AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
NOVEMBER 19, 1996
Registration No. 333-
==============================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ICN PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0628076
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
3300 Hyland Avenue
Costa Mesa, California 92626
(714) 545-0100
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Copies To:
David C. Watt
Executive Vice President, General Counsel and Corporate Secretary
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California 92626
(714) 545-0100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
If the only securities being registered on this form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. [ ]
If any of the securities being registered on this form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462 (b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box: [ ]
[RED HERRING]
Information contained herein is subject to completion or
amendment. A Registration Statement relating to these securities
has been filed with the Securities and Exchange Commission.
These Securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------
Title of
Each Class
of Proposed Proposed
Securities Amount to Maximum Maximum
to be be Offering Aggregate Amount of
Registered Registered Price Per Offering Registration
(1) (1)(2) Share (3) Price (3) Fee
- ---------- ---------- ---------- ---------- ------------
Common 2,577,320 $19.875 $51,224,235 $15,522.50
Stock,
$.01 par
value
- -----------------------------------------------------------------
(1) Also includes associated Preferred Stock Purchase Rights.
(2) Includes the registration for resale of such presently
indeterminate number of shares of Common Stock issuable upon
conversion of, or as dividends on, all the 50,000 shares of
the Registrant's Series B Convertible Preferred Stock issued
in a private placement in October 1996. Estimated solely
for purposes of calculating the registration fee in
connection with this Registration Statement and assumes that
all shares of the Series B Convertible Preferred Stock are
converted into shares of Common Stock based on a market
price of $20.00 per share of Common Stock (the last
reported sales price on the New York Stock Exchange on
November 15, 1996) and using a discount rate of 3%.
(3) The offering price per share is estimated pursuant to Rule
457(c) solely for the purpose of calculating the
registration fee and is based upon the average of the high
and low price of shares of Common Stock as reported on the
New York Stock Exchange on November 15, 1996 (which date is
within five business days prior to the date of the filing of
this Registration Statement).
=============================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
=============================================================
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1996
PROSPECTUS
ICN PHARMACEUTICALS, INC.
2,577,320 SHARES OF COMMON STOCK*
All of the shares of Common Stock, $ .01 par value (the
"Common Stock"), of ICN Pharmaceuticals, Inc., a Delaware
corporation (the "Company" or "ICN") offered hereby (the
"Shares") are being offered by certain selling security holders
(the "Selling Stockholders") as more fully described herein. The
Company has agreed to bear all expenses (other than underwriting
discounts and selling commissions of any underwriters, brokers,
dealers or agents retained by the Selling Stockholders) in
connection with the registration and sale of the Shares being
offered by the Selling Stockholders. See "Selling Stockholders"
and "Plan of Distribution."
The Shares may be sold from time to time by the Selling
Stockholders. Such sales may be made in the over - the - counter
market, on the New York Stock Exchange ("NYSE") or other
exchanges (if the Common Stock is listed for trading thereon), or
otherwise at prices and at terms then prevailing, at prices
related to the then current market price or at negotiated prices.
The Shares may be sold by any one or more of the following
methods: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer
as principal and resale by such broker or dealer for its account;
(c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and (d) privately negotiated
transactions. In addition, any Shares that qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus.
The Preferred Stock was originally issued to the Selling
Stockholders in a private placement made by the Company under
Rule 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in
the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act and any commissions
received by such broker-dealers, agents or underwriters and any
profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the
Securities Act.
The Common Stock is traded on the NYSE under the symbol
"ICN." On November 15, 1996, the closing sale price per share,
as reported by the NYSE, was $20.00.
*The Shares of Common Stock offered hereby includes the
resale of such presently indeterminate number of shares of Common
Stock as shall be issuable upon conversion of, or as dividends
on, the 50,000 shares of the Series B Convertible Preferred Stock
of the Company (the "Series B Preferred Stock") issued in a
private placement in October 1996. The number of shares of
Common Stock issuable in connection therewith and offered for
resale hereby is an estimate based upon the market price of the
Common Stock set forth below and the discount rate that would
apply if all shares of the Series B Preferred Stock were
converted on the date hereof, is subject to adjustment and could
be materially less or more than such estimated amount depending
upon factors which cannot be predicted by the Company at this
time, including, among other factors, the date on which the
Series B Preferred Stock is converted and the future market price
of the Common Stock. If, however, the market price of the Common
Stock and the discount rate that would apply to that market price
upon conversion were used to determine the number of shares
issuable as of the date hereof, the Company would be obligated to
issue a total of approximately 2,577,320 shares of Common Stock
if all 50,000 shares of Series B Preferred Stock were converted
on such date. The terms of the Series B Preferred Stock limit
the amount thereof that may be converted by the holders during
the first year after issuance, except in certain limited
circumstances. This presentation is not intended to constitute a
prediction as to the future market price of the Common Stock or
as to the number of shares of Common Stock that may be issued
upon conversion of or as dividends on the Series B Preferred
Stock. See "Risk Factors -- Effect of Conversion of Series B
Preferred Stock" and "Description of Series B Preferred Stock."
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is ____________________, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements
and other information filed by the Company may be inspected and
copies obtained (at prescribed rates) at the public reference
facilities maintained by the Commission in Washington, D.C. at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's Regional Offices in New York at 7 World
Trade Center 13th Floor, New York, New York 10048 and in Chicago
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained (at
prescribed rates), by writing to the Public Reference Section of
the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material is also available through
the Commission's Web site (http://www.sec.gov). In addition,
such material may also be inspected at the NYSE, 20 Broad Street,
New York, New York 10005, on which the Common Stock is listed.
This Prospectus is part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") filed by the Company with the
Commission under the Securities Act with respect to the Shares.
This Prospectus does not contain all the information set forth or
incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the Commission's rules
and regulations. For further information with respect to the
Company and the Shares offered hereby, reference is made to the
Registration Statement and the exhibits thereto which are on file
at the offices of the Commission and may be obtained upon payment
of the fee prescribed by the Commission as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and documents filed by the Company
with the Commission pursuant to the Exchange Act are incorporated
into this Prospectus by reference as of their respective dates:
1. Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 as amended by Form 10-K/A-
1, dated April 29, 1996.
2. Quarterly Report on Form 10-Q for the three months
ended March 31, 1996.
3. Quarterly Report on Form 10-Q for the six months
ended June 30, 1996.
4. Quarterly Report on Form 10-Q for the nine months
ended September 30,1996.
5. The description of the Common Stock and associated
Preferred Stock Purchase Rights contained in the
Registration Statement on Form 8-A, dated November
10, 1994.
6. Form 8-K dated October 28, 1996.
All reports and other documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the effective date of this Registration Statement
and prior to the termination of the offering of the Shares
pursuant to this Prospectus (this "Offering") shall be deemed to
be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such reports and documents.
Any statement contained herein or in a report or document
incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any subsequently filed report or document that is or is deemed to
be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The making of a modifying or superseding statement shall not
be deemed an admission for any purpose that the modified or
superseded statement, when made, constituted a misrepresentation,
an untrue statement of a material fact or an omission to state a
material fact that is required to be stated or that is necessary
to make a statement not misleading in light of the circumstances
in which it was made.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE REQUEST OF
SUCH PERSON, A COPY OF ANY OR ALL OF THE REPORTS AND DOCUMENTS
INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
REPORTS AND DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH REPORTS OR DOCUMENTS).
WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO DAVID C.
WATT, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE
SECRETARY, ICN PHARMACEUTICALS, INC., 3300 HYLAND AVENUE, COSTA
MESA, CALIFORNIA 92626. TELEPHONE INQUIRIES MAY BE DIRECTED TO
DAVID C. WATT AT (714) 545-0100.
THE COMPANY
On November 1, 1994, the stockholders of ICN
Pharmaceuticals, Inc. ("Old ICN"), SPI Pharmaceuticals, Inc.
("SPI"), Viratek, Inc. ("Viratek"), and ICN Biomedicals, Inc.
("Biomedicals") (collectively, the "Predecessor Companies")
approved the combination of the Predecessor Companies ("the
Merger"). On November 10, 1994, SPI, Old ICN and Viratek merged
into ICN Merger Corp., and Biomedicals merged into ICN Subsidiary
Corp., a wholly-owned subsidiary of ICN Merger Corp. In
conjunction with the Merger, ICN Merger Corp. was renamed ICN
Pharmaceuticals, Inc. For accounting purposes, SPI was the
acquiring company and as a result, the Company reports the
historical financial data of SPI in its financial results.
Subsequent to November 1, 1994, the results of the Company
include the combined operations of all Predecessor Companies.
ICN is a multinational research-based pharmaceutical company
that develops, manufactures, distributes and sells
pharmaceutical, nutrition, research and diagnostic products. The
Company pursues a strategy of international expansion which
includes (i) research and development of proprietary products
with the potential to be significant contributors to the
Company's global operations; (ii) penetration of major
pharmaceutical markets by means of targeted acquisitions; and
(iii) expansion in these major markets through the development or
acquisition of pharmaceutical products that meet the particular
needs of each market.
The Company distributes and sells a broad range of
prescription and over-the-counter pharmaceutical and nutritional
products in over 60 countries worldwide, primarily in North
America, Latin America, Western Europe and Eastern Europe. These
pharmaceutical products treat viral and bacterial infections,
diseases of the skin, myasthenia gravis, cancer, cardiovascular
disease, diabetes and psychiatric disorders. The Company's
leading product is the broad spectrum antiviral agent ribavirin,
which is marketed in the United States, Canada and most of Europe
under the trade name Virazole[REGISTERED TRADEMARK].
Virazole[REGISTERED TRADEMARK] is currently approved for
commercial sale in over 40 countries for one or more of a variety
of viral infections, including respiratory syncytial virus
("RSV"), herpes simplex, influenza, chicken pox, hepatitis and
HIV. In the United States, Virazole[REGISTERED TRADEMARK] is
approved only for use in hospitalized infants and young children
with severe lower respiratory infections due to RSV.
The Company believes it has substantial opportunities to
realize growth from its internally developed compounds. These
compounds are the result of significant investments in its
research and development activities related to nucleic acids
conducted over three decades. The Company believes that the
approval of Virazole[REGISTERED TRADEMARK] for the treatment of
chronic hepatitis C would be important to the Company because of
the potential size of the chronic hepatitis C market both in the
United States and abroad. On June 1, 1994, a New Drug
Application ("NDA") was filed with the United States Food and
Drug Administration (the "FDA") for the use of
Virazole[REGISTERED TRADEMARK] for the treatment of chronic
hepatitis C in the United States. Similar applications for
approval to market Virazole[REGISTERED TRADEMARK] for chronic
hepatitis C were filed in the European Union, Canada, Sweden,
Norway, Finland, Australia and New Zealand. Following the
submission of the NDA, the FDA raised serious questions regarding
the safety and efficacy of Virazole[REGISTERED TRADEMARK].
Similar questions were raised by foreign reviewers.
Subsequently, the Company withdrew its NDA for
Virazole[REGISTERED TRADEMARK] and the applications for
Virazole[REGISTERED TRADEMARK] submitted in other world markets.
On July 28, 1995, the Company entered into an agreement
(described below) with a subsidiary of Schering-Plough
Corporation (collectively with such subsidiary, "Schering") to
license ribavirin (Virazole[REGISTERED TRADEMARK]) as a treatment
for chronic hepatitis C in combination with Schering's alpha
interferon (the "Combination Therapy"). The FDA subsequently
approved a protocol for the testing of the Combination Therapy,
and Schering is currently conducting Phase III clinical trials of
the Combination Therapy. To obtain FDA approval of
Virazole[REGISTERED TRADEMARK] for use in Combination Therapy,
the Company and Schering must demonstrate that the Combination
Therapy is safer and more effective in treating chronic hepatitis
C than alpha interferon alone. Schering is also testing the
Combination Therapy pursuant to protocols approved by the
European Union. The Company continues to believe that
Virazole[REGISTERED TRADEMARK] has potential in the treatment of
hepatitis C in Combination Therapy and is taking steps to
capitalize on its full potential. See "Risk Factors--No
Assurance of Successful Development and Commercialization of
Future Products."
Pursuant to an Exclusive License and Supply Agreement (the
"License Agreement") with Schering, the Company licensed
ribavirin to Schering for use in Combination Therapy. The
License Agreement provided the Company an initial non-refundable
payment by Schering of $23,000,000, and future royalty payments
to the Company for marketing of ribavirin, including certain
minimum royalty rates. Schering will have exclusive marketing
rights for ribavirin for hepatitis C worldwide, except that the
Company will retain the right to co-market the drug in the
countries of the European Union. In addition, Schering will
purchase up to $42,000,000 in Common Stock upon the achievement
of certain regulatory milestones. Under the License Agreement,
Schering will be responsible for all clinical developments
worldwide.
The Company believes it is positioned to expand its presence
in the pharmaceutical markets in Eastern Europe. In 1991, a 75%
interest was acquired in Galenika Pharmaceuticals, a large drug
manufacturer and distributor in Yugoslavia. Galenika
Pharmaceuticals was subsequently renamed ICN Galenika
("Galenika"). This acquisition added new products and
significantly expanded the sales volume of the Company. With the
investment in Galenika Pharmaceuticals, the Company became one of
the first Western pharmaceutical companies to establish a direct
investment in Eastern Europe. Galenika continues to be a
significant part of the Company's operations although its sales
and profitability have, at times, been substantially diminished
owing principally to the imposition of sanctions on Yugoslavia by
the United Nations. However, the United Nations Security Council
adopted resolutions that, in December 1995, suspended and, in
October 1996, lifted economic sanctions imposed on the Federal
Republic of Yugoslavia since May of 1992. The suspension and
lifting of economic sanctions has enabled Galenika to resume
exporting certain of its product lines to Russia, other Eastern
Europe Markets, Africa, the Middle East and the Far East.
Additionally, during 1995 and 1996, in pursuing its Eastern
Europe expansion strategy, the Company made several additional
investments in companies based in the region. See "Risk Factors--
Risk of Operations in Eastern Europe, Russia and China."
In addition to its pharmaceutical operations, the Company
also develops, manufacturers and sells a broad range of research
chemical products, diagnostic reagents and radiation monitoring
services. The Company markets these products internationally to
major scientific, academic, health care and governmental
institutions through catalog and direct mail marketing programs.
The principal executive offices of the Company are located
at 3300 Hyland Avenue, Costa Mesa, California 92626. The
telephone number at such address is (714) 545-0100.
RISK FACTORS
An investment in the Shares involves a high degree of risk
and may not be appropriate for investors who cannot afford to
lose their entire investment. Prospective purchasers of the
Shares should be fully aware of the risk factors set forth
herein. This Prospectus contains or incorporates statements that
constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Those
statements appear in a number of places in this Prospectus and in
the documents incorporated by reference and include statements
regarding, among other matters, the Company's growth
opportunities, the Company's acquisition strategy, regulatory
matters pertaining to governmental approval of the marketing or
manufacturing of certain of the Company's products and other
factors affecting the Company's financial condition or results of
operations. Prospective investors are cautioned that any such
forward looking statements are not guarantees of future
performance and involve risks, uncertainties and other factors
which may cause actual results, performance or achievements to
differ materially from the future results, performance or
achievements expressed or implied in such forward looking known
and unknown statements. Such factors include the various risk
factors described below.
DEPENDENCE ON FOREIGN OPERATIONS
Approximately 75% and 78% of the Company's net sales for
1995 and the nine months ended September 30, 1996, respectively,
were generated from operations outside the United States. The
Company operates directly and through distributors in North
America, Latin America (principally Mexico), Western Europe and
Eastern Europe and through distributors elsewhere in the world.
Foreign operations are subject to certain risks inherent in
conducting business abroad, including possible nationalization or
expropriation, price and exchange controls, limitations on
foreign participation in local enterprises, health-care
regulation and other restrictive governmental actions. Changes
in the relative values of currencies take place from time to time
and may materially affect the Company's results of operations.
Their effects on the Company's future operations are not
predictable.
RISK OF OPERATIONS IN YUGOSLAVIA
Galenika represents a material part of the Company's
business. Approximately 46% and 45% of the Company's net sales
for 1995 and the nine months ended September 30, 1996,
respectively, were from Galenika. In addition, approximately 39%
and 57% of the Company's operating income for 1995 and the nine
months ended September 30, 1996, respectively, were from
Galenika. The current political and economic circumstances in
Yugoslavia create certain business risks particular to that
country. Between May 1992 and December 1995, Yugoslavia operated
under sanctions imposed by the United Nations which had severely
limited the ability to import raw materials for manufacturing and
had prohibited all exports. While the sanctions were suspended
in December 1995 and lifted in October 1996, certain risks such
as hyperinflation, currency devaluations, wage and price controls
and potential government action could continue to have a material
adverse effect on the Company's results of operations.
Galenika operates in a highly inflationary economy and uses
the dollar as the functional currency rather than the Yugoslavian
dinar. Before the enactment of an economic stabilization program
in January 1994, the rate of inflation in Yugoslavia was over 1
billion percent per year. The rate of inflation was dramatically
reduced when, on January 24, 1994, the Yugoslavian government
enacted a "Stabilization Program" designed to strengthen its
currency. Throughout 1994, this program was successful in
reducing inflation to approximately 5% per year, increasing the
availability of hard currency, stabilizing the exchange rate of
the dinar, and improving the overall economy in Yugoslavia.
Throughout 1995, the effectiveness of the stabilization
program weakened and Galenika began experiencing a decline in the
availability of hard currency in Yugoslavia. Additionally,
inflation levels accelerated to an approximate annual rate of 90%
by the end of the year and on November 24, 1995, the dinar
devalued from a rate of 1.4 dinars per U.S. $1 to a rate of 4.7
dinars per U.S. $1.
During the first nine months of 1996, the trend toward a
weakening economy continued. The rate of inflation increased to
an approximate annual rate of 120% and the availability of hard
currency declined along with shortages of local currency. The
suspension of United Nations sanctions at the beginning of the
year provides economic opportunities for Yugoslavia; however, the
realization of the benefits from the suspension will be dependent
on the implementation of economic reform in Yugoslavia that
includes increased privatization. Galenika maintains an
approximate 50% market share of the pharmaceutical business in
Yugoslavia. With 81% of Galenika sales arising from government
or government-sponsored entities, Galenika is economically
dependent on the Yugoslavian government. Additionally, Galenika
is subject to credit risk in that 56% of its September 30, 1996,
domestic accounts receivables and 67% of its year-to-date sales
are with three major customers.
The future profitability of Galenika is heavily dependent
upon the overall business climate in Yugoslavia, the political
stability of the Yugoslavian government and the ability of the
government to fund health care spending.
The net monetary asset position of Galenika has risen to
$103,000,000 as of September 30, 1996 from $7,396,000 at December
31, 1995. This net monetary asset position would be subject to
foreign exchange losses if a devaluation of the dinar were to
occur. The increase in the net monetary asset position is
primarily attributed to increases in accounts receivable
resulting from increased sales and the lengthening of the
collection period resulting from the lack of availability of
dinars in Yugoslavia. Additionally, the amount of net monetary
exposure at December 31, 1995 reflects the impact of a November
24, 1995 devaluation and the Company's efforts to minimize its
monetary exposure preceding the November 1995 devaluation.
