register the Securities (other
than registration of the resale of the 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
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 Shares may be transferred without registration under the 1933 Act.
(B) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees that
the Note shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the Note):
This Note has not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws. The sale to the holder of
this Note of the shares of Common Stock issuable upon conversion of this Note
and in payment of interest on this Note are not covered by a registration
statement under the Act or registration under state
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securities laws. This Note has been acquired, and such shares must be
acquired, for investment only and may not be sold, transferred or assigned in
the absence of registration of the resale thereof or an opinion of counsel
reasonably satisfactory in form, scope and substance to the Company that such
registration is not required.
(2) The Buyer further 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 further acknowledges and agrees that until such time as
the Shares have been registered for resale under the 1933 Act as contemplated by
Section 8, the certificates for the 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 Shares):
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.
(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 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 Note or Interest Shares issued in payment of interest on the
Note 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 in accordance with Section 2(b) hereof, and in
any event prior to the Closing Date, the Company will (1) irrevocably instruct
the Transfer Agent, pursuant to the
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Transfer Agent Instructions substantially in the form attached hereto as ANNEX
IV, to issue certificates for the Shares from time to time upon conversion of
the Note and exercise of the Warrants in such amounts as specified from time to
time to the Transfer Agent in the Conversion Notice surrendered in connection
with each such conversion and the Form of Subscription in the form attached to
the Warrants and (2) appoint the Transfer Agent the conversion agent for the
Note and the warrant agent for the Warrants. The certificates for the Shares may
bear the restrictive legend specified in Section 5(b) prior to registration of
the resale of the Shares under the 1933 Act, 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 the Note or exercise of the Warrants, as the
case may be. 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
Shares under the 1933 Act and (z) the instructions required by Section 8(b)(12)
will be given by the Company to the Transfer Agent and that the Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Note and the Warrants. 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 Shares in accordance with the last sentence of Section 5(a)
is not required under the 1933 Act, the Company shall permit the transfer of
such 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 names 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(b)(12).
(D) NASDAQ LISTING; REPORTING STATUS. On or before the Closing Date,
the Company will file with Nasdaq an application or other document required by
Nasdaq for the listing of the Shares with Nasdaq and shall provide evidence of
such filing to the Buyer. So long as the Buyer beneficially owns any portion of
the Note or the Warrants or any Shares, the Company will use its best efforts to
maintain the listing of the Common Stock on Nasdaq or another national
securities exchange. So long as the Company is required to maintain
effectiveness of the Registration Statement in accordance with Section 8 and its
shares of Common Stock are publicly traded, the Company shall timely file all
reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the
1934 Act, and the Company shall not, during the period the Company is required
to keep the Registration Statement effective pursuant to Section 8(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.
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(F) SECURITY AGREEMENT; FINANCING STATEMENTS. The Company agrees to
execute and deliver to the Collateral Agent the Security Agreement in the form
attached hereto as ANNEX III on or before the Closing Date. The Company shall
prepare, and on or before the Closing Date, file with the appropriate officials,
Uniform Commercial Code financing statements on Form UCC-1 relating to the
Collateral in which the Company is granting a security interest to the
Collateral Agent for the benefit of the Buyer pursuant to the Security Agreement
if such financing statements are, in the reasonable judgment of the Buyer,
advisable to perfect such security interest. The Company shall provide evidence
of such filings and customary search reports of the records of the relevant
Uniform Commercial Code filing offices on or prior to the Closing Date.
(G) STATE SECURITIES LAWS. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Note for sale to the Buyer pursuant to this Agreement, the
Warrants for issuance to the Buyer pursuant to this Agreement and the Shares for
sale upon conversion of the Note or exercise of the Warrants, as the case may
be, under such of the securities laws of jurisdictions in the United States as
shall be applicable to the sale of the Note to the Buyer pursuant to this
Agreement and issuance of the Shares upon conversion of the Note or exercise of
the Warrants, as the case may be. Prior to the issuance of the Final Maturity
Note, the Company shall take such actions under applicable state securities laws
as shall be necessary to qualify, or to obtain an exemption for, the Final
Maturity Note under such laws. In connection with the foregoing obligations of
the Company in this Section 5(g), 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(g), (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 the Buyer with copies of all filings, applications, orders
and grants or confirmations of exemptions relating to such securities laws on or
before the Closing Date.
(H) CERTAIN FUTURE FINANCINGS AND RELATED ACTIONS. (1) The Company
shall not issue any equity securities or securities convertible into,
exchangeable for or otherwise entitling the holder to acquire, any equity
securities of the Company which would, for purposes of Section 4460(i)(1)(D) of
the rules of the NASD (or any successor or replacement provision thereof), be
integrated with the sale of the Note and the issuance of Shares upon conversion
of, or in payment of interest on, the Note.
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(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 or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any Common Stock 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(h)(2) shall
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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 (z) pursuant to a public offering underwritten on a firm commitment
basis registered under the 1933 Act.
(I) LIMITATION ON CERTAIN ACTIONS. From the date of execution and
delivery of this Agreement by the parties hereto to the date of issuance of the
Note, the Company (1) shall comply with Article III of the Note as if the Note
was outstanding, (2) shall not take any action which, if the Note was
outstanding, (A) would constitute an Event of Default or, with the giving of
notice or the passage of time or both, would constitute an Event of Default or
(B) would constitute a Repurchase Event or, with the giving of notice or the
passage of time or both, would constitute a Repurchase Event.
(J) 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" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System ("margin stock"); (2) the proceeds of
sale of the Note will be used for general working capital purposes and 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
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 such Regulation G; 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.
(K) 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 Note set forth in
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Section 6 or 7, as the case may be, of this Agreement on or before the Closing
Date.
(L) DEBT OBLIGATION. So long as any portion of the Note is
outstanding, the Company shall cause its books, records and financial statements
to reflect the Note as a debt of the Company in its unpaid principal amount and,
whenever appropriate, as a valid senior debt obligation of the Company for money
borrowed.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Note
and issue the Warrants to the Buyer pursuant to this Agreement is conditioned
upon the following (any or all of which may be waived by the Company in its sole
discretion):
(a) The delivery by the Buyer to the Escrow Agent of 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 and in the Questionnaire shall have been true and correct on the date
of this Agreement and on or before the Closing Date the Buyer shall have
performed all covenants and agreements of the Buyer required to be performed by
the Buyer on or before the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Note and acquire the Warrants is conditioned upon the following (any or all of
which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the Note and the
Warrants in accordance with this Agreement;
(b) The Collateral Agent shall have executed and delivered to the
Company the Security Agreement in the form attached hereto as ANNEX III;
(c) The Transfer Agent shall have acknowledged in writing the Transfer
Agent Instructions;
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(d) 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;
(e) The representations and warranties of the Company contained in
this Agreement shall have been true and correct on the date of this Agreement,
and on or before the Closing Date the Company shall have performed all covenants
and agreements of the Company contained herein required to be performed by the
Company on or before the Closing Date;
(f) No event which, if the Note were outstanding, (1) would constitute
an Event of Default or, with the giving of notice or the passage of time or
both, would constitute an Event of Default shall have occurred and be continuing
or (2) would constitute a Repurchase Event or, with the giving of notice or the
lapse of time, or both, would constitute a Repurchase Event shall have occurred
and be continuing;
(g) 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 (d), (e), and (f) of this Section 7;
(h) The receipt by the Buyer of 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;
(i) On the Closing Date, the Buyer shall have received opinions of
Kirkland & Ellis, LLP, special counsel for the Company, and Kai Larson, Esq.,
General Counsel to the Company, each dated the Closing Date, addressed to the
Buyer, in form, scope and substance reasonably satisfactory to the Buyer,
substantially in the form of ANNEX VI and ANNEX VII attached hereto,
respectively;
(j) On the Closing Date, (i) trading in securities on the New York
Stock Exchange, the American Stock Exchange or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of Colorado or the State of New York shall not
have been declared by either federal or state authorities; and
(k) The Company shall have obtained written waivers, in form and
substance reasonably satisfactory to the Buyer, (1) 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
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respect to the purchase of certain securities by D&N, and shall have furnished a
copy of such waiver to the Buyer and (2) by all persons listed on the Disclosure
Statement by reason of the last sentence of Section 4(c).
8. REGISTRATION RIGHTS.
(A) MANDATORY REGISTRATION. (1) The Company shall prepare and, on or
prior to the date which is 10 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3 by the Buyer which at the time such
Registration Statement is declared effective by the SEC covers the resale of a
number of shares of Common Stock equal to (A) at least 110% of the number of
Conversion Shares issuable to Buyer under the Note, determined as if the Note,
together with accrued and unpaid interest, was converted in full on the trading
day prior to the SEC Effective Date at a conversion price equal to 90% of the
lowest per share Trading Price on such trading day, (B) at least 100% of the
Warrant Shares issuable to the Buyer and (C) such additional number of shares of
Common Stock as the Company shall in its discretion determine to register in
connection with the issuance of the Interest Shares, as Registrable Securities,
and which Registration Statement shall state that, in accordance with Rule 416
under the 1933 Act, such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Note to prevent dilution resulting from stock splits, stock
dividends or similar transactions. 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 Note based
on changes from time to time in the conversion price thereof 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 portion of the Note (after taking into
account any redemptions pursuant to Section 2.4(b) of the Note), 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
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rights of the holder of the Note to have all or a portion of the Note redeemed
pursuant to Section 2.4(b) of the Note. 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).
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(2) Prior to the SEC Effective Date and 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 Shares, 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 Section 8(a) 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;
(3) furnish to each Investor whose Registrable Securities are included
in the
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Registration Statement and its legal counsel, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
Prospectus and each amendment or supplement thereto, (2) each letter written by
or on behalf of the Company to the SEC or the staff of the SEC and each item of
correspondence from the SEC or the staff of the SEC relating to such
Registration Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment), each of
which the Company hereby determines to be confidential information and which the
Buyer hereby agrees to keep confidential as a confidential Record in accordance
with Section 8(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) register and qualify the Registrable
Securities covered by the Registration Statement under the securities or blue
sky laws of such jurisdictions as the Investors who hold a majority in interest
of the Registrable Securities reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period
and (iii) 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, 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;
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(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 sold
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 such Investors' sole 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 Inspectors
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 officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
-------- -------
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(i) the 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 (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of 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
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federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at such Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(10) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement as of the SEC Effective Date to be listed
on Nasdaq or such other principal securities market on which securities of the
same class or series issued by the Company are then listed or traded;
(11) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the 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
VIII 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 IX;
(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 Investor of the Registrable Securities pursuant to
the Registration Statement.
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(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 otherwise in compliance with applicable securities laws and that it will
promptly notify the Company of any material changes in the information set forth
in the Registration Statement regarding such Investor or its plan of
distribution; each Investor agrees (a) to notify the Company in writing in the
event that such Investor enters into any material agreement with a broker or a
dealer for the sale of the Registrable Securities through a block trade, special
offering, exchange distribution or a purchase by a broker or dealer and (b) in
connection with such agreement, to provide to the Company in writing the
information necessary to prepare any supplemental prospectus pursuant to Rule
424(c) under the 1933 Act which is required with respect to such transaction;
(4) Each Investor acknowledges that during the times specified in
Section 8(b)(5) or 8(b)(6) 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 the Prospectus in accordance
with Section
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8(b)(5) or 8(b)(6) during the period commencing at the time at which the Company
gives such Investor notice of the suspension of the use of the Prospectus 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 (a) fees and expenses of investment bankers retained by any Investor
and (b) brokerage commissions incurred by any 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 other information as may be necessary to permit the
Investors to sell such securities pursuant to Rule 144 without registration; and
(2) if at any time the Company is not required to file such reports
with the SEC, use its best efforts to, upon the request of an Investor, make
publicly available other information so long as is necessary to permit
publication by 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) 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 of the
following statements, omissions or violations in the Registration Statement, or
any
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<PAGE>
post-effective amendment thereof, or any prospectus included therein: (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, (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 (iv) any breach
or alleged breach by any person other than the Buyer of any representation,
warranty, covenant, agreement or other term of this Agreement, the Note, the
Final Maturity Note, the Security Agreement, the Transfer Agent Instructions or
the Warrants (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). 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 such 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; 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.
(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 reasonably 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
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<PAGE>
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.
(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
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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 seller of Registrable Securities shall be limited to the amount by which the
proceeds received by such seller 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 NEW YORK.
(B) HEADINGS. The headings, captions and footers of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(C) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(D) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail, personal delivery, by telephone
line facsimile transmission or courier and shall be effective five days after
being placed in the mail, if mailed, or upon receipt, if delivered personally,
by telephone line facsimile transmission or by courier, in each case addressed
to a party at such party's address (or telephone line facsimile transmission
number) shown in the introductory paragraph or on the signature page of this
Agreement or such other address (or telephone line facsimile transmission
number) as a party shall have provided by notice to the other party in
accordance with this provision. In the case of any notice to the Company, such
notice should be 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 number (303) 530-1296), and a copy
-
shall also be given to: Kirkland & Ellis, LLP, 153 East 53rd Street, New York,
New York 10022 Attention: Lance Balk, Esq._(telephone line facsimile
transmission number (212) 446-4900), and in the case of any notice to the Buyer,
a copy shall be
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given to: Law Offices of Brian W. Pusch, Penthouse Suite, 29 West 57th Street,
New York, New York 10019 (telephone line facsimile transmission number
(212) 980-7055), in each case with a copy to:
____________________________________________________________________
(telephone line facsimile transmission number ____________________).
(E) COUNTERPARTS. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, each of which shall be deemed to
be an original but all of which together shall constitute one and the same
agreement. A telephone line 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 Exhibit 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 Exhibit hereto, supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. This Agreement and the terms and provisions hereof are
for the sole benefit of only the Company, the Buyer and their respective
successors and permitted assigns.
(G) WAIVER. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or exercise of any other right or power.
(H) AMENDMENT. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(I) FURTHER ASSURANCES. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(J) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Buyer or any
other Investor under Sections 8 and 9 of this Agreement and the rights and
obligations of each Investor
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under Section 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 Note) 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 such 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 8 and 9 hereof. 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 Initial 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. 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 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
June 30, 1997, other than solely by reason of a breach of this Agreement by
the Buyer.
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<PAGE>
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. All representations and warranties made as of the date
of this Agreement and as of any other date deemed to be made by the terms of
this Agreement and agreements of the Company and of the Buyer contained herein
will survive the execution and delivery hereof and the Closing hereunder and
delivery of and payment for the Note, and shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Buyer or any person who controls the Buyer within the meaning of the 1933 Act,
or by or on behalf of the Company or any person who controls the Company within
the meaning of the 1933 Act.
(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.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the dates
set forth below.
Principal Amount: $
Purchase Price: $
NAPRO BIOTHERAPEUTICS, INC.
By: __________________________________
Name:
Title:
Date: __________________________________
__________________________________
__
By __________________________________
Name:
Title:
Date: __________________________________
Address:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Facsimile No.: _______________
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<PAGE>
EXHIBIT A
---------
COMPANY DISCLOSURE STATEMENT
A-38
<PAGE>
EXHIBIT 10.2
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF THIS NOTE
OF THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE AND IN
PAYMENT OF INTEREST ON THIS NOTE ARE NOT COVERED BY A REGISTRATION STATEMENT
UNDER THE ACT OR REGISTRATION UNDER STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NAPRO BIOTHERAPEUTICS, INC.
SENIOR CONVERTIBLE NOTE
No. ________ $______________
New York, New York
, 1997
FOR VALUE RECEIVED, NAPRO BIOTHERAPEUTICS, INC., a Delaware
corporation (hereinafter called the "Company"), hereby promises to pay to
[INSERT NAME AND ADDRESS OF BUYER], or registered assigns (the "Holder") or
order, the sum of _____________ Dollars ($_____________), on [BEFORE SIGNING THE
NOTE, INSERT DATE WHICH IS THREE YEARS AFTER THE CLOSING DATE], 2000 (the
"Maturity Date"), and to pay interest on the unpaid principal balance hereof at
the Applicable Rate from the date hereof, until the same becomes due and
payable, whether at maturity or upon acceleration or by redemption or repurchase
in accordance with the terms hereof or otherwise. If the Applicable Rate for
any period for which interest on this Note has already been paid increases, the
amount of additional interest due with respect to such period by reason of such
increase shall be paid in cash by the Company to the Holder within three
Business Days after such increase becomes effective. Any amount of principal of
or interest on this Note which is not paid when due shall bear interest at the
Default Rate from the due date thereof until the same is paid ("Default
Interest"). Interest shall be payable in arrears on the
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1st day of each March, June, September and December on the principal amount
outstanding on such date, commencing on September 1, 1997, and at maturity (the
"Interest Payment Dates"). Interest on this Note shall be computed on the basis
of a 360-day year of 12 30-day months and actual days elapsed. No interest shall
be payable on an Interest Payment Date on any portion of the principal amount of
this Note which shall have been converted or redeemed prior to such Interest
Payment Date so long as the Company shall have complied in full with its
obligations with respect to such conversion or redemption.
Except as otherwise specifically provided in Article VI, all payments
of principal of and premium, if any, and interest on this Note shall be made in
lawful money of the United States of America, or, at the option of the Company
and subject to the provisions of this Note, interest payable on the Interest
Payment Dates may be paid in whole or in part in fully paid and nonassessable
shares of Common Stock. All cash payments shall be made by wire transfer of
immediately available funds to such account as the Holder may from time to time
designate by written notice in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note is due on any
day which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any Interest Payment
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. Certain capitalized terms used in this
Note are defined in Article VII.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
indebtedness for borrowed money or the purchase price of property. This Note is
issued pursuant to the Note Purchase Agreement. The obligations of the Company
under this Note are secured pursuant to, and the Holder of this Note is entitled
to the benefits of, the Security Agreement.
The following terms shall apply to this Note:
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ARTICLE I
INTEREST IN COMMON STOCK; OPTIONAL REDEMPTION
1.1 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If the
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Company exercises its option to make a payment of interest on this Note wholly
or partly in shares of Common Stock (herein sometimes called the "Stock Payment
Option"), the issuance of shares of Common Stock upon such exercise of the Stock
Payment Option shall have been authorized by the Board of Directors of the
Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of shares of Common Stock pursuant to
the Stock Payment Option or the public resale of such shares by the Holder
would require registration with or approval of any governmental authority
under any law or regulation, and such registration or approval has not been
effected or obtained;
(iii) the shares of Common Stock to be issued upon exercise of the
Stock Payment Option shall not then have been authorized for listing, upon
official notice of issuance, on the principal securities exchange on which
the Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of the Common
Stock;
(v) an Event of Default, Repurchase Event or Registration
Repurchase Event has occurred and is continuing;
(vi) the Common Stock is neither (i) listed or admitted
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for trading on a national securities exchange nor (ii) quoted on Nasdaq; or
(vii) the issuance of shares of Common Stock in payment of interest
on this Note would result in the Holder (including all Aggregated Persons)
beneficially owning more than 4.9% of the Common Stock, determined as
provided in the second sentence of Section 2.1.
