<TABLE>
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): March 24, 1999
SUGEN, INC.
(Exact name of registrant as specified in its charter)
<CAPTION>
Delaware 0-24814 13-3629196
<S> <C> <C> <C>
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer Identification No.)
incorporation or organization)
230 East Grand Avenue
South San Francisco, California 94080
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 553-8300
</TABLE>
<PAGE>
Item 5. Other Events.
On March 22, 1999, SUGEN, Inc. (the "Company") announced the private placement
of $28,000,000 aggregate principal amount of its 12% Senior Convertible Notes
due 2002 (the "Notes") and warrants (the "Warrants") to acquire $21,000,000
principal amount of 12% Senior Convertible Notes (the "Warrant Notes"). The
private placement closed on March 24, 1999 (the "Closing Date"). In addition,
the holders of the outstanding balance of approximately $5,700,000 of the
Company's 5% Senior Custom Convertible Notes issued in September 1997 (the "1997
Notes") have agreed, subject to certain conditions set forth in the Securities
Purchase and Exchange Agreement attached hereto as Exhibit 4.1, that the 1997
Notes will be converted into common stock of the Company (the "Common Stock") in
accordance with the terms of the 1997 Notes or exchanged for additional Notes
and Warrants at a premium of 125-132% of the outstanding principal amount of the
1997 Notes within 135 days of the Closing Date. The exchange of all outstanding
1997 Notes would result in the issuance of an additional $7,368,073 principal
amount of Notes and Warrants to purchase an additional $5,526,055 principal
amount of Warrant Notes. The following summary of certain terms of the Notes and
Warrants does not purport to be a complete description and is qualified in its
entirety by reference to the forms of Securities Purchase and Exchange
Agreement, Note and Warrant, each of which are incorporated by reference herein
and copies of which are filed as Exhibits 4.1, 4.2 and 4.3 to this Form 8-K.
The Notes were sold at par, mature in March 2002 and bear interest at the rate
of 12% per annum, payable in cash or, at the election of the Company, shares of
Common Stock. The principal amount of the Notes, together with accrued and
unpaid interest, is convertible into shares of Common Stock at a conversion
price of $20.50 (the "Conversion Price"). Among other covenants, the Notes
include covenants that require the Company to meet certain cash and cash
equivalent maintenance requirements.
The Warrants are exercisable at any time until March 2001, subject to
restrictions on the level of exercises in any period as set forth in the
Warrants. During the term of the Warrants, if the closing bid price of the
Company's Common Stock exceeds 175% of the Conversion Price for a period of 20
consecutive trading days, the Company may require the Warrant holders to
exercise the Warrants and purchase the Warrant Notes, subject to restrictions on
the level of exercises that the Company may require in any period as set forth
in the Warrants. However, if the closing bid price of the Company's Common Stock
exceeds 200% of the Conversion Price for a period of 20 consecutive days, the
Company, without limitation, may require the Warrant holders to exercise the
Warrants and purchase the Warrant Notes. The Warrant Notes will have
substantially the same terms as the Notes with a term of three years from their
date of issuance and an interest rate of 12.0% per annum, payable in cash or, at
the election of the Company, shares of Common Stock.
The Company has the right, subject to certain conditions set forth in the Notes,
to redeem the Notes, Warrants and Warrant Notes at any one time by delivering a
cash amount equal to the outstanding principal and accrued interest of the Notes
and Warrant Notes, plus a premium of 105%-110% depending on the redemption date,
and warrants to purchase shares of the Company's Common Stock at the Conversion
Price (the "Common Stock Warrants"). The Company also has the right to defease
the Notes in accordance with the terms set forth in the Notes.
The Company has agreed to prepare and, on or prior to April 23, 1999, file with
the SEC a Registration Statement on Form S-3 which covers the resale by the
holders of the Notes and Warrants issued on the Closing Date of (i) a number of
shares of Common Stock equal to at least the number of shares of Common Stock
issuable to the holders upon conversion of the Notes issued on the Closing Date
and the Warrant Notes issuable upon exercise of the Warrants issued on the
Closing Date, determined as if such Notes and the Warrant Notes, together with
three months' accrued and unpaid interest thereon, were converted in full at the
Conversion Price, and (ii) such additional number of shares of Common Stock as
the Company in its discretion determines to register in connection with the
issuance of the shares of Common Stock in payment of interest on the Notes
issued on the Closing Date and Warrant Notes issuable upon exercise of the
Warrants issued on the Closing Date and the issuance of shares of Common Stock
upon exercise of any Common Stock Warrants that may be issued upon redemption of
the Notes, Warrants and Warrant Notes. If the Company does not file the
registration statement by April 23, 1999 or if the registration statement is not
declared effective within 90 days of the Closing Date if the registration
statement is not reviewed by the staff of the SEC or within 135 days of the
Closing Date if the registration statement is reviewed by the staff of the SEC,
at the Noteholders' option the Company will be obligated to redeem the Notes for
100% of their outstanding face value plus accrued and unpaid interest.
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 $1,400,000 with respect to the
placement of the $28,000,000 principal amount of Notes issued on the Closing
Date. Diaz & Altschul Capital, LLC will be entitled to additional fees in the
event the Warrants are exercised.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
4.1 Form of Securities Purchase and Exchange Agreement, dated as of March
19, 1999, by and between the Company and the investors named therein.
4.2 Form of 12% Senior Convertible Note due 2002.
4.3 Form of 12% Senior Convertible Note Purchase Warrant.
99.1 Press Release, titled "SUGEN, Inc. Announces $28.0 Million Financing by
Private Placement of Senior Convertible Notes," dated March 22, 1999.
<PAGE>
SIGNATURES
<TABLE>
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.
<CAPTION>
SUGEN, Inc.
<S> <C> <C>
Dated: March 29, 1999 By: /s/ James L. Knighton
--------------- -------------------------------------------------
James L. Knighton
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
================================================================================
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
dated as of March 19, 1999
by and between
SUGEN, INC.
and
[BUYER]
----------------------------------
12% SENIOR CONVERTIBLE NOTES DUE 2002
and
WARRANTS TO PURCHASE ADDITIONAL
12% SENIOR CONVERTIBLE NOTES
----------------------------------
Placement Agent:
DIAZ & ALTSCHUL CAPITAL, LLC
================================================================================
<PAGE>
SUGEN, INC.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
12% SENIOR CONVERTIBLE NOTES DUE 2002
and
WARRANTS TO PURCHASE ADDITIONAL
12% SENIOR CONVERTIBLE NOTES
TABLE OF CONTENTS
Page
----
1. DEFINITIONS................................................................1
2. PURCHASE AND SALE..........................................................6
(a) Purchase..........................................................6
(b) Form of Payment...................................................6
(c) Exchange of Notes.................................................6
(d) Closing...........................................................7
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF
THE BUYER..................................................................7
(a) Acquisition for Investment........................................7
(b) Accredited Investor...............................................7
(c) Reoffers and Resales..............................................7
(d) Company Reliance..................................................8
(e) Information Provided..............................................8
(f) Absence of Approvals..............................................8
(g) Securities Purchase and Exchange Agreement........................8
(h) Buyer Status......................................................9
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF
THE COMPANY................................................................9
(a) Organization and Authority........................................9
(b) Qualifications....................................................9
(c) Capitalization....................................................9
(d) Material Losses..................................................10
(e) Concerning the Shares and the Common Stock.......................10
(f) Corporate Authorization..........................................10
(g) Non-contravention................................................11
(h) Approvals, Filings, Etc..........................................11
(i) Information Provided.............................................11
(j) Conduct of Business..............................................11
(k) SEC Filings......................................................12
(l) Absence of Certain Proceedings...................................12
(m) Liabilities......................................................12
-2-
<PAGE>
(n) Absence of Certain Changes.......................................12
(o) Intellectual Property............................................12
(p) Internal Accounting Controls.....................................13
(q) Compliance with Law..............................................13
(r) Properties.......................................................13
(s) Labor Relations..................................................13
(t) Insurance........................................................13
(u) Tax Matters......................................................13
(v) Investment Company...............................................14
(w) Absence of Brokers, Finders, Etc.................................14
(x) No Solicitation..................................................14
(y) Rights Agreement.................................................14
(z) Certain Securities Law Matters...................................14
5. CERTAIN COVENANTS AND WAIVER..............................................14
(a) Transfer Restrictions............................................14
(b) Restrictive Legends..............................................15
(c) Nasdaq Listing...................................................16
(d) Form D...........................................................16
(e) State Securities Laws............................................16
(f) Limitation on Certain Actions....................................16
(g) Use of Proceeds..................................................16
(h) Best Efforts.....................................................17
(i) Debt Obligation..................................................17
(j) Buyer's Waiver...................................................17
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
AND EXCHANGE..............................................................17
7. CONDITIONS TO THE BUYER'S OBLIGATIONS TO
PURCHASE AND EXCHANGE.....................................................18
(a) Closing Date.....................................................18
(b) Exchange Date....................................................19
8. REGISTRATION RIGHTS.......................................................19
(a) Mandatory Registration...........................................19
(b) Obligations of the Company.......................................20
(c) Obligations of the Buyer and other Investors.....................23
(d) Rule 144.........................................................24
9. INDEMNIFICATION AND CONTRIBUTION..........................................24
(a) Indemnification..................................................24
(b) Contribution.....................................................26
(c) Other Rights.....................................................26
10. MISCELLANEOUS....................................................26
(a) Governing Law....................................................26
(b) Headings.........................................................26
(c) Severability.....................................................26
(d) Notices..........................................................26
-3-
<PAGE>
(e) Counterparts.....................................................26
(f) Entire Agreement.................................................27
(g) Waiver...........................................................27
(h) Amendment........................................................27
(i) Further Assurances...............................................27
(j) Assignment of Certain Rights and Obligations.....................27
(k) Expenses.........................................................28
(l) Termination......................................................28
(m) Survival.........................................................28
(n) Public Statements, Press Releases, Etc...........................28
(o) Construction.....................................................29
ANNEXES
- -------
ANNEX I - Form of 12% Senior Convertible Note due 2002
ANNEX II - Form of 12% Senior Convertible Note Purchase Warrant
ANNEX III - Form of Issuing Agent Instruction to Be Delivered on the Closing
Date
ANNEX IV - Form of Opinion of Cooley Godward LLP to Be Delivered on the
Closing Date
ANNEX V - Form of Opinion of Lyon & Lyon LLP to Be Delivered on the Closing
Date
ANNEX VI - Form of Instruction to Transfer Agent to Be Delivered in
Connection with Effectiveness of the Registration Statement
ANNEX VII - Form of Opinion of Cooley Godward LLP to Be Delivered in
Connection with Effectiveness of the Registration Statement
ANNEX VIII - Form of Opinion of Lyon & Lyon LLP to Be Delivered in Connection
with Effectiveness of the Registration Statement
-4-
<PAGE>
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT, dated as of March 19,
1999 (this "Agreement"), by and between SUGEN, INC., a Delaware corporation,
with headquarters located at 230 East Grand Avenue, South San Francisco,
California 94080 (the "Company"), and [_________________] (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, the Purchase Note (such capitalized term and all other
capitalized terms used in this Agreement having the meanings provided in Section
1) having the aggregate principal amount, if any, set forth on the signature
page of this Agreement and which will be convertible into shares of Common
Stock;
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company wishes to issue the Exchange Note, if any, to the Buyer
in exchange for the Outstanding Note, if any, and the Buyer wishes to exchange
the Outstanding Note, if any, for the Exchange Note; and
WHEREAS, in connection with the issuance of the Notes, the Company is
issuing to the Buyer Warrants on the terms provided herein;
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):
"Blackout Period" means the period of up to 20 consecutive Trading Days
commencing on the day immediately 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
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<PAGE>
reason of Section 8(b)(5)(B), the Company is not required to amend the
Registration Statement or to supplement the Prospectus.
"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 March 24, 1999
or such other mutually agreed to time.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Common Stock Warrants" means the Common Stock Purchase Warrants
issuable or issued by the Company upon redemption of the Notes, the Warrant
Notes and the Warrants.
"Common Stock Warrant Expiration Date" means the "Expiration Date" as
defined in the Common Stock Warrants.
"Conversion Price" shall have the meaning to be provided or provided in
the Notes.
"Conversion Shares" means the shares of Common Stock and the related
Preferred Share Purchase Rights issuable upon conversion of any Note or Warrant
Note.
"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 Buyer.
"Event of Default" shall have the meaning to be provided or provided in
the Notes or the Warrant Notes.
"Exchange Date" means the date that is 135 days after the Closing Date
or such earlier date specified by the Buyer in accordance with Section 2(c)(2).
"Exchange Note" means the 12% Senior Convertible Note due 2002 in the
form of Annex I to this Agreement to be issued to the Buyer in exchange for the
Outstanding Note, if any, pursuant to Section 2(c).
"Indemnified Party" means the Company, each of its directors, each of
its officers, 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
offering or 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.
-6-
<PAGE>
"Indemnified Person" means the Buyer and each other Investor who
beneficially owns or holds Registrable Securities included in the Registration
Statement and each other Investor who offers or sells Registrable Securities
included in the Registration Statement in the manner permitted under this
Agreement, the directors, if any, of the Buyer or such Investor, the officers,
if any, of the Buyer and any such Investor, each Person, if any, who controls
the Buyer or any such Investor within the meaning of the 1933 Act or the 1934
Act, any underwriter (as defined in the 1933 Act) acting on behalf of an
Investor who participates in the offering of Registrable Securities of such
Investor in accordance with the plan of distribution contained in the
Prospectus, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each Person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act.
"Inspector" means any attorney, accountant or other agent 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 Notes or
the Warrant Notes.
"Investor" means the Buyer and any permitted transferee or assignee who
agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10 of
this Agreement.
"Issuing Agent Instruction" means the letter from the Company to the
Transfer Agent in the form of Annex III to this Agreement.
"Margin Stock" shall have the meaning provided in Regulation U of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 221).
"Market Price" shall have the meaning to be provided or provided in the
Notes.
"Maturity Date" shall have the meaning to be provided or provided in
the Notes.
"Nasdaq" means the Nasdaq National Market.
"NASD" means the National Association of Securities Dealers, Inc.
"1997 10-K" means the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (including any information or documents
incorporated therein by reference).
"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
Required Information to the Company at least one Business Day prior to the
filing of the Registration Statement.
-7-
<PAGE>
"Note" means the Purchase Note or the Exchange Note and "Notes" means,
collectively, the Purchase Note and the Exchange Note.
"Other Notes" means the "Other Notes" and the "Warrant Notes" as
defined in the Notes.
"Other Securities Purchase Agreements" means the several Securities
Purchase and Exchange Agreements, dated as of the date hereof, by and between
the Company and the buyers named therein relating to the Other Notes.
"Outstanding Note" means all of the Company's 5% Senior Custom
Convertible Notes due 2000 registered in the name of the Buyer or its nominee.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association,
or similar entity or any government, governmental agency or political
subdivision.
"Placement Agent" means Diaz & Altschul Capital, LLC.
"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).
"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 and including any documents or information
incorporated therein by reference.
"Purchase Note" means the 12% Senior Convertible Note due 2002 of the
Company in the form of Annex I to this Agreement to be purchased by the Buyer
pursuant to Section 2(a).
"Purchase Price" means the purchase price for the Purchase Note set
forth on the signature page of this Agreement.
"Questionnaire" means the Prospective Purchaser Questionnaire completed
by the Buyer in connection with this Agreement.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"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 the 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 (other than the Conversion
Shares issuable upon conversion of, and the Interest Shares issuable in payment
of interest on, the
-8-
<PAGE>
Exchange Notes) 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 stock or other securities into which or for which the
shares are so changed, converted or exchanged) upon any reclassification, share
combination, share subdivision, share dividend, merger, consolidation or similar
transaction or event.
"Registration Period" means the period from the SEC Effective Date to
the earlier of
(i) the date which is two years after the later of (A) the end of the
Warrant Exercise Period and (B) the Common Stock Warrant Expiration Date (or, if
(x) the Notes and the Warrant Notes shall have been fully converted into shares
of Common Stock and the Warrants and the Common Stock Warrants shall have been
fully exercised, (y) the Maturity Date of the Notes and the Warrant Notes shall
have occurred, the Common Stock Warrant Expiration Date shall have occurred and
the Warrant Exercise Period shall have expired or (z) the Notes, the Warrant
Notes, the Warrants and the Common Stock Warrants 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 beneficially own any
Registrable Securities.
"Registration Statement" means a registration statement on Form S-3 (or
the comparable form at the time of filing with the SEC) of the Company under the
1933 Act relating to the resale of the Registrable Securities and which names
the Investors as selling stockholders.
"Regulation D" means Regulation D under the 1933 Act.
"Repurchase Event" shall have the meaning to be provided or provided in
the Notes or the Warrant Notes.
"Required Information" means, with respect to any Investor, all
information regarding such Investor, the Registrable Securities held by such
Investor or which such Investor has the right to acquire and the intended method
of disposition of the Registrable Securities held by such Investor or which such
Investor has the right to acquire as shall be required by the 1933 Act to effect
the registration of the resale by such Investor of such Registrable Securities.
"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 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time provide a "safe harbor" exemption
from registration under the 1933 Act so as to permit a holder of any securities
to sell securities of the Company to the public without registration under the
1933 Act.
-9-
<PAGE>
"Rule 144A" means Rule 144A under the 1933 Act or any successor rule
thereto.
"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 (1) the 1997 10-K, (2) the Company's definitive
Proxy Statement for its 1998 Annual Meeting of Stockholders, and (3) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30, and September 30, 1998, 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 Notes, the Warrant Notes, the
Warrants, the Common Stock Warrants, and the Shares.
"September 1998 10-Q" means the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, as filed with the SEC.
"Shares" means the Conversion Shares, the Interest Shares and the
Warrant Shares.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Trading Day" shall have the meaning to be provided or provided in the
Notes.
"Transaction Documents" means, collectively, this Agreement, the
Securities 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.
"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 the 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,
-10-
<PAGE>
(iii) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act, any state securities law or any rule or regulation under the
1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by any Person other than the Buyer of
any representation, warranty, covenant, agreement or other term of any of the
Transaction Documents.
"Warrant Exercise Period" means the "Exercise Period" as defined in the
Warrants.
"Warrants" means the 12% Senior Convertible Note Purchase Warrants in
the form of Annex II to this Agreement.
"Warrant Note" means any 12% Senior Convertible Note in the form of
Exhibit 3 to the Warrants in the aggregate principal amount set forth on the
signature page of this Agreement that is issuable or issued to the Buyer
pursuant to the Warrant.
"Warrant Shares" means the shares of Common Stock and the related
Preferred Share Purchase Rights issuable upon exercise of the Common Stock
Warrants.
2. PURCHASE AND SALE; PURCHASE PRICE; EXCHANGE.
(a) Purchase. Upon the terms and subject to the conditions of this
Agreement, the Buyer hereby agrees to purchase from the Company, and the Company
hereby agrees to sell to the Buyer, on the Closing Date, the Purchase 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 and
sale of the Purchase Note, the Company will issue to the Buyer a Warrant to
purchase Warrants Notes having an aggregate principal amount equal to 75 percent
of the original principal amount the Purchase Note.
(b) Form of Payment. Payment by the Buyer of the Purchase Price, if
any, to the Company on the Closing Date shall be made by wire transfer of funds
to:
Citibank, N.A.
111 Wall Street
New York, New York
ABA No. 021000089
For credit to the account of Morgan, Stanley & Co.
Account No. 3889-0774
For further credit to the account of SUGEN, Inc.
Account No. 14-78177
Reference: NP
(c) Exchange of Notes. (1) Upon the terms and subject to the conditions
of this Agreement, the Buyer hereby agrees to deliver to the Company on the
Exchange Date the Outstanding Note, if any, and the Company agrees (x) to
deliver to the Buyer or its designee on the Exchange Date in exchange for the
Outstanding Note, if any, an Exchange Note in the
-11-
<PAGE>
principal amount determined as stated opposite the heading Exchange Ratio on the
signature page of this Agreement and a Warrant to purchase Warrant Notes having
an aggregate principal amount equal to 75 percent of the original principal
amount of the Exchange Note and (y) to pay the Buyer on the Exchange Date by
wire transfer of immediately available funds to the account specified by the
Buyer an amount in cash equal to the accrued and unpaid interest on the
Outstanding Note, if any, to the Exchange Date. The Company agrees to cancel the
Outstanding Note in full immediately after such exchange. Nothing in this
Agreement shall limit the right of the Buyer to convert the Outstanding Note in
accordance with the terms thereof at any time prior to the Exchange Date.
(2) At any time on or after the Closing Date and prior to the date that
is 135 days after the Closing Date, the Buyer shall have the right, exercisable
by notice given to the Company, to specify an Exchange Date which is prior to
the date that is 135 days after the Closing Date, but not earlier than three
Trading Days after the Buyer gives such notice. If the Buyer shall have given
such notice and stated in such notice that the Buyer is waiving the condition
precedent in Section 7(b)(4), then the Buyer may specify that the Exchange Date
shall be on the date that the Buyer gives such notice, in which case the Buyer
shall be deemed to have become the holder of the Exchange Note on the date the
Buyer gives such notice; provided, however, that the Buyer shall not be entitled
to exercise any of the rights of a holder of the Exchange Note until the Buyer
surrenders the Outstanding Note to the Company.
(3) If the conditions precedent in Section 7(b) are not satisfied or
waived by the Buyer on an Exchange Date that is on or prior to the date which is
135 days after the Closing Date, then neither the Buyer nor the Company shall
have any further obligation to exchange the Outstanding Note for the Exchange
Note but each of the Buyer and the Company shall remain liable for any breach of
its obligations under the Transaction Documents with respect thereto.
(d) Closing. The issuance and sale of the Purchase Note and the
issuance of the Warrant referred to in Section 2(a) 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 Purchase
Note and such Warrant against payment by the Buyer to the Company of an amount
equal to the Purchase Price, and the Buyer shall pay to the Company an amount
equal to the Purchase Price against delivery of the Purchase Note and such
Warrant to the Buyer.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) Acquisition for Investment. The Buyer is acquiring the Notes and
the Warrant and will acquire the Warrant Notes, the Common Stock Warrants and
the Warrant Shares 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 of the Registration Statement covering the resale of such Shares
by the Buyer for its own account for investment and not with a view
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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; provided, however, that by making this representation the
Buyer does not agree to hold the securities for any minimum or specified period
of time (unless any such holding period is required by the terms of any such
exemption being relied on by the Buyer).
(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 Notes are
being offered and sold and the Warrants are being issued to the Buyer, (2) the
Shares, the Warrant Notes and the Common Stock Warrants are being offered to the
Buyer, (3) upon conversion of the Notes, the Conversion Shares will be issued to
the Buyer, (4) upon exercise of the Warrants, the Warrant Notes will be issued
to the Buyer, (5) upon any redemption of the Notes and the Warrants, the Common
Stock Warrants will be issued to the Buyer, (6) upon exercise of the Common
Stock Warrants, the Warrant Shares will be issued to the Buyer, and (7) the
Interest Shares will be issued to the Buyer, in each such case in reliance on
one or more exemptions from the registration requirements of the 1933 Act,
including, without limitation, Regulation D, and exemptions from state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein and in the
Questionnaire, a true and accurate copy of which has been delivered by the Buyer
to the Company, in order to determine the availability of such exemptions and
the 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
Notes and issuance of the Warrants, and the offer of the Warrant Notes, the
Conversion Shares, the Common Stock Warrants, and the Warrant Shares deemed
relevant by them (assuming the accuracy and completeness of the SEC Reports and
of the Company's responses to the Buyer's requests); the Buyer and its advisors,
if any, 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
and prospects of the Company and have received satisfactory answers to any such
inquiries (assuming the accuracy and completeness of the SEC Reports and the
Company's responses to the Buyer's requests); 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 Notes and to acquire the Warrants, the Buyer has relied solely upon the SEC
Reports, the Disclosure
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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, if any; the Buyer understands that its investment in the
Securities involves a high degree of risk; and the Buyer understands that the
offering of the Notes and the Warrants 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 Notes 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;
(g) Securities Purchase and Exchange Agreement. The Buyer has all
requisite power and authority, corporate or otherwise, to execute, deliver and
perform its obligations under this Agreement and the other agreements executed
by the Buyer in connection herewith and to consummate the transactions
contemplated hereby and thereby; and this Agreement has been duly and validly
authorized, duly executed and delivered by the Buyer and, assuming due execution
and delivery by the Company, is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law; and
(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, will be true and correct on the Closing Date and, to the extent
stated in Section 7(b) will be true and correct on the Exchange 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 (i) to 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 being
executed and delivered by the Company in connection herewith, and to consummate
the transactions contemplated hereby and thereby. The Company has no
Subsidiaries except as set forth on Schedule 4(a).
(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
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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. (1) The authorized capital of the Company consists
of (a) 30,000,000 shares of Common Stock, of which 16,734,113 shares were
outstanding at the close of business on March 10, 1999 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 March 10, 1999 to the Closing Date there will be (x) no material increase
in the number of shares of Common Stock outstanding (except for shares of Common
Stock 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 except for shares of Common Stock issued upon conversion or
in payment of interest on the Company's 5% Senior Custom Convertible Notes due
2002 that are outstanding on the date of this Agreement) and (y) no issuance of
securities convertible into, exchangeable for, or otherwise entitling the holder
to acquire, shares of Common Stock (except for securities issued pursuant to the
Other Securities Purchase Agreements and except for Preferred Share Purchase
Rights issuable in connection with the issuance of shares of Common Stock issued
in accordance with the immediately preceding clause (x)). The 1997 10-K
discloses as of December 31, 1997 all outstanding options or warrants for the
purchase of, or other rights to purchase or subscribe for, or securities
convertible into or exchangeable for, Common Stock or other capital stock of the
Company, or any contracts or commitments to issue or sell Common Stock or other
capital stock of the Company or any such options, warrants, rights or other
securities; and from December 31, 1997 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.