The potential loss arising from a devaluation will depend on
the size of the devaluation and the amount of the net monetary
asset position at the time of the devaluation. A devaluation
could result in a material adverse charge to the results of
operations of the Company.
The timing and the size of a devaluation are strongly
influenced by the amount of inflation and length of time from the
last devaluation. Since the last devaluation of November 24,
1995, the overall level of inflation has been at an annual rate
of 120%. As time and inflation continue, the risk of devaluation
increases. The Company is unable to predict when a devaluation
will occur.
Galenika is subject to price controls in Yugoslavia. The
size and frequency of government-approved price increases are
influenced by local inflation, devaluations, cost of imported raw
materials and demand for Galenika products. During 1995 and
through September 30, 1996, Galenika received fewer price
increases than in the past due to lower relative levels of
inflation. As inflation increases, the size and frequency of
price controls are expected to increase. Price increases
obtained by Galenika are based on economic events preceding such
an increase and not on expectations of ongoing inflation. A lag
in approved price increases could reduce the gross margins that
Galenika receives on its products. Although the Company expects
that Galenika will limit sales of products that have poor margins
until an acceptable price increase is received, the impact of an
inability to obtain adequate price increases in the future could
have an adverse impact on the Company as a result of declining
gross profit margins or declining sales in an effort to maintain
existing gross margin levels.
RISK OF OPERATIONS IN EASTERN EUROPE, RUSSIA AND CHINA
The Company has an approximately $17 million investment in
Russia through its 90% interest in the Russian pharmaceutical
company Oktyabr, which investment was initially made in 1995. In
May 1996, the Company purchased a 40% investment in a U.S.
company which has a 51% interest in a joint venture with a joint
stock company in Kazakhstan to convert a former Soviet scientific
production complex in Kazakhstan into a pharmaceutical
manufacturing and distribution plant. It is anticipated that the
Company's investment in the joint venture, including its
investment in the U.S. company, will be approximately $3 million.
In June 1996, the Company acquired an approximately 88% interest
in Lekstredstva, a Russian pharmaceutical company, and intends to
make additional purchases from existing Lekstredstva stockholders
to increase its interest to 95%. It is estimated that the
aggregate investment in Lekstredstva will cost approximately $6.3
million. From July 1996 through the date of this Prospectus, the
Company acquired a 65% interest in Polypharm, a Russian
pharmaceutical company, for approximately $1.3 million. In
October 1996, the Company acquired a 50.02% interest in Alkaloida
Chemical Co. ("Alkaloida"), a Hungarian state-owned
pharmaceutical company. As required under the terms of the
acquisition agreement, the Company made initial payments of
approximately $9.1 million for this interest, with an additional
payment of up to approximately $12.3 million (including
approximately $624,000 which will be used to offer to repurchase
shares from employees of Alkaloida) due in January 1997, at which
time the Company will receive an additional 10.79% interest in
Alkaloida (13.24% assuming full acceptance of the offer to
repurchase shares from Alkaloida employees). In September 1996,
a subsidiary of the Company entered into a joint venture
agreement with Jiangsu Wuxi Pharmaceutical Corporation ("Wuxi"),
a Chinese state-owned pharmaceutical corporation to establish a
limited liability company, which will require a $24 million
investment by the Company over three years. The Company is also
considering several other strategic acquisitions and investments
in Eastern Europe. Although the Company believes that investment
in Russia, Eastern Europe and China offers access to growing
markets, the economic, political and regulatory conditions in
such countries are unstable, which could have a signficant
adverse effect upon the business and operations of the Company.
See "Recent Developments."
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION
OF FUTURE PRODUCTS
The Company's future growth will depend, in large part, upon
its ability to develop or obtain and commercialize new products
and new formulations of or indications for current products. The
Company is engaged in an active research and development program
involving compounds owned by the Company or licensed from others
which the Company may, in the future, desire to develop
commercially. There can be no assurance that the Company will be
able to develop or acquire new products, obtain regulatory
approvals to use such products for proposed or new clinical
indications in a timely manner, manufacture its potential
products in commercial volumes or gain market acceptance for such
products. In addition, the Company may require financing over
the next several years to fund costs of development and
acquisitions of new products and, if Virazole[REGISTERED
TRADEMARK] is approved for treatment of chronic hepatitis C in
Combination Therapy (for which there can be no assurance), to
expand the production and marketing of Virazole[REGISTERED
TRADEMARK] in the countries of the European Union, where the
Company has retained marketing rights under the License
Agreement. It may be desirable or necessary for the Company to
enter into licensing arrangements with other pharmaceutical
companies in order to market effectively any new products or new
indications for existing products such as the License Agreement
with Schering for the marketing of Virazole[REGISTERED TRADEMARK]
for Combination Therapy (if approved). There can be no assurance
that the Company will be successful in raising such additional
capital or entering into such marketing arrangements, if
required, or that such capital will be raised, or such marketing
arrangements will be, on terms favorable to the Company.
LIMITED PATENT PROTECTION
The Company may be dependent on the protection afforded by
its patents relating to Virazole[REGISTERED TRADEMARK] and no
assurance can be given as to the breadth or degree of protection
which these patents will afford the Company. The Company has
patent rights in the United States expiring in 1999 relating to
the use of Virazole[REGISTERED TRADEMARK] to treat specified
human viral diseases. If future development of
Virazole[REGISTERED TRADEMARK] in Combination Therapy is
successful and approval is granted in the United States, an
additional award of exclusivity will be granted of up to three
years from date of approval (Waxman-Hatch Act); however, there
can be no assurance that such development will be successful or
that such approval will be obtained. While the Company has
patents in certain foreign countries covering the use of
Virazole[REGISTERED TRADEMARK] in the treatment of certain
diseases, which coverage and expiration varies and which patents
expire at various times through 2006, the Company has no, or
limited, patent rights with respect to Virazole[REGISTERED
TRADEMARK] and/or its use in certain foreign countries where
Virazole[REGISTERED TRADEMARK] is currently, or in the future may
be, approved for commercial sale, including France, Germany and
Great Britain. However, the Company and Schering intend to file
applications for approval of Combination Therapy through a
centralized procedure in the European Union (which includes
France, Germany and Great Britain). If such approval is granted
(of which approval no assurance can be given), the Company and
Schering would be afforded either six or ten years (depending
upon the particular country) of protection for the Combination
Therapy against competition . There can be no assurance that the
loss of the Company's patent rights with respect to
Virazole[REGISTERED TRADEMARK] upon expiration of the Company's
patent rights in the United States, Europe and elsewhere will not
result in competition from other drug manufacturers or will not
otherwise have a significant adverse effect upon the business and
operations of the Company.
As a general policy, the Company expects to seek patents,
where available, on inventions concerning novel drugs,
techniques, processes or other products which it may develop or
acquire in the future. However, there can be no assurance that
any patents applied for will be granted, or that, if granted,
they will have commercial value or as to the breadth or the
degree of protection which these patents, if issued, will afford
the Company. The Company intends to rely substantially on its
unpatented proprietary know-how, but there can be no assurance
that others will not develop substantially equivalent proprietary
information or otherwise obtain access to the Company's know-how.
Patents for pharmaceutical compounds are not available in certain
countries in which the Company markets its products.
Marketing approvals in certain foreign countries provide an
additional level of protection for products approved for sale in
such countries.
UNCERTAIN IMPACT OF ACQUISITION PLANS
The Company intends aggressively to continue its strategy of
targeted expansion through the acquisition of compatible
businesses and product lines and the formation of strategic
alliances, joint ventures and other business combinations.
Should the Company complete any material acquisition, the
Company's success or failure in integrating the operations of the
acquired company may have a material impact on the future growth
or success of the Company. Since some or all of these potential
acquisitions may be affected with the issuance of Common Stock by
the Company to the sellers of the businesses being acquired or
financed with the issuance of Common Stock or securities
convertible into Common Stock, the interest of existing
stockholders in the Company may be diluted (which dilution may be
material depending on the size and the number of acquisitions
consummated). Subject to sufficient authorized and unissued
shares of Common Stock being available, no stockholder approval
of any acquisition transaction would be required unless the
number of shares of Common Stock issued by the Company in
connection with the transaction (or series of related
transactions) were to exceed 20% of the then outstanding shares
of Common Stock.
POTENTIAL LITIGATION EXPOSURE
ICN is a defendant in various lawsuits including certain
consolidated class action lawsuits alleging, among other things,
violations of federal securities laws. The plaintiffs in these
lawsuits allege that ICN made, or aided and abetted other
defendants in making, misrepresentations of material facts and
omitted to state material facts concerning the business,
financial condition and future prospects of the Company,
primarily concerning developments regarding Virazole[REGISTERED
TRADEMARK], including statements made in the 1980's concerning
the efficacy and safety of the drug and the market for the drug
in the treatment of AIDS and AIDS related diseases, and
statements made in 1994 and 1995 concerning the Company's NDA for
the use of Virazole[REGISTERED TRADEMARK] for the treatment of
chronic hepatitis C (the "Hepatitis C NDA"). See "Recent
Developments."
The Commission is conducting a private investigation (the
"Commission Investigation") with respect to certain matters
pertaining to the status and disposition of the Hepatitis C NDA,
including whether, during the period from June 1994 through
February 1995, the Company, persons or entities associated with
it and others (including Mr. Milan Panic, Chairman, President and
Chief Executive Officer of the Company), in the offer and sale or
in connection with the purchase and sale of Common Stock, engaged
in possible violations of federal securities laws, by having
possibly: (i) made false or misleading statements or omitted
material facts with respect to the status and disposition of the
Hepatitis C NDA; (ii) purchased or sold Common Stock while in
possession of material, non-public information concerning the
status and disposition of the Hepatitis C NDA; or (iii) conveyed
material, non-public information concerning the status and
disposition of the Hepatitis C NDA, to other persons who may have
purchased or sold Common Stock. The Company is cooperating with
the Commission in its investigation.
The Company has received a Subpoena (the "Subpoena") from a
Grand Jury in the United States District Court, Central District
of California requesting the production of documents covering a
broad range of matters over various time periods. The Company
and Milan Panic are subjects of the investigation and are
cooperating with the production of documents pursuant to the
Subpoena.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its continued success will depend
to a significant extent upon the efforts and abilities of its
management, including Milan Panic, its Chairman, President and
Chief Executive Officer. The loss of their services could have a
material adverse effect on the Company. The Company cannot
predict what effect, if any, the Commission's Investigation and
the Subpoena may have on Mr. Panic's ability to continue to
devote services on a full time basis to the Company. See " --
Potential Litigation Exposure" above.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND LACK OF INSURANCE
The Company could be exposed to possible claims for personal
injury resulting from allegedly defective products. Even if a
drug were approved for commercial use by an appropriate
governmental agency, there can be no assurance that users will
not claim that effects other than those intended may result from
the Company's products. The Company generally self-insures
against potential product liability exposure with respect to its
marketed products, including Virazole[REGISTERED TRADEMARK].
While to date no material adverse claim for personal injury
resulting from allegedly defective products, including
Virazole[REGISTERED TRADEMARK], has been successfully maintained
against the Company or any of its predecessors, a substantial
claim, if successful, could have a material adverse effect on the
Company.
GOVERNMENT REGULATION
FDA approval must be obtained in the United States and
approval must be obtained from comparable agencies in other
countries prior to marketing or manufacturing new pharmaceutical
products for use by humans in such respective jurisdictions.
Obtaining FDA approval for new products and manufacturing
processes can take a number of years and involves the expenditure
of substantial resources. Numerous requirements must be
satisfied, including preliminary testing programs on animals and
subsequent clinical testing programs on humans, to establish
product safety and efficacy. No assurance can be given that
authorization of the commercial sale of any new drugs or
compounds by the Company for any application or of existing drugs
or compounds for new applications will be secured in the United
States or any other country, or that, if such authorization is
secured, those drugs or compounds will be commercially
successful.
The FDA in the United States and other regulatory agencies
in other countries also periodically inspect manufacturing
facilities. Failure to comply with applicable regulatory
requirements can result in, among other things, sanctions, fines,
delays or suspensions of approvals, seizures or recalls of
products, operating restrictions and criminal prosecutions.
Furthermore, changes in existing regulations or adoption of new
regulations could prevent or delay the Company from obtaining
future regulatory approvals.
The Company is subject to price control restrictions on its
pharmaceutical products in the majority of countries in which it
operates. To date, the Company has been affected by pricing
adjustments in Spain and by the lag in allowed price increases in
Yugoslavia and Mexico, which have created lower sales in U.S.
dollars and reductions in gross profit. Future sales and gross
profit could be materially affected if the Company is unable to
obtain price increases commensurate with the levels of inflation.
COMPETITION
The Company operates in a highly competitive environment.
The Company's competitors, many of whom have substantially
greater capital resources and marketing capabilities and larger
research and development staffs and facilities than the Company,
are actively engaged in marketing products similar to those of
the Company and in developing new products similar to those
proposed to be developed and sold by the Company. Others may
succeed in developing products that are more effective than those
marketed or proposed for development by the Company. Progress by
other researchers in areas similar to those being explored by the
Company may result in further competitive challenges. In early
1996, MedImmune, Inc. began marketing in the United States
RespiGam, a prophylactic drug for the treatment of RSV. The
Company is aware of several other ongoing research and
development programs which are attempting to develop new
prophylactic and therapeutic products for treatment of RSV.
Although the Company will follow publicly disclosed developments
in this field, on the basis of currently available data, it is
unable to evaluate whether RespiGam or the other technology being
developed in these programs poses a threat to the Company's
current market position in the treatment of RSV or its revenue
streams. In addition, a number of companies and researchers are
engaged in developmental efforts for the treatment of Hepatitis
C, including through the use of protease inhibitors. The Company
may also face increased competition from manufacturers of generic
pharmaceutical products when certain of the patents covering
certain of its currently marketed products expire.
EFFECT OF CONVERSION OF THE SERIES B PREFERRED STOCK
The exact number of shares of Common Stock issuable upon
conversion of all of or as dividends on the Series B Preferred
Stock offered hereby will vary inversely with the market price of
the Common Stock. The holders of Common Stock may be materially
diluted by conversion of the Series B Preferred Stock depending
on the future market price of the Common Stock and the discount
rate applied to determine the number of shares of Common Stock
issuable upon conversion. On November 15, 1996, the last
reported sales price of the Common Stock on the NYSE was $20.00
per share. If such market price were used to determine the
number of shares of Common Stock issuable as of the date hereof
and using the discount rate of 3% applicable on the date hereof,
the Company would issue a total of approximately 2,577,320 shares
of Common Stock if all shares of the Series B Preferred Stock
were converted on such date. To the extent the Current Market
Price (as defined herein) is lower or higher than $20.00 as of
any date on which shares of Series B Preferred Stock are
converted, the Company would issue more or fewer shares of Common
Stock than reflected in such estimate, and such difference could
be material. In addition, the discount rate that applies in
calculating the number of shares of Common Stock issuable upon
conversion will increase from 3% for the first three months after
issuance of the Series B Preferred Stock to 5% during the next
three months and 9% thereafter, and subject to further increases
in certain circumstances. The terms of the Series B Peferred
Stock limit the amount thereof that may be converted by the
holders during the first year after issuance, except in certain
limited circumstances The increases in the discount rate will
result in more shares of Common Stock being issuable upon
conversion. Assuming the last reported sale price on November
15, 1996, the Company would issue a total of approximately
2,631,579 and 2,747,253 shares, respectively, assuming a discount
rate of 5% and 9%, if all shares of the Series B Preferred Stock
were converted. See "Description of the Series B Preferred
Stock."
USE OF PROCEEDS
Since this Prospectus relates to the offering of Shares by
the Selling Stockholders, the Company will not receive any
proceeds from the sale of the Shares offered hereby.. See
"Selling Stockholders."
SELLING STOCKHOLDERS
The registration effected hereby is being effected pursuant
to certain registration rights granted by the Company at the time
of the issuance of the Series B Preferred Stock. The Shares
hereby registered may from time to time be issued to Selling
Stockholders upon conversion of, or as payment of dividends on,
the Preferred Stock.
As of November 6, 1996, the Company had outstanding
approximately 33,510,000 shares of Common Stock.
The following table sets forth certain information regarding
the beneficial ownership of the Shares to be offered hereby as of
November 15, 1996, and as adjusted to reflect the sale of the
securities offered hereby, by the Selling Stockholders. Except
as otherwise indicated, to the knowledge of the Company, all
persons listed below have sole voting and investment power with
respect to their securities. The information in the table
concerning the Selling Stockholders who may offer Shares
hereunder from time to time is based on information provided to
the Company by such securityholders, except for the assumed
conversion ratio of shares of Series B Preferred Stock into
Common Stock, which is based solely on the assumptions discussed
or referenced in footnote (1) to the table. Information
concerning such Selling Stockholders may change from time to time
and may include pledgees of any Shares upon exercise of the
pledge, and any changes of which the Company is advised will be
set forth in a Prospectus Supplement to the extent required. See
"Plan of Distribution."
COMMON
COMMON SHARES SHARES
BENEFICIALLY OWNED TO BE
PRIOR TO THE SOLD IN
OFFERING/(1)/ THE
OFFERING
/(1)/
NAME OF SELLING
STOCKHOLER NUMBER PERCENT NUMBER
Halifax Fund, L.P. 489,691 1.36 489,691
Ramius Fund Limited 154,639 * 154,639
Palladin Partners, L.P. 77,320 * 77,320
Gershon Partners, L.P. 51,546 * 51,546
CIBC Wood Gundy
Securities Corp. 257,732 * 257,732
Cerberus Partners, L.P. 515,464 1.43 515,464
New York Life Separate 51,546 * 51,546
Account No. 7
Mainstay VP Series
Fund, Inc. (High Yield
Corporate Bond Fund
Potfolio) 77,320 * 77,320
The Mainstay Funds
(Convertible Fund
Series). 463,918 1.25 463,918
The Mainstay Funds
(High Yield Corporate
Bond Fund Series) 438,144 1.21 438,144
(1) Such beneficial ownership represents an estimate of the
number of shares of Common Stock issuable upon the
conversion of shares of Series B Preferred Stock
beneficially owned by such person, assuming the last
reported sales price of $20.00 per share of Common Stock on
November 15, 1996 and the discount rate of 3% were used to
determine the number of shares of Common Stock issuable as
of the date hereof. The actual number of shares of Common
Stock offered hereby is subject to adjustment and could be
materially less or more than the estimated amount indicated
depending upon factors which cannot be predicted by the
Company at this time, including, among other factors,
application of the conversion provisions based on market
prices prevailing and the applicable discount rate at the
actual date of conversion and whether or to what extent
dividends are paid in Common Stock. This presentation is
not intended to constitute a prediction as to the future
market price of Common Stock. The percentage of Common
Shares beneficially owned prior to the Offering is based on
the actual number of shares outstanding on November 6, 1996
and assumes conversion of all 50,000 shares of Series B
Preferred Stock as described in this footnote (1). See
"Risk Factors -- Effect of Conversion of Series B Preferred
Stock" and "Description of Series B Preferred Stock."
