SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 28, 1998
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Date of Report (Date of earliest event reported)
PALATIN TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-22686 95-4078884
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(Commission File Number) (IRS Employer Identification Number)
214 Carnegie Center, Suite 100, Princeton, New Jersey 08540
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (609) 520-1911
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
As of April 28, 1998, Palatin Technologies, Inc. (the "Company")
completed a private placement of 18,875 shares of Series B Convertible Preferred
Stock of the Company for gross proceeds of $1,887,500 and net proceeds of
approximately $1,600,000. The Series B Convertible Preferred Stock was sold to
four accredited investors pursuant to Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act").
The Company has agreed to file, by June 12, 1998, a registration
statement under the Securities Act, registering for resale the shares of the
Company's common stock, $.01 par value (the "Common Stock") issuable on
conversion of the Series B Convertible Preferred Stock. See the Registration
Rights Agreement filed as Exhibit 99.2 to this Form 8-K.
The net proceeds of the private placement will be used for working
capital purposes, and no portion will be used to redeem any equity or
equity-equivilent securities of the Company, and no more than $1,200,000 will be
used for repayment of the Company's indebtedness. Paramount Capital, Inc.
received a finder's fee of $188,750 in connection with the private placement.
Each share of Series B Convertible Preferred Stock is convertible at any
time, at the option of the holder, into the number of shares of Common Stock
equal to $100 divided by the conversion price (as "conversion price" is defined
in the Certificate of Designations of the Series B Convertible Preferred Stock
filed as Exhibit 3.8 to this Form 8-K). The current conversion price for the
Series B Convertible Preferred Stock is $5.50. Each share of Series B
Convertible Preferred Stock is currently convertible into approximately 18.2
shares of Common Stock.
The conversion price for Series B Convertible Preferred Stock is subject
to adjustment upon certain events, including payment of stock dividends,
distributions, and tender offer or merger announcements. The Series B Conversion
Price is also subject to adjustment on August 26, 1998, if the average closing
bid price of the Common Stock for the thirty (30) consecutive trading days
immediately preceding August 26, 1998 (the "Series B Reset Trading Price") is
less than $6.05 (a "Series B Reset Event"). Upon a Series B Reset Event, the
Series B Conversion Price will be reduced to greater of (i) the Series B Reset
Trading Price divided by 1.1 or (ii) $2.75. See the Certificate of Designations
of the Series B Convertible Preferred Stock, filed as Exhibit 3.8 to this Form
8-K.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
c) Exhibits
3.8 Certificate of Designations of Series B Convertible
Preferred Stock of the Company, filed on April 27, 1998
4.7 Specimen Certificate for Series B Convertible Preferred
Stock
99.1 Convertible Preferred Stock Purchase Agreement dated as
of April 28, 1998, between the Company and the
purchasers named therein, relating to Series B
Convertible Preferred Stock
99.2 Registration Rights Agreement dated as of April 28,
1998, between the Company and the purchasers named
therein, relating to Common Stock issuable on conversion
of Series B Convertible Preferred Stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALATIN TECHNOLOGIES, INC.
By /s/ Stephen T. Wills
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Name: Stephen T. Wills
Title: Vice President and
Chief Financial Officer
Date: May 8, 1998
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CERTIFICATE OF DESIGNATIONS
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
PALATIN TECHNOLOGIES, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
PALATIN TECHNOLOGIES, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby certify
that, pursuant to the authority conferred on the Board of Directors of the
Corporation by the Certificate of Incorporation, as amended to date (the
"Certificate of Incorporation"), of the Corporation and in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation adopted the following resolution establishing a
series of 18,875 shares of Preferred Stock of the Corporation designated as
"Series B Convertible Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board
of Directors of this Corporation by the Certificate of Incorporation, a
series of Preferred Stock, par value $.01 per share, of the Corporation
is hereby established and created, and that the designation and number
of shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of such
series and the qualifications, limitations and restrictions thereof are
as follows:
Series B Convertible Preferred Stock
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as Series B Convertible Preferred Stock (the
"Preferred Stock") and the number of shares so designated shall be 18,875 (which
shall not be subject to increase without the consent of the holders of the
Preferred Stock (each, a "Holder")). Each share of Preferred Stock shall have a
par value of $.01 per share and a stated value of $100 per share (the "Stated
Value").
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Section 2. Dividends and Certain Distributions.
(a) Holders of Preferred Stock shall not be entitled to receive periodic
dividends on the Preferred Stock.
(b) So long as any Preferred Stock shall remain outstanding, neither the
Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 7), nor
shall the Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in Section 5)
upon, nor shall any distribution be made in respect of, any Junior Securities,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities or shares pari
passu with the Preferred Stock, except for repurchases effected by the Company
on the open market, pursuant to a direct stock purchase plan.
Section 3. Voting Rights. Except as otherwise provided herein and
as otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not and shall cause its subsidiaries not to, without the affirmative vote
of the Holders of 66 2/3% of the shares of the Preferred Stock then outstanding,
(a) alter or change adversely the powers, preferences or rights given to the
Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
authorize or create any class of stock ranking as to distribution of assets upon
a Liquidation (as defined in Section 4) or as to dividends, voting rights or
otherwise senior to the Preferred Stock, (d) amend its Certificate of
Incorporation, bylaws or other charter documents so as to affect adversely any
rights of any Holders, (e) increase the authorized number of shares of Preferred
Stock, or (f) enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the Company
shall be insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders of Preferred Stock shall be distributed among the
Holders of Preferred Stock ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder of Preferred Stock.
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Section 5. Conversion.
(a)(i) Each share of Preferred Stock shall be convertible into shares of
Common Stock (subject to reduction pursuant to Section 5(a)(ii) hereof and
Section 4.8 of the Purchase Agreement) at the Conversion Ratio (as defined in
Section 7) at the option of the Holder in whole or in part at any time after the
Original Issue Date (as defined in Section 7). The Holders shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with the form
of conversion notice attached hereto as Exhibit A (a "Conversion Notice"). Each
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered pursuant to Section 5(h). Subject to Sections 5(b)
and 5(a)(ii) hereof, each Conversion Notice, once given, shall be irrevocable.
If the Holder is converting less than all shares of Preferred Stock represented
by the certificate or certificates tendered by the Holder with the Conversion
Notice, or if a conversion hereunder cannot be effected in full for any reason,
the Company shall promptly deliver to such Holder (in the manner and within the
time set forth in Section 5(b)) a certificate for such number of shares as have
not been converted.
(ii) If on any Conversion Date (A) the Common Stock is listed for
trading on the Nasdaq National Market or the Nasdaq SmallCap Market, (B) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion in full of all then
outstanding shares of Preferred Stock, together with any shares of the Common
Stock previously issued upon conversion of the shares of Preferred Stock, would
equal or exceed 20% of the number of shares of the Common Stock outstanding on
the Original Issue Date (such number of shares as would not equal or exceed such
20% limit, the "Issuable Maximum"), and (C) the Company shall not have
previously obtained the vote of stockholders (the "Shareholder Approval"), if
any, as may be required by the rules and regulations of The Nasdaq Stock Market
(or any successor association) applicable to approve the issuance of Common
Stock in excess of the Issuable Maximum in a private placement whereby shares of
Common Stock are deemed to have been issued at a price that is less than the
greater of book or fair market value of the Common Stock, then the Company shall
issue to the Holder so requesting a conversion a number of shares of Common
Stock equal to the Issuable Maximum and, with respect to the remainder of the
aggregate Stated Value of the shares of Preferred Stock then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of Common Stock in excess of the Issuable Maximum, the Company shall
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request.
(b) (i) Not later than three (3) Trading Days after any Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 4.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of shares of Preferred
Stock (subject to reduction pursuant to Section 5(a)(ii) hereof and Section 4.8
of the Purchase Agreement) and (ii) one or more certificates representing the
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number of shares of Preferred Stock tendered for conversion that were not
requested to be converted (or that the Company is prohibited from converting);
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Preferred Stock until certificates evidencing such shares of Preferred Stock are
either delivered for conversion to the Company or any transfer agent for the
Preferred Stock or Common Stock, or the Holder of such Preferred Stock notifies
the Company that such certificates have been lost, stolen or destroyed and
provides a bond (or other adequate security) reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the Holder, if available, use its
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by the
third Trading Day after the Conversion Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the certificates representing the
shares of Preferred Stock tendered for conversion, (such recission shall be in
addition to, and not in lieu of, the rights set forth elsewhere herein).
