SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 12, 1997
SUGEN, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-24814 13-3629196
(State of jurisdiction) (Commission File No.) (IRS Employer
Identification No.)
351 Galveston Drive
Redwood City, California 94063
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 306-7700
<PAGE>
Item 5. Other Events.
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On September 10, 1997, SUGEN, Inc. (the "Company") announced the private
placement of $17,500,000 aggregate principal amount of its 5% Senior Custom
Convertible Notes due 2000 (the "Notes"). The private placement closed on
September 12, 1997 (the "Closing Date"). The following summary of certain
terms of the Notes does not purport to be a complete description of the
terms of the Notes and is qualified in its entirety by reference to the
Note Purchase Agreement and the form of Note, which are incorporated by
reference herein and copies of which are filed as Exhibits 4.1 and 4.2 to
this Form 8-K.
The Notes were sold at par, mature in September 2000 and bear interest at
the rate of 5% per annum, payable in cash or, at the election of the
Company, shares of common stock of the Company (the "Common Stock") valued
at the fair market value of the Common Stock at the time of the interest
payment.
The Notes, which will not be convertible for 90 days from the Closing Date,
can thereafter be converted, together with accrued and unpaid interest and
subject to certain limitations, into shares of Common Stock at a conversion
price equal to the average of the two lowest trade prices of the Common
Stock as reported on Nasdaq for the 20 trading days immediately preceding
the conversion date (the "Conversion Price"). Starting on January 19, 1998
(the "Fixed Conversion Date"), the Conversion Price may not exceed 115% of
the average closing bid price of the Common Stock for the 20 trading days
immediately preceding the Fixed Conversion Date. An Investor will not be
permitted at any time to convert in excess of the principal amount of Notes
which would result in such Investor owning more than 4.9% of the then
outstanding Common Stock.
If at any time the number of shares issuable upon conversion of the Notes
exceeds the number of shares of Common Stock available for issuance in
connection with the Notes without obtaining the approval of the Company's
stockholders in accordance with Nasdaq requirements, then, at the
Investors' option, the Company may be required to redeem from the Investors
in cash (at redemption prices ranging from 112.5% to 120% depending on the
date of redemption) a sufficient principal amount of Notes so that the
remaining Notes are fully convertible. The Company may also redeem the
Notes in connection with an acquisition of the Company at redemption prices
ranging from 125% to 130%. Upon the occurrence and continuation of an event
of default, the Company will be required to redeem the Notes at redemption
prices ranging from 115% to 122.5%.
If the Notes are not converted into Common Stock, upon maturity in
September 2000, the Notes will be exchanged for 13.75% five-year
debentures. Pursuant to the terms of the Notes, in addition to other
covenants, the Company has agreed to certain limitations on the incurrence
of additional indebtedness.
1.
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In connection with the private placement, Investors were granted three-year
warrants to purchase up to 262,500 shares of Common Stock at an exercise
price of $16.74 per share.
Diaz & Altschul Capital, LLC of New York City was the placement agent in
the transaction. In consideration for its services as placement agent, the
Company paid Diaz & Altschul Capital, LLC a fee of $875,000 and issued to
an affiliate of Diaz & Altschul Capital, LLC warrants to acquire 70,000
shares of Common Stock at an exercise price of $16.74 per share.
The Company has agreed to file a registration statement for the resale of
the Common Stock issuable upon conversion of the Notes, upon payment of
interest with respect to the Notes in shares of Common Stock and upon
exercise of the warrants, as the case may be, within thirty days of the
Closing Date. The Company will be required to redeem the Notes at 115% if
it does not file the registration statement by such time or if the
registration statement is not declared effective within 90 days of the
Closing Date. The Company expects to initially register up to 2,262,500
shares of Common Stock.
2.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements.
None.
(b) Pro Forma Financial Information.
None.
(c) Exhibits.
4.1 Form of Note Purchase Agreement, dated as of September 8, 1997, by and
between the Company and the investors named therein.
4.2 Form of 5% Senior Custom Convertible Note due 2000.
4.3 Form of Common Stock Purchase Warrant.
99.1 Press Release, titled "SUGEN, Inc. Announces Private Placement of $17.5
Million Senior Convertible Notes," dated September 10, 1997.
3.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SUGEN, Inc.
Dated: September 18, 1997 By: /s/ Christine E. Gray-Smith
----------------------------
Christine E. Gray-Smith
Vice President, Finance
(Principal Financial and
Accounting Officer)
4.
NOTE PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 8, 1997
BY AND BETWEEN
SUGEN, INC.
AND
DELTA OPPORTUNITY FUND, LTD.
5% SENIOR CUSTOM CONVERTIBLE NOTES DUE 2000
<PAGE>
PLACEMENT AGENT:
DIAZ & ALTSCHUL CAPITAL, LLC
<PAGE>
SUGEN, INC.
NOTE PURCHASE AGREEMENT
5% SENIOR CUSTOM CONVERTIBLE NOTES DUE 2000
TABLE OF CONTENTS
Page
----
1. DEFINITIONS..........................................................1
2. PURCHASE AND SALE....................................................6
(a) Purchase........................................................6
(b) Form of Payment.................................................6
(c) Closing.........................................................7
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
BUYER................................................................7
(a) Purchase for Investment.........................................7
(b) Accredited Investor.............................................7
(c) Reoffers and Resales............................................7
(d) Company Reliance................................................7
(e) Information Provided............................................7
(f) Absence of Approvals............................................8
(g) Note Purchase Agreement.........................................8
(h) Buyer Status....................................................8
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
COMPANY..............................................................8
(a) Organization and Authority......................................8
(b) Qualifications..................................................8
(c) Capitalization..................................................9
(d) Material Losses.................................................9
(e) Concerning the Shares and the Common Stock......................10
(f) Corporate Authorization.........................................10
(g) Non-contravention...............................................10
(h) Approvals.......................................................11
(i) Information Provided............................................11
(j) Conduct of Business.............................................11
(k) SEC Filings.....................................................11
(l) Absence of Certain Proceedings..................................11
(m) Liabilities.....................................................12
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1. (n) Absence of Certain Changes......................................12
2. (o) Intellectual Property...........................................12
(p) Internal Accounting Controls....................................12
(q) Compliance with Law.............................................12
(r) Properties......................................................12
3. (s) Labor Relations.................................................13
(t) Insurance.......................................................13
(u) Tax Matters.....................................................13
(v) Investment Company..............................................13
(w) Absence of Brokers, Finders, Etc................................13
(x) No Solicitation.................................................13
(y) Certain Issuances of Securities.................................13
(z) Rights Agreement................................................14
5. CERTAIN COVENANTS....................................................14
(a) Transfer Restrictions...........................................14
4. (b) Restrictive Legends.............................................14
(c) Transfer Agent Agreement........................................15
(d) Nasdaq Listing..................................................16
(e) Form D..........................................................16
(f) State Securities Laws...........................................16
(g) Certain Future Financings and Related Actions...................16
(h) Limitation on Certain Actions...................................17
(i) Use of Proceeds.................................................17
(j) Best Efforts....................................................17
(k) Debt Obligation.................................................17
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.......................18
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.....................18
8. REGISTRATION RIGHTS..................................................19
(a) Mandatory Registration..........................................19
(b) Obligations of the Company......................................20
1. (c) Obligations of the Buyer and other Investors....................24
2. (d) Rule 144........................................................25
9. INDEMNIFICATION AND CONTRIBUTION.....................................25
(a) Indemnification.................................................25
(b) Contribution....................................................26
3. (c) Other Rights....................................................27
10. MISCELLANEOUS........................................................27
(a) Governing Law...................................................27
(b) Headings........................................................27
(c) Severability....................................................27
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4. (d) Notices........................................................27
(e) Counterparts...................................................27
(f) Entire Agreement...............................................27
(g) Waiver.........................................................28
(h) Amendment......................................................28
(i) Further Assurances.............................................28
(j) Assignment of Certain Rights and Obligations...................28
(k) Expenses.......................................................28
(l) Termination....................................................29
(m) Survival.......................................................29
(n) Public Statements, Press Releases, Etc.........................29
(o) Construction...................................................29
SCHEDULES
Schedule 4(c)
ANNEXES
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ANNEX I - 5% Senior Custom Convertible Note due 2000
ANNEX II - Joint Escrow Instructions
ANNEX III - Transfer Agent Agreement
ANNEX IV - Common Stock Purchase Warrant
ANNEX V - Opinion of Cooley Godward LLP
ANNEX VI - Opinion of Lyon & Lyon LLP
ANNEX VII - Instruction to Transfer Agent
ANNEX VIII - Opinion of Company Counsel to Be Delivered in Connection with
Effectiveness of the Registration Statement
ANNEX IX - Opinion of Lyon & Lyon LLP to Be Delivered in
Connection with Effectiveness of the Registration Statement
<PAGE>
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of September 8, 1997 (this
"Agreement"), by and between SUGEN, INC., a Delaware corporation, with
headquarters located at 351 Galveston Drive, Redwood City, California 94063-4720
(the "Company"), and DELTA OPPORTUNITY FUND, LTD., a British Virgin Islands
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 capitalized 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;
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):
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct
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or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Blackout Period" means the period of up to 20 consecutive Trading Days
after the date the Company notifies the Investors that they are required,
pursuant to Section 8(c)(4), to suspend offers and sales of Registrable
Securities as a result of an event or circumstance described in Section
8(b)(5)(A) during which period, by reason of Section 8(b)(5)(B), the Company is
not required to amend the Registration Statement or to supplement the
Prospectus; provided, however, that in the case of any Blackout Period which
commences prior to the date which is 90 days after the Closing Date the Company
shall have determined that public disclosure of such event or circumstance at
such time would not be in the best interests of the Company.
"Business Day" means 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.
"Claims" means any losses, claims, damages, liabilities or expenses
(joint or several), incurred by a Person.
"Closing Date" means 12:00 noon, New York City time, on September 12,
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.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Conversion Notice" means a Notice of Conversion of 5% Senior Custom
Convertible Note due 2000 substantially in the form of Exhibit A to the Note.
"Conversion Shares" means the shares of Common Stock and the related
Preferred Share Purchase Rights issuable upon conversion of the Note.
"Derivative Securities" means puts, calls, options or other derivative
securities in respect of the Common Stock.
"Disclosure Schedule" means the Disclosure Schedule prepared by the
Company and furnished to the Buyer prior to the date of execution and delivery
of this Agreement by the
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Buyer.
"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 J 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 who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act.
"Indemnified Person" means each Investor who holds Registrable
Securities and each Investor who sells such Registrable Securities in the manner
permitted under this Agreement, the directors, if any, of such Investor, the
officers, if any, of such Investor, each Person, if any, who controls any
Investor within the meaning of the 1933 Act or the 1934 Act, any underwriter (as
defined in the 1933 Act) acting on behalf of an Investor who participates in the
offering of Registrable Securities of such Investor in accordance with the plan
of distribution contained in the Prospectus 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 .
"Inspector" means any attorney, accountant or other agent reasonably
acceptable to the Company 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 Share 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
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as Annex II.
"Letter Agreement" means the letter agreement, dated as of the date of
this Agreement, between the Company and the Buyer.
"Margin Stock" shall have the meaning provided in Regulation G of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 207).
"Maturity Date" shall have the meaning provided in the Note.
"Maximum Share Amount" 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.
"Note" means the 5% Senior Custom Convertible Note due 2000 of the
Company in the form of Annex I to this Agreement.
"Other Notes" shall have the meaning provided in the Note (including any
information or documents incorporated therein by reference).
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, government, governmental
agency or political subdivision.
"Preferred Share Purchase Rights" means the Preferred Share 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).
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"Prospectus" means the prospectus forming part of the Registration
Statement at the time the Registration Statement is declared effective 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.
"Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) a Person which
(A) has the same investment adviser as an Investor of the holder of any of the
Other Notes, (B) has an investment adviser which is under common control with
the investment adviser to an Investor or the holder of any of the Other Notes or
(C) is an Affiliate of any Investor or the holder of any Other Note.
"Record" means 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 (or, if
(x) the Note shall have been fully converted into shares of Common Stock, (y)
the Maturity Date shall have occurred or (z) the Note shall no longer remain
outstanding, such date after which each Investor may sell all of its Registrable
Securities without registration under the 1933 Act pursuant to Rule 144, free of
any limitation on the volume of such securities which may be sold in any period)
and (ii) the date on which the Investors no longer own any Registrable
Securities.
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"Registration Statement" means a registration statement on Form S-3 of
the 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 August 1,
1995, by and between the Company and Boston EquiServe, 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 Filing Date" means the date the Registration Statement is first
filed with the SEC pursuant to Section 8.