(c) If the Stock Payment Option is elected, the Company shall issue
and dispatch or cause to be dispatched to the Holder one or more certificates
for the aggregate number of whole shares of Common Stock determined by dividing
the per share Computed Price of the Common Stock on the applicable Interest
Payment Date into the total amount of lawful money of the United States of
America which the Holder would receive if the aggregate amount of interest on
this Note which is being paid in shares of Common Stock were being paid in such
lawful money; provided, however, that if in connection with any such election
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the Company shall have failed to deliver the appropriate number of shares of
Common Stock to the Holder within three Business Days after the applicable
Interest Payment Date, then the Company shall not be entitled to use the Stock
Payment Option in respect of such Interest Payment Date, such cash interest
shall be immediately due and payable and the Company shall pay the interest for
such Interest Payment Date in cash with Default Interest, at the rate provided
in the Note, from such Interest Payment Date until paid. No fractional shares
will be issued in payment of interest on this Note. In lieu thereof, the
Company may, at its option, issue a number of shares of Common Stock which
reflects a rounding up to the next whole number or may pay lawful money of the
United States of America for such fractional share.
(d) If the Company exercises the Stock Payment Option with respect to
a payment of interest on this Note, the Company shall deliver to the Holder, on
the date on which Payment Shares for such payment of interest on this Note are
to be received by the Holder, a Company Certificate setting forth (i) the total
amount of the interest payment to which the Holder is entitled, (ii) the portion
of the interest payment being made in Payment Shares, (iii) the number of
Payment Shares allocable to such payment, as
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calculated pursuant to this Section 1.1, (iv) any rounding adjustment to such
number or any payment necessary to be made pursuant to Section 1.1(c), (v) a
brief statement of the facts requiring such adjustment, (vi) the number of
Payment Shares issuable with respect to each $100 of interest on this Note after
such adjustment and (vii) a brief statement that none of the conditions set
forth in Section 1.1(b) has occurred and is existing. Such Company Certificate
shall be accompanied by the certificates, each duly issued in the name of the
Holder or its nominee, representing the Payment Shares. Such Company Certificate
shall be conclusive evidence of the correctness of the calculation of the number
of Payment Shares allocable to the payments to which such Company Certificate
relates and of any adjustments to such number made pursuant to this Section 1.1
in the absence of manifest error. In addition, on or before the pertinent
payment date, the Company shall cause the transfer agent for the Common Stock to
prepare and issue the certificates representing the Payment Shares in the name
of the Holder before being so delivered by the Company on the payment date.
(e) The Payment Shares, when issued pursuant to and in compliance
with this Section 1.1, shall be, and for all purposes shall be deemed to be,
validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of such Common Stock, will be, and for
all purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Note to which such Payment
Shares relate.
(f) Upon request of the Company from time to time, the Holder shall
provide information concerning the number of Payment Shares which may be issued
to the Holder within the limitation provided in Section 1.1(b)(vii).
1.2 OPTIONAL REDEMPTION BY COMPANY. (a) The Company shall have the
------------------------------
right to redeem at any one time or from time to time up to 50% of the original
principal amount of this Note at the Optional Redemption Price pursuant to this
Section 1.2 on any Optional Redemption Date, so long as (x) no Event of Default
or
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Repurchase Event has occurred and is continuing, (y) the Company is in
compliance in all material respects with its obligations to the Holder
(including, without limitation, its obligations under the Note Purchase
Agreement) and (z) the Company has funds available to pay the Optional
Redemption Price when it gives the Optional Redemption Notice. In order to
exercise its right of redemption under this Section 1.2, the Company shall give
an Optional Redemption Notice to the Holder not less than 20 days or more than
30 days prior to the Optional Redemption Date stating that: (1) the Company is
exercising its right to redeem a specified portion of this Note in accordance
with this Section 1.2, (2) the principal amount of this Note to be redeemed, (3)
the Optional Redemption Price and (4) the Optional Redemption Date. On the
applicable Optional Redemption Date the Company shall pay to or upon the order
of the Holder by wire transfer of immediately available funds to such account as
shall be specified for such purpose by the Holder an amount equal to the
Optional Redemption Price of the portion of this Note to be redeemed.
(b) The Company shall not be entitled to give an Optional Redemption
Notice or to redeem any portion of this Note with respect to which the Holder
has given a Conversion Notice. Notwithstanding the giving of an Optional
Redemption Notice, the Holder shall be entitled to convert in accordance with
the terms of this Note up to five percent of the portion of this Note which
otherwise is to be redeemed in accordance with such Optional Redemption Notice
by giving a Conversion Notice at any time prior to the later of (1) the date
which is one Business Day prior to the applicable Optional Redemption Date and
(2) the date on which the Company pays the Optional Redemption Price of such
portion of this Note to the Holder.
(c) Any redemption of this Note pursuant to this Section 1.2 shall be
made at the same time as a redemption by the Company of a pro rata portion
(based on the outstanding principal amounts) of the Other Notes. The Company
shall not redeem any of the Other Notes pursuant to the provisions thereof
similar to this Section 1.2 or repurchase or otherwise acquire any of the Other
Notes (other than a mandatory redemption pursuant to provisions of the Other
Notes comparable to Section 2.4) unless the Company offers simultaneously to
redeem, repurchase or otherwise acquire a pro
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rata portion (based on outstanding principal amount) of this Note for cash at
the same price as the Other Note or Other Notes.
1.3 NO PREPAYMENT. Except as otherwise specifically provided in
-------------
Section 1.2, this Note may not be prepaid, redeemed or repurchased at the option
of the Company prior to the Maturity Date.
ARTICLE II
CONVERSION; CERTAIN MANDATORY REDEMPTION
RIGHTS AND OBLIGATIONS
2.1 CONVERSION RIGHT. The Holder shall have the right (a) during the
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period from and after the Issuance Date and ending on the date which is 119 days
after the Issuance Date, to convert at any one time or from time to time up to
an aggregate of 50% of the original principal amount of this Note and (b) on and
after the date which is 120 days after the Issuance Date to the date this Note
is paid in full, to convert at any time all or from time to time any part of the
outstanding and unpaid principal amount of this Note, in each such case of at
least $25,000, or such lesser amount as shall remain unpaid at the time of the
conversion or may be permitted from time to time by the Company in its
discretion, and in each such case accrued and unpaid interest on the principal
amount to be converted and on any such interest, into fully paid and
nonassessable shares of Common Stock at the Conversion Price in effect on the
date the applicable Conversion Notice is given in accordance with this Note.
Notwithstanding any other provision of this Note, in no event shall the Holder
be entitled at any time to convert any portion of the principal amount of this
Note (and accrued and unpaid interest thereon and on any such interest) in
excess of that portion of the principal amount of this Note (and accrued and
unpaid interest thereon and on any such interest) upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned by the Holder
(including shares of Common Stock beneficially owned by all Aggregated Persons)
(other than shares of Common Stock deemed beneficially owned by the Holder or
any Aggregated Person of the Holder through the ownership of (x) the unconverted
portion of the principal amount of this Note and the Other Notes and accrued and
unpaid interest thereon and on any
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such interest and (y) the unconverted or unexercised portion of any instrument
which contains limitations similar to those set forth in this sentence) and (2)
the number of shares of Common Stock issuable upon conversion of the portion of
the principal amount of this Note and accrued and unpaid interest thereon and on
any such interest with respect to which the determination in this sentence is
being made, would result in beneficial ownership by the Holder and all
Aggregated Persons of the Holder of more than 4.9% of the outstanding shares of
Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act,
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the immediately preceding sentence. For purposes of the second preceding
sentence, the Company shall be entitled to rely, and shall be fully protected in
relying, on any statement or representation made by the Holder to the Company in
connection with a particular conversion, without any obligation on the part of
the Company to make any inquiry or investigation or to examine its records or
the records of any transfer agent for the Common Stock and without any liability
of the Company with respect thereto. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing the sum
of (1) that portion of the principal amount of this Note to be converted plus
----
(2) accrued and unpaid interest on such principal amount to the date the
Conversion Notice for such conversion is given plus (3) accrued and unpaid
----
Default Interest, if any, on the amount referred to in the immediately preceding
clause (2) to the date such Conversion Notice is given, by the Conversion Price
in effect on the date the Conversion Notice for such conversion is given.
2.2 AUTHORIZED SHARES. The Company covenants that, during the period
-----------------
the conversion rights exist, the Company will reserve from its authorized and
unissued Common Stock [INSERT THE LESSER OF 20% OF THE OUTSTANDING COMMON STOCK
AND 150% OF THE AGGREGATE NUMBER OF SHARES ISSUABLE UPON CONVERSION FOR THIS
NOTE AND THE OTHER NOTES AT 90% OF LOW TRADE PRICE DURING THE NINE TRADING DAYS
PRIOR TO DATE THIS NOTE IS ISSUED] shares, (such amount to be subject to
equitable adjustment from time to time on terms reasonably acceptable to the
Holder for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring on or after the
Issuance
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Date) to provide for the issuance of Common Stock upon the full conversion of
this Note and the Other Notes, subject to reduction from time to time by the
number of shares of Common Stock issued on conversion of this Note and the Other
Notes. The Company shall, from time to time, authorize and reserve additional
shares of Common Stock to be issuable pursuant to the terms of this Note as
shall be necessary to ensure that an adequate number of shares of Common Stock
are at all times authorized and reserved for issuance upon full conversion of
this Note and the Other Notes and the payment of interest on this Note in
accordance with Section 1.1 and on the Other Notes in accordance with the terms
thereof. The Company represents and warrants that upon issuance, such shares of
Common Stock will be duly and validly issued, fully paid and non-assessable. The
Company agrees that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of and payment of interest on this Note.
2.3 METHOD OF CONVERSION. (a) The right of the Holder to convert
--------------------
this Note shall be exercised by delivering (which may be made by telephone line
facsimile transmission) to the Conversion Agent at the address or telephone line
facsimile transmission number provided in or pursuant to the Transfer Agent
Instruction, a Conversion Notice stating the principal amount of this Note
which, together with interest and Default Interest, if any, as provided in this
Note, is being converted and the number of shares of Common Stock to be issued
upon such conversion. The Holder shall deliver a copy of such Conversion Notice
to the Company when such notice is delivered to the Conversion Agent or as soon
as practical thereafter, provided that the failure to do so shall not relieve
the Conversion Agent of its obligations or prejudice the Holder's rights. The
number of shares of Common Stock to be issued upon each conversion of this Note
shall be the number set forth in the applicable Conversion Notice, which number
shall be conclusive absent manifest error. The Company shall notify the Holder
of any claim by the Company of manifest error in a Conversion Notice within one
Business Day after the Holder gives such Conversion Notice and no such claim of
error shall limit or delay performance of the Company's obligation to issue upon
such conversion the number of shares of Common Stock which are not in dispute.
A
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Conversion Notice shall be deemed for all purposes to be in proper form unless
the Company notifies the Holder by telephone line facsimile transmission within
one Business Day after a Conversion Notice has been given (which notice from the
Company shall specify all defects in the Conversion Notice) and any Conversion
Notice containing any such defect shall nonetheless be effective on the date
given if the Holder promptly undertakes in writing to correct all such defects.
The Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Common Stock
or other securities or property on conversion of this Note in a name other than
that of the Holder, and the Company shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of any such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Holder shall be responsible for the
amount of any withholding tax payable in connection with such conversion.
(b) If the Holder elects to convert this Note in accordance with
Section 2.1, the Holder shall not be required to surrender this Note physically
unless the entire unpaid principal amount of this Note is so converted. The
Company shall maintain records showing the principal amount so converted and the
dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon each such conversion. In the event of any dispute
or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid the Holder may not
transfer this Note unless (1) the Holder first physically surrenders this Note
to the Company, whereupon the Company will forthwith issue and deliver upon the
order of the Holder a new note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this Note
and (2) such transfer is otherwise in compliance with Section 8.7 hereof. THE
HOLDER AND ANY ASSIGNEE, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGES AND AGREES
THAT, BY REASON OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING CONVERSION OF A
PORTION OF THIS NOTE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF THIS NOTE
REPRESENTED BY
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THIS NOTE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE HEREOF.
(c) In case of any consolidation or merger of the Company with any
other corporation (other than a wholly-owned subsidiary of the Company) in which
the Company is not the surviving corporation, or in case of any sale or transfer
of all or substantially all of the assets of the Company, or in the case of any
share exchange pursuant to which all of the outstanding shares of Common Stock
are converted into other securities or property, the Company shall make
appropriate provision or cause appropriate provision to be made so that the
Holder shall have the right thereafter to convert this Note into the kind of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by the persons who were
holders of Common Stock immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the Holder on a
basis as nearly as practical as such rights existed prior to such consolidation,
merger, sale, transfer or share exchange. If, in connection with any such
consolidation, merger, sale, transfer or share exchange each holder of shares of
Common Stock is entitled to elect to receive either securities, cash or other
assets upon completion of such transaction, the Company shall provide or cause
to be provided to the Holder the right to elect the securities, cash or other
assets into which this Note shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election). The Company shall not effect
any such transaction unless the provisions of this paragraph have been complied
with. The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.
Whenever the Company shall propose to take any of the actions
specified in this Section 2.3(c), the Company shall cause a notice to be mailed
to the Holder at least 20 days prior to the date on which the books of the
Company will close or on which a record will be taken for such action. Such
notice shall specify
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the action proposed to be taken by the Company and the date as of which holders
of record of the Common Stock shall participate in any such actions or be
entitled to exchange their Common Stock for securities or other property, as the
case may be.
(d) Upon receipt by the Conversion Agent from the Holder of a
Conversion Notice meeting the requirements for conversion as provided in Section
2.1 and this Section 2.3, the Company shall issue and deliver or cause to be
issued and delivered to the Holder certificates for the Common Stock issuable
upon such conversion by the close of business on the third Business Day after
the date of such receipt, and as of the close of business on the date of receipt
of such Conversion Notice the Holder shall be deemed to be the holder of record
of the Common Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note shall be
reduced to reflect such conversion, and all rights with respect to the portion
of this Note being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a Conversion
Notice as provided herein, the Company's obligation to issue and deliver the
certificates for Common Stock shall be absolute and unconditional, irrespective
of any action or inaction 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 or any other person 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 conversion.
If the Company fails to issue and deliver the certificates for the Common Stock
to the Holder pursuant to the first sentence of this Section 2.3(d) as and when
required to do so, in addition to any other liabilities the Company may have
hereunder and under applicable law, (1) 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
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Holder as a result of such failure, (2) the percentage used to calculate the
Conversion Price applicable to such conversion shall be reduced by two-and-one-
half percentage points from the percentage otherwise used to calculate the
Conversion Price applicable to such conversion, provided that if the Fixed
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Conversion Price is applicable to such conversion, the Fixed Conversion Price
shall be reduced by two-and-one-half percent and (3) the 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 the Holder of the certificates for the shares of
Common Stock issuable upon such conversion of this Note, rescind such
conversion, whereupon the Holder shall have the right to convert this Note
thereafter in accordance herewith.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of the aggregate number of such
shares converted at one time by the same holder, the Company may round the
number of shares of Common Stock issued on such conversion up to the next
highest whole share or may pay lawful money of the United States of America for
such fractional share, based on a value of one share of Common Stock being equal
to the last sale price of the Common Stock on the date the applicable Conversion
Notice is given to the Company, as reported by Bloomberg, L.P.
2.4 LIMITATION ON SHARES ISSUABLE ON CONVERSION; MANDATORY
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REDEMPTION. (a) Notwithstanding any other provision herein, unless the
- ----------
Stockholder Approval shall have been obtained from the stockholders of the
Company or waived by Nasdaq, the Company shall not be required to issue upon
conversion of this Note a number of shares of Common Stock in excess of the
Maximum Share Amount less the number of shares of Common Stock issued pursuant
to Section 1.1 from time to time in payment of interest on this Note. The
Company shall maintain records which show the number of shares of Common Stock
issued by the Company upon conversion from time to time of this Note and issued
by the Company pursuant to Section 1.1 in payment of interest on this Note,
which records shall be controlling in the absence of manifest error. Upon
surrender of this Note for transfer or re-registration hereof (or, at the option
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of the Holder, for conversion pursuant to Section 2.1 of less than all of this
Note), the Company shall make a notation on the new Note issued upon such
transfer or re-registration or evidencing such unconverted portion of this Note,
as the case may be, as to the remaining number of shares of Common Stock from
the Maximum Share Amount remaining available for conversion of the Note
evidenced by such new certificate (including, without limitation, by taking into
account the number of shares of Common Stock issued by the Company pursuant to
Section 1.1 in payment of interest on this Note and not previously reflected on
the Note so surrendered, as shown on the records maintained by the Company). If
this Note is surrendered for split-up into two or more Notes representing an
aggregate principal amount equal to the principal amount of this Note at the
time so surrendered (as reduced by any contemporaneous conversion of this Note),
each Note issued on such split-up shall bear a notation of the portion of the
Maximum Share Amount allocated thereto determined by pro rata allocation from
among the remaining portion of the Maximum Share Amount allocated to this Note
at the time so surrendered. If any Other Note is converted in full, repaid,
repurchased or redeemed, all of the portion of the Maximum Share Amount (as
defined in such Other Note) allocated to such Other Note which remains unissued
after such conversion, repayment, repurchase or redemption shall be re-allocated
to this Note and the Other Notes outstanding at the close of business on the
date of such conversion, repayment, repurchase or redemption of the Other Note
so converted, repaid, repurchased or redeemed pro rata based on the principal
amounts outstanding at the close of business on such date.