(c) (i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be $5.50; provided,
that, if the Reset Price (as defined in Section 7) is less than $6.05, then the
Conversion Price shall be reduced to the greater of (A) the Reset Price divided
by 1.1 and (B) $2.75 ($5.50 as so reset, the "Initial Conversion Price");
provided, however, that, (a) if the Underlying Securities Registration Statement
is not filed on or prior to the Filing Date (as defined in the Registration
Rights Agreement) (for purposes hereof, in the event the Company files such
Underlying Securities Registration Statement without complying with the
provisions of Section 3(a) of the Registration Rights Agreement, such filing
shall not be deemed to have occurred), or (b) if the Company fails to file with
the Commission a request for acceleration in accordance with Rule 12d1-2
promulgated under the Exchange Act within five (5) days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that an Underlying Securities Registration Statement will not be
"reviewed" or not subject to further review, or (c) if the Underlying Securities
Registration Statement is not declared effective by the Commission on or prior
to the 120th day after the Original Issue Date, or (d) if such Underlying
Securities Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at any
time prior to the expiration of the "Effectiveness Period" (as such term is
defined in the Registration Rights Agreement), without being succeeded within 10
Trading Days by a subsequent Underlying Securities Registration Statement filed
with and declared effective by the Commission, or (e) if the conversion rights
of the Holders are suspended for any reason, or if a Holder is not permitted to
resell Registrable Securities under an Underlying Securities Registration
Statement, or (f) if the Company is required to convene a stockholders meeting
pursuant to Section 5(a)(ii) and fails to convene such meeting within the time
period specified in such Section or does so convene such a meeting within such
time period but fails to obtain Shareholder Approval at such meeting, or (g) if
an amendment to the Underlying Securities Registration Statement is not filed by
the Company with the Commission within ten (10) days of the Commission's
notifying the
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Company that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective, or (h) if the Company fails to
comply with requests for conversion of any Preferred Stock into shares of Common
Stock in accordance with the terms hereof (any such failure or breach being
referred to as an "Event" and for purposes of clauses (a), (c), (e), (f) and (h)
the date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) day period is exceeded, or for purposes of clauses (d) and
(g) the date which such 10 Trading Day-period is exceeded, being referred to as
"Event Date"), then each Holder shall have the right, exercisable by notice to
the Company (an "Initial Reduced Conversion Notice"), to decrease the Conversion
Price by 1.5% as of the Event Date, and by an additional 2.5% (on a cumulative
basis) as of each monthly anniversary of such Event Date until the Event at
issue has been cured. The Holder can discontinue and recontinue such election as
to subsequent periods by notice to the Company to such effect. Any decrease in
the Conversion Price pursuant to this Section shall continue notwithstanding the
fact that the Event causing such decrease has been subsequently cured. If the
Common Stock shall fail to be listed on, or be suspended from trading from, the
Nasdaq National Market or Nasdaq SmallCap Market for three (3) Trading Days
(which need not be consecutive Trading Days), then each Holder shall have the
right, exercisable by notice to the Company (the "Subsequent Reduced Conversion
Price Notice"), to discount the Conversion Price by 25% (which discount shall be
cumulative with any other discounts herein provided). For purposes hereof,
shares of Preferred Stock for which a conversion has been requested in
accordance with the terms hereof shall be deemed to be outstanding and held by
the converting holder if such Event, delisting or suspension (as the case may
be) occurs on or prior to the date that the Holder receives the Underlying
Shares from the Company in respect thereof.
(ii) If the Company, at any time while any shares of Preferred Stock are
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities or pari passu securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, the Initial
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall issue rights or warrants to all holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value of the Common Stock at the record
date mentioned below, the Initial Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants
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plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to this
Section 5(c)(iii), if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions of
this Section 5 after the issuance of such rights or warrants) had the adjustment
of the Initial Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to Holders
of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Sections 5(c)(ii) and (iii) above), then in each such case the Conversion
Price at which each share of Preferred Stock shall thereafter be convertible
shall be determined by multiplying the Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, if
the Holders of a majority in interest of the Preferred Stock dispute such
valuation, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the Holders of a majority in interest of the shares of Preferred
Stock then outstanding; and provided, further, that the Company, after receipt
of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the Holders
of Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
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(vi) Whenever the Conversion Price is adjusted pursuant to Section
5(c)(i),(ii),(iii) or (iv), the Company shall promptly mail to each Holder of
Preferred Stock, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vii) A. In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
cash or property, the Holders of the Preferred Stock then outstanding shall have
the right thereafter to convert such shares only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange, and
the Holders of the Preferred Stock shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which such shares of Preferred Stock could have been converted
immediately prior to such reclassification or share exchange would have been
entitled.
B. In the case of any consolidation or merger of the Company with or
into another Person pursuant to which the Company will not be the surviving
entity, any sale of all or substantially all of the assets of the Company, or
any sale or transfer or compulsory share exchange pursuant to which the Common
Stock is converted into securities of an entity other than the Company, each
Holder of Preferred Stock then outstanding shall have the option to either (1)
convert their shares of Preferred Stock into shares of Common Stock pursuant to
the terms hereof prior to the effective date of such transaction, or (2) subject
to the liquidation rights of the Company's Series A Convertible Preferred Stock,
be issued shares of convertible preferred stock or convertible debentures of the
Person with which such consolidation, merger, sale, transfer or share exchange
takes place, which newly issued shares or debentures (as the case may be) shall
have terms substantially similar in all material respects to the terms of the
Preferred Stock (including with respect to conversion) and shall be entitled to
all of the rights and privileges of a Holder set forth in this Certificate of
Designation, the Registration Rights Agreement and the Purchase Agreement
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of the freely tradeable securities
issuable upon a conversion or exchange thereof). Simultaneously with such
issuance of such convertible preferred stock or convertible debentures, the
Holders of Preferred Stock shall have the right to convert such shares of
preferred stock only into shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such consolidation, merger, sale, transfer or exchange. In the case of
clause (2) of the immediately preceding sentence, the conversion price for such
newly issued shares or debentures (as the case may be) shall be based upon the
amount of securities, cash or property that each share of Common Stock would
receive in such transaction and the Conversion Price stated herein. The terms of
any such reclassification, consolidation, merger, sale or exchange under this
Section shall include such terms so as to continue to give the Holders the right
to receive the securities, cash or property set forth in this Section upon any
conversion or redemption following such reclassification, consolidation, merger,
sale, transfer or exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(viii) If:
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A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company,
of any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the Holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, 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, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Preferred Stock during
the 20-day period commencing the date of such notice to the effective date of
the event triggering such notice.
(ix) If the Company (i) makes a public announcement that it intends to
enter into a Change of Control Transaction or (ii) any person, group or entity
(including the Company, but excluding a Holder or any affiliate of a Holder)
publicly announces a bona fide tender offer, exchange offer or other transaction
to purchase 50% or more of the Common Stock (such announcement being referred to
herein as a "Major Announcement" and the date on which a Major Announcement is
made, the "Announcement Date"), then, in the event that a Holder seeks
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to convert shares of Preferred Stock on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and continuing
through the earlier to occur of the consummation of the proposed transaction or
tender offer, exchange offer or other transaction and the Abandonment Date (as
defined below), be equal to the lower of (x) the average Per Share Market Value
on the five Trading Days immediately preceding (but not including) the
Announcement Date and (y) the Conversion Price in effect on the Conversion Date
for such Preferred Stock. "Abandonment Date" means with respect to any proposed
transaction or tender offer, exchange offer or other transaction for which a
public announcement as contemplated by this paragraph has been made, the date
upon which the Company (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer, exchange offer or
another transaction which caused this paragraph to become operative.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock free from preemptive rights or
any other actual contingent purchase rights of persons other than the Holders of
Preferred Stock, not less than such number of shares of Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(a) and Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable and freely
tradeable, subject to the legend requirements of Section 4.1(b) of the Purchase
Agreement.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
must make a cash payment in respect of any final fraction of a share based on
the Per Share Market Value at such time.
(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally
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recognized overnight courier service, addressed to the attention of the Chief
Executive Officer of the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Purchase
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder of Preferred Stock at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern
Standard Time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any
date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii)
upon receipt, if sent by a nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given.
Section 6. Redemption at Option of Company.
(a) The Company shall have the right, exercisable at any time upon 20
Trading Days notice (an "Optional Redemption Notice") to the Holders of the
Preferred Stock given at any time after the Original Issue Date to redeem all or
any portion of the shares of Preferred Stock which have not previously been
converted or redeemed, at a price equal to the Optional Redemption Price (as
defined below). The entire Optional Redemption Price shall be paid in cash.