"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 information and documents (other than
exhibits) incorporated therein by reference.
"Securities" means, collectively, the Note, the Final Maturity Note, the
Shares and the Warrants.
"Shares" means the Conversion Shares, the Interest Shares and the
Warrant Shares.
6
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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 Day" means at any time a day on which any of a national
securities exchange, Nasdaq or such other securities market as at such time
constitutes the principal securities market for the Common Stock is open for
general trading of securities.
"Trading Price" shall have the meaning provided in the Note.
"Transaction Documents" means, collectively, this Agreement, the
Securities, the Transfer Agent Agreement and the other agreements, instruments
and documents contemplated hereby and thereby.
"Transfer Agent" means BankBoston, N.A., 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 Agreement" means the Transfer Agent Agreement among the
Company, the Transfer Agent, the Buyer and the purchasers of the Other Notes, in
substantially the form attached hereto as Annex III.
"Violation" means
(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
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(iv) any breach or alleged breach by any Person other than the Buyer of
any representation, warranty, covenant, agreement or other term of any of the
Transaction Documents.
"Warrants" means Common Stock Purchase Warrants in the form attached
hereto as Annex IV initially entitling the holder to purchase the number of
shares of Common Stock determined in accordance with Section 2(a).
"Warrant Shares" means the shares of Common Stock and the related
Preferred Share 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 Warrants initially entitling the holder to purchase fifteen shares of
Common Stock for each $1,000 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 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. Delivery of the Purchase Price to the Escrow Agent
shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: SUGEN/Delta
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
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incorporated herein by this reference as if set forth in full.
(c) Closing. 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. At the closing, upon
the terms and subject to the conditions of this Agreement, the Company shall
issue and deliver to the Buyer the Note and the Warrants against payment by the
Buyer to the Company of an amount equal to the Purchase Price. Such delivery and
payment shall be effected by simultaneous release of the Notes, the Warrants and
an amount equal to the Purchase Price pursuant to the Joint Escrow Instructions.
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 within the meaning of the 1933
Act; the Buyer will acquire any Shares issued to the Buyer prior to the SEC
Effective Date for its own account for investment and not with a view towards
the public sale or distribution thereof within the meaning of the 1933 Act prior
to the SEC Effective Date; and the Buyer has no intention of making any
distribution, within the meaning of the 1933 Act, of the Shares except in
compliance with the registration requirements of the 1933 Act or pursuant to an
exemption therefrom;
(b) Accredited Investor. The Buyer is an "accredited investor" as that
term is defined in Rule 501 of Regulation D under the 1933 Act 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
unless 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,
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including, without limitation, Regulation D, and exemptions from state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein and in the
Questionnaire, a true and accurate copy of which has been delivered by the Buyer
to the Company, in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire or receive an offer 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, if any, 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 conversion 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 offering 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 Schedule; in connection with its decision to purchase
the Note and to acquire the Warrants, the Buyer has relied solely upon the SEC
Reports, the Disclosure Schedule, the representations, warranties, covenants and
agreements of the Company set forth in this Agreement and to be contained in the
other Transaction Documents, as well as any investigation of the Company
completed by the Buyer or its advisors; the Buyer understands that its
investment in the Securities involves a high degree of risk; 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,
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insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law.
(h) Buyer Status. The Buyer is not a "broker" or "dealer" as those terms
are defined in the 1934 Act which is required to be registered with the SEC
pursuant to Section 15 of the 1934 Act.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY.
The Company represents and warrants to the Buyer that the following
matters are true and correct on the date of execution and delivery of this
Agreement and will be true and correct on the Closing Date, and the Company
covenants and agrees with the Buyer as follows:
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as described in the SEC
Reports and as currently conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents executed
and delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. The Company has no Subsidiaries.
(b) Qualifications. The Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions where such
qualification is necessary and where failure so to qualify could have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company.
(c) Capitalization. The authorized capital of the Company consists of
(a) 30,000,000 shares of Common Stock, of which 13,132,738 shares were
outstanding on September 5, 1997 and (b) 20,000,000 shares of Preferred Stock,
$.01 par value, of which 300,000 shares have been designated Series A Junior
Participating Preferred Stock, none of which is outstanding; from September 5,
1997 to the Closing Date there will be (x) no material increase in the number of
shares of Common Stock outstanding (except for shares issued upon exercise of
options and warrants outstanding on the date hereof or options or similar rights
granted subsequent to the date of this Agreement pursuant to the Company's stock
option plans in effect on the date of this Agreement) and (y) no issuance of
shares of preferred stock of the Company. 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
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any contracts or commitments to issue or sell Common Stock or other capital
stock of the Company or any such options, warrants, rights or other securities;
and from December 31, 1996 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 and except as disclosed in the SEC Reports. 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 and (b) 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; and, immediately following the Closing
Date, after giving effect to any antidilution or similar adjustment arising by
reason of issuance of the Note, the Other Notes, the Warrants and the warrants
issuable to the purchasers of the Other Notes, 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, the Other Notes, the Warrants and the warrants to be issued
to the purchasers of the Other Notes) will be 2,941,442. No antidilution
adjustment will occur with respect to any outstanding class or series of
securities of the Company, by reason of issuance or conversion of the Note or
the Other Notes or the issuance or exercise of the Warrants or the warrants to
be issued to the purchasers of the Other Notes except as set forth on Schedule
4(c). 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. 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.
(d) Material Losses. Since the date as of which information is given in
the 1996 10-K or the June 1997 10-Q, the Company has not 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 prospects of the
Company.
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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. The holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Shares, the Note or the
Warrants. The Company has duly reserved 262,500 shares of Common Stock as the
Warrant Shares and for issuance upon exercise of the warrants issuable to the
purchasers of the Other Notes and 1,930,000 shares of Common Stock for issuance
upon conversion of the Notes and the Other Notes, 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, and pursuant to the Warrants, so long as
the Warrants are outstanding. The Board of Directors has authorized officers of
the Company to reserve from time to time additional shares of Common Stock for
issuance upon conversion of the Note up to the Maximum Share Amount. 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 and the other Transaction
Documents 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, and the Transfer Agent Agreement
will be, when duly executed and delivered by the Company and the Transfer Agent,
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
Transfer Agent Agreement, 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
Transfer Agent Agreement, 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 provision of the certificate of
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incorporation or by-laws of the Company, (ii) conflict with or result in a
breach by the Company of any of the terms or provisions of, or constitute a
default under, or result in the modification of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company pursuant to, any indenture, mortgage, deed
of trust or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties or assets are bound or affected which
would have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company 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 properties or assets which would
have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company or (iv) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate any of its properties and to conduct any of its
business or the ability of the Company 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 in connection with the execution, delivery and
performance of this Agreement, the Transfer Agent Agreement, 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, and (4) filing of one or
more Forms D with respect to the Securities as required under Regulation D.
(i) Information Provided. The written 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
December 31, 1996, the Company has not (i) incurred any material obligation or
liability
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(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 owns, possesses or has obtained all
governmental, administrative and third party licenses, permits, certificates,
registrations, approvals, consents and other authorizations necessary to own or
lease (as the case may be) and operate its properties, whether tangible or
intangible, and to conduct its business or operations as currently conducted,
except such licenses, permits, certificates, registrations, approvals, consents
and authorizations the failure of which to obtain would not have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company.
(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, threatened against or affecting the Company wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or the transactions contemplated by this
Agreement or any of the other Transaction Documents or which could adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the other
Transaction Documents; the Company does not have pending before the SEC any
request for confidential treatment of information and to the best of the
Company's knowledge no such request will be made by the Company prior to the SEC
Effective Date except as set forth in the Disclosure Schedule; 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 current director
or officer of the Company.
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(m) Liabilities. Except as and to the extent disclosed, reflected or
reserved against in the financial statements of the Company and the notes
thereto included in the SEC Reports, the Company has no material (individually
or in the aggregate) liability, debt or obligation whether accrued, absolute,
contingent or otherwise, and whether due or to become due. Subsequent to
December 31, 1996, the Company has not incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company, other than those incurred in the ordinary course of its
business and as set forth in the SEC Reports.
(n) Absence of Certain Changes. Since December 31, 1996, there has been
no material adverse change in the business, properties, operations, condition
(financial or other), results of operations or, to the best of the Company's
knowledge, prospects of the Company, except as disclosed in the SEC Reports.
(o) Intellectual Property. Except as disclosed in the SEC Reports, the
Company (1) to its knowledge after reasonable investigation for the purposes
hereof, owns, or possesses 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 it or which are necessary
for the conduct of its business, except for failure to own or possess any such
rights as would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company, and (2) has no reason to
believe, and is not aware of any claim, that the conduct of its business will
conflict with any such rights of others which conflict or claim is material to
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company.
(p) Internal Accounting Controls. The Company maintains a system of
internal accounting controls meeting the requirements of Section 13(b)(2) of the
1934 Act in all material respects.
(q) Compliance with Law. To the best of the Company's knowledge, 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 substances or wastes, except where such
violation would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company; and the Company is not aware
of any pending investigation which would
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reasonably be expected to lead to such a claim.
(r) Properties. Except as disclosed in the Disclosure Schedule, the
Company has good title to all property real and personal (tangible and
intangible) and other assets owned by it which are individually or in the
aggregate material to the Company, 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. To the best of the
Company's knowledge, the leases, licenses or other contracts or instruments
under which the Company leases, holds or is entitled to use any property, real
or personal, which individually or in the aggregate are material to the Company,
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. The Company has not 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, is imminent with respect to any of the employees of
the Company.
(t) Insurance. The Company maintains insurance against loss or damage by
fire or other casualty and such other insurance, including but not limited to,
product liability insurance, in such amounts and covering such risks as is
reasonably adequate for the conduct of its business and the value of its
properties.
(u) Tax Matters. The Company 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 which has had (nor does the Company have any knowledge
of any tax deficiency which, if determined adversely to the Company, might have)
a material adverse effect on the business, properties, operations, conditions
(financial or other), results of operations, or prospects of the Company.
(v) Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the SEC thereunder.
(w) 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.
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(x) 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 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.
(y) 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 4460(i)(1)(D).
(z) Rights Agreement. Assuming that the Buyer does not hold any shares
of Common Stock other than as acquired pursuant to this Agreement or upon
conversion of the Note and exercise of the Warrants, and subject to the
limitations on the number of shares of Common Stock that may be held by the
Buyer contained therein, the execution and delivery of this Agreement by the
Company, the issuance of the Note and the Warrants as contemplated by this
Agreement, the issuance of the Shares upon conversion of the Note and exercise
of the Warrants and the other transactions contemplated by this Agreement and
the other Transaction Documents will not result in the Buyer becoming an
Acquiring Person, as defined in the Rights Agreement; and the holders of the
Note and the Warrants will be entitled, with respect to the Shares, to the
benefits available to the holders of Common Stock under the Rights Agreement.
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
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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 to a Permitted Transferee;
(3) the Shares are not transferable in the absence of registration under the
1933 Act and applicable state securities laws, or applicable exemptions
therefrom; (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 Legends.
(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 "1933 Act"), or any state securities laws. The issuance 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 1933 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 under the 1933 Act 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
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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 Agreement. Promptly following the execution and
delivery of this Agreement and 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 Transfer Agent Agreement substantially in the form attached hereto as Annex
III, to issue certificates for the Conversion Shares from time to time upon
conversion of the Note in such amounts as specified from time to time to the
Company and the Transfer Agent in the Conversion Notice surrendered in
connection with each such conversion and (2) appoint the Transfer Agent the
issuing agent for the Note. The Company agrees to enter into the Transfer Agent
Agreement substantially in the form attached hereto as Annex III on or prior to
the Closing Date. The certificates for the Shares shall be registered in the
name of the Buyer or its nominee and in such denominations to be specified by
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the Buyer in connection with each conversion of the Note or exercise of the
Warrants, as the case may be. The Company warrants that except as provided in
the Transfer Agent Agreement 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. Not later than the Business Day
following 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. During the Registration Period,
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
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. So long as the Buyer owns the Note or any Shares, the Company shall
furnish to the Buyer copies of all reports and other information filed by the
Company with the SEC pursuant to Sections 13, 14(a), 14(c) and 15(d) of the 1934
Act promptly, but in no event later than ten days, after the same are filed with
the SEC.
(e) Form D. The Company agrees to file one or more Forms D with respect
to the Securities as required under Regulation D to claim the exemption provided
by Rule 506 of Regulation D and to provide a copy thereof to the Buyer promptly
after such filing.
(f) State Securities Laws. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the 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
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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.
(g) 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.