* Represents less than 1% of the outstanding Common Stock.
Because the Selling Stockholders may sell all or part of the
Shares which they hold pursuant to this Prospectus and because
this Offering is not being underwritten on a firm commitment
basis, no estimate can be given as to the amount of Shares that
will be held by the Selling Stockholders upon termination of this
Offering. See "Plan of Distribution."
DESCRIPTION OF SERIES B PREFERRED STOCK
On October 9, 1996, the Company issued 50,000 shares of
Series B Preferred Stock to the initial Selling Stockholders for
aggregate gross proceeds of $50 million.
The Series B Preferred Stock is convertible, at the option
of the holders from time to time (subject to certain limitations
during the first year), into Shares at a conversion price equal
to the average daily low price of the Common Stock (the "Current
Market Price") on the NYSE (so long as the Common Stock is traded
on the NYSE and, if the Common Stock is not so traded, on the
principal national securities market for the Common Stock or on
the National Association of Securities Dealers, Inc., Automated
Quotation System (NASDAQ)) for the five trading days preceding
the applicable conversion date, discounted as follows: 3% during
the first three months after issuance of the Series B Preferred
Stock, 5% during the next three months, and 9% thereafter. If
the Registration Statement is suspended for more than 90 days
during any 360-day period, these discounts are permanently
increased by 1% for each 30-day period over such 90-day period.
The Series B Preferred Stock is automatically converted
into Shares upon the occurrence of certain extraordinary
corporate transactions or at the fifth anniversary of the date of
issuance of the Series B Preferred Stock, subject in the later
case to (i) successive six month extensions if the Current Market
Price is below $20 per share (subject to anti-dilution
adjustments) at any time during the three months prior to such
mandatory conversion date, and (ii) certain specified extensions
if the Registration Statement is suspended.
The Series B Preferred Stock has a cumulative dividend rate
of 6% per annum, payable quarterly, at the option of the Company,
in cash or Shares (based upon the Current Market Price).
At any time when the Current Market Price is below $17.50
per share (subject to anti-dilution adjustment), the Series B
Preferred Stock is redeemable by the Company at 120% of the
liquidation value ($1,000 per share) plus accrued and unpaid
dividends through the date of redemption. If the Registration
Statement is suspended for more than 180 days in any 360-day
period or trading in the Shares is suspended on the principal
market or exchange for the Shares for seven consecutive trading
days or the Common Stock ceases to be listed on an exchange or
the NASDAQ, the Series B Preferred Stock is redeemable at the
option of the holders thereof, by written notice given no later
than 60 days following the end of either suspension period, at
130% of the liquidation value plus accrued and unpaid dividends
to the date of redemption.
The terms of the Series B Preferred Stock contain certain
restrictions on payment of dividends or other distributions on
the capital stock of the Company and the making of certain
advances, loans or capital contributions in or to non-majority
owned entities. The limitation on the payment of dividends does
not limit the Company from making regular quarterly cash
dividends on the Common Stock in an amount up to the greater of
(a) $.40 per share and (b) 1.5% of the then Current Market Price.
The terms of the Series B Preferred Stock also prohibit the
Company from issuing preferred stock ranking senior to the Series
B Preferred Stock upon liquidation or with respect to the payment
of dividends and prohibit issuing any preferred stock ranking on
par with or junior to the Series B Preferred Stock with a
principal payment, interest, maturity date, or mandatory date of
redemption on or or prior to the mandatory conversion date for
the Series B Preferred Stock.
Assuming a Current Market Price of $20.00 (the closing price
of the Common Stock on the NYSE on November 15, 1996) and
assuming the discount rate then in effect is alternatively 3%, 5%
and 9%, (i) the number of Shares issuable upon conversion of all
the Series B Preferred Stock would be 2,577,320, 2,631,579, or
2,747,253 shares, respectively, and (ii) if the Company elected
to issue Shares as payment for dividends on the Series B
Preferred Stock, the Company would be required to issue an
additional 150,000 shares, respectively, as dividends on the
series B Preferred Stock on an annual basis.
The description set forth above of the Series B Preferred
Stock is a summary and as such is subject to and qualified in its
entirety by reference to the text of the Certificate of
Designations, Preferences and Rights of the Series B Preferred
Stock, a copy of which is attached as an exhibit to this
Registration Statement and is incorporated herein by reference.
PLAN OF DISTRIBUTION
The Selling Stockholders are offering the Shares for their
own account, and not for the account of the Company. The Company
will not receive any proceeds from the sale of the Shares by the
Selling Stockholders.
The Shares may be sold from time to time by the Selling
Stockholders. Such sales may be made in the over-the-counter
market, on the New York Stock Exchange or other exchanges (if the
Common Stock is listed for trading thereon), or otherwise at
prices and at terms then prevailing, at prices related to the
then current market price or at negotiated prices. The Shares
may be sold by any one or more of the following methods: (a) a
block trade in which the broker or dealer so engaged will attempt
to sell the securities as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
(b) purchases by a broker as principal and resale by such broker
or dealer for its account; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers; and
(d) privately negotiated transactions. In addition, any Shares
that qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholder in the
distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act and any commissions
received by such broker-dealer, agent or underwriter and any
profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the
Securities Act.
Under the Exchange Act and the regulations thereunder, any
person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making
activities with respect to the Common Stock during any applicable
"cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing,
the Selling Stockholder will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder
including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Common
Stock by the Selling Stockholders.
There can be no assurance that the Selling Stockholders will
sell any or all of the Shares hereby registered. To the extent
required, the Company will use its best efforts to file, during
any period in which offers or sales are being made, one or more
supplements to this Prospectus to describe any material
information with respect to the plan of distribution not
previously disclosed in this Prospectus or any material change to
such information in this Prospectus.
The registration effected hereby is being effected pursuant
to certain registration rights previously granted by the Company
to the Selling Stockholders at the time of the issuance of the
Preferred Stock. The Company has agreed to bear all expenses
(other than underwriting discounts and selling commissions of any
underwriters, brokers, sellers or agents retained by the Selling
Stockholders) in connection with the registration and sale of the
Shares being offered by the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed
upon for the Company by David C. Watt, Executive Vice President,
General Counsel and Corporate Secretary of the Company. As of
November 15, 1996, Mr. Watt beneficially owned 100,332 shares of
Common Stock, including 98,337 shares which he has the right to
acquire upon the exercise of currently exercisable stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets as of December 31, 1995 and
1994, and the consolidated statements of income, retained
earnings and cash flows for each of the three years in the period
ended December 31, 1995, incorporated by reference in this
Prospectus, have been included herein in reliance on the report,
which includes, as it relates to 1994 and 1993, an emphasis of
matter paragraph related to certain transactions between
affiliates, of Coopers & Lybrand L.L.P., independent public
accountants, given on the authority of that firm as experts in
auditing and accounting. With respect to the unaudited interim
financial information for the periods ended September 30, 1996
and 1995, June 30, 1996 and 1995 and March 31, 1996 and 1995,
incorporated by reference in this Prospectus, the independent
accountants have reported that they have applied limited
procedures in accordance with professional standards for a review
of such information. However, their separate reports included in
the Company's quarterly reports on Form 10-Q for the quarters
ended September 30, 1996, June 30, 1996 and March 31, 1996, and
incorporated by reference herein, state that they did not audit
and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the
limited nature of the review procedures applied. The accountants
are not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim
financial information because that report is not a "report" or a
"part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the
Securities Act.
Any financial statements and schedules hereafter
incorporated by reference in the Registration Statement that have
been audited and are the subject of a report by independent
accountants will be so incorporated by reference in reliance upon
such reports and upon the authority of such firms as experts in
accounting and auditing to the extent covered by consents filed
with the Commission.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
IN CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses of the
Registrant in connection with the distribution of the securities
being registered hereunder.
SEC Filing Fee $ 15,523.00
Legal Fees and Expenses $ 25,000.00
Accounting Fees and Expenses $ 20,000.00
Miscellaneous $ 2,500.00
---------------
Total $ 63,023.00
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact
that he or she is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation or enterprise. Depending on the character of the
proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted
in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, had no cause
to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification
may be made in respect to any claim, issue or matter as to which
such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent a director
or officer of a corporation has been successful in the defense of
any action, suit or proceeding referred to above or in the
defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
However, if the director or officer is not successful in the
defense of any action, suit or proceeding as referred to above or
in the defense of any claim, issue or matter therein, he shall
only be indemnified by the corporation as authorized in the
specific case upon a determination that indemnification is proper
because he or she met the applicable standard set forth above as
determined by a majority of the disinterested Board of Directors
or by the stockholders.
The Registrant's bylaws provide indemnification to its
officers and directors against liability they may incur in their
capacity as such, which indemnification is similar to that
provided by Section 145, unless a determination is reasonably and
promptly made by a majority of the disinterested Board of
Directors that the indemnitee acted in bad faith and in a manner
that the indemnitee did not believe to be in or not opposed to
the best interests of the Registrant, or, with respect to any
criminal proceeding, that the indemnitee believed or had
reasonable cause to believe that his or her conduct was unlawful.
The Registrant carries directors' and officers' liability
insurance, covering losses up to $5,000,000 (subject to a
$500,000 deductible).
The Registrant, as a matter of policy, enters into
indemnification agreements with its directors and officers
indemnifying them against liability they may incur in their
capacity as such. The indemnification agreements require no
specific standard of conduct for indemnification and make no
distinction between civil and criminal proceedings, except in
proceedings where the dishonesty of an indemnitee is alleged.
Such indemnification is not available if an indemnitee is
adjudicated to have acted in a deliberately dishonest manner with
actual dishonest purpose and intent where such acts were material
to the adjudicated proceeding. Additionally, the indemnity
agreements provide indemnification for any claim against an
indemnitee where the claim is based upon the indemnitee obtaining
personal advantage or profit to which he or she was not legally
entitled, the claim is for an accounting of profits made in
connection with a violation of Section 16(b) of the Securities
Exchange Act of 1934, or similar state law provision, or the
claim was brought about or contributed to by the dishonesty of
the indemnitee.
Section 102(b) (7) of the Delaware General Corporation Law,
as amended, permits a corporation to include in its certificate
of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law (relating to unlawful
payment of dividend and unlawful stock purchase and redemption),
or (iv) for any transaction from which the director derived an
improper personal benefit. The Registrant has provided in its
certificate of incorporation, as amended, that its directors
shall be exculpated from liability as provided under Section
102(b) (7).
The foregoing summaries are necessarily subject to the
complete text of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation and the agreements
referred to above and are qualified in their entirety by
reference thereto.
ITEM 16. EXHIBITS
4.1 Amended and Restated Certificate of Incorporation of
Registrant, previously filed as Exhibit 3.1 to Registration
Statement No. 33-83952 on Form S-1, which is incorporated
herein by reference, as amended by the Certificate of
Merger, dated November 10, 1994, of ICN Pharmaceuticals,
Inc., SPI Pharmaceuticals, Inc., and Viratek, Inc. with and
into ICN Merger Corp., previously filed as Exhibit 4.1 to
Registration Statement No. 333-08179 on Form S-3, which is
incorporated herein by reference.
4.2 Bylaws of the Registrant, previously filed as Exhibit 3.2 to
Registration Statement No. 33-83952 on Form S-1, which is
incorporated herein by reference.
4.3 Form of Rights Agreement, dated as of November 2, 1994
between the Registrant and American Stock Transfer & Trust
Company as Trustee, previously filed as Exhibit 4.3 to
Registration Statement on Form 8-A, dated November 10, 1994.
4.4 Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of ICN Pharmaceuticals,
Inc.
4.5 Registration Rights Agreement for Securities By and Among
ICN Pharmaceuticals, Inc. and the Initial Selling
Stockholders, dated as of October 9, 1996.
4.6 Stock Subscription Agreement By and Among ICN
Pharmaceuticals, Inc. and the Initial Selling Stockholders,
dated as of October 9, 1996.
5. Opinion of David C. Watt, Executive Vice President, General
Counsel and Corporate Secretary of the Registrant, regarding
the legality of the securities being registered.
15.1 Awareness Letter of Independent Public Accountants regarding
Unaudited Interim Financial Information.
15.2 Review Report of Independent Public Accountants for the
period ended March 31, 1996, previously filed as Exhibit 15
to Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, and incorporated herein by reference.
15.3 Review Report of Independent Public Accountants for the
period ended June 30, 1996, previously filed as Exhibit 15
to Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, and incorporated herein by reference.
15.4 Review Report of Independent Public Accountants for the
period ended September 30, 1996, previously filed as Exhibit
15 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, and incorporated herein by reference.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Public
Accountants.
23.2 Consent of David C. Watt (contained in his opinion filed as
Exhibit 5).
24. Power of Attorney (included elsewhere in this Registration
Statement).
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (i)
and (ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to that
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Costa Mesa and State of
California on November 15, 1996.
ICN PHARMACEUTICALS, INC.
/s/ Bill A. MacDonald
-----------------------
By: Bill A. MacDonald
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Milan Panic and David C.
Watt his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments and
amendments pursuant to Rule 462(b) under the Securities Act of
1933, as amended) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Milan Panic
- ---------------
Milan Panic Chairman and Chief November 15, 1996
Executive Officer
(Principal
Executive Officer)
/s/ John E. Giordani
- --------------------- Executive Vice November 15, 1996
John E. Giordani President, Chief
Financial Officer
(Principal
Financial and
Accounting Officer)
/s/ Norman Barker, Jr.
- --------------------- Director November 15, 1996
Norman Barker, Jr.
/s/ Birch E. Bayh, Jr.
- --------------------- Director November 15, 1996
Senator Birch E. Bayh,
Jr.
/s/ Alan F. Charles
- --------------------- Director November 15, 1996
Alan F. Charles
/s/ Roger Guillemin
- --------------------- Director November 15, 1996
Roger Guillemin, M.D.,
Ph.D.
/s/ Adam Jerney
- --------------------- Director, Executive November 15, 1996
Adam Jerney Vice President,
Chief Operating
Officer
/s/ Dale M. Hanson
- --------------------- Director November 15, 1996
Dale M. Hanson
/s/ Weldon B. Jolley
- --------------------- Director November 15, 1996
Weldon B. Jolley, Ph.D.
/s/ Jean-Francois Kurz
- --------------------- Director November 15, 1996
Jean-Francois Kurz
/s/ Thomas H. Lenaugh
- --------------------- Director November 15, 1996
Thomas H. Lenagh
/s/ Charles T. Manatt
- --------------------- Director November 15, 1996
Charles T. Manatt
/s/ Stephen D. Moses
- --------------------- Director November 15, 1996
Stephen D. Moses
/s/ Michael Smith
- --------------------- Director November 15, 1996
Michael Smith, Ph.D.
Roberts A. Smith
- --------------------- Director November 15, 1996
Roberts A. Smith, Ph.D.
/s/ Richard W. Starr
- --------------------- Director November 15, 1996
Richard W. Starr
INDEX TO EXHIBITS
4.1 Amended and Restated Certificate of Incorporation of
Registrant, previously filed as Exhibit 3.1 to
Registration Statement No. 33-83952 on Form S-1, which is
incorporated herein by reference, as amended by the
Certificate of Merger, dated November 10, 1994, of ICN
Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc., and
Viratek, Inc. with and into ICN Merger Corp., previously
filed as Exhibit 4.1 to Registration Statement No. 333-
08179 on Form S-3, which is incorporated herein by
reference.
4.2 Bylaws of the Registrant, previously filed as Exhibit 3.2
to Registration Statement No. 33-83952 on Form S-1, which
is incorporated herein by reference.
4.3 Form of Rights Agreement, dated as of November 2, 1994
between the Registrant and American Stock Transfer & Trust
Company as Trustee, previously filed as Exhibit 4.3 to
Registration Statement on Form 8-A, dated November 10,
1994.
4.4 Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of ICN
Pharmaceuticals, Inc.
4.5 Registration Rights Agreement for Securities By and Among
ICN Pharmaceuticals, Inc. and the Initial Selling
Stockholders, dated as of October 9, 1996.
4.6 Stock Subscription Agreement By and Among ICN
Pharmaceuticals, Inc. and the Initial Selling
Stockholders, dated as of October 9, 1996.
5. Opinion of David C. Watt, Executive Vice President,
General Counsel and Corporate Secretary of the Registrant,
regarding the legality of the securities being registered.
15.1 Awareness Letter of Independent Public Accountants
regarding Unaudited Interim Financial Information.
15.2 Review Report of Independent Public Accountants for the
period ended March 31, 1996, previously filed as Exhibit
15 to Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, and incorporated herein by reference.
15.3 Review Report of Independent Public Accountants for the
period ended June 30, 1996, previously filed as Exhibit 15
to Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, and incorporated herein by reference.
15.4 Review Report of Independent Public Accountants for the
period ended September 30, 1996, previously filed as
Exhibit 15 to Quarterly Report on Form 10-Q for the
quarter ended September 30,1996, and incorporated herein
by reference.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Public
Accountants.
23.2 Consent of David C. Watt (contained in his opinion filed
as Exhibit 5).
24. Power of Attorney (included elsewhere in the Registration
Statement).
Exhibit 4.4
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK
OF
ICN PHARMACEUTICALS, INC.
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware
The undersigned, David C. Watt, Executive Vice
President, General Counsel and Corporate Secretary of ICN
Pharmaceuticals, Inc., a Delaware corporation (hereinafter called
the "Corporation"), pursuant to the provisions of Sections 103
and 151 of the General Corporation Law of the State of Delaware,
does hereby make this Certificate of Designations, Preferences
and Rights and does hereby state and certify that pursuant to the
authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following
resolution:
RESOLVED, that, pursuant to Article 4 of the
Certificate of Incorporation which authorizes 10,000,000 shares
of preferred stock, $.01 par value ("Preferred Stock"), the Board
of Directors hereby fixes the powers , designations, preferences
and relative, participating, optional and other special rights,
and the qualification, limitations and restrictions, of a series
of Preferred Stock as follows:
(1) NUMBER AND DESIGNATION. 50,000 shares of the
Preferred Stock of the Corporation shall be designated as Series
B Convertible Preferred Stock (the "Series B Preferred Stock").
(2) RANK. The Series B Preferred Stock shall, with
respect to dividend rights and rights on liquidation, dissolution
and winding up, rank prior to all classes or series of equity
securities of the Corporation, including the Corporation's common
stock, $.01 par value ("Common Stock"), except with respect to a
class or series of Parity Securities (as defined below) created
by the Corporation after the Initial Issuance Date (as defined in
paragraph (3)(a) hereof) in accordance with the terms of this
Certificate of Designations. All equity securities of the
Corporation to which the Series B Preferred Stock ranks prior
(whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise), including the Common
Stock, are collectively referred to herein as the "Junior
Securities." All equity securities of the Corporation with which
the Series B Preferred Stock ranks on a parity (whether with
respect to dividends or upon liquidation, dissolution or winding
up) are collectively referred to herein as the "Parity
Securities." The respective definitions of Junior Securities and
Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Junior Securities
and Parity Securities, as the case may be.