(2) 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
or any Subsidiary; and, immediately following the Closing Date, after giving
effect to any antidilution or similar adjustment arising by reason of issuance
of the Notes and the Other Notes and the other transactions contemplated by this
Agreement, 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 Notes and the Other Notes and the other
transactions contemplated by this Agreement) will be 5,729,664. No antidilution
adjustment will occur with respect to any outstanding class or series of
securities of the Company by reason of issuance, conversion or exercise of the
Securities or the other transactions contemplated by this Agreement except as
set forth on Schedule 4(c) of the Disclosure Schedule. 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
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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 1997 10-K or the September 1998 10-Q, neither the Company nor any Subsidiary
has sustained any loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, which loss or interference would be material to the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and the Subsidiaries, taken as a whole.
(e) Concerning the Shares and the Common Stock. The Shares have been
duly authorized and the Conversion Shares, when issued upon conversion of the
Notes and the Warrant Notes, the Interest Shares, when issued in payment of
interest on the Notes and the Warrant Notes, and the Warrant Shares, when issued
upon exercise of the Common Stock Warrants, in each such case 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 Securities. The Company has duly
reserved 4,750,000 shares of Common Stock for issuance upon conversion of the
Notes, the Warrant Notes and the Other Notes and exercise of the Common Stock
Warrants, 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 Notes, the Warrants, the Warrant Notes, and the
Common Stock Warrants as long as the Notes and the Warrant Notes may be
converted or the Warrants and the Common Stock Warrants may be exercised. 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, 1996 by the NASD or the Nasdaq
Stock Market of any failure or potential failure to meet the criteria for
continued listing and trading on Nasdaq and (3) no suspension of trading in the
Common Stock is in effect. The Company knows of no reason that the 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 Notes, the Warrants, each
Warrant Note and the Common Stock 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.
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(g) Non-contravention. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated by the Transaction Documents do not and will not, with or without
the giving of notice or the lapse of time, or both, (i) result in any violation
of any provision of the certificate of incorporation or by-laws or similar
instruments of the Company or any Subsidiary, (ii) conflict with or result in a
breach by the Company or any Subsidiary of any of the terms or provisions of, or
constitute a default under, or result in the modification of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary or any of
their respective properties or assets are bound or affected which would have a
material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the
Subsidiaries, taken as a whole, (iii) violate or contravene any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any Subsidiary or any
of their respective properties or assets which would have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken as
a whole, or (iv) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
or any Subsidiary to own or lease and operate any of its properties and to
conduct any of its business or the ability of the Company or any Subsidiary to
make use thereof.
(h) Approvals, Filings, Etc. No authorization, approval or consent of,
or filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company or any Subsidiary in connection
with the execution, delivery and performance of the Transaction Documents and
the issuance and sale of the Securities as contemplated by the Transaction
Documents, 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, 1997, neither the Company nor any Subsidiary has (i) incurred any
material obligation or liability (absolute or contingent) other than in the
ordinary course of business; (ii) canceled, without payment in full, any
material notes, loans or other obligations receivable or other debts or claims
held by it other than in the ordinary course of business; (iii) sold,
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assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of
its material properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement; (iv) conducted its
business in a manner materially different from its business as conducted on such
date; (v) declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any agreement with respect to, any transaction or event which would
constitute a Repurchase Event. Except as disclosed in the SEC Reports, the
Company and each Subsidiary 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 and the Subsidiaries, taken as a whole.
(k) SEC Filings. The Company has timely filed all reports required to
be filed under the 1934 Act and any other material reports or documents required
to be filed with the SEC since January 1, 1997. 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
Registrable Securities by the Buyer and any other Investor. The Company has not
filed any reports with the SEC under the 1934 Act since December 31, 1997 other
than the SEC Reports.
(l) Absence of Certain Proceedings. Except as disclosed in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body, or governmental agency pending or, to the
knowledge of the Company and the Subsidiaries, threatened against or affecting
the Company or any Subsidiary 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 and the Subsidiaries, taken as a whole, or the transactions contemplated
by the Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, the Transaction Documents; the Company does not have pending
before the SEC any request for confidential treatment of information and, to the
best of the Company's knowledge, no such request will be made by the Company
prior to the SEC Effective Date except as set forth in Schedule 4(l) of the
Disclosure Schedule; and to the best of the Company's knowledge there is not
pending or contemplated any, and there has been no, investigation by the SEC
involving the Company or any current director or officer of the Company.
(m) Liabilities. Except as and to the extent disclosed, reflected or
reserved against in the financial statements of the Company and the notes
thereto included in the SEC Reports, neither the Company nor any Subsidiary has
any 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, 1997, neither the Company nor any Subsidiary has
incurred any liabilities, debts or obligations of any nature whatsoever which
are individually or in the aggregate material to the Company and the
Subsidiaries, taken as a
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whole, 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, 1997, there has been
no material adverse change in the business, properties, operations, condition
(financial or other), results of operations or, to the best knowledge of the
Company and the Subsidiaries, prospects of the Company and the Subsidiaries,
taken as a whole, except as disclosed in the SEC Reports.
(o) Intellectual Property. Except as disclosed in the SEC Reports, each
of the Company and each Subsidiary (1) to the knowledge of the Company and the
Subsidiaries 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 the Subsidiaries, taken as a whole,
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 and the
Subsidiaries, taken as a whole.
(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 knowledge of the Company and the
Subsidiaries, neither the Company nor any Subsidiary is in violation of or has
any liability under 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
or liability 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 Subsidiaries, taken as
a whole; and the Company and the Subsidiaries are not aware of any pending
investigation which would reasonably be expected to lead to such a claim.
(r) Properties. Except as disclosed in Schedule 4(r) of the Disclosure
Schedule, the Company and each Subsidiary 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 and the Subsidiaries,
taken as a whole, free and clear of all security interests, charges, mortgages,
liens or other encumbrances, except such as are described in the SEC Reports or
such as do not materially interfere with the use of such property made, or
proposed to be made, by the Company and the Subsidiaries. To the best knowledge
of the Company and the Subsidiaries, the leases, licenses or other contracts or
instruments under which the Company and each Subsidiary leases, holds or is
entitled to use any property, real or personal, which individually or in the
aggregate are material to the Company and the
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Subsidiaries, taken as a whole, are valid, subsisting and enforceable with only
such exceptions as do not materially interfere with the use of such property
made, or proposed to be made by the Company and the Subsidiaries. Neither the
Company nor any Subsidiary has received notice of any material violation of any
applicable law, ordinance, regulation, order or requirement relating to its
owned or leased properties.
(s) Labor Relations. No material labor problem exists or, to the
knowledge of the Company and the Subsidiaries, is imminent with respect to any
of the employees of the Company or any Subsidiary.
(t) Insurance. The Company and each Subsidiary 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 and each Subsidiary has filed all federal,
state and local income and franchise tax returns required to be filed and has
paid all taxes shown by such returns to be due, and no tax deficiency has been
determined adversely to the Company or any Subsidiary which has had (nor does
the Company or any Subsidiary have any knowledge of any tax deficiency which, if
determined adversely to the Company or any Subsidiary, might have) a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations, or prospects of the Company and the Subsidiaries,
taken as a whole.
(v) Investment Company. Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended, and the rules and regulations of the SEC
thereunder.
(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 the Placement Agent,
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.
(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
Securities (other than the Placement Agent) 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) 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
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Notes and the Warrant Notes or upon exercise of the Common Stock 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 Securities as contemplated by the
Transaction Documents and the other transactions contemplated by the Transaction
Documents will not result in the Buyer becoming an "Acquiring Person," as
defined in the Rights Agreement; and the holders of the Notes, the Warrant Notes
and the Common Stock Warrants will be entitled, with respect to the Shares, and
the holders of the Shares will be entitled, in each case to the benefits
available to the holders of Common Stock under the Rights Agreement.
(z) Certain Securities Law Matters. For purposes of Rule 144, the Buyer
will be entitled to tack the holding period of the Outstanding Note to the
holding period of the Exchange Note issued to the Buyer in exchange for the
Outstanding Note and, based on the law in effect on the date of this Agreement,
the Company will not take a contrary position on such matter.
5. CERTAIN COVENANTS AND WAIVER.
(a) Transfer Restrictions. The Buyer acknowledges and agrees that (1)
the Notes and the Warrants to be issued and any Warrant Notes and Common Stock
Warrants which may be issued to it hereunder 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 Notes, the Warrants, the
Warrant Notes, and Common Stock Warrants may not be transferred unless the Buyer
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Note, the Warrant, the Warrant Note, or the Common Stock Warrant or the portion
thereof to be transferred may be transferred without such registration or unless
transferred in accordance with Rule 144A to a QIB; (2) no sale, assignment or
other transfer of any Note, Warrant, Warrant Note, or Common Stock Warrant or
any interest therein may be made except in accordance with the terms thereof;
(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
Registrable Securities in accordance with Section 8) under the 1933 Act or,
except as provided in Sections 5(d) and 8, Section 3.12 of the Notes and the
Warrant Notes, Section 18 of the Warrants, and Section 17 of the Common Stock
Warrants, to comply with the terms and conditions of any exemption thereunder.
Prior to the time particular Shares are eligible for resale under Rule 144(k),
the Buyer may not transfer such Shares in a transaction which does not
constitute a transfer thereof pursuant to the Registration Statement relating to
such Shares in accordance with the plan of distribution set forth therein or in
any supplement to the Prospectus 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
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under the 1933 Act. Nothing in any of the Transaction Documents shall limit the
right of a holder of the Securities to make a bona fide pledge thereof to an
institutional lender.
(b) Restrictive Legends. (1) The Buyer acknowledges and agrees that the
Notes and the Warrant Notes shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
Notes and the Warrant Notes):
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, in payment of interest on this Note and upon exercise of
Common Stock Warrants issuable upon redemption of this Note are not covered
by a registration statement under the 1933 Act or registration under state
securities laws. This Note has been acquired for investment only and may
not be sold, transferred or assigned unless (1) the resale hereof is
registered under the 1933 Act, (2) the Company has received an opinion of
counsel reasonably satisfactory in form, scope and substance to the Company
that such registration is not required or (3) sold, transferred or assigned
to a QIB pursuant to Rule 144A.
(2) The Buyer further acknowledges and agrees that each Warrant shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against each Warrant);
This Warrant has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), or applicable state securities laws and may not
be sold, transferred or assigned unless (1) the resale hereof is registered
under the 1933 Act, (2) the Company has received an opinion of counsel
reasonably satisfactory in form, scope and substance to the Company that
such registration is not required or (3) sold, transferred or assigned to a
QIB pursuant to Rule 144A.
This Warrant is issued pursuant to a Securities Purchase and Exchange
Agreement, dated as of March 19, 1999, 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 Securities Purchase and Exchange Agreement.
(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 or are eligible for resale under Rule 144(k) under the 1933 Act, 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 reasonably
satisfactory in form, scope and substance to the Company that registration
is not required under said Act.
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(4) Once the Registration Statement has been declared effective, or
particular Shares are eligible for resale pursuant to Rule 144(k) under the 1933
Act, thereafter (A) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any such Shares
issued prior to the SEC Effective Date or the time of such eligibility, as the
case may be, 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 (B) the Company shall not
place any restrictive legend on certificates for such Shares subsequently issued
or impose any stop-transfer restriction thereon.
(c) 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 any of the Securities, 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 beneficially owns any of the Securities, 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.
(d) 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.
(e) 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 offer and sale of the Securities to the Buyer as contemplated
by the Transaction Documents under such of the securities laws of jurisdictions
in the United States as shall be applicable thereto. In connection with the
foregoing obligations of the Company in this Section 5(e), 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(e), (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.
(f) 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
Notes, the Company (1) shall comply with Article III of the Notes as if the
Notes were outstanding, (2) shall not take any action which, if the Notes 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)
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would constitute a Repurchase Event or, with the giving of notice or the passage
of time, or both, would constitute a Repurchase Event.
(g) Use of Proceeds. The Company represents and agrees that: (1) it
does not own or have any present intention of acquiring any Margin Stock; (2)
the proceeds of sale of the Notes, the Warrant Notes and the Warrant Shares 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 Regulation U of the Board of Governors of the Federal
Reserve System; and (4) neither the Company nor any agent acting on its behalf
has taken or will take any action which might cause this Agreement or the
transactions contemplated hereby to violate Regulation T, Regulation U 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.
(h) 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 Notes and issue and acquire the Warrants set forth in Section 6 or
7, as the case may be, of this Agreement on or before the Closing Date. If the
Buyer or the Company shall exercise any of its rights under the Warrants, each
of the parties shall use its best efforts timely to satisfy each of the
applicable conditions to the other party's obligations thereunder on or before
the applicable date for closing the particular transaction.
(i) Debt Obligation. So long as any portion of any Note or Warrant Note
is outstanding, the Company shall cause its books, records and financial
statements to reflect the Notes and the Warrant Note as debts of the Company in
the unpaid principal amount thereof and, whenever appropriate, as valid senior
debt obligations of the Company for money borrowed.
(j) Buyer's Waiver. The Buyer, on behalf of itself and any subsequent
holder of the Outstanding Note, hereby waives any requirements or restrictions
contained in the Outstanding Note which would restrict or prohibit the
transactions contemplated by this Agreement and the Other Securities Purchase
Agreements and any "Event of Default" under and as defined in the Outstanding
Note (and the consequences thereof) which would otherwise arise from the
execution and delivery of this Agreement and the Other Securities Purchase
Agreements and completion of the transactions contemplated hereby and thereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND EXCHANGE.
The Buyer understands that the Company's obligations to sell to the
Buyer the Purchase Note and to issue to the Buyer the Warrant to be issued to
the Buyer pursuant to Section 2(a) on the Closing Date and to issue to the Buyer
the Exchange Note, if any, and to issue to the Buyer the Warrant to be issued to
the Buyer pursuant to Section 2(c) in exchange for the Outstanding Note, if any,
on the Exchange Date are conditioned upon satisfaction of the
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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) 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;
(b) 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
(c) No event which, if the Notes were outstanding (1) would constitute
an Event of Default under and as defined in the Notes or, with the giving of
notice or the passage of time, or both, would constitute an Event of Default
under and as defined in the Notes shall have occurred and be continuing or (2)
would constitute a Repurchase Event under and as defined in the Notes or, with
the giving of notice or the passage of time, or both, would constitute a
Repurchase Event under and as defined in the Notes 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 Notes with respect to such (and only such) Event of Default or
Repurchase Event, as the case may be.
7. CONDITIONS TO THE BUYER'S OBLIGATIONS TO PURCHASE AND EXCHANGE.
(a) Closing Date. The Company understands that the Buyer's obligation to
purchase from the Company the Purchase Note and to acquire from the Company the
Warrant to be acquired from the Company pursuant to Section 2(a) on the Closing
Date and to exchange the Outstanding Note, if any, for the Exchange Note, if
any, on the Exchange Date are 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):
(1) 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;
(2) The representations and warranties of the Company contained in this
Agreement shall have been true and correct on the date of this Agreement and
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 except for the
approvals referred to in clause (3) of Section 4(h), which shall have been
obtained on or before the Closing Date), and on or before the Closing Date the
Company shall have performed all covenants and agreements of the Company
contained herein required to be performed by the Company on or before the
Closing Date;
(3) No event which, if the Notes were outstanding (1) would constitute
an Event of Default under and as defined in the Notes or, with the giving of
notice or the passage of time, or both, would constitute an Event of Default
under and as defined in the Notes shall
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have occurred and be continuing or (2) would constitute a Repurchase Event or,
with the giving of notice or the passage of time, or both, would constitute a
Repurchase Event under and as defined in the Notes shall have occurred and be
continuing;
(4) The Company shall have delivered to the Buyer a certificate, dated
the Closing Date, duly executed by its Chief Executive Officer or Chief
Financial Officer to the effect set forth in subparagraphs (1), (2), and (3) of
this Section 7(a);
(5) The Company shall have delivered to the Buyer a certificate, dated
the Closing Date, of the Secretary of the Company certifying (A) the Certificate
of Incorporation and By-Laws of the Company as in effect on the Closing Date,
(B) all resolutions of the Board of Directors (and committees thereof) of the
Company relating to the Transaction Documents and the transactions contemplated
hereby and (C) such other matters as reasonably requested by the Buyer;
(6) The Transfer Agent shall have acknowledged receipt of the Issuing
Agent Instruction;
(7) 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 IV to this Agreement;
(8) 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 V to this Agreement; and
(9) On the Closing Date (i) trading in securities on the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of California or the State of New York shall not
have been declared by either federal or state authorities.
(b) Exchange Date. The Company understands that, in addition to the
conditions precedent in Section 7(a), the Buyer's obligation to exchange the
Outstanding Note, if any, for the Exchange Note, if any, on the Exchange Date is
conditioned upon satisfaction of the following conditions precedent on the
Exchange Date (any or all of which may be waived by the Buyer in its sole
discretion):
(1) On the Exchange Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(2) The representations and warranties of the Company contained in this
Agreement insofar as they relate to the Exchange Note and the Warrants issuable
pursuant to Section 2(c) shall have been true and correct on the date of this
Agreement and shall be true and correct on the Exchange Date as if given on and
as of the Exchange Date (except for representations given as of a specific date,
which representations shall be true and correct as
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<PAGE>
of such date and except for the approvals referred to in clauses (1) through (4)
of Section 4(h), which shall have been obtained on or before the Exchange Date),
and on or before the Exchange 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 Exchange Date;
(3) No Event of Default under and as defined in the Notes and no event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default under and as defined in the Notes shall have
occurred and be continuing and (2) no Repurchase Event and no event which, with
the giving of notice or the passage of time, or both, would constitute a
Repurchase Event under and as defined in the Notes shall have occurred and be
continuing;
(4) The Company shall have delivered to the Buyer a certificate, dated
the Exchange Date, duly executed by its Chief Executive Officer or Chief
Financial Officer to the effect set forth in subparagraphs (1), (2), and (3) of
this Section 7(b);
(5) The SEC Effective Date shall have occurred and the Registration
Statement shall be effective and available for use under the 1933 Act by the
Buyer for resale of the Registrable Securities required to be included therein;
and
(6) On the Exchange Date (i) trading in securities on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not have
been suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of 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 covers the resale by the Buyer of (A) a
number of shares of Common Stock equal to at least the number of Conversion
Shares issuable to the Buyer under the Purchase Note and the Warrant Notes,
determined as if the Purchase Note and the Warrant Notes, together with three
months' accrued and unpaid interest thereon, were converted in full at the
Conversion Price in effect on the SEC Filing Date, and (B) 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 and
Warrant Shares, as Registrable Securities, and which Registration Statement
shall state that, in accordance with Rule 416 under the 1933 Act, the
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Notes and
the Warrant Notes or exercise of the Common Stock Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) Prior to the SEC Effective Date the Company will not, without the
prior written consent of the Majority Holders, request the acceleration of any
other registration statement filed with the SEC, 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
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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.
(3) The Company shall use its best efforts to maintain its eligibility
to use Form S-3 for registration of the resale of shares of its Common Stock
under the 1933 Act so long as Form S-3 is generally available for use by
registrants for registration of the resale of common stock, and if Form S-3 is
rescinded by the SEC or, despite such efforts, the Company is ineligible to use
Form S-3 then the Company will use commercially reasonable efforts to become
eligible and maintain its eligibility to use "short form" for registration of
the resale of shares of its Common Stock; provided, however, that nothing in
this Section 8(a)(3) shall require the Company to issue shares of its Common
Stock in order to meet any public "float" requirement for eligibility to use any
such registration form or to meet any asset, net worth or tangible asset
requirement for eligibility to use any such registration form.
(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 to become
effective as promptly as possible after the Closing and to keep the Registration
Statement effective pursuant to Rule 415 at all times during the Registration
Period. The Company shall submit to the SEC, within three Business Days after
the Company learns that no review of the Registration Statement will be made by
the staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request. The Company represents and warrants
to the Investors that (a) the Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein), at the time it is
first filed with the SEC, at the time it is ordered effective by the SEC and at
all times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (b) the Prospectus, at the
time the Registration Statement is declared effective by the SEC and at all
times that the Prospectus is required by this Agreement to be available for use
by any Investor 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;
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(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 and
the Prospectus and each amendment or supplement thereto, (2) one copy of each
letter written by or on behalf of the Company to the SEC or the staff of the SEC
and each item of correspondence from the SEC or the staff of the SEC relating to
the 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 the 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 (i) to register
and qualify the Registrable Securities covered by the Registration Statement
under the securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Securities reasonably request,
(ii) to prepare and to file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period and (iii) to take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
by the Investors in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto (I) to
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8(b)(4), (II) to subject itself to
general taxation in any such jurisdiction, (III) to file a general consent to
service of process in any such jurisdiction, (IV) to provide any undertakings
that cause more than nominal expense or burden to the Company or (V) to make any
change in its charter or by-laws which the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
stockholders;
(5) (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, 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 such Investor or its intended plan of distribution
of its Registrable Securities, 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,
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however, that the aggregate number of Trading Days on which any Blackout Period
is in effect may not exceed 20 Trading Days (whether or not consecutive) in any
period of 12 consecutive months; 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 offered or sold
pursuant to the Registration Statement of the issuance by the SEC of any stop
order or other suspension of effectiveness of the Registration Statement at the
earliest possible time;
(7) permit the Investors who hold Registrable Securities being included
in the Registration Statement, 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 five Business Days prior to their
filing with the SEC and shall not file any such document to which any Investor
reasonably objects; 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 by the Registration Statement) 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 SEC Effective Date
of the Registration Statement;
(9) make available for inspection by any Investor and any Inspector
retained by such Investor at such Investor's sole expense, all Records as shall
be reasonably necessary to enable such 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 such Investor shall
hold in confidence and shall not make any disclosure of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination such Investor is so notified, unless (i)the disclosure of
such Record is necessary to avoid or correct a misstatement or omission in the
Registration Statement, (ii) the release of such Record is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction or (iii) the information in such Record 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 a confidentiality agreement with the Company
with respect thereto, substantially in the form of this Section 8(b)(9), which
agreement shall permit such Inspector to disclose Records to the Investor who
has retained such Inspector. Each Investor agrees that it shall, upon learning
that disclosure of such
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Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at the Company's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to this Agreement unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) disclosure of
such information is necessary to avoid or correct a misstatement or omission in
the Registration Statement, (iii) 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 at all times;
(12) cooperate with the Investors who hold Registrable Securities being
offered pursuant to the Registration Statement 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 (i) to the Transfer Agent (with copies to the Investors whose
Registrable Securities are included in the Registration Statement) an
instruction substantially in the form of Annex VI to this Agreement and (ii)
shall cause legal counsel selected by the Company to deliver to the Investors
whose Registrable Securities are included in the Registration Statement and, if
required by the Transfer Agent, to the Transfer Agent opinions of counsel, in
the forms of Annex VII and Annex VIII to this Agreement; 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.
(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
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of a particular Investor that such Investor shall furnish to the Company the
Required Information and shall execute such documents in connection with such
registration as the Company may reasonably request. At least four Business Days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the Required Information if any of such
Investor's Registrable Securities are eligible for inclusion in the Registration
Statement. If at least one Business Day prior to the SEC Filing Date the Company
has not received the Required Information from an Investor, then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor; provided, however, that nothing herein shall relieve
the Company of its obligation to register the resale of such Investor's
Registrable Securities promptly after such Investor provides the Required
Information to the Company.
(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 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 the Prospectus to such broker or brokers and shall
instruct such broker or brokers to deliver such Prospectus to the purchaser in
such sale or such purchaser's broker, (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
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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 each Investor the
benefits of Rule 144, the Company agrees:
(1) to promptly furnish to each Investor so long as such Investor owns
Registrable Securities, such information as may be necessary to permit each
Investor 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 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 or any of the transactions contemplated by the Transaction
Documents. 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 the Prospectus was timely made available by the Company
pursuant to Section 8(b)(3) hereof; (II) amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; (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); and
(IV) any Investor with respect to a Claim by the Company against such Investor
to the extent and solely to the extent such Investor shall have been determined
by final judgment of a court of competent jurisdiction, not subject to further
appeal (x) to have breached the obligation of such Investor under Section 1(b)
of the Warrants to purchase Warrant Notes in accordance with the terms of such
Warrants and (y) to have breached such obligation principally by reason of
conduct of such Investor involving gross negligence or willful
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misconduct. 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 whose
Registrable Securities are included in the Registration Statement 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 the 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 all Claims in the
aggregate as does not exceed the amount by which the proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to the Registration
Statement exceeds the amount paid by such Investor for such Registrable
Securities. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 9(a)(2) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the Prospectus, as then amended or
supplemented.
(3) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 9(a) of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 9(a), deliver to the indemnifying party a
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 or
Indemnified Parties, as the case may be, 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.
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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) the contribution by any seller of
Registrable Securities in respect of all Claims in the aggregate 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 shall be addressed to the Company at its address shown in
the introductory paragraph of this Agreement, Attention: Senior Vice
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President and Chief Financial Officer (telephone line facsimile number (650)
553-8310), and a copy shall also be given to: Cooley Godward LLP, 3000 El Camino
Real, Five Palo Alto Square, Palo Alto, California 94306, Attention: Alan C.
Mendelson, Esq., and Suzanne Sawochka Hooper, 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: [__________________________] (telephone line facsimile
transmission number [____________]), in each case with a copy to: Diaz &
Altschul Capital, LLC, 745 Fifth Avenue, Suite 1710, New York, New York 10151
(telephone line facsimile transmission number (212) 751-5757).
(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.
Although this Agreement is dated as of the date first set forth above, the
actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to (1) the date of execution and
delivery of this Agreement by the Buyer shall be deemed a reference to the date
set forth below the Buyer's signature on the signature page hereof, (2) the date
of execution and delivery of this Agreement by the Company shall be deemed a
reference to the date set forth below the Company's signature on the signature
page hereof and (3) the date of execution and delivery of this Agreement, or the
date of execution and delivery of this Agreement by the Buyer and the Company,
shall be deemed a reference to the later of the dates set forth below the
signatures of the parties on the signature page hereof.