(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(g)(2) shall
prohibit the Company from issuing securities (w) 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, (x) 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, (y) pursuant to a public offering underwritten on a firm commitment
basis registered under the 1933 Act or (z) as part of a transaction involving a
strategic alliance, collaboration, joint venture, partnership or other similar
arrangement of the Company with another corporation, partnership or other
business entity which is engaged in a business similar to or related to the
business of the Company, so long as in the case of this clause (z) the Board of
Directors by resolution duly adopted (and a copy of which shall be furnished to
the Buyer promptly after adoption) determines that such issuance is fair to the
holders of each class and series of capital stock of
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the Company and to the Buyer in respect of its equity interest in the Company
that is represented by the Note and the Warrants; and provided further, however,
that for purposes of computing such 90-day period, any day on which a Blackout
Period is in effect in accordance with Section 8(b)(5)(B) shall be deemed a day
on which the Registration Statement is effective with the SEC and available for
use by the selling stockholders named therein.
(h) Limitation on Certain Actions. From the date of execution and
delivery of this Agreement by the parties hereto to the date of issuance of the
Note, the Company (1) shall comply with Article III of the Note as if the Note
were outstanding, (2) shall not take any action which, if the Note were
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.
(i) Use of Proceeds. The Company represents 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.
(j) Best Efforts. Each of the parties shall use its best efforts timely
to satisfy each of the conditions to the other party's obligations to sell and
purchase the Note set forth in Section 6 or 7, as the case may be, of this
Agreement on or before the Closing Date.
(k) 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.
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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
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Company in its sole discretion):
(a) 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;
(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 the Closing Date as if made on the Closing Date 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; and
(d) No event which, if the Note were outstanding, (1) would constitute
an Event of Default or, with the giving of notice of 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 unless the Buyer shall have waived in writing such (and only
such) Event of Default or Repurchase Event, as the case may be, and the rights
of the Buyer under the Note with respect to such (and only such) Event of
Default or Repurchase Event, as the case may be.
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 satisfaction of the following
conditions precedent on or before the Closing Date (any or all of which may be
waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the Note and the
Warrants in accordance with this Agreement;
(b) The Transfer Agent shall have executed and delivered the Transfer
Agent Agreement;
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(c) On the Closing Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(d) The representations and warranties of the Company contained in this
Agreement shall have been true and correct on the date of this Agreement and,
except for the approvals referred to in clauses (1)-(4) of Section 4(h), which
shall have been obtained, shall be true and correct on the Closing Date as if
given on and as of the Closing Date (except for representations given as of a
specific date, which representations shall be true and correct as of such date),
and on or before the Closing Date the Company shall have performed all covenants
and agreements of the Company contained herein required to be performed by the
Company on or before the Closing Date;
(e) No event which, if the 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;
(f) The Company shall have delivered to the Buyer its certificate, dated
the Closing Date, duly executed by its Chief Executive Officer to the effect set
forth in subparagraphs (c), (d), and (e) of this Section 7;
(g) 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;
(h) On the Closing Date, the Buyer shall have received an opinion of
Cooley Godward LLP, counsel for the Company, dated the Closing Date, addressed
to the Buyer, in form, scope and substance reasonably satisfactory to the Buyer,
substantially in the form of Annex V attached hereto;
(i) On the Closing Date, the Buyer shall have received an opinion of
Lyon & Lyon LLP, special counsel for the Company, dated the Closing Date,
addressed to the Buyer, in form, scope and substance reasonably satisfactory to
the Buyer, substantially in the form of Annex VI attached hereto; and
(j) On the Closing Date, (i) trading in securities on the New York Stock
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Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of California or the State of New York shall not
have been declared by either federal or state authorities.
8. REGISTRATION RIGHTS.
(a) Mandatory Registration.
(1) The Company shall prepare and, on or prior to the date which is 30
days after the Closing Date, file with the SEC a Registration Statement on Form
S-3 which on the SEC Filing Date covers the resale by the Buyer of a number of
shares of Common Stock equal to (A) at least the number of Conversion Shares
issuable to the Buyer under the Note, determined as if the Note, together with
accrued and unpaid interest, were converted in full (determined without regard
to the limitation in the second sentence of Section 2.1 of the Note) on the SEC
Filing Date and as if the Note were convertible on the SEC Filing Date, (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 20 days after
such insufficiency shall occur, the Company shall file with the SEC an
additional Registration Statement on Form S-3 (which shall not constitute a
post-effective amendment to the Registration Statement filed pursuant to the
first sentence of this Section 8(a)) covering such number of shares of Common
Stock as shall be sufficient to permit such conversion; provided, however, that
nothing in this Section 8(a) shall limit the rights of the holder of the 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
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required to be filed by the Company pursuant to this Section 8(a).
(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 Registrable Securities,
the Company shall not file any other registration statement or any amendment
thereto with the SEC under the 1933 Act or request the acceleration of the
effectiveness of any other registration statement previously filed with the SEC,
other than (A) any registration statement on Form S-8 and (B) any registration
statement or amendment which the Company is required to file or as to which the
Company is required to request acceleration pursuant to any obligation in effect
on the date of execution and delivery of this Agreement.
(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 Closing
Date, 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;
provided, however, that if the Company determines that a development which has
not been publicly disclosed and which occurred subsequent to the date of
execution and delivery of this Agreement and prior to the SEC Effective Date
would require public disclosure prior to the Registration Statement being
declared effective and that such public disclosure at such time would not be in
the best interests of the Company, the Company may refrain from making such
public disclosure for up to an aggregate of 20 Trading Days (whether or not
consecutive), but in no event beyond the date which is 85 days after the Closing
Date and by so refraining from making such public disclosure the Company shall
not be deemed to have failed to use its best efforts and in connection therewith
the Company shall not be obligated to submit an acceleration request for the
Registration Statement during the period the Company refrains from making such
public disclosure in accordance with this proviso. 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
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<PAGE>
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 and, in accordance with Section 8(c)(4),
any Investor is entitled to sell Registrable Securities pursuant to the
Prospectus, shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(2) subject to Section 8(b)(5), prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times
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 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) subject to Section 8(b)(5), use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the securities or blue sky laws of such jurisdictions as the Investors who hold
a majority in interest of the Registrable Securities reasonably request, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times 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
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<PAGE>
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) (A) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of the occurrence of an event or circumstance
of which the Company has knowledge, (x) as a result of which the Prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (y) which requires
the Company to amend or supplement the Registration Statement due to the receipt
from an Investor of new or additional information about an Investor or its
intended plan of distribution of its Shares, and use its best efforts promptly
to prepare a supplement or amendment to the Registration Statement and
Prospectus to correct such untrue statement or omission or to add any new or
additional information, and deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request;
(B) notwithstanding Section 8(b)(5)(A) above, if at any time the Company
notifies the Investors as contemplated by Section 8(b)(5)(A) that the event
giving rise to such notice relates to a development involving the Company which
occurred subsequent to the later of (x) the SEC Effective Date and (y) the
latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment during a Blackout Period; provided,
however, that the aggregate number of Trading Days on which any Blackout Period
is in effect may not exceed 60 Trading Days (whether or not consecutive) during
the period from the date which is 90 days after the Closing Date to the Maturity
Date, of which not more than 20 such Trading Days (whether or not consecutive)
may occur during the period commencing on the date which is 90 days after the
Closing Date and ending on the first anniversary of the date which is 90 days
after the Closing Date; provided further, however, that the number of Trading
Days in which any Blackout Period is in effect during the period of 50 Trading
Days commencing on the date which is 90 days after the Closing Date shall not
exceed ten Trading Days; and provided further, however, that no Blackout Period
may commence within 40 Trading Days after the end of an earlier Blackout Period;
(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;
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(7) permit the Investors who hold Registrable Securities being included
in the Registration Statement, at such Investors' sole cost and expense (except
as otherwise specifically provided in Section 10(k)) to review and have a
reasonable opportunity to comment on the Registration Statement and all
amendments and supplements thereto at least three Business Days (or such shorter
period as may reasonably be specified by the Company) prior to their filing with
the SEC; provided, however, that all comments by such Investors shall be given
to the Law Offices of Brian W Pusch (or such other counsel as designated by
Investors who hold a majority in interest of the Registrable Securities proposed
to be offered) to convey to the Company;
(8) make generally available to its security holders as soon as
practical, but not later than 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 12-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 with respect to Section 11 of the 1933 Act as it
relates to the Registration Statement or any amendment thereof, and cause the
Company's officers 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; provided further,
however, that each Investor understands that in the course of exercising the
rights provided in this Section 8(b)(9) such Investor may come into possession
of material non-public information about the Company and that by reason of the
requirements of the 1934 Act any such Investor who possesses such material
non-public information may be restricted in making purchases and sales of the
Common Stock unless such information has been publicly disclosed. 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
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to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to this Agreement unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor and allow such Investor, at such Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information;
(10) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement as of the SEC Effective Date to be listed
on 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 VII
and (ii) to the Investors whose Registrable Securities are included in such
Registration Statement and, if required by the Transfer Agent, to the Transfer
Agent opinions of counsel, in the forms attached hereto as Annex VIII and Annex
IX; and
(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.
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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 SEC 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 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 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
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Section 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
by an Investor pursuant to the Registration Statement (A) if such sale is made
through a broker, such 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 (B) if such
sale is made in a transaction directly with a purchaser and not through the
facilities of any securities exchange or market, such Investor shall deliver, or
cause to be delivered, the Prospectus to such purchaser; and (C) if such sale is
made by any means other than those described in the immediately preceding
clauses (A) and (B), such Investor shall otherwise use its reasonable best
efforts to comply with the prospectus delivery requirements of the 1933 Act
applicable to such sale; and
(6) Each Investor agrees to notify the Company promptly after the event
of the completion of the sale by such Investor of all Registrable Securities to
be sold by such Investor pursuant to the Registration Statement.
(d) Rule 144. With a view to making available to the Investors the
benefits of Rule 144, the Company agrees to:
(1) to promptly furnish to each Investor so long as such Investor owns
Registrable Securities, such information as may be necessary to permit the
Investors to sell Registrable Securities pursuant to Rule 144 without
registration; and
(2) if at any time the Company is not required to file such reports with
the SEC under Sections 13 or 15(d) of the 1934 Act, to 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) Indemnification.
(1) To the extent not prohibited by applicable law, the Company will
indemnify and hold harmless each Indemnified Person against any Claims to which
any of them may
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become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any Violation. Subject to the
restrictions set forth in Section 9(a)(3) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such controlling
Person, promptly as such expenses are incurred and are due and payable, for any
documented reasonable legal fees or other documented and reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 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 and
(III) an Indemnified Person with respect to a Claim which arises solely from the
failure of such Indemnified Person to comply in any material respect with
Section 8(c)(4) or 8(c)(5). 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 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
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<PAGE>
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 notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel reasonably satisfactory to the Indemnified Person
or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding; provided further,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all Indemnified Persons hereunder
and one separate counsel in each jurisdiction in which a claim is pending or
threatened. The failure to deliver notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 9(a), except to the extent that the indemnifying party
is prejudiced in its ability to defend such action. The indemnification required
by this Section 9(a) shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss, damage
or liability is incurred and is due and payable.
(b) Contribution. To the extent any indemnification by an indemnifying
party as set forth in Section 9(a) above is applicable by its terms but is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 9(a) to the fullest extent permitted by law. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the relative fault of each party, the parties' relative knowledge
of and access to information concerning the matter with respect to which the
claim was asserted, the opportunity to correct and prevent any statement or
omission and any other equitable considerations appropriate under the
circumstances; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 9(a), (b) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any other Person who was not guilty
of such fraudulent misrepresentation and (c) contribution by any
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<PAGE>
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.
(c) Other Rights. The indemnification and contribution provided in this
Section shall be in addition to any other rights and remedies available at law
or in equity.
10. MISCELLANEOUS.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
(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 in writing and 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, Finance
(telephone line facsimile number (650) 306-4016), and a copy shall also be given
to: Cooley Godward LLP, 3000 El Camino Real, Five Palo Alto Square, Palo Alto,
California 94306, Attention: Brian C. Cunningham, Esq. (telephone line facsimile
transmission number (650) 857-0663), and in the case of any notice to the Buyer,
a copy shall be 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: Diaz &
Altschul Capital, LLC, 745 Fifth Avenue, Suite 3001, New York, New York 10022
(telephone line facsimile transmission number (212) 751-5757).