(3) DIVIDENDS. (a) The Corporation shall pay on
March 27, June 27, September 27 and December 27 (each of such
dates being a "Dividend Date" and each of such quarterly periods
being a "Dividend Period") of each twelve-month period following
the date of the initial issuance of the Series B Preferred Stock
(the "Initial Issuance Date"), a dividend per share of Series B
Preferred Stock, at a rate per annum of 6%, payable, at the
option of the Corporation, (i) in cash equal to 6% of the
Liquidation Value (as defined in paragraph (4)(a) hereof) divided
by 4, (ii) in shares of Common Stock (with any fractional shares
being rounded up or down to the nearest whole share) equal to a
number of shares of Common Stock determined by dividing the
amount determined pursuant to clause (i) by the Current Market
Price Per Common Share (as defined in paragraph (7)(g) hereof) or
(iii) a combination of cash and shares of Common Stock; PROVIDED,
HOWEVER, that the cash or the number of shares of Common Stock
payable as a dividend for the initial Dividend Period, or any
other period shorter of longer than a full Dividend Period, on
the Series B Preferred Stock shall be computed by multiplying the
result of the calculation in clause (i) by a fraction the
numerator of which shall be the number of days in such Dividend
Period and the denominator of which shall be 90; and PROVIDED,
FURTHER, that no dividends shall be payable with respect to
shares of Series B Preferred Stock converted into Common Stock
for the period following the most recent Dividend Date occurring
prior to the date of conversion. If dividends are not paid in
cash, then out of funds legally available therefor, the Board of
Directors of the Corporation shall declare and pay the dividends
in shares of Common Stock. Dividends shall be cumulative from
the Initial Issuance Date. Each such dividend shall be issuable
or payable to the holders of record of shares of the Series B
Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on the record date
applicable to the Dividend Date, which shall be no less than 10
and no more than 30 days preceding the applicable Dividend Date
thereof. Accrued and unissued or unpaid dividends for any past
Dividend Periods may be issued or paid at any time, without
reference to any Dividend Date, to holders of record at such time
of payment.
(b) Accrued dividends not paid on the applicable
Dividend Date therefor, whether in cash or in stock, shall
compound quarterly, at an interest rate per annum of 6%, from
such Dividend Date until the date of payment of such dividend.
(c) So long as any shares of the Series B Preferred
Stock are outstanding, no dividends shall be declared or paid or
set apart for payment on Parity Securities for any period unless
(i) full cumulative dividends have been or contemporaneously are
paid on the Series B Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of the dividend on
such class or series of Parity Securities or (ii) all dividends
declared upon shares of Series B Preferred Stock and Parity
Securities shall have been declared and paid ratably in
accordance with the respective amounts of dividends that would be
declared and payable on the shares of Series B Preferred Stock
and Parity Securities if all dividends thereon were declared and
paid in full.
(d) So long as any shares of the Series B Preferred
Stock are outstanding, no dividends (including, without
limitation, dividends or distributions paid in shares of, or
options warrants or rights to subscribe for or purchase shares
of, Junior Securities) shall be declared or paid or set apart for
payment or other distribution upon Junior Securities, nor shall
any Junior Securities be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any shares of
any such stock) by the Corporation, directly or indirectly
(except by conversion into or exchange for Junior Securities),
unless in each case the full cumulative dividends on all
outstanding shares of the Series B Preferred Stock and any other
Parity Securities shall have been paid for all past Dividends
Periods with respect to the Series B Preferred Stock and all past
dividend periods with respect to such Parity Securities.
(4) LIQUIDATION PREFERENCE. (a) In the event of any
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series B Preferred Stock
shall be entitled to receive $1000 (the "Liquidation Value") per
share of Series B Preferred Stock plus cash in an amount equal to
all dividends (whether or not earned or declared) accrued and
unpaid thereon to the date of final distribution to such holders;
but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of Series B
Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any
Parity Securities, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of Series B
Preferred Stock and any other Parity Securities ratably in accordance
with the respective amounts that would be payable on such shares of
Series B Preferred Stock and any such other stock if all amounts
payable thereon were paid in full. For the purposes of this
paragraph (4), (i) a consolidation or merger of the Corporation
with one or more corporations, or (ii) a sale or transfer of all
or substantially all of the Corporation's assets, shall not be
deemed to be a liquidation, dissolution or winding up, voluntary
or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the
holders of the Series B Preferred Stock, as provided in this
paragraph (4), any other series or class or classes of Junior
Securities shall, subject to the respective terms and provisions
(if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of
the Series B Preferred Stock shall not be entitled to share
therein.
(5) OPTIONAL REDEMPTION. (a) CORPORATION'S OPTIONAL
REDEMPTION (i) To the extent the Corporation shall have funds
legally available for such payment, the Corporation may redeem at
its option shares of Series B Preferred Stock, at any time in
whole or from time to time in part, at a redemption price per
share in an amount in cash equal to 120% of the Liquidation
Value, together with cash in an amount equal to accrued and
unpaid dividends thereon to the date fixed for redemption,
without interest; PROVIDED, HOWEVER, that such right of
redemption shall be exercisable by the Corporation only by
delivery by the Corporation of a notice of redemption given at
such time as the Current Market Price Per Common Share is less
than $17.50 per share (subject to adjustment pursuant to the
terms of paragraph (7)(g)(i) hereof).
(ii) Shares of Series B Preferred Stock which have been
issued and reacquired in any manner, including shares purchased
or redeemed, shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) have the status
of authorized and unissued shares of the class of Preferred Stock
undesignated as to Series and may be redesignated and reissued as
part of any series of the Preferred Stock; PROVIDED that no such
issued and reacquired shares of Series B Preferred Stock shall be
reissued or sold as Series B Preferred Stock.
(b) PROCEDURE FOR OPTIONAL REDEMPTION. (i) In the
event that fewer than all the outstanding shares of Series B
Preferred Stock are to be redeemed, the number of shares to be
redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be selected pro rata (with any
fractional shares being rounded to the nearest whole share).
(ii) In the event the Corporation shall redeem shares
of Series B Preferred Stock, notice of such redemption shall be
given by first class mail, postage prepaid, to each holder of the
shares to be redeemed at such holder's address as the same
appears on the stock register of the Corporation; PROVIDED that
neither the failure to give such notice nor any defect therein
shall affect the validity of the giving of notice for the
redemption of any share of Series B Preferred Stock to be
redeemed except as to the holder to whom the Corporation has
failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (I) the
Trading Days and Daily Prices (as hereinafter defined) being used
to determine the eligibility of the Corporation to exercise its
right of redemption; (II) a redemption date not less than 30 nor
more than 60 days following the date of mailing of the notice;
(III) the number of shares of Series B Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder
are to be redeemed, the number of shares to be redeemed from such
holder; (IV) the redemption price; (V) the place or places where
certificates for such shares are to be surrendered for payment of
the redemption price; and (VI) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
(iii) Notice having been mailed as aforesaid, from
and after the redemption date (unless default shall be made by
the Corporation in providing money for the payment of the
redemption price of the shares called for redemption), dividends
on the shares of Series B Preferred Stock so called for
redemption shall cease to accrue, and all rights of the holders
thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the certificates
for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such share shall be
redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder
thereof.
(6) REDEMPTION AT THE OPTION OF THE HOLDER. (a)
FAILURE TO REGISTER COMMON STOCK. (i) If the Corporation shall
have failed to have registered with the Securities and Exchange
Commission (the "SEC") the Common Stock issuable upon conversion
of the Series B Preferred Stock pursuant to the terms of
paragraph (7) hereof and all shares of Common Stock issuable as
dividends upon the Series B Preferred Stock within 180 days of
the Initial Issuance Date or (ii) if such registration shall for
any reason (including, but not limited to, those specified in
paragraph (6)(c) hereof) at any time or from time to time cease
to be in effect for a period in excess of an aggregate of 180
days in any 360 day period, then any holder of Series B Preferred
Stock may demand that the Corporation effectuate redemption of
any or all of such holder's Series B Preferred Stock in the
manner set forth in paragraph (6)(d) hereof at a redemption price
per share in an amount in cash equal to 130% of the Liquidation
Value, together with cash in an amount equal to accrued and
unpaid dividends thereon (plus accrued interest, if any, on
unpaid dividends in accordance with paragraph (3)(b)) to the date
of redemption, without interest; PROVIDED, HOWEVER, that if
prior to the delivery of the demand for redemption pursuant to
clauses (i) or (ii) the Corporation shall have cured such failure
to register or to keep such registration effective, then the
right of any holder of Series B Preferred Stock to demand such
redemption shall terminate (subject to reassertion in the event
of a subsequent failure to keep such registration effective)
unless the demand is made within the sixty (60) day period
following the Corporation's cure of such failure; and PROVIDED
FURTHER, (x) in the case of the failure to register set forth in
clause (i) above, if such registration shall cease to be in
effect for an aggregate of more than sixty (60) days in the 360
day period following the initial effective date of such
registration, and (y) in the case of the failure to keep such
registration effective as set forth in clause (ii) above, if such
registration shall cease to be in effect for an aggregate of more
than sixty (60) days in the 180 day period following the
Corporation's cure (a "Subsequent Registration Failure"), then
the aforesaid right to demand redemption by holders of the Series
B Preferred Stock may be exercised by written demand given within
sixty (60) days of the cure of such Subsequent Registration
Failure.
(b) SUSPENSION OF TRADING IN COMMON STOCK. In the
event that at any time or from time to time after the Initial
Issuance Date trading in the shares of Common Stock is suspended
on the principal market or exchange for such shares (including
the National Market of the National Association of Securities
Dealers, Inc., Automated Quotation System ("NASDAQ")), for a
period of seven consecutive Trading Days (as defined in paragraph
(7)(a)(ii) hereof), other than as a result of the suspension of
trading in securities in general, or if such shares of Common
cease to be listed for trading on a national securities exchange
or NASDAQ, then, any holder of shares of Series B Preferred Stock
may demand that the Corporation effectuate the redemption of any or
all of such holder's shares of Series B Preferred Stock, in the
manner set forth in paragraph (6)(d) hereof at a redemption price per
share in cash equal to 130% of the Liquidation Value, together with
cash in an amount equal to the accrued and unpaid dividends
thereon (plus accrued interest, if any, on unpaid dividends in
accordance with paragraph (3)(b)) to the date of redemption,
without interest; PROVIDED, HOWEVER, that if prior to the
delivery of the demand for redemption, such trading of Common
Stock shall have resumed or relisting shall have occurred, then
the right of any holder to demand such redemption shall terminate
unless such demand is made within sixty (60) days of such
resumption of trading or relisting of the Common Stock.
(c) BLACKOUT PERIOD. In the event that at any time or
from time to time (I) any holder of shares of Series B Preferred
Stock receives a notice from the Corporation relating to the
Common Stock issuable upon conversion of the Series B Preferred
Stock pursuant to the terms of paragraph (7) hereof and as
dividends upon the Series B Preferred Stock stating that (A) the
SEC has made a request for an amendment or supplement with
respect to any registration statement or related prospectus
relating to such Common Stock (a "Registration Statement"), (B)
the SEC has issued a stop order suspending the effectiveness of a
Registration Statement or has initiated a proceeding for such
purpose, (C) any representation or warranty of the Corporation
contained in any agreement entered into in order to expedite or
facilitate the disposition of such Common Stock has ceased to be
true and correct in all material respects so that the Common
Stock may not be sold in accordance with the intended plan of
distribution, (D) the Corporation has received a notice with
respect to the suspension of the qualification of the Common
Stock for sale in any material jurisdiction or the initiation or
threatening of any proceeding for such purpose, (E) an event has
occurred the result of which is that the prospectus included in a
Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus or any preliminary
prospectus, in light of the circumstances under which they were
made) not misleading, (F) the Corporation has made a reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate or that there exist circumstances
not yet disclosed to the public which makes further sales under
such Registration Statement inadvisable pending such disclosure
and post-effective amendment, or (G) the Corporation has decided
to suspend the use of any Registration Statement for a reasonable
length of time in order to (i) avoid disclosing any corporate
development that the Corporation is not otherwise obligated to
disclose or (ii) satisfy SEC requirements relating to the
financial statements of businesses acquired, or (II) trading in
the shares of Common Stock shall be suspended as set forth in
paragraph (6)(b) hereof, then the Mandatory Conversion Date (as
defined in paragraph (7)(a)(ii) hereof) shall be automatically
extended for a period equal to 1.5 times the number of days in
any Blackout Period (rounded up to the next whole day). For the
purposes hereof, the term "Blackout Period" refers to the period
from and including the date of receipt of the notice of any event
described in (I) or the suspension of trading as set forth in
(II) to and including the date of written advice from the
Corporation that (w) in the case of clause (I)(A), (B), (E), (F)
or (G) above the use of the applicable prospectus contained in
any Registration Statement may be resumed, accompanied by any
required supplemented or amended prospectuses or additional or
supplemental filings, (x) in the case of clause (I)(D) above,
such suspension has been lifted, (y) in the case of clause (I)(C)
above, the condition which caused such material inaccuracy has
ceased to exist (whether by amendment or supplement to the
prospectus or otherwise), or (z) in the case of clause (II) above
the resumption of trading in shares of Common Stock.
(d) PROCEDURE FOR REDEMPTION AT THE OPTION OF THE
HOLDERS. (i) In the event that the Corporation shall receive
from any holder of Series B Preferred Stock a demand to effect
redemption of any or all of such holder's outstanding shares of
Series B Preferred Stock pursuant to any provision contained in
paragraphs (6)(a), (6)(b) or (7)(d)(ii) hereof, then the
Corporation shall effect such redemption in the following manner:
Within 15 days following the receipt by the Corporation of such
demand, the Corporation shall mail to such holder of Series B
Preferred Stock a notice (the "Mandatory Redemption Notice"),
addressed to such holder at the mailing address shown on the
records of the Corporation, containing all instructions and
materials necessary to enable such holder of Series B Preferred
Stock to surrender his shares of Series B Preferred Stock for
redemption and shall state: (I) a redemption date not later than
45 days after the date of receipt by the Corporation of the
demand for redemption from such holder of shares of Series B
Preferred Stock, (II) the redemption price, (III) the place or
places where certificates for such shares are to be surrendered
for payment of the redemption price and (IV) that dividends on
the shares to be redeemed will cease to accrue on such redemption
date.
(ii) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption
price of the shares surrendered for redemption), dividends on the
shares of Series B Preferred Stock for which a notice of
redemption has been sent shall cease to accrue, and all rights of
the holders thereof with respect to such shares surrendered for
redemption as stockholders of the Corporation (except the right
to receive from the Corporation the redemption price) shall
cease. Upon surrender in accordance with said notice of the
certificates representing shares of Series B Preferred Stock to
be so redeemed (properly endorsed or assigned for transfer, if
the Board of Directors of the Corporation shall so require and
the Mandatory Redemption Notice shall so state), such surrendered
shares shall be redeemed by the Corporation at the redemption
price aforesaid. In case fewer than all the shares represented
by any certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the
holder thereof.
(7) CONVERSION. (a) (i) OPTIONAL CONVERSION. (I)
Subject to the provisions of this paragraph (7), each holder of
the shares of Series B Preferred Stock shall have the right, at
any time and from time to time, at such holder's option, to
convert any or all outstanding shares of Series B Preferred Stock
of such holder, in whole or in part, into fully paid and non-
assessable shares of Common Stock; PROVIDED, HOWEVER, that no
holder of Series B Preferred Stock shall at any one time convert
fewer than the lesser of (x) that number of shares of Series B
Preferred Stock that would then be convertible into 10,000 shares
of Common Stock and (y) all shares of Series B Preferred Stock
then owned by such holder; and PROVIDED FURTHER that no holder of
Series B Preferred Stock shall be entitled to convert any shares
of Series B Preferred Stock in excess of the applicable
Conversion Limit, if any. The "Conversion Limit" shall be in
effect only in the first two six-month periods following the
Initial Issuance Date and shall be equal to (I) for the first six-
month period following the Initial Issuance Date, thirty percent
(30%) of the total number of shares of Series B Preferred Stock
held on the Initial Issuance Date by such holder of Series B
Preferred Stock, and (II) for the second six-month period
following the Initial Issuance Date, sixty-five percent
(65%) of the total number of shares of Series B Preferred Stock
held on the Initial Issuance Date by such holder of Series B
Preferred Stock, less the number of shares of Series B Preferred
Stock actually converted by the holder during the first six-month
period following the Initial Issuance Date. If any shares of
Series B Preferred Stock are transferred following the Initial
Issuance Date, then so long as the Conversion Limit is in effect,
the successor holder of such Series B Preferred Stock shall have
the right to convert only that number of shares of Series B
Preferred Stock transferred that is determined by multiplying (x)
the remaining number of shares that may be converted by the
transferor prior to such transfer by (y) a fraction the numerator
of which is the number of shares of Series B Preferred Stock
being transferred and the denominator of which is the total
number of shares of Series B Preferred Stock held by the
transferor before such transfer; with the number of shares of
Series B Preferred Stock that may be converted by the transferor
being reduced by such amount; subject, in the case of a transfer
that occurred in the first six-month period following the Initial
Issuance Date, to proportional increase during the second six-
month period following the Initial Issuance Date to reflect the
increase in the Conversion Limit. Any such transfer shall
require the transferor to send a notice of transfer to the
Conversion Monitor stating the number of shares being transferred
by the transferor and the transferor's calculation of the number
of shares of Series B Preferred Stock that the transferor and the
transferee may convert subsequent to such transfer (the
"Subsequent Conversion Rights"). The Conversion Monitor shall
confirm the Subsequent Conversion Rights calculation and inform
the Corporation of the transfer and the calculation of the
Subsequent Conversion Rights. The "Conversion Monitor" for the
Series B Preferred Stock shall be CIBC-Wood Gundy Securities
Corporation, 425 Lexington Avenue, New York, New York 10017. The
Conversion Limit shall no longer be applicable following the
first time that (v) the Current Market Price Per Common Share as
of any date exceeds $30.00 (which price shall be subject to
adjustment from time to time in accordance with the provisions of
paragraph (7)(g)(i) hereof), (w) the Corporation executes a
definitive agreement that would result in the majority of the
outstanding Common Stock being owned by any Person or group
(within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended), (x) the Corporation or any of
its Subsidiaries executes a definitive agreement that would
result in a sale or transfer of all or substantially all of the
assets of the Corporation and its Subsidiaries on a consolidated
basis in a single transaction or a series of related
transactions, (y) a tender offer or an exchange offer is
commenced by any Person or group (other than the Corporation or
an Affiliate (as defined in paragraph (8)(a) hereof) of the
Corporation) for all or any portion of the outstanding shares of
Common Stock as a result of which such Person or group would
beneficially own a majority of the outstanding Common Stock or
(z) the Corporation or an Affiliate of the Corporation shall
commence a tender offer or exchange offer for 20% or more of the
outstanding Common Stock.