Holders of Preferred Stock may convert (and the Company shall honor such
conversions in accordance with the terms hereof) any shares of Preferred Stock,
including shares subject to an Optional Redemption Notice, during the period
from the date thereof through the 20th Trading Day after the receipt of an
Optional Redemption Notice.
(b) If any portion of the Optional Redemption Price shall not be paid by
the Company within seven (7) calendar days after the 20th Trading Day after the
delivery of an Optional Redemption Notice, interest shall accrue thereon at the
rate of 15% per annum until the Optional Redemption Price plus all such interest
is paid in full (any such amount shall be paid as liquidated damages and not as
a penalty). In addition, if any portion of the Optional Redemption Price remains
unpaid for more than seven (7) calendar days after the date due, the Holder of
the Preferred Stock subject to such redemption may elect, by written notice to
the Company given at any time thereafter, to either (i) demand conversion in
accordance with the formula and the time frame therefor set forth herein of all
or any portion of the shares of Preferred Stock for which such Optional
Redemption Price, plus accrued liquidated damages thereof, has not been paid in
full (the "Unpaid Redemption Shares"), in which event the Per Share Market Value
for such shares shall be the lower of the Per Share Market Value calculated on
the date the Optional Redemption Price was originally due and the Per Share
Market Value as of the Holder's written demand for conversion, or (ii)
invalidate ab initio such redemption, notwithstanding anything herein contained
to the contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days of its receipt of such election deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares
subject to such Holder conversion demand and
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<PAGE>
otherwise perform its obligations hereunder with respect thereto; or, if the
Holder elects option (ii) above, the Company shall promptly, and in any event
not later than three (3) Trading Days from receipt of Holder's notice of such
election, return to the Holder all of the Unpaid Redemption Shares.
(c) The "Optional Redemption Price" shall equal the sum of (i) the
product of (A) the number of shares of Preferred Stock to be redeemed and (B)
the product of (1) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (x) the date of the Optional Redemption Notice or (y)
the date of payment in full by the Company of the Optional Redemption Price,
whichever is greater, and (2) the Conversion Ratio calculated on the date of the
Optional Redemption Notice, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such shares of Preferred Stock.
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value and of which the denominator is the Conversion Price
at such time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Junior Securities" means the Common Stock and all other equity
securities of the Company, other than the Company's Series A Convertible
Preferred Stock and Series C Convertible Preferred Stock (provided it is issued
in a financing contemplated in Section 6(b) to the Registration Rights
Agreement) or any other security that the Holders consent to be pari passu with
the Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq National
Market or Nasdaq SmallCap Market or any other stock exchange or quotation system
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on the Nasdaq National Market or Nasdaq SmallCap Market or any stock exchange or
quotation system, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar
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<PAGE>
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by an Appraiser selected in good faith by the Holders of a majority in interest
of the shares of the Preferred Stock; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holder of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Original Issue Date, by and among the Company and the original
Holder of the Preferred Stock.
"Reset Price" means the average of Per Share Market Value for the 30
consecutive Trading Days immediately preceding the 120th day after the Original
Issue Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded on the
Nasdaq National Market or Nasdaq SmallCap Market or other stock exchange or
market on which the Common Stock has been listed, or (b) if the Common Stock is
not listed on the Nasdaq SmallCap Market or any stock exchange or market, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Underlying Securities Registration Statement" means a registration
statement under the Securities Act prepared by the Company and filed with the
Commission in accordance with the Registration Rights Agreement, covering the
resale of the Underlying Shares and naming the Holders as "selling stockholders"
thereunder.
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"Underlying Shares" means shares of Common Stock into which the
Preferred Stock are convertible in accordance with the terms hereof.
[Remainder of page left blank intentionally]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be signed
on its behalf by Edward J. Quilty, its Chairman and Chief Executive Officer,
this 27th day of April, 1998.
The Company:
PALATIN TECHNOLOGIES, INC.
By: /s/Edward J. Quilty
------------------------
Name: Edward J. Quilty
Title: Chairman and Chief Executive Officer
ATTEST
/s/ Stephen Wills
- -----------------
Stephen Wills
Assistant Secretary
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock indicated below, into shares of Common Stock, $.01
par value (the "Common Stock"), of Palatin Technologies, Inc. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations:
_________________________________________
Date to Effect Conversion
_________________________________________
Number of shares of Preferred Stock to be
Converted
_________________________________________
Number of shares of Common Stock to be Issued
_________________________________________
Applicable Conversion Price
_________________________________________
Signature
_________________________________________
Name
_________________________________________
Address
PREFERRED STOCK [GRAPHIC OMITTED] PREFERRED STOCK
[CORPORATE LOGO]
PALATIN TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of Delaware
- ----------------------- -----------------------
Certificate Number Number of Shares
B0000 0,000
- ----------------------- -----------------------
TRANSFER IS RESTRICTED SEE LEGENDS ON REVERSE
SERIES B CONVERTIBLE PREFERRED STOCK
$.01 PAR VALUE
This Certifies That NAME OF HOLDER is the record owner of NUMBER fully paid and
non-assessable shares of Series B Convertible Preferred Stock of Palatin
Technologies, Inc. transferable on the books of the Corporation by the holder
hereof in person or by Attorney upon surrender of this Certificate properly
endorsed.
Witness the seal of the Corporation and the signatures of its duly authorized
officers.
Dated April 28, 1998.
___________________ ____________________
Chairman Secretary
[GRAPHIC OMITTED]
[CORPORATE SEAL]
<PAGE>
- --------------------------------------------------------------------------------
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON CONVERSION SET FORTH IN SECTION 4.8 OF THE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF APRIL 28, 1998, BETWEEN PALATIN TECHNOLOGIES,
INC. (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
- --------------------------------------------------------------------------------
The Company will furnish without charge to each stockholder who so requests the
powers, designations, preferences, and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
- --------------------------------------------------------------------------------
For Value Received, (I/we) sell, assign and transfer to ________________________
shares of the Series B Convertible Preferred Stock represented by this
Certificate, and appoint ________________________________ to transfer the said
Stock on the books of Palatin Technologies, Inc. with full power of substitution
in the premises.
Social Security Number or Employer
Identification Number of transferee, if
known:____________________________________
Signed _____________________________ Dated _________________,_____
Signed _____________________________ Dated _________________,_____
- ------------------------------------------------
NOTICE: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.
- ------------------------------------------------
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
PALATIN TECHNOLOGIES, INC.
------------------------------
April 28, 1998
------------------------------
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of April
28, 1998 (this "Agreement"), between Palatin Technologies, Inc., a Delaware
corporation (the "Company"), and the parties who have executed this Agreement
and whose names appear on Schedule 1 hereto (each party listed on Schedule 1
hereto being hereinafter sometimes referred to as a "Purchaser" and collectively
as the "Purchasers").
WHEREAS, certain of the Purchasers and the Company have executed
one or more Subscription Agreements in connection with the offering by the
Company of certain Units relating to the Company's Series B Convertible Stock
(the "Unit Offering");
WHEREAS, the parties to the Unit Offering desire to void ab
initio all agreements and understandings relating thereto;
WHEREAS, subject to the terms and conditions set forth herein,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to acquire shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement,
unless the context requires a different meaning, the following terms have the
meanings indicated in this Section 1.1:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the recitals
hereto.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a Federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
actions to close.
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<PAGE>
"Certificate of Designation" shall have the meaning set forth in
Section 2.1(a).
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section
2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.01
per share.
"Company" shall have the meaning set forth in the recitals
hereto.
"Conversion Price" shall have the meaning set forth in the
Certificate of Designation.
"Disclosure Materials" means, collectively, the SEC Documents,
the schedules to this Agreement and the Registration Rights Agreement and all
other information furnished in writing by or on behalf of the Company to the
Purchasers or their respective agents and counsel in connection with the
transactions contemplated by this Agreement.
"Escrow Agent" means Robinson Silverman Pearce Aronsohn & Berman
LLP.
"Escrow Agreement" means the escrow agreement, dated as of the
date hereof, among the Company, JNC and the Escrow Agent, in the form of Exhibit
D, as the same may be amended, supplemented or otherwise modified in accordance
with its terms.
"Event" shall have the meaning set forth in Section 4.14.
"Event Date" shall have the meaning set forth in Section 4.14.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"JNC" means JNC Opportunity Fund Ltd., a Cayman Islands
corporation, and a Purchaser hereunder.
"Initial Reserve" shall have the meaning set forth in Section
3.1(d).