(b) The Company shall promptly, but in no event later than three
Business Days after the occurrence, give notice to the Holder in the form
attached hereto as EXHIBIT B (by telephone line facsimile transmission at such
number as the Holder has specified in writing to the Company for such purposes
or, if the Holder shall not have specified any such number, by overnight courier
or first class mail, postage prepaid, at the Holder's address as the same
appears on the records of the Company) and the Holder may at any time after the
occurrence give notice to the Company in the form attached hereto as EXHIBIT C,
in either case, if on any five Trading Days ending on or after the fifth Trading
Day after the Issuance Date (the "Inconvertibility Days") within any period of
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ten consecutive Trading Days (x) the Company would not have been required to
convert this Note in full as a consequence of the limitations set forth in
Section 2.4(a) had this Note been converted in full into Common Stock on each
such day, determined at the Conversion Price applicable on each such Trading Day
and without regard to the limitation, if any, on the Holder contained in the
second sentence of Section 2.1 (a "Maximum Share Amount Inconvertibility") or
(y) notwithstanding Rule 416 under the Act or the provisions of Section 8(b) of
the Note Purchase Agreement, the Registration Statement is not deemed to cover
such indeterminate number of shares of Common Stock as shall be issuable upon
conversion of this Note based on changes from time to time in the Conversion
Price, the number of shares of Common Stock issuable upon conversion of this
Note in full had this Note been converted in full into Common Stock on each such
Trading Day and without regard to the limitation if any on the Holder contained
in the second sentence of Section 2.1 would exceed the number of shares of
Common Stock covered by the Registration Statement and available for sale by the
Holder pursuant to the Registration Statement (a "Registration Restriction
Inconvertibility") (any such notice, whether given by the Company or the Holder,
an "Inconvertibility Notice"). If the Company shall have given or been required
to give any Inconvertibility Notice, or if the Holder shall have given any
Inconvertibility Notice, then within three Business Days (the "Mandatory
Redemption Period") after the earlier of (x) the date such Inconvertibility
Notice is given and (y) the date such Inconvertibility Notice was required to be
given, the Company shall redeem (A) the portion of this Note (which, if
applicable, shall be all of this Note) as shall not, on the Business Day
immediately preceding the date of such redemption, be convertible into shares of
Common Stock by reason of the limitations set forth in Section 2.4(a)
(determined without regard to the limitation, if any, on the Holder contained in
the second sentence of Section 2.1) or (B) the portion of this Note (which, if
applicable, shall be all of this Note) as shall not, on the Business Day
immediately preceding the date of such redemption, be convertible into shares of
Common Stock which are covered by the Registration Statement and available for
sale by the Holder pursuant to the Registration Statement, in either the case of
the preceding clause (A) or clause (B) at a price equal to the Redemption Price
(such portion, the "Inconvertible Portion") unless prior to the expiration of
the
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applicable Mandatory Redemption Period the Company and the Holder shall, by
mutual agreement in the form attached hereto as EXHIBIT D (a "Mandatory
Redemption Waiver"), waive the Company's obligation to make such redemption. If
the Company shall have become obligated to redeem all or any portion of this
Note pursuant to this Section 2.4 by reason of a Maximum Share Amount
Inconvertibility and, prior to the expiration of the Mandatory Redemption Period
with respect thereto, the Company would have been able, within the limitations
set forth in Section 2.4(a), to satisfy its obligations to the Holder to convert
all of this Note (determined without regard to the limitation, if any, on the
Holder contained in the second sentence of Section 2.1) on any two Trading Days
within any period of five consecutive Trading Days commencing after the period
of ten consecutive Trading Days which gave rise to the applicable
Inconvertibility Notice from the Company or the Holder, as the case may be, had
this Note been surrendered for conversion in full into Common Stock on each of
such two Trading Days within such five-Trading-Day period, then the Company
shall not be required to redeem any of this Note by reason of such
Inconvertibility Notice. The Company shall notify the Holder of any claim by
the Company of manifest error in an Inconvertibility Notice given by a Holder
within one Business Day after the Holder gives such Inconvertibility Notice and
no such claim or error shall limit or delay performance of the Company's
obligation to redeem any Inconvertible Portion which is not in dispute. An
Inconvertibility Notice given by a Holder shall be deemed for all purposes to be
in proper form unless the Company notifies the Holder within one Business Day
after an Inconvertibility Notice has been given (which notice shall specify all
defects in the Inconvertibility Notice) and any Inconvertibility Notice
containing any such defect shall nonetheless be effective on the date given if
the Holder promptly undertakes in writing to correct all such defects.
(c) Notwithstanding the giving of any Inconvertibility Notice by the
Company or the giving or the absence of any Inconvertibility Notice by the
Holder or any redemption of any portion of this Note, thereafter the provisions
of Section 2.4(b) 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.
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<PAGE>
(d) On each Redemption Date, the Company shall make payment in
immediately available funds of the applicable Redemption Price of the portion of
this Note to be redeemed on such Redemption Date to the Holder or upon the order
of the Holder as specified by the Holder in writing to the Company at least one
Business Day prior to such Redemption Date. Upon redemption of less than all of
this Note, promptly, but in no event later than three Business Days after
surrender of this Note to the Company, the Company shall issue a replacement
Note of like tenor for the portion of this Note which has not been redeemed.
(e) If the Company shall have failed to pay in full the Redemption
Price (other than by reason of a Maximum Share Amount Inconvertibility), the
Repurchase Price or the Registration Repurchase Price for any portion (which, if
applicable, may be all) of this Note when the same is due and payable, without
in any way relieving the Company of its obligation to pay such amount, the
Holder shall have the right to convert such portion of this Note into Common
Stock in accordance with Section 2.1 (subject to the numerical limit contained
in the second sentence of Section 2.1); provided, however, that the shares of
-------- -------
Common Stock received by the Holder upon any such conversion may be subject to
restrictions on resale by the Holder arising under applicable securities laws to
the extent not registered for resale by the Holder pursuant to the Registration
Statement.
(f) If the Company shall have failed to pay in full the Redemption
Price for any portion (which, if applicable, may be all) of this Note when the
same is due and payable by reason of a Maximum Share Amount Inconvertibility,
without in any way relieving the Company of its obligation to pay such amount,
the Holder shall have the right to convert such portion of this Note into Common
Stock at the lower of (1) the Market Price of the Common Stock on the date the
Maximum Share Amount Inconvertibility occurs and (2) the arithmetic average of
the Market Price of the Common Stock for the period of five (5) consecutive
Trading Days ending one Trading Day prior to the date the Conversion Notice is
given, and otherwise in accordance with Section 2.1 (subject to the numerical
limit contained in the second sentence of Section 2.1). If the Holder converts
any portion of this Note as permitted by this Section 2.4,
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then, notwithstanding such conversion, the Company shall remain liable to the
holder for payment in cash of the amount by which the Redemption Price of the
portion of this Note so converted exceeds the product of (x) the number of
shares of Common Stock issued upon such conversion of such portion of the
principal amount of this Note times (y) the arithmetic average of the Market
-----
Price of the Common Stock for the period of five (5) consecutive Trading Days
ending one Trading Day prior to the date the Conversion Notice is given.
ARTICLE III
CERTAIN COVENANTS
3.1 LIMITATIONS ON CERTAIN INDEBTEDNESS. The Company will not
-----------------------------------
itself, and will not permit any Subsidiary to, create, assume, incur or in any
manner become liable in respect of, including, without limitation, by reason of
any business combination transaction (all of which are referred to herein as
"incurring"), any Indebtedness (other than Excluded Indebtedness) unless (1)
immediately after the incurring of such Indebtedness no Event of Default,
Repurchase Event or Registration Repurchase Event shall be continuing and (2)
such Indebtedness is unsecured and contains the provisions set forth in EXHIBIT
F attached hereto providing for the subordination of such Indebtedness to this
Note; provided, however, that nothing in this Section 3.1 shall limit the
-------- -------
issuance by the Company of preferred stock which would be shown as indebtedness
on a balance sheet of the Company prepared in accordance with Generally Accepted
Accounting Principles; provided further, however, that the limitations on
---------------- -------
incurring Indebtedness set forth in this Section 3.1 shall not apply on and
after January 15, 1998 if (x) the outstanding aggregate principal amount of this
Note and the Other Notes is less than 35% of the original aggregate principal
amount of this Note and the Other Notes and (y) no Event of Default, Repurchase
Event or mandatory redemption obligation pursuant to Section 2.4 shall have
occurred and be continuing.
3.2 TENDER OFFERS. The Company will not itself, and will not permit
-------------
any Subsidiary to (1) make any Tender Offer for outstanding shares of Common
Stock unless the Company
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contemporaneously therewith makes an offer, or (2) enter into an agreement
regarding a Tender Offer for outstanding shares of Common Stock by any person
other than the Company or any Subsidiary, unless such person agrees with the
Company to make an offer, in either such case, to the Holder to purchase the
same percentage of the outstanding principal amount of this Note held by the
Holder as the percentage of outstanding shares of Common Stock offered to be
purchased in such Tender Offer, at a price equal to the greater of (i) an amount
equal to the sum of (1) the sum of (A) the outstanding principal amount of this
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
Note to the date of purchase pursuant to such Tender Offer plus (2) an amount
----
equal to the product obtained by multiplying (a) the sum of the amounts stated
in the immediately preceding clauses (1)(A) and (1)(B) times (b) either (I) if
-----
the date of purchase pursuant to such Tender Offer is on or before the date
which is 119 days after the Issuance Date, 115% or (II) if the date of purchase
pursuant to such Tender Offer is on or after the date which is 120 days after
the Issuance Date, the quotient (expressed as a percentage) obtained by dividing
(A) the amount determined by subtracting from 100 percent the applicable
percentage which would be used to determine the Conversion Price on the date of
purchase pursuant to such Tender Offer if a Conversion Notice were given by the
Holder on such date by (B) the applicable percentage which would be used to
determine the Conversion Price on the date of purchase pursuant to such Tender
Offer if a Conversion Notice were given by the Holder 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 2.1 of this Note and any
accrued and unpaid interest thereon and any accrued and unpaid Default Interest
if a Conversion Notice were given by the Holder on the date of purchase pursuant
to such Tender Offer (determined without regard to any limitation on conversion
contained in Section 2.1) times (y) the highest price per share of Common Stock
-----
paid or payable pursuant to such Tender Offer.
3.3 PAYMENT OF OBLIGATIONS. The Company will pay and
----------------------
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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.
3.4 MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep,
----------------------------------
and will cause each Subsidiary to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
(b) The Company 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.
3.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
------------------------------------------------
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as now conducted by the Company, 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 rights, privileges and franchises necessary or
desirable in the normal conduct of business.
3.6 COMPLIANCE WITH LAWS. The Company 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 Company and its Subsidiaries.
3.7 INVESTMENT COMPANY ACT. The Company 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
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registered under Section 8 of the Investment Company Act of 1940, as amended.
3.8 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
----------------------------
permit any Subsidiary to, directly or indirectly, 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
connection with any joint enterprise or other joint arrangement with, any
Affiliate of the Company, except, on terms to the Company or such Subsidiary no
less favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company, as determined
in good faith by the Board of Directors of the Company.
ARTICLE IV
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
4.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails (a) to
------------------------------------
pay the principal, Optional Redemption Price, Redemption Price or Repurchase
Price hereof when due, whether at maturity, upon redemption, upon acceleration
or otherwise, as applicable, or (b) to pay any installment of interest hereon
when due and, in the case of this clause (b) of this Section 4.1 only, such
failure continues for a period of five (5) Business Days after the due date
thereof;
4.2 CONVERSION AND THE SHARES. The Company fails to issue or cause
-------------------------
to be issued shares of Common Stock to the Holder upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of this Note or
upon exercise of the Warrants or fails to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Note or in
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payment of interest on this Note or upon exercise of the Warrants as and when
required by this Note, the Note Purchase Agreement, the Transfer Agent
Instruction and the Warrants;
4.3 BREACH OF COVENANT. The Company (a) fails to comply with any
------------------
provision of Article III of this Note or (b) breaches any other material
covenant or other material term or condition of this Note (other than as
specifically provided in Sections 4.1, 4.2 and 4.3(a) hereof), the Note Purchase
Agreement, the Security Agreement, the Transfer Agent Instruction or the
Warrants, and in the case of this clause (b) of this Section 4.3 only, such
breach continues for a period of fifteen (15) days after written notice thereof
to the Company from the Holder;
4.4 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Note Purchase Agreement, the Security
Agreement, the Transfer Agent Instruction and the Warrants) shall be false or
misleading in any material respect when made;
4.5 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any material
-----------------------------
Subsidiary 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;
4.6 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
-------------------------------
proceeding shall be commenced against the Company or any material Subsidiary
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
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<PAGE>
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) consecutive days;
4.7 JUDGMENTS. Any court of competent jurisdiction shall enter one
---------
or more final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
$100,000, which is not vacated, bonded, stayed, discharged, satisfied or waived
for a period of thirty (30) consecutive days;
4.8 DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any
------------------------------
Subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Note) which indebtedness has an outstanding
principal amount in excess of $250,000 individually or $500,000 in the aggregate
for the Company and its Subsidiaries, beyond the period of grace, if any,
provided in the instrument or agreement under which such indebtedness was
created or (ii) default in the observance or performance of any agreement,
covenant or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any indebtedness of the Company or any of its Subsidiaries which has an
outstanding principal amount in excess of $750,000 individually or $1,500,000 in
the aggregate shall, in accordance with its terms, be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled or
required payment prior to the stated maturity thereof;
4.9 DELISTING OF COMMON STOCK. The Common Stock shall cease to be
-------------------------
listed on any of Nasdaq, the NYSE or the AMEX and shall
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<PAGE>
remain unlisted for a period of three (3) days;
4.10 SECURITY AGREEMENT. The occurrence of any Event of Default (as
------------------
defined in the Security Agreement); or
4.11 ASSERTION OF INVALIDITY. There shall have been asserted, in
-----------------------
writing, by or on behalf of the Company that any provision of this Note, the
Note Purchase Agreement, the Security Agreement, the Transfer Agent Instruction
or the Warrants is not valid and binding on the Company, or declaration shall
have been sought by or on behalf of the Company that any such provision is null
and void, or there shall have been commenced by or on behalf of the Company a
proceeding to contest the validity or enforceability thereof, or there shall
have been a denial by or on behalf of the Company that it has any or further
liability or obligation under this Note, the Note Purchase Agreement, the
Warrants, the Security Agreement or the Transfer Agent Instruction; then, upon
the occurrence and during the continuation of any Event of Default specified in
Section 4.1, 4.2, 4.3, 4.4, 4.7, 4.8, 4.9, 4.10, or 4.11 at the option of the
Holder the Company shall, and upon the occurrence of any Event of Default
specified in Section 4.5 or 4.6, the Company shall, pay to the Holder an amount
equal to the sum of (1) the product obtained by multiplying (a) the sum of (A)
the outstanding principal amount of this Note plus (B) accrued and unpaid
----
interest on such principal amount to the date of payment times (b) 118% plus (2)
----- ----
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (B) at the rate provided in this Note to the 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,
reasonable legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity, including all rights and remedies under or in connection with the
Security Agreement.
ARTICLE V
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<PAGE>
REPURCHASE UPON A REPURCHASE EVENT OR
REGISTRATION REPURCHASE EVENT
5.1 REPURCHASE RIGHT UPON REPURCHASE EVENT. If there shall occur a
--------------------------------------
Repurchase Event, then the Holder shall have the right, at the Holder's option,
to require the Company to repurchase all of this Note, or any portion hereof (in
a minimum principal amount of $100,000 or integral multiples thereof (or such
lesser remaining principal amount of this Note)), on the repurchase date that is
three (3) Business Days after the date of the Holder Notice delivered with
respect to such Repurchase Event. The Holder shall have the right to require
the Company to repurchase all or any such portion of this Note if a Repurchase
Event occurs at any time while any portion of the principal amount of this Note
is outstanding at a price equal to the Repurchase Price.
5.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (a) On or
----------------------------------------------------
before the fifth (5th) Business Day after the occurrence of a Repurchase Event,
the Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
(ii) a description of the procedure (set forth below) which the Holder
must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver to the
Company on or before the thirtieth (30th) day after the Company Notice (or if no
such Company Notice has been given, within forty (40) days after the Holder
first learns of the Repurchase Event) (i) a Holder Notice setting forth the name
of the Holder and the principal amount of this Note to be repurchased, and
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<PAGE>
(ii) this Note, duly endorsed for transfer to the Company of the portion of the
principal amount of this Note to be repurchased. Such notice by the Holder shall
be irrevocable.
5.3 REPURCHASE RIGHT UPON REGISTRATION REPURCHASE EVENT. Upon the
---------------------------------------------------
occurrence of a Registration Repurchase Event, the Holder shall have the right,
at the Holder's option, to require the Company to repurchase all of this Note,
or from time to time any portion hereof (in a minimum principal amount of
$100,000 or integral multiples thereof (or such lesser remaining principal
amount of this Note)), on the repurchase date that is three (3) Business Days
after the date a Holder Registration Repurchase Notice is given by the Holder.
The Holder shall exercise its right to require repurchase pursuant to this
Section 5.3 by giving a Holder Registration Repurchase Notice as follows: (i) if
the Registration Repurchase Event occurs by reason of the Company's failure to
timely file the Registration Statement with the SEC, within 30 days after such
event or (ii) if the Registration Repurchase Event occurs by reason of the non-
occurrence of the SEC Effective Date within 120 days after the Issuance Date, at
any time prior to the SEC Effective Date. If the Holder shall have given a
Holder Registration Repurchase Notice, the Company shall repurchase this Note or
the portion of this Note as stated in such Holder Registration Repurchase Notice
at a purchase price equal to the Registration Repurchase Price.
5.4 OTHER. (a) If the Company fails to repurchase on the applicable
-----
repurchase date this Note (or portion hereof) as to which the repurchase right
has been properly exercised pursuant to this Article V, then the Repurchase
Price or the Registration Repurchase Price, as the case may be, for the portion
(which, if applicable, may be all) of this Note which is required to have been
so repurchased shall bear interest to the extent not prohibited by applicable
law from the applicable repurchase date until paid at the Default Rate.
(b) If a portion of this Note is to be repurchased, upon surrender of
this Note to the Company in accordance with the terms of this Article V, the
Company shall execute and deliver to the Holder without service charge, a new
Note or Notes, having the same date hereof and containing identical terms and
conditions, in such
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<PAGE>
denomination or denominations as requested by the Holder in aggregate principal
amount equal to, and in exchange for, the unrepurchased portion of the principal
amount of the Note so surrendered.
(c) The Company shall notify the Holder of any claim by the Company
of manifest error in a Holder Notice or a Holder Registration Repurchase Notice
within one Business Day after the Holder gives such notice and no such claim of
error shall limit or delay performance of the Company's obligation to repurchase
such portion of the Note which is not in dispute and (ii) such notice shall be
deemed for all purposes to be in proper form unless the Company notifies the
Holder within one Business Day after such notice has been given (which notice
from the Company shall specify all defects in such notice) and any Holder Notice
or Holder Registration Repurchase Notice containing any such defect shall
nonetheless be effective on the date given if the Holder promptly undertakes in
writing to correct all such defects.
ARTICLE VI
PAYMENT AT MATURITY
6.1 HOLDER ELECTION. The Holder shall have the right, exercisable at
---------------
any time prior to the Maturity Date (or such later date as the Company may
permit) by giving a Final Conversion Election, to elect that upon the Maturity
Date the outstanding amount of this Note shall be converted into shares of
Common Stock in accordance with Section 2.1. The Holder may make such election
by giving notice of the Final Conversion Election at any time prior to the
Maturity Date. If the Holder gives a Final Conversion Election, then on the
Maturity Date the outstanding amount of this Note shall be converted into the
number of shares of Common Stock determined in accordance with Section 2.1
(determined without regard to the limitation, if any, on the Holder contained in
the second sentence of Section 2.1). Such conversion, however, shall be subject
to the limitations contained in Section 2.4. The Company shall notify the
Holder of any claim by the Company of manifest error in a Final Conversion
Election within one Business Day after the Holder gives such Final Conversion
Election and no
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<PAGE>
such claim or error shall limit or delay performance of the
Company's obligation to issue upon such conversion the number of shares of
Common Stock which are not in dispute. A Final Conversion Election shall be
deemed for all purposes to be in proper form unless the Company notifies the
Holder within one Business Day after a Final Conversion Election has been given
(which notice shall specify all defects in the Final Conversion Election) and
any Final Conversion Election containing any such defect shall nonetheless be
effective on the date given if the Holder promptly undertakes in writing to
correct all such defects.