(II) The number of shares of Common Stock deliverable
upon conversion of a share of Series B Preferred Stock, adjusted
as hereinafter provided, is referred to herein as the "Conversion
Ratio." The Conversion Ratio shall be determined by dividing (x)
the Liquidation Value per share of Series B Preferred Stock, plus
unpaid dividends to the last Dividend Date occurring prior to the
date of conversion (and interest, if any, thereon) as provided in
paragraph (3) hereof, by (y) the product of (I) the Current
Market Price Per Common Share and (II) the Conversion Multiple
(as defined below), but in no event shall the Conversion Ratio
result in an issuance price per share of Common Stock of less
than $0.01 per share. The "Conversion Multiple" shall be equal
to (a) for the first three-month period following the Initial
Issuance Date, 0.97, (b) for the second three-month period
following the Initial Issuance Date, 0.95, and (c) for any
period subsequent to the first six-month period following the
Initial Issuance Date, 0.91; PROVIDED, HOWEVER, that the
Conversion Multiple shall be permanently reduced (A) by 0.01
commencing ninety days following the Initial Issuance Date if the
Common Stock issuable upon conversion of the Series B Preferred
Stock and the Common Stock issuable as dividends on the Series B
Preferred Stock shall not have been registered with the SEC by
such ninetieth day; (B) by a further 0.03 commencing one hundred
twenty days following the Initial Issuance Date if the Common
Stock issuable upon conversion of the Series B Preferred Stock
and the Common Stock issuable as dividends on the Series B
Preferred Stock has not been registered with the SEC by such one
hundred twentieth day; and (C) by a further 0.05 at the
expiration of each thirty day period thereafter if the Common
Stock has not been registered with the SEC within such thirty day
period; PROVIDED FURTHER that, in addition to and not in
limitation of the foregoing, the Conversion Multiple shall be
permanently reduced (A) by 0.01 at any time that the total
number of days that constitute a Blackout Period during any 360
day period exceeds 90 days and (B) by a further 0.01 for each
additional 30 days that constitute a Blackout Period during any
such 360 day period; and PROVIDED FURTHER that the Conversion
Multiple shall at no time be reduced to less than 0.01.
Notwithstanding any call for redemption pursuant to paragraphs
(5) or (6), the right to convert shares so called for redemption
shall terminate at the close of business on the date immediately
preceding the redemption date unless the Corporation shall
default in making payment of the amount payable upon such
redemption.
(ii) MANDATORY CONVERSION. At the Mandatory
Conversion Date (as defined below), all shares of Series B
Preferred Stock outstanding at such time shall be automatically
converted into Common Stock at the then applicable Conversion
Ratio in accordance with the terms of this paragraph (7), without
notice. The "Mandatory Conversion Date" shall be the day that is
the fifth anniversary of the Initial Issuance Date (or, if the
Mandatory Conversion Date is extended pursuant to the provisions
of paragraphs (6)(c) or (7)(d)(ii) hereof or pursuant to clause
(ii) below, such later date); PROVIDED, HOWEVER, that (i) if such
day is not a Trading Day, then the Mandatory Conversion Date
shall mean the Trading Day immediately following the applicable
Mandatory Conversion Date and (ii) if the Current Market Price
Per Common Share is less than $20 per share (which price shall be
subject to adjustment from time to time in accordance with the
provisions of paragraph (7)(g)(i) hereof) at any time during the
90 days preceding such fifth anniversary of the Initial Issuance
Date (or, if the Mandatory Conversion Date is extended pursuant
to the provisions of paragraphs (6)(c) or (7)(d)(ii) hereof or
pursuant to this clause (ii), such later date), then the
Mandatory Conversion Date shall be extended for six months. A
"Trading Day" means any day that is not a Saturday, a Sunday or a
legal holiday or a day on which the New York Stock Exchange
("NYSE") is authorized to or does close.
(b) (i) In order to convert shares of Series B
Preferred Stock, the holder of the shares of Series B Preferred
Stock to be converted shall (i) deliver to the transfer agent for
the Series B Preferred Stock, which transfer agent shall at all
times be the transfer agent for the Common Stock (the "Transfer
Agent"), by facsimile, hand delivery, certified or registered
mail or air courier guaranteeing overnight delivery, a written
notice of election to convert substantially in the form included
on the reverse of the certificate for the shares of Series B
Preferred Stock, completed and signed, specifying the number of
shares of Series B Preferred Stock to be converted and (ii)
surrender the certificate(s) representing such shares at the
offices of the Transfer Agent (which surrender may occur
simultaneously with or as promptly as practicable following the
delivery of notice of election to convert). Any notice of
conversion will be irrevocable. A copy of the written notice of
conversion shall also be delivered to the Corporation and to the
Conversion Monitor but failure to do so shall not affect the
validity of the notice of conversion. Unless the shares issuable
on conversion are to be issued in the same name as the name in
which such shares of Series B Preferred Stock are registered,
each share surrendered for conversion shall be accompanied by
instruments of transfer, in form reasonably satisfactory to the
Transfer Agent, duly executed by the holder or the holder's duly
authorized attorney and an amount sufficient to pay any transfer
or similar tax.
(ii) As promptly as practicable (and in any event
within two Trading Days) after the surrender by the holder of
the certificates for shares of Series B Preferred Stock as
aforesaid, the Transfer Agent shall issue and shall deliver to
such holder, or on the holder's written order to the holder's
transferee, a certificate or certificates for the whole number of
shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this paragraph (7).
(iii) Each conversion shall be deemed to have
been effected immediately prior to the close of business on the
date (the "Conversion Effective Date") on which proper notice of
election to convert shall have been received by the Transfer
Agent as aforesaid, and the person in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder of record of shares of Common Stock represented thereby at
such time on such date and such conversion shall be into a number
of shares of Common Stock equal to the product of the number of
shares of Series B Preferred Stock surrendered times the
Conversion Ratio in effect at such time on such date. All shares
of Common Stock delivered upon conversion of the Series B
Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and
not subject to any preemptive rights. On the Conversion
Effective Date, the shares of Series B Preferred Stock being
converted shall no longer be deemed to be outstanding and all
rights of a holder with respect to such shares surrendered for
conversion shall immediately terminate except for the right to
receive the Common Stock and other amounts payable pursuant to
this paragraph (7).
(c) (i) Upon delivery to the Transfer Agent by a
holder of shares of Series B Preferred Stock of a notice of
election to convert, the right of the Corporation to redeem such
shares of Series B Preferred Stock shall terminate, regardless of
whether a notice of redemption has been mailed as aforesaid;
PROVIDED, HOWEVER, that such notice of election to convert shall
be received by the Transfer Agent prior to the date of redemption
specified in such notice of redemption.
(ii) From the date of delivery to the Transfer
Agent by a holder of shares of Series B Preferred Stock of a
notice of election to convert, in lieu of dividends on such
Series B Preferred Stock pursuant to paragraph (3), such Series B
Preferred Stock shall participate equally and ratably with the
holders of shares of Common Stock in all dividends and
distributions paid to holders of record of the Common Stock on or
after the Conversion Effective Date.
(d) (i) The Corporation covenants that it will
reserve and keep available, free from preemptive rights,
4,000,000 of its authorized but unissued shares of Common Stock
for the purposes of (x) effecting conversions of the Series B
Preferred Stock and (y) issuance as dividends on the Series B
Preferred Stock. The number of shares of Common Stock so
reserved may be reduced from time to time in proportion to the
number of shares of Series B Preferred Stock converted pursuant
to the conversion rights contained herein and the number of
shares so reserved shall be increased or decreased to reflect
stock splits, reverse stock splits, stock dividends and
distributions.
(ii) If the Corporation does not have a sufficient
number of shares of Common Stock available for issuance upon
conversion of the Series B Preferred Stock or the payment of
dividends payable on the next succeeding Dividend Date in shares
of Common Stock, the Corporation shall so notify the holders of
the Series B Preferred Stock. If such condition shall remain
unremedied for a period of ninety (90) days, then (A) any holder
of shares of Series B Preferred Stock may demand that the
Corporation effectuate the redemption of any or all of such
holder's shares of the Series B Preferred Stock in the manner set
forth in paragraph (6)(d) hereof at a redemption price per share
in cash equal to 130% of the Liquidation Value, together with
cash in an amount equal to the accrued and unpaid dividends
thereon (plus accrued interest, if any, on unpaid dividends in
accordance with paragraph (3)(b)) to the date of redemption,
without interest; PROVIDED, HOWEVER, that if prior to the
delivery of the demand for redemption the Corporation shall have
cured such condition, the right of the holder to demand such
redemption shall terminate (subject to reinstitution in the event
of a subsequent failure to satisfy such condition) unless the
demand is made within the sixty (60) day period of the
Corporation's cure of such condition, and (B) the Mandatory
Conversion Date shall be automatically extended for a period
equal to 1.5 times the number of days in excess of 90 during
which such condition remains unremedied.
(e) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect to
the issue or delivery of shares of Common Stock on conversion of
the Series B Preferred Stock pursuant hereto; PROVIDED that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of
the holder of the Series B Preferred Stock to be converted (and
no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.)
(f) In connection with the conversion of any shares of
Series B Preferred Stock, no fractions of shares of Common Stock
shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in an amount equal to such fractional interest
multiplied by the Daily Price (as defined in paragraph (g)(iv)
hereof) per share of Common Stock on the date on which such
shares of Series B Preferred Stock are deemed to have been
converted or if such date is not a Trading Day, the immediately
preceding Trading Day.
(g) (i) In case at any time during a Valuation Period
the Common Stock shall trade "ex" (I) a dividend or distribution
payable in Common Stock, (II) a subdivision or split of the
outstanding Common Stock, or (III) a combination or
reclassification of the outstanding Common Stock into a smaller
number of shares (unless, in the case of (I), (II), or (III), the
Common Stock shall trade with due bills, in which case when the
Common Stock trades separate from the due bills), then the Daily
Price for the days within such Valuation Period occurring prior
to such date shall be proportionately adjusted (but only in
respect of Series B Preferred Stock converted within such
Valuation Period). In addition, the Current Market Prices Per
Common Share numbers set forth in paragraphs (5)(a) (initially
$17.50), (7)(a)(i)(I) (initially $30.00) and (7)(a)(ii)
(initially $20.00) shall be proportionately adjusted on or after
such date by multiplying such number by a fraction, the numerator
of which shall be the number of shares of Common Stock
outstanding immediately prior to such date and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of shares on such
date.
(ii) In case the Corporation shall at any time (I)
merge or consolidate with or into any other corporation or other
entity or Person (whether or not the Corporation is the surviving
corporation), or there occurs any other corporate reorganization
or transaction or series of related transactions, and as a result
thereof the shareholders of the Corporation pursuant to such
merger, consolidation, reorganization or other transaction own
less in the aggregate than 50% of the voting power or equity of
the ultimate parent corporation or other entity surviving or
resulting from such merger, consolidation, reorganization or
other transaction or (II) the Corporation transfers all or
substantially all of the Corporation's assets to any other
corporation or other entity or Person, then the effective date of
such merger, consolidation, reorganization, transaction or
transfer shall be deemed to be a Mandatory Conversion Date and
all shares of Series B Preferred Stock outstanding at such time
shall be automatically converted into Common Stock at the then
applicable Conversion Ratio in accordance with the terms of this
paragraph (7), without notice.
(iii) In the event that at any time or from
time to time, the Common Stock issuable upon the conversion of
the Series B Preferred Stock is changed into the same or a
different number of shares of any class or classes of stock,
whether by capital reorganization, recapitalization,
reclassification or otherwise (other than as provided for
elsewhere in this paragraph (7)), then and in each such event
each holder of Series B Preferred Stock shall have the right
thereafter to convert such Series B Preferred Stock into the kind
of stock or securities or property receivable upon such
reorganization, recapitalization, reclassification or other
change by holders of shares of Common Stock, all subject to
further adjustment as provided herein. In such event, the
formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or
the market price of the securities or property or, if shares of a
new class of stock are issued, to reflect the market price of the
class or classes of stock (applying the same factors used in
determining the Current Market Price Per Common Share) issued in
connection with the above described transactions.
(iv) With respect to any date on which a determination
is required to be made with respect to the value of the Common
Stock (which in the case of optional conversion of the Series B
Preferred Stock shall be the date on which proper notice of
election to convert is delivered), (I) the "Current Market Price
Per Common Share" shall be deemed to be the average of the Daily
Prices (as defined below) per share of the applicable class of
Common Stock for the 5 consecutive Trading Days immediately prior
to such date (such 5 consecutive Trading Day period being
referred to herein as the "Valuation Period"); and (II) "Daily
Price" means (1) if the shares of such class of Common Stock then
are listed and traded on the NYSE, the lowest reported sales
price on such day as reported on the NYSE Composite Transactions
Tape; (2) if the shares of such class of Common Stock then are
not listed and traded on the NYSE, the lowest reported sales
price on such day as reported by the principal national
securities exchange on which the shares are listed and traded;
(3) if the shares of such class of Common Stock then are not
listed and traded on any such securities exchange, the lowest
reported sale price on such day on NASDAQ; or (4) if the shares
of such class of Common Stock then are not traded on the NASDAQ
National Market, the lesser of (A) the lowest sales price and (B)
the average of the last reported bid and asked price on such day
as reported by NASDAQ. If during a Valuation Period, (i) the
Corporation fixes a record date for the determination of holders
of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation (other than
shares of Common Stock), assets or other property (other than
regular quarterly dividends on the Common Stock not exceeding an
annual rate equal to the greater of $.40 per share (subject to
proportional adjustment for stock dividends, splits, reverse
stock splits, combinations and reclassifications in accordance
with paragraph (g)(i) hereof) or 1.5% of the then Current Market
Price Per Common Share), (ii) the Corporation issues or sells any
Common Stock (other than pursuant to a stock dividend, split,
combination or reclassification contemplated by paragraph (g)(i)
hereof) for a consideration per share less than the Current
Market Price Per Common Share immediately prior to such issuance
or sale, (iii) the Corporation fixes a record date for the
issuance of rights, options or warrants to the holders of its
Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into shares of Common Stock) at a price per share (or
having a conversion price per share) less than the Current Market
Price Per Common Share immediately prior to such record date or
issuance, then the Corporation shall so notify on such record
date or issuance or sale date, as the case may be, each holder of
the Series B Preferred Stock specifying the terms of such
transaction or proposed transaction in reasonable detail, and for
purposes of computing the Conversion Ratio in the event that a
notice of election to convert is delivered by a holder of shares
of Series B Preferred Stock within five Trading Days of such
distribution, issuance or record date, the Valuation Period shall
be deemed to include only those Trading Days (though less than
five) that occur on or after such distribution, issuance or
record date, as the case may be.
(v) No adjustment to the Conversion Ratio shall
be required unless such adjustment would require an increase or
decrease of at least 0.1% in the Conversion Ratio; PROVIDED
HOWEVER, that any adjustments which by reason of this paragraph
(g)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this paragraph (g) shall be made to the
nearest four decimal points.
(vi) In the event that, at any time as a result of
the provisions of this paragraph (g), the holder of any shares of
Series B Preferred Stock upon subsequent conversion shall become
entitled to receive any shares of capital stock of the
Corporation other than Common Stock, the number of such other
shares so receivable upon conversion of any shares of Series B
Preferred Stock shall thereafter be subject to adjustment from
time to time in manner and on terms as nearly equivalent as
practicable to the provisions contained herein.
(vii) The Corporation shall not effect any
stock split, reverse stock split, subdivision, combination,
consolidation, merger or reclassification within five Trading
Days of the Mandatory Conversion Date.
(viii) The Corporation shall not make, or fix a
record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in
shares of additional Common Stock, with an effective date within
five Trading Days of the Mandatory Conversion Date.
(ix) In the event of a dispute between a holder of
shares of Series B Preferred Stock and the Corporation with
respect to any of the adjustments required pursuant to the
provisions of this paragraph (g), then the Series B Preferred
Stock shall be converted in a manner consistent with the Schedule
of Computations delivered as set forth in paragraph (7)(h) below.
Such holder of shares of Series B Preferred Stock shall then be
entitled, within 60 days of receipt of the Schedule of
Computations, to submit such dispute to the American Arbitration
Association for resolution according to then applicable rules
thereof, which determination shall be final and binding. If it
shall be determined that a holder of Series B Preferred Stock
should have received additional shares of Common Stock upon such
conversion (the "Undelivered Shares") then, within three Trading
Days of receipt of written notice of such determination, the
Corporation shall issue to such holder that number of additional
shares of Common Stock as shall have a value, based upon the then
Current Market Price Per Common Share, as shall equal the
Undelivered Shares times the Current Market Price Per Common
Share on the date of conversion. The cost of such proceeding
shall be shared 50% by the holder or holders of shares of Series
B Preferred Stock involved in such dispute and 50% by the
Corporation, except that the prevailing party, as determined by
the arbitrator presiding over the arbitration, shall be entitled
to recover reasonable attorney's fees, in addition to other costs
and expenses and any other available remedy.
(h) All adjustments pursuant to this paragraph (7)
shall be notified in writing to the holders of this Series B
Preferred Stock within five (5) Trading Days of the occurrence
thereof. Such notice shall be accompanied by a Schedule of
Computations of the adjustments and such Schedule of Computations
shall be accompanied by a certificate of concurrence by the
independent public accountants of the Corporation.
(8) COVENANTS. (a) The following terms, as used in
this paragraph (8), have the following meanings:
"Affiliate" means, when used with reference to any
Person, any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, that Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct or
cause the direction of the management or policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
corporate stock or any and all equivalent ownership interests in
a Person (other than a corporation).
"Consolidated Net Income" for any period means the
aggregate of the net income (or loss) of any Person and its
Subsidiaries for such period, on a consolidated basis, determined
in accordance with generally accepted accounting principles
("GAAP") as in effect on the Initial Issuance Date, after
reduction of net income in respect of the payment of dividends on
any preferred stock, PROVIDED that (i) the net income of any
Person (other than a Subsidiary of such Person) in which any
other individual, partnership, corporation, limited liability
company, trust or unincorporated organization or other entity
(other than such Person or any of its Subsidiaries) has a joint
interest (which interest does not cause the net income of such
Person to be consolidated into the net income of the Corporation
in accordance with GAAP) shall be included only to the extent of
the amount of cash dividends or distributions paid or loans made
to such Person or its Subsidiaries by such other individual,
partnership, corporation, limited liability company, trust or
unincorporated organization or other entity in such period, (ii)
the net loss of any Person (other than a Subsidiary of such
Person) in which any other individual, partnership, corporation,
limited liability company, trust or unincorporated organization
or other entity (other than such Person or any of its
Subsidiaries) has a joint interest (which interest does not cause
the net loss of such Person to be consolidated into the net
income or loss of the Corporation in accordance with GAAP) shall
not be included, (iii) the net income (but not loss) of any
Subsidiary that is subject to any restriction or limitation on
the payment of dividends or the payment of other distributions
(including loans or advances) by operation of the terms of its
charter or by agreement, instrument, judgment, decree, order,
structure, or governmental regulation applicable to the
Subsidiary shall be excluded to the extent of such restriction or
limitation and included to the extent of the amount of cash
dividends or distributions paid or loans made to such Person or
its Subsidiaries in such period and to the extent that at the
time of determination such income can be repatriated by a
Subsidiary of such Person incorporated or primarily engaged in
business outside the United States or Canada in the form of
principal repayments on intercompany accounts then in existence,
(iv) the net income (or loss) of any Person acquired in a pooling
of interests transaction for any period prior to the date of such
acquisition shall be excluded, (v) expenses incurred in the
acquisition of any Person in a pooling of interests transaction
shall be excluded and (vi) non-recurring gains shall be excluded
in determining net income.