"Intellectual Property Rights" shall have the meaning set forth
in Section 3.1(q).
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<PAGE>
"Legal Opinion" means the legal opinion letter of Rubin Baum
Levin Constant & Friedman, outside counsel to the Company, addressed to the
Purchasers, dated the Closing Date, substantially in the form attached hereto as
Exhibit C.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, right of first refusal, charge, security interest or encumbrance of any
kind in or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"New York Courts" shall have the meaning set forth in Section
5.8.
"Original Issue Date" shall mean the first issuance of any
Shares, regardless of the number of transfers of any particular Share and
regardless of the number of certificates which may be issued to evidence any
particular Share.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition).
"Purchaser(s)" shall have the meaning set forth in the recitals
hereto.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof, among the Company and the Purchasers, in
the form of Exhibit B, as the same may be amended, supplemented or otherwise
modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in Section
3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(k).
"Securities" means, collectively, the Shares and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock to be purchased
pursuant to this Agreement.
"Stated Value" means $100.
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<PAGE>
"Subsequent Financing" shall have the meaning set forth in
Section 4.9.
"Subsequent Financing Notice" shall have the meaning set forth in
Section 4.9.
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Trading Day" shall have the meaning set forth in the Certificate
of Designation.
"Transaction Documents" means collectively, this Agreement, the
Registration Rights Agreement, the Certificate of Designation and the Escrow
Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Shares in accordance with the terms of the Certificate of
Designation.
"Underlying Securities Registration Statement" means a
registration statement under the Securities Act prepared by the Company and
filed with the Commission in accordance with the Registration Rights Agreement,
covering the resale of the Underlying Shares and naming the holder or holders of
such Underlying Shares as "selling stockholders" thereunder.
"Unit Offering" shall have the meaning set forth in the recitals
hereto.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and the Purchasers
shall, severally and not jointly, purchase up to an aggregate of 18,875 Shares
for an aggregate purchase price of $1,887,500. The Shares shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation").
(b) The closing of the purchase and sale of the Shares (the
"Closing") shall take place on such date as the parties shall agree at the
offices of the Escrow Agent, 1290 Avenue of the Americas, New York, New York
10104, in accordance with the Escrow Agreement. The date of the Closing is
hereinafter referred to as the "Closing Date."
(c) At the Closing the parties shall deliver the following items
(with respect to the Closing of the purchase and sale of the Shares to be
acquired by JNC hereunder, such deliveries will be made prior to the Closing in
accordance with and subject to the terms and
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<PAGE>
conditions of the Escrow Agreement): (i) the Company shall deliver or cause to
be delivered (A) stock certificates representing the aggregate Stated Value of
the Shares to be acquired hereunder by each Purchaser as set forth in Schedule
1, registered in the name of such Purchaser and (B) the Legal Opinion; (ii) each
Purchaser shall deliver or cause to be delivered immediately available funds
equal to the aggregate Stated Value of Shares to be acquired by such Purchaser
as set forth in Schedule 1, in United States dollars and (iii) each party hereto
shall deliver or cause to be delivered all other executed instruments,
agreements and certificates as are required to be delivered by or on their
behalf at the Closing, including without limitation, this Purchase Agreement,
the Registration Rights Agreement and, with respect to the Company and JNC, the
Escrow Agreement. The Company acknowledges that its outside counsel has
received, and the Purchasers (other than JNC) and the Company agree that the
Company's outside counsel shall continue to hold, $287,500, representing the
Purchase Price to be paid at Closing by such other Purchasers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchasers as follows:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Shares or any Transaction Document, (y) have a material adverse effect on
the results of operations, assets, prospects, or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (x), (y) or (z), a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and to otherwise carry out its
obligations thereunder. The execution and
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delivery of each Transaction Document by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company. Each Transaction Document has been
duly executed by the Company and, when delivered in accordance with the terms
hereof and of the Escrow Agreement, each Transaction Document shall constitute
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. Neither the Company nor any Subsidiary is
in violation of any provision of its respective certificate of incorporation,
bylaws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or, except as a result of the purchase and
sale of the Shares hereunder, securities, rights or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents or Schedule 3.1(c), no
Person or group of Persons beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock.
(d) Issuance of Securities. The Shares are duly authorized and,
when issued in accordance with the terms hereof, shall be validly issued, fully
paid and nonassessable, free and clear of all Liens. The Company has and at all
times while any Shares are outstanding will maintain an adequate reserve of duly
authorized shares of Common Stock to enable it to perform its conversion
obligations under the Certificate of Designation, which reserve shall be no less
than 175% of the number of shares of Common Stock as would be issuable upon
conversion in full of the Shares, assuming such conversion occurred on the
Original Issue Date or the Effective Date (as defined in the Registration Rights
Agreement), whichever yields a lower Conversion Price (the "Initial Reserve").
If at any time the sum of the number of shares of Common Stock issuable upon
conversion in full of the then outstanding Shares exceeds 85% of the Initial
Reserve, then the Company shall duly reserve 175% of the number of shares of
Common Stock equal to such excess to fulfill such obligations. This obligation
shall similarly apply to successive excesses. When issued in accordance with the
Certificate of Designation the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), (ii) subject to
obtaining the consents referred to in Section 3.1(f), conflict with, or
constitute a
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default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Company debt or otherwise) to which the Company is a party or by
which any property or asset of the Company is bound or affected, or (iii) result
in a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the Company
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), as could not, individually or in the
aggregate, have or result in a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental authority, except for violations which, individually and in
the aggregate, could not have or result in a Material Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or registration with, any court or other federal, state,
local, foreign or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing of the Certificate of Designation with the
Secretary of State of Delaware, (ii) the filing of one or more Underlying
Securities Registration Statements with the Commission and the making of
applicable blue-sky filings under state securities laws with respect to the
Securities and the transactions contemplated hereby, each as contemplated hereby
and by the Registration Rights Agreement, (iii) the application for the listing
of the Underlying Shares on the Nasdaq SmallCap Market (and on each other
national securities exchange, market or trading facility on which the Common
Stock is then listed), and (iv) other than, in all other cases, where the
failure to obtain such consent, waiver, authorization or order, or to give or
make such notice or filing, could not, individually or in the aggregate, have or
result in a Material Adverse Effect (the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in
the Disclosure Materials, there is no action, suit, notice of violation,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality, validity or
enforceability of any Transaction Document or the Securities or (ii) could,
individually or in the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received notice of
a claim that it is in default under or that it is in violation of) any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is in violation of any statute, rule or regulation of any governmental
authority, except as could not, individually or in the aggregate, have or result
in a Material Adverse Effect.
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(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers contained in Sections
3.2(b)-3.2(f), the offering, issuance or sale of the Securities as contemplated
hereunder are exempt from the registration requirements of the Securities Act.
(j) Certain Fees. Except for fees payable to Paramount Capital,
Inc., no fees or commissions will be payable by the Company to any broker,
financial advisor or consultant, finder, investment banker or Person performing
a similar function, placement agent, or bank with respect to the transactions
contemplated hereby. The Purchasers shall have no obligation with respect to
such fees or commissions or with respect to any claims made by or on behalf of
other Persons for fees or commissions of a type contemplated in this Section
that may be due in connection with the transactions contemplated hereby. The
Company shall indemnify and hold harmless each Purchaser, its respective
employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and reasonable attorney's fees) and expenses suffered in
respect of any such claimed or existing fees, as and when incurred.
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, since July 1, 1996 (the
foregoing materials being collectively referred to herein as the "SEC
Documents") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company as of and for the
dates thereof and the results of operations, retained earnings and cash flows
for the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-QSB for the period ended
December 31, 1997, (a) there has been no event, occurrence or development that
has had or that could have or result in a Material Adverse Effect, (b) there has
been no material change in the Company's accounting principles, practices or
methods and (c) the Company has conducted its business only in the ordinary
course of such business. The Company last filed audited financial statements
with the Commission for the fiscal year ended June 30, 1997, and has not
received any comments from the Commission in respect thereof.
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(l) Seniority. Except for the Company's Series A Preferred Stock,
no class of equity securities of the Company is senior to the Shares in right of
payment, whether upon liquidation, dissolution or otherwise.
(m) Form S-3 Eligibility. The Company is, and at the Closing Date
will be, eligible to register securities for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(n) Investment Company. The Company is not, and is not an
"Affiliate person" of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(o) Exclusivity. The Company shall not issue or sell Preferred
Stock to any Person other than the Purchasers.