6.2 FINAL MATURITY NOTE ISSUANCE. (a) If the Holder fails timely to
----------------------------
make the Final Conversion Election, then as of the Maturity Date of this Note,
the Company shall issue to the Holder a Final Maturity Note in the principal
amount herein provided. The principal amount of the Final Maturity Note shall
be (a) the sum of (1) the outstanding principal amount of this Note, (2) the
amount of accrued and unpaid interest on such principal amount to the Maturity
Date and (3) Default Interest, if any, on the amount referred to in the
immediately preceding clause (2) to the Maturity Date less (b) the sum of (1)
----
the principal amount of this Note, if any, which on the Maturity Date is
inconvertible pursuant to Section 2.4, (2) accrued and unpaid interest on such
principal amount to the Maturity Date and (3) Default Interest, if any, on the
amount referred to in the immediately preceding clause (2) to the Maturity Date.
Notwithstanding the issuance of the Final Maturity Note, the Company shall
remain liable for payment of all unpaid amounts due under this Note which are
not included in the principal amount of the Final Maturity Note, including,
without limitation, the Redemption Price and the Repurchase Price. If the
Holder shall have failed to give a Final Conversion Election prior to the
Maturity Date, then prior to issuance of the Final Maturity Note, the Company
shall have the right within 15 days after the Maturity Date to contact the
Holder and for a period of 15 days after such notice to seek a Final Conversion
Election from the Holder; provided, however, that if the Holder fails to give a
-------- -------
Final Conversion Election within such 15 days, the Company shall immediately
issue the Final Maturity Note, which shall be dated the Maturity Date.
(b) The Holder of this Note by its acceptance hereof,
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<PAGE>
acknowledges and agrees that the Final Maturity Note shall bear a restrictive
legend in substantially the following form (and a stop-transfer order to such
effect may be placed against transfer of the Final Maturity Note):
This Final Maturity Note has not been registered under the Securities Act
of 1933, as amended or any state securities laws. This Final Maturity 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 Company that
such registration is not required.
This Final Maturity Note may not be transferred except as provided in
Section 3.7.
ARTICLE VII
DEFINITIONS
7.1 CERTAIN DEFINED TERMS. (a) 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 Note.
(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):
"Act" means the Securities Act of 1933, as amended.
"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.
"Aggregated Person" means any person whose beneficial ownership of
shares of Common Stock would be aggregated with the
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<PAGE>
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.
"Applicable Rate" means five percent (5%) per annum; provided,
--------
however, that if the SEC Effective Date has not occurred on or before the 70th
- -------
day after the Issuance Date, the Applicable Rate shall be twelve percent (12%)
per annum from the Issuance Date until the SEC Effective Date.
"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.
"Collateral Agent" means First Trust National Association, as
Collateral Agent under the Security Agreement.
"Common Stock" shall mean the Common Stock, $.0075 par value, together
with the related Preferred Stock Purchase Rights or similar rights, of the
Company or any shares of capital stock and related rights of the Company into
which such stock shall be changed or reclassified after the Issuance Date.
"Company" shall have the meaning provided in the first paragraph of
this Note.
"Company Certificate" means a certificate of the Company signed by an
Officer.
"Company Notice" means a Company Notice in the form attached hereto as
EXHIBIT G.
"Computed Price" for any date
(1) during the period commencing on the Issuance Date and ending
on the date which is 119 days after the Issuance Date, means the lower of
(a) the arithmetic average of the Market Price of the Common Stock for the
period of five
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(5) consecutive Trading Days ending one Trading Day prior to such date or
(b) $10.00;
(2) during the period commencing on the date which is 120 days
after the Issuance Date and ending on the date which is 149 days after the
Issuance Date, means 95% of the lowest per share Trading Price during the
applicable Measurement Period;
(3) during the period commencing on the date which is 150 days
after the Issuance Date and ending on the date which is 179 days after the
Issuance Date, means 92.5% of the lowest per share Trading Price during the
applicable Measurement Period; and
(4) on and after the date which is 180 days after the Issuance
Date, means 90% of the lowest per share Trading Price during the applicable
Measurement Period.
"Conversion Agent" means American Stock Transfer & Trust Company, its
successor or such other person who shall be serving as transfer agent and
registrar for the Common Stock and who shall have been authorized by the Company
to act as conversion agent for the Note in accordance with the Transfer Agent
Instruction and the name, address and telephone number of whom shall have been
given to the Holder by notice from the Company.
"Conversion Notice" means a Notice of Conversion of Senior Convertible
Note substantially in the form attached hereto as EXHIBIT A, properly completed
and duly executed by the Holder or the Holder's attorney-in-fact.
"Conversion Price" for any date
(1) during the period commencing on the Issuance Date and ending on
the date which is 119 days after the Issuance Date, means the Fixed
Conversion Price;
(2) during the period commencing on the date which is 120 days after
the Issuance Date and ending on the date which is 149 days after the
Issuance Date, means 95% of the lowest
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per share Trading Price during the applicable Measurement Period;
(3) during the period commencing on the date which is 150 days after
the Issuance Date and ending on the date which is 179 days after the
Issuance Date, means 92.5% of the lowest per share Trading Price during the
applicable Measurement Period; and
(4) on and after the date which is 180 days after the Issuance Date,
means 90% of the lowest per share Trading Price during the applicable
Measurement Period;
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 Market Price of the Common Stock for the period of thirty (30)
consecutive Trading Days ending one Trading Day prior to such 270th day.
"Conversion Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable upon conversion of this Note in
accordance with Article II.
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 12 percent per annum (or such lesser rate equal
to the highest rate permitted by applicable law); provided, however, that if the
-------- -------
SEC Effective Date has not occurred on or before the 70th day after the Issuance
Date, the Default Rate shall be 18 percent per annum (or such lesser rate equal
to the highest rate permitted by applicable law) from the Issuance Date until
the SEC Effective Date.
"Engagement Agreement" means the Engagement Agreement, dated May 12,
1997, between the Company and Diaz & Altschul, LLC relating to the private
placement offering of this Note by the Company.
"Event of Default" shall have the meaning provided in Article IV.
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"Excluded Indebtedness" means
(1) Indebtedness which is outstanding and which would be reflected on
a balance sheet of the Company as of the Issuance Date prepared in
accordance with Generally Accepted Accounting Principles; and
(2) Indebtedness incurred after the Issuance Date consisting of
equipment lease obligations or other equipment financings which are
required to be capitalized in accordance with Generally Accepted Accounting
Principles and working capital lines of credit not in excess of $10,000,000
in the aggregate outstanding at any one time from the Issuance Date to the
date on which the Company has delivered a copy of the FDA Recommendation to
Holders, and $20,000,000 thereafter.
"FDA" shall mean the United States Food and Drug Administration.
"FDA Recommendation" shall mean a written statement by an advisory
panel established by the FDA addressed to the FDA which recommends that the
FDA approve a new drug application, submitted by a subsidiary of Ivax
Corporation pursuant to an agreement with the Company, for Paxene for use
in treating any one of Kaposi's sarcoma, breast cancer or ovarian cancer
and permitting the commercial sale of Paxene for such uses in the United
States. Each copy of such statement delivered pursuant to this Agreement
shall be accompanied by an Officer's Certificate certifying that such
statement is a true and correct copy of the statement and that subsequent
to the date of such statement it has not been retracted, modified or
reviewed by such advisory panel or the FDA.
"Final Conversion Election" means a Holder Notice of Final Conversion
of Senior Convertible Note in the form attached hereto as EXHIBIT J.
"Final Maturity Note" shall mean a note issued by the Company in the
form attached hereto as EXHIBIT K.
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"Fixed Conversion Price" means $10.00 (subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring on and after the Issuance Date).
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person as
at and for the year ended December 31, 1996.
"Holder" shall have the meaning provided in the first paragraph of
this Note.
"Holder Notice" means a Holder Notice in the form attached hereto as
EXHIBIT H.
"Holder Registration Repurchase Notice" means a Holder Registration
Repurchase Notice in the form attached hereto as EXHIBIT I.
"Inconvertibility Days" shall have the meaning provided in Section
2.4(b).
"Inconvertibility Notice" shall have the meaning provided in Section
2.4(b).
"Inconvertible Portion" shall have the meaning provided in Section
2.4(b).
"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
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purposes hereof, such indebtedness shall be treated as though it has been
assumed by such person.
"Interest Payment Dates" shall have the meaning provided in the first
paragraph of this Note.
"Issuance Date" means the date this Note was issued to the original
Holder of this Note.
"Majority Holders" means at any time the holders of this Note and the
Other Notes which hold Notes and Other Notes which, based on the original
principal amount thereof, represent a majority of the original aggregate
principal amount of this Note and the Other Notes, whether or not outstanding at
such time.
"Mandatory Redemption Period" shall have the meaning provided in
Section 2.4(b).
"Mandatory Redemption Waiver" means a Mandatory Redemption Waiver in
the form attached hereto as EXHIBIT D.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on Nasdaq or such other 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 Nasdaq or such
exchange or other market.
"Maturity Date" shall have the meaning provided in the first paragraph
of this Note.
"Maximum Share Amount" means [INSERT PRO RATA PORTION OF 20% OF THE
NUMBER OF SHARES OUTSTANDING IMMEDIATELY PRIOR TO THE TIME THE NOTE IS ISSUED]
shares (such amount to be subject to equitable adjustment from time to time on
terms reasonably acceptable to the Holder for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the Issuance Date) of Common Stock.
"Measurement Period" means
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(1) with respect to any date during the period commencing on the date
which is 120 days after the Issuance Date and ending on the date which is
149 days after the Issuance Date, the period of seven (7) consecutive
Trading Days ending one Trading Day prior to such date;
(2) with respect to any date during the period commencing on the date
which is 150 days after the Issuance Date and ending on the date which is
179 days after the Issuance Date, the period of eight (8) consecutive
Trading Days ending one Trading Day prior to such date; and
(3) with respect to any date on or after the date which is 180 days
after the Issuance Date, the period of nine (9) consecutive Trading Days
ending one Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"1934 Act" shall have the meaning provided in Section 2.1.
"Note" shall have the meaning provided in Section 8.3.
"Note Purchase Agreement" shall mean the Note Purchase Agreement,
dated as of ___________________, 1997, by and between the Company and the
original Holder of this Note.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Date" means any Business Day during the period
commencing on the Issuance Date and ending on the date which is 119 days after
the Issuance Date.
"Optional Redemption Notice" means an Optional Redemption Notice in
the form attached hereto as EXHIBIT E.
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"Optional Redemption Price" means an amount in cash equal to the sum
of (1) the product obtained by multiplying (A) the sum of (i) the outstanding
principal amount of the Note specified in an Optional Redemption Notice as being
required to be redeemed by the Company plus (ii) accrued and unpaid interest on
such principal amount to the Optional Redemption Date times (B) 115% plus (2)
-----
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (1)(A)(ii) at the rate provided in this Note to the
Optional Redemption Date. The Optional Redemption Price shall be adjusted to
reflect the reduced outstanding principal amount of the Note and related accrued
interest on the Optional Redemption Date resulting from any permitted
conversions of the Note after the Optional Redemption Notice is given.
"Other Notes" means the several Senior Convertible Notes issued by the
Company pursuant to the Other Note Purchase Agreements and pursuant to the
Engagement Agreement.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of the date of the Note Purchase Agreement, between the
Company and the several buyers named therein.
"Paxene" shall mean the drug formulation that includes the bulk active
drug substance manufactured by the Company.
"Payment Shares" means the shares of Common Stock and the related
Preferred Stock Purchase Rights issuable in payment of interest on this Note in
accordance with Section 1.1.
"Person" means an individual, partnership, corporation, trust or
incorporated organization, and a government or a governmental agency or
political subdivision.
"Preferred Stock Purchase Rights" means the Preferred Stock Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar right
hereafter issued by the Company with respect to the Common Stock).
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"Redemption Date" means a date on which the Company is required to
redeem all or any portion of this Note as provided in Section 2.4.
"Redemption Percentage" means with respect to each Redemption Date,
the applicable percentage set forth below determined with respect to such date
as follows:
Redemption Date Percentage
--------------- ----------
Issuance Date through and including the 119th day thereafter 110%
120th through 149th day after the Issuance Date 111%
150th through 179th day after the Issuance Date 112%
On and after the 180th day after the Issuance Date 113%
"Redemption Price" means an amount in cash equal to the sum of (1) the
product obtained by multiplying (A) the sum of (i) the principal amount of this
Note to be redeemed on a particular Redemption Date plus (ii) accrued and unpaid
----
interest on such principal amount to such Redemption Date times (B) the
-----
applicable Redemption Percentage plus (2) accrued and unpaid Default Interest,
----
if any, on the amount referred to in the immediately preceding clause (1)(A)(ii)
at the rate provided in this Note to such Redemption Date.
"Registration Repurchase Event" means the occurrence of either of the
following events:
(a) the Company fails to file the Registration Statement within the
ten day period provided in Section 8(a)(1) of the Note Purchase Agreement;
or
(b) the SEC Effective Date shall not have occurred on or
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before the date which is 120 days after the Issuance Date.
"Registration Repurchase Price" means an amount in cash equal to the
sum of (1) the product obtained by multiplying (A) the sum of (i) the principal
amount of this Note to be repurchased plus (ii) accrued and unpaid interest on
----
such principal amount to the date of such repurchase times (B) 115%, plus (2)
----- ----
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (1)(A)(ii) at the rate provided in this Note to the
date of repurchase in accordance with Article V.
"Registration Restriction Inconvertibility" shall have the meaning
provided in Section 2.4(b).
"Registration Statement" means the Registration Statement required to
be filed by the Company with the SEC pursuant to Section 8(a) of the Note
Purchase Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) For any period of five consecutive Trading Days following the
date hereof there shall be no reported sale price of the Common Stock on
any of Nasdaq, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading on Nasdaq, the
NYSE or the AMEX;
(c) Any consolidation or merger of the Company or any subsidiary of
the Company with or into another entity (other than a merger or
consolidation of a subsidiary of the Company into the Company or a wholly-
owned subsidiary of the Company) where the shareholders of the Company
immediately prior to such transaction do not collectively own at least 51%
of the outstanding voting securities of the surviving corporation of such
consolidation or merger immediately following such transaction; or the sale
of all or substantially all of the assets of the Company and its
subsidiaries;
(d) The adoption of any amendment to the Company's
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Certificate of Incorporation (other than any certificate designating a
series of preferred stock of the Company) or the taking of any other action
which materially and adversely affects the rights of the Holder;
(e) The inability of the Holder for (x) 20 Trading Days (whether or
not consecutive) during the period commencing on the SEC Effective Date and
ending on the first anniversary of the Issuance Date or (y) 60 Trading Days
(whether or not consecutive) during the period from the SEC Effective Date
to the Maturity Date, to sell shares of Common Stock issued upon conversion
of this Note pursuant to the Registration Statement required to be filed by
the Company pursuant to the Note Purchase Agreement (1) by reason of the
requirements of the Act, the 1934 Act or any of the rules or regulations
under either thereof or (2) due to the Registration Statement containing
any untrue statement of material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or other failure of the Registration Statement to comply
with the rules and regulations of the SEC; or
(f) The occurrence of any Event of Default specified in Article IV of
this Note.
"Repurchase Price" means an amount in cash equal to the sum of (1) the
product obtained by multiplying the sum of (A) the outstanding principal amount
of this Note plus (B) accrued and unpaid interest on such principal amount to
----
the date of repurchase times 118% plus (2) accrued and unpaid Default Interest,
----- ----
if any, on the amount referred to in the immediately preceding clause (1)(B) at
the rate provided in this Note to the date of repurchase.
"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.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date on which the Registration
Statement is first declared effective by the SEC.
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"Security Agreement" shall mean the Pledge and Security Agreement,
dated as of _________________, 1997, by and between the Company and the
Collateral Agent.
"Senior Indebtedness" shall have the meaning provided in EXHIBIT F
hereto.
"Shares" means the Conversion Shares and the Payment Shares.
"Stock Payment Option" shall have the meaning provided in Section
1.1(a).
"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 Company (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 Company of
20% or more of the outstanding Common Stock of the Company for less than the
greater of the book or market value of such Common Stock on conversion of the
Note and the Other Notes, as and to the extent required under Rule 4460(i) of
Nasdaq (or any successor or replacement provision thereof).
"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.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market for
the Common Stock is open for general trading.
"Trading Price" on any date means the lowest sale price (regular way)
for one share of the Common Stock on such date, on the first applicable among
the following: (a) the national
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securities exchange on which the shares of Common Stock are listed which
constitutes the principal securities market for the Common Stock or (b) Nasdaq,
in either case as reported by Bloomberg, L.P., provided, however, that if during
-------- -------
any Measurement Period:
(i) The Company 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 earlier of (1) the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution and (2) the date on
which 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
earlier of (1) the record date fixed for such determination and (2) 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 Company 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
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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 Company;
(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 earlier of (1) the day
upon which such subdivision becomes effective and (2) 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 day upon which such combination becomes
effective shall be proportionately increased;
(iv) The Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the
Company (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 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
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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 earlier of (1) the record date for such distribution and (2)
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 Company) 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 Notes shall have
the right to receive in payment of interest on the Notes or upon conversion
of the Notes, as the case may be, the amount of Securities the holders of
Notes would have received had the number of shares of Common Stock to be
issued in payment of such interest on the Notes, or had the holders of
Notes converted the Notes, in either such case immediately prior to the
record date for such distribution. If the Board of Directors of the Company
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
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Stock, or rights or warrants to subscribe for or purchase shares of Common
Stock to which clause (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;
(v) The Company or any subsidiary of the Company 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 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
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 Company) of consideration paid in respect of any
repurchase or other reacquisition by the Company or any subsidiary of the
Company of any shares of Common Stock made 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 Company) of consideration
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payable in respect of any tender offer by the Company or any of its
subsidiaries 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 earlier of (1) the record date with respect to such distribution and
(2) 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 Notes
shall have the right to receive in payment of interest on Notes or upon
conversion of Notes, as the case may be, the amount of cash the holders of
Notes would have received had the number of shares of Common Stock to be
issued in payment of such interest on Notes, or had the holders of Notes
converted Notes, in either such case, immediately prior to the record date
for such distribution or the payment date of such repurchase, as
applicable; or
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(vi) A tender offer made by the Company or any of its subsidiaries
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 Company) 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
Company), as of the expiration of such tender offer, of consideration
payable in respect of any other tender offers, by the Company 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
Company) of consideration paid in respect of any repurchase or other
reacquisition by the Company or any subsidiary of the Company of any shares
of Common Stock made 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, and (3) the aggregate amount of any
distributions to all holders of the Company's 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
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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 Trading Day there shall be no reported
- -------- ------- -------
sale price (regular way) of such security, the "Trading Price" on such Trading
Day shall be the lowest sale price (regular way) of such security on the Trading
Day next preceding such Trading Day on which a sale price (regular way) for such
security has been so reported; provided further, however, that if on any date
-------- ------- -------
there shall be no reported sale price (regular way) of such security and at the
time the lowest sale price (regular way) for such Trading Day is being
determined there shall be known a sale price (regular way) so reported for the
Trading Day next subsequent to such Trading Day on which a sale price (regular
way) shall have been so reported, then the Trading Price on such Trading Day for
which there shall have been no reported sale price (regular way) shall be the
lower of (x) the Trading Price as determined pursuant to the immediately
preceding proviso to this definition and (y) the lowest sale price (regular way)
as so reported for such succeeding Trading Day for which a sale price (regular
way) as so reported is known.