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<PAGE>
(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
instrument. 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,
Schedule and Disclosure Schedule, and the Letter Agreement constitute 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 and therein. This Agreement, including the
Annexes, Schedule and Disclosure Schedule, and the Letter Agreement supersede
all prior agreements and understandings, whether written or oral, between the
parties hereto with respect to the subject matter hereof. This Agreement and the
Letter Agreement and the terms and provisions hereof and thereof 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, or course of dealing between the parties shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(h) Amendment. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific 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 Certain Rights and Obligations. The rights of an
Investor under Sections 5(a), 5(b), 8 and 9 of this Agreement shall be
automatically assigned by such Investor to any transferee of all or any portion
of such Investor's Registrable Securities (or all or any portion of the Note or
the Warrants) who is a Permitted Transferee only if: (1) such Investor agrees in
writing with such transferee to assign such rights, and a copy of such
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<PAGE>
agreement is furnished to the Company within a reasonable time after such
assignment, (2) the Company is, within a reasonable time after such transfer,
furnished with notice of (A) the name and address of such transferee and (B) the
securities with respect to which such rights and obligations are being
transferred, (3) immediately following such transfer or assignment the further
disposition of Registrable Securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (4) at or
before the time the Company received the notice contemplated by clause (2) of
this sentence the transferee agrees in writing with the Company to be bound by
all of the provisions contained in Sections 5(a), 5(b), 8 and 9 hereof and (5)
immediately after such transfer such transferee holds at least 50,000 shares of
Common Stock or a portion (which, if applicable, may be all) of the Notes and/or
Warrants which at the time of such transfer is convertible into or exercisable
for 50,000 shares of Common Stock (or any combination thereof) or such lesser
amount into which the Note is convertible at the time of such transfer. Upon any
such transfer, the Company shall be obligated to such transferee to perform all
of its covenants under Sections 5, 8 and 9 of this Agreement as if such
transferee were the Buyer. In connection with any such transfer the Company
shall, at its sole cost and expense, promptly after such transfer take such
actions as shall be reasonably acceptable to the transferring 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 such rights and obligations have been so transferred.
(k) Expenses. All reasonable expenses incurred in connection with
registrations, filings or qualifications pursuant to this Agreement shall be
paid by the Company, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company but excluding (a) fees and expenses of
investment bankers retained by any Investor, (b) brokerage commissions incurred
by any Investor and (c) fees and disbursements of counsel for the Investors. 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) any default or breach of any of the Company's obligations set forth in
the Transaction Documents and (2) 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 otherwise provided 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
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<PAGE>
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
September 25, 1997, other than solely by reason of a breach of this Agreement by
the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(m) Survival. The respective representations, warranties, covenants and
agreements of the Company and the Buyer contained in this Agreement and the
documents delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and the Closing hereunder and delivery
of and payment for the Note and issuance of the Warrants, 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 controlling or acting on behalf of the
Buyer or by the Company or any Person controlling or acting on behalf of the
Company.
(n) Public Statements, Press Releases, Etc.; The Company and the Buyer
shall have the right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations,
including the 1933 Act and the rules and regulations promulgated thereunder
(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 date
first set forth above.
Principal Amount: $
Purchase Price: $
SUGEN, INC.
By: ______________________________
Name:
Title:
DELTA OPPORTUNITY FUND, LTD.
By ________________________________
Name:
Title:
Address:
c/o International Fund
Administration, Ltd.
Suite 464
48 Par La Ville Road
Hamilton HM11
Bermuda
Facsimile No.: (441) 295-9637
40
Annex I
to
Note Purchase
Agreement
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. THE ISSUANCE 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 1933 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 UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
THIS NOTE IS ISSUED PURSUANT TO A NOTE PURCHASE AGREEMENT, DATED AS OF SEPTEMBER
8, 1997, BY AND BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THIS NOTE, AS
AMENDED FROM TIME TO TIME, AND THE HOLDER OF THIS NOTE AND THIS NOTE ARE SUBJECT
TO CERTAIN OF THE TERMS OF THE NOTE PURCHASE AGREEMENT.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 8.7.
The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of SECTION 2.3(b), following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be less than the amount stated on the face hereof.
SUGEN, INC.
5% SENIOR CUSTOM CONVERTIBLE NOTE
No. ________ $_________
New York, New York
September , 1997
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FOR VALUE RECEIVED, SUGEN, INC., a Delaware corporation (hereinafter
called the "Company"), hereby promises to pay to [INSERT NAME AND ADDRESS OF
BUYER], or registered assigns (the "Holder") or order, the sum of _________
Dollars ($_________________), on 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 repurchase in accordance with the terms hereof or otherwise. 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 each Interest
Payment Date, commencing on November 15, 1997, on the principal amount
outstanding on such date. 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 and the Holder of this Note and
the Note are subject to the terms of the Note Purchase Agreement. The aggregate
principal amount of this Note and the Other Notes is $17,500,000.00.
The following terms shall apply to this Note:
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<PAGE>
ARTICLE I
INTEREST IN COMMON STOCK; NO PREPAYMENT
1.1 Issuance of Common Stock in Lieu of Cash Interest.
(a) If the Company exercises its option to make a payment of interest
on this Note wholly or partly in shares of Common Stock (herein sometimes called
the "Stock Payment Option"), the issuance of Payment Shares 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 Payment Shares or the public resale of
such Payment 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 or is not
in effect and the Registration Statement is unavailable for use by the
Holder for the resale of the Payment Shares; provided, however, that with
respect to compliance with the securities or blue sky laws of the states of
the United States, the requirements of this clause (ii) shall be deemed
satisfied if at the applicable time the Company is in compliance with
Section 8(b) of the Note Purchase Agreement;
(iii) the Payment Shares shall not at the time of issuance 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 for the Payment Shares is less than the par
value of the Common Stock;
(v) an Event of Default has occurred and is continuing;
(vi) the Common Stock is neither (i) listed or admitted for trading on
a national securities exchange nor (ii) quoted on Nasdaq; or
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<PAGE>
(vii) the issuance of Payment Shares 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 the Company
shall have failed to notify the Holder on or before the particular Interest
Payment Date that the Company has elected to use the Stock Payment Option with
respect to such Interest Payment Date or to deliver the appropriate number of
shares of Common Stock to the Holder within five Trading 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 in lieu of issuance of 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 or
prior to the date on which Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the interest payment to which the Holder is entitled, (ii)
the portion of the interest payment being made in Payment Shares, (iii) the
number of Payment Shares allocable to such payment, as calculated pursuant to
this Section 1.1, (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. The certificates for the Payment Shares shall be 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
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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 will in all respects be 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 No Prepayment, Etc. 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 on and after the
date which is 90 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 $10,000, or such lesser amount as shall remain unpaid at the time of the
conversion or shall be convertible within the limitation on beneficial ownership
provided in the second sentence of Section 2.1 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 Default Interest 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
Default Interest on any such interest) in excess of that portion of the
principal amount of this Note (and accrued and unpaid interest thereon and
Default Interest 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
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amount of this Note and the Other Notes and accrued and unpaid interest thereon
and on any such interest and (y) the unconverted or unexercised portion of any
instrument which contains limitations similar to those set forth in this
sentence) and (2) the number of shares of Common Stock issuable upon conversion
of the portion of the principal amount of this Note and accrued and unpaid
interest thereon and Default Interest 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 125% OF THE AGGREGATE NUMBER OF SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
AND THE OTHER NOTES AT THE AVERAGE OF TWO LOWEST TRADING PRICES DURING THE 20
TRADING DAYS PRIOR TO DATE THE NOTE PURCHASE AGREEMENT IS SIGNED] 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 Date) to provide for the issuance of
Common Stock upon the conversion in full 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 conversion in full 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
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in accordance with the terms thereof. The Company shall notify the Holder
promptly, but in no event more than ten Business Days, after the Company so
reserves additional shares of Common Stock, which notice shall set forth the
number of additional shares of Common Stock so reserved. 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
Company and the Issuing Agent at the addresses or telephone line facsimile
transmission numbers provided in or pursuant to the Transfer Agent Agreement, 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 make reasonable efforts to deliver a copy of such
Conversion Notice to the Company's legal counsel when such notice is delivered
to the Company and the Issuing Agent or as soon as practical thereafter,
provided that the failure to do so shall not relieve the Company or the Issuing
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 two Trading
Days 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
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
two Trading Days 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 any conversion of this
Note.
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(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, 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 without physical surrender of this Note to the Company 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 Company may by notice to the Holder from time to time require the
Holder to surrender this Note in exchange for the issuance by the Company of a
new Note in a principal amount equal to the outstanding principal amount of this
Note and otherwise having terms identical to this Note. Such new Note shall be
delivered by the Company to the Holder within three Trading Days after the
Company receives this Note from the Holder in response to such notice. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be less than the amount stated on the face hereof.
(c) In case of any consolidation or merger of the Company with any
other corporation (other than a wholly-owned subsidiary of the Company) in which
the Company is not the surviving corporation, or in case of any sale or transfer
of all or substantially all of the assets of the Company, or in the case of any
share exchange pursuant to which all of the outstanding shares of Common Stock
are converted into other securities or property, the Company shall make
appropriate provision or cause appropriate provision to be made so that the
Holder shall have the right thereafter to convert this Note into the kind of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by the persons who were
holders of Common Stock immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the Holder on a
basis as nearly as practical as such rights existed prior to such consolidation,
merger, sale, transfer or share exchange. If, in connection with any such
consolidation, merger, sale, transfer or share exchange each holder of shares of
Common Stock is entitled to elect to receive either securities, cash or other
assets upon completion of such transaction, the Company shall provide or cause
to be provided to the Holder the right to elect the securities, cash or other
assets into which this Note shall be convertible after completion of any such
transaction on the same terms and subject
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<PAGE>
to the same conditions applicable to holders of the Common Stock (including,
without limitation, notice of the right to elect, limitations on the period in
which such election shall be made, and the effect of failing to exercise the
election). Notwithstanding the foregoing, in connection with any such merger,
consolidation, sale, transfer or exchange, the Company shall have the right, in
lieu of making provision for preservation of the economic benefits of the
conversion rights of the Holder, to redeem this Note immediately after
completion of such transaction at a redemption price equal to the sum of (1) the
product obtained by multiplying (A) the sum of (i) the outstanding principal
amount of this Note on the date of such redemption plus (ii) accrued and unpaid
interest on such principal amount to the date of such redemption times (B) the
applicable Business Combination 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 the date of
such redemption. Such right shall be exercised by notice from the Company to the
Holder stating that the Company is exercising its redemption right under this
Section 2.3(c), which notice shall be given at least 20 Trading Days (or such
lesser period as the Company gives notice of such transaction to the holders of
outstanding shares of Common Stock) prior to completion of such transaction. 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 15 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 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 Company and the Issuing 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 Trading 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. The Holder shall also give a copy of each
Conversion Notice to the Company's legal counsel, as specified in the form of
Conversion Notice, but the
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<PAGE>
failure to give such copy shall not affect the validity of any Conversion
Notice. If the Holder shall have given a Conversion Notice in accordance with
the terms of this Note, 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;
provided, however, that nothing herein shall limit or prejudice the right of the
Company to pursue any such claim in any other manner permitted by applicable
law. The occurrence of an event which requires an equitable adjustment of the
Trading Price as contemplated by the definition thereof in Section 7.1 shall in
no way restrict or delay the right of the Holder to receive certificates for
Common Stock upon conversion of this Note and the Company shall use its best
efforts to implement such adjustment on terms reasonably acceptable to the
Holder within two Business Days of such occurrence. 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 Holder as a result of such failure, (2) the
Conversion Price applicable to such conversion shall be reduced by one-tenth of
one percent of the amount thereof otherwise applicable to such conversion for
each Trading Day during the period from the date the Company was required to
deliver such certificates to the date the Company so delivers such certificates;
provided, however, that in no event shall any such reduction be made for any
Trading Day in such period which is after the date which is 120 days after the
date the Company was required to deliver such certificates in connection with
such conversion, 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;
provided, however, that the Company shall not be liable to the Holder under the
preceding clause (1) or clause (2) to the extent the failure of the Company to
deliver or cause to be delivered such shares of Common Stock results from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, act of God or any similar event
outside the control of the Company (it being understood that the actions or
failure to act of the Issuing Agent shall not be deemed an event outside the
control of the Company except to the extent resulting from fire, flood, storm,
earthquake,
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<PAGE>
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, the bankruptcy, liquidation or reorganization of
the Issuing Agent under any bankruptcy, insolvency or other similar law or any
similar event outside the control of the Issuing Agent). The Holder shall notify
the Company in writing (or by telephone conversation, confirmed in writing) as
promptly as practicable after becoming aware that shares of Common Stock issued
on conversion of this Note have not been received as provided in this Section
2.3(d).