(f) Entire Agreement; Benefit. This Agreement, including the Annexes,
Schedules and Disclosure Schedule, constitutes the entire agreement between 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,
Schedules and Disclosure Schedule, supersedes all prior agreements and
understandings, whether written or oral, between the parties hereto with respect
to the subject matter hereof. This Agreement and the terms and provisions hereof
are for the sole benefit of only the Company, the Buyer and their respective
successors and permitted assigns and in no event shall the Buyer have any
liability to any stockholder or creditor of the Company or any other Person
(other than the Company) in any way relating to or arising from this Agreement
or the transactions contemplated hereby.
(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
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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, 9, and 10 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 any Note,
Warrant, Warrant Note, or Common Stock Warrant) who is an "accredited investor"
as that term is defined in Regulation D under the 1933 Act, only if: (1) such
Investor agrees in writing with such transferee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (2) the Company is, within a reasonable time after such
assignment, 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 such transferee 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, 9, and 10 hereof and (5)
immediately after such transfer such transferee holds at least 25,000 shares of
Common Stock or a portion (which, if applicable, may be all) of any Note,
Warrant, Warrant Note, or Common Stock Warrant which at the time of such
transfer is convertible into or exercisable for 25,000 shares of Common Stock
(or any combination thereof) or such lesser amount of Common Stock that any
Note, Warrant, Warrant Note, or Common Stock Warrant is convertible into or
exercisable for at the time of such assignment. Upon any such assignment, the
Company shall be obligated to such transferee to perform all of its covenants
under Sections 5, 8, 9, and 10 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 assignment take such actions as shall be
reasonably acceptable to the transferring Investor and such transferee to assure
that the Registration Statement relating to the Registrable Securities involved
in such transfer and the 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 fees, 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 fees and disbursements of counsel, 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
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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. Nothing
herein shall limit the rights of the Placement Agent under its Engagement
Agreement with the Company.
(l) Termination. The Buyer shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(1) the Company shall have failed, refused, or been unable at or prior
to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or before
March 31, 1999, 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 Notes 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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 and on the dates set forth below their respective
signatures.
Principal Amount of Purchase Note: $
Purchase Price of Purchase Note: $
Exchange Ratio: Exchange Note having a principal amount equal to ________% of
the principal amount of the Outstanding Note that is
outstanding on the Exchange Date
SUGEN, INC.
By:___________________________________________
Name:
Title:
Date: March 19, 1999
[BUYER]
By:___________________________________________
Name:
Title:
Address:
Attention:
Facsimile No:
Date: March 19, 1999
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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,
IN PAYMENT OF INTEREST ON THIS NOTE AND UPON EXERCISE OF COMMON STOCK WARRANTS
ISSUABLE UPON REDEMPTION OF THIS NOTE ARE NOT COVERED BY A REGISTRATION
STATEMENT UNDER THE 1933 ACT OR REGISTRATION UNDER STATE SECURITIES LAWS. THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED UNLESS (1) THE RESALE HEREOF IS REGISTERED UNDER THE 1933 ACT, (2) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM,
SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR (3)
SOLD, TRANSFERRED OR ASSIGNED TO A QIB PURSUANT TO RULE 144A.
SUCH SHARES OF COMMON STOCK MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (1)
THE RESALE THEREOF IS REGISTERED UNDER THE 1933 ACT OR (2) THE COMPANY HAS
RECEIVED 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 SECURITIES PURCHASE AND EXCHANGE AGREEMENT,
DATED AS OF MARCH 19, 1999, 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 SECURITIES PURCHASE AND EXCHANGE
AGREEMENT.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 8.7.
SUGEN, INC.
12% SENIOR CONVERTIBLE NOTE DUE 2002
No. ___ $______________
New York, New York
March 24, 1999
FOR VALUE RECEIVED, SUGEN, INC., a Delaware corporation (hereinafter
called the "Company"), hereby promises to pay to [HOLDER], c/o
__________________________________, or registered assigns (the "Holder") or
order, the sum of ___________________________________ Dollars
($________________), 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 July 1, 1999, 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
<PAGE>
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.
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 VI.
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 Securities Purchase Agreement and the Holder of this Note
and this Note are subject to the terms of the Securities Purchase Agreement.
The following terms shall apply to this Note:
ARTICLE I
INTEREST IN COMMON STOCK; REDEMPTION
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 Interest Shares upon such exercise of the Stock
Payment Option shall have been authorized by the Board of Directors.
(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 other than payment of interest on this
Note, or held in the Company's treasury, after taking into account shares of
Common Stock required to be reserved for conversion of this Note, the Other
Notes and the Warrant Notes and exercise of the Warrants, the Common Stock
Warrants and the Other Common Stock Warrants, is insufficient to pay the portion
of such interest to be paid in Common Stock;
(ii) the issuance or delivery of Interest Shares or
the public resale of such Interest Shares by the Holder would require
registration or filing with or approval of any governmental authority under any
law or regulation, and such registration, filing or approval has not been
effected or obtained or is not in effect or the Registration Statement is
unavailable for use by the Holder for the resale of the Interest Shares;
provided, however, that with respect to compliance with the securities or blue
sky laws of the states of the United States, the
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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 Securities Purchase
Agreement;
(iii) the Interest 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 Interest Share Price for the Interest Shares
is less than the par value of
the Common Stock;
(v) an Event of Default has occurred and is
continuing on the applicable Interest Payment Date or at any time thereafter to
and including the date on which the Company delivers such Interest Shares to the
Holder; or
(vi) the Common Stock is neither (i) listed or
admitted for trading on a national securities exchange nor (ii) quoted on
Nasdaq.
(c) (1) The Company shall have the right to elect the
Stock Payment Option for this Note with respect to a particular Interest Payment
Date only if (A) the Company gives notice of such election to the Holder on or
before such Interest Payment Date and (B) the Company also elects the similar
option which it has with respect to the Other Notes and the Warrant Notes for
the interest due thereon on the date which is such Interest Payment Date and in
each such case described in this clause (B) pro rata among this Note, the Other
Notes and the Warrant Notes, based on the amounts of interest due on such date
hereon and thereon. If the Company elects the Stock Payment Option with respect
to a particular Interest Payment Date, the Company shall issue to the Holder in
respect of such Interest Payment Date the aggregate number of whole shares of
Common Stock determined by dividing the per share Interest Share Price of the
Common Stock on the applicable Interest Payment Date into an amount equal to 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 Interest Shares were being paid in such lawful money.
(2) If the Company elects the Stock Payment Option
with respect to an Interest Payment Date, the Interest Shares for such Interest
Payment Date shall become issuable on such Interest Payment Date and the Company
shall deliver, or cause to be delivered, the appropriate number of Interest
Shares to the Holder within three Trading Days after the applicable Interest
Payment Date. If in any case the Company shall fail to deliver or cause to be
delivered such number of Interest Shares to the Holder within five Trading Days
after such Interest Payment Date, then in addition to any other liabilities the
Company may have hereunder and under applicable law (A) the Company shall pay or
reimburse the Holder on demand for all out-of-pocket expenses, including,
without limitation, reasonable fees and expenses of legal counsel, incurred by
the Holder as a result of such failure, (B) if as a result of such failure the
Holder shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of purchasing
securities to cover a sale (whether by the Holder or the Holder's securities
broker) or borrowing of shares of Common Stock by the Holder for purposes of
settling any trade involving a sale of shares of Common Stock made by the Holder
during the period beginning on the applicable Interest Payment Date and ending
on the date the Company delivers or causes to be delivered to the Holder the
Interest Shares issuable in respect thereof), then the Company shall upon demand
of the Holder pay to the Holder an amount equal to the actual direct,
out-of-pocket damages and liabilities suffered by the Holder by reason thereof
which the Holder documents to the reasonable satisfaction of the
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Company, and (C) 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 shares of Common Stock issuable in connection with such
exercise of the Stock Payment Option, require payment in cash of the interest in
respect of which the Company exercised the Stock Payment Option, in which case
the amount of such interest shall be immediately due and payable, with Default
Interest thereon from the applicable Interest Payment Date until paid in full
and upon such cash payment in full the Company shall not be obligated to issue
such Interest Shares to the Holder. Notwithstanding the foregoing the Company
shall not be liable to the Holder under clause (B) of the immediately preceding
sentence to the extent the failure of the Company to deliver or to cause to be
delivered such Interest Shares results from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, or any similar event outside the control of the
Company (it being understood that the action 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, 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
following the third Trading Day after such Interest Payment Date if the Holder
becomes aware that Interest Shares so issuable have not been received as
provided herein, but any failure so to give such notice shall not affect the
Holder's rights under this Note or otherwise.
(3) No fractional shares of Common Stock shall 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 of shares or may pay lawful money of the United
States of America in payment of the amount of such interest in lieu of issuance
of such fractional share.
(4) If the Company elects the Stock Payment Option
with respect to a payment of interest on this Note with respect to a particular
Interest Payment Date and the arithmetic average of the Market Price of one
share of Common Stock during the Interest Shares Measurement Period with respect
to such Interest Payment Date is less than the Interest Share Price for such
Interest Payment Date, then the Company shall pay to the Holder an amount in
cash determined as follows:
PA = I - (IS x M)
where:
PA = the amount payable by the Company to the Holder in
respect of such Interest Payment Date pursuant to this
Section 1.1(c)(4)
I = the amount of interest payable to the Holder on such
Interest Payment Date in respect of which the Company
elected the Stock Payment Option
IS = the number of Interest Shares issued to the Holder in
respect of such Interest Payment Date
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M = the arithmetic average of the Market Price of one
share of Common Stock during the Interest Shares
Measurement Period with respect to such Interest
Payment Date
The amount, if any, payable by the Company pursuant to this Section 1.1(c)(4)
shall be deemed to be additional interest on this Note and shall be paid to the
Holder in lawful money of the United States of America within three Business
Days after the end of the applicable Interest Shares Measurement Period by wire
transfer of immediately available funds to such account as shall be specified by
notice from the Holder to the Company from time to time.
(d) If the Company elects the Stock Payment Option with
respect to a payment of interest on this Note with respect to a particular
Interest Payment Date, the Company shall deliver to the Holder, on or prior to
the date on which Interest Shares for such payment of interest on this Note are
required to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the cash interest payment to which the Holder is entitled,
(ii) the portion of such interest payment being made in Interest Shares, (iii)
the Interest Share Price and the Market Price on each Trading Day used in
computing the Interest Share Price, (iv) the number of Interest Shares allocable
to such payment, as calculated pursuant to this Section 1.1, (v) any rounding
adjustment to such number or any payment necessary to be made pursuant to
Section 1.1(c), (vi) a brief statement of the facts requiring such adjustment,
and (vii) a brief statement that none of the conditions set forth in Section
1.1(b) has occurred and is existing and that all of the requirements of this
Section 1.1 have been met. Such Company Certificate shall be conclusive evidence
of the correctness of the calculation of the number of Interest 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. On or before the pertinent Interest Payment Date, the Company shall
issue, or cause the Issuing Agent to prepare and issue, the Interest Shares in
the name of the Holder or its nominee before being so delivered by the Company
on such Interest Payment Date.
(e) The Interest 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 has been in all respects authorized by the
Company; 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 and any amount required to be paid by the Company pursuant to Section
1.1(c)(4) with respect to such interest payment, 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 Interest Shares
relate.
1.2 Optional Redemption. (a) At any time after the SEC Effective Date,
the Company shall have the right on one occasion only to redeem this Note in
full pursuant to this Section 1.2 on the Optional Redemption Date, so long as
(x) on the date the Optional Redemption Notice is given and at all times
thereafter to and including the Optional Redemption Date, the Registration
Statement is effective under the 1933 Act and available for use by the Holder
for the resale of all shares of Common Stock issuable or issued to the Holder,
including, without limitation, all Interest Shares issued to the Holder, except
as may otherwise be agreed by the Holder at any time with respect to any such
shares of Common Stock, (y) on the date the Optional Redemption Notice is given
and at all times thereafter to and including the Optional Redemption Date one or
more registration statements under the 1933 Act covering the resale of the
shares of Common Stock issuable to the Holder upon exercise of the Common Stock
Warrants issuable to the Holder in payment of a portion of the Optional
Redemption
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<PAGE>
Consideration shall be effective under the 1933 Act and available for use by the
Holder for the resale of such shares of Common Stock and each such registration
statement shall be expected to remain available for such use for 30 Trading Days
after the Optional Redemption Date, and (z) on the date the Optional Redemption
Notice is given, the Company has funds available to pay the cash portion of the
Optional Redemption Consideration. In order to exercise its right of redemption
under this Section 1.2, the Company shall give the Optional Redemption Notice to
the Holder not less than 45 days or more than 90 days prior to the Optional
Redemption Date. The Optional Redemption Notice shall state that: (1) the
Company is exercising its right to redeem this Note in accordance with this
Section 1.2, (2) the amount of the Optional Redemption Consideration and (3) the
Optional Redemption Date (which, in the case of a redemption in connection with
a proposed transaction that would not be permitted by the terms of this Note,
may be stated as the date which coincides with completion of such transaction,
but in no event may be sooner than 45 days or more than 90 days after the
Optional Redemption Notice is given). Nothing herein shall permit the Company to
exercise its right of redemption on a basis that is contingent or conditioned
upon any event or other matter. On the Optional Redemption Date (or such later
date as the Holder surrenders this Note to the Company duly endorsed for
transfer) the Company shall (x) pay to or upon the order of the Holder, by wire
transfer of immediately available funds to such account as shall be specified
for such purpose by the Holder at least one Business Day prior to the Optional
Redemption Date, an amount equal to the cash portion of the Optional Redemption
Consideration of this Note and (y) issue and deliver to the Holder the portion
of the Optional Redemption Consideration consisting of Common Stock Warrants,
which will be deemed for all purposes to have been issued to the Holder on the
Optional Redemption Date, unless the Company shall have failed to pay the amount
specified in the immediately preceding clause (x) when due.
(b) The Company shall not be entitled to give the Optional
Redemption Notice or to redeem any portion of this Note with respect to which
the Holder has given a Conversion Notice on or prior to the date the Company
gives the Optional Redemption Notice. Notwithstanding the giving of the Optional
Redemption Notice, the Holder shall be entitled to convert this Note in
accordance with the terms of this Note by giving a Conversion Notice at any time
on or prior to the later of (1) the date which is one Trading Day prior to the
Optional Redemption Date and (2) if the Company fails to pay and deliver to the
Holder or deposit in accordance with Section 8.10 the Optional Redemption
Consideration on or before the Optional Redemption Date, the date on which the
Company pays and delivers to the Holder or deposits in accordance with Section
8.10 the Optional Redemption Consideration. The Optional Redemption
Consideration set forth in the Optional Redemption Notice shall be adjusted to
reflect the reduced outstanding principal amount of this Note and related
accrued interest and Default Interest on the Optional Redemption Date resulting
from any permitted conversions of this Note after the Optional Redemption Notice
is given.
(c) Redemption of this Note pursuant to this Section 1.2
shall be made at the same time as a redemption by the Company of all Other Notes
and Warrant Notes that are outstanding on the Optional Redemption Date. The
Company shall not redeem any of the Other Notes or Warrant Notes pursuant to the
provisions thereof similar to this Section 1.2 or repurchase or otherwise
acquire any of the Other Notes or the Warrant Notes (other than a mandatory
repurchase pursuant to provisions of the Other Notes and the Warrant Notes
comparable to Article V) unless the Company offers simultaneously to redeem,
repurchase or otherwise acquire a pro rata portion (based on outstanding
principal amount) of this Note for cash at the same unit price as the Other
Note(s) or Warrant Note(s).
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<PAGE>
1.3 No Prepayment, Etc. Except as specifically provided in Sections
1.2, 5.2 and 5.3, this Note may not be prepaid, redeemed or repurchased at the
option of the Company prior to the Maturity Date. The Company shall not
repurchase or otherwise acquire any of the Other Notes or the Warrant Notes
unless the Company offers simultaneously to redeem, repurchase or otherwise
acquire a pro rata portion of this Note for cash at the same price per unit of
outstanding principal amount as the Other Note(s) or Warrant Note(s). Nothing in
this Section 1.3 shall limit the Company's rights under Article VI.
ARTICLE II
CONVERSION
2.1 Right to Convert. Subject to and upon compliance with the
provisions of this Note, the Holder of this Note shall have the right, at the
Holder's option, at any time prior to the close of business on the Maturity Date
(except that if the Holder shall have exercised repurchase rights under Sections
5.1 and 5.2 or Section 5.3 or the Company shall have exercised its redemption
rights under Section1.2 such conversion right shall terminate with respect to
the portion of this Note to be repurchased or redeemed, as the case may be, at
the close of business on the last Trading Day prior to the date the Company pays
or deposits in accordance with Section 8.10 the applicable Repurchase Price,
Registration Repurchase Price or Optional Redemption Consideration unless the
Company shall default in payment due upon repurchase or redemption hereof) to
convert the principal amount of this Note, or any portion of such principal
amount which is at least $10,000 (or such lesser principal amount of this Note
as shall be outstanding at such time), plus accrued and unpaid interest, into
that number of fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) obtained by dividing (1) the sum of (x) the
principal amount of this Note or portion thereof being converted plus (y)
accrued and unpaid interest on the portion of the principal amount of this Note
being converted to the applicable Conversion Date plus (z) accrued and unpaid
Default Interest, if any, on the amount referred to in the immediately preceding
clause (y) to the applicable Conversion Date by (2) the Conversion Price in
effect on the applicable Conversion Date, by giving a Conversion Notice in the
manner provided in Section 2.2; provided, however, that, if at any time this
Note is converted in whole or in part pursuant to this Section 2.1, the Company
does not have available for issuance upon such conversion as authorized and
unissued shares or in its treasury at least the number of shares of Common Stock
required to be issued pursuant hereto, then, at the election of the Holder made
by notice from the Holder to the Company, this Note (or portion hereof as to
which conversion has been requested), to the extent that sufficient shares of
Common Stock are not then available for issuance upon conversion, shall be
converted into the right to receive from the Company, in lieu of the shares of
Common Stock into which this Note or such portion hereof would otherwise be
converted and which the Company is unable to issue, payment in an amount equal
to the product obtained by multiplying (x) the number of shares of Common Stock
which the Company is unable to issue times (y) the arithmetic average of the
Market Price for the Common Stock during the five consecutive Trading Days
immediately prior to the applicable Conversion Date. Any such payment shall, for
all purposes of this Note, be deemed to be a payment of principal plus a premium
equal to the total amount payable less the principal portion of this Note
converted as to which such payment is required to be made because shares of
Common Stock are not then available for issuance upon such conversion. The
Holder is not entitled to any rights of a holder of Common Stock until the
Holder has converted this Note to Common Stock, and only to the extent this Note
is deemed to have been converted to Common Stock under this Article II. For
purposes of Sections 2.5 and 2.6, whenever a provision references the shares of
Common Stock into which this Note (or a portion hereof) is convertible or the
shares of Common Stock
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<PAGE>
issuable upon conversion of this Note (or a portion hereof) or words of similar
import, any determination required by such provision shall be made as if a
sufficient number of shares of Common Stock were then available for issuance
upon conversion in full of this Note.
2.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. (a) In order to exercise
the conversion privilege with respect to this Note, the Holder shall give a
Conversion Notice (or such other notice which is acceptable to the Company) to
the Company and the Issuing Agent or to the office or agency designated by the
Company for such purpose by notice to the Holder. 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. A Conversion Notice may be given by telephone line facsimile
transmission to the numbers set forth on the form of Conversion Notice.
(b) As promptly as practicable, but in no event later than
three Trading Days, after a Conversion Notice is given, the Company shall issue
and shall deliver to the Holder or the Holder's designee the number of full
shares of Common Stock issuable upon such conversion of this Note or portion
hereof in accordance with the provisions of this Article and deliver a check or
cash in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 2.2(f) and, if applicable,
any cash payment required pursuant to the proviso to the first sentence of
Section 2.1 (which payment, if any, shall be paid no later than three Trading
Days after the applicable Conversion Date).
(c) Each conversion of this Note (or portion hereof) shall be
deemed to have been effected on the applicable Conversion Date, and the person
in whose name any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become on such
Conversion Date the holder of record of the shares represented thereby;
provided, however, that if a Conversion Date is a date on which the stock
transfer books of the Company shall be closed such conversion shall constitute
the person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the applicable Conversion Date. Upon conversion of this Note or any portion
hereof, the accrued and unpaid interest on this Note (or portion hereof) to (but
excluding) the applicable Conversion Date shall be deemed to be paid to the
Holder of this Note through receipt of such number of shares of Common Stock
issued upon conversion of this Note or portion hereof as shall have an aggregate
Current Fair Market Value on the Trading Day immediately preceding such
Conversion Date equal to the amount of such accrued and unpaid interest.
(d) 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 to correct all such defects. The Company shall
not be required to pay any tax which may be payable in respect of
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<PAGE>
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.
(e) (1) 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 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
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 adjustment of the
Conversion Price as contemplated by Section 2.3 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 Trading
Days of such occurrence.
(2) If the Company fails to issue and deliver the shares
of Common Stock to the Holder in connection with a particular conversion of this
Note within five Trading Days after the Holder gives the Conversion Notice for
such conversion, in addition to any other liabilities the Company may have
hereunder and under applicable law (A) the Company shall pay or reimburse the
Holder on demand for all out-of-pocket expenses, including, without limitation,
reasonable fees and expenses of legal counsel, incurred by the Holder as a
result of such failure, (B) if as a result of such failure the Holder shall
suffer any direct damages or liabilities from such failure (including, without
limitation, margin interest and the cost of purchasing securities to cover a
sale (whether by the Holder or the Holder's securities broker) or borrowing of
shares of Common Stock by the Holder for purposes of settling any trade
involving a sale of shares of Common Stock made by the Holder during the period
beginning on the Issuance Date and ending on the date the Company delivers or
causes to be delivered to the Holder such shares of Common Stock, then the
Company shall upon demand of the Holder pay to the Holder an amount equal to the
actual direct, out-of-pocket damages and liabilities suffered by the Holder by
reason thereof which the Holder documents to the reasonable satisfaction of the
Company, and (C) 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 shares of Common Stock issuable in connection with such
exercise of the Holder's conversion right, rescind such exercise and the
Conversion Notice relating thereto, in which case the Holder shall thereafter be
entitled to convert that portion of this Note as to which such exercise is so
rescinded. Notwithstanding the foregoing the Company shall not be liable to the
Holder under clause (B) of the immediately preceding sentence to the extent the
failure of the Company to deliver or to 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, acts of
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<PAGE>
God, or any similar event outside the control of the Company (it being
understood that the action 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, 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
following the third Trading Day after the Holder gives a Conversion Notice if
the Holder becomes aware that such shares of Common Stock so issuable have not
been received as provided herein, but any failure so to give such notice shall
not affect the Holder's rights under this Note or otherwise.
(f) 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 such conversion, 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 applicable Conversion Date.
2.3 Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall on or after the Issuance Date
pay a dividend or make a distribution to all holders of the outstanding Common
Stock in shares of Common Stock, the Conversion Price in effect at the opening
of business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the Record Date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 2.3(a) is declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(b) In case the Company shall on or after the Issuance Date
issue rights or warrants (other than any rights or warrants (including the
Preferred Share Purchase Rights) referred to in Section 2.3(d)) to all holders
of its outstanding shares of Common Stock entitling them (for a period expiring
within 45 days after the date fixed for the determination of stockholders
entitled to receive such rights or warrants) to subscribe for or purchase shares
of Common Stock at a price per share less than the Current Market Price on the
Record Date fixed for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
at the opening of business on the date after such Record Date by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding at
the close of business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Current Market Price, and the denominator shall be the number of shares
of Common Stock outstanding on the close of business on the Record Date plus the
total number of additional shares of Common
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Stock so offered for subscription or purchase. Such adjustment shall become
effective immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants, upon the expiration or termination of such
rights or warrants, the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustments made upon the issuance
of such rights or warrants been made on the basis of delivery of only the number
of shares of Common Stock actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the holder
to subscribe for or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, the value of such consideration, if other than cash, to
be determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall on or
after the Issuance Date be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the earlier
of the day following the day upon which such subdivision becomes effective and
the day on which "ex-" trading of the Common Stock begins with respect to such
subdivision shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the earlier of the day following the day upon which such combination
becomes effective and the day on which "ex-" trading of the Common Stock with
respect to such combination begins shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately after
the opening of business on the earlier of the day following the day upon which
such subdivision or combination becomes effective and the day on which "ex-"
trading of the Common Stock begins with respect to such subdivision or
combination.