"Transaction Documents" means this Note, the Note Purchase Agreement,
the Final Maturity Note, the Security Agreement, the Warrants and the other
agreements, instruments and documents contemplated hereby and thereby.
-48-
<PAGE>
"Transfer Agent Instruction" means the instruction letter from the
Company to the Conversion Agent in the form attached as Annex IV to the Note
Purchase Agreement.
"Warrants" means Common Stock Purchase Warrants of the Company issued
to the original holder of this Note pursuant to the Note Purchase Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
--------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.2 NOTICES. Except as otherwise specifically provided herein, any
-------
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Company (telephone line facsimile transmission number (303) 530-
1296); and the address of the Company 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 Company may change the address for service by service of written notice
to the other as herein provided.
8.3 AMENDMENT PROVISION. The term "Note" and all
-------------------
-49-
<PAGE>
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented. Neither this Note or any Other Note nor the Security
Agreement nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Majority Holders, provided that no such change, waiver, discharge
or termination shall, without the consent of the Holder and the holders of the
Other Notes affected thereby, (i) extend the scheduled final maturity of this
Note or any Other Note, or reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability of any post-
default increase in interest rates) hereon or thereon or reduce the principal
amount hereof or thereof or the Redemption Price or Repurchase Price, (ii)
release the collateral or reduce the amount of collateral required to be
deposited or maintained by the Company pursuant to the Security Agreement except
as expressly provided in the Security Agreement, (iii) amend, modify or waive
any provision of this Section 8.3, (iv) reduce any percentage specified in, or
otherwise modify, the definition of Majority Holders or (v) except as provided
in this Note, change the method of calculating the Conversion Price.
8.4 ASSIGNABILITY. This Note shall be binding upon the Company and
-------------
its successors and permitted assigns, and shall inure to the benefit of and be
binding upon the Holder and its successors and permitted assigns.
8.5 CERTAIN EXPENSES. The Company 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 Company'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 Company from
paying any amount due the Holder.
-50-
<PAGE>
8.6 GOVERNING LAW. This Note shall be governed by the internal laws
-------------
of the State of New York, without regard to the principles of conflict of laws.
8.7 TRANSFER OF NOTE. This Note has not been and is not being
----------------
registered under the provisions of the Act or any state securities laws and this
Note may not be transferred unless (1) the transferee is an "accredited
investor" as defined in Regulation D under the Act and (2) the Holder shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that this Note may be sold or
transferred pursuant to an exemption from such registration. Prior to any such
transfer, such transferee shall (x) have made written representations and
warranties to and covenants with the Company with respect to such transferee in
the form of Sections 3(a), 3(c), 5(a) and 5(b) of the Note Purchase Agreement,
and (y) shall have further represented in writing to the Company that such
transferee has requested and received from the Company all information relating
to the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company deemed relevant by such transferee;
that such transferee has been afforded the opportunity to ask questions of the
Company concerning the foregoing and has had the opportunity to obtain and
review the Registration Statement and the prospectus included therein, each as
amended or supplemented to the date of transfer to such transferee, and the
reports and other information concerning the Company which at the time of such
transfer have been filed by the Company with the SEC pursuant to the 1934 Act
and which are incorporated by reference in such prospectus as of the date of
such transfer. Upon the transferee's compliance with its obligations in the
immediately preceding sentence, the Company shall agree in writing with such
transferee to be bound by the provisions of Sections 5(a) and 5(b) of the Note
Purchase Agreement and the terms of the Transfer Agent Instruction, in each case
for the benefit of such transferee.
8.8 ENFORCEABLE OBLIGATION. The Company represents and warrants that
-----------------------
at the time of the original issuance of this Note it received the full purchase
price payable pursuant to the Note Purchase Agreement in an amount at least
equal to the original principal amount of this Note, and that this Note is an
enforceable
-51-
<PAGE>
obligation of the Company which is not subject to any offset, reduction,
counterclaim or disallowance of any sort.
8.9 CERTAIN AMOUNTS. Whenever pursuant to this Note the Company is
----------------
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Company and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Company and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
8.10 REPLACEMENT OF NOTES. Upon receipt by the Company of evidence
--------------------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory to the Company
or (b) in the case of mutilation, upon surrender and cancellation of the Note,
the Company at its expense will execute and deliver to the Holder a new Note of
like tenor.
-52-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer on the day and in the year first above
written.
NAPRO BIOTHERAPEUTICS, INC.
By:
Name:
Title:
-53-
<PAGE>
EXHIBIT A
---------
NOTICE OF CONVERSION
OF SENIOR CONVERTIBLE NOTE
OF NAPRO BIOTHERAPEUTICS, INC.
To: American Stock Transfer & Trust Company,
as Conversion Agent
40 Wall Street
New York, New York 10005
Attention: Paula Caripoli
Facsimile No: (718) 921-8336
With a copy to:
Napro BioTherapeutics, Inc.
6304 Spine Road Unit A
Boulder, Colorado 80301
Attention:
Facsimile No.: (303) 530-1296
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), the undersigned hereby elects to convert
$_________________ of the Note, equal to the sum of $_________________ principal
amount of the Note, $________________ of accrued and unpaid interest on such
principal amount and $________________ of Default Interest on such interest into
shares of Common Stock of NAPRO BIOTHERAPEUTICS, INC., a Delaware corporation
(the "Company"), at a conversion price per share equal to $_____________.
Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.
(2) Please issue a certificate or certificates for ____________
shares of Common Stock in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:
A-54
<PAGE>
_____________________ _____________________
Name Name
_____________________ _____________________
Address Address
_____________________ _____________________
SS or Tax ID Number SS or Tax ID Number
Delivery Instructions
for Common Stock:
(3) The Holder hereby represents to the Company that the exercise of
conversion rights contained herein does not violate the provisions of Section
2.1 of the Note 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
Note have not been registered under the Securities Act of 1933, as amended (the
"Act"), the undersigned represents and warrants that (i) such shares of Common
Stock are being acquired for the account of the undersigned for investment, and
not with a view to, or for resale in connection with, the distribution thereof,
and that the undersigned has no present intention of distributing or reselling
such shares and (ii) the undersigned is an "accredited investor" as defined in
Regulation D under the Act. The undersigned further agrees that (A) such shares
shall not be sold or transferred unless either (i) they first shall
A-55
<PAGE>
have been registered under the Act and applicable state securities laws or (ii)
the Company shall have been furnished with an opinion of legal counsel
reasonably satisfactory to the Company to the effect that such sale or transfer
is exempt from the registration requirements of the Act and (B) until such
shares are registered under the Act, the Company may place a legend on the
certificate(s) for the shares to that effect and place a stop-transfer
restriction in its records relating to the shares.
NAME:
Date _________________________ ______________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
A-56
<PAGE>
EXHIBIT B
---------
COMPANY INCONVERTIBILITY NOTICE
(SECTION 2.4(b) OF SENIOR CONVERTIBLE NOTE)
TO: ___________________________
(Name of Holder)
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Company"), 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 amount) of principal of the Note and the related
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__ $_____________
____________________, 199__ $_____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
B-57
<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 Note.
Date _________________________ NAPRO BIOTHERAPEUTICS, INC.
By___________________________
B-58
<PAGE>
EXHIBIT C
---------
HOLDER INCONVERTIBILITY NOTICE
(SECTION 2.4(b) OF SENIOR CONVERTIBLE NOTE)
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), __________ (the "Holder"), hereby notifies
NaPro BioTherapeutics, Inc., a Delaware corporation (the "Company"):
(a) On __________________ (fill in date) five Inconvertibility Days
had occurred in a period of ten Trading Days and on such date
$_______________ (fill in amount) of principal of the Note and the related
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__ $_____________
____________________, 199__ $_____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
D-59
<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 Note.
Date _________________________ NAME OF HOLDER:
_____________________________
By___________________________
Title:
D-60
<PAGE>
EXHIBIT D
---------
MANDATORY REDEMPTION WAIVER
NaPro BioTherapeutics, Inc., a Delaware corporation (the "Company"),
and the undersigned holder (the "Holder") of the Company's Senior Convertible
Note due ____________, 2000 (the "Note") hereby agree as follows:
1. The Company's or the Holder's Inconvertibility Notice given on
__________________ (the "Waiver Commencement Date"), if any, is hereby
rescinded and the Note shall not be redeemed pursuant to Section 2.4 of the Note
by reason of such Inconvertibility Notice or any inconvertibility of the Note
which may arise pursuant to Section 2.4 of the Note 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 Company 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
Note Purchase 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 Company pursuant to Section 8(b)(1) of the Note Purchase
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 Note).
Number of Registrable Securities: ______________________________
D-61
<PAGE>
3. If the Company 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 Note.
D-62
<PAGE>
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:
------------------------------
By____________________________
Title:
Date:_________________________
D-63
<PAGE>
EXHIBIT E
---------
OPTIONAL REDEMPTION NOTICE
TO: ___________________________
(Name of Holder)
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Company"), hereby notifies the above-named Holder that the
Company is exercising its right to redeem the Note in accordance with Section
1.2 of the Note as set forth below:
(i) The principal amount of the Note to be redeemed is $_________.
(ii) The Optional Redemption Price is $_______________.
(iii) The Optional Redemption Date is ______________.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ NAPRO BIOTHERAPEUTICS, INC.
By_____________________________
Title:
E-64
<PAGE>
EXHIBIT F
---------
SUBORDINATION OF INDEBTEDNESS
Any Indebtedness to be issued as permitted by Section 3.1 of the Note
shall contain the following provisions and no provision inconsistent with the
following provisions:
ARTICLE __ - SUBORDINATION
Section _.1 Agreement of Subordination. The Company covenants
--------------------------
and agrees, and each holder of the indebtedness created by this instrument (this
"Indebtedness") by its acceptance hereof or thereof covenants and agrees,
expressly for the benefit of holders of Senior Indebtedness, that this
Indebtedness shall be issued subject to the provisions of this Article; and each
person holding this Indebtedness, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and interest on this
Indebtedness shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full of all
Senior Indebtedness.
No provision of this Article shall prevent the occurrence of any
default or event of default with respect to this Indebtedness.
Section _.2 Payments to Holders of this Indebtedness. (a) In the
----------------------------------------
event and during the continuation of any (1) Event of Default (as defined in the
Notes), (2) Repurchase Event (as defined in the Notes), (3) absence of SEC
registration under the circumstances provided in Section 5.3 of the Note or (4)
circumstance specified in Section 2.4 of any Note which results in any portion
of such Note becoming inconvertible, then, unless and until (x) such default
shall have been cured or waived or shall have ceased to exist, (y) holders of
the Notes shall no longer be entitled to exercise their repurchase rights
pursuant to Article V of the Notes following such Repurchase Event (or such
rights have
F-65
<PAGE>
been waived) or (z) the Company shall have redeemed such portions of any Note as
required by Section 2.4(b) of such Note, as the case may be, no payment shall be
made by the Company with respect to the principal of or, premium, if any, or
interest on this Indebtedness.
(b) A "Reorganization" shall include and mean any dissolution, winding
up, total or partial liquidation or reorganization of the Company, or any
similar transaction resulting in distributions of cash, securities or other
property ("Distributions") to creditors generally, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings.
(c) Upon any Reorganization, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof provided for
in money in accordance with its terms, before any Distribution is made to, for,
or on account of this Indebtedness or any portion thereof (including without
limitation any Distribution in connection with a payment of principal, interest
or premium or the repurchase of any portion of this Indebtedness).
(d) Upon any Reorganization, all Distributions on account of this
Indebtedness shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent, assignee for the benefit of creditors or
other person making such Distribution directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, or as otherwise required by law or a
court order or the terms of any subordination as between or among such Senior
Indebtedness) or their respective representative or representatives, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any
Distribution is made on account of this Indebtedness.
(e) Distributions other than cash, when made on account of Senior
Indebtedness as aforesaid, shall not be credited towards the payment of such
Senior Indebtedness until such Distributions are liquidated or otherwise
converted to cash and such cash is
F-66
<PAGE>
received by the holders of such Senior Indebtedness, with such liquidation and
conversion to be conducted by each holder of Senior Indebtedness at its sole and
absolute discretion.
(f) In the event that, notwithstanding the foregoing, upon a
Reorganization or Distribution on account of this Indebtedness is received by a
holder thereof from the Company (including without limitation by way of set-off)
or from the holder (or indenture trustee or other representative) of any
indebtedness subordinated to this Indebtedness, such Distribution shall be held
by the recipient or recipients thereof in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness, or their
respective representative or representatives, in the same manner and fashion as
the Company is obligated to make the same under paragraphs (d) and (e) above.
(g) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of set-off or
otherwise), prohibited by the foregoing, shall be received by any holder of this
Indebtedness before all Senior Indebtedness is paid in full, or provision is
made for such payment in accordance with its terms, such payment or distribution
shall be held by the recipient or recipients in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness or their
respective representative or representatives, as their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution (or provision therefor) to or for the holders
of such Senior Indebtedness.
(h) Except as shall be specifically prohibited by the first two
paragraphs of this Section _.2, nothing contained in this Article shall prevent
the Company from making any scheduled payment of principal or interest on this
Indebtedness.
Section _.3 Subrogation of this Indebtedness. Subject to the
--------------------------------
payment in full of all Senior Indebtedness, the rights of
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<PAGE>
the holders of this Indebtedness shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Company which by its express terms is subordinated to
Senior Indebtedness to substantially the same extent as this Indebtedness is
subordinated and is entitled to like rights of subrogation) to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the principal of (and premium, if any) and interest on this Indebtedness
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the holders of this Indebtedness would be entitled except
for the provisions of this Article, and no payment over pursuant to the
provisions of this Article, to or for the benefit of the holders of Senior
Indebtedness by holders of this Indebtedness, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the holders of this
Indebtedness, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness; and no payments or distributions of cash, property or
securities to or for the benefit of the holders of this Indebtedness pursuant to
the subrogation provisions of this Article, which would otherwise have been paid
to the holders of Senior Indebtedness shall be deemed to be a payment by the
Company to or for the account of this Indebtedness.
Section _.4 Provisions Solely to Define Relative Rights. It is
-------------------------------------------
understood that the provisions of this Article are, and are intended, solely for
the purposes of defining the relative rights of the holders of this
Indebtedness, on the one hand, and the holders of the Senior Indebtedness, on
the other hand. Nothing contained in this Article or in the terms of this
Indebtedness is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of this
Indebtedness, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of this Indebtedness the principal of (and
premium, if any) and interest on this Indebtedness as and when the same shall
become due and payable in accordance with its terms, or is intended to or shall
affect the
F-68
<PAGE>
relative rights of the holders of this Indebtedness and creditors of the Company
other than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent any holder of this Indebtedness from exercising all remedies
otherwise permitted by applicable law upon default under this Indebtedness,
subject to the rights, if any, under this Article of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Section _.5 Reliance on Judicial Order or Certificate of Liquidating
--------------------------------------------------------
Agent. Upon any payment or distribution of assets of the Company referred to in
- -----
this Article, the holders of this Indebtedness shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the holders of this Indebtedness, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
Section _.6 No Impairment of Subordination. No right of any
------------------------------
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of the Note Purchase Agreement or the
documents, agreements and instruments relating to this Indebtedness, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with.
Section _.7 Certain Conversions Deemed Payment. If this Indebtedness
----------------------------------
is convertible into securities of the Company, for the purposes of this Article
only, (1) the issuance and delivery of junior securities upon conversion of this
Indebtedness in accordance with such conversion rights shall not be deemed to
F-69
<PAGE>
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on this Indebtedness or on account of the purchase or other
acquisition of this Indebtedness, and (2) the payment, issuance or delivery of
cash, property or securities (other than junior securities) upon conversion of
this Indebtedness shall be deemed to constitute payment on account of the
principal of this Indebtedness. For the purposes of this Section, the term
"junior securities" means (a) shares of any stock of any class of the Company,
(b) securities of the Company which are subordinated in right of payment to the
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, this Indebtedness is so subordinated as provided in this Article and (c)
securities, if any, into which this Indebtedness becomes convertible in
connection with any business combination transaction if so provided in the terms
of this Indebtedness. Nothing contained in this Article or elsewhere in the
terms of this Indebtedness is intended to or shall impair, as among the Company,
its creditors other than holders of Senior Indebtedness and the holders of this
Indebtedness, the right, if any, which is absolute and unconditional, of the
holder of this Indebtedness to convert this Indebtedness in accordance with the
terms of this Indebtedness.
Section _.8 Definitions. As used in this Article, the following
-----------
terms shall have the following meanings:
Company: The term "Company" means NaPro BioTherapeutics, Inc., a
-------
Delaware corporation, and shall include its successors and assigns.
Notes: The term "Notes" means the several Senior Convertible Notes,
-----
dated ____________, 1997, issued by the Company pursuant to the several Note
Purchase Agreements, dated as of ________ __, 1997, by and between the Company
and the several purchasers named therein.
Senior Indebtedness: The term "Senior Indebtedness" means the
-------------------
principal of, premium, if any, and interest on (including any interest accruing
after the filing of a petition by or against the Company under any bankruptcy
law, whether or not allowed as a
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<PAGE>
claim after such filing in any proceeding under such bankruptcy law), and any
other payment (including, without limitation, the Redemption Price (as defined
in the Notes), the Repurchase Price (as defined in the Notes) and the
Registration Repurchase Price (as defined in the Notes)), due pursuant to, any
of the following, whether outstanding at the time of issuance of this
Indebtedness or thereafter incurred or created:
(a) the Notes; and
(b) all renewals, extensions, refundings, deferrals, amendments or
modifications of the Notes;
unless in the case of any such renewal, extension, refunding, amendment,
modification or supplement, the instrument or other document creating or
evidencing the same or the assumption or guarantee of the same expressly
provides that such renewal, extension, refunding, amendment, modification or
supplement is not superior in right of payment to, or pari passu with, this
Indebtedness.
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<PAGE>
EXHIBIT G
---------
COMPANY NOTICE
(SECTION 5.2(a) OF SENIOR CONVERTIBLE NOTE)
TO: ___________________________
(Name of Holder)
(1) A Repurchase Event described in the Senior Convertible Note due
________________, 2000 (the "Note") of NaPro BioTherapeutics, Inc., a Delaware
corporation (the "Company"), occurred on ____________________, ______. As a
result of such Repurchase Event, the Holder is entitled to exercise its
repurchase rights pursuant to Section 5.2 of the Note.
(2) The Holder's repurchase right must be exercised on or before
______________, _______.
(3) At or before the date set forth in the preceding paragraph (2),
the Holder must:
(a) deliver to the Company a Holder Notice, in the form attached
as EXHIBIT H to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ NAPRO BIOTHERAPEUTICS, INC.