(p) Listing and Maintenance Requirements Compliance. Since the
date that the listing of the Common Stock was initially approved for trading on
the Nasdaq SmallCap Market, the Company has not received notice (written or
oral) from any stock exchange, market or trading facility on which the Common
Stock is or has been listed (or on which it is or has been quoted) to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such exchange, market or trading facility. The Company is in
compliance with all such maintenance requirements.
(q) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, trade secrets and other
intellectual property rights which are necessary for use in connection with its
business or which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company, none of the Intellectual Property Rights infringe on any rights of any
other Person, and the Company either owns or has duly licensed or otherwise
acquired all necessary rights with respect to the Intellectual Property Rights.
The Company has not received any notice from any third party of any claim of
infringement by the Company of any of the Intellectual Property Rights, and has
no reason to believe there is any basis for any such claim. To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.
(r) Registration Rights. Except as and to the extent set forth on
Schedule 6(b) to the Registration Rights Agreement, the Company has not granted
or agreed to grant any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission
which have not been satisfied.
(s) Conversion Procedures. Other than the Conversion Notice
attached to the Certificate of Designation, there are no other procedures to be
followed or legal opinions or other
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documents required be delivered in order to permit holders to exercise their
right to convert Shares in accordance with the time periods set forth in the
Certificate of Designation.
(t) Disclosure. All information relating to or concerning the
Company set forth in the Transaction Documents or the Disclosure Materials
(other than the SEC Documents) is true and correct in all material respects and
does not fail to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. The Company confirms that, to the best of its
knowledge, it has not provided any Purchaser or any of such Purchaser's agents
or counsel any information that constitutes or might constitute material
nonpublic information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representation in effecting transactions in
securities of the Company.
Section 3.2. Representations and Warranties of the Purchasers.
Each Purchaser hereby, severally and not jointly, represents and warrants to the
Company as follows:
(a) Organization; Authority. If such Purchaser is an entity, such
Purchaser is an entity organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents to which it is a party and to carry out its obligations
thereunder. If such Purchaser is an individual, such Purchaser has the capacity
to enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and to carry out its obligations thereunder.
The purchase of the Securities to be acquired by such Purchaser hereunder has
been duly authorized by all necessary action on the part of such Purchaser. Each
of this Agreement, the Registration Rights Agreement and, with respect to JNC
only, the Escrow Agreement has been duly executed by such Purchaser and, when
delivered by such Purchaser in accordance with the terms hereof and, with
respect to JNC, of the Escrow Agreement, shall constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
to be acquired by it hereunder for its own account for investment purposes only
and not with a view to or for distributing or reselling such Securities or any
part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities to be acquired by it hereunder, it was, at the date hereof, it is,
and at the Closing Date, it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial
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matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the merits and
risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser acknowledges that an investment in the Securities to be acquired by it
hereunder is speculative and involves a high degree of risk. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities, (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Materials. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives, agents or
counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities to be acquired by it hereunder are being offered and sold to
it without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. (a) The Securities may only
be disposed of pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant to an available exemption from or in
a transaction not subject to the registration requirements thereof. In
connection with any transfer of any Securities other than pursuant to an
effective registration statement or to the Company, the Company may require the
transferor
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thereof to provide to the Company an opinion of counsel selected and paid for by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register any transfer of Shares by a
Purchaser to an Affiliate thereof and to any transfers among any such Affiliates
provided the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Any such Affiliate
transferee shall have the rights of the Purchaser under the Transaction
Documents.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on the certificates
representing the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON CONVERSION SET FORTH IN SECTION 4.8 OF THE CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF APRIL 28, 1998, BETWEEN
PALATIN TECHNOLOGIES, INC. (THE "COMPANY") AND THE ORIGINAL HOLDER
HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
Underlying Shares shall not contain the legend set forth above or
any other legend if the conversion of Shares or other issuances of Underlying
Shares, as the case may be, occurs at any time while an Underlying Securities
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Underlying Securities Registration Statement at such
time, if in the opinion of counsel to the Company such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide Purchasers, upon request, with a certificate
or certificates representing Underlying Shares, free from such legend at such
time as such legend is no longer required hereunder. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in this Section
4.1(b).
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Section 4.2. Acknowledgment of Dilution. The Company acknowledges
that the issuance of Underlying Shares upon conversion of the Shares may result
in dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares in accordance with the
Certificate of Designation is unconditional and absolute regardless of the
effect of any such dilution.
Section 4.3. Furnishing of Information. As long as any Purchaser
owns Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. If at any time prior to the date on which
all Purchasers may resell all of their respective Underlying Shares without
volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act
(as determined by counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent for the
benefit of and enforceable by the Purchasers) the Company is not required to
file reports pursuant to such sections, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
Section 4.4. Use of Proceeds. The Company shall use all of the
proceeds from the sale of the Securities for working capital purposes and not
for the satisfaction of any portion of Company debt in excess of an aggregate of
$1,200,000 or to redeem any Company equity or equity-equivalent securities.
Pending application of the proceeds of this placement in the manner permitted
hereby the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
Section 4.5. Listing of Underlying Shares. The Company shall (a)
not later than the fifth Business Day following the Closing Date prepare and
file with the Nasdaq SmallCap Market (as well as any other national securities
exchange, market or trading facility on which the Common Stock is then listed)
an additional shares listing application covering at least 175% of the number of
Underlying Shares as would be issuable upon a conversion in full of the Shares,
assuming such conversion occurred on the Original Issue Date, (b) take all steps
necessary to cause such shares to be approved for listing on the Nasdaq SmallCap
Market (as well as on any other national securities exchange, market or trading
facility on which the Common Stock is then
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listed) as soon as possible thereafter, and (c) provide to the Purchasers
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange or market. In addition, if at any time the number
of shares of Common Stock issuable on conversion of all then outstanding Shares
is greater than the number of shares of Common Stock theretofore listed with the
Nasdaq SmallCap Market (and any such other national securities exchange, market
or trading facility), the Company shall promptly take such action (including the
actions described in the preceding sentence) to file an additional shares
listing application with the Nasdaq SmallCap Market (and any such other national
securities exchange, market or trading facility) covering at least a number of
shares equal to 175% of the number of Underlying Shares as would then be
issuable upon a conversion in full of the Shares.
Section 4.6. Integration. The Company shall not and shall use its
best efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the issue, offer or sale of the Securities to the Purchasers.
Section 4.7. Increase in Authorized Shares. At such time as the
Company would be, if a notice of conversion were to be delivered on such date,
precluded from converting in full all of the Shares that remain unconverted at
such date due to the unavailability of a sufficient number of shares of
authorized but unissued or re-acquired Common Stock, the Board of Directors of
the Company shall promptly (and in any case within 30 Business Days from such
date) prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate of incorporation to
increase the number of shares of Common Stock which the Company is authorized to
issue to at least a number of shares equal to the sum of (i) all shares of
Common Stock then outstanding, (ii) the number of shares of Common Stock
issuable on account of all outstanding warrants, options and convertible
securities (other than the Preferred Stock) and on account of all shares
reserved under any stock option, stock purchase, warrant or similar plan, and
(iii) 175% of the number of Underlying Shares as would then be issuable upon a
conversion in full of the then outstanding Shares in accordance with the terms
of this Agreement and the Certificate of Designation. In connection therewith,
the Board of Directors shall (x) adopt proper resolutions authorizing such
increase, (y) recommend to and otherwise use its best efforts to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery of
the proxy materials relating to such meeting) and (z) within 5 Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's certificate of incorporation to evidence such increase. If the Company
does not receive stockholder approval for such increase or the Company fails to
file an appropriate amendment in the time provided therefor by the immediately
preceding sentence, then the provisions of Section 5(c) of the Certificate of
Designation and Section 4.14 hereof shall apply.
Section 4.8. Purchaser Ownership of Common Stock. JNC agrees not
to use its ability to convert Shares to the extent such conversion or exercise
would result in it beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules
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thereunder) in excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of the Shares held by it
after application of this Section. To the extent that the limitation contained
in this Section applies, the determination of whether Shares are convertible by
JNC (in relation to other securities owned by it) and of which Shares are
convertible shall be in the sole discretion of JNC, and the submission of Shares
for conversion shall be deemed to be JNC's determination of whether such Shares
are convertible (in relation to other securities owned by it) and of which of
its Shares are convertible, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of JNC to convert Shares at such time as such conversion will
not violate the provisions of this Section. The provisions of this Section may
be waived by JNC upon not less than 75 days prior notice to the Company, and the
provisions of this Section shall continue to apply until such 75th day (or
later, if stated in the notice of waiver).