(d) In case the Company shall on or after the Issuance Date,
by dividend or otherwise, distribute to all holders of its Common Stock shares
of any class of capital stock of the Company (other than any dividends or
distributions to which Section 2.3(a) applies) or evidences of its indebtedness,
cash or other assets (including securities, but excluding any rights or warrants
referred to in Section 2.3(b) and dividends and distributions paid exclusively
in cash and excluding any capital stock, evidences of indebtedness, cash or
assets distributed upon a merger or consolidation to which Section 2.4 applies)
(the foregoing hereinafter in this Section 2.3(d) called the "Securities")),
then, in each such case, subject to the second paragraph of this Section 2.3(d),
the Conversion Price shall be reduced so that the same shall be equal to the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the Record Date with respect to such distribution by
a fraction of which the numerator shall be the Current Market Price on such date
less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the Securities so distributed applicable to one share of
Common Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business on
the day following the Record Date; provided, however, that in the event the then
fair market value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that the Holder shall have the
right to receive upon conversion of this Note (or any portion hereof) the amount
of Securities
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<PAGE>
such holder would have received had such holder converted this Note (or portion
hereof) immediately prior to such Record Date. In the event that such dividend
or distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 2.3(d) by reference to the actual or when issued trading market for any
Securities comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price to the extent possible.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events (a "Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall not be deemed to have been
distributed for purposes of this Section 2.3 (and no adjustment to the
Conversion Price under this Section 2.3 will be required) until the occurrence
of the earliest Trigger Event. If any such rights or warrants, including any
such existing rights or warrants distributed prior to the Issuance Date
(including the Preferred Share Purchase Rights), are subject to Trigger Events,
upon the satisfaction of each of which such rights or warrants shall become
exercisable to purchase different securities, evidences of indebtedness or other
assets, then the occurrence of each such Trigger Event shall be deemed to be
such date of issuance and record date with respect to new rights or warrants
(and a termination or expiration of the existing rights or warrants without
exercise by the holder thereof) (so that, by way of illustration and not
limitation, the dates of issuance of any such rights shall be deemed to be the
dates on which such rights become exercisable to purchase capital stock of the
Company, and not the date on which such rights may be issued, or may become
evidenced by separate certificates, if such rights are not then so exercisable).
In addition, in the event of any distribution of rights or warrants, or any
Trigger Event with respect thereto (including the Preferred Share Purchase
Rights), that was counted for purposes of calculating a distribution amount for
which an adjustment to the Conversion Price under this Section 2.3 was made (1)
in the case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants (including the Preferred Share Purchase Rights)
which shall have expired or been terminated without exercise by any holders
thereof, the Conversion Price shall be readjusted as if such rights and warrants
had not been issued.
For purposes of this Section 2.3(d) and Sections 2.3(a) and
(b), any dividend or distribution to which this Section 2.3(d) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 2.3(b) applies (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
other than such shares of Common Stock or rights or warrants to which Section
2.3(b) applies (and any Conversion Price reduction required by this Section
2.3(d) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (and any further Conversion Price reduction
required by Sections 2.3(a) and (b) with respect to such dividend or
distribution shall then be
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made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 2.3(a) and as
"the date fixed for the determination of stockholders entitled to receive such
rights or warrants", "the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Record Date"
within the meaning of Section 2.3(b) and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed "outstanding at the close
of business on the Record Date fixed for such determination" within the meaning
of Section 2.3(a).
(e) In case the Company shall on or after the Issuance Date,
by dividend or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or consolidation to which
Section 2.4 applies or as part of a distribution referred to in Section 2.3(d))
in an aggregate amount that, combined with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to this Section 2.3(e) has been made,
and (2) the aggregate of any cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and set forth in
a Board Resolution) of consideration payable in respect of any Tender Offer by
the Company or any Subsidiary for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to Section 2.3(f)
has been made, exceeds 10% of the product of (x) the Current Market Price on the
Record Date with respect to such distribution times (y) the number of shares of
Common Stock outstanding on such date, then, and in each such case, immediately
after the close of business on such date, unless the Company elects to reserve
such cash for distribution to the Holder upon the conversion of this Note (and
shall have made adequate provision) so that the Holder will receive upon such
conversion, in addition to the shares of Common Stock to which the Holder is
entitled, the amount of cash which the Holder would have received if the Holder
had, immediately prior to the Record Date for such distribution of cash,
converted this Note into Common Stock, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on such Record Date
by a fraction (i) the numerator of which shall be equal to the Current Market
Price on the Record Date less an amount equal to the quotient of (x) the excess
of such combined amount over such 10% and (y) the number of shares of Common
Stock outstanding on the Record Date and (ii) the denominator of which shall be
equal to the Current Market Price on the Record Date; provided, however, that in
the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price of the Common
Stock on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that the Holder shall have the right to receive upon
conversion of this Note (or any portion hereof) the amount of cash the Holder
would have received had the Holder converted this Note (or portion hereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(f) In case a Tender Offer on or after the Issuance Date made
by the Company or any Subsidiary for all or any portion of the Common Stock
shall expire and such Tender Offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a
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fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) that combined together
with (1) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution), as of the expiration of such Tender Offer, of consideration
payable in respect of any other Tender Offers, by the Company or any Subsidiary
for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such Tender Offer and in respect of which no
adjustment pursuant to this Section 2.3(f) has been made and (2) the aggregate
amount of any distributions to all holders of the Company's Common Stock made
exclusively in cash within 12 months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to Section 2.3(e) has been
made, exceeds 10% of the product of the Current Market Price as of the last time
(the "Expiration Time") tenders could have been made pursuant to such Tender
Offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time, then, and in
each such case, immediately prior to the opening of business on the day after
the date of the Expiration Time, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to close of business on the date of the Expiration Time
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the Tender Offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase shares
pursuant to any such Tender Offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such Tender Offer had not been made. If
the application of this Section 2.3(f) to any Tender Offer would result in an
increase in the Conversion Price, no adjustment shall be made for such Tender
Offer under this Section 2.3(f).
(g) (1) In case at any time on or after the Issuance Date the
Company shall issue shares of its Common Stock or Common Stock Equivalents
(collectively, the "Newly Issued Shares"), other than an issuance pro rata to
all holders of its outstanding Common Stock, at a price below the Current Fair
Market Value of the Common Stock at the time of such issuance, then following
such issuance of Newly Issued Shares the Conversion Price shall be adjusted as
provided in this Section 2.3(g). The Conversion Price following any such
adjustment shall be determined by multiplying the Conversion Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the sum
of (a) the number of shares of Common Stock outstanding immediately prior to the
issuance of the Newly Issued Shares (calculated on a fully-diluted basis
assuming the conversion of all options, warrants, purchase rights or convertible
securities which are exercisable at the time of the issuance of the Newly Issued
Shares) plus (b) the number of shares of Common Stock which the aggregate
consideration, if any, received by the Company for the number of Newly Issued
Shares would purchase at a price equal to the Current Fair Market Value of the
Common Stock at the time of such issuance, and the denominator shall be the sum
of (X) the number of shares of Common Stock
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outstanding immediately prior to the issuance of the Newly Issued Shares
(calculated on a fully-diluted basis assuming the exercise or conversion of all
options, warrants, purchase rights or convertible securities which are
exercisable or convertible at the time of the issuance of the Newly Issued
Shares) plus (Y) the number of Newly Issued Shares. The adjustment provided for
in this Section 2.3(g) may be expressed as the following mathematical formula:
----------------------------- ------------------------- --------------
( O +(C / FMV)) x CP
---------------
----------------------------- ------------------------- --------------
NCP = ( O + N )
----------------------------- ------------------------- --------------
where,
C = aggregate consideration received by the Company for
the Newly Issued Shares
N = number of Newly Issued Shares
O = number of shares of Common Stock outstanding (on a
fully diluted basis, as described above) immediately
prior to the issuance of the Newly Issued Shares
FMV = Current Fair Market Value of the Common Stock at the
time of issuance of the Newly Issued Shares
CP = Conversion Price immediately prior to the issuance of
the Newly Issued Shares
NCP = Conversion Price immediately after the issuance of the
Newly Issued Shares
(2) Notwithstanding the foregoing, no adjustment shall
be made under this Section 2.3(g) by reason of:
(A) the issuance by the Company of shares of
Common Stock pro rata to all holders of the Common Stock so long as (i) any
adjustment to the Conversion Price that is required by Section 2.3(a) is made
and (ii) the Company shall have given notice of such issuance thereof to the
Holder pursuant to Section 2.6;
(B) the issuance by the Company of Newly Issued
Shares in an offering for cash for the account of the Company that is
underwritten on a firm commitment basis and is registered under the 1933 Act;
(C) the issuance by the Company for cash of Newly
Issued Shares in connection with a strategic alliance, collaboration, joint
venture, partnership or similar arrangement of the Company with another Person
which strategic alliance, collaboration, joint venture, partnership or similar
arrangement relates to the Company's business as conducted immediately prior
thereto and which Person is engaged in a business similar or related to the
business of the Company so long as (x) the price per Newly Issued Share is not
less than 85 percent of the Current Fair Market Value of the Common Stock on the
date of issuance of such Newly Issued Shares and (y) the consideration other
than cash which the Company receives in connection with such strategic alliance,
collaboration, joint venture, partnership or similar
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<PAGE>
arrangement has a value, as determined by the Board of Directors in its
reasonable judgment and set forth in a Board Resolution, at least equal to the
amount by which (i) the product of the number of Newly Issued Shares so issued
times the Current Fair Market Value of the Common Stock on the date such Newly
Issued Shares are issued exceeds (ii) the aggregate cash consideration received
by the Company for such Newly Issued Shares at the time of issuance thereof;
(D) the issuance by the Company of the Warrant
Notes, the Common Stock Warrants or the Other Common Stock Warrants or shares of
Common Stock upon conversion of this Note, the Other Notes or the Warrant Notes
or upon exercise of the Common Stock Warrants or the Other Common Stock Warrants
in accordance with the terms hereof and thereof; and
(E) the issuance by the Company of shares of
Common Stock in payment of interest on this Note, the Other Notes and the
Warrant Notes in accordance with the terms hereof and thereof.
(h) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 2.3(a), (b), (c), (d), (e),
(f), and (g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 2.3(i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
II shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value of
the Common Stock or from par value to no par value or from no par value to par
value.
(j) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly, but in no event later than five days
thereafter, give a notice to the Holder setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment, but which statement shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.
(k) In any case in which this Section 2.3 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Holder in connection with any conversion of this Note after such Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash in
lieu of any fraction pursuant to Section 2.2(f).
(l) For purposes of this Section 2.3, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall
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include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company other than (i) dividends or distributions payable only in shares of
Common Stock and (ii) the Preferred Share Purchase Rights.
2.4 Effect of Reclassification, Consolidation, Merger or Sale. (a) If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Holder a written agreement providing
that this Note shall be convertible into the kind and amount of shares of stock
and other securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
by the holder of a number of shares of Common Stock issuable upon conversion of
this Note immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise such holder's rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance (provided that, if the kind or
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance is not the same for each share of
Common Stock in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purposes of this Section 2.4 the
kind and amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such written agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. If, in the case of
any such reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such written agreement shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the Holder as the Board of Directors shall
reasonably consider necessary by reason of the foregoing, including, to the
extent practicable, the provisions providing for the repurchase rights set forth
in Article V herein.
(b) The above provisions of this Section shall similarly apply
to successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
(c) If this Section 2.4 applies to any event or occurrence,
Section 2.3 shall not apply.
2.5 Reservation of Shares; Shares to Be Fully Paid; Listing of Common
Stock.
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(a) The Company shall reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock or
shares of Common Stock held in treasury, solely for issuance upon conversion of
this Note and the Other Notes, and in addition to the shares of Common Stock
required to be reserved by the terms of the Warrant Notes, the Warrants, the
Common Stock Warrants, and the Other Common Stock Warrants, sufficient shares to
provide for the conversion of this Note and the Other Notes from time to time as
this Note and the Other Notes are converted.
(b) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of this Note, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue shares of such Common Stock at
such adjusted Conversion Price.
(c) The Company covenants that all shares of Common Stock
issued upon conversion of this Note will be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
(d) The Company covenants that if any shares of Common Stock
to be provided for the purpose of conversion of this Note hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
(e) The Company covenants that, so long as the Common Stock
shall be listed on the Nasdaq, the NYSE or any other national securities
exchange, the Company shall obtain and, so long as the Common Stock shall be so
listed on such market or exchange, maintain approval for listing thereon of all
Common Stock issuable upon conversion of or in payment of interest on this Note.
2.6 Notice to Holder Prior to Certain Actions. In case on or after the
Issuance Date:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained earnings);
or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any share of
any class or any other rights or warrants; or
(c) the Board of Directors shall authorize any
reclassification of the Common Stock of the Company (other than a subdivision or
combination of its outstanding Common Stock, or a change in par value, or from
par value to no par value, or from no par value to par value), or any
consolidation or merger or other business combination transaction to which the
Company is a party and for which approval of any stockholders of the Company is
required, or the sale or transfer of all or substantially all of the assets of
the Company; or
(d) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
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<PAGE>
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a Conversion Notice
which is contingent on the completion of such action.
ARTICLE III
CERTAIN COVENANTS
So long as at least $3,750,000 aggregate principal amount of this Note,
the Other Notes and the Warrant Notes are outstanding or issuable upon exercise
of unexercised Warrants, unless the Company shall have obtained the prior
written consent of the Majority Holders:
3.1 Limitations on Certain Indebtedness. The Company will not itself,
and will not permit any Subsidiary to, create, assume, incur or in any manner
become liable in respect of, including, without limitation, by reason of any
business combination transaction (all of which are referred to herein as
"incurring"), any Indebtedness other than Permitted Indebtedness.
3.2 Maintenance of Net Cash, Cash Equivalent and Short-Term Investment
Balances. The Company shall maintain Net Cash, Cash Equivalent and Short-Term
Investment Balances at all times at least equal to the aggregate outstanding
principal amount of this Note, the Other Notes and the Warrant Notes. In
computing Net Cash, Cash Equivalent and Short-Term Investment Balances of the
Company, such computation shall be made on the basis of the Company's Net Cash,
Cash Equivalent and Short-Term Investment Balances standing alone except that
there shall be included therein the amount, if any, by which the Net Cash, Cash
Equivalent and Short-Term Investment Balances of each Subsidiary on the date of
determination under this Section 3.2 exceed the sum of (x) the liabilities of
the type required to be reflected on a balance sheet prepared in accordance with
Generally Accepted Accounting Principles of such Subsidiary proposed as of the
date of determination under this Section 3.2 plus (y) liabilities of such
Subsidiary under agreements, contracts or other instruments (excluding
liabilities of such Subsidiary to the Company under a cost-sharing agreement
that meets the requirements of Section 3.11 to the extent payment of such
liabilities is not yet due) which liabilities are not required to be reflected
on such a balance sheet on such date of determination, to the extent such
liabilities exceed $500,000. Within 30 days after the end of each calendar
quarter, the Company shall furnish to the Holder a Company Certificate setting
forth the amount of the Company's Net Cash, Cash Equivalent and Short-Term
Investment Balances and the outstanding principal amount of this Note, the Other
Notes and the Warrant Notes as of the end of such calendar quarter but which
shall not contain any information which
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would be material, non-public information concerning the Company for the
purposes of the 1934 Act.
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.
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance, including, without limitation, products liability
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 the Subsidiaries,
taken as a whole. The Company 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 except where the failure to do so would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole,
or on the ability of the Company to perform and comply with its obligations
under the Transaction Documents.
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 the 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.
3.8 Limitations on Asset Sales, Liquidations, Etc.; Certain Matters.
The Company shall not:
(a) sell, convey or otherwise dispose of all or substantially
all of the assets of the Company as an entirety or substantially as an entirety
in a single transaction or in a series of related transactions; or
(b) liquidate, dissolve or otherwise wind up the affairs of
the Company.
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For purposes of the preceding clause (b), a consolidation or merger of the
Company in and of itself shall not be considered a liquidation, dissolution or
winding up of the Company.
3.9 Limitations on Liens. The Company will not itself, and will not
permit any Subsidiary to, create, assume or suffer to exist any mortgage, lien,
pledge, security interest or other charge or encumbrance (including, without
limitation, the lien or retained security title of a conditional vendor), all of
which are referred to below as "liens", upon all or any part of its property of
any character, whether owned at the date hereof or thereafter acquired, except:
(a) liens upon any property of any Subsidiary or Subsidiaries
as security for indebtedness owing to the Company;
(b) purchase money liens upon any property acquired by the
Company or any Subsidiary after the Issuance Date, or liens existing on such
property at the time of acquisition after the Issuance Date; provided that (i)
no such lien shall extend to or cover any other property of the Company or any
Subsidiary, (ii) the principal amount of indebtedness secured by each such lien
on any such property shall not exceed the cost (including such principal amount
of the indebtedness secured thereby) to the Company or the Subsidiary of the
property subject thereto, and (iii) the aggregate principal amount of all
indebtedness of the Company and all Subsidiaries secured by all liens described
in this subsection (b) and any extensions, renewals or replacements thereof, at
any one time outstanding, shall not exceed $7,500,000.00 for the Company and the
Subsidiaries; and the extending, renewing or replacing of any lien permitted by
this subsection (b) or of the indebtedness secured thereby; provided, however,
that in any such case the lien by which any lien is extended, renewed or
replaced shall not extend to or cover any other property of the Company or any
Subsidiary and the principal amount of such indebtedness extended, renewed or
replaced shall not be increased;
(c) liens securing this Note, the Other Notes and the Warrant
Notes ratably;
(d) liens for taxes or assessments or governmental charges or
levies on its property if such taxes or assessments or charges or levies shall
not at the time be due and payable or if the amount, applicability, or validity
of any such tax, assessment, charge or levy shall currently be contested in good
faith by appropriate proceedings or necessary preliminary steps are being taken
to contest, compromise or settle the amount thereof or to determine the
applicability or validity thereof and if the Company or such Subsidiary, as the
case may be, shall have set aside on its books reserves (segregated to the
extent required by sound accounting practice) deemed by it adequate with respect
thereto; deposits or pledges to secure payment of worker's compensation,
unemployment insurance, old age pensions or other social security; deposits or
pledges to secure performance of bids, tenders, contracts (other than contracts
for the payment of money borrowed or credit extended), leases, public or
statutory obligations, surety or appeal bonds, or other deposits or pledges for
purposes of like general nature in the ordinary course of business; mechanics',
carriers', workers', repairmen's or other like liens arising in the ordinary
course of business securing obligations which are not overdue for a period of 60
days, or which are in good faith being contested or litigated, or deposits to
obtain the release of such liens; liens created by or resulting from any
litigation or legal proceedings or proceedings being contested in good faith by
appropriate proceedings, provided any execution levied thereon shall be stayed;
leases made, or existing on property acquired, in the ordinary course of
business; landlords' liens under leases to which the Company or any Subsidiary
is a party; and zoning restrictions, easements, licenses or restrictions on the
use of real property or minor irregularities in title thereto; provided that all
such liens described in this subsection (d) do not, in the aggregate, materially
impair the use of such property in the operations of the
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business of the Company or any Subsidiary or the value of such property for the
purpose of such business; and
(e) liens existing on the Issuance Date securing the
obligations and covering the property listed in Schedule 4(r) to the Securities
Purchase Agreement and which liens constitute liens only on equipment, fixtures,
furnishings, furniture, and leasehold improvements and related computer software
the acquisition of which was financed with the proceeds of such obligations.
3.10 Listing Eligibility Reporting. The Company shall notify the Holder
from time to time within five days after the Company first learns that it does
not meet any of the applicable requirements for the continued listing of the
Common Stock on the principal securities market or exchange on which the Common
Stock is listed from time to time.
3.11 Transactions with Affiliates. The Company will not, and will not
permit any Subsidiary, directly or indirectly, to pay any funds to or for the
account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement with, any
Affiliate of the Company, except, on terms to the Company or such Subsidiary no
less favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company, as determined
in good faith by the Board of Directors; provided, however, that any
cost-sharing arrangement between the Company and any Subsidiary which meets the
requirements for a qualified cost sharing arrangement under Treasury Regulation
Section 1.482-7 shall be deemed to meet the requirements of this Section 3.11.
3.12 Rule 144A Information Requirement. Within the period prior to the
expiration of the holding period applicable to sales hereof under Rule 144(k)
under the 1933 Act (or any successor provision), the Company shall, during any
period in which it is not subject to Section13 or 15(d) under the 1934 Act, make
available to the Holder or any holder of shares of Common Stock issued upon
conversion hereof which continue to be Restricted Securities in connection with
any sale thereof and any prospective purchaser of this Note from the Holder, the
information required pursuant to Rule 144A(d)(4) under the 1933 Act upon the
request of the Holder and it will take such further action as the Holder may
reasonably request, all to the extent required from time to time to enable the
Holder to sell this Note without registration under the 1933 Act within the
limitation of the exemption provided by Rule 144A, as Rule 144A may be amended
from time to time. Upon the request of the Holder, the Company will deliver to
the Holder a written statement as to whether it has complied with such
requirements.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. If any of the following events of default (each,
an "Event of Default") shall occur:
(a) Failure to Pay Principal or Interest. The Company fails
(1) to pay the principal, Optional Redemption Consideration, Repurchase
Price or Registration Repurchase Price hereof when due, whether at
maturity, upon redemption, upon
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acceleration or otherwise, as applicable, or (2) to pay any installment
of interest hereon when due and, in the case of this clause (2) of this
Section 4.1(a) only, such failure continues for a period of five
Business Days after the due date thereof; or
(b) 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 or purchase rights of the Holder within
two Trading Days after the due date therefor in accordance with the
terms of this Note, any Other Note, any Warrant Note, any Common Stock
Warrant or any Other Common Stock Warrant 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 as and
when required by this Note and the Securities Purchase Agreement; or
(c) Breach of Covenant. The Company (1) fails to comply with
Section 3.1, 3.2, 3.8, 3.9, or 3.10 or (2) fails to comply in any
material respect with any provision of Article III of this Note (other
than Section 3.1, 3.2, 3.8, 3.9, or 3.10) or breaches any other
material covenant or other material term or condition of this Note
(other than as specifically provided in clauses (a), (b) or (c)(1) of
this Section 4.1), the Securities Purchase Agreement, the Warrants, or
the Warrant Notes, and in the case of this clause (2) of this Section
4.1(c) only, such breach continues for a period of 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
(d) 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 Securities
Purchase Agreement) shall be false or misleading in any material
respect when made; or
(e) 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
(f) 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 property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty consecutive days; or
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(g) 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 consecutive
days; or
(h) Default under Other Agreements and Instruments. (1) 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 Business Days
of becoming aware of such event or condition; (2) 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; or
(i) 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 days;
then, (X) upon the occurrence and during the continuation of any Event of
Default specified in clause (a), (b), (c), (d), (g), (h), or (i) of this Section
4.1 at the option of the Holder the Company shall, and upon the occurrence of
any Event of Default specified in clause (e) or (f) of this Section 4.1, the
Company shall, pay to the Holder an amount equal to 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 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.
ARTICLE V
REPURCHASE UPON A REPURCHASE EVENT OR
REGISTRATION REPURCHASE EVENT
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5.1 Repurchase Right upon Repurchase Event. If a Repurchase Event shall
occur, then, in addition to any other rights of the Holder, 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 outstanding 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 and the Warrant Notes, may qualify as a
pooling of interests under the Pooling Standards, then, without relieving the
Company of its other obligations under this Note, the Company may, in the
reasonable exercise of its discretion, elect not to repurchase such Note in
order to comply with the Pooling Standards.
5.2 Notices; Method of Exercising Repurchase Rights, Etc. (a) On or
before the fifth 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 in this Section
5.2) 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 30th day after a Company Notice (or if no such
Company Notice has been given, within 40 days after the Holder first learns of
the Repurchase Event) a Holder Notice setting forth the name of the Holder and
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.
(c) If the Holder shall have given a Holder Notice, then on
the repurchase date that is five Business Days after the date such Holder Notice
is given (or such later date as the Holder surrenders this Note duly endorsed
for transfer) the Company shall repurchase this Note or the portion of this Note
as stated in such Holder Notice by making payment in immediately available funds
of the applicable Repurchase Price to such account as specified by the Holder by
notice given to the Company at least one Business Day prior to the applicable
repurchase date.
5.3 Repurchase Right upon Registration Repurchase Event. (1) If a
Registration Repurchase Event occurs, then, in addition to any other rights of
the Holder, the Holder shall have the right, at the Holder's option, to require
the Company to repurchase in accordance with this Section 5.3 all of this Note,
or from time to time any portion hereof (in a
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minimum principal amount of $100,000 or integral multiples thereof (or such
lesser remaining principal amount of this Note), at the applicable Registration
Repurchase Price.
(2) To exercise the repurchase right pursuant to this Section
5.3, the Holder shall give 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, at any time
prior to the earlier of (x) the date which is 30 days after such event and (y)
the date the Company files the Registration Statement with the SEC or (ii) if
the Registration Repurchase Event occurs by reason of the non-occurrence of the
SEC Effective Date within 90 days or 135 days, as the case may be, after the
Issuance Date, at any time prior to the SEC Effective Date. A Holder
Registration Repurchase Notice may be revoked by the Holder at any time prior to
the time the Company pays the applicable Registration Repurchase Price.
(3) If the Holder shall have given a Holder Registration
Repurchase Notice, then on the repurchase date that is five Business Days after
the date such Holder Registration Repurchase Notice is given (or such later date
as the Holder surrenders this Note to the Company duly endorsed for transfer)
the Company shall repurchase this Note or the portion of this Note as stated in
such Holder Registration Repurchase Notice by making payment in immediately
funds on such repurchase date of the applicable Registration Repurchase Price to
such account as specified by the Holder by notice given to the Company at least
one Business Day prior to the applicable repurchase date.