By____________________________
Title:
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[Page H-73 intentionally left blank]
H-73
<PAGE>
EXHIBIT H
---------
HOLDER NOTICE
(SECTION 5.2(b) OF SENIOR CONVERTIBLE NOTE)
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), the undersigned Holder hereby elects to
exercise its right to require repurchase by the Company pursuant to Sections
5.2(a) and 5.2(b) of $________________ of the Note, equal to the sum of
$________________ principal amount of the Note, $________________ of accrued and
unpaid interest on such principal amount and $________________ of Default
Interest on such interest at the Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By______________________________
Signature of Registered Holder
(Must be signed exactly as
name appears in the Note.)
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<PAGE>
EXHIBIT I
---------
HOLDER REGISTRATION REPURCHASE NOTICE
(SECTION 5.3 OF SENIOR CONVERTIBLE NOTE)
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Senior Convertible Note due
__________ _____, 2000 (the "Note"), the undersigned Holder hereby elects to
exercise its right to require repurchase by the Company pursuant to Section 5.3
of $__________ of the Note, equal to the sum of $__________ principal amount of
the Note, $__________ of accrued and unpaid interest on such principal amount
and $__________ of Default Interest on such interest at the Registration
Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By______________________________
Signature of Registered Holder
(Must be signed exactly as
name appears in the Note.)
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<PAGE>
EXHIBIT J
---------
HOLDER NOTICE OF FINAL CONVERSION
OF SENIOR CONVERTIBLE NOTE
TO: NAPRO BIOTHERAPEUTICS, INC.
(1) Pursuant to the terms of the Senior Convertible Note due
____________, 2000 (the "Note"), issued by NaPro BioTherapeutics, Inc., a
Delaware corporation (the "Company"), the undersigned Holder of the Note hereby
elects (check one)
[_] To convert the principal amount of the Note, accrued and unpaid
interest on such principal amount and Default Interest on such interest into
shares of Common Stock of the Company which is outstanding on the Maturity Date.
[_] To receive a Final Maturity Note in the form attached to the Note
as EXHIBIT K in accordance with Section 6.2 of the Note.
(2) In connection with this certificate the Holder hereby represents
to the Company as follows:
(a) If the Holder hereby elects to exercise its conversion rights, it
will not violate the provisions of Section 2.1 of the Note relating to
beneficial ownership in excess of 4.9% of the Common Stock.
(b) If the shares of Common Stock issuable upon
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<PAGE>
conversion of the Note have not been registered under the Securities Act of
1933, as amended (the "Act"), the undersigned represents and warrants that (i)
such shares of Common Stock are being acquired for the account of the
undersigned for investment, and not with a view to, or for resale in connection
with, the distribution thereof, and that the undersigned has no present
intention of distributing or reselling such shares and (ii) the undersigned is
an "accredited investor" as defined in Regulation D under the Act. The
undersigned further agrees that (A) such shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Act and
applicable state securities laws or (ii) the Company first shall have been
furnished with an opinion of legal counsel reasonably satisfactory to the
Company to the effect that such sale or transfer is exempt from the registration
requirements of the Act and (B) until such shares are registered under the Act,
the Company may place a legend on the certificate(s) for the shares to that
effect and place a stop-transfer restriction in its records relating to the
shares.
(c) It is an "accredited investor" as that term is defined in Rule 501
of Regulation D under the Act by reason of Rule 501(a)(3).
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
NAME OF HOLDER:
Date _________________________
By_____________________________
Title:
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<PAGE>
EXHIBIT K
---------
THIS FINAL MATURITY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS FINAL MATURITY
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 COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED. THIS FINAL MATURITY NOTE MAY NOT BE TRANSFERRED EXCEPT AS
PROVIDED IN SECTION 3.7.
NAPRO BIOTHERAPEUTICS, INC.
FINAL MATURITY NOTE
-------------------
New York, New York $_____________
, 2000
FOR VALUE RECEIVED, NAPRO BIOTHERAPEUTICS, INC., a Delaware
corporation (hereinafter called the "Company"), hereby promises to pay to
____________________________, [Address], or registered assigns (the "Holder") or
order, the sum of _____________ Dollars ($_____________), on [BEFORE SIGNING THE
FINAL MATURITY NOTE, INSERT MONTH AND DAY OF THE NOTE'S ISSUANCE DATE], 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
Final Maturity 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 May
and November, commencing on November 1, 2000, and at maturity (the "Interest
Payment Dates"). Interest on this Final Maturity Note shall be computed on the
basis of a 360-day year of 12 30-day months and actual days elapsed.
All payments of principal of and interest on this Final Maturity Note
shall be made in lawful money of the United States of America, or, at the option
of the Company and subject to the provisions of this Final Maturity Note,
interest payable on the
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<PAGE>
Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock, $.001 par value, or any shares of capital
stock and related rights of the Company into which such stock shall hereafter be
changed or reclassified (the "Common Stock"). All cash payments shall be made by
wire transfer of immediately available funds to such account as the Holder may
from time to time designate by written notice in accordance with the provisions
of this Final Maturity Note. Whenever any amount expressed to be due by the
terms of this Final Maturity 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 Final Maturity 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 Final Maturity Note, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.
The obligations of the Company under this Final Maturity Note shall
rank in right of payment on a parity with all other unsubordinated obligations
of the Company for indebtedness for borrowed money or the purchase price of
property. This Final Maturity Note is issued pursuant to a Senior Convertible
Note, dated _____________, 1997, issued by the Company (the "Note").
The following terms shall apply to this Final Maturity Note:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 PREPAYMENT. The Company shall have the right to prepay this
----------
Final Maturity 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
-------------------------------------------------
Company exercises its option to make a payment of
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<PAGE>
interest on this Final Maturity Note wholly or partly in shares of Common Stock
(herein sometimes called the "Stock Payment Option"), the issuance of shares of
Common Stock upon such exercise of the Stock Payment Option shall have been
authorized by the Board of Directors of the Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Final Maturity
Note if:
(i) the number of shares of Common Stock authorized, unissued
and unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of shares of Common Stock
pursuant to the Stock Payment Option or the public resale of such shares by
the Holder would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) the shares of Common Stock to be issued upon exercise of
the Stock Payment Option have not been authorized for listing, upon
official notice of issuance, on the principal securities exchange on which
the Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of the
Common Stock;
(v) an Event of Default (as defined herein) has occurred and
is continuing; or
(vi) the Common Stock is neither (i) listed or admitted for
trading on a national securities exchange nor (ii) quoted on the Nasdaq
National Market.
(c) If the Stock Payment Option is elected, the Company shall issue
and dispatch or cause to be dispatched to the Holder one or more certificates
for the aggregate number of whole shares
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<PAGE>
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 Final Maturity Note which is being paid
in shares of Common Stock were being paid in such lawful money; provided,
--------
however, that if in connection with any such election the Company shall have
- -------
failed to deliver the appropriate number of shares of Common Stock to the Holder
within three business days after the applicable Interest Payment Date, then the
Company shall not be entitled to use the Stock Payment Option in respect of such
Interest Payment Date, such cash interest shall be immediately due and payable
and the Company shall pay the interest for such Interest Payment Date in cash
with Default Interest, at the rate provided in this Note, from such Interest
Payment Date until paid. No fractional shares will be issued in payment of
interest on this Final Maturity Note. In lieu thereof, the Company may issue a
number of shares of Common Stock which reflects a rounding up to the next whole
number or may pay lawful money of the United States of America. The shares of
Common Stock issued or to be issued by the Company in payment of interest on
this Final Maturity Note are sometimes referred to herein as the "Payment
Shares."
(d) If the Company exercises the Stock Payment Option with respect to
a payment of interest on this Final Maturity Note, the Company shall deliver to
the Holder, on or prior to the date on which Payment Shares for such payment of
interest on this Final Maturity Note are to be received by the Holder, a Company
Certificate setting forth (i) the total amount of the interest payment to which
the Holder is entitled, (ii) the portion of the interest payment being made in
Payment Shares, (iii) the number of Payment Shares allocable to such payment, as
calculated pursuant to this Section 1.2, (iv) any rounding adjustment to such
number or any payment necessary to be made pursuant to Section 1.2(c), (v) a
brief statement of the facts requiring such adjustment, (vi) the number of
Payment Shares issuable with respect to each $100 of interest on this Final
Maturity Note after such adjustment and (vii) a brief statement that none of the
conditions set forth in Section 1.2(b) has occurred and is existing. Such
Company Certificate shall be accompanied by the certificates, each duly issued
in the name of the Holder, representing the Payment Shares.
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<PAGE>
Such Company Certificate shall be conclusive evidence of the correctness of the
calculation of the number of Payment Shares allocable to the payments to which
such Company Certificate relates and of any adjustments to such number made
pursuant to this Section 1.2 in the absence of manifest error. In addition, on
or before the pertinent payment date, the Company shall cause the transfer agent
for the Common Stock to prepare and issue the certificates representing the
Payment Shares in the name of the Holder before being so delivered by the
Company.
(e) The Payment Shares, when issued pursuant to and in compliance with
this Section 1.2, shall be, and for all purposes shall be deemed to be, validly
issued, fully paid and nonassessable shares of Common Stock; the issuance and
delivery thereof is in all respects hereby authorized; and the issuance thereof,
together with lawful money of the United States of America, if any, paid in lieu
of fractional shares of such Common Stock, will be, and for all purposes shall
be deemed to be, in full discharge and satisfaction of the Company's obligation
to pay the interest on this Final Maturity Note to which such Payment Shares
relate.
(f) As used in this Final Maturity Note, the following terms shall
have the meanings provided herein:
(1) "Company Certificate" means a certificate of the Company signed by
an Officer.
(2) "Computed Price" for any date means arithmetic average of the per
share Trading Price during the Measurement Period with respect to such
date.
(3) "Measurement Period" means, with respect to any date, the period
of five consecutive trading days ending three trading days prior to such
date.
(4) "Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer or the Chief Financial
Officer of the Company.
(5) "Other Final Maturity Notes" means the several Final Maturity
Notes issued pursuant to the Other Notes.
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<PAGE>
(6) "Other Notes" means the several Senior Convertible Notes dated
___, 1997 issued by the Company.
(7) "Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market
for the Common Stock is open for general trading.
(8) "Trading Price" on any date means the closing bid price for one
share of the Common Stock on such date, on the first applicable among the
following: (a) the national securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market
for the Common Stock or (b) the Nasdaq National Market, in either case as
reported by Bloomberg, L.P. (subject to equitable adjustment from time to
time on terms reasonably acceptable to the Majority Holders for (i) stock
splits, (ii) stock dividends, (iii) combinations, (iv) capital
reorganizations, (v) issuance to all holders of Common Stock of rights or
warrants to purchase shares of Common Stock at a price per share less than
the Trading Price which would otherwise be applicable, (vi) the
distribution by the Company to all holders of Common Stock of evidences of
indebtedness of the Company or cash (other than regular quarterly cash
dividends), (vii) tender offers by the Company or any subsidiary of the
Company or other repurchases of shares of Common Stock in one or more
transactions which, individually or in the aggregate, result in the
purchase of more than ten percent of the Common Stock outstanding and
(viii) similar events relating to the Common Stock, in each such case which
occur during a particular Measurement Period).
(9) "Transaction Documents" means this Final Maturity Note, the Note,
the Note Purchase Agreement and the other agreements, instruments and
documents contemplated hereby and thereby.
ARTICLE II
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<PAGE>
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
2.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails (a) to
------------------------------------
pay the principal hereof when due, whether at maturity, upon redemption, upon
acceleration or otherwise or (b) to pay any installment of interest hereon when
due and, in the case of this clause (b) of this Section 2.1 only, such failure
continues for a period of ten (10) days after the due date thereof;
2.2 BREACH OF COVENANT. The Company breaches any material covenant
------------------
or other material term or condition of this Final Maturity 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 Company from the
Holder or within 60 days after delivery of such notice if and only if, such
default is reasonably capable of cure and during such 60-day period, the Company
has been diligently taking action to cure such default and such cure cannot be
completed within such 20-day period;
2.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Note Purchase Agreement) shall be false or
misleading in any material respect when made;
2.4 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any material
-----------------------------
subsidiary of the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or 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
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<PAGE>
fail generally to pay its debts as they become due or shall admit in writing its
inability generally to pay its debts as they become due;
2.5 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
-------------------------------
proceeding shall be commenced against the Company or any material subsidiary of
the Company seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) consecutive days;
2.6 JUDGMENTS. Any court of competent jurisdiction shall enter one
---------
or more final judgments against the Company or any subsidiary of the Company or
any of their respective properties or other assets in an aggregate amount in
excess of $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 Company or any
------------------------------
subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Final Maturity Note) which indebtedness has an
outstanding principal amount in excess of $750,000 individually or $1,500,000 in
the aggregate for the Company and its subsidiaries, beyond the period of grace,
if any, provided in the instrument or agreement under which such indebtedness
was created or (ii) default in the observance or performance of any agreement,
covenant or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in
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effect thereunder); or (b) any such indebtedness of the Company or any of its
subsidiaries shall, in accordance with its terms, be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled or
required payment prior to the stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Company shall, pay to the Holder an amount equal to the
sum of (A) the outstanding principal amount of this Final Maturity 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 Final Maturity
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 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
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<PAGE>
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Company (telephone line facsimile transmission number (___) ___-
____); and the address of the Company shall be 6304 Spine Road, Unit A, Boulder,
Colorado 80301, Attention: ________________ (telephone line facsimile
transmission number (___) ___-____). Both the Holder and the Company may change
the address for service by service of written notice to the other as herein
provided.
3.3 AMENDMENT PROVISION. The term "Final Maturity 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 Final Maturity Note shall be binding upon
-------------
the Company and its successors and assigns, and shall inure to the benefit of
and be binding upon the Holder and its successors and permitted assigns.
3.5 CERTAIN EXPENSES. The Company 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 Company'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 Company from
paying any amount due the Holder.
3.6 GOVERNING LAW. This Final Maturity 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 FINAL MATURITY NOTE. This Final Maturity Note has
-------------------------------
not been and is not being registered under the
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<PAGE>
provisions of the Act or any state securities laws and this Final Maturity 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 Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that this Final Maturity 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 the Company 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 Company that such transferee has requested and
received from the Company all information relating to the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity to obtain and review the Registration
Statement and the prospectus included therein, each as amended or supplemented
to the date of transfer to such transferee, and the reports and other
information concerning the Company which at the time of such transfer have been
filed by the Company with the SEC pursuant to the 1934 Act and which are
incorporated by reference in such prospectus as of the date of such transfer.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Final Maturity 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:
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<PAGE>
EXHIBIT 10.3
FORM OF WARRANT
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED
UNDER THOSE LAWS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER EACH OF THOSE LAWS
IS AVAILABLE.
Right to Purchase _______ Shares of Common
Stock of NaPro BioTherapeutics, Inc.
NAPRO BIOTHERAPEUTICS, INC.
COMMON STOCK PURCHASE WARRANT
NAPRO BIOTHERAPEUTICS, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, [NAME OF BUYER] 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), _______ 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:
"Business Day" as used herein shall mean a day on which the New York
Stock Exchange is open for business.
"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
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FORM OF WARRANT
exchanged pursuant to a plan of recapitalization, reorganization, merger,
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 June 3, 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 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.
"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.
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
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FORM OF WARRANT
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 a "Related Person" and
all such persons other than the Holder, collectively, the "Related 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
Senior Convertible Notes due June 3, 2000 by the Holder and all Related Persons)
and (2) 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
Related 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 the
principal office of the Company 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
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FORM OF WARRANT
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 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 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 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
averaged over a period of five consecutive Business 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 Business Day, the Business Day next
preceding such day) and the four consecutive Business 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 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 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
Business Days thereafter, the
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FORM OF WARRANT
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
hereof, 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.
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
(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 thereof 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
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FORM OF WARRANT
period, giving effect to all adjustments called for during such period by
Section 4.
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 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, 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, 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, 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 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.
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<PAGE>
FORM OF WARRANT
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 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, 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, 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
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FORM OF WARRANT
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.
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.
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
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<PAGE>
FORM OF WARRANT
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 hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, 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 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 Note Purchase Agreement by and
between the Company and the original Holder of this Warrant (the "Registration
Rights 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 Note Purchase 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
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<PAGE>
FORM OF WARRANT
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 under the
Securities 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 Delaware. 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.
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FORM OF WARRANT
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
Dated: June 3, 1997 NAPRO BIOTHERAPEUTICS, INC.
By:___________________________________________
______
Title:________________________________________
______
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<PAGE>
FORM OF WARRANT
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.
-12-
<PAGE>
FORM OF WARRANT
Name: _____________________________________
Address: _____________________________________
_____________________________________
Dated:____________ ___, ____ ____________________________
(Signature must conform to name of Holder
as specified on the face of the Warrant)
____________________________
____________________________
(Address)
-13-
<PAGE>
EXHIBIT 10.4
Annex III
to
Note Purchase
Agreement
PLEDGE AND SECURITY AGREEMENT
-----------------------------
THIS PLEDGE AND SECURITY AGREEMENT, dated as of June 4, 1997 (this
"Agreement"), by and between NAPRO BIOTHERAPEUTICS, INC., a Delaware corporation
(the "Company"), and FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION as Collateral
Agent (the "Pledgee"), for the benefit of the holders from time to time of the
Notes (as defined herein).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company has entered into several Note Purchase
Agreements, dated as of May 30, 1997 (as amended, modified or supplemented from
time to time in accordance with their respective terms, the "Note Purchase
Agreements"), with the several buyers named therein (the "Buyers" and, together
with the holders from time to time of the Notes, the "Holders"), providing for
the purchase by the Buyers from the Company of Senior Convertible Notes in the
aggregate principal amount of $10,000,000 issued by the Company (the "Notes");
WHEREAS, it is a condition precedent to the obligations of the Buyers
under the Note Purchase Agreements to purchase their respective Notes that the
Company shall have executed and delivered to the Pledgee this Agreement, the
Collateral Account hereunder shall have been established and the Company shall
have caused to be deposited in the Collateral Account (as defined herein)
certain Collateral as provided herein; and
WHEREAS, the Company desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the premises and other benefits
accruing to the Company, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Pledgee hereby agree for the benefit of the
Holders as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is for the senior
benefit of the Holders to secure:
(i) the full and prompt payment when due of all obligations and
liabilities to the Holders, whether now existing or hereafter arising, under
the Note Purchase Agreements and the due performance and compliance with the
terms of the Note Purchase Agreements;
(ii) the full and prompt payment when due of all obligations and
liabilities of the Company pursuant to the Notes and the due performance and
compliance with the terms contained therein;
(iii) any and all sums advanced by the Pledgee or any Holder in order
to preserve the Collateral or preserve the Pledgee's security interest in the
Collateral;
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations or liabilities of the Company referred to in
clauses (i) through (iii), after an Event of Default shall have occurred and
be continuing, the reasonable expenses of re-taking, holding, preparing for
sale, selling or otherwise disposing of or
III-1
<PAGE>
realizing on the Collateral, or of any exercise by the Pledgee of its rights
hereunder, together with reasonable attorneys' fees and court costs; and
(v) any amounts for which the Pledgee or any Holders is entitled to
indemnification under Section 12 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being collectively called the "Obligations".