(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 Market 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 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 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
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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) (1) If a Maximum Share Amount Inconvertibility or a Registration
Restriction Inconvertibility occurs, then the Company shall promptly, but in no
event later than three Business Days after each such occurrence, give an
Inconvertibility Notice to the Holder (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 such occurrence give an Inconvertibility Notice to the Company. 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 the applicable Redemption Election Period the Holder shall have the right
by a Redemption Election given to the Company (which may be contained in the
Inconvertibility Notice given by the Holder) to direct the Company to redeem the
portion of this Note (which, if applicable, shall be all of this Note) as shall
not, on the Business Day prior to the applicable Redemption Date, (x) be
convertible into shares of Common Stock by reason of a Maximum Share Amount
Inconvertibility or (y) be available for sale by the Holder pursuant to the
Registration Statement by reason of a Registration Restriction Inconvertibility,
in each such case, on the applicable Redemption Date, at a price equal to the
Redemption Price; provided, however, that (1) no such redemption shall be made
with respect to a Registration Restriction Inconvertibility if, prior to the
expiration of the applicable Redemption Election Period, the Company and the
Holder shall, by a Mandatory Redemption Waiver, waive the Company's obligation
to make such redemption and (2) no such redemption shall be made with respect to
a Registration Restriction Inconvertibility if (i) the Registration Statement is
effective and available for use by the Holder for resale of the shares of Common
Stock which are covered by the Registration Statement, (ii) the Company files
with an additional Registration Statement as and when required by Section
8(b)(1) and (iii) the Company maintains Net Cash, Cash Equivalent and Short-Term
Investment Balances of at least $15,000,000, then the Company shall not be
required to redeem any portion of this Note prior to the date which is 30 days
after such Registration Restriction Inconvertibility occurs. If the Holder gives
a Redemption Election to the Company by reason of a Maximum Share Amount
Inconvertibility and, prior to the date the Company is required to redeem this
Note or any portion hereof, the Company would have been able, within the
limitations set forth in Section 2.4(a), to convert all of this Note (determined
without regard to the limitation, if any, contained in the second sentence of
Section 2.1 and
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regardless of whether this Note is, by its terms, convertible at such time) on
any two Trading Days within any period of three consecutive Trading Days
commencing after the period of ten consecutive Trading Days which gave rise to
the applicable Inconvertibility Notice from the Company or the Holder, as the
case may be, had the Holder given a Conversion Notice for conversion in full of
this Note on each of such two Trading Days within such three-Trading Day period,
then the Company shall not be required to redeem any of this Note by reason of
such Redemption Election.
(2) An Inconvertibility Notice or a Redemption Election given by the
Holder shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder in writing within three Business Days after an
Inconvertibility Notice or a Redemption Election has been given (which notice
shall specify all defects in the Inconvertibility Notice or Redemption
Election), and any Inconvertibility Notice or Redemption Election containing any
such defect shall nonetheless be effective on the date given if the Holder
promptly undertakes in writing to correct all such defects. In the absence of
any such undertaking from the Holder, no such claim of error shall limit or
delay performance of the Company's obligation to redeem the full amount of the
Inconvertible Portion as to which a Redemption Election has been given and which
is not in dispute.
(c) Notwithstanding the giving of any Inconvertibility Notice by the
Company to the Holder or the giving or the absence of any Inconvertibility
Notice or Redemption Election by the Holders or any redemption of an
Inconvertible Portion pursuant to Section 2.4(b), thereafter the provision 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 the Nasdaq.
(d) On each Redemption Date, the Company shall make payment in
immediately available funds of the applicable Redemption Price to 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. If the Company is required
to redeem any Inconvertible Portion pursuant to this Section 2.4, the Company
shall make payment to the Holder of an amount equal to the Redemption Price.
Upon redemption of less than all of this Note, promptly, but in no event later
than three Business Days after surrender of this Note to the Company, the
Company shall issue a replacement Note of like tenor having a principal amount
equal to the principal amount of this Note remaining after such redemption.
(e) If the Company shall have failed to pay in full the Redemption
Price (other than by reason of a Maximum Share Amount Inconvertibility) or the
Registration Redemption Price 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 into Common Stock
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the portion of this Note in respect of which such payment was not made 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 in
certain circumstances 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 any Inconvertible
Portion when the same is due and payable by reason of a Maximum Share Amount
Inconvertibility and the Stockholder Approval shall not have been obtained,
without in any way relieving the Company of its obligation to pay such amount in
accordance with Sections 2.4(b) and 2.4(d), upon the written request of the
Majority Holders, the Company shall use its commercially reasonable best efforts
to obtain a waiver from the NASD of the requirement for Stockholder Approval for
issuance of all shares of Common Stock issuable upon conversion of this Note and
the Other Notes. If such a waiver, in form reasonably satisfactory to the
Majority Holders, is not obtained within 15 days after the Company's receipt of
such request from the Majority Holders, the Company promptly shall call a
special meeting of its stockholders, to be held not later than 60 days after the
expiration of the foregoing 15-day period, to seek the Stockholder Approval for
issuance of all shares of Common Stock issuable upon conversion of this Note and
the Other Notes in accordance with Section 2.1.
(g) If the Holder converts all or any portion of this Note pursuant to
Section 2.4(e), the amount of the Redemption Price or the Registration
Redemption Price, as the case may be, due to the Holder with respect to the
portion of this Note so converted shall be reduced by the principal amount of
this Note so converted and the Company shall remain liable for payment of the
premium, if any, included in such Redemption Price or Registration Repurchase
Price, as the case may be.
ARTICLE III
CERTAIN COVENANTS
So long as at least $1,500,000 aggregate principal amount of this Note
and the Other Notes remains outstanding:
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
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of which are referred to herein as "incurring"), any Indebtedness other than
Permitted Indebtedness.
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 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 120 days after the Issuance Date, 12.5%, (II) if the
date of purchase pursuant to such Tender Offer is on or after the date which is
121 days after the Issuance Date and on or before the date which is 270 days
after the Issuance Date, 15.0%, and (III) if the date of purchase pursuant to
such Tender Offer is on or after the 271st day after the Issuance Date, 20.0%
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 the
portion of this Note tendered by the Holder 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 the
second sentence of 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 discharge, and
will cause each Significant 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 Significant Subsidiary
to keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted.
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(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance in at least such amounts and against such risks as is
reasonably adequate for the conduct of their respective businesses and the value
of their respective properties.
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 Significant 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
Significant 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 taken as a whole.
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 registered under Section 8 of the
Investment Company Act of 1940, as amended.
ARTICLE IV
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
4.1 Failure to Pay Principal or Interest. The Company fails (a) to pay
the principal, Redemption Price, Repurchase Price or Registration 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 Business Days after the due date thereof;
or
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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 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 Agreement and the
Warrants; or
4.3 Breach of Covenant. The Company (a) fails to comply with Section
3.1 or 3.2 or (b) fails to comply in any material respect with any provision of
Article III of this Note (other than Section 3.1 or 3.2) or 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, 4.3(a)), the Note Purchase
Agreement, the Transfer Agent Agreement 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 or
within 30 days after delivery of such notice if, and only if, such default is
reasonably capable of cure within 30 days after such notice and at all times
during such 30-day period the Company has been diligently taking action to cure
such default and such cure cannot be completed within such 15-day period; or
4.4 Breach of Representations and Warranties. Any material
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
Transfer Agent Agreement and the Warrants) shall be false or misleading in any
material respect when made; or
4.5 Certain Voluntary Proceedings. The Company or any Significant
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; or
4.6 Certain Involuntary Proceedings. An involuntary case or other
proceeding shall be commenced against the Company or any Significant 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 seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its
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property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of sixty (60) consecutive days; or
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
$750,000, which is not vacated, bonded, stayed, discharged, satisfied or waived
for a period of thirty (30) consecutive days; or
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 $1,000,000 individually or $2,500,000 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); provided, however, that the
events and conditions described in the preceding clauses (i) and (ii) shall not
constitute an Event of Default unless and until the Company fails to take the
action necessary to correct such event or condition within five (5) Business
Days of becoming aware of such event or condition; or (b) any indebtedness of
the Company or any of its Subsidiaries which has an outstanding principal amount
in excess of $1,500,000 individually or $3,500,000 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; provided, however, that the acceleration of any
indebtedness as a result of the Company's relocation from its current facilities
shall not constitute an Event of Default unless and until an event of default is
declared under the instrument or agreement under which such indebtedness was
created and such default is not cured by the Company within five Business Days
of receipt of notice of such event of default; or
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 remain unlisted for a
period of three (3) days;
then, (X) upon the occurrence and during the continuation of any Event of
Default specified in
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Section 4.1, 4.2, 4.3, 4.4, 4.7, 4.8, or 4.9 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) the applicable
Acceleration Percentage 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 (Y) 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 (Z) the Holder shall be entitled to exercise all other rights
and remedies available at law or in equity; provided, however, that if in
connection with any Event of Default the Company shall not at such time be in
compliance with Section 2.3(c), then in lieu of payment of the amount provided
in the preceding clause (X) the Company shall pay to the Holder an amount equal
to the amount which would be payable by the Company upon redemption of this Note
in accordance with Section 2.3(c) as if the Company had exercised its right to
redeem this Note pursuant to Section 2.3(c) on the date of such payment pursuant
hereto.
ARTICLE V
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
five 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; provided, however, that if such right
to require repurchase of this Note arises in connection with a transaction that
(i) is intended to qualify as a pooling of interests under the Pooling Standards
and (ii) but for the exercise of repurchase rights under Section 5.1 of this
Note and Section 5.1 of the Other Notes, may qualify as a pooling of interests
under the Pooling Standards, then the Company may, in the reasonable exercise of
its discretion, elect not to repurchase such Note in order to comply with the
Pooling Standards.
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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 a 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 (ii)
this Note, duly endorsed for transfer to the Company of the portion of the
principal amount of this Note to be repurchased. A Holder Notice may be revoked
by the Holder at any time prior to the time the Company pays the applicable
Repurchase Price to the Holder.
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 five (5) 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 90 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. A Holder
Registration Repurchase Notice may be revoked by the Holder at
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any time prior to the time the Company pays the applicable 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 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 three Business Days 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
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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 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, 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):
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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 of the Final Maturity Note.
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):
"Acceleration Percentage" means with respect to the date of payment in
full of the amount due in respect of this Note as set forth in clause (X) of
Article IV, the applicable percentage set forth below determined with respect to
such date as follows:
Date Percentage
---- ----------
Issuance Date to and including the 120th day thereafter 115.0%
121st through 270th day after the Issuance Date 117.5%
On and after the 271st day after the Issuance Date 122.5%
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate", the term "control" (including the terms "controlling",
"controlled by" and "under common control with") means
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the possession, direct or indirect, of the power to direct or to cause the
direction of the management and policies of a Person, whether through the
ownership of securities, by contract or otherwise.
"Aggregated Person" means any person whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means five percent (5%) per annum.
"Business Combination Redemption Percentage" means for any redemption
of this Note in accordance with Section 2.3(c) the applicable percentage set
forth below:
Redemption Date Percentage
--------------- ----------
Issuance Date through 180th day thereafter the Issuance Date 125.0%
On and after the 181st day after the Issuance Date 130.0%
"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.
"Cash, Cash Equivalent and Short-Term Investment Balances" of the
Company at any date shall be determined from the Company's books maintained in
accordance with Generally Accepted Accounting Principles, and shall mean,
without duplication, the sum of (1) the cash owned by the Company on such date,
(2) all assets which would on a balance sheet of the Company prepared as of such
date in accordance with Generally Accepted Accounting Principles be classified
as cash or cash equivalents and (3) all assets which would on a balance sheet of
the Company prepared as of such date in accordance with Generally Accepted
Accounting Principles be classified as short-term investments.
"Common Stock" shall mean the Common Stock, $.01 par value, together
with the related Preferred Share 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.
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"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 F.
"Computed Price" for any date means the arithmetic average of the
lowest per share Trading Price on the two Trading Days during the applicable
Measurement Period for such date on which the two lowest per share Trading
Prices occur.
"Conversion Notice" means a Notice of Conversion of 5% Senior Custom
Convertible Note due 2000 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 means the arithmetic average of the
lowest per share Trading Price on the two Trading Days during the applicable
Measurement Period for such date on which the two lowest per share Trading
Prices occur; provided, however, that on any date on or after January 19, 1998,
the Conversion Price shall not be greater than 115% of the arithmetic average of
the Market Price of the Common Stock for the period of twenty (20) consecutive
Trading Days ending one Trading Day prior to January 19, 1998.
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 10 percent per annum (or such lesser rate equal to
the highest rate permitted by applicable law).
"Event of Default" shall have the meaning provided in Article IV.
"Final Conversion Election" means a Holder Notice of Final Conversion
of 5% Senior Custom Convertible Note in the form attached hereto as Exhibit I.
"Final Maturity Note" shall mean a note issued by the Company in the
form attached hereto as Exhibit J.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"Holder" shall have the meaning provided in the first paragraph of this
Note.