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
SATISFACTION AND DISCHARGE OF CERTAIN PROVISIONS
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6.1 Discharge of Certain Provisions. (a) If
(i) the Company and the Trustee shall have executed and
delivered one to the other the Trust Agreement, which Trustee shall be
approved and which Trust Agreement shall be in form, scope and
substance as shall have been approved by the Majority Holders, such
approval to be evidenced by the written approval of the Trustee and the
Trust Agreement given by the Majority Holders prior to such execution
and delivery;
(ii) the Company shall have deposited with the Trustee, in
trust, funds or Government Obligations, the principal of and interest
on which when due will, together with any funds set aside at the same
time and without the necessity for investment or reinvestment of such
funds or for further investment or reinvestment of the principal amount
of or interest on such Government Obligations, provide funds sufficient
to pay at maturity or upon redemption all of this Note, the Other Notes
and the Warrant Notes, including principal and interest due or to
become due to the Maturity Date or the maturity date thereof, as the
case may be, or earlier redemption;
(iii) if such deposit is being made in connection with the
redemption of this Note, the Other Notes and the Warrant Notes pursuant
to Section 1.2 and the comparable provisions of the Other Notes and the
Warrant Notes prior to their maturity, all action other than the giving
of notices of redemption necessary to redeem this Note, the Other Notes
and the Warrant Notes as of the specified redemption date or dates for
this Note, the Other Notes and the Warrant Notes shall have been taken
and arrangements reasonably satisfactory to the Majority Holders shall
have been made for the giving of notices of such redemption; and
(iv) notice of such deposit shall have been given to the
Holder and the holders of the Other Notes and the Warrant Notes, within
ten days after the date of such deposit;
and the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then on the date which is 92 days after the date of
such deposit by the Company with the Trustee, so long as during such 92-day
period no Event of Default specified in clause (e) or (f) of Section 4.1 or
event which with notice or passage of time, or both, would become an Event of
Default specified in clause (e) or (f) of Section 4.1 has occurred (x) this Note
shall cease to be of further effect (except as provided herein) and (y) the
Holder, on demand of the Company accompanied by a Company Certificate and an
opinion of counsel and at the cost and expense of the Company, shall execute
proper instruments acknowledging the satisfaction and discharge of this Note to
the extent set forth herein.
(b) So long as this Note shall remain outstanding after such
discharge, this Note shall continue in effect following the discharge provided
for above solely with respect to (1) rights of registration of transfer,
exchange or replacement of this Note, (2) rights to receive payment of the
principal and Optional Redemption Consideration hereof and interest hereon in
accordance with the terms of this Note from such deposited funds or the proceeds
of or interest on such deposited Government Obligations, (3) the rights under
Article II, and (4) the rights under Sections 3.5, 3.6 and 3.7; provided,
however, that, following such discharge, no claim for payment of principal or
the Optional Redemption Consideration of or interest on this Note shall be made
against the Company. Upon such discharge, any Event of Default which occurred
prior to such discharge solely by reason of one or more provisions of this Note
with which the
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Company thereafter is no longer obligated to comply, then such Event of Default
shall no longer exist.
6.2 Deposited Moneys and Government Obligations to Be Held in
Accordance with Trust Agreement. All funds and Government Obligations deposited
with the Trustee pursuant to Section 6.1 shall be held in trust and subject to
and in accordance with the terms of the Trust Agreement and such funds and
interest on such Government Obligations shall be applied by the Trustee to the
payment of this Note, the Other Notes and the Warrant Notes in accordance with
their terms and the Trust Agreement.
6.3 Reinstatement. If (i) the Trustee is unable to apply any funds in
accordance with Section 6.2 and the Trust Agreement by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the Majority Holders so specify
by notice to the Company, the Company's obligations under this Note, the Other
Notes and the Warrant Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 6.1 until such time as the Trustee is permitted
to apply all such funds in accordance with Section 6.2 and the Trust Agreement.
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):
"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.
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means 12 percent (12%) per annum.
"Board of Directors" means the Board of Directors of the
Company.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors, or duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect on the date of
such certification, and delivered to the Holder.
"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.
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"Cash, Cash Equivalent and Short-Term Investment Balances" of
any Person at any date shall be determined from such Person's books maintained
in accordance with Generally Accepted Accounting Principles, and shall mean,
without duplication, the sum of (1) the cash owned by such Person on such date,
(2) all assets which would on a balance sheet of such Person 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
such Person prepared as of such date in accordance with Generally Accepted
Accounting Principles be classified as short-term investments.
"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 and 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 Note, in lieu of or in addition to Common
Stock.
"Common Stock Equivalent" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock, any
security convertible into, exchangeable for, or otherwise entitling the holder
thereof to acquire, shares of Common Stock or any warrant, option, subscription
or purchase right with respect to any such convertible, exchangeable or other
security.
"Common Stock Warrants" means the Common Stock Purchase
Warrants issuable or issued by the Company in the form of Exhibit C to this
Note.
"Company" shall have the meaning provided in the first
paragraph of this Note.
"Company Certificate" means a certificate of the Company
signed by an Officer.
"Company Notice" means a Company Notice in the form of Exhibit
D to this Note.
"Conversion Date" means the date on which a Conversion Notice
is given in accordance with Section 2.2(a).
"Conversion Notice" means a duly executed Notice of Conversion
of 12% Senior Convertible Note due 2002 substantially in the form of Exhibit A
to this Note.
"Conversion Price" means $20.50, subject to adjustment as
provided in Section 2.3.
"Current Fair Market Value" when used with respect to the
Common Stock as of a specified date means with respect to each share of Common
Stock the average of the closing prices of the Common Stock sold on all
securities exchanges (including the Nasdaq National Market and the Nasdaq
SmallCap 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 all such exchanges 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
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<PAGE>
quoted in the NASDAQ System as of 4:00 p.m., New York City time, or, if on such
day the Common Stock is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked price on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of five
Trading Days consisting of the day as of which the Current Fair Market Value of
Common Stock is being determined (or if such day is not a Trading Day, the
Trading Day next preceding such day) and the four consecutive Trading Days prior
to such day. If on the date for which Current Fair Market Value is to be
determined the Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Current Fair Market
Value of Common Stock shall be the greater of (i) the highest price per share of
Common Stock at which the Company has sold shares of Common Stock or Common
Stock Equivalents during the 365 days prior to the date of such determination
and (ii) the highest price per share which the Company could then obtain from a
willing buyer (not an employee or director of the Company at the time of
determination) for shares of Common Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by the Board of Directors.
"Current Market Price" shall mean the arithmetic average of
the daily Market Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question; provided, however, that
(1) if the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Section 2.3(a), (b), (c), (d), (e), (f), or
(g), occurs during such ten consecutive Trading Days, the Market Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Market Price by the same fraction by which the Conversion Price
is so required to be adjusted as a result of such other event, (2) if the "ex"
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 2.3(a), (b), (c), (d), (e), (f), or (g), occurs on or after the "ex"
date for the issuance or distribution requiring such computation and prior to
the day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Market Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section 2.3(d)
or (f), whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Section 2.3(f), the Current Market Price of the Common Stock on any date shall
be deemed to be the arithmetic average of the daily Market Prices per share of
Common Stock for such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the Tender Offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 2.3(a), (b), (c), (d), (e), (f), or (g), occurs on or after
the Expiration Time for the Tender Offer requiring such computation and prior to
the day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular way, on the
relevant exchange
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or in the relevant market from which the Market Price was obtained without the
right to receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the first date
on which the Common Stock trades, regular way, on such exchange or in such
market after the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any Tender Offer means the first
date on which the Common Stock trades, regular way, on such exchange or in such
market after the Expiration Time of such Tender Offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are called
for pursuant to Section 2.3, such adjustments shall be made to the Current
Market Price as may be necessary or appropriate to effectuate the intent of
Section 2.3 and to avoid unjust or inequitable results as determined in good
faith by the Board of Directors.
"Default Interest" shall have the meaning provided in the
first paragraph of this Note.
"Default Rate" means 20 percent per annum (or such lesser rate
equal to the highest rate permitted by applicable law).
"Depositary" means The Depository Trust Company.
"Eligible Bank" means a corporation organized or existing
under the laws of the United States or any state, having combined capital and
surplus of at least $100 million and subject to supervision by federal or state
authority and which has a branch located in New York, New York or San Francisco,
California.
"Expiration Time" shall have the meaning provided in Section
2.3(f).
"Event of Default" shall have the meaning provided in Article
IV.
"Fundamental Change" means
(a) 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 the Subsidiaries in a single transaction or a series of related
transactions; or
(b) The occurrence of any transaction or event in connection
with which all or substantially all the Common Stock shall be exchanged for,
converted into, acquired for or constitute the right to receive consideration
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) which is not all or substantially all common stock which is (or will,
upon consummation of or immediately following such transaction or event, will
be) listed on a national securities exchange or approved for quotation on Nasdaq
or any similar United States system of automated dissemination of transaction
reporting of securities prices; or
(c) The acquisition by a Person or entity or group of Persons
or entities acting in concert as a partnership, limited partnership, syndicate
or group, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, of
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<PAGE>
beneficial ownership of securities of the Company representing 50% or more of
the combined voting power of the outstanding voting securities of the Company
ordinarily (and apart from rights accruing in special circumstances) having the
right to vote in the election of directors.
"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.
"Government Obligations" means direct obligations of, or
obligations the timely payment of the principal of and the interest on which are
unconditionally guaranteed by, the United States of America and which are not,
by their terms, callable.
"Holder" shall have the meaning provided in the first
paragraph of this Note.
"Holder Notice" means a Holder Notice in the form of Exhibit E
to this Note.
"Holder Registration Repurchase Notice" means a Holder
Registration Repurchase Notice in the form of as Exhibit F to this Note.
"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.
"Interest Payment Dates" shall mean each January 1, April 1,
July 1 and October 1 and the Maturity Date.
"Interest Share Price" means, with respect to any Interest
Payment Date, an amount equal to 95 percent of the arithmetic average of the
Market Price of one share of Common Stock for each of the ten consecutive
Trading Days ending on and including the Trading Day immediately preceding such
Interest Payment Date.
"Interest 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.
"Interest Shares Measurement Period" means with respect any
Interest Payment Date the period of 15 consecutive Trading Days commencing on
and including the Trading Day immediately following such Interest Payment 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
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been authorized by the Company to act as conversion agent for this Note in
accordance with the Issuing Agent Instruction and the name, address and
telephone number of whom shall have been given to the Holder by notice from the
Company.
"Issuing Agent Instruction" means the Issuing Agent
Instruction, dated March 24, 1999, from the Company to the Issuing Agent for the
benefit of the holders from time to time of this Note, the Other Notes and the
Warrant Notes.
"Majority Holders" means at any time the holders of this Note,
the Other Notes and the Warrant Notes who hold this Note and Other Notes and
Warrant Notes which, based on the outstanding principal amount hereof and
thereof, represent a majority of the aggregate outstanding principal amount of
this Note, the Other Notes and the Warrant Notes.
"Market Price" with respect to any security on any day shall
mean the closing bid price of such security on such day on the Nasdaq or the
NYSE or the AMEX, as applicable, or, if such security is not listed or admitted
to trading on the Nasdaq, the NYSE or the AMEX, on the principal national
securities exchange or quotation system on which such security is quoted or
listed or admitted to trading, in any such case as reported by Bloomberg, L.P.
or, if not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in question, as reported
by the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution.
"Maturity Date" means March 24, 2002.
"Nasdaq" means the Nasdaq National Market.
"Net Cash, Cash Equivalent and Short-Term Investment Balances"
means for any Person at any time such Person's Cash, Cash Equivalent and
Short-Term Investment Balances less the sum of (1) the amount of any outstanding
Indebtedness of such Person's which is secured in whole or in part by Cash, Cash
Equivalent and Short-Term Investment 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 such Person's which at the time it
becomes outstanding will be secured in whole or in part by Cash, Cash Equivalent
and Short-Term Investment Balances.
"Newly Issued Shares" shall have the meaning provided in
Section 2.3(g).
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means this instrument as originally executed, or if
later amended or supplemented, then as so amended or supplemented.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Consideration" means (1)an amount in cash
equal to the sum of (A) the product obtained by multiplying (i) the principal
amount of this Note that is outstanding on the Optional Redemption Date times
(ii) the applicable Optional Redemption Percentage on such Optional Redemption
Date plus (B) accrued and unpaid interest on such principal amount to the
Optional Redemption Date 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 Optional Redemption Date and (2) a Common Stock
Warrant that initially (I) entitles the holder thereof to purchase a number of
shares of Common Stock equal to the quotient obtained by dividing (x) the
principal amount of this Note outstanding immediately prior to redemption of
this Note on the Optional Redemption Date by (y)the Conversion Price in effect
immediately prior to redemption of this Note on the Optional Redemption Date and
(II) has a Purchase Price (as defined in the Common Stock Purchase Warrants)
equal to the Conversion Price in effect immediately prior to redemption of this
Note on the Optional Redemption Date, subject to adjustment as provided in the
Common Stock Warrants.
"Optional Redemption Date" means the Business Day on which
this Note is to be redeemed, but in no event later than the Maturity Date.
"Optional Redemption Notice" means the Optional Redemption
Notice in the form of Exhibit B to this Note.
<TABLE>
"Optional Redemption Percentage" means with respect to any
Optional Redemption Date during any period set forth below the percentage set
forth below opposite such period:
<CAPTION>
Optional
Redemption
Date Percentage
---- ----------
<S> <C>
Issuance Date to date that is 365 days after Issuance Date 110%
From and after date that is 366 days after Issuance Date to Maturity Date 105%
</TABLE>
"Other Common Stock Warrants" means the Company's Common Stock
Purchase Warrants issuable or issued pursuant to the Other Notes and the
Warrants.
"Other Notes" means the several 12% Senior Convertible Notes
due 2002 issued by the Company pursuant to the Other Securities Purchase
Agreements.
"Other Securities Purchase Agreements" means the several Other
Securities Purchase and Exchange Agreements, dated as of the date of the
Securities Purchase Agreement, by and between the Company and the several buyers
named therein.
"Permitted Indebtedness" means
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(1) Indebtedness not in excess of $13,100,000
aggregate principal amount which is either (x) outstanding on the Issuance Date
and which would be reflected on a consolidated 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 or any Subsidiary under a lease line in
effect on the date of execution and delivery of the Securities Purchase
Agreement;
(2) Indebtedness incurred by SUGEN Europe A.G. after
the Issuance Date in the aggregate principal amount not in excess of $25,000,000
(or the foreign currency equivalent thereof based on the foreign exchange rate
in effect on the date of incurrence of such Indebtedness) and for which the
Company shall have no liability or obligation for payment of any amount which
may become due in respect of such Indebtedness;
(3) Indebtedness incurred after the Issuance Date in
the aggregate principal amount outstanding at any one time not in excess of
$7,500,000 and which is incurred for lease lines and equipment, inventory,
receivable and other similar asset-backed financing arrangements;
(4) Indebtedness incurred after the Issuance Date not
in excess of $15,000,000 aggregate principal amount outstanding at any one time
in connection with a strategic alliance, collaboration, joint venture,
partnership or other similar arrangement with another Person, which strategic
alliance, collaboration, joint venture, partnership or other similar arrangement
relates to the Company's business as conducted immediately prior thereto and
which Person is engaged in a business similar or related to the business of the
Company or any Subsidiary as long as (A) no payment of principal of such
Indebtedness is scheduled to be due prior to the date which is two years after
the Maturity Date and (B) in each instance such Indebtedness is incurred in a
strategic alliance, collaboration, joint venture, partnership or other similar
arrangement in which the original principal amount of such Indebtedness is not
in excess of 25 percent of the total amount of cash (including proceeds to the
Company or such Subsidiary of such Indebtedness) which the Company or such
Subsidiary is receiving or is entitled to receive at or before the stated
maturity of such Indebtedness on a basis that is not subject to any condition,
contingency, milestone or other event (other than the passage of time); and
(5) Indebtedness which is subordinated to this Note,
the Other Notes and the Warrant Notes as to payment on the Subordination Terms
or on such other terms as shall have been approved in advance of the incurrence
of such Indebtedness by the Majority Holders as evidenced by the written
approval of the Majority Holders given prior to the incurrence of such
Indebtedness and for which no payment of principal of such Indebtedness is
scheduled to be due prior to the date that is one year after the Maturity Date.
so long as in the case of Indebtedness permitted by the preceding clauses (2)
through (5), at the time of incurrence of such Indebtedness no Event of Default
has occurred and is continuing or would result from such incurrence and no event
which, with notice or passage of time, or both, would become an Event of Default
has occurred and is continuing or would result from such incurrence.
"Person" means any natural person, partnership, corporation,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
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"Pooling Standards" means Opinion No. 16 of the Accounting
Principles Board (or any successor accounting standard of the Financial
Accounting Standards Board (or any successor or replacement Person or board the
accounting pronouncements 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).
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Registration Repurchase Event" means the occurrence of any 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 Securities
Purchase Agreement;
(b) the SEC Effective Date shall not have occurred
on or before the date which is (i) 90 days after the Issuance Date, if the staff
of the SEC determines not to review the Registration Statement or determines to
make only a limited review of the Registration Statement, or (ii) 135 days after
the Issuance Date, if the staff of the SEC determines to review the Registration
Statement (other than a limited review); or
(c) counsel to the Holder shall in good faith have
advised the Holder that, based on a review of the Registration Statement, such
counsel is unable to furnish to the Holder a letter, to the effect set forth in
the first paragraph following paragraph (3) of Annex VII to the Securities
Purchase Agreement, at any time that the Company is required by the Transaction
Documents to cause its counsel to furnish to the Holder an opinion in the form
of such Annex VII, unless prior to such time the Company shall have notified the
Holder that the provisions of this clause (c) shall no longer be of any further
force or effect.
"Registration Repurchase Price" means an amount in cash equal
to the sum of (1) the principal amount of this Note to be repurchased plus (2)
accrued and unpaid interest on such principal amount to the date of such
repurchase plus (3) accrued and unpaid Default Interest, if any, on the amount
referred to in the immediately preceding clause (2) at the rate provided in this
Note to the date of repurchase in accordance with Article V.
"Registration Statement" means the Registration Statement
required to be filed by the Company with the SEC pursuant to Section 8(a)(1) of
the Securities Purchase Agreement covering the resale of the shares of Common
Stock issuable or issued upon conversion of this Note.
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"Repurchase Event" means the occurrence of any one or more of
the following events:
(a) For any period of five consecutive Trading Days
following the date hereof there shall be no reported sale price of the Common
Stock on any of Nasdaq, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading
on Nasdaq, the NYSE or the AMEX;
(c) Any Fundamental Change;
(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 by the Company which
materially and adversely affects the rights of the Holder;
(e) The inability of the Holder for 20 Trading Days
(whether or not consecutive) during any period of 365 consecutive days occurring
on or after the SEC Effective Date to sell shares of Common Stock issued or
issuable upon conversion of this Note pursuant to the Registration Statement (1)
by reason of the requirements of the 1933 Act, the 1934 Act or any of the rules
or regulations under either thereof or (2) due to the Registration Statement
containing any untrue statement of material fact or omitting to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or other failure of the Registration Statement to comply with the
rules and regulations of the SEC; or
(f) 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 (x) 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 (y) 110% plus (2) accrued and unpaid
Default Interest, if any, on the amount referred to in the immediately preceding
clause (1)(x)(B) at the rate provided in this Note to the date of such
repurchase.
"Restricted Securities" means securities that are not eligible
for resale pursuant to Rule 144(k) under the 1933 Act (or any successor
provision).
"Rights Agreement" means the Rights Agreement, dated as of
August 1, 1995, by and between the Company and Boston EquiServe, as Rights
Agent.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act.
"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.
"Securities" shall have the meaning provided in Section
2.3(d).
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<PAGE>
"Securities Purchase Agreement" means the Securities Purchase
and Exchange Agreement, dated as of March 19, 1999, by and between the Company
and the original Holder of this Note.
"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).
"Subordination Terms" means with respect to any Indebtedness
the terms of subordination set forth in Exhibit G hereto and which terms shall
be set forth in the instrument evidencing or governing such Indebtedness.
"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.
"Transaction Documents" means this Note, the Securities
Purchase Agreement, the Warrant Notes, the Warrants, and the other agreements,
instruments and documents contemplated hereby and thereby.
"Trigger Event" shall have the meaning provided in Section
2.3(d).
"Trust Agreement" means the Trust Agreement entered into
between the Company and the Trustee, as trustee for the benefit of the holders
from time to time of this Note, the Other Notes and the Warrant Notes, for the
purposes and otherwise in accordance with Article VI of this Note and the
comparable provisions of the Other Notes and the Warrant Notes.
"Trustee" means the trustee appointed and acting under the
Trust Agreement, who shall be a Person approved by the Majority Holders.
"Warrant Notes" means the Company's 12% Senior Convertible
Notes issuable or issued pursuant to the Warrants.
"Warrants" means the Company's 12% Senior Convertible Note
Purchase Warrants issued pursuant to the Securities Purchase Agreement and the
Other Securities Purchase Agreements.
ARTICLE VIII
MISCELLANEOUS
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<PAGE>
8.1 Failure or Indulgency Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
8.2 Notices. Except as otherwise specifically provided herein, any
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier and shall be deemed to have been given upon receipt. For the purposes
hereof, the address and facsimile line transmission number of the Holder shall
be furnished by the Holder for such purpose and shown on the records of the
Company; and the address of the Company shall be SUGEN, Inc., 230 East Grand
Avenue, South San Francisco, California 94080, Attention: Senior Vice President
and Chief Financial Officer facsimile line transmission number (650) 553-8310. 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: Alan C. Mendelson, Esq. and Suzanne Sawochka Hooper, Esq. (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 or Warrant
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 and Warrant Notes affected thereby, (i) extend the scheduled final
maturity of this Note or any Other Note or Warrant 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 Optional Redemption
Consideration, 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 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
-39-
<PAGE>
prior to the date which is two years after the Issuance Date unless (1) (A) the
transferee is an "accredited investor" as defined in Regulation D under the 1933
Act and (B) the Holder shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, or
(2) this Note is transferred to a QIB in accordance with Rule 144A, to the
effect that this Note may be sold or transferred without registration under the
1933 Act. Before any transfer of this Note prior to the date which is two years
after the Issuance Date, the 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), 8, 9, and 10 of the
Securities Purchase Agreement, such transfer shall otherwise be made in
compliance with Section 10.7 of the Securities Purchase Agreement.
(b) Upon any transfer of a this Note to a QIB in accordance
with Rule 144A, and upon receipt of this Note, together with a certification,
substantially in the form attached to this Note, from the transferor that the
transfer is being made in compliance with Rule 144A (or other evidence
satisfactory to the Company), the Company shall permit the Note issued upon such
transfer to be held by the Depositary, and the Company shall cancel this Note;
provided however, that no such Note issued upon transfer of this Note in respect
of which the Company or an Affiliate of the Company holds any beneficial
interest shall be so held by the Depositary until such Note is freely tradable
in accordance with Rule 144(k) under the 1933 Act; provided further however,
that the Company shall issue a Note registered in the name of the owner thereof
upon any transfer of a beneficial interest in this Note while registered in the
name of the Depositary to the Company or any Affiliate of the Company.
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 Securities 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 Note Register; Replacement of Notes. The Company shall maintain a
register showing the names, addresses and telephone line facsimile numbers of
the Holder and the registered holders of the Other Notes. The Company shall also
maintain a facility for the registration of transfers of this Note and the Other
Notes and at which this Note and the Other Notes may be surrendered for split up
into instruments of smaller denominations or for combination into instruments of
larger denominations. 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
-40-
<PAGE>
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).
8.10 Payment of Note on Redemption or Repurchase; Deposit of Redemption
or Repurchase Price, Etc. If this Note is to be redeemed as provided in Section
1.2 or this Note or any portion of this Note is to be repurchased as provided in
Sections 5.1 and 5.2 or Section 5.3 and any notice required in connection
therewith shall have been given as provided therein and the Company shall have
otherwise complied with the requirements of this Note with respect thereto, then
this Note or the portion of this Note to be so redeemed or repurchased and with
respect to which any such notice has been given shall become due and payable on
the date stated in such notice at the applicable Optional Redemption
Consideration, Repurchase Price or Registration Repurchase Price. On and after
the Optional Redemption Date or repurchase date so stated in such notice,
provided that the Company shall have deposited with an Eligible Bank on or prior
to such Optional Redemption Date or repurchase date, an amount and Common Stock
Warrants sufficient to pay the applicable Optional Redemption Consideration or
an amount sufficient to pay the applicable Repurchase Price or Registration
Repurchase Price, as the case may be, interest on this Note or the portion of
this Note to be so redeemed or repurchased shall cease to accrue, and this Note
or such portion hereof shall be deemed not to be outstanding and shall not be
entitled to any benefit with respect to principal of or interest on the portion
to be so redeemed or repurchased except to receive payment and delivery of the
applicable Optional Redemption Consideration, Repurchase Price or Registration
Repurchase Price. On presentation and surrender of this Note or such portion
hereof, this Note or the specified portion hereof shall be redeemed or
repurchased at the applicable Optional Redemption Consideration, Repurchase
Price or Registration Repurchase Price. If a portion of this Note is to be
repurchased, upon surrender of this Note to the Company in accordance with the
terms hereof, 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 this Note so
surrendered.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-41-
<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:__________________________________________
James L. Knighton
Senior Vice President and
Chief Financial Officer
-42-
<PAGE>
ASSIGNMENT
For value received _________________________ hereby sell(s), assign(s)
and transfer(s) unto _________________________ (Please insert social security or
other Taxpayer Identification Number of assignee:
______________________________) the within Note, and hereby irrevocably
constitutes and appoints _________________________ attorney to transfer the said
Note on the books of the Company, with full power of substitution in the
premises.
In connection with any transfer of the Note within the period prior to
the expiration of the holding period applicable to sales thereof under Rule
144(k) under the 1933 Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
1933 Act), the undersigned confirms that such Note is being transferred:
[ ] To SUGEN, Inc. or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule 144A; or
[ ] To an "accredited investor" pursuant to and in compliance with
the 1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the 1933 Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the 1933 Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in this
Assignment shall have the respective meanings provided in the Note.
Dated:_____________________________ NAME:_____________________________
__________________________________
Signature(s)
-43-
<PAGE>
EXHIBIT A
TO NOTE
NOTICE OF CONVERSION
OF 12% SENIOR CONVERTIBLE NOTE DUE 2002
OF SUGEN, INC.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
<S> <C>
To: SUGEN, Inc. with a copy to:
230 East Grand Avenue
South San Francisco, California 94063-4720 Cooley Godward LLP
Attention: Senior Vice President and 5 Palo Alto Square
Chief Financial Officer 3000 El Camino Real
Palo Alto, California 94306
Primary Facsimile No.: (650) 553-8310 Attn: Suzanne Sawochka Hooper, Esq.