"Disqualified Capital Stock" means any Capital Stock of
the Corporation that, by the terms of any security into which it
is convertible or exchangeable, is, or upon the happening of an
event would be, required to be repurchased, including at the
option of the holder thereof, in whole or in part, or has, or
upon the happening of an event would have, a redemption or
similar payment, including a principal payment, due, on or prior
to the Mandatory Conversion Date (without regard to any
extensions thereof).
"Investments" means, with respect to any Person, any
direct or indirect advances, loans or other extensions of credit
or capital contributions (excluding commissions, travel and
advances to officers and employees made in the ordinary course of
the business and consistent with past practice and contributions
to employee benefit plans) by such Person to (by means of
transfers of property to others or payments for property or
services for the account or use of others, or otherwise), or
purchases or other acquisitions by such Person or Capital Stock,
bonds, notes, debentures or other securities issued by, any other
Person or purchases of assets constituting the purchase of a
business or line of business and all other items which are or
would be classified as investments on the balance sheet of such
Person prepared in accordance with GAAP.
"Net Cash Proceeds" means (i) in the case of any sale
of Capital Stock by the Corporation, the aggregate net proceeds
received in cash by the Corporation, after payment of expenses,
commissions and other costs incurred in connection therewith, and
(ii) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of the Corporation or its
Subsidiaries for or into shares of Capital Stock of the
Corporation, the net carrying value of such outstanding
securities on the books of the Corporation on the date of such
exchange, exercise, conversion or surrender plus any additional
amount of cash required to be paid by the holder to the
Corporation upon such exchange, exercise, conversion or
surrender, and less any and all payments (excluding such Capital
Stock) made to the holders, and less all expenses incurred by the
Corporation in connection therewith.
"Person" means any individual, partnership,
corporation, limited liability company, trust or unincorporated
organization or other entity.
"Restricted Payment" means (i) any Stock Payment or
(ii) any other direct or indirect Investments by the Corporation
in any Affiliate of the Corporation or its Subsidiaries,
excluding Investments in direct or indirect Subsidiaries of the
Corporation.
"Stock Payment" means (i) with respect to the
Corporation, any dividend, either in cash or in property (except
dividends payable in Common Stock of the Corporation and
dividends payable in cash on the Series B Preferred Stock), on,
or the making by the Corporation of any other distribution in
respect of, its Capital Stock, now or hereafter outstanding, or
the redemption, repurchase, retirement or other acquisition for
value by the Corporation, directly or indirectly, of its Capital
Stock (other than the Series B Preferred Stock), or any warrants,
rights or options to purchase or acquire shares of any class of its
Capital Stock (other than the Series B Preferred Stock), now or
hereafter outstanding, and (ii) with respect to any Subsidiary of
the Corporation, any such dividend or distribution in respect of,
or any redemption, repurchase, retirement or other acquisition of,
its Capital Stock or any warrants, rights or options to purchase
or acquire shares of any class of its Capital Stock or the
Capital Stock of the Corporation, now or hereafter outstanding,
except with respect to its Capital Stock or warrants, rights or
options to purchase or acquire shares of any class of its Capital
Stock owned by the Corporation or a Subsidiary of the
Corporation.
"Subsidiary" means, with respect to any Person, any
corporation, limited or general partnership, trust, association
or other business entity of which 50% or more of the outstanding
Capital Stock or other interests entitled to vote in the election
of the board of directors of such corporation (irrespective of
whether, at the time, Capital Stock of any other class or classes
of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more Subsidiaries
of such Person.
(b) RESTRICTED PAYMENT. The Corporation shall not,
and shall cause its Subsidiaries not to, directly or indirectly,
make a Restricted Payment, unless, at the time thereof the
aggregate amount expended for all such purposes, including the
Restricted Payment (the amount expended for such purposes, if
other than cash, to be the fair market value of such property
determined as provided below) shall not exceed the sum of (A) (i)
in the case of a Stock Payment $0 and (ii) in the case of an
Investment $100,000,000, plus (B) 50% of the aggregate
Consolidated Net Income (or, in the case such aggregate
Consolidated Net Income shall be a loss, minus 100% of such loss)
earned subsequent to the Initial Issuance Date to the end of the
fiscal quarter immediately preceding such Restricted Payment
(treated as a single accounting period) plus (C) the aggregate
Net Cash Proceeds received by the Corporation from any Person,
other than a Subsidiary of the Corporation, subsequent to the
Initial Issuance Date and prior to the date of the Restricted
Payment, from the issuance or sale of Capital Stock (other than
Disqualified Capital Stock) or upon the exercise of options,
warrants or rights to purchase or subscribe for such Capital
Stock (other than Disqualified Capital Stock), including Capital
Stock (other than Disqualified Capital Stock) of the Corporation
issued upon conversion of or in exchange for any debt securities
of the Corporation (but excluding (1) any Capital Stock paid as a
dividend on any Capital Stock or as interest on any indebtedness
of the Corporation and (2) the issuance of Capital Stock upon the
conversion, surrender or exchange of any Capital Stock), plus (D)
solely in the case of an Investment, the amount (if any) of an
Investment made after the Initial Issuance Date and previously
included as a Restricted Payment if (and only for so long as) the
Person with respect to which such Investment was made becomes a
direct or indirect Subsidiary of the Corporation.
(c) The foregoing provisions shall not prevent (i) the
payment of any dividend within 30 days after the date of
declaration if the dividend would have been permitted on the date
of its declaration, (ii) the payment by the Corporation of
regular quarterly dividends on its Common Stock not exceeding an
annual rate equal to the greater of $.40 per share of Common
Stock (subject to proportional adjustment for stock dividends,
splits, reverse stock splits, combinations and reclassifications
in accordance with paragraph (7)(g)(i) hereof) or 1.5% of the
then Current Market Price Per Common Share or (iii) the purchase,
redemption, acquisition or retirement of any shares of Capital
Stock of the Corporation solely out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Corporation) of shares of Capital Stock (other than Disqualified
Capital Stock); PROVIDED that (I) the amount of any such dividend
shall be taken into account for purposes of determining whether
any Restricted Payment can be made pursuant to paragraph (8)(b)
above and (II) the Net Cash Proceeds from such sale (to the
extent used to effect such purchase, redemption, acquisition or
retirement) shall be excluded from clause (C) of paragraph (8)(b)
above.
(d) The amount of the Restricted Payment (other than
cash) shall be the fair market value of such payment. Fair
market value shall be determined by the Board of Directors of the
Corporation; PROVIDED that the Board of Directors shall retain an
independent appraiser to determine such fair market value if such
Fair Market Value exceeds $15,000,000 in any single instance or
related series of instances.
(e) BELOW MARKET ISSUANCES. Except for issuances and
sales after the Initial Issuance Date of (x) Common Stock having
an aggregate Current Market Price Per Common Share at the time of
issuance or sale of not more than $50,000,000 and (y) convertible
preferred stock ranking pari passu with or junior to the Series B
Preferred Stock and convertible into Common Stock at a conversion
price that fluctuates based on the market price of the Common
Stock at the time of conversion and to which a discount is
applied in determining the number of shares of Common Stock
issuable upon conversion, the Corporation shall not (i) issue or
sell any Common Stock, (ii) fix a record date for the issuance of
rights, options or warrants to the holders of its Common Stock or
other securities entitling such holders to subscribe for or
purchase shares of Common Stock (or securities convertible into
shares of Common Stock) or (iii) issue rights, options or
warrants entitling the holders thereof to subscribe for or
purchase Common Stock (or securities convertible into shares of
Common Stock) or issue convertible securities, on terms which
provide the purchaser of such shares of Common Stock an effective
discount from the Current Market Price Per Common Share on the
date of the applicable issuance or sale or the applicable record
date for such issuance.
(f) LIMITATION ON PAYMENT RESTRICTIONS. The
Corporation shall not, and shall not permit any of its
Subsidiaries to, create or otherwise suffer to exist or become
effective any consensual restriction which by its terms limits
the ability of such Subsidiary to (a) pay dividends or make other
distributions on such Subsidiary's Capital Stock or pay any
indebtedness owed to the Corporation or any other Subsidiary of
the Corporation or (B) make any loans or advances to the
Corporation or any other Subsidiary of the Corporation; PROVIDED
that the foregoing covenant shall not be applicable to
Subsidiaries of the Corporation neither incorporated in nor
primarily engaged in business in the United States or Canada.
(9) VOTING RIGHTS. (a) The holders of record of
shares of Series B Preferred Stock shall not be entitled to any
voting rights except as hereinafter provided in this paragraph
(9) or as otherwise provided by law.
(b) If and whenever six quarterly dividends (whether
or not consecutive) payable on the Series B Preferred Stock have
not been paid in full, the number of directors then constituting
the Board of Directors shall be increased by two and the holders
of shares of Series B Preferred shall be entitled to elect the
two additional directors to serve on the Board of Directors at
any annual meeting of stockholders or special meeting held in
place thereof, at a special meeting of the holders of the Series
B Preferred Stock called as hereinafter provided or by action
taken by written consent. Whenever all arrears in dividends on
the Series B Preferred Stock then outstanding shall have been
paid, then the right of the holders of the Series B Preferred Stock
to elect such additional two directors shall cease (but subject always
to the same provisions for the vesting of such voting rights in the
case of any similar future arrearages in six quarterly dividends),
and the terms of office of all persons elected as directors by the
holders of the Series B Preferred Stock shall forthwith terminate
and the number of the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have been
so vested in the holders of shares of Series B Preferred Stock,
the Secretary of the Corporation may, and upon written request of
any holder of Series B Preferred Stock (addressed to the
Secretary at the principal office of the Corporation) shall, call
a special meeting of the holders of the Series B Preferred Stock
for the election of the two directors to be elected by them as
herein provided, such call to be made by notice similar to that
provided in the Bylaws of the Corporation for a special meeting
of the stockholders or as required by law. If any such special
meeting required to be called as above provided shall not be
called by the Secretary within 20 days after receipt of any such
request, then any holder of shares of Series B Preferred Stock
may call such meeting, upon the notice above provided, and for
that purpose shall have access to the stock books of the
Corporation. The directors elected at any such special meeting
shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such
office shall not have previously terminated as above provided, at
which time the holders of shares of Series B Preferred Stock
shall elect two directors for an additional term. If any vacancy
shall occur among the directors elected by the holders of the
Series B Preferred Stock, a successor shall be elected by the
Board of Directors, upon nomination of the then remaining
director elected by the holders of the Series B Preferred Stock
or the successor of such remaining director, to serve until the
next annual meeting of the stockholders or special meeting held
in place thereof if such office shall not have previously
terminated as provided above.
(c) Without the written consent of a majority of the
outstanding shares of Series B Preferred Stock or the vote of
holders of a majority of the outstanding shares of Series B
Preferred Stock at a meeting of the holders of Series B Preferred
Stock called for such purpose, the Corporation will not amend,
alter or repeal any provision of the Certificate of Incorporation
(by merger or otherwise) so as to adversely affect the
preferences, rights or powers of the Series B Preferred Stock;
PROVIDED that any such amendment that changes (i) the dividend
payable on or the liquidation preference of the Series B
Preferred Stock, (ii) the rights of holders of Series B Preferred
Stock to convert any shares of Series B Preferred Stock or the
terms governing any such conversion or (iii) the right of any
holder to demand the redemption of the Series B Preferred Stock,
shall require the affirmative vote at a meeting of holders of
Series B Preferred Stock called for such purpose or written
consent of the holder of each share of Series B Preferred Stock.
(d) Without the written consent of a majority of the
outstanding shares of Series B Preferred Stock or the vote of
holders of a majority of the outstanding shares of Series B
Preferred Stock at a meeting of such holders called for such
purpose, the Corporation will not (i) issue any additional Series
B Preferred Stock, (ii) create, authorize or issue any securities
senior to the Series B Preferred Stock or increase the authorized
amount of any such class or series of securities or (iii) create,
authorize or issue any Parity Securities or Junior Securities
which provide a principal payment, a maturity date or a mandatory
date of redemption (not at the option of the holder of such
securities) on or prior to the Mandatory Redemption Date (as
determined on the date of such creation, authorization or
issuance without regard to any potential extensions thereof).
(e) In exercising the voting rights set forth in this
paragraph (9), each share of Series B Preferred Stock shall have
one vote per share, except that when any other series of
preferred stock shall have the right to vote with the Series B
Preferred Stock as a single class on any matter, then the Series
B Preferred Stock and other series shall have with respect to
such matters one vote per $1000 of stated liquidation preference.
Except as otherwise required by applicable law or as set forth
herein, the shares of Series B Preferred Stock shall not have any
relative, participating, optional or other special voting rights
and powers and the consent of the holders thereof shall not be
required for the taking of any corporate action.
(10) GENERAL PROVISIONS. (a) The term "Person" as
used herein has the meaning set forth in paragraph (8)(a) hereof.
(b) The term "outstanding", when used with reference
to shares of stock, shall mean issued shares, excluding shares
held by the Corporation or a Subsidiary.
(c) The headings of the paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designations,
Preferences and Rights are for convenience of reference only and
shall not define, limit or affect any of the provisions hereof.
IN WITNESS WHEREOF, ICN Pharmaceuticals, Inc., has
caused this Certificate of Designations, Preferences and Rights
to be signed and attested by the undersigned this 7th day of
October, 1996.
ICN PHARMACEUTICALS, INC.
By:
-----------------------
Name: David C. Watt
Title: Executive Vice
President, General
Counsel and Corporate
Secretary
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT FOR SECURITIES
REGISTRATION RIGHTS AGREEMENT FOR SECURITIES (the
"Agreement"), dated as of October 9, 1996, by and among ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company") and
the Investors (as hereinafter defined).
This Agreement is made pursuant to the Stock
Subscription Agreement, dated as of even date herewith, by and
among the Company and the Investors (the "Subscription
Agreement"). In order to induce the Investors to enter into the
Subscription Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized
terms shall have the following meanings:
CERTIFICATE OF DESIGNATIONS shall mean the Certificate
of Designations, Preferences and Rights of the Preferred Stock,
as filed with the Secretary of State of the State of Delaware.
COMMON STOCK shall mean the common stock, par value
$0.01 per share, of the Company; PROVIDED, that if the Company's
Common Stock is recapitalized, "Common Stock" shall mean such
recapitalized stock.
COMPANY shall have the same meaning set forth in the
preamble.
EXCHANGE ACT shall mean the Securities Exchange Act of
1934, as amended from time to time.
HOLDER shall mean each of the Investors or such other
Person to whom any such Investor shall have assigned or
transferred such Investor's Registrable Securities in accordance
with this Agreement. A Person is deemed to be a Holder whenever
such Person owns Registrable Securities or Preferred Stock.
INITIAL ISSUANCE DATE shall mean the date of the
initial issuance of the Preferred Stock.
INVESTORS shall mean the investors specified on the
signature page to this Agreement.
NASD shall mean the National Association of Securities
Dealers, Inc.
NYSE shall mean the New York Stock Exchange.
PERSON shall mean an individual, partnership,
corporation, limited liability company, trust or unincorporated
organization, or a government or agency or political subdivision
thereof.
PREFERRED STOCK shall mean the Series B Convertible
Preferred Stock of the Company, par value $.01 per share, having
a liquidation preference of $1000 per share and such other rights
and preferences as are set forth in the Certificate of
Designations.
PROSPECTUS shall mean the prospectus included in any
Registration Statement, 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 such
Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
REGISTRABLE SECURITIES shall mean the shares of Common
Stock issued or issuable pursuant to the dividend or conversion
provisions of the Certificate of Designations, until such time as
they have been sold under a Registration Statement.
REGISTRATION STATEMENT shall mean any registration
statement of the Company which covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such
Registration Statement.
SEC shall mean the Securities and Exchange Commission.
SECURITIES ACT shall mean the Securities Act of 1933,
as amended from time to time.
SUBSCRIPTION AGREEMENT shall have the meaning set forth
in the preamble.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING
shall mean a registration in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. REGISTRATION.
(a) REGISTRATION STATEMENT. All Registrable
Securities shall, within 90 days of the Initial Issuance Date and
for so long thereafter as is required by this Agreement, be
subject to an effective Registration Statement pursuant to Rule
415 under the Securities Act on any appropriate form under the
Securities Act, covering the resale or other disposition of the
Registrable Securities by the Holders thereof in accordance with
the intended method or methods of distribution thereof as
specified by the Holders at any time and from time to time after
such issuance. The Registration Statement shall remain effective
pursuant to the provisions of Rule 415 of the Securities Act or
otherwise until such time (if any) as the Holders, either in the
opinion of their counsel or pursuant to a "no-action letter"
reasonably satisfactory to counsel for the Holders provided by
the staff of the SEC at the request of the Company, are free to
sell the Registrable Securities without compliance with the
registration provisions under the Securities Act, and any
applicable state securities laws.
(b) NO COMPANY REGISTRATIONS. The Company shall
not be permitted to register any securities in any Registration
Statement for sale for its own account.
(c) PIGGYBACK REGISTRATIONS. (i) The Company
shall not be permitted to grant in any Registration Statement any
registration rights (the "Piggyback Registration Rights") for any
securities other than the Registrable Securities except for the
Piggyback Registration Rights granted pursuant to (I) the Common
Stock Undertaking, dated as of February 28, 1996, by and among
Gly Derm, Inc., certain shareholders set forth in such agreement
and the Company, (II) the Common Stock Undertaking, dated as of
July 18, 1996, by and among Siemens Medical Systems, Inc. and the
Company and (III) the Sale and Purchase Agreement, dated as of
September 18, 1996, by and between Organen Teknika Corporation,
Akzo Nobel Pharma International B.V. and the Company.
(ii) Notwithstanding any other provision of
this Section 2(c), if the investment banker to the Company shall
advise the Company in writing that the inclusion of securities
entitled to Piggyback Registration Rights would, in such
investment banker's opinion, adversely affect the success of the
offering in which such securities entitled to Piggyback
Registration Rights are proposed for inclusion, then the
securities entitled to Piggyback Registration Rights shall be
excluded from any applicable Registration Statement to the extent
so recommended in such opinion, to the extent and only to the
extent not inconsistent with the terms of the agreements pursuant
to which such Piggyback Registration Rights were granted.
(iii) Notwithstanding any other provision of
this Section 2(c), if any disposition of Registrable Securities
is pursuant to a firm commitment underwritten registration, and
the managing underwriter or underwriters advise the Company and
the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, then the
securities entitled to Piggyback Registration Rights shall
participate pro rata with the Holders of Registrable Securities
to be disposed of in such underwritten registration to the extent
required by such limitation, to the extent and only to the extent
not inconsistent with the terms of the agreements pursuant to
which such Piggyback Registration Rights were granted.