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"Holder Notice" means a Holder Notice in the form attached hereto as
Exhibit G.
"Holder Registration Repurchase Notice" means a Holder Registration
Repurchase Notice in the form attached hereto as Exhibit H.
"Inconvertibility Day" means any Trading Day on which (x) the Company
would not have been required to convert in accordance with Section 2.1 any
portion of this Note as a consequence of the limitations set forth in Section
2.4(a) had the Holder converted this Note in full on such Trading Day,
determined at the Conversion Price applicable on such Trading Day and without
regard to the limitation, if any on the Holder contained in the second sentence
of Section 2.1 or (y) on which the Company does not have reserved from its
authorized and unissued shares of Common Stock for purposes of conversion of
this Note and the Other Notes the number of shares of Common Stock so required
to be reserved pursuant to Section 2.2.
"Inconvertibility Notice" means a notice from the Company to the Holder
in the form set forth in Exhibit B or a notice from the Holder to the Company in
the form set forth in Exhibit C.
"Inconvertible Portion" means (1) in the case of a Maximum Share Amount
Inconvertibility, the portion of this Note (which, if applicable, shall be all
of this Note) as shall not, on the Business Day immediately preceding the
applicable Redemption Date, 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 (2) in the case of a Registration Restriction Inconvertibility, the
portion of this Note (which, if applicable, shall be all of this Note) as shall
not, on the Business Day immediately preceding the applicable Redemption Date,
be convertible into shares of Common Stock which are covered by the Registration
Statement and available for resale by the Holder pursuant to the Registration
Statement.
"Indebtedness" as used in reference to any Person means all
indebtedness of such person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such person or
in effect guaranteed by such person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such person, although such person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such person.
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"Interest Payment Dates" shall mean each February 15, May 15, August 15
and November 15 and the Maturity Date.
"Issuance Date" means the date this Note was issued to the original
Holder of this Note.
"Issuing Agent" means BankBoston, N.A., 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 Agreement and the name, address
and telephone number of whom shall have been given to the Holder by notice from
the Company.
"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 Waiver" means a Mandatory Redemption Waiver in
the form attached hereto as Exhibit E.
"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" means September [BEFORE SIGNING NOTE INSERT DAY OF
CLOSING DATE], 2000.
"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.
"Maximum Share Amount Inconvertibility" means the occurrence of five or
more Inconvertibility Days ending on or after the 90th day after the Issuance
Date within any period of ten consecutive Trading Days.
"Measurement Period" means with respect to any date the period of 20
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consecutive Trading Days ending one Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Net Cash, Cash Equivalent and Short-Term Investment Balances" means at
any time the Company's Cash and Cash Equivalent Balances less the sum of (1) the
amount of any outstanding Indebtedness of any Person which is secured in whole
or in part by Cash and Cash Equivalent Balances plus (2) the maximum amount
which is not outstanding and which may be borrowed pursuant to any revolving
credit facility or any commitment to lend of or to any Person which at the time
it becomes outstanding will be secured in whole or in part by Cash and Cash
Equivalent Balances.
"Note" means this instrument as originally executed, or if later
amended or supplemented, then as so amended or supplemented.
"Note Purchase Agreement" shall mean the Note Purchase Agreement, dated
as of September 8, 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.
"Other Notes" means the several 5% Senior Custom Convertible Notes due
2000 issued by the Company pursuant to the Other Note Purchase Agreements.
"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.
"Payment Shares" means the shares of Common Stock and the related
Preferred Share Purchase Rights issuable in payment of interest on this Note in
accordance with Section 1.1.
"Permitted Indebtedness" means
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(1) Indebtedness not in excess of $8.0 million aggregate principal
amount which is either (x) outstanding on the Issuance Date 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 or (y)
Indebtedness incurred after the Issuance Date pursuant to commitments
available to the Company under its lease line in effect on the date of
execution and delivery of this Agreement;
(2) Indebtedness incurred after the Issuance Date consisting of (A)
equipment lease obligations or other equipment financings which are
required to be capitalized in accordance with Generally Accepted Accounting
Principles; (B) Indebtedness incurred in connection with the acquisition of
furnitures, fixtures and equipment; and (C) Indebtedness incurred after the
Issuance Date that is secured solely by the Company's interest in real
estate, improvements to real estate and office and laboratory facilities;
(3) Indebtedness incurred in connection with a strategic alliance,
collaboration, joint venture, partnership or other similar arrangement of
the Company with another Person which is engaged in a business similar to
or related to the business of the Company; and
(4) Indebtedness (other than as permitted by the preceding clauses (1)
through (4)) in a principal amount not in excess of $3 million outstanding
at any one time;
so long as (x) in the case of Indebtedness permitted by the preceding clauses
(2) through (4), on the date of incurrence of such Indebtedness no Event of
Default has occurred and is continuing, and (y) in the case of Indebtedness
permitted by the preceding clause (2), the aggregate amount thereof (other than
any amount thereof permitted by clause (1)(y) of this definition) outstanding at
any one time does not exceed $12 million.
"Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) a Person which
(A) has the same investment adviser as the Holder or the holder of any of the
Other Notes, (B) has an investment adviser which is under common control with
the investment adviser to the Holder or the holder of any of the Other Notes or
(C) is an Affiliate of the Holder or the holder of any Other Note.
"Person" means an individual, partnership, corporation, limited
liability company, trust or incorporated organization, and a government or a
governmental agency or political subdivision.
"Pooling Standards" means Opinion No. 16 of the Accounting Principles
Board
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<PAGE>
(or any successor accounting standard of the Financial Accounting Standards
Board (or any successor or replacement Person or board the accounting
pronoucements of which are applicable to issuers having a class of securities
registered pursuant to Section 12(b) or 12(g) of the 1934 Act)) and any
applicable requirements of the SEC relating to pooling of interests accounting
for business combination transactions, in each case as in effect from time to
time.
"Preferred Share Purchase Rights" means the Preferred Share 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).
"Redemption Date" means the date which is five Business Days after the
date the Holder gives a Redemption Election to the Company.
"Redemption Election" means (1) a notice by the Holder to the Company
substantially in the form set forth in Exhibit D or (2) a notice by the Holder
to the Company included in the form of Inconvertibility Notice set forth in
Exhibit C.
"Redemption Election Period" means, with respect to a particular
Maximum Share Amount Inconvertibility or Registration Restriction
Inconvertibility, the period of ten Business Days after the later of (x) the
date an Inconvertibility Notice with respect to such Maximum Share Amount
Inconvertibility or Registration Restriction Inconvertibility is given or (y)
the date such Inconvertibility Notice was required to have been given by the
Company.
"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 120th day thereafter 112.5%
121st through 270th day after the Issuance Date 115.0%
On and after the 271st day after the Issuance Date 120.0%
"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.
30
<PAGE>
"Registration Repurchase Event" means the occurrence of either of the
following events:
(a) the Company fails to file the Registration Statement within the
30-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 before the
date which is 90 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" means that, notwithstanding
Rule 416 under the 1933 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 additional shares of Common Stock as shall be issuable
upon conversion of this Note based on changes from time to time in the
Conversion Price, and on any five Trading Days ending on or after the SEC
Effective Date within any period of ten consecutive Trading Days the number of
shares of Common Stock issuable upon conversion of this Note in full had this
Note been converted in full into Common Stock on each such Trading Day,
determined at the Conversion Price applicable on each such Trading Day and
without regard to the limitation, if any, on 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.
"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
31
<PAGE>
or the AMEX;
(c) Any consolidation or merger of the Company or any Subsidiary with
or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders 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 Certificate of
Incorporation (other than any certificate designating a series of preferred
stock of the Company) which materially and adversely affects the rights of
the Holder 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 1933 Act, the 1934 Act or any of the rules or
regulations under either thereof or (2) due to the Registration Statement
containing any untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or 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 with respect to any repurchase pursuant to
Sections 5.1 and 5.2 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 such repurchase times (x) 112.5%, if the date of such repurchase is on or
before the 120th day after the Issuance Date, (y) 115.0%, if the date of such
repurchase is on or after the 121st day after the Issuance Date and on or before
the 270th day after the Issuance Date, or (z) 120.0%, if the date of such
repurchase is on or after the 271st day after the Issuance Date 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 such repurchase.
32
<PAGE>
"Rights Agreement" means the Rights Agreement, dated as of August 1,
1995, by and between the Company and Boston EquiServe, 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.
"Significant Subsidiary" means a Subsidiary which is a "significant
subsidiary," as that term is defined in Rule 1-02(w) of Regulation S-X of the
SEC as in effect on the date of this Agreement.
"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 securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market for
the Common Stock, (b) Nasdaq, (c) the Nasdaq SmallCap Market or (d) such other
market as at the time constitutes the principal trading market for the Common
Stock, in any such case as reported by Bloomberg, L.P. (subject to equitable
33
<PAGE>
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 10% of the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in each such
case which occur on or after the Execution Date); provided, however, that if on
any Trading Day there shall be no reported sale price (regular way) of the
Common Stock, the "Trading Price" on such Trading Day shall be the lowest sale
price (regular way) of the Common Stock on the Trading Day next preceding such
Trading Day on which a sale price (regular way) for the Common Stock has been so
reported.
"Transaction Documents" means this Note, the Note Purchase Agreement,
the Final Maturity Note, the Transfer Agent Agreement, the Warrants and the
other agreements, instruments and documents contemplated hereby and thereby.
"Transfer Agent Agreement" means the Transfer Agent Agreement, dated as
of September 8, 1997, by and among the Company, the Issuing Agent, the original
Holder of this Note and the Original Holders of the Other Notes.
"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
34
<PAGE>
by telephone line facsimile transmission or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served, sent by telephone line facsimile transmission or sent by
courier or three (3) days after being deposited in the United States mail,
certified, with postage pre-paid and properly addressed, if sent by mail. For
the purposes hereof, the address of the Holder shall be as shown on the records
of the Company (telephone line facsimile transmission number ____________); and
the address of the Company shall be 351 Galveston Drive, Redwood City,
California 94063-4720, Attention: Vice President, Finance (telephone line
facsimile transmission number (650) 306-4016). A copy of any notice to the
Company pursuant to this Note shall also be provided to Cooley Godward LLP, 3000
El Camino Real, Palo Alto, California 94306, Attention: Brian Cunnigham and
Suzanne Sawochka Hooper (telephone line facsimile transmission number (650)
857-0663). The Holder or the Company may change its address for service by
service of written notice to the other as herein provided.
8.3 Amendment Provision. Neither this Note or any Other Note 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, Repurchase Price or Registration Repurchase
Price, (ii) amend, modify or waive any provision of this Section 8.3, (iii)
reduce any percentage specified in, or otherwise modify, the definition of
Majority Holders or (iv) except as provided in this Note, change the method of
calculating the Conversion Price in a manner adverse to the Holder.
8.4 Assignability. This Note shall be binding upon the Company and its
successors, and shall inure to the benefit of and be binding upon the Holder and
its successors and permitted assigns. The Company may not assign its rights or
obligations under this Note.
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) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (y) 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.
8.6 Governing Law. This Note shall be governed by the internal laws of
the
35
<PAGE>
State of California, 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 1933 Act or any state securities laws and
this Note may not be transferred unless (1) the transferee is a Permitted
Transferee 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 without registration under
the 1933 Act. Prior to any such transfer, such transferee shall have 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. If
such transfer is intended to assign the rights and obligations under Sections
5(a), 5(b) and 8 of the Note Purchase Agreement, such transfer shall otherwise
be made in compliance with Section 10.7 of the Note Purchase Agreement.
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 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.
36
<PAGE>
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 this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (b)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor. In
connection with the issuance of any such new Note, the Holder shall pay or
reimburse the Company for the reasonable and documented attorneys' fees and
expenses incurred by the Company in connection therewith (but not in excess of
$500.00 for each such issuance).
37
<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.
SUGEN, INC.
By:______________________
Name:
Title:
38
<PAGE>
Exhibit A
NOTICE OF CONVERSION
OF 5% SENIOR CUSTOM CONVERTIBLE NOTE DUE 2000
OF SUGEN, INC.
To: SUGEN, Inc. with a copy to:
351 Galveston Drive
Redwood City, California 94063-4720 Cooley Godward LLP
5 Palo Alto Square
Attention: Vice President, Finance 3000 El Camino Real
Palo Alto, California 94306
Primary Facsimile No.: (650) 306-4016
Alternative Facsimile No. (if primary not Attention: Brian C.
functioning): (650) 369-0741 Cunningham, Esq.
Suzanne Sawochka
Hooper, Esq.