2. DEFINITIONS. Capitalized terms defined in the introductory
paragraph of, in the recitals to, or elsewhere in, this Agreement shall have
the respective meanings provided therein. Except as otherwise defined herein,
terms used herein and defined in the Note Purchase Agreement (as in effect on
the date hereof) and in the Notes shall be used as so defined. The following
terms shall have the meanings herein specified unless the context otherwise
requires. Such definitions shall be equally applicable to the singular and
plural forms of the terms defined.
"Account Bank" means First Trust National Association (Minneapolis,
MN).
"Business Day" shall have the meaning provided in the Notes.
"Collateral" shall mean:
(a) all cash in U.S. currency held in the Collateral Account;
(b) all Government Obligations held in the Collateral Account;
(c) all cash, securities, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect of
the cash or Government Obligations held at any time in the Collateral Account;
(d) the Collateral Account and each and every general intangible (as
such term is defined in UCC Section 9-106 relating thereto);
(e) all insurance policies relating to the Collateral Account or any
of the cash or Government Obligations held at any time in the Collateral
Account;
(f) all liens, guaranties and other rights and privileges relating to
any of the Collateral;
(g) all books, ledgers, books of account, records, writings, data
bases, information and other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to any of the foregoing;
and
(h) all proceeds, products, rents, issues, profits and returns of and
from any of the foregoing.
"Collateral Value" shall mean:
(a) in the case of Government Obligations, 100 percent of the
principal amount thereof; and
(b) in the case of all other Collateral, zero.
III-2
<PAGE>
"Event of Default" shall mean (i) any Event of Default, Repurchase
Event or Registration Repurchase Event, as such terms are defined in the Notes,
(ii) the breach by the Company of any material covenant or other material term
or condition of this Agreement, including without limitation those set forth in
Section 16, or (iii) any representation or warranty made by the Company in
Section 16 or any material representation or warranty made in the other
provisions of this Agreement shall be false or misleading when made or at any
time thereafter.
"FDA" shall mean the United States Food and Drug Administration.
"FDA Recommendation" shall mean a written statement by an advisory
panel established by the FDA addressed to the FDA which recommends that the FDA
approve a new drug application, submitted by a subsidiary of Ivax Corporation
pursuant to an agreement with the Company, for Paxene for use in treating any
one of Kaposi's sarcoma, breast cancer or ovarian cancer and permitting the
commercial sale of Paxene for such uses in the United States. Each copy of such
statement delivered pursuant to this Agreement shall be accompanied by an
Officer's Certificate certifying that such statement is a true and correct copy
of the statement and that subsequent to the date of such statement it has not
been retracted, modified or reviewed by such advisory panel or the FDA, and the
Pledgee may conclusively rely on such certificate for purposes of Section 5(a).
"Government Obligations" shall mean direct obligations of, or
obligations the timely payment of principal of and the interest on which are
unconditionally guaranteed by, the full faith and credit of the United States of
America and which mature not later than three months after their date of
issuance, which are held in the book-entry system.
"Issuance Date" means the date on which the Notes are initially
issued.
"Majority Holders" shall mean at any time holders of the Notes which
represent a majority of the outstanding aggregate principal amount of the Notes.
"Outstanding Principal" for any date shall mean the aggregate
principal amount of the Notes outstanding on such date.
"Paxene" shall mean the drug formulation that includes the bulk active
drug substance manufactured by the Company.
"Redemption Obligation" shall mean any outstanding and unsatisfied
obligation of the Company to redeem all or any portion of any Note pursuant to
Section 2.4(b) of such Note.
"Release Date" shall mean the SEC Filing Date and the last day of each
15-day period thereafter, or if such day is not a Business Day the next day
thereafter which is a Business Day.
"SEC Filing Date" shall mean the date the Registration Statement is
filed with the SEC.
"UCC" means the Uniform Commercial Code as enacted and in force in
Colorado (with respect to questions of enforcement governed by Colorado law) or
the State of New York (with respect to interpretation of this Agreement pursuant
to the choice of law provisions herein).
3. ESTABLISHMENT AND MAINTENANCE OF COLLATERAL ACCOUNT. (a) On or
before the Closing Date, the Pledgee shall establish and maintain at the Account
Bank a separate account to hold the cash and Government Obligations constituting
part of the Collateral, which account shall be entitled "NaPro BioTherapeutics,
Inc. Noteholder Collateral Account" (the
III-3
<PAGE>
"Collateral Account"). The terms and conditions of the Collateral Account shall
require the Account Bank to make entries in its records as to the type and
amount of Government Obligations held in the Collateral Account and indicating
that such Government Obligations are registered to the Pledgee in accordance
with the terms of this Agreement, the intention of which is to make the Pledgee
a holder of a perfected security interest in such Government Obligations or a
securities entitlement with respect thereto under Article 8 and Section 9-115 of
the Uniform Commercial Code, Revised Article 8, Investment Securities (with
Conforming and Miscellaneous Amendments to Articles 1, 3, 4, 5, 9 and 10) 1994
Official Text ("Revised Article 8") as applicable under 31 C.F.R. Part 357. The
terms and conditions agreed to by the Account Bank relating to the Collateral
Account shall provide that the Account Bank shall not permit funds or Government
Obligations to be withdrawn from the Collateral Account without the prior
written authorization of the Pledgee. All costs, fees (including reasonable
default fees) and expenses of the Account Bank and Pledgee with respect to the
Collateral Account shall be paid by the Company when due.
(b) On or before the Closing Date, the Company shall cause to be
deposited in the Collateral Account cash or Government Obligations, or any
combination thereof, which shall have a Collateral Value on the Closing Date of
not less than 97% of the original aggregate principal amount of the Notes. No
assets of the Company other than the Collateral shall be held in the Collateral
Account.
(c) Subject to release of Collateral pursuant to Section 5, the
Company shall at all times insure that cash and Government Obligations in the
Collateral Account having a Collateral Value of at least 97% of the outstanding
aggregate principal amount of the Notes.
(d) The Collateral Value of the cash and Government Obligations held
in the Collateral Account shall be determined at 4:00 p.m., New York City time,
on each business day. If on any day the cash and Government Obligations held in
the Collateral Account is less than the amount thereof which is required to be
maintained by the Company hereunder, the Company shall notify the Pledgee of
such fact by 1:00 p.m., New York City time, on the next succeeding business day
and, not later than the close of business, on such next succeeding business day,
cause to be deposited in the Collateral Account additional cash or additional
Government Obligations, or any combination thereof, which have a Collateral
Value at least equal to the amount of such deficiency.
4. GRANT OF SECURITY INTEREST. (a) To secure the Obligations and
for the purposes set forth in Section 1, the Company hereby (x) grants to the
Pledgee for the benefit of the Holders a first priority security interest in all
of the Collateral, (y) pledges to the Pledgee all Government Obligations
deposited or held from time to time in the Collateral Account and (z) assigns,
transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of
the Company's right, title and interest in and to the Government Obligations and
cash deposited or held in the Collateral Account (and in and to the certificates
or instruments evidencing such Government Obligations), to be held by the
Pledgee or the Account Bank upon the terms and conditions set forth in this
Agreement.
(b) By its joinder herein, the Account Bank in its capacity as the
Pledgee's securities intermediary with respect to the Collateral Account hereby
agrees that it will (and the Company hereby authorizes it to) comply with
instructions originated by the Pledgee and/or the Holders directing transfer or
redemption of securities and other government obligations held or carried in the
Collateral Account (including securities entitlements therein) without further
consent by the Company, and whether or not an Event of Default shall have
occurred and be continuing (it being the intent of all parties to establish in
favor of Pledgee and the Holders "control" over the Collateral Account and all
securities and securities entitlements held or carried therein as such term is
defined in Sections 8-106 and 9-115 of Revised Article 8 and in compliance with
31 CFR Part 357).
III-4
<PAGE>
5. RELEASE OF COLLATERAL. (a) So long as no Event of Default or
Redemption Obligation shall have occurred or be continuing and the Company shall
have filed the Registration Statement with the SEC as and when required by the
Note Purchase Agreements, the Company shall be entitled to the release of
Collateral from the Collateral Account and from the lien of this Agreement as
follows:
(1) If the Company shall not theretofore have delivered a copy of
the FDA Recommendation to the Pledgee and the Holders, the Company shall be
required to maintain in the Collateral Account Collateral having Collateral
Value equal to the specified percentages of Outstanding Principal during the
periods set forth below. On each Release Date, the Company shall be entitled to
the release of that portion of the Collateral, if any, which has a Collateral
Value in excess of the Collateral Value required to be maintained in the
Collateral Account on such Release Date.
Period Percentage of
------ -------------
Outstanding Principal
---------------------
Issuance Date to SEC Filing Date 97%
SEC Filing Date to August 30, 1997 70%
September 1, 1997 to September 30, 1997 60%
October 1, 1997 to October 31, 1997 50%
November 1, 1997 to November 30, 1997 40%
December 1, 1997 to December 30, 1997 30%
On and after December 31, 1997 0%
(2) If the Company has delivered a copy of the FDA Approval to the
Pledgee and each Holder, Section 5(a)(1) shall not apply and the Company shall
be required to maintain Collateral in the Collateral Account having Collateral
Value equal to the specified percentages of Outstanding Principal during the
periods set forth below. On each Release Date, the Company shall be entitled to
the release of that portion of the Collateral, if any, which has a Collateral
Value in excess of the Collateral Value required to be maintained in the
Collateral Account on such Release Date.
Period Percentage of
------ -------------
Outstanding Principal
---------------------
Issuance Date to SEC Filing Date 97%
SEC Filing Date through and including the 90th day after 50%
the Issuance Date
90th through 119th day after the Issuance Date 25%
On and after the 120th day after the Issuance Date 0%
(3) In addition to any right of the Company to release of all
Collateral from the Collateral Account pursuant to Sections 5(a)(1) or 5(a)(2),
whichever is then applicable,
III-5
<PAGE>
the Company shall be entitled to the release of all the Collateral from the
Collateral Account upon the payment and performance in full of all Obligations.
(b) Except as set forth in Section 5(a), in no event may any
Collateral be released or withdrawn from the Collateral Account to any person
without the prior written authorization to the Pledgee by the Majority Holders
specifying the date and amount of such release or withdrawal. The Collateral
Account will be operated and maintained exclusively for the benefit of the
Pledgee and the Holders. The Company shall have no right to make or countermand
withdrawals from the Collateral Account. The Company and the Pledgee agree to
sign such consents and authorizations and to take all other actions as may be
required to permit the prompt release and disbursement of the Collateral as
provided in this Section 5.
6. ACCOUNT BANK. Pledgee hereby confirms Account Bank as its
securities intermediary, agent and custodian, and Account Bank hereby agrees
that it acts in such capacity and agrees to act as securities intermediary,
agent and custodian for the Collateral on the terms specified herein and in
ANNEX B.
7. DISTRIBUTIONS. Unless and until an Event of Default shall have
occurred and be continuing, all interest and other amounts payable in cash in
respect of the Collateral shall be held in the Collateral Account. The Pledgee
shall also be entitled to receive directly, and to retain as part of the
Collateral until released pursuant to the terms hereof all other or additional
securities or property (other than cash) paid or distributed by way of dividend
or otherwise, as the case may be, in respect of the Collateral. All payments
which are received by the Company contrary to the provisions of this Section 7
or Section 8 shall be received in trust for the benefit of the Pledgee, shall be
segregated from other property or funds of the Company and shall be forthwith
paid over to the Pledgee as Collateral in the same form as so received (with any
necessary endorsement).
8. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement, the Note Purchase Agreements or the Notes or by law) for the
protection and enforcement of its rights in respect of the Collateral,
including, without limitation, all the rights and remedies of a secured party
upon a default under the Uniform Commercial Code of the State of New York, and
the Pledgee shall be entitled, without limitation, to exercise the following
rights, which the Company hereby agrees to be commercially reasonable:
(a) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees; and
(b) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Government Obligations or
other non-cash assets included in the Collateral, or any interest therein, at
any public or private sale, without demand of performance, advertisement or
notice of intention to sell or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are hereby waived by the
Company), for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or prices and
on such terms as the Pledgee in its absolute discretion may determine. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of the Company, and the Company hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshaling the Collateral and any other
security for the Obligations or otherwise, and all rights, if any, of stay
and/or appraisal which it now has or may at any time in the future have under
rule of law or statute now existing or hereinafter enacted. At any such sale,
unless prohibited by applicable law, the Pledgee on behalf of the Holders may
III-6
<PAGE>
bid for and purchase all or any part of the Collateral so sold free from any
such right or equity of redemption. Neither the Pledgee nor any Holder shall be
liable for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing nor shall any of them be under any obligation to take
any action whatsoever with regard thereto.
9. REMEDIES, ETC. CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement, the Note Purchase Agreements or the
Notes or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or commencement of the exercise by the Pledgee of
any one or more of the rights, powers or remedies provided for in this
Agreement, the Note Purchase Agreements or the Notes or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any Holder of all such other
rights, powers or remedies, and no failure or delay on the part of the Pledgee
or any Holder to exercise any such right, power or remedy shall operate as a
waiver thereof.
10. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any receipt, sale or other disposition of Collateral through
enforcement, realization hereunder or otherwise, together with all other moneys
received by the Pledgee hereunder in respect of any Collateral, shall first be
applied to the payment of all fees, costs and expenses incurred by the Pledgee
in connection with such sale or disposition, the delivery of the Collateral or
the collection of any such moneys (including, without limitation, reasonable
attorneys' fees and expenses), and the balance of such moneys (the "Remaining
Proceeds") shall be applied by the Pledgee as required by the following
provisions of this Section.
(b) The Remaining Proceeds shall be applied (x) to satisfy the
Obligations with each Holder to receive an amount equal to its outstanding
Obligations or (y) if the available Remaining Proceeds are insufficient for the
payment in full of each Holder's outstanding Obligations, to satisfy a portion
of each Holders' outstanding Obligations equal to such Holder's pro rata share
(in relation to all Holders' outstanding Obligations) of the available Remaining
Proceeds. The balance of such Remaining Proceeds will be paid to the Company.
(c) The Company shall promptly after learning the same, provide notice
to the Pledgee containing information concerning conversions, redemptions and
repurchases of Notes in sufficient detail to permit the Pledgee to administer
this Section 10.
11. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or non- application thereof.
12. INDEMNITY. The Company agrees to indemnify and hold harmless the
Pledgee and Account Bank from and against any and all claims, demands, losses,
judgments and liabilities (including liabilities for penalties) of whatsoever
kind or nature, and to reimburse the Pledgee and Account Bank for all costs and
expenses, including reasonable attorneys' fees and expenses, arising out of or
resulting from this Agreement or the exercise by the Pledgee or the Account
Bank, as the case may be, of any right or remedy granted to it hereunder or
under the Note Purchase Agreements or the Notes; provided, that the Company
--------
shall not be required to indemnify the Pledgee and Account Bank to the extent
any claim, demand, loss, judgment, liability, cost or expense is determined by
final judgment (not subject to further appeal) of a court of competent
jurisdiction to have arisen primarily from the negligence or willful misconduct
of the
III-7
<PAGE>
Pledgee or the Account Bank, as the case may be. In no event shall the Pledgee
or the Account Bank be liable, in the absence of a determination of negligence
or willful misconduct on its part by final judgment (not subject to further
appeal) of a court of competent jurisdiction, for any matter or thing in
connection with this Agreement other than to account for moneys actually
received by it in accordance with the terms hereof. If and to the extent that
the obligations of the Company under this Section 12 are unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Company agrees
that it will join with the Pledgee in executing and, at its own expense, file
and refile under the Uniform Commercial Code such financing statements,
continuation statements and other documents in such offices as the Pledgee may
reasonably deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Pledgee's security interest in the
Collateral and hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of the Company where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Pledgee such additional
conveyances, assignments, agreements and instruments as the Pledgee may
reasonably require or deem advisable to carry into effect the purposes of this
Agreement or to further assure and confirm unto the Pledgee its rights, powers
and remedies hereunder.
(b) The Company hereby appoints the Pledgee the Company's attorney-in-
fact, with full authority in the place and stead of the Company and in the name
of the Company or otherwise, from time to time after the occurrence and during
the continuance of an Event of Default, in the Pledgee's discretion to take any
action and to execute any instrument which the Pledgee may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement. This power
of attorney is coupled with an interest and shall not be terminable for so long
as any Collateral remains subject to the security interest granted to the
Pledgee hereunder.
14. CONCERNING THE PLEDGEE. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The duties of the Pledgee hereunder
shall terminate when all the Collateral has been released pursuant hereto. The
Pledgee shall act hereunder on the terms and conditions set forth herein and in
ANNEX A hereto. The Pledgee hereby waives for the benefit of the Holders any
claim, right or lien of the Pledgee against the Collateral arising under
applicable law or arising from any business or transaction between the Pledgee
and the Company other than pursuant to this Agreement.
15. TRANSFER BY THE COMPANY. The Company will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein except in accordance with
the terms of this Agreement, the Note Purchase Agreements and the Notes.
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to, and covenants and agrees with, the Pledgee
for the benefit of the Holders that (a) except as otherwise set forth in this
Agreement, it is and will be the legal, record and beneficial owner of, and has
good and marketable title to, the Collateral described in Section 2 hereof,
subject to no pledge, lien, mortgage, hypothecation, security interest, charge,
option, adverse claim (as such term is used in UCC Section 8-302(1)) or other
encumbrance whatsoever (collectively, "Adverse Claim"), except the liens and
security interests created by this Agreement; (b) it has full power, authority
and legal right to pledge all the Collateral pursuant to
III-8
<PAGE>
this Agreement; (c) this Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms; (d) the execution, delivery and
performance of this Agreement will not violate any provision of any applicable
law or regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of any securities
issued by the Company, or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Company is a party or which
purports to be binding upon the Company or upon any of its assets and will not
result in the creation or imposition of any lien or encumbrance on any of the
assets of the Company except as contemplated by this Agreement; (e) this
Agreement creates, and will continue to create so long as any Obligations are
outstanding, as security for the Obligations, a valid and enforceable perfected
security interest and lien on and first priority security interest in all of the
Collateral in favor of the Pledgee for the benefit of the Holders sufficient to
make the Pledgee and/or the Holders "bona fide purchasers" and entitlement
holders with respect to the Collateral constituting Government Obligations or
investment securities pursuant to 31 C.F.R. Part 357 and UCC Sections 8-302(1)
and 8-313(1) of the New York UCC and Revised Article 8, subject to no other
Adverse Claim; and (f) no consent, filing, approval, registration, recording,
registration or other action is required (x) for the grant of the security
interest by the Company in the Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Company, or (y) to
perfect the security interest and lien purported to be created by this
Agreement, in each case except as has been accomplished. The Company further
represents and warrants that its chief executive office is located at the
address set forth below for notices to be given hereunder, and the Company keeps
and maintains its books and records, including all books and records relating to
the Collateral Account, at such address. The Company covenants and agrees that
it will not change the location of its chief executive office or of its books
and records (including the books and records relating to the Collateral Account)
without giving Pledgee at least 90 days prior notice thereof. The Company
covenants and agrees that it will defend the Pledgee's right, title and security
interest in and to the Collateral and the proceeds thereof against the claims
and demands of all persons whomsoever; and the Company covenants and agrees that
it will have like title to and right to pledge any other funds, Government
Obligations or property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the Holders.