3. REGISTRATION PROCEDURES.
In connection with the Company's registration
obligations pursuant to Section 2, the Company will use its best
efforts to effect such registrations to permit the sale of such
Registrable Securities in accordance with the intended method or
methods of distribution thereof as specified by the Holders, and
pursuant thereto the Company will:
(a) as expeditiously as possible but in no event
later than forty-five (45) days after the Initial Issuance Date,
prepare and file with the SEC a Registration Statement relating
to such registration pursuant to Rule 415 under the Securities
Act on any appropriate form under the Securities Act, which form
shall be available for the sale of the Registrable Securities by
the Holders thereof in accordance with the intended method or
methods of distribution thereof as specified by the Holders,
cooperate and assist in any filings required to be made with the
NYSE, any other public exchange or the NASD, and use its best efforts
to cause such Registration Statement to become effective; PROVIDED,
HOWEVER, that before filing a Registration Statement or Prospectus or
any amendments or supplements thereto, including documents incorporated
by reference after the initial filing of any Registration Statement,
the Company will furnish to the Holders of the Registrable
Securities covered by such Registration Statement, their counsel
and the underwriters, if any, copies of all such documents
proposed to be filed sufficiently in advance of filing to provide
them with a reasonable opportunity to review such documents and
comment thereon;
(b) prepare and file with the SEC such amendments
and post-effective amendments to a Registration Statement as may
be necessary to keep such Registration Statement effective for
the applicable period; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement or supplement to such Prospectus;
(c) notify each Holder of Registrable Securities
included in the Registration Statement, their counsel and the
managing underwriters, if any, promptly, and (if requested by any
such Person) confirm such notice in writing, (1) when a
Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has
become effective, (2) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or
for additional information, (3) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purposes,
(4) if at any time the representations and warranties of the
Company contained in agreements contemplated by Section 3 (m)
cease to be true and correct, (5) of the receipt by the Company
of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (6) of the happening of any event as
a result of which the Prospectus included in the Registration
Statement (as then in effect) contains any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in
light of the circumstances under which they were made) not
misleading and (7) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be
appropriate or that there exist circumstances not yet disclosed
to the public which make further sales under such Registration
Statement inadvisable pending such disclosure and post-effective
amendment;
(d) upon the occurrence of any event contemplated
by Section 3(c)(2)-(7) and immediately upon the expiration of any
Delay Periods (as defined at the end of this Section (3)), (i)
prepare, if the occurrence of such event or period requires such
preparation, a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such Prospectus
will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein not misleading and (ii) comply with the obligations of
the Company set forth in the last paragraph of this Section 3;
(e) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest possible moment;
(f) if reasonably requested by a managing
underwriter, if any, or any Holder of Registrable Securities to
which a Prospectus relates, immediately incorporate in a
Prospectus supplement or post-effective amendment such
information concerning such Holder of Registrable Securities, the
managing underwriter or underwriters, if any, or the intended
method of distribution as the managing underwriter or
underwriters, if any, or such Holder of Registrable Securities
reasonably requests to be included therein and as is appropriate
in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of Registrable
Securities being sold to such underwriter or underwriters, if
any, the purchase price being paid therefor by such underwriter
or underwriters, if any, and with respect to any other terms of
the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after notification of the
matters to be incorporated in such Prospectus supplement or post-
effective amendment;
(g) furnish to each Holder of Registrable
Securities included in such Registration Statement and each
managing underwriter, if any, without charge, one manually-signed
copy of the Registration Statement and any post-effective
amendments thereto, including financial statements, schedules and
statistical data, and, upon request, all documents incorporated
therein by reference and all exhibits (including those
incorporated by reference);
(h) deliver to each Holder of Registrable
Securities included in such Registration Statement, their counsel
and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each preliminary
Prospectus) and any amendment or supplement thereto as such
Persons may reasonably require in order to facilitate the
disposition of Registrable Securities in accordance with the
intended methods of disposition by the sellers thereof set forth
in such Prospectus or amendment or supplement; the Company
consents to the use of such Prospectus or any amendment or
supplement thereto by each Holder of Registrable Securities
included in the Registration Statement and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus or any amendment or
supplement thereto, subject to the provisions of the last
paragraph of this Section 3;
(i) insure that all Registrable Securities
subject to the Registration Statement shall at all times be
registered or qualified for offer and sale under the securities
or blue sky laws of such jurisdictions as any Holder or
underwriter reasonably requests in writing; use its best efforts
to keep each such registration or qualification effective,
including through new filings or amendments or renewals, during
the period such Registration Statement is required to be kept
effective 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 the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company will not be
required to qualify to do business or take any action that would
subject it to taxation or general service of process in any
jurisdiction where it is not then so qualified or subject;
(j) cooperate with the Holders of Registrable
Securities included in the Registration Statement and the
managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legends), representing Registrable Securities to be
sold under the Registration Statement; and enable such Registrable
Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or such Holders
may request prior to any sale of Registrable Securities;
(k) use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate
the disposition of such Registrable Securities in accordance with
the chosen method or methods of distribution;
(l) cause all Registrable Securities included in
such Registration Statement to be listed, by the date of first
sale of Registrable Securities pursuant to such Registration
Statement, on the principal securities exchange or automated
interdealer system on which the same type of securities of the
Company are then listed or traded;
(m) enter into such agreements and take all such
other reasonable actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable
Securities and in such connection, (1) obtain a "cold comfort"
letter and updates thereof from the Company's independent
certified public accountants addressed to each Holder of
Registrable Securities included in the Registration Statement and
the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold
comfort" letters given by accountants in connection with
underwritten offerings, (2) in the case of an underwritten
offering, (I) enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and use
its best efforts to obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriter or underwriters) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such
other related matters as may be reasonably requested by such
Holders and underwriters, (II) the underwriting agreement shall
set forth in full the indemnification and contribution provisions
and procedures of Section 5 with respect to all parties (which in
all events shall include the underwriters and all Persons who
control the underwriters) to be indemnified pursuant to said
Section, and (III) the Company shall deliver such documents and
certificates as may be reasonably requested by the managing
underwriter or underwriters, if any, to evidence compliance with
any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company. The above shall
be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(n) make available for inspection by designated
representatives of the Holders of Registrable Securities included
in the Registration Statement, any underwriter participating in
any disposition pursuant to such Registration Statement and any
lawyer or accountant retained by such selling Holders or
underwriter all pertinent records and documents as they may
reasonably request; provide such persons full access upon
reasonable notice and at reasonable times to the personnel,
properties and all books, records and other information
concerning the Company (other than technical information
regarding designs, products, methods of manufacture or research)
and will furnish to such persons such financial and operating
data, including financial statements, and other information with
respect to the business, assets, financial condition and
operations of the Company as such persons shall from time to time
reasonably request; and the Company will permit such persons
access to the Company's personnel, consultants, agents,
attorneys, accountants, customers, suppliers, bankers, and others
who have significant relationships with the Company and the
Company's assets, books and records and the Company shall
provide such persons with any further information concerning the
Company to enable such persons to conduct an ongoing due
diligence review of the Company; PROVIDED, HOWEVER, that any
records, information or documents that are confidential in nature
shall be furnished by the Company only after the execution of a
confidentiality agreement by such persons;
(o) cause the Holders of Registrable Securities
to receive the following opinions (I) dated the date that the
Registration Statement is declared effective by the SEC and (II)
dated within ten (10) days following the filing by the Company of
its annual report on Form 10-K for its most recently completed
fiscal year, so long as the Registration Statement is effective:
1) an opinion of Fried, Frank, Harris, Shriver &
Jacobson, or such other outside counsel to the Company
satisfactory to the Holders, to the effect that:
(i) the statements (A) in the Prospectus
under the caption "Description of Capital Stock" and (B) in the
Registration Statement in Item 15, in each case insofar as such
statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize in all material
respects the matters referred to therein;
(ii) such counsel is of the opinion that the
Registration Statement and accompanying Prospectus (except for
financial statements, schedules and financial and statistical
data included therein as to which such counsel need not express
any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
SEC thereunder; and
(iii) in the opinions required to be
delivered pursuant to clause (II) above: In the course of the
preparation by the Company of the Registration Statement and the
Prospectus (excluding the documents incorporated by reference
therein, other than the Company's Annual Report on Form 10-K for
each fiscal year ending on or after December 31, 1996 (each an
"ICN Form 10-K")), such counsel participated in conferences with
certain of the officers and representatives of, and the
independent public accountants for, the Company. Between the
date of the Registration Statement and the time of delivery of
the opinion, such counsel participated in additional conferences
in connection with the preparation of the ICN Form 10-K with
certain officers and representatives of, and independent public
accountants for, the Company at which the contents of the ICN
Form 10-K were discussed. Such counsel did not participate in
the preparation or drafting of any other document incorporated by
reference in the Registration Statement and the Prospectus.
Given the limitations inherent in the independent verification of
factual matters and the character of determinations involved in
the registration process and in the preparation of the ICN Form
10-K, such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectus,
including the documents incorporated by reference, and has not
made any independent check or verification thereof. Subject to
the foregoing and on the basis of the information such counsel
gained in the course of the performance of the services referred
to above, including information obtained from the officers and
other representatives of the Company, no facts have come to the
attention of such counsel that causes such counsel to believe
that the Registration Statement, at the time of the filing of the
ICN Form 10-K, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that the Prospectus contained any untrue statement of a material
fact or omitted 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.
In each case, however, such counsel expresses no view or
belief with respect to financial statements, notes, schedules
or financial or statistical data included, or incorporated by
reference, in the Registration Statement or the Prospectus;
2) an opinion of Proskauer, Rose, Goetz &
Mendelsohn, or such other outside counsel to the Company
satisfactory to the Holders, to the effect that after due
inquiry, such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are
required to be described in any Registration Statement or
accompanying Prospectus and are not so described; and
3) an opinion of David Watt, Executive Vice
President, General Counsel and Corporate Secretary of the
Company, or any other executive officer of the Company that may
come to hold such similar office, to the effect that:
(i) the Company is in good standing under
the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct
its business as described in any Registration Statement and
accompanying Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company is
validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business as
described in any Registration Statement and accompanying
Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(iii) the statements (A) in the Prospectus
under the caption "Description of Capital Stock" and (B) in the
Registration Statement in Items 14 and 15, in each case insofar
as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(iv) after due inquiry, such counsel does
not know of any legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of
its subsidiaries is subject that are required to be described in
any Registration Statement or accompanying Prospectus and are not
so described or any of the statutes, regulations, contracts or
other documents that are required to be described in any
Registration Statement or accompanying Prospectus or to be filed
as exhibits to the Registration Statement that are not described
or filed as required; and
(v) such counsel (A) is of the opinion that
any Registration Statement and accompanying Prospectus (except
for financial statements, schedules and statistical data included
therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities
Act and the applicable rules and regulations of the SEC
thereunder, (B) has no reason to believe that (except for
financial statements, schedules and statistical data as to which
such counsel need not express any belief) any Registration
Statement or accompanying Prospectus at the time that the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (C) has no reason to believe that
(except for financial statements, schedules and statistical data
as to which such counsel need not express any belief) any
Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; and
(p) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC and make
generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act,
no later than ninety (90) days after the end of any 12-month
period (1) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm or best
efforts underwritten offering and (2) beginning with the first
day of the Company's first fiscal quarter next succeeding each
sale of Registrable Securities after the effective date of a
Registration Statement, which statements shall cover said 12-
month periods.
The Company's failure to take any of the actions
required pursuant to this Section 3 shall have the effect
specified in the Certificate of Designations.
The Company may require each seller of Registrable
Securities as to which any registration is being effected to
furnish promptly to the Company such information regarding the
distribution of such securities as the Company may from time to
time reasonably request in writing.
Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of
any notice from the Company of the happening of any event of the
kind described in Section 3(c)(2)-(7) or upon receipt of any
notice from the Company of the commencement of any Delay Period
(as defined below), such Holder will, if the occurrence of such
event or period so requires, forthwith discontinue disposition of
such Registrable Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section
3(d), or until it is advised in writing by the Company that the
use of the applicable Prospectus may be resumed or that the
applicable Delay Period has ended, and has received copies of any
additional or supplemental filings which are incorporated by
reference in such Prospectus (the period from and including the
date of receipt of any such notice requiring the discontinuance
of the disposition of Registrable Securities to and including the
date that the Holder shall have received such supplemented or
amended Prospectus, advice and additional or supplemental filings
being hereinafter termed a "Blackout Period"), and, if so
directed by the Company, such Holder will, or will request the
managing underwriter or underwriters, if any, to, deliver to the
Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the
time of receipt of such notice. The Company shall have the right
(i) to avoid the disclosure of any corporate development that the
Company is not otherwise obligated to disclose and (ii) to
satisfy SEC requirements relating to the financial statements of
businesses acquired, in either case by suspending the use of the
Registration Statement for a reasonable length of time not
exceeding an aggregate of ninety (90) days in any 360 day period
(a "Delay Period").
4. REGISTRATION EXPENSES. (a) All expenses incident
to the Company's performance of or compliance with this
Agreement, including, without limitation, all registration and
filing fees, fees with respect to the registration and filings
required to be made with the NYSE, fees, costs and expenses of
compliance with securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky qualifications
of the Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel
for the Company and of all independent certified public accountants
of the Company (including the expenses of any "cold comfort" letters
required by or incident to such performance), securities acts
liability insurance if the Company so desires and fees and expenses
or other Persons, including special experts, retained by the Company
will be borne by the Company whether or not the Registration
Statement becomes effective. In addition, the Company shall pay
the reasonable fees and expenses for not more than one counsel to
the sellers of Registrable Securities in connection with each
registration hereunder, such counsel to be designated by the
Holders of a majority of the Registrable Securities to be sold
pursuant to such registration. The Company will, in any event,
pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and
the fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange on
which similar securities issued by the Company are then listed.
(b) The Investors participating in any sale of
Registrable Securities shall pay all underwriting discounts and
selling commissions applicable to such sale of Registrable
Securities and all fees and disbursements of counsel incurred in
any such sale of Registrable Securities not otherwise provided
for in this Agreement.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
each Holder, its directors and officers and each person, if any,
who controls each Holder within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, suits, damages, causes of
action, liabilities, costs and expenses (including, without
limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or
claim) to which such Holder or other person may become subject to
under the Securities Act or under the Exchange Act or otherwise,
arising from or relating to any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, HOWEVER, that the
Company's indemnification obligations shall not extend to any
misstatement or alleged misstatement or omission or alleged
omission with reference to information relating to any Holder
furnishing in writing by or on behalf of such Holder expressly
for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements
thereto; and PROVIDED FURTHER that the indemnification contained
in this paragraph (a) with respect to any preliminary Prospectus
shall not inure to the benefit of any Holder (or to the benefit
of any Person controlling such Holder) on account of any such
loss, claim, damage, liability or expense arising from the sale
of the Registrable Securities by such Holder to any person if a
copy of the Prospectus shall not have been delivered or sent to
such Person within the time required by the Securities Act and
the regulations thereunder (if such Prospectus is so required to
be delivered), and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact
contained in such preliminary Prospectus was corrected in the
Prospectus, provided that the Company has delivered the
Prospectus to the Holders in requisite quantity on a timely basis
to permit such delivery or sending.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange
Act and each other Holder, from and against any and all losses,
claims, suits, damages, causes of action, liabilities, costs and
expenses (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or
investigating any such action or claim) to which the Company or
such person may become subject to under the Securities Act or
under the Exchange Act or otherwise, arising from or relating to
any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended
or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only with reference to information relating to
such Holder furnishing in writing by or on behalf of such Holder
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in
respect of which indemnity may be sought pursuant to paragraph
(a) or (b) of this Section 5, such person (the "indemnified
party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party shall retain counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such indemnified party
unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of other counsel or (ii)
the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing
interests between them; PROVIDED, HOWEVER, that it is understood
that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm
(in addition to one firm of local counsel in any jurisdiction)
for all indemnified parties, their directors, officers and all
persons, if any, who control such indemnified parties within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act. In the case of any such separate firm, such
firm shall be designated in writing by a majority of the
indemnified parties. All such fees and expenses shall be
reimbursed as they are incurred; PROVIDED, HOWEVER, that if it is
subsequently determined by a court of competent jurisdiction not
subject to appeal that such indemnified party was not entitled to
such indemnification, then the indemnified party shall promptly
reimburse the indemnifying party for all the fees and expenses of
such separate firm of counsel previously paid by the indemnifying
party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel
as contemplated by this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by
such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified 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.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an
indemnified party or insufficient in respect of any losses,
claims, suits, damages, causes of action, liabilities, costs and
expenses referred to therein, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, suits,
damages, causes of action, liabilities, costs and expenses (i) in
such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one
hand and by the indemnified party or parties on the other hand in
connection with the actions that resulted in such losses, claims,
suits, damages, causes of action, liabilities, costs and expenses
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying part or
parties on the one hand and of the indemnified party or parties
on the other hand in connection with the actions that resulted in
such losses, claims, suits, damages, causes of action,
liabilities, costs and expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on
the one hand and the Holders on the other hand shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact or other
action arising under the Securities Act or the Exchange Act
relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission. The Holders' respective obligations to contribute
pursuant to this Section 5 are several in proportion to the
respective number of shares of Preferred Stock they have
purchased, and not joint.
(e) The Company and the Holders agree that it would
not be just or equitable if contribution pursuant to this Section
5 were determined by PRO RATA allocation or by any other method
of allocation that does not take account of the equitable
considerations referred to in paragraph (d) of this Section 5.
The amount paid or payable by an indemnified party as a result of
the losses, claims, suits, damages, causes of action,
liabilities, costs and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder shall
be required to indemnify and contribute any amount in excess of
the amount by which the total price at which the shares of Common
Stock offered by such Holder and distributed to the public were
offered to the public exceed the amount paid by such Holder for
the underlying Preferred Stock converted into such shares of
Common Stock. 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 remedies provided for in
this Section 5 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified
party at law or in equity.
(f) The indemnity and contribution provisions
contained in this Section 5 shall remain operative and in full
force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Holder, its officers or directors or any person controlling such
Holder; or the Company, its officer or directors or any person
controlling the Company and (iii) acceptance of any payment for
any of the Preferred Stock.
6. SEC FILINGS.
The Company agrees that it will file the reports
required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC
thereunder. The Company shall cause its annual reports to
stockholders and any quarterly or other financial reports and
information furnished by it to stockholders pursuant to the
requirements of the Exchange Act to be mailed to the Holders of
Registrable Securities (no later than the date such materials are
mailed to the Company's stockholders). If the Company is not
required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, it shall cause its
financial statements, including any notes thereto (and with
respect to annual reports, an auditors' report by a nationally
recognized firm of independent certified public accountants), a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and such other information which the
Company would otherwise be required to include in annual and
quarterly reports filed under the Exchange Act, to be mailed to
the Holders of Registrable Securities, within one hundred twenty
(120) days after the end of each of the Corporation's fiscal
years and within sixty (60) days after the end of each of its
first three fiscal quarters.
7. UNDERWRITTEN REGISTRATION.
If any of the Registrable Securities are to be sold in
an underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority of the Registrable
Securities to be sold in such offering, which investment banker
or investment bankers or manager or managers will be reasonably
satisfactory to the Company.