Facsimile No.: (650) 857-0663
BankBoston N.A.,
as Issuing Agent
150 Royall Street
Canton, Massachusetts 02021
Attention: Ms. Debra Spearin,
Special Issuances
Facsimile No.: (617) 575-2804
(1) Pursuant to the terms of the 5% Senior Custom 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
SUGEN, 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) The number of shares of Common Stock issuable upon the conversion
of the Note to which this Notice relates is ___________.
(3) If the conversion of the Note by this Notice is based on the
Trading Prices
A-1
<PAGE>
during a Measurement Period, set forth below or on a schedule which accompanies
this Notice are the Trading Prices during the Measurement Period applicable to
this Notice and an indication of the two Trading Prices used to determine the
Conversion Price set forth above.
Date Trading Price
---- -------------
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
A-2
<PAGE>
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
(4) 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:
_____________________ _____________________
Name Name
_____________________ _____________________
Address Address
_____________________ _____________________
SS or Tax ID Number SS or Tax ID Number
Delivery Instructions
for Common Stock:
(5) 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.
(6) The Holder hereby represents and warrants that it has complied and
will comply with the applicable requirements of Sections 8(c)(3) and 8(c)(5) of
the Note Purchase Agreement with respect to the shares of Common Stock issuable
upon the conversion of the Note
A-3
<PAGE>
to which this Notice relates.
(7) 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) the shares of Common
Stock issuable upon the conversion of the Note to which this Notice relates 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 1933 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 1933 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 1933 Act and (B) until such
shares are registered under the 1933 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-4
<PAGE>
Exhibit B
COMPANY INCONVERTIBILITY NOTICE
(Section 2.4(b) of 5% Senior Custom Convertible Note due 2000)
TO:_______________________
(Name of Holder)
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), SUGEN, 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:
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
|_| (a) Maximum Share Amount Inconvertibility
|_| (b) Registration Restriction Inconvertibility
(3) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
B-1
<PAGE>
Date _________________________ SUGEN, INC.
By____________________
B-2
<PAGE>
Exhibit C
HOLDER INCONVERTIBILITY NOTICE
(Section 2.4(b) of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned (the "Holder"), hereby notifies SUGEN, 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:
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
|_| (a) Maximum Share Amount Inconvertibility
|_| (b) Registration Restriction Inconvertibility
(3) If the following date and amounts are completed in this Notice, the
Holder hereby directs the Company to redeem the principal amount set forth below
(and the related interest) in accordance with Section 7(a) of the Certificate of
Designations set forth below:
C-1
<PAGE>
(a) Principal amount of Note to be redeemed: __________ (fill in)
(b) On ______________ (fill in Redemption Date), the Company shall pay
the Holder the Redemption Price of the portion (which, if applicable, may be
all) of the Note to be redeemed of $____________. The Redemption Price is equal
to the sum of (1) the product obtained by multiplying (A)(i) $_____________
(fill in) of principal plus (ii) $____________ of accrued and unpaid interest on
such principal amount to such Redemption Date times (B) ______________% (fill in
applicable Redemption Percentage) plus (2) $ of accrued and unpaid Default
Interest (if any) to such Redemption Date.
(4) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date _________________________ NAME OF HOLDER:
_____________________________
By___________________________
Title:
C-1
<PAGE>
Exhibit D
HOLDER REDEMPTION ELECTION
(Section 2.4(b) of 5% Senior Custom
Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned (the "Holder") hereby notifies SUGEN, Inc., a
Delaware corporation (the "Company"), that the Holder is exercising its right to
require the Company to redeem a portion (which, if applicable, may be all) of
the Note as set forth below in accordance with Section 2.4(b) of the Note. On
_______________ (fill in Redemption Date), the Company shall pay the Holder the
Redemption Price of $________________. The Redemption Price is equal to the sum
of (1) the product obtained by multiplying (A)(i) $________________ (fill in) of
principal plus (ii) $________________ of accrued and unpaid interest on such
principal amount to such Redemption Date times (B) ________________% (fill in
applicable Redemption Percentage) plus (2) $________________ of accrued and
unpaid Default Interest (if any) to such Redemption Date.
(2) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date NAME OF HOLDER:
_____________________________
By___________________________
D-1
<PAGE>
Exhibit E
MANDATORY REDEMPTION WAIVER
SUGEN, Inc., a Delaware corporation (the "Company"), and the
undersigned holder (the "Holder") of the Company's 5% Senior Custom 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: _______________________ , 19___
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: ________________
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
California. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided in the Note.
E-1
<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.
SUGEN, INC.
By___________________________
Title:
Date:________________________
NAME OF HOLDER:
_____________________________
By___________________________
Title:
Date:________________________
E-2
<PAGE>
Exhibit F
COMPANY NOTICE
(Section 5.2(a) of 5% Senior Custom Convertible Note due 2000)
TO:______________________
(Name of Holder)
(1) A Repurchase Event described in the 5% Senior Custom Convertible
Note due 2000 (the "Note") of SUGEN, 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
G 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 _________________________ SUGEN, INC.
By____________________________
Title:
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<PAGE>
Exhibit G
HOLDER NOTICE
(Section 5.2(b) of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom 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 H
HOLDER REGISTRATION REPURCHASE NOTICE
(Section 5.3 of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom 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.)
H-1
<PAGE>
Exhibit I
HOLDER NOTICE OF FINAL CONVERSION
OF 5% SENIOR CUSTOM CONVERTIBLE NOTE DUE 2000
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), issued by SUGEN, 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 J 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 Holder has selected conversion of the Note and the shares of
Common Stock issuable upon conversion of the Note have not been registered under
the Securities Act of 1933, as amended (the "1933 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 1933 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 1933 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
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<PAGE>
registration requirements of the 1933 Act and (B) until such shares are
registered under the 1933 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 1933 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.
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<PAGE>
NAME OF HOLDER:
Date _________________________
By______________________________
Title:__________________________
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<PAGE>
Exhibit J
THIS FINAL MATURITY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 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 REGISTRATION OF THE RESALE THEREOF
UNDER THE 1933 ACT 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.
SUGEN, INC.
FINAL MATURITY NOTE
New York, New York $________
, 2005 No.
FOR VALUE RECEIVED, SUGEN, INC., a Delaware corporation (hereinafter
called the "Company"), hereby promises to pay to , [Address], or registered
assigns (the "Holder") or order, the sum of Dollars ($ ), 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 fifteen percent (15%) per annum from the due date thereof until the same is
paid ("Default Interest"). Interest shall be payable on the 1st day of each
April and October, commencing on April 1, 2001, 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 Interest Payment Dates may be paid in whole or in part
in fully paid and nonassessable shares of Common Stock, $.01 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
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<PAGE>
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 5% Senior Custom
Convertible Note due 2000 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 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
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<PAGE>
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 or is not in effect and the Registration Statement is unavailable for
use by the Holder for the resale of such shares;
(iii) the shares of Common Stock to be issued upon exercise of the
Stock Payment Option have not been authorized for listing, upon official
notice of issuance, on the principal securities exchange on which the
Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of the Common Stock;
(v) an Event of Default (as defined herein) has occurred and is
continuing; or
(vi) the Common Stock is neither (i) listed or admitted for trading on
a national securities exchange nor (ii) quoted on the Nasdaq National
Market.
(c) If the Stock Payment Option is elected, the Company shall issue and
dispatch or cause to be dispatched to the Holder one or more certificates for
the aggregate number of whole shares of Common Stock determined by dividing the
per share Computed Price of the Common Stock on the applicable Interest Payment
Date into the total amount of lawful money of the United States of America which
the Holder would receive if the aggregate amount of interest on this 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
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<PAGE>
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. 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,
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<PAGE>
the President, the Chief Operating Officer, any Senior Vice President or
the Chief Financial Officer of the Company.
(5) "Other Final Maturity Notes" means the several Final Maturity Notes
issued by the Company pursuant to the Other Notes.
(6) "Other Notes" means the several 5% Senior Custom Convertible Notes
due 2000 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 Holder for (i) stock splits,
(ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
issuance to all holders of Common Stock of rights or warrants to purchase
shares of Common Stock at a price per share less than the Trading Price
which would otherwise be applicable, (vi) the distribution by the 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
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
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<PAGE>
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) business 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 significant
subsidiary (as defined in Section 1.02(w) of Regulation S-X of the Securities
and Exchange Commission) of the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due or shall admit in writing its inability generally to pay its debts as they
become due;
2.5 Certain Involuntary Proceedings. An involuntary case or other
proceeding shall be commenced against the Company or any significant 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
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<PAGE>
respective properties or other assets in an aggregate amount in excess of
$1,500,000, 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 $2,000,000 individually or $5,000,000
in the aggregate for the Company and its subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created or (ii) default in the observance or performance of any
agreement, covenant or condition relating to any such indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any such indebtedness of the Company or any of its subsidiaries shall, in
accordance with its terms, be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled or required payment prior to the
stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Company shall, pay to the Holder an amount equal to the
sum of (A) the outstanding principal amount of this 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
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thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
3.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served, sent by telephone line facsimile
transmission or delivered by courier or sent by United States mail and shall be
deemed to have been given upon receipt if personally served, sent by telephone
line facsimile transmission or sent by courier or three (3) days after being
deposited in the United States mail, certified, with postage pre-paid and
properly addressed, if sent by mail. For the purposes hereof, the address of the
Holder shall be as shown on the records of the Company (telephone line facsimile
transmission number (_)______-_______ ); and the address of the Company shall be
351 Galveston Drive, Redwood City, California 94063-4720 Attention: Vice
President, Finance (telephone line facsimile transmission number (650) 306-4016.
A copy of any notice to the Company pursuant to this Note shall also be provided
to Cooley Godward LLP, 3000 El Camino Real, Palo Alto, California 94306,
Attention: Brian Cunningham and Suzanne Sawochka Hooper (telephone line
facsimile transmission number (650) 857-0663). The Holder or 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) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (y) 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 California, without regard to the principles of
conflict of laws.
3.7 Transfer of Final Maturity Note. This Note has not been and is not
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being registered under the provisions of the 1933 Act or any state securities
laws and this Note may not be transferred unless (1) the transferee is a
Permitted Transferee 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
without registration under the 1933 Act. Prior to any such transfer, such
transferee shall have 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. "Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) a Person which
(A) has the same investment adviser as an Investor of the holder of any of the
Other Notes, (B) has an investment adviser which is under common control with
the investment adviser to an Investor or the holder of any of the Other Notes or
(C) is an Affiliate of any Investor of the holder of any Other Note.
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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.
SUGEN, INC.
By
Name:
Title:
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Annex IV
to
Note Purchase
Agreement
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.
THIS WARRANT IS ISSUED PURSUANT TO A NOTE PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER __, 1997, BY AND BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THIS
WARRANT, AS AMENDED FROM TIME TO TIME, AND THE HOLDER OF THIS WARRANT AND THIS
WARRANT ARE SUBJECT TO CERTAIN OF THE TERMS OF THE NOTE PURCHASE AGREEMENT.
THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN
SECTION 17.
No. Right to Purchase _______ Shares of Common
Stock of SUGEN, Inc.
SUGEN, INC.
Common Stock Purchase Warrant
SUGEN, 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 capitalized terms, unless the context
otherwise requires, have the following respective meanings:
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"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate", the term "control" (including the terms "controlling",
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or to cause the direction of the management and
policies of a Person, whether through the ownership of securities, by contract
or otherwise.
"Aggregated Person" means a Person whose beneficial ownership of shares
of Common Stock would be aggregated with the Holder's beneficial ownership of
shares of Common Stock for purposes of Section 13(d) of the Exchange Act and
Regulation 13D-G thereunder.
"Business Day" means a day on which the New York Stock Exchange is open
for trading of securities.
"Common Stock" includes the Company's Common Stock, par value $.01 per
share, and the related Preferred Share 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 Share Purchase Rights (and any similar rights issued with respect to
the Common Stock) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" shall include SUGEN, Inc. and any corporation that shall
succeed to or assume the obligation of SUGEN, Inc. hereunder in accordance with
the terms hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means [INSERT MONTH AND DAY OF CLOSING DATE], 2000.
"Note Purchase Agreement" means the Note Purchase Agreement, dated as
of September _____________, 1997, by and between the Company and the original
Holder of this Warrant.
"Notes" means the several 5% Senior Custom Convertible Notes due 2000
issued by the Company pursuant to the Note Purchase Agreement and the Other Note
Purchase Agreements.
"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.
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"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person 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.
"Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the Securities Act and (2) a Person
which (A) has the same investment adviser as the Holder or the holder of any of
the Notes, (B) has an investment adviser which is under common control with the
investment adviser to the Holder or the holder of any of the Notes or (C) is an
Affiliate of the Holder or the holder of any of the Notes.