Alternate Facsimile No. (if primary not Facsimile No.: (650) 857-0663
functioning): (650) 553-8301
BankBoston N.A.,
as Issuing Agent
150 Royall Street
Canton, Massachusetts 02021
Attention: Ms. Dawn Coe
Special Issuances
Facsimile No.: (781) 575-2393
- ---------------------------------------------------------------------------------------
</TABLE>
1. Pursuant to the terms of the 12% Senior Convertible Note due 2002
(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 _______________(the "Conversion
Shares").
3. 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:_______________________________________________________________
4. 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 Securities Purchase
A-44
<PAGE>
Agreement with respect to the shares of Common Stock issuable upon the
conversion of the Note to which this Notice relates.
5. If the shares of Common Stock issuable upon conversion of the Note
have not been registered for resale under the Securities Act of 1933, as amended
(the "Act"), and the provisions of Rule 144(k) under the 1933 Act are
inapplicable to the undersigned with respect to the Conversion Shares relating
to this Notice, 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. If the provisions of Rule 144(k)
under the 1933 Act are inapplicable to the undersigned with respect to the
Conversion Shares relating to this Notice, the undersigned further agrees that
(A) such shares shall not be sold or transferred unless (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 in form, scope and substance 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-45
<PAGE>
EXHIBIT B
TO NOTE
SUGEN, INC.
OPTIONAL REDEMPTION NOTICE
(Section 1.2 of 12% Senior Convertible Note due 2002)
TO:________________________________________________________________
(Name of Holder)
1. Pursuant to the terms of the 12% Senior Convertible Note due 2002
(the "Note"), SUGEN, Inc., a Delaware corporation (the "Company"), hereby
notifies the above-named Holder that the Company is exercising its right to
redeem the Note in accordance with Section 1.2 of the Note as set forth below:
(i) The cash portion of Optional Redemption Consideration
(based on the principal amount of the Note outstanding on the date this Notice
is given) is $_____________.
(ii) The Common Stock Warrant issuable upon such redemption
(based on the principal amount of the Note outstanding on the date this notice
is given) initially will entitle the holder to purchase ________ shares of
Common Stock at a price of $_________ per share.
(iii) The Optional Redemption Date is _____________.
2. Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date_________________________________ SUGEN, INC.
By:____________________________________
Title:_________________________________
B-46
<PAGE>
EXHIBIT C
TO NOTE
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) IT HAS BEEN REGISTERED UNDER
THOSE LAWS, (2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER EACH OF THOSE LAWS
IS AVAILABLE OR (3) SUCH SALE, TRANSFER OR OTHER DISPOSITION IS TO A QIB
PURSUANT TO RULE 144A.
THIS WARRANT IS ISSUED IN CONNECTION WITH SECURITIES ISSUED PURSUANT TO A
SECURITIES PURCHASE AND EXCHANGE AGREEMENT, DATED AS OF MARCH 19, 1999, 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 MAY BE SUBJECT TO
CERTAIN OF THE TERMS OF THE SECURITIES PURCHASE AND EXCHANGE AGREEMENT.
THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 16.
No. WB-1 Right to Purchase [BEFORE ISSUANCE, INSERT
NUMBER DETERMINED IN ACCORDANCE WITH SECTION
5 OF 12% SENIOR CONVERTIBLE NOTE PURCHASE
WARRANT OR DEFINITION OF OPTIONAL REDEMPTION
CONSIDERATION IN NOTE, AS APPLICABLE] Shares
of Common Stock of SUGEN, Inc.
SUGEN, INC.
Common Stock Purchase Warrant
SUGEN, INC., a Delaware corporation, hereby certifies that, for value
received, [INSERT NAME OF HOLDER] 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 (such capitalized term and all other
capitalized terms used herein having the respective meanings provided herein),
[BEFORE ISSUANCE, INSERT NUMBER DETERMINED IN ACCORDANCE WITH SECTION 5 OF 12%
SENIOR CONVERTIBLE NOTE PURCHASE WARRANT OR DEFINITION OF OPTIONAL REDEMPTION
CONSIDERATION IN NOTE, AS APPLICABLE] fully paid and nonassessable shares of
Common Stock at a purchase price per share equal to the Purchase Price. 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:
C-47
<PAGE>
"Aggregate Purchase Price" means at any time an amount equal to the
product obtained by multiplying (x) the Purchase Price times (y) the number of
shares of Common Stock for which this Warrant may be exercised at such time.
"AMEX" means the American Stock Exchange, Inc.
"Board of Directors" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect on the date of
such certification, and delivered to the Holder.
"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.
"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 and 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.
"Common Stock Equivalents" means any warrant, option, subscription or
purchase right with respect to shares of Common Stock, any security convertible
into, exchangeable for, or otherwise entitling the holder thereof to acquire,
shares of Common Stock or any warrant, option, subscription or purchase right
with respect to any such convertible, exchangeable or other security.
"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.
"Current Fair Market Value" means when used with respect to the Common
Stock as of a specified date with respect to each share of Common Stock, the
average of the closing prices of the Common Stock sold on all securities
exchanges (including the Nasdaq National Market and the Nasdaq SmallCap 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 all such exchanges at the end of such day, or, if on such
day the Common Stock is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 p.m., New York City time,
or, if on such day the Common Stock is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five Trading Days consisting of the day as of which the Current
Fair Market Value of Common Stock is being determined (or if such day is not a
Trading Day, the Trading Day next preceding such day) and the four consecutive
Trading Days prior to such day. If on the date for which Current Fair Market
Value is to be determined the Common Stock is not listed on any
C-48
<PAGE>
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the Current Fair Market Value of Common Stock shall be the greater of
(i) the highest price per share of Common Stock at which the Company has sold
shares of Common Stock or Common Stock Equivalents within 365 days prior to the
date of such determination and (ii) the highest price per share which the
Company could then obtain from a willing buyer (not an employee or director of
the Company at the time of determination) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors.
"Current Market Price" shall mean the arithmetic average of the daily
Market Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question; provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Purchase Price pursuant to Section 3(a), (b), (c), (d), (e), (f), or (g) occurs
during such ten consecutive Trading Days, the Market Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Market Price by the same fraction by which the Purchase Price is so
required to be adjusted as a result of such other event, (2) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Purchase Price pursuant to
Section 3(a), (b), (c), (d), (e), (f), or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior to the day
in question, the Market Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Market Price by the
reciprocal of the fraction by which the Purchase Price is so required to be
adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Market Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section 3(d) or
(f), whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Section 3(f), the Current Market Price of the Common Stock on any date shall be
deemed to be the arithmetic average of the daily Market Prices per share of
Common Stock for such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the Tender Offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 3(a), (b), (c), (d), (e), (f), or (g) occurs on or after the
Expiration Time for the Tender Offer requiring such computation and prior to the
day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Purchase Price is so required to be
adjusted as a result of such other event. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular way, on the
relevant exchange or in the relevant market from which the Market Price was
obtained without the right to receive such issuance or distribution, (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades, regular way, on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect to any Tender
Offer means the first date on which the Common Stock trades, regular way, on
such exchange or in such market after the Expiration Time of such Tender Offer.
Notwithstanding the foregoing, whenever successive adjustments to the Purchase
Price are called for pursuant to Section 3, such adjustments shall be made to
the Current Market Price as
C-49
<PAGE>
may be necessary or appropriate to effectuate the intent of Section 3 and to
avoid unjust or inequitable results as determined in good faith by the Board of
Directors.
"Expiration Date" means March 31, 2004.
"Expiration Time" shall have the meaning provided in Section 3(f).
"Issuance Date" shall mean the date of original issuance of this
Warrant.
"Market Price" means with respect to any security on any day the
closing bid price of such security on such day on the Nasdaq or the NYSE or the
AMEX, as applicable, or, if such security is not listed or admitted to trading
on the Nasdaq, the NYSE or the AMEX, on the principal national securities
exchange or quotation system on which such security is quoted or listed or
admitted to trading, in any such case as reported by Bloomberg, L.P. or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question, as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution.
"Newly Issued Shares" shall have the meaning provided in Section 3(g).
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Notes" shall mean the 12% Senior Convertible Notes due 2002 of the
Company issued pursuant to the Securities Purchase Agreement and the Other
Securities Purchase Agreements.
"Note Warrants" means the 12% Senior Convertible Note Purchase Warrants
issued by the Company pursuant to the Securities Purchase Agreement and the
Other Securities Purchase Agreements.
"NYSE" means the New York Stock Exchange, Inc.
"Other Securities Purchase Agreements" means the several Securities
Purchase and Exchange Agreements, dated as of the date of the Securities
Purchase Agreement, by and between the Company and the several buyers named
therein.
"Other Warrants" shall mean the Common Stock Purchase Warrants (other
than this Warrant) issued or issuable pursuant to the Notes or the Note
Warrants.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association,
or similar entity or any 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).
C-50
<PAGE>
"Purchase Price" means $[PRIOR TO ISSUANCE, INSERT CONVERSION PRICE OF
NOTES IN EFFECT IMMEDIATELY PRIOR TO ISSUANCE OR CONVERSION PRICE OF WARRANT
NOTES THAT WOULD BE IN EFFECT IMMEDIATELY PRIOR TO ISSUANCE, AS APPLICABLE],
subject to adjustment as provided in this Warrant.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Record Date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock have the right
to receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Restricted Securities" means securities that are not eligible for
resale pursuant to Rule 144(k) under the 1933 Act (or any successor provision).
"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.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Securities" shall have the meaning provided in Section 3(d).
"Securities Purchase Agreement" means the Securities Purchase and
Exchange Agreement, dated as of March 19, 1999, by and between the Company and
the original Holder of the Note or Note Warrant pursuant to which this Warrant
was issued.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the 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.
"Trigger Event" shall have the meaning provided in Section 3(d).
"Warrant Notes" means the Company's 12% Senior Convertible Notes
issuable or issued pursuant to the Note Warrants.
1. Exercise of Warrant.
1.1 Exercise. 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
C-51
<PAGE>
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 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 such telephone number for the Company
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; provided further, however, that any failure or delay on
the part of the Holder in giving such original of any subscription form shall
not affect the validity or the date on which such subscription form is so given
by telephone line facsimile transmission.
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 the
subscription form annexed hereto (duly executed by the Holder) to the Company
(followed by surrender of this Warrant to the Company within three Trading Days
after surrender of such subscription form), in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:
X = Y x (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
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within five
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder, or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and nonassessable shares of Common Stock 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 Current Fair Market Value of one share of Common Stock calculated as of the
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last Trading Day immediately preceding the date of such exercise, together with
any other stock or other securities or 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. Adjustments to Purchase Price. The Purchase Price and the number of
shares of Common Stock which may be purchased upon exercise of this Warrant
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall on or after the Issuance Date
pay a dividend or make a distribution to all holders of the outstanding Common
Stock in shares of Common Stock, then
(1) the Purchase Price in effect at the opening of business on
the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be
reduced by multiplying such Purchase Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the Record Date fixed for such determination
and the denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the
opening of business on the day following the Record Date; and
(2) the number of shares of Common Stock for which this
Warrant may thereafter be exercised that shall be in effect at the
opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution shall be increased to a number equal to the quotient
obtained by dividing (x) the Aggregate Purchase Price in effect
immediately prior to such adjustment in the Purchase Price pursuant to
clause (1) of this Section 3(a) by the Purchase Price in effect
immediately after such adjustment in the Purchase Price pursuant to
clause (1) of this Section 3(a).
If any dividend or distribution of the type described in this Section 3(a) is
declared but not so paid or made, the Purchase Price shall again be adjusted to
the Purchase Price which would then be in effect if such dividend or
distribution had not been declared and the number of shares of Common Stock for
which this Warrant may thereafter be exercised shall again be adjusted
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(subject to proportionate adjustment for any intervening exercises of this
Warrant) to the number which would then be in effect if such dividend or
distribution had not been declared.
(b) In case the Company shall on or after the Issuance Date
issue rights or warrants (other than any rights or warrants (including the
Preferred Share Purchase Rights) referred to in Section 3(d)) to all holders of
its outstanding shares of Common Stock entitling them (for a period expiring
within 45 days after the date fixed for the determination of stockholders
entitled to receive such rights or warrants) to subscribe for or purchase shares
of Common Stock at a price per share less than the Current Market Price on the
Record Date fixed for the determination of stockholders entitled to receive such
rights or warrants, then
(1) the Purchase Price shall be adjusted so that the same
shall equal the price determined by multiplying the Purchase Price in
effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on such Record Date
plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market
Price, and the denominator shall be the number of shares of Common
Stock outstanding on the close of business on such Record Date plus the
total number of additional shares of Common Stock so offered for
subscription or purchase; and
(2) the number of shares of Common Stock which the Holder may
thereafter purchase upon exercise of this Warrant at the opening of
business on the date after such Record Date shall be increased to a
number equal to the quotient obtained by dividing (x) the Aggregate
Purchase Price in effect immediately prior to such adjustment in the
Purchase Price pursuant to clause (1) of this Section 3(b) by (y) the
Purchase Price in effect immediately after such adjustment in the
Purchase Price pursuant to Section 3(a)(1).
Such adjustment shall become effective immediately after the opening of business
on the day following the Record Date fixed for determination of stockholders
entitled to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants, the Purchase Price shall be
readjusted to the Purchase Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered and the number of shares of Common Stock for which this Warrant may
thereafter be exercised shall be readjusted (subject to proportionate adjustment
for any intervening exercises of this Warrant) to the number which would then be
in effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so issued,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such Record Date had not been fixed and the number of
shares of Common Stock for which this Warrant may thereafter be exercised shall
again be adjusted (subject to proportionate adjustment for any intervening
exercises of this Warrant) to be the number which would then be in effect if
such Record Date had not been fixed. In determining whether any rights or
warrants entitle the holder to subscribe for or purchase shares of Common Stock
at less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
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(c) In case the outstanding shares of Common Stock shall on or
after the Issuance Date be subdivided into a greater number of shares of Common
Stock, the Purchase Price in effect at the opening of business on the earlier of
the day following the day upon which such subdivision becomes effective and the
day on which "ex-" trading of the Common Stock begins with respect to such
subdivision shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Purchase Price in effect at the opening of business
on the earlier of the day following the day upon which such combination becomes
effective and the day on which "ex-" trading of the Common Stock with respect to
such combination begins shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the earlier of the day following the day upon which such
subdivision or combination becomes effective and the day on which "ex-" trading
of the Common Stock begins with respect to such subdivision or combination. If
the Purchase Price shall be reduced or increased pursuant to this Section 3(c),
then commencing at the time of such reduction or increase the number of shares
of Common Stock for which this Warrant may thereafter be exercised shall be
adjusted to a number equal to the quotient obtained by dividing (x) the
Aggregate Purchase Price in effect immediately prior to such reduction or
increase in the Purchase Price pursuant to this Section 3(c) by (y) the Purchase
Price in effect immediately after such reduction or increase in the Purchase
Price pursuant to this Section 3(c).
(d) In case the Company shall on or after the Issuance Date,
by dividend or otherwise, distribute to all holders of its Common Stock shares
of any class of capital stock of the Company (other than any dividends or
distributions to which Section 3(a) applies) or evidences of its indebtedness,
cash or other assets (including securities, but excluding any rights or warrants
referred to in Section 3(b) and dividends and distributions paid exclusively in
cash and excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 4 applies) (the
foregoing hereinafter in this Section 3(d) called the "Securities")), then, in
each such case, subject to the second paragraph of this Section 3(d):
(1) the Purchase Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Purchase Price in
effect immediately prior to the close of business on the Record Date
with respect to such distribution by a fraction of which the numerator
shall be the Current Market Price on such date less the fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) on such date
of the portion of the Securities so distributed applicable to one share
of Common Stock and the denominator shall be such Current Market Price,
such reduction to become effective immediately prior to the opening of
business on the day following such Record Date; provided, however, that
in the event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price on
the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that the Holder shall have the right to
receive upon exercise of this Warrant (or any portion hereof) the
amount of Securities the Holder would have received had the Holder
exercised this Warrant (or portion hereof) immediately prior to such
Record Date; and
(2) if the Purchase Price is reduced as provided in clause (1)
of this Section 3(d) the number of shares of Common Stock which may be
purchased upon exercise of this Warrant commencing at the opening of
business on the day following such Record Date shall be increased to a
number equal to the quotient obtained by dividing (x) the
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<PAGE>
Aggregate Purchase Price in effect immediately prior to such reduction
in the Purchase Price pursuant to Section 3(d)(1) by (y) the Purchase
Price in effect immediately after such reduction in the Purchase Price
pursuant to clause (1) of this Section 3(d).
In the event that such dividend or distribution is not so paid or made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such dividend or distribution had not been declared and the
number of shares of Common Stock for which this Warrant may thereafter be
exercised shall again be adjusted (subject to proportionate adjustment for any
intervening exercises of this Warrant) to the number which would then be in
effect if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes of
this Section 3(d) by reference to the actual or when issued trading market for
any Securities comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price to the extent possible.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events (a "Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall not be deemed to have been
distributed for purposes of this Section 3 (and no adjustment to the Purchase
Price or the number of shares of Common Stock which may be purchased upon
exercise of this Warrant under this Section 3 will be required) until the
occurrence of the earliest Trigger Event. If any such rights or warrants,
including any such existing rights or warrants distributed prior to the Issuance
Date (including the Preferred Share Purchase Rights), are subject to Trigger
Events, upon the satisfaction of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of indebtedness
or other assets, then the occurrence of each such Trigger Event shall be deemed
to be such date of issuance and Record Date with respect to new rights or
warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof) (so that, by way of illustration and not
limitation, the dates of issuance of any such rights shall be deemed to be the
dates on which such rights become exercisable to purchase capital stock of the
Company, and not the date on which such rights may be issued, or may become
evidenced by separate certificates, if such rights are not then so exercisable).
In addition, in the event of any distribution of rights or warrants, or any
Trigger Event with respect thereto (including the Preferred Share Purchase
Rights), that was counted for purposes of calculating a distribution amount for
which adjustments to the Purchase Price and the number of shares of Common Stock
for which this Warrant may be exercised under this Section 3 were made (1) in
the case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Purchase Price shall be
readjusted (and the number of shares of Common Stock for which this Warrant may
thereafter be exercised shall be readjusted, subject to proportionate adjustment
for any intervening exercises of this Warrant) upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants (including the
Preferred Share Purchase Rights) which shall have expired or been terminated
without exercise by any holders thereof, the Purchase Price shall be readjusted
as if such rights and warrants had not been issued and the number of shares of
Common Stock for which this Warrant may thereafter be exercised shall be
readjusted (subject to proportionate
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<PAGE>
adjustment for any intervening exercises of this Warrant) as if such rights and
warrants had not been issued.
For purposes of this Section 3(d) and Sections 3(a) and (b),
any dividend or distribution to which this Section 3(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 3(b) applies (or both), shall
be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or rights or warrants to which Section 3(b) applies
(and any Purchase Price reduction and increase in the number of shares of Common
Stock for which this Warrant may thereafter be exercised that are required by
this Section 3(d) with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution of such shares of
Common Stock or such rights or warrants (and any further Purchase Price
reduction and increase in the number of shares of Common Stock for which this
Warrant may thereafter be exercised that are required by Sections 3(a) and (b)
with respect to such dividend or distribution shall then be made), except (A)
the Record Date of such dividend or distribution shall be substituted as "the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination" and
"Record Date" within the meaning of Section 3(a) and as "the date fixed for the
determination of stockholders entitled to receive such rights or warrants", "the
Record Date fixed for the determination of the stockholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of Section
3(b) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
Record Date fixed for such determination" within the meaning of Section 3(a).
(e) In case the Company shall on or after the Issuance Date,
by dividend or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or consolidation to which
Section 4 applies or as part of a distribution referred to in Section 3(d)) in
an aggregate amount that, combined with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to this Section 3(e) has been made, and
(2) the aggregate of any cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and set forth in a
Board Resolution) of consideration payable in respect of any Tender Offer by the
Company or any Subsidiary for all or any portion of the Common Stock concluded
within the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to Section 3(f) has been made, exceeds
10% of the product of (x) the Current Market Price on the Record Date with
respect to such distribution times (y) the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date, unless the Company elects to reserve such cash
for distribution to the Holder upon the exercise of this Warrant (and shall have
made adequate provision) so that the Holder will receive upon such exercise, in
addition to the shares of Common Stock to which the Holder is entitled, the
amount of cash which the Holder would have received if the Holder had,
immediately prior to the Record Date for such distribution of cash, exercised
this Warrant to purchase Common Stock:
(1) the Purchase Price shall be reduced so that the same shall
equal the price determined by multiplying the Purchase Price in effect
immediately prior to the close of business on such Record Date by a
fraction (i) the numerator of which shall be equal to the Current
Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% and (y) the number
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of shares of Common Stock outstanding on the Record Date and (ii) the
denominator of which shall be equal to the Current Market Price on the
Record Date; provided, however, that in the event the portion of the
cash so distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that the Holder shall have the right to receive upon
exercise of this Warrant (or any portion hereof) the amount of cash the
Holder would have received had the Holder exercised this Warrant (or
portion hereof) immediately prior to such Record Date; and
(2) if the Purchase Price is reduced as provided in clause (1)
of this Section 3(e), then the number of shares of Common Stock for
which this Warrant may thereafter be exercised shall be increased at
the time of such reduction in the Purchase Price to a number equal to
the quotient obtained by dividing (x) the Aggregate Purchase Price in
effect immediately prior to the close of business on such Record Date
by (y) the Purchase Price in effect immediately after such reduction in
the Purchase Price pursuant to clause (1) of this Section 3(e).
In the event that such dividend or distribution is not so paid or made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such dividend or distribution had not been declared and the
number of shares of Common Stock for which this Warrant may thereafter be
exercised shall again be adjusted (subject to proportionate adjustment for any
intervening exercises of this Warrant) to the number which would then be in
effect if such dividend or distribution had not been declared.
(f) In case a Tender Offer on or after the Issuance Date made
by the Company or any Subsidiary for all or any portion of the Common Stock
shall expire and such Tender Offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such Tender Offer, of consideration payable
in respect of any other Tender Offers, by the Company or any Subsidiary for all
or any portion of the Common Stock expiring within the 12 months preceding the
expiration of such Tender Offer and in respect of which no adjustment pursuant
to this Section 3(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made exclusively in
cash within 12 months preceding the expiration of such Tender Offer and in
respect of which no adjustment pursuant to Section 3(e) has been made, exceeds
10% of the product of the Current Market Price as of the last time (the
"Expiration Time") tenders could have been made pursuant to such Tender Offer
(as it may be amended) times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time, then, and in each such
case, immediately prior to the opening of business on the day after the date of
the Expiration Time:
(1) the Purchase Price shall be adjusted so that the same
shall equal the price determined by multiplying the Purchase Price in
effect immediately prior to close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time multiplied by the Current Market Price
of the Common Stock on the
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Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid)
of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the Tender
Offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased
Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time;
and
(2) the number of shares of Common Stock for which this
Warrant may thereafter be exercised shall be adjusted at the time of
such reduction (if any) in the Purchase Price to a number equal to the
quotient obtained by dividing (x) the Aggregate Purchase Price in
effect immediately prior to the close of business on the date of the
Expiration Time by (y) the Purchase Price in effect immediately after
such reduction in the Purchase Price pursuant to clause (1) of this
Section 3(f).
Such reduction (if any) in the Purchase Price and increase in the number of
shares of Common Stock for which the Warrant may thereafter be exercised shall
become effective immediately prior to the opening of business on the day
following the Expiration Time. In the event that the Company is obligated to
purchase shares pursuant to any such Tender Offer, but the Company is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such Tender Offer had not
been made. If the application of this Section 3(f) to any Tender Offer would
result in an increase in the Purchase Price, no adjustment shall be made for
such Tender Offer under this Section 3(f).
(g) (1) In case at any time on or after the Issuance Date the
Company shall issue shares of its Common Stock or Common Stock Equivalents
(collectively, the "Newly Issued Shares"), other than an issuance pro rata to
all holders of its outstanding Common Stock, at a price below the Current Fair
Market Value of the Common Stock at the time of such issuance, then following
such issuance of Newly Issued Shares the Purchase Price shall be reduced as
provided in clause (2) of this Section 3(g) and the number of shares of Common
Stock which may be issued upon exercise of this Warrant shall be increased as
provided in clause (3) of this Section 3(g).
(2) The reduction in the Purchase Price following any such
adjustment shall be determined by multiplying the Purchase Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the sum
of (a) the number of shares of Common Stock outstanding immediately prior to the
issuance of the Newly Issued Shares (calculated on a fully-diluted basis
assuming the exercise or conversion of all options, warrants, purchase rights or
convertible securities which are exercisable or convertible at the time of the
issuance of the Newly Issued Shares) plus (b) the number of shares of Common
Stock which the aggregate consideration, if any, received by the Company for the
number of Newly Issued Shares would purchase at a price equal to the Current
Fair Market Value of the Common Stock at the time of such issuance, and the
denominator shall be the sum of (X) the number of shares of Common Stock
outstanding immediately prior to the issuance of the Newly Issued Shares
(calculated on a fully-diluted basis assuming the exercise or conversion of all
options, warrants, purchase rights or convertible securities which are
exercisable or convertible at the time of the issuance of the Newly Issued
Shares) plus (Y) the number of Newly Issued Shares. The
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adjustment provided for in this Section 3(g)(2) may be expressed as the
following mathematical formula:
------------------------ ---------------------------------- -----------
( O +(C / FMV)) x PP
-------------------
------------------------ ---------------------------------- -----------
NPP = ( O + N )
------------------------ ---------------------------------- -----------
where,
C = aggregate consideration received by the Company for the Newly
Issued Shares
N = number of Newly Issued Shares
O = number of shares of Common Stock outstanding (on a fully diluted
basis, as described above) immediately prior to the issuance of
the Newly Issued Shares
FMV = Current Fair Market Value of the Common Stock at the time of
issuance of the Newly Issued Shares
PP = Purchase Price immediately prior to the issuance of the Newly
Issued Shares
NPP = Purchase Price immediately after the issuance of the Newly
Issued Shares
(3) If the Purchase Price is reduced in connection with
the issuance of Newly Issued Shares as provided in Section 3(g)(2), then the
number of shares of Common Stock for which this Warrant may thereafter be
exercised shall be increased at the time of such reduction in the Purchase Price
to a number equal to the quotient obtained by dividing (x) the Aggregate
Purchase Price in effect immediately prior to such issuance of Newly Issued
Shares by (y) the Purchase Price in effect immediately after such issuance of
Newly Issued Shares after such reduction in the Purchase Price pursuant to
Section 3(g)(2).