Section 4.9. Right of Participation; Subsequent Registrations.
(a) The Company shall not, other than pursuant to the currently contemplated
strategic arrangement described in Schedule 6(b) to the Registration Rights
Agreement, directly or indirectly, without the prior written consent of JNC,
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any of
its or its Affiliates' equity or equity-equivalent securities or any instrument
that permits the holder thereof to acquire Common Stock at any time over the
life of the security or investment at a price that is less than the closing
sales price of the Common Stock at the time of issuance of such security or
investment (a "Subsequent Financing") for a period of 180 days after the Closing
Date, except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan or employment agreement or, with respect to senior
management, consulting agreements heretofore or hereinafter duly adopted by the
Company, (ii) shares issued upon exercise of any currently outstanding warrants
and upon conversion of any currently outstanding convertible preferred stock in
each case disclosed in Schedule 3.1(c), and (iii) shares of Common Stock issued
upon conversion of the Shares, unless (A) the Company delivers to JNC a written
notice (the "Subsequent Financing Notice") of its intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the Persons with whom such Subsequent
Financing shall be affected, and attached to which shall be a term sheet or
similar document relating thereto, and (B) JNC shall not have notified the
Company by 5:00 p.m. (Eastern Standard time) on the tenth (10th) Trading Day
after its receipt of the Subsequent Financing Notice of its willingness to
provide (or to cause its sole designee to provide), subject to completion of
mutually acceptable documentation, up to $2,000,000 (at JNC's option) of the
financing described in the Subsequent Financing Notice to the Company on
substantially the terms set forth in the Subsequent Financing Notice. If JNC
shall fail to notify the Company of its (or its designee's) intention to
participate in such Subsequent Financing and to enter into such negotiations
within such time period, the Company may effect the Subsequent Financing
substantially upon the terms and to the Persons (or Affiliates of such Persons)
set forth in the Subsequent Financing Notice without participation therein by
JNC; provided, that the Company shall provide JNC with a second Subsequent
Financing Notice,
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and JNC shall again have the right of participation set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within forty-five (45) days after the
date of the initial Subsequent Financing Notice with the Person (or an Affiliate
of such Person) identified in the Subsequent Financing Notice. The right of
participation granted in this paragraph to JNC shall confer no rights to any
Purchaser other than JNC to participate in a future financing by the Company.
(b) Except for Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement and for Company
securities permitted under Section 6(b) of the Registration Rights Agreement to
be registered in the Underlying Securities Registration Statement, the Company
shall not, for a period of not less than forty-five (45) days after the date
that the Underlying Securities Registration Statement is declared effective by
the Commission, without the prior written consent of the Purchasers, (i) issue
or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company. Any days that a
Purchaser is not permitted to sell Underlying Shares under the Underlying
Securities Registration Statement shall be added to such forty-five (45) day
period for the purposes of (i) and (ii) above.
Section 4.10. Notice of Breaches. Each of the Company and each
Purchaser shall give prompt written notice to the other of any breach by it of
any representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof,
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained in the Transaction
Document to be incorrect or breached as of such Closing Date. However, no
disclosure by a party pursuant to this Section shall be deemed to cure any
breach of any representation, warranty or other agreement contained in any
Transaction Document.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchasers of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the Purchasers a
copy of any written statement in support of or relating to such claim or notice.
Section 4.11. Conversion and Exercise Obligations of the Company.
The Company shall honor conversions of the Shares and shall deliver Underlying
Shares upon such conversions in accordance with the respective terms and
conditions and time periods set forth in the Certificate of Designation.
Section 4.12. Transfer of Intellectual Property Rights. Except in
the ordinary course of the Company's business consistent with past practice or
in connection with the sale of all or substantially all of the assets of the
Company, the Company shall not transfer, sell or
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otherwise dispose of, any Intellectual Property Rights, or allow the
Intellectual Property Rights to become subject to any Liens, or fail to renew
such Intellectual Property Rights (if renewable and would otherwise expire).
Section 4.13. Reimbursement. In the event that any Purchaser,
other than by reason of its gross negligence or willful misconduct, becomes
involved in any capacity in any action, proceeding or investigation brought by
or against any Person, including stockholders of the Company, in connection with
or as a result of the consummation of the transactions contemplated pursuant to
the Transaction Documents, the Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliate of each Purchaser and each of the partners, directors, agents,
employees and controlling persons (if any), as the case may be, of each
Purchaser and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, each Purchaser and any such Affiliate and any such Person. The Company
also agrees that no Purchaser or any such Affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction Documents,
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Purchaser or its partners, directors, agents, employees and controlling
persons (if any), in connection with the transactions contemplated by this
Agreement. No Purchaser shall, without the prior written consent of the Company,
which shall not be unreasonably withheld or delayed, effect any settlement of
any action in respect of which the Company is a party.
Section 4.14. Liquidated Damages Upon Occurrence of Certain
Events. (a) If the Common Stock shall for any reason fail to be listed on, or be
suspended from trading from, the Nasdaq National Market or Nasdaq SmallCap
Market for three (3) Trading Days (which need not be consecutive Trading Days),
then each holder of Preferred Stock then outstanding shall have the right to
require the Company to pay to it in cash an amount equal to 25% of the aggregate
Stated Value of all shares of Preferred Stock then held by it, as liquidated
damages and not as a penalty. Any such payment by the Company shall be due in
full within five (5) Business Days of the date that the holder of such Preferred
Stock notifies the Company of the exercise of the right to payment contained in
this paragraph. Interest shall accrue and be payable on such liquidated damages
at the rate of 18% per annum until the full amount of such liquidated damages,
plus all accrued and unpaid interest thereon, are paid in full. A Purchaser
shall not be entitled to liquidated damages as a result of a suspension or
delisting described above in this paragraph if it has previously provided the
Company with a Subsequent Reduced Conversion Price Notice pursuant Section
5(c)(i) of the Certificate of Designation, except in the event that the
suspension or delisting that was the subject of such Subsequent Reduced
Conversion Price Notice had been cured and a new suspension or delisting arose
thereafter. For purposes hereof, shares of Preferred Stock for which a
conversion has been requested in accordance with the Certificate of Designation
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shall be deemed to be outstanding if such delisting or suspension occurs on or
prior to the date that the holder receives Underlying Shares from the Company in
respect thereof.
(b) If (i) the conversion rights of a Purchaser are suspended for
any reason, or if a Purchaser is not for any reason permitted to sell
Registrable Securities under an Underlying Securities Registration Statement, or
(ii) the Company fails to comply with requests by a Purchaser for conversion of
any shares of its Preferred Stock into Underlying Shares in accordance with the
terms and time periods set forth in the Certificate of Designation or (iii) the
Company is required to convene a meeting of stockholders pursuant to Section
5(a)(ii) of the Certificate of Designation and fails to convene such meeting
within the time period specified in such Section or does so convene such a
meeting within such time period but fails to obtain Shareholder Approval (as
defined in the Certificate of Designation) at such meeting (any such failure or
breach being referred to as an "Event" and, for purposes of clauses (i), (ii)
and (iii) the date on which such Event occurs, being referred to as "Event
Date"), then, each such Purchaser may require the Company to pay to it in cash,
1.5% of the aggregate Stated Value of all shares of Preferred Stock then held by
it, as liquidated damages and not as a penalty. In addition, on each monthly
anniversary of the Event Date until the Event is cured, each such Purchaser may
require the Company to pay to it in cash, 2.5% of the aggregate Stated Value of
all shares of Preferred Stock then held by it, as liquidated damages and not as
a penalty. A Purchaser shall not be entitled to liquidated damages for an Event
for any month for which it has elected to deliver to the Company an Initial
Reduced Conversion Price Notice pursuant Section 5(c)(i) of the Certificate of
Designation in respect of such Event. However, a Purchaser shall be entitled to
receive both the benefits of the Initial Reduced Conversion Price Notice and the
liquidated damages contemplated in this paragraph for the same Event, but not
both in the same monthly period. The Purchasers shall have the right to
liquidated damages for multiple and/or successive Events. For purposes hereof,
shares of Preferred Stock for which a conversion has been requested in
accordance with the Certificate of Designation shall be deemed to be outstanding
and held by the converting holder if an Event occurs on or prior to the date
that the holder receives Underlying Shares from the Company in respect thereof.