"Person" means an individual, partnership, corporation, limited
liability company, trust or incorporated organization, and a government or a
governmental agency or political subdivision.
"Preferred Share Purchase Rights" means the Preferred Share 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).
"Purchase Price" means $16.74, subject to adjustment as provided in
this Warrant.
"Rights Agreement" means the Rights Agreement, dated as of August 1,
1995, by and between the Company and Boston EquiServe, as Rights Agent, as
amended from time to time in accordance with its terms.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
1. Exercise of Warrant.
1.1 Exercise. (a) This Warrant may be exercised by the Holder 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 (x) surrendering this
Warrant to the Company, (y) giving a subscription form in the form annexed
hereto (duly executed by the Holder) to the Company, and (z) making payment, in
cash or by certified or official bank check payable to the order of the Company,
or by wire transfer of funds to the account of the Company, in either case, 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
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<PAGE>
the Company will forthwith issue and deliver to or upon the order of the Holder
a new Warrant or Warrants of like tenor, in the name of the Holder or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised. The subscription form may be surrendered by
telephone line facsimile transmission to the telephone numbers shown thereon or
such other numbers for the Company or such transfer agent as shall have been
specified in writing to the Holder by the Company; provided, however, that if
the subscription form is given to the Company by telephone line facsimile
transmission the Holder shall send an original of such subscription form to the
Company within ten Business Days after such subscription form is so given to the
Company.
(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 Aggregated Persons (other than shares
of Common Stock deemed beneficially owned through the ownership of the
unexercised portion of this Warrant and any of the Company's 5% Senior Custom
Convertible Notes due 2000 and any other securities containing similar
restrictions by the Holder and all Aggregated 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 Aggregated Persons of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of the immediately
preceding sentence. For purposes of the second preceding sentence, the Company
shall be entitled to rely, and shall be fully protected in relying, on any
statement or representation made by the Holder to the Company in connection with
a particular exercise of this Warrant, without any obligation on the part of the
Company to make any inquiry or investigation or to examine its records or the
records of any transfer agent for the Common Stock.
1.2 Net Issuance. Notwithstanding anything to the contrary contained in
Section 1.1, the Holder may elect to exercise this Warrant, in whole or in part,
by receiving shares of Common Stock equal to the net issuance value (as
determined below) of this Warrant, or any part hereof, upon surrender of this
Warrant to the Company's transfer agent and registrar for the Common Stock
together with the subscription form annexed hereto (duly executed by the
Holder), in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
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<PAGE>
X = Y (A-B)
_______
A
Where: X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of shares of Common Stock as to which
this Warrant is to be exercised
A = the current fair market value of one share of
Common Stock calculated as of the last trading
day immediately preceding the exercise of this
Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the 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 Stock Market as of 4:00
p.m., New York City time, or, if on such day the Common Stock is not quoted in
the Nasdaq National Market, 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
on the Nasdaq National Market 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 ten
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue or stamp taxes) will cause to be issued in the name
of and delivered to the Holder, or as the Holder (upon payment
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<PAGE>
by the Holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which the Holder shall be entitled on such
exercise, in such denominations as may be requested by the Holder, plus, in lieu
of any fractional share to which the Holder would otherwise be entitled, cash
equal to such fraction multiplied by the then current fair market value (as
determined in accordance with subsection 1.2) of one full share, together with
any other stock or other securities any property (including cash, where
applicable) to which the Holder is entitled upon such exercise pursuant to
Section 1 or otherwise. Upon exercise of this Warrant as provided herein, the
Company's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, 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 exercise. If the Company fails to
issue and deliver the certificates for the Common Stock to the Holder pursuant
to the first sentence of this paragraph as and when required to do so, in
addition to any other liabilities the Company may have hereunder and under
applicable law, the Company shall pay or reimburse the Holder on demand for all
out-of-pocket expenses including, without limitation, fees and expenses of legal
counsel incurred by the Holder as a result of such failure.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(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
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<PAGE>
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
thereof to and including the date of such exercise, retained such shares and all
such other or additional stock and other securities and property (including cash
in the case referred to in subdivisions (b) and (c) of this Section 3)
receivable by the Holder as aforesaid during such period, 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, (c) effect an exchange of
outstanding shares of the Company for securities of any other Person or (d)
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, share exchange, sale or conveyance, the Company shall
cause effective provisions to be made so that the Holder shall have the right
thereafter, by exercising this Warrant (in lieu of the shares of Common Stock of
the Company purchasable and receivable upon exercise of the rights represented
hereby immediately prior to such transaction) to purchase the kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such reorganization, consolidation, merger, share exchange, sale or
conveyance by a holder of the number of shares of Common Stock that might have
been received upon exercise of this Warrant immediately prior to such
reorganization, consolidation, merger, share exchange, sale or conveyance;
provided, however, that in the event (a) the value of the stock, securities or
other assets or property (determined in good faith by the Board of Directors of
the Company) issuable or payable with respect to one share of Common Stock of
the Company purchasable and receivable upon the exercise of the rights
represented hereby immediately prior to such transaction is in excess of the
Purchase Price hereof in effect at the time of such reorganization,
consolidation, merger, share exchange, sale or conveyance (after giving effect
to any adjustment in such Purchase Price required to be made under the terms of
this Warrant), and (b) the securities, if any, to be received in such
reorganization, consolidation, merger, share exchange, sale or conveyance are
publicly traded, then if the Company gives the Holder at least 20 Business Days
(or such lesser period as the Company gives notice of such transaction to the
holders of the outstanding shares of Common Stock) prior notice of such
reorganization, merger, share exchange, sale or conveyance this Warrant shall
expire unless exercised prior to such reorganization, consolidation, merger,
share exchange, sale or conveyance. Any such provision shall include provisions
for adjustments in respect of such shares of stock and other securities and
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The provisions of this section shall
apply to successive reorganizations, consolidations, mergers, share exchanges,
sales and conveyances.
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,
IV-7
<PAGE>
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.
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 or merger (to which
the Company is a party and for which approval of any stockholders of the Company
is required, other than a consolidation or merger in which the Company is the
continuing corporation and that does not
IV-8
<PAGE>
result in any reclassification or change of the Common Stock outstanding),
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 or a favorable vote of stockholders if either is required.
8. Reservation of Stock, etc., Issuable on Exercise of Warrants. The
Company will at all times reserve and keep available out of its authorized but
unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company
exerciseable for, convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock (or Other Securities), and if at any
time the number of authorized but unissued shares of Common Stock (or Other
Securities) shall not be sufficient to effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock (or Other Securities) to such
number as shall be sufficient for such purposes.
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 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), 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 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 the Holder at the time of such surrender.
IV-9
<PAGE>
12. Replacement of Warrant. On receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security), or (b)
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company will execute and deliver to the Holder a new Warrant of like tenor. In
connection with the issuance of any such new Warrant, the Holder shall pay or
reimburse the Company for the reasonable and documented attorneys' fees and
expenses incurred by the Company in connection therewith (but not in excess of
$500.00 for each such issuance).
13. Warrant Agent. The Company may, by written notice to the Holder,
appoint the transfer agent and registrar for the Common Stock as the Company's
agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Warrant pursuant to Section 1, and the Company may, by written
notice to the Holder, appoint an agent having an office in the United State of
America for the purpose of exchanging this Warrant pursuant to Section 11, and
replacing this Warrant pursuant to Section 12, or any of the foregoing, and
thereafter any such 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 to any voting rights or other rights as a stockholder of the
Company. Nothing contained in this Warrant shall be construed as conferring upon
Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the Common Stock (or Other Securities) purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised in accordance with
its terms.
16. Notices, etc. All notices and other communications from the Company
to the 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. This Warrant has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws and
this Warrant may not be transferred unless (1) the transferee is a Permitted
Transferee and (2) the Holder shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and
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<PAGE>
substance to the Company, to the effect that this Warrant may be sold or
transferred pursuant without registration under the 1933 Act. Prior to any such
transfer, such transferee shall have 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 Exchange Act and which are incorporated by reference in such
prospectus as of the date of such transfer. If such transfer is intended to
assign the rights and obligations under Sections 5(a), 5(b) and 8 of the Note
Purchase Agreement, such transfer shall otherwise be made in compliance with
Section 10(j) of the Note Purchase Agreement.
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 whom 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 California. 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.
20. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and Holder relating hereto, the prevailing party shall be
entitled to attorneys' fees and expenses and all costs of proceedings incurred
in enforcing this Warrant.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
Dated: , 1997 SUGEN, INC.
By:_______________________________
Title:____________________________
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<PAGE>
FORM OF SUBSCRIPTION
SUGEN, INC.
(To be signed only on exercise of Warrant)
TO: SUGEN, Inc.
351 Galveston Drive
Redwood City, California 94063-4720
Attention: Vice President, Finance
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares (the "Exercise Shares") of Common Stock, as defined in the
Warrant, of SUGEN, 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 (i) in lawful money of the United States or by 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:
Name: _____________________________________
Address: _____________________________________
_____________________________________
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<PAGE>
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.
Dated:____________ ___, ____ __________________________________
(Signature must conform to name of
Holder as specified on the face of
the Warrant)
__________________________________
__________________________________
(Address)
IV-3
EXHIBIT 99.1
(BW) (SUGEN) (SUGN) SUGEN, Inc. Announces Private Placement of $17.5 Million
Senior Convertible Notes
Business Editors & Health Writers
REDWOOD CITY, Calif.--(BW HealthWire)--Sept. 10, 1997--SUGEN, Inc.
(NASDAQ:SUGN) announced the private placement of $17.5 million of Senior
Convertible Notes. The notes, which will not be convertible for 90 days from the
closing date, can thereafter be converted at 100% of an average of specified
trading prices during the 20 trading day period prior to a conversion. The
private placement is scheduled to close on September 12.
The convertible notes will be sold at par, mature in September 2000 and
bear interest at a rate of 5.0% per annum. Interest on the convertible notes may
be paid in SUGEN Common Stock or cash at the Company's option. Starting on
January 19, 1998, the conversion price may not exceed 115% of the average
closing bid price of the SUGEN Common Stock for the 20 trading days immediately
preceding this date. The investors will also be issued three year warrants to
acquire 262,500 shares of Common Stock which have an exercise price of $16.74.
If the notes are not converted into Common Stock, upon maturity in September
2000 they will be exchanged for 13.75% 5-year debentures.
"This innovative financing allows us to maintain the strength of
SUGEN's financial position while addressing concerns about dilution and the
disruption to trading of stock that so often occur with conventional secondary
offerings," stated Stephen Evans-Freke, SUGEN's Chairman and Chief Executive
Officer. "The structure of this financing allows us to tap into new pools of
capital not traditionally available to biotechnology companies. More
importantly, the absence of a discount-to-market in the conversion pricing is
crucial in aligning the interests of the noteholder with the Company. Moreover,
the financing was effected with a very small and select group of investors
assembled and led by Diaz & Altschul Capital LLC."
Diaz & Altschul Capital, LLC of New York City was the placement agent
in the transaction. Delta Opportunity Fund, Ltd., which is advised by Diaz &
Altschul Advisors, LLC, is the lead investor in the transaction. SUGEN has
agreed to file a registration statement for the resale of the shares of SUGEN
Common Stock acquired on conversion of the convertible notes and exercise of the
warrants within 30 days of the closing date.
SUGEN, Inc. is a biopharamceutical company focusing on the development
of new classes of small molecule drugs which interact in a specific manner with
different members of the tyrosine kinase, serine-threonine kinase and tyrosine
phosphatase families of signal transduction molecules, and their signalling
pathways. These pathways are involved in a number of human diseases including
cancer and diabetes, as well as disorders of the body's
<PAGE>
immune defenses and neurological systems. SUGEN currently has SU101 (a PDGF
receptor inhibitor) in Phase II clinical studies for the treatment of malignant
gliomas and other cancers; SU5271 (an EGF receptor inhibitor) in Phase I
clinical studies for the treatment of psoriasis; and recently filed an IND for a
Flk-1 angiogenesis inhibitor. The Company has research and development
collaborations with Zeneca, ASTA Medica and Allergan.
This press release contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include the factors more fully discussed in the Company's 1996 Form
10-K and most recent Form 10-Q. The Company undertakes no obligation to release
the results of any revision to these forward-looking statements which may be
made to reflect events or circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
Additional written materials and press releases regarding SUGEN are
available through the SUGEN Fax-On-Demand Information Service by dialing
888/329-4699.
Contact: SUGEN, Inc.
D. Kevin Kwok, 650/306-7700
[email protected]
or
Burns McClellan, Inc.
Reagan Codner, 212/213-0006 (investors)
Audra Nass, 415/352-6262 (media)