17. SURVIVAL. All representations, warranties, covenants and
agreements of the Company and of the Pledgee contained herein will survive the
execution and delivery hereof, the establishment of the Collateral Account and
the release of any Collateral pursuant hereto and shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Pledgee or the Company or any person who controls the Pledgee or the
Company.
18. COMPANY'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Company under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any of the Note Purchase Agreements, the Notes or any other instrument or
agreement referred to therein, or any assignment or transfer of any thereof; (b)
any waiver, consent, extension, indulgence or other action or inaction under or
in respect of any such agreement or instrument or this Agreement; (c) any
furnishing of any additional security to the Pledgee or its assignees or any
acceptance thereof or any release of any security by the Pledgee or its
assignees; (d) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (e) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to the Company, or any action
taken with respect to this Agreement by any trustee or receiver, or by any
court, in any such proceeding, whether or not the Company shall have notice or
knowledge of any of the foregoing.
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<PAGE>
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered (which shall include transmission by
telephone line facsimile transmission) or mailed by first class mail, postage
prepaid, to the parties at their addresses set forth below and shall be
effective upon receipt, if so delivered, or five days after being placed in the
facilities of the United States Postal Service, if mailed:
(a) if to the Company, at: NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, Colorado 80301
Attention: Vice President and Chief Financial
Officer
Telephone: (303) 530-3891
Facsimile: (303) 530-1296
(b) if to the Pledgee, at:
First Trust of New York, National Association
100 Wall Street
New York, New York 10005
Attention: Mr. Adam Dalmy
Telephone: (303) 585-4592
Facsimile: (303 585-6865
with a copy to:
Colorado National Bank
950 17th Street
Denver, Colorado 80202
Attention: Mr. Adam Dalmy
Telephone: (303) 585-4592
Facsimile: (303 585-6865
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the party to be charged with the enforcement
thereof and, in the case of the Pledgee, with the written consent of the
Majority Holders or, as and to the extent required by the Notes, all of the
Holders.
21. MISCELLANEOUS. This Agreement shall create a continuing security
interest in the Collateral and this Agreement and such security interest shall
(a) remain in full force and effect, subject to release and/or termination as
set forth in Section 5, (b) be binding upon the Company, its successors,
transferees and assigns and (c) inure, together with the rights and remedies of
the Pledgee hereunder, to the benefit of the Pledgee, the Holders and their
successors,
III-10
<PAGE>
transferees and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT UNDER THE NEW YORK UNIFORM COMMERCIAL CODE THE LAWS OF
ANOTHER JURISDICTION GOVERN MATTERS OF PERFECTION AND THE EFFECT OF PERFECTION
OR NON-PERFECTION OF ANY SECURITY INTEREST GRANTED HEREUNDER. THE PARTIES HERETO
AGREE THAT FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION REVISED ARTICLE 8 AND
31 C.F.R. PART 357, THE JURISDICTION OF THE PLEDGEE AND OF THE ACCOUNT BANK IS
THE STATE OF NEW YORK. The headings of the several sections and subsections in
this Agreement are for purposes of reference only and shall not limit or define
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one instrument. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement. In the event that any provision of this Agreement shall prove to be
invalid or unenforceable, such provision shall be deemed to be severable from
the other provisions of this Agreement which shall remain binding on all parties
hereto.
22. WAIVER OF JURY TRIAL. The Company hereby irrevocably waives all
right to a trial by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement or the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
NAPRO BIOTHERAPEUTICS, INC.
By: ____________________________________________
Name:
Title:
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION,
as Collateral Agent and Pledgee
By: ____________________________________________
Name:
Title:
By executing and delivering a counterpart of this Agreement, the Account Bank
hereby (1) accepts its appointment pursuant to Section 6 of this Agreement and
(2) agrees to be bound by the provisions of Section 21 of this Agreement.
FIRST TRUST NATIONAL
ASSOCIATION
By _____________________________________________
Title:
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<PAGE>
ANNEX A
TO
PLEDGE AND
SECURITY
AGREEMENT
THE PLEDGEE
1. Appointment. The Holders (all capitalized terms used herein and
not otherwise defined shall have the respective meanings provided in the Pledge
and Security Agreement to which this ANNEX A is attached (the "Security
Agreement")), by their acceptance of the benefits of the Security Agreement,
hereby irrevocably designate First Trust of New York, National Association, as
Pledgee to act as specified herein and in the Security Agreement. Each Holder
hereby irrevocably authorizes, and each holder of any promissory note which is
secured pursuant to the Security Agreement (each a "Note" and collectively the
"Notes") by the acceptance of such Note shall be deemed irrevocably to
authorize, the Pledgee to take such action on its behalf under the provisions of
the Security Agreement and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Pledgee by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Pledgee may perform any of its duties hereunder by or
through its agents or employees.
2. Nature of Duties. The Pledgee shall have no duties or
responsibilities except those expressly set forth in the Security Agreement.
Neither the Pledgee nor any of its officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under the Security
Agreement or hereunder or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct. The duties of the Pledgee
shall be mechanical and administrative in nature; the Pledgee shall not have by
reason of the Security Agreement or any Note Purchase Agreement or Note a
fiduciary relationship in respect of any Holder; and nothing in the Security
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Pledgee any obligations in respect of the Security Agreement
except as expressly set forth herein.
Pledgee shall not be liable for any act it may do or omit to do while
acting in good faith and in the exercise of its own best judgment. Any act done
or omitted by the Pledgee on the advice of its own attorneys shall be deemed
conclusively to have been done or omitted in good faith. Pledgee shall have the
right at any time to consult with counsel on any question arising under this
Security Agreement. The Pledgee shall incur no liability for any delay
reasonably required to obtain the advice of counsel.
3. Lack of Reliance on the Pledgee. Independently and without
reliance upon the Pledgee, each Holder, to the extent it deems appropriate, has
made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in
connection with the making and the continuance of the Obligations and the taking
or not taking of any action in connection therewith, and (ii) its own appraisal
of the creditworthiness of Company and its subsidiaries, and the Pledgee shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Holder with any credit or other information with respect thereto,
whether coming into its possession before the extension of any Obligations or
the purchase of any Notes, or at any time or times thereafter. The Pledgee and
the Account Bank shall not be responsible to any Holder for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Security Agreement or the
financial condition of the Company or be required to make any inquiry concerning
either the performance or observance of any of the terms,
A-1
<PAGE>
provisions or conditions of the Security Agreement, or the financial condition
of the Company, or the existence or possible existence of any Event of Default
or Repurchase Event.
4. Certain Rights of the Pledgee. No Holder shall have the right to
cause the Pledgee to take any action with respect to the Collateral, with only
the Majority Holders having the right to direct the Pledgee to take any such
action. If the Pledgee shall request instructions from the Majority Holders
with respect to any act or action (including failure to act) in connection with
the Security Agreement, the Pledgee shall be entitled to refrain from such act
or taking such action unless and until it shall have received instructions from
the Majority Holders, and to the extent requested, appropriate indemnification
in respect of actions to be taken; and the Pledgee shall not incur liability to
any person by reason of so refraining. Without limiting the foregoing, no
Holder shall have any right of action whatsoever against the Pledgee as a result
of the Pledgee acting or refraining from acting (x) hereunder in accordance with
the instructions of the Majority Holders or (y) under any Note Purchase
Agreement or Note as provided for therein.
5. Reliance. The Pledgee shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper person or entity, and, with respect to all legal matters pertaining
to the Security Agreement and its duties thereunder, upon advice of counsel
selected by it.
6. Indemnification. To the extent the Pledgee is not reimbursed and
indemnified by Company and/or its subsidiaries, the Holders will reimburse and
indemnify the Pledgee, in proportion to their respective principal amounts of
Obligations, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Pledgee in performing its duties hereunder or under the
Security Agreement, or in any way relating to or arising out of the Security
Agreement except for those determined by a final judgment (not subject to
further appeal) of a court of competent jurisdiction to have resulted solely
from the Pledgee's own negligence or willful misconduct.
7. The Pledgee in its Individual Capacity. The Pledgee and its
affiliates may lend money to, purchase, sell and trade in securities of and
generally engage in any kind of business with the Company or any affiliate or
subsidiary of the Company as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Company for
services to the Company in connection with the Note Purchase Agreements and the
Notes and otherwise without having to account for the same to the Holders;
provided, however, that the Pledgee on behalf of itself and such affiliates
hereby waives any claim, right or lien against the Collateral in any way arising
from or relating to any such loan, securities transaction or business with the
Company.
8. Holders. The Pledgee may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Pledgee. Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or endorsee, as the case may be, of such
Note or of any Note(s) issued in exchange therefor.
9. Resignation by the Pledgee. (a) The Pledgee may resign from the
performance of all its functions and duties under the Security Agreement at any
time by giving 60 Business Days' prior written notice (as provided in the
Security Agreement) to the Company and the Holders. Such resignation shall take
effect upon the appointment of a successor Pledgee pursuant to clauses (b) and
(c) below.
A-2
<PAGE>
(b) Upon any such notice of resignation, the Majority Holders shall
appoint a successor Pledgee hereunder who shall be a Holder.
(c) If a successor Pledgee shall not have been so appointed within
said 60 Business Day period, the Pledgee shall then appoint a successor Pledgee
who shall serve as Pledgee hereunder or thereunder until such time, if any, as
the Majority Holders appoint a successor Pledgee as provided above. If a
successor Pledgee has not been appointed within such 60 day period, the Pledgee
may petition any court of competent jurisdiction or may interplead the Company
and Holders in a proceeding for the appointment of a successor Pledgee, and all
fees, including but not limited to extraordinary fees associated with the filing
of interpleader, and expenses associated therewith shall be payable by the
Company.
A-3
<PAGE>
ANNEX B
TO
PLEDGE AND
SECURITY
AGREEMENT
THE ACCOUNT BANK
1. ROLE AS SECURITIES INTERMEDIARY. Account Bank hereby agrees to
-------------------------------
act as securities intermediary on the terms hereinafter specified. Account Bank
represents that (i) it is a bank that in the ordinary course of its business
maintains security accounts for others and is acting in that capacity with
respect to the Account, (ii) the Account Bank is eligible to maintain and
maintains a Participant's Securities Account (as such term is defined in 31
C.F.R. (S)357.2) at the Reserve Bank for each of the pertinent types of
Government Obligations which shall be book-entry securities and (iii) all
entries made on the books of the Account Bank with respect to the book-entry
securities included in the Collateral will be complete and accurate in all
respects.
2. CUSTODY OF ASSETS. Account Bank shall act as securities
-----------------
intermediary for the Pledgee with respect to Government Obligations and other
property, including all income thereon and proceeds from the sale or maturity
thereof (collectively, the "Assets") from time to time delivered to or received
by it to be held in the Pledgee's custodial account entitled "NaPro
BioTherapeutics, Inc. Noteholder Collateral Account for First Trust of New York,
National Association, as Collateral Agent" (the "Account") and shall be
segregated at all times (except for cash and Assets held in book entry form
which shall be appropriately designated as property of Pledgee) from the
securities and property of any other person or entity.
The Account is being established by the Pledgee pursuant to the Pledge
and Security Agreement to which it is attached.
3. ASSETS HELD IN BOOK-ENTRY SYSTEM. As used herein, the term
--------------------------------
"Assets" shall include all securities held on behalf of Pledgee in the Federal
Reserve/Treasury book-entry system.
4. REGISTRATION OF ASSETS. All assets which are in registered form
----------------------
shall, unless Account Bank is otherwise Instructed (as hereafter defined) in
writing, be registered in accordance with paragraph 3 above in the name of the
Pledgee.
5. INCOME ON ASSETS. Account Bank shall take all steps necessary or
----------------
advisable to collect the dividends, interest and other income on the Assets and
shall credit, subject to the terms of the Security Agreement, said income to the
Account from time to time, provided that the Account Bank shall not be required
-1-
<PAGE>
to initiate proceedings with respect to such collection. All income credited to
the Account shall be promptly reinvested or distributed to Pledgee in
accordance with Pledgee's Instructions given from time to time, subject to the
terms of the Security Agreement.
6. PURCHASES AND SALES OF ASSETS. Subject to the terms of the
-----------------------------
Security Agreement, Account Bank shall promptly effect purchases and sales of
the Assets in accordance with Pledgee's Instructions or instructions of
Pledgee's designee from time to time, and shall take all steps necessary or
advisable to collect the proceeds of any Assets which are sold, redeemed or
which have matured and shall promptly deposit said proceeds in the Account,
provided that Account Bank shall not be responsible for the collection of Assets
called for redemption or otherwise payable (other than by reason of sale or
other disposition by Account Bank) unless notice thereof is published in
national financial reporting services to which Account Bank subscribes, or
notice is otherwise received by Account Bank. Account Bank shall not be under
any duty to advise or recommend any sales or purchases of Assets for Pledgee's
account.
7. LIMITATION OF LIABILITY; RESPONSIBILITIES. (a) Account Bank
-----------------------------------------
shall not be liable for any loss or damage suffered by Pledgee as the result of
any act or omission of any broker or other agent engaged by Pledgee in effecting
purchases, sales or exchanges of Assets except to the extent of any liability
caused by (i) the negligent, reckless or willful conduct of Account Bank or its
subagent or subcustodian, or (ii) the failure of Account Bank or its subagent or
subcustodian to perform any act required by law or this Agreement. Account Bank
shall not be liable for loss or damage caused directly or indirectly by
invasion, insurrection, riot, war, nuclear disaster, order of civil authority or
any other causes beyond its control.
(b) Account Bank shall not be responsible to file any tax returns or
pay any taxes due in connection with the Assets held hereunder and the income
therefrom.
8. STATEMENTS. Account Bank shall deliver to Pledgee periodically in
----------
accordance with its standard practices a statement of all accounts maintained
hereunder showing all receipts, disbursements and other transactions affecting
the Assets during the applicable period. The scope, content and frequency of the
statements required hereunder may be changed from time to time upon the mutual
written agreement of the parties hereto.
9. OTHER ACQUISITIONS. Pledgee authorizes Account Bank to act, and
------------------
Account Bank agrees that it shall act for Pledgee from time to time, in the
acceptance of the delivery from a fiduciary or a donor to the Pledgee of
securities, cash or other property. Upon delivery to it of securities, cash or
other
-2-
<PAGE>
property to be credited to the Account, whether as the result of a purchase or
distribution of a bequest of gift, Account Bank shall promptly notify Pledgee
and issue to it a receipt setting forth an accurate description of each item
received, together with the face value thereof in the case of an evidence of
indebtedness and the number of shares in the case of stock.
10. WITHDRAWAL OF ASSETS. (a) No cash, securities, evidences of
--------------------
indebtedness or any other property included in the Assets may be withdrawn from
Account Bank except in accordance with the Pledgee's Instructions.
(b) Upon receipt of such Instructions and subject to the terms and
conditions thereof, Account Bank shall deliver the items specified therein to
the person or entity designated and shall obtain a proper receipt therefor.
(c) In connection with the sale of any Assets, Account Bank shall make
delivery of such Assets only against payment therefor, in federal funds or by
certified check or bank cashier's check, provided that, consistent with
customary practice at the place of delivery, Account Bank may (i) make delivery
for inspection prior to sale at buyer's location, upon delivery to Account Bank
of a proper receipt therefore, to a member of registered national securities
exchange or bank or trust company. In no event shall Account Bank be liable
hereunder for not delivering Assets in accordance with Pledgee's Instructions
where such delivery is withheld by reason of the purchaser's inability or
unwillingness to make a payment therefore in federal funds or by certified or
bank cashier's check or as otherwise provided in this paragraph 10(c).
(d) Any cash included in the Assets may be withdrawn from Account Bank
in accordance with the terms of paragraph 10(a) provided, however, that subject
to a transfer or other disposition of securities by bookkeeping entry in
connection with Account Bank's participation (through its agent) in the Federal
Reserve/Treasury book-entry system, Account Bank shall make payments of cash
to, or from the account of, Pledgee only (i) for the purchase of Government
Obligations or other Assets and delivery of such securities or other Assets to
Account Bank in proper form for transfer; (ii) for the payment of Account
Bank's expenses and fees authorized in this Agreement; (iii) for payments in
connection with the conversion, exchange or surrender of Government Obligations
included in the Assets.
(e) Account Bank shall promptly notify the Pledgee of all withdrawals
from or deliveries to Account Bank for Pledgee's account hereunder.
11. INDEMNITY. With respect to any Assets received by Account Bank
---------
and registered in the name of Pledgee or held on behalf of Pledgee, solely in
its capacity as such, in the Federal
-3-
<PAGE>
Reserve/Treasury book-entry system, Account Bank shall be fully responsible and
liable for and shall indemnify and hold Pledgee harmless against any loss,
damage or expense (including attorney's fees and amounts paid with Account
Bank's consent in settlement of any claim or action) which Pledgee may sustain
resulting from (i) any act of Account Bank which has not been authorized
hereunder, or (ii) any failure by Account Bank to perform any of its
obligations. Except with respect to the extent same may result, directly or
indirectly from any negligent act or omission or willful or reckless misconduct
of Account Bank or any failure of Account Bank to perform any of Account Bank's
obligations under this Agreement, Pledgee shall indemnify and hold Account Bank
harmless against any loss, damage or expense (including attorney's fees and
amounts paid, with Pledgee's consent, in settlement of any claim or action)
which Account Bank may sustain resulting from its performance in accordance with
this Agreement.
12. INSTRUCTIONS. As used in this Agreement, the term "Instructions"
------------
or "Instructed" by Pledgee means a request or order given or delivered to
Account Bank by an officer of Pledgee. As used in this Agreement, the term
"Instructions" or "Instructed" by the Pledgee means a request or order given or
delivered to Account Bank by an authorized representative of the Pledgee. Unless
specifically required herein to be in writing, Instructions may be oral or
written; provided, that any oral Instructions shall be promptly confirmed in
writing. Failure to provide a written confirmation of oral Instruction shall not
invalidate any such Instructions.
13. APPLICABLE LAW. This Agreement shall be interpreted and enforced
--------------
in accordance with the laws of the State of New York.
FIRST TRUST NATIONAL
ASSOCIATION
By
--------------------------------
Title:
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,150
<SECURITIES> 2,262
<RECEIVABLES> 767
<ALLOWANCES> 0
<INVENTORY> 3,164
<CURRENT-ASSETS> 16,034
<PP&E> 14,566
<DEPRECIATION> 1,738
<TOTAL-ASSETS> 30,390
<CURRENT-LIABILITIES> 5,857
<BONDS> 9,947
0
0
<COMMON> 95
<OTHER-SE> 10,776
<TOTAL-LIABILITY-AND-EQUITY> 30,390
<SALES> 1,099
<TOTAL-REVENUES> 1,099
<CGS> 0
<TOTAL-COSTS> 8,080
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 374
<INCOME-PRETAX> (7,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,068)
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<NET-INCOME> (7,068)
<EPS-PRIMARY> (0.59)
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