(B) If the Company fails for any reason to deliver to a holder
certificates representing the number of Underlying Shares issuable upon a
conversion of Preferred Stock in accordance with Section 5(b)(i) of the
Certificate of Designation prior to the third Trading Day after the Conversion
Date, then the Company shall pay to the converting holder, in cash, as
liquidated damages and not as a penalty, $1,500 for each day after such third
Trading Day until such certificates are received. Nothing herein shall limit a
holder's right to pursue actual damages for the Company's failure to deliver
certificates representing such Underlying Shares within the period specified
herein and in the Certificate of Designation, and such holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall be cumulative and shall not prohibit the
holders from seeking to enforce other damages available under this Agreement or
the Certificate of Designation.
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ARTICLE V
MISCELLANEOUS
Section 5.1. Fees and Expenses. At the Closing, the Company shall
pay (i) $25,000 to the Escrow Agent for the legal fees and disbursements of the
Purchasers in connection with the preparation and negotiation of the Transaction
Documents and (ii) $5,000 to JNC for its due diligence expenses and
disbursements in connection with the transactions contemplated hereby. Other
than the amounts contemplated by the immediately preceding sentence, and except
as set forth in the Registration Rights Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Shares pursuant hereto. The Purchasers shall be responsible for
their own tax liability that may arise as a result of the investment hereunder
or the transactions contemplated by this Agreement.
Section 5.2. Entire Agreement; Amendments, Exhibits and
Schedules. This Agreement, together with the Exhibits and Schedules hereto, the
Certificate of Designation, the Registration Rights Agreement and (with respect
to JNC and the Company) the Escrow Agreement contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
including, without limitation, any and all agreements and understandings with
respect to the Unit Offering. The Exhibits and Schedules to this Agreement are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
Section 5.3. Notices. Any notice or other communication or
delivery required or permitted to be provided hereunder shall be in writing and
shall be deemed to have been received on the earliest of (i) the date of
transmission, if such notice or communication is delivered to the address or to
the facsimile telephone number (as the case may be) specified in this Section
prior to 8:00 p.m. (Eastern Standard time) on a Business Day, (ii) the Business
Day after the date of transmission or hand delivery, if such notice or
communication is delivered to the address or the at the facsimile telephone
number (as the case may be) specified in this Section later than 8:00 p.m.
(Eastern Standard time) on any date and earlier than 11:59 p.m. (Eastern
Standard time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications to any Purchaser shall be as set
forth below such Purchaser's name on Schedule 1 and, if to the Company, to the
following address:
Palatin Technologies, Inc.
214 Carnegie Center
Princeton, NJ 08540
Facsimile No.: (609) 452-0880
Attn: Edward J. Quilty
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With copies to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Facsimile No.: (212) 698-7700
Attn: Faith L. Charles, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Section 5.4. Amendments; Waivers. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of
an amendment, by the Company and each Purchaser, or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns, including any Persons to whom a Purchaser transfers Shares.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
Section 5.7. No Third-Party Beneficiaries; Obligations Several.
This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and, other than with respect to
permitted assignees under Section 5.6, is not for the benefit of, nor may any
provision hereof be enforced by, any other Person. The obligations of the
Purchasers under the Transaction Documents are several and not joint and no
Purchaser shall be responsible for any obligations of or misdeeds by any other
Purchaser.
Section 5.8. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of any New
York state court sitting in the Borough of Manhattan, the state and federal
courts sitting in the City of New York or any federal court sitting in the
Borough of Manhattan in the City of New York (collectively, the "New York
Courts") in respect of any Proceeding arising out of or relating to this
Agreement, and irrevocably accepts for itself and in respect of its property,
generally and unconditionally, jurisdiction of the New York Courts. Each
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party irrevocably waives to the fullest extent it may effectively do so under
applicable law any objection that it may now or hereafter have to the laying of
the venue of any such proceeding brought in any New York Court and any claim
that any such proceeding brought in any New York Court has been brought in an
inconvenient forum. Nothing herein shall affect the right of any Holder. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by receiving a copy
thereof sent to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Section 5.9. Survival. The representations, warranties,
agreements and covenants contained in this Agreement shall survive the Closing
and the issuance and conversion of the Shares for a period of three years from
the Closing Date, except for claims arising from fraud which shall survive for
the applicable statute of limitations.
Section 5.10. Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement, and shall become effective when counterparts have been
signed by each party and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 5.11. Publicity. The Company and JNC shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither JNC nor the
Company shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of JNC without its prior written consent, except to the extent
that JNC's name (but not the name of any beneficial owner thereof) is required
to be disclosed by the Nasdaq Stock Market (or any successor association) or the
Commission. The Purchasers other than JNC shall not make any public statement or
issue any press release regarding the transactions contemplated hereby without
the prior written consent of JNC and the Company. Within 10 Business Days of the
Closing Date, the Company shall issue a press release or file with the
Commission a Form 8-K or Form 10-QSB publicly announcing the sale of the Shares
to the Purchasers.
Section 5.12. Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall
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be a reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Agreement.
Section 5.13. Remedies. Each of the parties to this Agreement
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties hereto agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in any action instituted in any court of the United
States of America or any state thereof having jurisdiction over the parties to
this Agreement and the matter, in addition to any other remedy to which they may
be entitled, at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Preferred Stock Purchase Agreement to be duly executed as of the
date first indicated above.
The Company:
-----------
PALATIN TECHNOLOGIES, INC.
By:_____________________________
Name: Edward J. Quilty
Title: Chairman and Chief Executive Officer
The Purchasers:
--------------
JNC OPPORTUNITY FUND LTD.
By:_____________________________
Name:
Title:
ROBERT LEAF
________________________________
Robert Leaf
JOSEPH AND BARBARA STRASSMAN
________________________________
Joseph Strassman Barbara Strassman
CARL F. SCHWARTZ
________________________________
Carl F. Schwartz
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 28, 1998, among Palatin Technologies, Inc., a Delaware
corporation (the "Company"), and the parties who have executed the signature
pages attached hereto and whose names appear on Schedule 1 (each such signatory,
a "Purchaser" and all such signatories, collectively, the "Purchasers").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Certificate of Designation" shall have the meaning set forth in
the Purchase Agreement.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.01
per share.
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"Effectiveness Date" means the 120th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 6(e).
"Event Date" shall have the meaning set forth in Section 6(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 45th day following the Closing Date.
"Initial Reduced Conversion Price Notice" shall have the meaning
set forth in the Certificate of Designation.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time, of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"New York Courts" shall have the meaning set forth in Section
7(j).
"Original Issue Date" shall have the meaning set forth in the
Certificate of Designation.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means Company's Series B Convertible Preferred
Stock, $.01 par value, issued to the Purchasers pursuant to the Purchase
Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
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"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Common Stock
issuable upon conversion in full of the Preferred Stock; provided, however that
in order to account for the fact that the number of shares of Common Stock that
are issuable upon such conversion may fluctuate between the date hereof and the
Effective Date due to changes in the market price of the Common Stock during
such time, Registrable Securities shall be deemed to include not less than 175%
of the number of shares of Common Stock into which the Preferred Stock is
convertible, assuming such conversion occurred on the Closing Date, and the
initial Registration Statement shall cover at least such number of shares. The
Company shall be required to file additional Registration Statements to the
extent the actual number of shares of Common Stock into which shares of
Preferred Stock are convertible exceeds the number of shares of Common Stock
initially registered in accordance with the immediately prior sentence, and the
filing of such additional Registration Statements shall occur no later than 10
Business Days after notice of the requirement thereof, which the Holders may
give at such time when the number of shares of Common Stock as are issuable upon
conversion of Preferred Stock exceeds 85% of the number of shares registered.
"Registration Statement" means the registration statement
contemplated by Section 2(a) (covering such number of Registrable Securities and
any additional Registration Statements contemplated in the definition of
Registrable Securities), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one law firm acting as counsel to the
Holders, for which the Holders will be reimbursed by the Company pursuant to
Section 4.
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"Stated Value" shall mean $100.