(4) Notwithstanding the foregoing, no adjustment shall be
made under this Section 3(g) by reason of:
(A) the issuance by the Company of shares of
Common Stock pro rata to all holders of the Common Stock so long as (i) any
adjustment required by Section 3(a) is made and (ii) the Company shall have
given notice thereof to the Holder pursuant to Section 6;
(B) the issuance by the Company of Newly
Issued Shares in an offering for cash for the account of the Company that is
underwritten on a firm commitment basis and is registered under the 1933 Act;
(C) the issuance by the Company for cash of
Newly Issued Shares in connection with a strategic alliance, collaboration,
joint venture, partnership or similar arrangement of the Company with another
Person which strategic alliance, collaboration, joint venture, partnership or
similar arrangement relates to the Company's business as conducted immediately
prior thereto and which Person is engaged in a business similar or related to
the business of the Company so long as (x) the price per Newly Issued Share is
not less than 85
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percent of the Current Fair Market Value of the Common Stock on the date of
issuance of such Newly Issued Shares and (y) the consideration other than cash
which the Company receives in connection with such strategic alliance,
collaboration, joint venture, partnership or similar arrangement has a value, as
determined by the Board of Directors in its reasonable judgment and set forth in
a Board Resolution, at least equal to the amount by which (i) the product of the
number of Newly Issued Shares so issued times the Current Fair Market Value of
the Common Stock on the date such Newly Issued Shares are issued exceeds (ii)
the aggregate cash consideration received by the Company for such Newly Issued
Shares at the time of issuance thereof;
(D) the issuance by the Company of the
Warrant Notes or the Other Warrants or shares of Common Stock upon conversion of
the Notes or the Warrant Notes or upon exercise of this Warrant or the Other
Warrants in accordance with the terms hereof and thereof; and
(E) the issuance by the Company of shares of
Common Stock in payment of interest on the Notes and the Warrant Notes in
accordance with the terms thereof.
(h) The Company may make such reductions in the Purchase
Price, in addition to those required by Sections 3(a), (b), (c), (d), (e), (f),
and (g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
(i) No adjustment in the Purchase Price (and no related
adjustment in the number of shares of Common Stock which may thereafter be
purchased upon exercise of this Warrant) shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
3(i) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 3 shall be
made by the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value of
the Common Stock or from par value to no par value or from no par value to par
value.
(j) Whenever the Purchase Price is adjusted as herein
provided, the Company shall promptly, but in no event later than five days
thereafter, give a notice to the Holder setting forth the Purchase Price and
number of shares of Common Stock which may be purchased upon exercise of this
Warrant after such adjustment and setting forth a brief statement of the facts
requiring such adjustment, but which statement shall not include any information
which would be material non-public information for purposes of the 1934 Act.
Failure to deliver such notice shall not affect the legality or validity of any
such adjustment.
(k) In any case in which this Section 3 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Holder in connection with any exercise of this Warrant after such Record Date
and before the occurrence of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the Common Stock issuable upon such exercise before giving effect
to
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such adjustment and (ii) paying to the Holder any amount in cash in lieu of any
fraction pursuant to Section 2.
(l) For purposes of this Section 3, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company other than (i) dividends or distributions
payable only in shares of Common Stock and (ii) the Preferred Share Purchase
Rights.
4. Effect of Reclassification, Consolidation, Merger or Sale. (a) If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Holder a written agreement providing
that this Warrant shall thereafter entitle the Holder to purchase the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by the holder of a number of shares of Common
Stock issuable upon exercise of this Warrant (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert this
Note) immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance assuming such holder of Common Stock did not
exercise such holder's rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 4 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such written agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. If, in the case of any such reclassification,
change, consolidation, merger, combination, sale or conveyance, the stock or
other securities and assets receivable thereupon by a holder of shares of Common
Stock includes shares of stock or other securities and assets of a corporation
other than the successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or
conveyance, then such written agreement shall also be executed by such other
corporation and shall contain such additional provisions to protect the
interests of the Holder as the Board of Directors shall reasonably consider
necessary by reason of the foregoing.
(b) The above provisions of this Section 4 shall similarly
apply to successive reclassifications, changes, consolidations, mergers,
combinations, sales and conveyances.
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(c) If this Section 4 applies to any event or occurrence,
Section 3 shall not apply.
5. 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.
6. Notice to Holder Prior to Certain Actions. In case on or after the
Issuance Date:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained earnings);
or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any share of
any class or any other rights or warrants; or
(c) the Board of Directors shall authorize any
reclassification of the Common Stock (other than a subdivision or combination of
its outstanding Common Stock, or a change in par value, or from par value to no
par value, or from no par value to par value), or any consolidation or merger or
other business combination transaction to which the Company is a party and for
which approval of any stockholders of the Company is required, or the sale or
transfer of all or substantially all of the assets of the Company; or
(d) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a subscription form
to exercise this Warrant in whole or in part that is contingent on the
completion of such action.
7. 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
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exercise, conversion or exchange of any other warrant or security of the Company
exercisable 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.
8. 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.
9. 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.
10. 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 9, 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 (or other securities) 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.
11. 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).
12. 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 States of
America for the purpose of exchanging this Warrant pursuant to Section 10, and
replacing this Warrant pursuant to Section 11, 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.
13. 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
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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.
14. 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 purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.
15. 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 9.
16. 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 an "accredited
investor" (as defined in Regulation D under the 1933 Act) or a QIB in a transfer
that meets the requirements of Rule 144A 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 Warrant 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, 8, 9, and 10 of the Securities Purchase Agreement, such
transfer shall otherwise be made in compliance with Section 10(j) of the
Securities Purchase Agreement.
17. Rule 144A Information Requirement. Within the period prior to the
expiration of the holding period applicable to sales hereof under Rule 144(k)
under the 1933 Act (or any successor provision), the Company covenants and
agrees that it shall, during any period in which it is not subject to Section 13
or 15(d) under the 1934 Act, make available to the Holder and the holder of any
Common Stock issued upon exercise of this Warrant which continue to be
Restricted Securities in connection with any sale thereof and any prospective
purchaser of this Warrant from the Holder, the information required pursuant to
Rule 144A(d)(4) under the 1933 Act upon the request of the Holder and it will
take such further action as the Holder may reasonably request, all to the extent
required from time to time to enable the Holder to sell this Warrant without
registration under the 1933 Act within the limitation of the exemption provided
by Rule 144A, as Rule 144A may be amended from time to time. Upon the request of
the Holder, the Company will deliver to the Holder a written statement as to
whether it has complied with such requirements.
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18. Legend. Unless theretofore registered for resale under the 1933
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 reasonably
satisfactory in form, scope and substance to the Company 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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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: ________________ SUGEN, INC.
By:___________________________________________
Name:
Title:
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FORM OF SUBSCRIPTION
SUGEN, INC.
(To be signed only on exercise of Warrant)
TO: SUGEN, Inc.
230 East Grand Avenue
South San Francisco, California 94080
Attention: Senior Vice President and Chief Financial Officer
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):
[ ] (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
[ ] (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: ___________________________________________
___________________________________________
Dated:____________ ___, ____
____________________________________________
(Signature must conform to name of Holder as
specified on the face of the Warrant)
____________________________________________
____________________________________________
(Address)
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<PAGE>
EXHIBIT D
TO NOTE
COMPANY NOTICE
(Section 5.2(a) of 12% Senior Convertible Note due 2002)
TO:_______________________________________________________
(Name of Holder)
1. A Repurchase Event described in the 12% Senior Convertible Note due
2002 (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 E 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 E
TO NOTE
HOLDER NOTICE
(Section 5.2(b) of 12% Senior Convertible Note due 2002)
TO: SUGEN, INC.
1. Pursuant to the terms of the 12% Senior Convertible Note due 2002
(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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EXHIBIT F
TO NOTE
HOLDER REGISTRATION REPURCHASE NOTICE
(Section 5.3 of 12% Senior Convertible Note due 2002)
TO: SUGEN, INC.
1. Pursuant to the terms of the 12% Senior Convertible Note due 2002
(the "Note"), the undersigned Holder hereby elects to exercise its right to
require repurchase by the Company pursuant to Section 5.3 of $_______________ of
the Note, equal to the sum of $_______________ principal amount of the Note,
$_______________ of accrued and unpaid interest on such principal amount and
$_______________ of Default Interest on such interest at the Registration
Repurchase Price provided in the Note.
2. Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date:________________________________ NAME OF HOLDER:
_______________________________________
By_____________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
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<PAGE>
Exhibit G
to
Note
SUBORDINATION OF INDEBTEDNESS
Any Indebtedness to be issued as permitted by clause (5) of
the definition of Permitted Indebtedness in the Note shall contain the following
provisions and no provision inconsistent with the following provisions:
ARTICLE ____. SUBORDINATION
Section __.1. Agreement of Subordination. The Company
covenants and agrees, and each holder of the indebtedness created by this
instrument (this "Indebtedness") by its acceptance hereof or thereof covenants
and agrees, expressly for the benefit of holders of Senior Indebtedness, that
this Indebtedness shall be issued subject to the provisions of this Article; and
each person holding this Indebtedness, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and interest
on this Indebtedness (including, without limitation, upon any redemption or
repurchase of this Indebtedness) shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness in cash or other payment
satisfactory to the holders of such Senior Indebtedness.
No provision of this Article shall prevent the occurrence of
any default or event of default with respect to this Indebtedness.
Section __.2. Payments to Holders of this Indebtedness. (a)(1)
No payment shall be made with respect to the principal of, premium, if any, or
interest on this Indebtedness (including, without limitation, the redemption
price with respect to any of this Indebtedness to be called for redemption in
accordance with its terms or any repurchase of this Indebtedness) if:
(i) a default in the payment of principal, premium, if any,
interest or other obligations in respect of the Senior Indebtedness
occurs and is continuing (a "Payment Default"), unless and until such
Payment Default shall have been cured or waived or shall have ceased to
exist; or
(ii) a default, other than a Payment Default, on any Senior
Indebtedness occurs and is continuing that then permits holders of such
Senior Indebtedness to accelerate its maturity and the holder of this
Indebtedness (or indenture trustee or other representative thereof)
receives a notice of the default (a "Payment Blockage Notice") from a
holder of Senior Indebtedness, a representative of the holder of such
Senior Indebtedness or the Company (a "Non-Payment Default").
If the holder of this Indebtedness (or indenture trustee or representative
thereof) receives any Payment Blockage Notice pursuant to the immediately
preceding clause (ii), no subsequent Payment Blockage Notice shall be effective
for purposes of this Section __.2 unless and until (A) at least 365 days shall
have elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium, if any,
and
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interest on this Indebtedness that have become due and are required by the terms
of this Indebtedness to be paid in cash have been paid in full in cash. No
Non-Payment Default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the holder of this Indebtedness (or indenture
trustee or other representative thereof) shall be, or be made, the basis for a
subsequent Payment Blockage Notice, unless such Non-Payment Default is based
upon facts or events arising after the date of delivery of such Payment Blockage
Notice.
(2) The Company may and shall resume payments on and
distributions in respect of this Indebtedness upon:
(A) in the case of a Payment Default, the date upon which any
such Payment Default is cured or waived or ceases to exist, or
(B) in the case of a Non-Payment Default, the earlier of (a)
the date upon which such default is cured or waived or ceases to exist
or (b) 179 days after the applicable Payment Blockage Notice is
received by the holder of this Indebtedness (or indenture trustee or
other representative thereof) if the maturity of such Senior
Indebtedness has not been accelerated and no Payment Default with
respect to any Senior Indebtedness has occurred which has not been
cured or waived (in which case clause (A) shall be applicable),
unless this Article __ otherwise prohibits the payment or distribution at the
time of such payment or distribution.
(b) A "Reorganization" shall include and mean any dissolution,
winding up, total or partial liquidation or reorganization of the Company, or
any similar transaction resulting in any payment or distribution of cash,
securities or other property ("Distributions") to creditors, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other proceedings.
(c) Upon any Reorganization, all amounts due or to become due
upon all Senior Indebtedness shall first be paid in full in cash or other
payment satisfactory to the holders of such Senior Indebtedness, or payment
thereof provided for in cash or other payment satisfactory to the holders of
such Senior Indebtedness, before any Distribution is made to, for, or on account
of this Indebtedness or any portion thereof (including, without limitation, any
Distribution in connection with a payment of principal, interest or premium or
the redemption or repurchase of all or any portion of this Indebtedness).
(d) Upon any Reorganization, all Distributions on account of
this Indebtedness shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent, assignee for the benefit of creditors or
other person making such Distribution directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, or as otherwise required by law or a
court order or the terms of any subordination as between or among such Senior
Indebtedness) or their respective representative or representatives, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in cash or other payment satisfactory to the holders of
such Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any
Distribution is made on account of this Indebtedness.
(e) In the event that, notwithstanding the foregoing, a
Distribution on account of this Indebtedness is received by a holder thereof (or
indenture trustee or other representative
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<PAGE>
thereof) from the Company (including, without limitation, by way of set-off) or
from the holder (or indenture trustee or other representative thereof) of any
indebtedness subordinated to this Indebtedness, such Distribution shall be held
by the recipient or recipients thereof in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness, or their
respective representative or representatives, in the same manner and fashion as
the Company is obligated to make the same under paragraphs (d) and (e) above.
(f) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of set-off or otherwise), prohibited by the foregoing, shall be received by any
holder of this Indebtedness (or indenture trustee or other representative
thereof) before all Senior Indebtedness is paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, or provision is made
for such payment in accordance with its terms in cash or other payment
satisfactory to the holders of such Senior Indebtedness, such payment or
distribution shall be held by the recipient or recipients in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representative or representatives, as their
respective interests may appear, as calculated by the Company, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, after giving effect to
any concurrent payment or distribution (or provision therefor) to or for the
holders of such Senior Indebtedness.
(g) In the event of the acceleration of this Indebtedness
because of an event of default or any amount of principal of or premium on this
Indebtedness becomes due prior to the maturity date of this Indebtedness, no
payment or distribution shall be made any holder of this Indebtedness (or
indenture trustee or other representative thereof) in respect of the principal
of, premium, if any, or interest on this Indebtedness (including, without
limitation, any redemption or repurchase price of any of this Indebtedness
called for redemption in accordance with its terms or submitted for redemption
or repurchase at the option of the holder of this Indebtedness in accordance
with its terms, as the case may be), until all Senior Indebtedness has been paid
in full in cash or other payment satisfactory to the holders of such Senior
Indebtedness or such acceleration is rescinded in accordance with the terms of
this Indebtedness. If payment of this Indebtedness is accelerated because of an
event of default, the Company, the holder of this Indebtedness (or indenture
trustee or other representative thereof) shall promptly notify holders of the
Senior Indebtedness of such acceleration.
(h) Except as shall be specifically prohibited by this Section
_.2, nothing contained in this Article shall prevent the Company from making any
scheduled payment of principal or interest on this Indebtedness.
Section __.3. Subrogation of this Indebtedness. Subject to the
payment in full of all Senior Indebtedness in cash or other payment satisfactory
to the holders of such Senior Indebtedness, the rights of the holders of this
Indebtedness shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the provisions of
this Article (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to Senior Indebtedness to
substantially the same extent as this Indebtedness is subordinated and is
entitled to like rights of subrogation) to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on this Indebtedness shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior
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<PAGE>
Indebtedness of any cash, property or securities to which the holders of this
Indebtedness would be entitled except for the provisions of this Article, and no
payment over pursuant to the provisions of this Article, to or for the benefit
of the holders of Senior Indebtedness by holders of this Indebtedness (or
indenture trustee or other representative thereof), shall, as among the Company,
its creditors other than holders of Senior Indebtedness, and the holders of this
Indebtedness, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness; and no payments or distributions of cash, property or
securities to or for the benefit of the holders of this Indebtedness pursuant to
the subrogation provisions of this Article, which would otherwise have been paid
to the holders of Senior Indebtedness, shall be deemed to be a payment by the
Company to or for the account of this Indebtedness.
Section __.4. Provisions Solely to Define Relative Rights. It
is understood that the provisions of this Article are and are intended solely
for the purposes of defining the relative rights of the holders of this
Indebtedness, on the one hand, and the holders of the Senior Indebtedness, on
the other hand. Nothing contained in this Article or in the terms of this
Indebtedness is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of this
Indebtedness, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of this Indebtedness the principal of (and
premium, if any) and interest on this Indebtedness as and when the same shall
become due and payable in accordance with its terms, or is intended to or shall
affect the relative rights of the holders of this Indebtedness and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent any holder of this Indebtedness from
exercising all remedies otherwise permitted by applicable law upon default under
this Indebtedness, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Section __.5. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Company
referred to in this Article, the holders of this Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, dissolution, winding-up,
liquidation, reorganization or similar case or proceeding is pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee,
custodian, agent, assignee for the benefit of creditors, or other person making
such payment or distribution, delivered to the holders of this Indebtedness (or
indenture trustee or other representative thereof), for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
Section __.6. No Impairment of Subordination. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of the Notes or the documents,
agreements and instruments relating thereto or to this Indebtedness, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with.
Section __.7. Certain Conversions Deemed Payment. If this
Indebtedness is convertible into securities of the Company, for the purposes of
this Article only, (1) the issuance and delivery of junior securities upon
conversion of this Indebtedness in accordance with such
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<PAGE>
conversion rights shall not be deemed to constitute a payment or distribution on
account of the principal of (or premium, if any) or interest on this
Indebtedness or on account of the purchase or other acquisition of this
Indebtedness, and (2) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion of this Indebtedness
shall be deemed to constitute payment on account of the principal of (and
premium, if any) and interest on this Indebtedness. For the purposes of this
Section, the term "junior securities" means (a) shares of any stock of any class
of the Company, (b) securities of the Company that are subordinated in right of
payment to all Senior Indebtedness to substantially the same extent as, or to a
greater extent than, this Indebtedness is so subordinated as provided in this
Article and (c) securities, if any, into which this Indebtedness becomes
convertible in connection with any business combination transaction if so
provided in the terms of this Indebtedness. Nothing contained in this Article or
elsewhere in the terms of this Indebtedness is intended to or shall impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of this Indebtedness, the right, if any, which is absolute and
unconditional, of the holder of this Indebtedness, if by the terms of this
Indebtedness this Indebtedness is convertible into securities of the Company, to
convert this Indebtedness in accordance with the terms of this Indebtedness.
Section __.8 Senior Indebtedness Entitled to Rely. The holders
of Senior Indebtedness shall have the right to rely upon this Article, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
Section __.9 Definitions. As used in this Article, the
following terms shall have the following meanings:
Company: The term "Company" means SUGEN, Inc., a Delaware
corporation, and shall include its successors and assigns.
Notes: The term "Notes" means the 12% Senior Convertible Notes
due 2002 at any one time outstanding not in excess of the original aggregate
authorized amount of $40,000,000, issued by the Company pursuant to the
Securities Purchase Agreements and the 12% Senior Convertible Notes of the
Company in the original aggregate principal amount at any one time outstanding
not in excess of $30,000,000 that are issued or issuable by the Company pursuant
to the 12% Senior Convertible Note Purchase Warrants issued by the Company
pursuant to such Securities Purchase Agreements, including any such notes issued
upon transfer thereof or in lieu of any such notes that are mutilated,
destroyed, lost or stolen.
Securities Purchase Agreements: The term "Securities Purchase
Agreements" means the several Securities Purchase and Exchange Agreements, dated
as of March 19, 1999, by and between the Company and the several buyers named
therein, as amended from time to time.
Senior Indebtedness: The term "Senior Indebtedness" means the
principal of, premium, if any, and interest on (including any interest accruing
after the filing of a petition by or against the Company under any bankruptcy
law, whether or not allowed as a claim after such filing in any proceeding under
such bankruptcy law), and any other payment (including, without limitation, the
Optional Redemption Consideration (as defined in the Notes), the Repurchase
Price (as defined in the Notes) and the Registration Repurchase Price (as
defined in the Notes)) due pursuant to, any of the following, whether
outstanding at the time of issuance of this Indebtedness or thereafter incurred
or created:
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(a) the Notes; and
(b) all renewals, extensions, refundings, deferrals,
amendments or modifications of the Notes;
unless in the case of any such renewal, extension, refunding, amendment,
modification or supplement, the instrument or other document creating or
evidencing the same or the assumption or guarantee of the same expressly
provides that such renewal, extension, refunding, amendment, modification or
supplement is not superior in right of payment to, or is pari passu with, this
Indebtedness.
G-77
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THE RESALE HEREOF IS REGISTERED UNDER
THE 1933 ACT, (2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR (3) SOLD, TRANSFERRED OR ASSIGNED TO A QIB PURSUANT TO RULE
144A.
THIS WARRANT IS ISSUED PURSUANT TO A SECURITIES PURCHASE AND EXCHANGE AGREEMENT,
DATED AS OF MARCH 19, 1999, 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 SECURITIES PURCHASE
AND EXCHANGE AGREEMENT.
THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 17.
No. WN- Right to Purchase $_________ Aggregate
Principal Amount of 12% Senior Convertible
Notes of SUGEN, Inc.
SUGEN, INC.
12% Senior Convertible Note Purchase Warrant
SUGEN, INC., a Delaware corporation, hereby certifies that,
for value received, [HOLDER] or registered assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company, by an
Exercise Notice (such capitalized term and all other capitalized terms used
herein having the respective meanings provided herein) given in accordance with
this Warrant at any time or from time to time during the Exercise Period,
$_____________ aggregated principal amount of Notes at a purchase price per Note
equal to the Purchase Price.
As used herein the following capitalized terms, unless the
context otherwise requires, have the following respective meanings:
"Board of Directors" means the Board of Directors of the
Company.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors, or duly authorized committee
thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to
the Holder.
"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.
<PAGE>
"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.
"Common Stock Warrants" means Common Stock Purchase Warrants
in the form of Exhibit 4 to this Warrant issued by the Company which
entitle the holder to purchase shares of Common Stock.
"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.
"Company Put Closing Date" shall have the meaning provided in
Section 2(a).
"Company Put Notice" means a Company Put Notice, in the form
of Exhibit 2 to this Warrant.
"Company Put Threshold Event" means a period of 20 consecutive
Trading Days occurring after the date of this Warrant during which the
arithmetic average of the daily Market Prices of the Common Stock shall
have been at least equal to 175 percent of the Conversion Price.
"Conversion Notice" has the meaning to be provided or provided
in the Notes.
"Conversion Price" shall have the meaning provided in the
Initial Notes, subject to adjustment as provided therein, whether or
not any of the Initial Notes is outstanding at the relevant time under
this Warrant.
"Conversion Shares" has the meaning to be provided or provided
in the Notes.
"Event of Default" has the meaning to be provided or provided
in the Notes.
"Exercise Notice" means an Exercise Notice in the form of
Exhibit 1 to this Warrant.
"Exercise Period" means the period from the date of this
Warrant to the Expiration Date.
"Expiration Date" means March 31, 2001.
"Fundamental Change" shall have the meaning to be provided or
provided in the Notes.
"Initial Notes" shall mean the Notes (as defined in the
Securities Purchase Agreement) and the Other Notes (as defined in the
Securities Purchase Agreement).
"Majority Holders" means at any time the holders of this
Warrant and the Other Warrants who hold this Warrant and Other Warrants
and Warrant Notes which, based on
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<PAGE>
the principal amount of Notes and Other Notes which at such time may be
purchased upon exercise of the unexercised portions hereof and thereof,
represent a majority of the aggregate principal amount of Notes and
Other Notes which may at such time be purchased upon exercise of the
unexercised portions hereof and thereof.
"Market Price" with respect to any security on any day shall
mean the closing bid price of such security on such day on the Nasdaq
or the NYSE or the AMEX, as applicable, or, if such security is not
listed or admitted to trading on the Nasdaq, the NYSE or the AMEX, on
the principal national securities exchange or quotation system on which
such security is quoted or listed or admitted to trading, in any such
case as reported by Bloomberg, L.P. or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question, as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means any of the several 12% Senior Convertible Notes
in the form of Exhibit 3 to this Warrant issued by the Company upon
exercise of this Warrant by the Holder or exercise by the Company of
its rights under Section 1(b).
"Other Notes" means the 12% Senior Convertible Notes issuable
or issued pursuant to the Other Warrants.
"Other Securities Purchase Agreements" means the several
Securities Purchase and Exchange Agreements, dated as of the date of
the Securities Purchase Agreement, by and between the Company and the
several buyers named therein.
"Other Warrants" means the 12% Senior Convertible Note
Purchase Warrants issued pursuant to the Other Securities Purchase
Agreements.
"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 with respect to any Note an amount
equal to the original principal amount of such Note.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redemption Consideration" means:
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<PAGE>
(1) Common Stock Warrants which initially (x) entitle
the holder thereof to purchase a number of shares of Common
Stock equal to the quotient obtained by dividing (i) the
principal amount of Notes for which this Warrant remains
unexercised immediately prior to redemption of this Warrant on
the Redemption Date by (ii) the Conversion Price in effect
immediately prior to redemption of this Warrant on the
Redemption Date and (y) have a Purchase Price (as defined in
the Common Stock Warrant) equal to the Conversion Price in
effect immediately prior to redemption of this Warrant on the
Redemption Date, subject to adjustment as provided in the
Common Stock Warrants; and
(2) an amount in cash equal to the product of (x) the
principal amount of Notes for which this Warrant remains
unexercised immediately prior to redemption of this Warrant on
the Redemption Date times (y) the applicable Redemption
Percentage.