"Trading Day" means (a) a day on which the Common Stock is traded
on the Nasdaq National Market or Nasdaq SmallCap Market or other stock exchange
or market on which the Common Stock has been listed, or (b) if the Common Stock
is not listed on the Nasdaq SmallCap Market or any stock exchange or market, a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415 in accordance, among other things, with the methods of distribution
thereof as specified by the Holders. The Registration Statement shall be on Form
S-3 (or, if the Company is not permitted to register the resale of the
Registrable Securities on Form S-3, the Registration Statement shall be on such
other appropriate form in accordance herewith as the Holders may consent). The
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of shares of
Common Stock as may be required to effect conversion of the Preferred Stock to
prevent dilution resulting from stock splits, stock dividends or similar events,
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or by reason of changes in the Conversion Price in accordance with the terms of
the Certificate of Designation (as defined in the Purchase Agreement). The
Company shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date, and shall use
its best efforts to keep such Registration Statement continuously effective
under the Securities Act until the date which is two years after the date that
such Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act, as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company's transfer agent (the "Effectiveness Period");
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which in the opinion of such managing underwriters can be sold, and such amount
shall be allocated pro rata among the Holders proposing to sell Registrable
Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements, and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement (and any additional Registration
Statements as may be required) in accordance with Section 2(a), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
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the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference, and including
the initial filing of such Registration Statement), the Company shall (i)
furnish to the Holders, their Special Counsel and any managing underwriters,
copies of all such documents proposed to be filed in the form proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the opinion of respective counsel to
such Holders and such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities, their Special
Counsel, or any managing underwriters, shall reasonably object on a timely
basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as practicable to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and promptly provide the Holders true and complete copies of
all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) and confirm such notice in writing no later than
one (1) Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
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is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
each of the Holders); and (C) when the Registration Statement or any
post-effective amendment has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and war ranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 3(e) that
would, in the opinion of counsel for the Company, violate applicable law or be
materially detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent reasonably
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
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hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Qualify or register (or procure any necessary exemptions from
such qualification or registration) the Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as any Holder
or underwriter requests in writing, and keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least three (3)
Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq SmallCap
Market and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) In the case of an Underwritten Offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
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copies thereof to each Holder and the managing underwriters, if any, of opinions
of counsel to the Company and updates thereof addressed to each selling Holder
and each such underwriter, in form, scope and substance reasonably satisfactory
to any such managing underwriters and Special Counsel to the selling Holders
covering the matters customarily covered in opinions requested in Underwritten
Offerings and such other matters as may be reasonably requested by such Special
Counsel and underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement or at the time of delivery of any Registrable Securities
sold pursuant thereto (at the option of the underwriters), obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each Person and in
such form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 7
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, a
representative of such Holders, an underwriter participating in any disposition
of Registrable Securities, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
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Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts Underwritten Offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date of
the Registration Statement, which statement shall cover said 12-month period, or
end shorter periods as is consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such selling
Holder as is required by law to be disclosed in the Registration Statement and
the Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder agrees by its acquisition of the Registrable
Securities that (i) it will not offer or sell any Registrable Securities under
the Registration Statement until it has received copies of the Prospectus as
then amended or supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c), and (ii) it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
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<PAGE>
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with Nasdaq SmallCap Market and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed, and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limi tation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to
the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
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<PAGE>
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof. Notwithstanding
anything herein to the contrary, if (i) prior to the Effectiveness Date the
Holders require the Company to register their Registrable Securities in an
Underwritten Offering (other than an Underwritten Offering that the Company has
otherwise undertaken) or (ii) after the Effectiveness Date, when there is an
effective Registration Statement that names the Holders as "selling
stockholders" therein and under which the Holders are permitted to sell
Registrable Securities, and the Holders require the Company to register their
Registrable Securities in an Underwritten Offering (other than an Underwritten
Offering that the Company has otherwise undertaken); then, in the case of (i) or
(ii) above, in addition to the cost and expenses that the Holders are required
to pay under this Section, the Holders shall pay all legal, accounting and other
fees and expenses reasonably incurred by the Company in connection with the
preparation and filing of such Underwritten Offering and cooperation with
requests of the Managing Underwriters.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, settlements, judgments, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20
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of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limita tions set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allo cation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Pro ceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
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6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as and to the extent
specifically set forth in Schedule 6(b) attached hereto, neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specifically set forth in
Schedule 6(b) attached hereto, neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specifically set forth in Schedule 6(b) attached hereto, neither the Company nor
any of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not, after the date
hereof, enter into any agreement providing any such right to any of its security
holders.
(d) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of the
Registrable Securities such holder requests to be registered. No right to
registration of Registrable Securities under this Section shall be construed to
limit any registration otherwise required hereunder.
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(e) Liquidated Damages. (i) if the Registration Statement is not
filed on or prior to the Filing Date (for purposes hereof, in the event the
Company files the Registration Statement without complying with the provisions
of Section 3(a) hereof, such filing shall not be deemed to have occurred), or
(ii) if the Company fails to file with the Commission a request for acceleration
in accordance with Rule 12d1-2 promulgated under the Exchange Act within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that the Registration Statement will not
be "reviewed," or not be subject to further review, or (iii) if the Registration
Statement is not declared effective by the Commission on or prior to the 120th
day after the Original Issue Date, or (iv) if the Registration Statement is
filed with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities at any time prior to the expiration
of the Effectiveness Period, without being succeeded within 10 Trading Days by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (v) if an amendment to the Registration Statement is not filed by
the Company with the Commission within ten (10) days of the Commission's
notifying the Company that such amendment is required in order for the
Registration Statement to be declared effective, (any such failure or breach
being referred to as an "Event," and for purposes of clauses (i) and (iii) the
date on which such Event occurs, or for purposes of clause (ii) the date on
which such five (5) day period is exceeded, or for purposes of clauses (iv) and
(v) the date which such 10 Trading Day-period is exceeded, being referred to as
"Event Date"), then each such Purchaser may require the Company to pay to it in
cash, 1.5% of the aggregate Stated Value of all shares of Preferred Stock then
held by it, as liquidated damages and not as a penalty. In addition, on each
monthly anniversary of the Event Date until the Event is cured, each such
Purchaser may require the Company to pay to it in cash, 2.5% of the aggregate
Stated Value of all shares of Preferred Stock then held by it, as liquidated
damages and not as a penalty. A Holder shall not be entitled to liquidated
damages for an Event for any month for which it has elected to deliver to the
Company an Initial Reduced Conversion Price Notice pursuant Section 5(c)(i) of
the Certificate of Designation in respect of such Event. However, a Holder shall
be entitled to receive both the benefits of the Initial Reduced Conversion Price
Notice and the liquidated damages contemplated in this paragraph for the same
Event, but not both in the same monthly period. The Holders shall have the right
to liquidated damages for multiple and/or successive Events. For purposes
hereof, shares of Preferred Stock for which a conversion has been requested in
accordance with the Certificate of Designation shall be deemed to be outstanding
and held by the converting Holder if an Event occurs on or prior to the date
that the holder receives shares of Common Stock from the Company in respect
thereof.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the
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provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 7:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 7:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications to any Purchaser shall be as set forth below
such Purchaser's name on Schedule 1 and, if to the Company, to the following
address:
Palatin Technologies, Inc.
214 Carnegie Center
Princeton, NJ 08540
Facsimile No.: (609) 452-0880
Attn: Edward J. Quilty
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Facsimile No.: (212) 698-7700
Attn: Faith L. Charles, Esq.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the
stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. A Purchaser may assign its respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of a Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by such Holder to any assignee or
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<PAGE>
transferee of all or a portion of the Preferred Stock or Registrable Securities
without the consent of the Company if: (i) such Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to such registration rights are
being transferred or assigned, (iii) at or before the time the Company receives
the written notice contemplated by clause (ii) of this Section, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (iv) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Purchaser's (and to subsequent)
successors and assigns.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(k) Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of any New York state
court sitting in the Borough of Manhattan, the state and federal courts sitting
in the City of New York or any federal court sitting in the Borough of Manhattan
in the City of New York (collectively, the "New York Courts") in respect of any
Proceeding arising out of or relating to this Agreement, and irrevocably accepts
for itself and in respect of its property, generally and unconditionally,
jurisdiction of the New York Courts. Each party irrevocably waives to the
fullest extent it may effectively do so under applicable law any objection that
it may now or hereafter have to the laying of the venue of any such proceeding
brought in any New York Court and any claim that any such Proceeding brought in
any New York Court has been brought in an inconvenient forum. Nothing herein
shall affect the right of any Holder. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by receiving a copy thereof sent to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or
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<PAGE>
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(o) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchasers or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
The Company
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PALATIN TECHNOLOGIES, INC.
By:_____________________________
Name: Edward J. Quilty
Title: Chairman and Chief Executive Officer
The Purchasers
--------------
JNC OPPORTUNITY FUND LTD.
By:_____________________________
Name:
Title:
ROBERT LEAF
________________________________
Robert Leaf
JOSEPH AND BARBARA STRASSMAN
________________________________
Joseph Strassman Barbara Strassman
CARL F. SCHWARTZ
________________________________
Carl F. Schwartz
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