"Redemption Date" shall have the meaning provided in Section
5.
"Redemption Notice" means a notice from the Company to the
Holder which states:
(1) that this Warrant has been called for redemption
pursuant to Section 5;
(2) the remaining principal amount of Notes
purchasable upon exercise of the unexercised portion of this
Warrant (determined on the date the Redemption Notice is
given);
(3) based on the unexercised portion of this Warrant
on the date the Redemption Notice is given, the number of
shares of Common Stock which may be purchased upon exercise of
the Common Stock Warrant to be issued to the Holder as part of
the Redemption Consideration, stated without regard to any
adjustment therein prior to the Redemption Date, and the
Purchase Price (as defined in the Common Stock Warrant) of
such Common Stock Warrant, stated without regard to any
adjustment thereof prior to the Redemption Date;
(4) based on the unexercised portion of this Warrant
on the date the Redemption Notice is given, the amount of the
cash portion of the Redemption Consideration of this Warrant;
(5) the Redemption Date;
(6) the place where this Warrant shall be delivered
and the Redemption Consideration paid and delivered; and
(7) that the right to exercise any portion of this
Warrant that is being redeemed and which has not theretofore
been exercised shall terminate at 12:00 midnight, New York
City time, on the Trading Day immediately preceding the
Redemption Date.
"Redemption Percentage" means with respect to any Redemption
Date during any period set forth below the percentage set forth below
opposite such period:
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<PAGE>
<TABLE>
<CAPTION>
Redemption
Date Percentage
---- ----------
<S> <C>
Date of this Warrant to date that is 365 days after such date 110%
From and after date that is 366 days after date of this Warrant to
Expiration Date 105%
</TABLE>
"Registration Statement" shall have the meaning provided in
the Securities Purchase Agreement.
"Repurchase Event" shall have the meaning to be provided or
provided in the Notes.
"Restricted Securities" means securities that are not eligible
for resale pursuant to Rule 144(k) under the 1933 Act (or any successor
provision).
"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.
"Rule 144A" means Rule 144A as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" shall have the meaning provided in the
Securities Purchase Agreement.
"Securities Purchase Agreement" means the Securities Purchase
and Exchange Agreement, dated as of March 19, 1999, by and between the
Company and the original Holder of this Warrant.
"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.
"Transaction Documents" shall have the meaning provided in the
Securities Purchase Agreement.
"Warrant Closing Date" shall have the meaning provided in
Section 2(a).
1. Exercise of Warrant; Company Put Right.
(a) Exercise by Holder. 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, in the following amounts during the following periods:
(1) during the period from the date hereof to December 31,
2000, in any calendar quarter, this Warrant may be exercised for not
more than one-third of the original aggregate principal amount of the
Notes issuable upon exercise of this Warrant,
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<PAGE>
subject to the provisions of Section 1(c); provided, however, that any
such amount for which this Warrant is not exercised in any such
calendar quarter may not be carried forward to any subsequent calendar
quarter in such period; and
(2) during the period from January 1, 2001 to the end of the
Exercise Period this Warrant may be exercised in full.
To exercise this Warrant, the Holder shall (x) surrender this
Warrant to the Company, (y) give an Exercise Notice (duly executed by the
Holder) to the Company, and (z) on the applicable Warrant Closing Date, make
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 each
such case, in an amount equal to the Purchase Price of the Note designated by
the Holder in the Exercise Notice for such Note. On any partial exercise, 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 aggregate principal amount of Notes for which such Warrant or
Warrants may still be exercised. An Exercise Notice may be surrendered by
telephone line facsimile transmission to the telephone numbers shown thereon or
such other numbers for the Company as shall have been specified in writing to
the Holder by the Company; provided, however, that if an Exercise Notice is
given to the Company by telephone line facsimile transmission the Holder shall
send an original of such Exercise Notice to the Company within ten Business Days
after such Exercise Notice is so given to the Company; provided further,
however, that any failure or delay on the part of the Holder in giving such
original of any Exercise Notice shall not affect the validity of or the date on
which such Exercise Notice is so given by telephone line facsimile transmission.
(b) Exercise of Company Put Right. (1) If a Company Put
Threshold Event occurs during the Exercise Period, then at any time within ten
Business Days after such Company Put Threshold Event, the Company shall have the
right on one occasion only with respect to such Company Put Threshold Event to
require the Holder to purchase Notes that are subject to this Warrant and that
the Holder has not previously purchased, in the following amounts during the
following periods:
(A) during the period from the date hereof to December 31,
2000, in any calendar quarter the Company may require the Holder to
purchase a principal amount of Notes that is not more than one-third of
the original principal amount issuable upon exercise of this Warrant;
provided, however, that any such amount for which the Company does not
exercise its rights in any such calendar quarter may not be carried
forward to any subsequent calendar quarter; provided further, however,
that if a Company Put Threshold Event occurs and the arithmetic average
of the Market Price of the Common Stock during the period of 20
consecutive Trading Days used to determine the occurrence of such
Company Put Threshold Event shall have been at least 200 percent of the
Conversion Price, then the limitation of this clause (A) shall be
inapplicable to such Company Put Threshold Event; and
(B) during the period from January 1, 2000 to the end of the
Exercise Period, the Company may require the Holder to purchase all or
any part of the Notes for which this Warrant is unexercised.
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<PAGE>
To exercise its right to require the Holder to purchase Notes, the Company shall
give the Holder a Company Put Notice and the Holder shall be obligated to
purchase Notes as specified in such Notice if the requirements of this Section
1(b) are satisfied.
(2) The Company shall be entitled to give the Company Put
Notice only if the following requirements are met:
(A) On the date the Company Put Notice is given and at all
times thereafter to and including the Company Put Closing Date, no
event which, if a Note were outstanding, would constitute an Event of
Default under and as defined in the Notes or which with notice or
passage of time, or both, would become an Event of Default shall have
occurred and be continuing;
(B) On the date the Company Put Notice is given and at all
times thereafter to and including the Company Put Closing Date, no
event which, if a Note were outstanding, would constitute a Repurchase
Event or event which with notice or passage of time, or both, would
become a Repurchase Event shall have occurred and be continuing;
(C) The SEC Effective Date for the Registration Statement
shall have occurred on or before the date the Company Put Notice is
given and on the date the Company Put Notice is given and at all times
thereafter to and including the Company Put Closing Date the
Registration Statement shall be effective and available for use for the
resale of the Conversion Shares issuable upon conversion of the Notes;
and
(D) On the date the Company gives the Company Put Notice, the
Company shall have exercised its rights under Section 1(b) of each of
the Other Warrants to require the holders of the Other Warrants to
purchase Other Notes in an amount which is pro rata among the Holder
and the holders of the Other Warrants, based on the original principal
amount of Notes for which this Warrant was exercisable and respective
original principal amounts of the Other Notes for which the Other
Warrants were exercisable.
(c) Acceleration of Exercise By Holder. Notwithstanding any
limitation on exercise of this Warrant contained in Section 1(a), if the Company
shall have given or been required to give to the Holder a notice in accordance
with Section 7 or if a Fundamental Change shall have occurred or there shall
have been any public announcement of any event or transaction that would be a
Fundamental Change, then thereafter the limitations in Section 1(a) on the
amount of this Warrant which may be exercised by the Holder shall not be of any
further force or effect and the Holder may exercise this Warrant in whole at any
time or in part from time to time.
2. Delivery of and Payment for each Note, etc., on Exercise.
(a) The date and time of each issuance and sale of a Note pursuant to the
exercise by the Holder of its rights under Section 1(a) shall be not earlier
than three Business Days or more than 90 days after the Holder gives a
particular Exercise Notice (unless a later date is agreed to by the Holder) as
specified by the Holder in such Exercise Notice (each a "Warrant Closing Date").
The date and time of issuance and sale of a Note pursuant to the exercise of the
Company's rights under Section 1(b) shall be the date which is 60 days after the
Company gives the Company Put Notice, or such earlier date (not sooner than five
Business Days after the date the Company gives such Company Put Notice) as
specified by the Holder by notice to the Company
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<PAGE>
(the "Company Put Closing Date"). The closing of such exercise shall occur at a
location and time of day as mutually agreed by the Holder and the Company.
(b) At the closing on each Warrant Closing Date or on the
Company Put Closing Date, as the case may be, upon the terms and subject to the
conditions of this Warrant, the Company at its expense (including the payment by
it of any applicable issue or stamp taxes) will cause to be issued in the name
of and delivered to the Holder, or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may direct, one or more Notes in the aggregate
principal amount stated in the applicable Exercise Notice or Company Put Notice,
as the case may be, in such denominations as may be requested by the Holder, and
the Holder shall pay to the Company an amount equal to the Purchase Price for
the Note or Notes issuable by the Company to the Holder on such Warrant Closing
Date or on the Company Put Closing Date, as the case may be.
(c) Except as otherwise specifically provided in Section 3,
upon exercise of this Warrant by the Holder or exercise by the Company of its
rights under Section 1(b) as provided herein, the Company's obligation to issue
and deliver the Note or Notes 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.
An Exercise 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 Business Days after an Exercise Notice has been given (which notice from the
Company shall specify all defects in such Exercise Notice) and any Exercise
Notice containing any such defect shall nonetheless be effective on the date
given if the Holder promptly undertakes to correct all such defects.
3. Company Conditions. The obligation of the Company to issue
a Note on a particular Warrant Closing Date or on the Company Put Closing Date,
as the case may be, is subject to the satisfaction of the condition precedent
that on such Warrant Closing Date or on the Company Put Closing Date, as the
case may be, the representations and warranties of the Holder made in Section 3
of the Securities Purchase Agreement (insofar as they relate to the Notes to be
issued on such Warrant Closing Date or the Company Put Closing Date), as the
case may be, or made by the Holder pursuant to Section 17, as the case may be,
shall be true and correct as if made on such Warrant Closing Date or on the
Company Put Closing Date, as the case may be (unless waived by the Company in
its sole discretion).
4. Holder Conditions. The obligation of the Holder to purchase
a Note on a particular Warrant Closing Date or on the Company Put Closing Date,
as the case may be, is subject to the satisfaction of the following conditions
precedent (any or all of which may be waived by the Holder in its sole
discretion):
(a) On such Warrant Closing Date or on the Company Put Closing
Date, as the case may be, no legal action, suit or proceeding shall be pending
or threatened which seeks to restrain or prohibit the transactions contemplated
by this Warrant or the other Transaction Documents;
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<PAGE>
(b) The representations and warranties of the Company
contained in the Transaction Documents shall have been true and correct on the
respective dates of the Transaction Documents and shall be true and correct on
such Warrant Closing Date or the Company Put Closing Date, as the case may be,
as if made on and as of such Warrant Closing Date or the Company Put Closing
Date, as the case may be (except for representations made as of a specific date,
which representations shall be true and correct as of such date and except for
the approvals referred to in clauses (1) through (4) of Section 4(h) of the
Securities Purchase Agreement, which shall have been obtained on or prior to
such date), and on or before such Warrant Closing Date or the Company Put
Closing Date, as the case may be, the Company shall have performed all covenants
and agreements of the Company contained in the Transaction Documents required to
be performed by the Company on or before such Warrant Closing Date or on the
Company Put Closing Date, as the case may be;
(c) On such Warrant Closing Date or on the Company Put Closing
Date, as the case may be, no event which, if such Note were outstanding (1)
would constitute an Event of Default under and as defined in such Note or, with
the giving of notice or the passage of time, or both, would constitute an Event
of Default under and as defined in such Note shall have occurred and be
continuing or (2) would constitute a Repurchase Event under and as defined in
such Note or, with the giving of notice or the passage of time, or both, would
constitute a Repurchase Event under and as defined in such Note shall have
occurred and be continuing;
(d) The Company shall have delivered to the Holder its
certificate, dated such Warrant Closing Date, or the Company Put Closing Date,
as the case may be, duly executed by its Chief Executive Officer to the effect
set forth in subparagraphs (a), (b), and (c) of this Section 4;
(e) On such Warrant Closing Date or the Company Put Closing
Date, as the case may be, (i) trading in securities on the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the State of California or the State of New York shall not
have been declared by either federal or state authorities; and
(f) In the case of the exercise by the Company of its rights
under Section 1(b), the requirements and conditions precedent of Section 1(b)(2)
shall have been satisfied.
5. Redemption. (a) If (x) the Company shall exercise its right
to redeem all outstanding Initial Notes, all outstanding Notes and all
outstanding Other Notes, in each such case pursuant to Section 1.2 thereof, or
(y) the Company shall have satisfied and discharged all outstanding Initial
Notes, all outstanding Notes and all outstanding Other Notes, in each such case
in accordance with Article VI thereof, then in the case of either the preceding
clause (x) or (y) the Company shall have the right on one occasion only to
redeem all of this Warrant in accordance with this Section 5 by issuance and
delivery and payment to the Holder of the Redemption Consideration. The
Company's right to redeem this Warrant shall be exercised by a Redemption Notice
from the Company to the Holder given not less than 45 or more than 60 days prior
to the date on which such redemption is to occur (the "Redemption Date"). If
this Warrant is called for redemption pursuant to this Section 5, the Company
shall simultaneously therewith call for redemption all of the Other Warrants in
accordance with their terms that are similar to this Section 5.
(b) If the Company shall have exercised its right to redeem
this Warrant, then (1) the Company shall thereafter no longer have the right to
exercise its rights under Section
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<PAGE>
1(b) and (2) the Holder's right to exercise this Warrant shall terminate at
12:00 midnight, New York City time, on the Trading Day preceding the applicable
Redemption Date unless, in the case of this clause (2), otherwise agreed by the
Company or the Company shall fail to issue and deliver and pay the Redemption
Consideration in full to the Holder as and when due. If this Warrant is being
redeemed in connection with a redemption described in clause (x) of Section
5(a), then the Redemption Notice given to the Holder shall be deemed for all
purposes of any Notes issued to the Holder after such Redemption Notice is given
which Notes are outstanding on the Redemption Date to be the notice of
redemption required by Section 1.2 of such Notes to redeem such Notes in
accordance with the terms thereof on the Redemption Date.
(c) From and after the Redemption Date, the Company shall, at
the place specified in the Redemption Notice, upon presentation or surrender to
the Company of this Warrant by or on behalf of the Holder, deliver or cause to
be delivered, and pay or cause to be paid by wire transfer of funds to the
account specified for such purpose by the Holder to or upon the written order of
the Holder the Redemption Consideration. From and after the Redemption Date and
upon the delivery and payment of the Redemption Consideration in full to the
Holder, this Warrant shall terminate and become void and all rights hereunder
shall cease.
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 to Holder Prior to Certain Actions. The Company
shall give notice to the Holder of the actions specified in Section 2.6 of the
Notes as and when required by the Notes, whether or not any Note is outstanding,
and Section 2.6 of the Notes (and any related definitions of capitalized terms
used therein) are hereby incorporated herein as if set forth in full. In the
case of any such action of which the Company gives such notice to the Holder or
is required to give such notice to the Holder, the Holder shall be entitled to
give an Exercise Notice for this Warrant and a Conversion Notice for the Note
issuable upon exercise of this Warrant by reason of such Exercise Notice, which
Exercise Notice and Conversion Notice are contingent on the completion of such
action.
8. Reservation of Stock, etc., Issuable on Conversion of
Notes. The Company will at all times comply with Section 2.5 of the Notes,
whether or not any Note is outstanding, and Section 2.5 of the Notes (and any
related definitions of capitalized terms used therein) are hereby incorporated
herein as if set forth in full.
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 the Holder's duly
authorized attorney, upon surrender of this Warrant properly endorsed. If this
Warrant or any predecessor instrument shall have been exercised in part by the
Holder or the Holder's predecessor in interest within 90 days prior to the
transfer of this Warrant and by reason of such exercise any Warrant issued on
such transfer shall, pursuant to Section 1(a), be exercisable for a principal
amount of Notes that is less than one-third of the aggregate principal amount of
Notes shown on the face of the Warrant so issued on such transfer, then the
Company shall place a notation on the Warrant so issued as to the remaining
portion less than such one-third that is so exercisable and the period during
which such limitation shall apply.
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<PAGE>
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 purchase the principal amount of the
Notes which may be purchased hereunder, each of such new Warrants to represent
the right to purchase such principal amount of the Notes as shall be designated
by the Holder at the time of such surrender.
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 or any
institution that would be qualified pursuant to the Trust Indenture Act of 1939,
as amended, to serve as indenture trustee for the Notes as the Company's agent
for the purpose of issuing Notes on the exercise of this Warrant by the Holder
pursuant to Section 1(a) or the exercise by the Company of its rights under
Section 1(b), and the Company may, by written notice to the Holder, appoint an
agent having an office in the United States of America for the purpose of
exchanging this Warrant pursuant to Section 11, and replacing this Warrant
pursuant to Section 12, or any of the foregoing, and thereafter any such
exercise, 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 Holder of Note or as a
Stockholder. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company. Except as otherwise specifically
provided in this Warrant, this Warrant shall not entitle the Holder to any
rights as a holder of a Note. Nothing contained in this Warrant shall be
construed as conferring upon the Holder 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 Notes purchasable hereunder or the Common Stock
issuable upon exercise of the Notes until, and only to the extent that, this
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<PAGE>
Warrant shall have been exercised in accordance with its terms or any such Note
shall have been converted in accordance with its terms, as the case may be.
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 an "accredited investor" (as defined in Regulation D under the
1933 Act) or a QIB in a transfer that meets the requirements of Rule 144A and
(2) in the case of a transfer to any Person described in the immediately
preceding clause (1) who is not a QIB, 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 Warrant may be sold or
transferred without registration under the 1933 Act. Prior to any such transfer
to a transferee who is not a QIB, 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 relating thereto, 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), 8, 9 and 10 of the Securities Purchase Agreement, such transfer
shall otherwise be made in compliance with Section 10(j) of the Securities
Purchase Agreement.
18. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales hereof under Rule
144(k) under the 1933 Act (or any successor provision), the Company covenants
and agrees that it shall, during any period in which it is not subject to
Section 13 or 15(d) under the 1934 Act, make available to the Holder or the
holder of any Note issued pursuant to this Warrant, Common Stock Warrant issued
upon redemption of this Warrant or shares of Common Stock issued upon conversion
or exercise thereof which continue to be Restricted Securities in connection
with any sale hereof or thereof and any prospective purchaser of this Warrant
from the Holder, the information required pursuant to Rule 144A(d)(4) under the
1933 Act upon the request of the Holder or such holder and it will take such
further action as the Holder may reasonably request, all to the extent required
from time to time to enable the Holder to sell this Warrant without registration
under the 1933 Act within the limitation of the exemption provided by Rule 144A,
as Rule 144A may be amended from time to time. Upon the request of the Holder,
the Company will deliver to the Holder a written statement as to whether it has
complied with such requirements.
19. Legend. Unless theretofore registered for resale under the
1933 Act, each Note issued upon exercise of this Warrant shall bear the legend
appearing on the first page of the Note.
20. Limitation of Holder's Liability. In connection with any
exercise by the Company of its rights under Section 1(b), the Holder (a) shall
be liable for damages from breach
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<PAGE>
of the Holder's obligations relating to such exercise only if and to the extent
such breach shall have been determined by final judgment, not subject to further
appeal, of a court of competent jurisdiction to have resulted from conduct of
the Holder which constitutes gross negligence or willful misconduct, (b) shall
have no liability in connection with any dispute or legal action relating to
such exercise if at any time prior to a final judgment referred to in the
immediately preceding clause (a) the Holder shall have tendered the Purchase
Price of all Notes the purchase of which is in dispute (in which case the
Company shall issue such Notes to the Holder in accordance with this Warrant)
and (c) if the immediately preceding clause (b) is inapplicable, shall not in
any event be liable for damages or liability arising from or in any way relating
to any breach or alleged breach by the Holder of its obligations under this
Warrant or otherwise in connection with this Warrant in an amount in excess of
the principal amount of Notes issuable upon exercise of the unexercised portion
of this Warrant. This Warrant and the terms and provisions hereof are for the
sole and exclusive benefit of the Holder, the Company and the Holder's permitted
assigns and in no event shall the Holder have any liability to any stockholder
or creditor of the Company or any other Person (other than the Company, subject
to the limitations on liability to the Company contained herein) in any way
relating to or arising from this Warrant or the transactions contemplated
hereby.
21. Miscellaneous. (a) 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.
(b) Prior to issuance of any Note or Other Note upon exercise
of this Warrant or any Other Warrant, the terms and provisions of the Notes and
Other Notes which may be so issued upon such exercise may not 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, prior to issuance of any Note or
Other Note, without the consent of the Holder and the holders of the Other
Warrants affected thereby, (i) extend the scheduled final maturity of any such
Note or 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) thereon or reduce the principal amount thereof or
the Optional Redemption Consideration (as defined therein), Repurchase Price (as
defined therein) or Registration Repurchase Price (as defined therein), (ii)
amend, modify or waive any provision of Section 8.3 thereof, (iii) reduce any
percentage specified in, or otherwise modify, the definition of "Majority
Holders" in any such Note or Other Note, or (iv) except as provided in any such
Note or other Note, change the method of calculating the "Conversion Price" (as
defined therein) in a manner adverse to the Holder.
22. 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: March 24, 1999 SUGEN, INC.
By: ________________________________
James L. Knighton
Senior Vice President and
Chief Financial Officer
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Contacts: SUGEN, Inc. Burns McClellan, Inc.
James L. Knighton Stephanie Diaz (media)
Senior Vice President and (415) 352-6262
Chief Financial Officer
(650) 553-8300
[email protected]
For Immediate Release:
- ----------------------
SUGEN, INC. ANNOUNCES $28.0 MILLION FINANCING BY PRIVATE
PLACEMENT OF SENIOR CONVERTIBLE NOTES
South San Francisco, CA, March 22, 1999 - SUGEN, Inc. (NASDAQ: SUGN) announced
today the execution of purchase agreements for the private placement of $28.0
million principal amount of 12% Senior Convertible Notes due 2002. The Notes,
which are 144A eligible, are convertible into SUGEN Common Stock at a fixed
price equal to $20.50 per share, representing an approximate 20% premium over
recent average market prices. Interest on the Notes may be paid in SUGEN Common
Stock or cash at the Company's option.
As part of the Note placement, purchasers will be issued Warrants to acquire up
to an additional $21.0 million principal amount of the 12% Senior Convertible
Notes which will mature on the third anniversary date of issuance. These
"Warrant Notes" will have principally the same terms and conditions as the
original Notes. The Warrants to purchase the Warrant Notes will be exercisable
for a period of two years following the closing date of the issuance of the
Notes. The Company will have the right, at its option, to require the exercise
of the Warrants by the holders in the event that the closing price of the
Company's Common Stock exceeds certain levels during the term of the Warrants.
An important element to this financing is that the outstanding balance of
approximately $5.6 million of the 5% Senior Custom Convertible issued by the
company in September 1997 with a floating conversion mechanism will be converted
into SUGEN Common Stock or exchanged for additional 12% Senior Convertible Notes
due 2002 and Warrants. "We believe the retirement of the 1997 Notes to be an
important step toward continued stock appreciation. This is the first of a
number of financing opportunities we are currently examining and our goal
remains to avoid doing a large publicly registered offering this year",
commented Stephen Evans-Freke, Chairman and Chief Executive Officer.
"This financing provides for a considerable amount of the cash we will need in
order to bring our two lead compounds through late stage clinical development,"
commented James L. Knighton, Senior Vice President and Chief Financial Officer
of SUGEN. "The structure of the Note and Warrant placement has several
advantages. First, it provides for
<PAGE>
the conversion of the Notes at a significant premium to today's prices; second,
the Warrants offer the potential for SUGEN to receive significantly more cash
over the next two years; and third, it permits us, at our option, to redeem the
Notes and Warrants at any time prior to their maturity or exercise."
The closing of the placement of the Notes and Warrant Notes is expected to occur
on March 24, 1999, subject to the satisfaction of closing conditions customary
for transactions of this type. Diaz & Altschul Capital, LLC, New York, New York,
was the placement agent in the transaction. Delta Opportunity Fund, Ltd., which
is advised by Diaz & Altschul Advisors, LLC, is lead investor in the
transaction. SUGEN has agreed to file a registration statement for the resale of
the shares of Common Stock acquired on conversion of the Notes and the Warrant
Notes within 30 days after the closing date. The summary of the terms and
conditions of the Notes, Warrant Notes and Warrants included in this press
release is not intended to be a a complete summary of the terms and conditions
of such securities. Copies of the Notes, Warrant Notes, Warrants and related
documents will be filed with the SEC on a Form 8-K after the closing date.
SUGEN, Inc. is a biopharmaceutical company focused on the discovery and
development of small molecule drugs which target specific cellular signal
transduction pathways. SUGEN currently has two cancer products in late stage
clinical trials: SU101 (a PDGF receptor inhibitor) is in Phase III trials in
refractory brain cancer, will be entering Phase III in refractory prostate
cancer this year, and is in Phase II in ovarian and non-small cell lung cancers;
SU5416 (a Flk-1/KDR angiogenesis inhibitor) is now entering Phase III
registrational studies for the treatment of non-small cell lung and colorectal
cancer and will be entering Phase II/III in Kaposi's sarcoma. A third compound,
SU6668, (a novel broad spectrum inhibitor of angiogenesis and tumor growth) is
in Phase I for the treatment of solid tumor cancers. The Company has major
research and development collaborations with Zeneca, ASTA Medica, Allergan and
Taiho.
Additional written materials and press releases regarding SUGEN are available
through the SUGEN FAX-On-Demand Information Service by dialing 1-888-329-4699 or
at www.sugen.com.