Notwithstanding anything herein to the contrary, no
Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwritten arrangements approved by
the Persons entitled hereunder to approve such arrangement and
(b) accurately completes and executes all questionnaires, powers
of attorney, indemnities, custody agreements, underwriting
agreements and other documents required under the terms of such
underwriting arrangements.
8. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENT. The Company has
not previously entered into any agreement with respect to its
securities granting any registration rights to any Person, and
will not on or after the date of this Agreement enter into any
agreement with respect to its securities, which in either case is
inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof.
(b) 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 Company has obtained the written consent of the Holders owning
at least a majority of the Registrable Securities then outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter which relates
exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and
which does not directly or indirectly affect the rights of other
Holders may be given by Holders owning a majority of the shares of
the Registrable Securities being sold by such Holders, provided that
the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(c) NOTICES. Any notices or other communications
required or permitted hereunder shall be given in writing and
shall be delivered by facsimile transmission to the below listed
facsimile numbers, with a confirmation of such facsimile
transmission sent by certified or registered mail, postage
prepaid, to the following addresses:
If to the Investors:
At their facsimile number and address specified on
Schedule A hereto
Copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Fax No.: (212) 593-5955
Attention: Burton Lehman, Esq.
If to the Company:
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California
Fax No.: (714) 641-7206
Attention: David C. Watt, Esq.
Copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, N.Y. 10004
Fax No.: (212) 859-8586
Attention: Jeffrey Bagner, Esq.
and thereafter at such other facsimile number or address, notice
of which has been given in accordance with this Section 8(d).
Each such notice or communication shall be deemed to be effective
when such facsimile transmission is transmitted to the facsimile
number specified in this Section 8(d) and the appropriate
answerback is received.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors of
each of the parties and subsequent Holders of Preferred Stock who
agree to be bound by all of the terms and conditions of this
Agreement.
(f) COUNTERPARTS. This Agreement may be executed
in two or more counterparts and by the parties hereto in separate
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 instrument.
(g) HEADING. The headings in this Agreement are
for convenience of reference only and shall not constitute a part
of this Agreement, nor shall they affect their meaning,
construction or effect.
(h) GOVERNING LAW. The validity, performance,
construction and effect of this Agreement shall be governed by
and construed in accordance with the internal laws of the State
of New York, without giving effect to principles of conflicts of
law.
(i) SEVERABILITY. In the event that any one or
more of the provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired
thereby.
(j) ENTIRE AGREEMENT. This Agreement, the
Subscription Agreement and the Certificate of Designations are
intended by the parties as a final expression of their agreement
and are intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein, with respect to
the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement, the Subscription
Agreement and the Certificate of Designations supersede all prior
agreements and understandings between the parties with respect to
such subject matter.
(k) ATTORNEYS' FEES. The prevailing party, as
determined by the judge presiding over the action or proceeding,
in any action or proceeding brought to enforce any provision of
this Agreement, or any party validly asserting any provision
hereof as a defense in any such action or proceeding, shall be
entitled to recover reasonable attorneys' fees, in addition to
costs and expenses and any other available remedy.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
COMPANY:
ICN PHARMACEUTICALS, INC.
By:
--------------------------------
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
INVESTOR:
By:
--------------------
Name:
Title:
SCHEDULE A
NOTICES
CIBC Wood Gundy
Securities Corp.
425 Lexington Avenue
New York, NY 10017
Facsimile Number: (212) 885-4998
Attention: Walter F. McLallen IV
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Ramius Fund Limited
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Palladin Partners, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Gershon Partners, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Cerberus Partners, L.P.
950 Third Avenue
20th Floor
New York, NY 10022
Facsimile Number: (212) 421-2947
Attention: Michael Hisler
Hare & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
Cypress & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
Daffodil & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
Exhibit 4.6
STOCK SUBSCRIPTION AGREEMENT
AMONG
ICN PHARMACEUTICALS, INC.
and
THE PURCHASERS NAMED HEREIN
Dated as of October 9, 1996
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated
as of October 9, 1996, by and among ICN Pharmaceuticals, Inc., a
Delaware corporation (the "Company") and the Purchasers specified
on the signature page to this Agreement (the "Purchasers").
WHEREAS, the Company desires to issue and sell 50,000
shares of Preferred Stock (for an aggregate purchase price of
$50,000,000); and
WHEREAS, the Purchasers desire to subscribe for and
purchase the securities described above upon the terms and
subject to the conditions specified herein (the "Sale
Transaction").
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" has the meaning ascribed to it in the
Securities Act.
"BALANCE SHEET" means the unaudited consolidated
balance sheet of the Company as of June 30, 1996 referred to in
Section 3.9 hereof.
"BALANCE SHEET DATE" means June 30, 1996.
"BANKRUPTCY CODE" means title 11 of the United States
Code, as amended.
"BENEFIT PLAN" has the meaning set forth in Section
3.12 hereof.
"BLUE SKY LAWS" means the state securities and takeover
laws.
"CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of
corporate stock or any and all equivalent ownership interests in
a Person (other than a corporation).
"CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations, Preferences and Rights of the Preferred Stock,
attached hereto as Exhibit A, filed with the Secretary of State
of the State of Delaware on October 8, 1996.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMON STOCK" means the common stock, par value $.01
per share, of the Company.
"COMPANY ASSETS" shall have the meaning set forth in
Section 3.16 hereof.
"ENVIRONMENTAL LAWS" means all federal, state, local
and foreign laws and regulations relating to pollution or the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata),
including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental
Concern.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, together with the rules and regulations
promulgated thereunder.
"FOOD AND DRUG ACT" means the Federal Food, Drug and
Cosmetic Act, 21 U.S.C. sections 301 ET SEQ., and the rules and
regulations promulgated thereunder, in each case as in effect and
as interpreted on the date hereof.
"GAAP" shall have the meaning set forth in Section 3.9
hereof.
"GOVERNMENTAL ENTITY" means any federal, state, local
or foreign legislative body, court, government, department or
instrumentality, or governmental, administrative or regulatory
authority or agency.
"KNOWLEDGE OF THE COMPANY" means the actual knowledge,
without independent inquiry, of any of the executive officers of
the Company or its Significant Subsidiaries.
"LIENS" has the meaning set forth in Section 3.16
hereof.
"MATERIAL ADVERSE EFFECT" means, in connection with the
Company or any of its Subsidiaries, any change or effect that is
materially adverse to the business, results of operations,
properties (including intangible properties), condition
(financial or otherwise), prospects or assets or liabilities of
the Company and its Subsidiaries taken as a whole.
"MATERIALS OF ENVIRONMENTAL CONCERN" means hazardous
substances as defined under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 ET
SEQ. and hazardous wastes as defined under the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, ET SEQ. and
petroleum and petroleum products and such other chemicals,
materials or substances as are listed as "hazardous wastes",
"hazardous materials", "toxic substances", or words of similar
import under any similar federal, state, local or foreign laws.
"NYSE" means the New York Stock Exchange.
"PERSON" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization,
or a government or agency or subdivision thereof.
"PREFERRED STOCK" means the Series B Convertible
Preferred Stock of the Company, par value $.01 per share, having
a liquidation preference of $1000 per share and such other rights
and preferences as are set forth in the Certificate of
Designations.
"PROSPECTUS" means the prospectus included in any
Registration Statement, as amended or supplemented by any
Prospectus supplement, including post-effective amendments, and
all material incorporated by reference in such Prospectus.
"PURCHASE PRICE" has the meaning set forth in Section
2.1 hereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreements to be entered into on the date hereof between
the Company and the Purchasers, substantially in the form
attached hereto as Exhibit B.
"REGISTRATION STATEMENT" means any registration
statement of the Company covering any shares of Common Stock to
be registered pursuant to the terms of the Registration Rights
Agreement.
"SALE CLOSING" has the meaning set forth in Section 2.2
hereof.
"SALE TRANSACTION" shall have the meaning set forth in
the recitals hereto.
"SEC" means the United States Securities and Exchange
Commission.
"SEC DOCUMENTS" shall have the meaning set forth in
Section 3.9 hereof.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended, together with the rules and regulations
promulgated thereunder.
"SIGNIFICANT SUBSIDIARIES" has the meaning specified in
Regulation S-X promulgated under the Securities Exchange Act.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited or general partnership, trust, association
or other business entity of which 50% or more of the outstanding
Capital Stock or other interests entitled to vote in the election
of the board of directors of such corporation (irrespective of
whether, at the time, Capital Stock of any other class or classes
of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more Subsidiaries
of such Person.
"TAXES" means all taxes, charges, fees, levies, duties
or other assessments, including without limitation all net
income, gross income, gross receipts, franchise, value added,
sales, use, property, ad valorem, transfer, withholding, profits,
license, employee, payroll, social security, unemployment,
excise, estimated, severance and any other taxes, duties,
withholdings, fees, assessments or charges of any kind
whatsoever, including any interest, penalties or additional
amounts attributable thereto, imposed by any federal, state,
local or foreign taxing authority.
"TAX RETURN" means any report, return, information
statement or other information required to be supplied to any
federal, state, local or foreign taxing authority, or any
election permitted to be made, in connection with Taxes.
ARTICLE II
PURCHASE, SALE AND EXCHANGE OF SHARES
2.1. AGREEMENT TO PURCHASE AND SELL. Upon the terms and
subject to the conditions hereinafter set forth, the Purchasers
hereby, severally but not jointly, subscribe for and agree to
purchase from the Company, in the amount for each Purchaser set
forth opposite such Purchaser's name on Schedule 2.1, and the
Company agrees to issue and sell to the Purchasers in such
amounts, on the date hereof, an aggregate of 50,000 shares of
Preferred Stock (the "Preferred Stock") for an aggregate cash
price (the "Purchase Price") equal to $50,000,000.
2.2. SALE CLOSING. (a) The closing of the purchase
and sale of the Preferred Stock pursuant to Section 2.1 hereof
(the "Sale Closing") shall take place at the time of the
execution of this Agreement. The Sale Closing shall be held at
the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York, or at such other place as the parties hereto
shall mutually agree.
(b) At the Sale Closing, (i) the Company shall deliver
to each Purchaser, against payment of the Purchase Price
therefor, one or more certificates for the shares of Preferred
Stock being purchased by such Purchaser, in definitive form and
registered in the name of such Purchaser or its nominee, which
name shall be designated in writing at least two (2) business
days prior to the Sale Closing, representing the Preferred Stock
being purchased by it, (ii) the Purchasers shall deliver to the
Company against delivery of the certificate or certificates
representing the Preferred Stock, by wire transfer to such
account as the Company shall designate in writing at least two
(2) business days prior to the Sale Closing, the Purchase Price
payable in immediately available funds, and (iii) each party to
this Agreement shall deliver to the other such other documents,
instruments and writings as may be required to be delivered in
accordance with this Agreement or as may be reasonably requested
by such other party.
ARTICLE III
REPRESENTATION AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchasers as follows:
3.1. CORPORATE ORGANIZATION. The Company and each of
its Subsidiaries is a corporation duly organized, validly
existing and, if applicable, in good standing under the laws of
its jurisdiction of incorporation, and has all requisite
corporate power and authority to own or lease and operate its
properties and to carry on its business as now being conducted,
and is duly qualified to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing would not reasonably be expected to
have a Material Adverse Effect. The Company has made available
to the Purchasers or its agents complete and correct copies of
the Restated Certificate of Incorporation and by-laws of the
Company as in effect on the date hereof.
3.2. CAPITALIZATION. (a) The authorized Capital Stock
of the Company consists of (i) 100,000,000 shares of Common Stock
and (ii) 10,000,000 shares of preferred stock, par value $0.01
per share. As of September 30, 1996, there were (i) 32,508,000
shares of Common Stock issued and outstanding all of which are
duly authorized and validly issued, fully paid and nonassessable
and (ii) 5,200,000 shares of Common Stock reserved for issuance
pursuant to the terms of the 8 1/2% Convertible Subordinated
Notes Due 1999 of the Company (the "Notes"), 918,000 shares of
Common Stock reserved for issuance pursuant to the terms of the 5
5/8% Swiss Franc Exchangeable Certificates, 554,000 shares of
Common Stock reserved for issuance pursuant to the terms of the
5- 1/2% Bio Capital Holding certificates, 12,000 shares of the
Common Stock reserved for issuance pursuant to the terms of the
6_% Euro Bond certificates, 2,655,000 shares of Common Stock
reserved for issuance pursuant to the 1992 Employee Incentive
Stock Option Plan, 2,938,000 shares of Common Stock reserved for
issuance pursuant to the 1992 Non-Qualified Stock Option Plan
and the 1992 Non-Qualified Stock Option Plan, 2,938,000 shares
of Common Stock reserved for issuance pursuant to the 1994 Stock
Option Plan and 4,000,000 shares reserved for issuance pursuant
to the conversion rights and dividend obligations set forth in
the Certificate of Designations (and when so issued
all such shares will be validly issued, fully paid and
nonassessable). Immediately after the Sale Closing,
there will be 50,000 shares of preferred stock, par
value $0.01 per share, outstanding, all of which shall consist of
the Preferred Stock, and 1,000,000 shares of Series A
Participating Preferred Stock reserved for issuance pursuant to
the ICN Merger Corp. Rights Agreement, dated as of November 2,
1994, and no other class or series of preferred stock authorized,
issued or reserved for issuance. The Preferred Stock has been
duly authorized and upon payment therefore as provided in this
Agreement will be validly issued, fully paid and nonassessable.
The Company has not issued any Common Stock since September 30,
1996, except pursuant to the exercise of stock options and the
conversion of the Notes, nor has the Company since such date
repurchased or redeemed or acquired any such shares. No shares
of Capital Stock of the Company are entitled to preemptive
rights.
(b) Except as set forth in Section 3.2(a) above, the
Company does not have outstanding any Capital Stock or securities
convertible into or exchangeable for any shares of Capital Stock
and there will be no options, warrants or other rights,
agreements, arrangements or commitments of any character to which
the Company is a party or otherwise obligating the Company to
issue or sell or entitling any Person to acquire from the
Company, and the Company is not a party to any agreement,
arrangement or commitment obligating it to repurchase, redeem or
otherwise acquire, any shares of its Capital Stock or securities
convertible into or exchangeable for any of its Capital Stock.
(c) Upon delivery of the certificate(s) representing
the Preferred Stock, and payment of the Purchase Price therefor,
pursuant to the Sale Transaction in accordance with the terms of
this Agreement, the Company will transfer to the Purchasers good
and valid title to the Preferred Stock, free and clear of any
Lien, other than Liens, if any, created by the Purchasers.
3.3. SUBSIDIARIES. (a) Schedule 3.3 hereto sets forth
a list of all Subsidiaries of the Company showing, as to each
such Subsidiary, the jurisdiction of its organization, the number
of shares or other equity or ownership interests of each class of
its Capital Stock authorized and the amount of each class
outstanding, and the percentage of the outstanding shares or
other equity or ownership interests of each such class owned,
directly or indirectly, by the Company other than directors'
qualifying shares.
(b) On the date hereof, except as and to the extent
set forth in Schedule 3.3, (i) all the outstanding stock or other
equity or ownership interests of each Subsidiary, owned directly
or indirectly by the Company as shown on Schedule 3.3, is owned
free and clear of all Liens and is validly issued and (ii) there
are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which any
Subsidiary is a party or otherwise obligating any Subsidiary to
issue or sell, or entitling any Person to acquire from any
Subsidiary, and no Subsidiary is a party to any agreement,
arrangement or commitment obligating it to repurchase, redeem or
otherwise acquire, any shares of the Capital Stock or any
securities convertible into or exchangeable for the Capital Stock
of any such Subsidiary.
3.4. AUTHORIZATION. The Company has full corporate
power and authority to execute and deliver this Agreement, the
Registration Rights Agreement and the Certificate of Designations
and to consummate the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof and to
issue the Preferred Stock and the Common Stock issuable upon
conversion of or as dividends on the Preferred Stock in
accordance with the terms of the Certificate of Designations.
The execution and delivery of this Agreement and the Registration
Rights Agreement, the execution, delivery and filing of the
Certificate of Designations, the issuance of the Preferred Stock
and of the Common Stock issuable upon conversion of or as
dividends on the Preferred Stock have been duly authorized by the
Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to approve
and authorize the execution and delivery of this Agreement, the
Registration Rights Agreement, the execution, delivery and filing
of the Certificate of Designations, the issuance of the Preferred
Stock and the Common Stock issuable upon conversion of or as
dividends on the Preferred Stock and the consummation of the
transactions contemplated hereby and thereby in accordance with
the terms hereof and thereof, other than, in connection with the
issuance of Common Stock as dividends on Preferred Stock, the
declaration of such dividends and the determination to pay such
dividends with Common Stock by the Board of Directors of the
Company. This Agreement and the Registration Rights Agreement
have been duly executed and delivered by the Company, the
Certificate of Designations has been duly filed in accordance
with the Delaware General Corporation Law and the Preferred Stock
has been duly issued and each of this Agreement, the Registration
Rights Agreement and the Certificate of Designations constitute
valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except to the extent
limited by (i) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity.
3.5. NO VIOLATION; CONSENTS. (a) Assuming the making
or receipt of all filings, notices, registrations, consents,
approvals, permits and authorizations described in the following
paragraph, the execution and delivery of this Agreement and the
Registration Rights Agreement, the execution, delivery and filing
of the Certificate of Designations by the Company, the issuance
of the Preferred Stock and the Common Stock issuable upon
conversion of or as dividends on the Preferred Stock by the
Company, the consummation of the transactions contemplated
hereby, by the Registration Rights Agreement or by the
Certificate of Designations, the compliance by the Company with
any of the provisions hereof or of the Registration Rights
Agreement or the Certificate of Designations will not (i)
conflict with, violate or result in any breach of the Restated
Certificate of Incorporation, by-laws or other charter documents
of the Company or its Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of
time or both) a default or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of
any Lien on or against any of the properties of the Company or
any of its Subsidiaries pursuant to any of the terms or
conditions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company
or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, or (iii) violate
any statute, law, rule, regulation, writ, injunction, judgment,
order or decree of any Governmental Entity, binding on the
Company or any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (i) and (ii)
conflicts, violations, breaches, defaults, rights of termination,
cancellation or acceleration, and liens which, individually or in
the aggregate, would not have a Material Adverse Effect, would
not prevent or materially delay consummation of the transactions
contemplated hereby and would not affect the validity of the
issuance of the Preferred Stock or of the Common Stock issuable
upon conversion of or as dividends on the Preferred Stock.
(b) Except for (i) the filing of the Certificate of
Designations in accordance with the Delaware General Corporations
Law, (ii) applicable requirements, if any, under Blue Sky Laws
and (ii) the filing of a Registration Statement, no filing,
consent, approval, permit, authorization, notice, registration or
other action of or with any Governmental Entity, is required to
be made or obtained by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of
this Agreement and the Registration Rights Agreement by the
Company, the issuance of the Preferred Stock and the Common Stock
issuable upon conversion of or as dividends on the Preferred
Stock by the Company or the consummation by the Company of the
transactions contemplated hereby and thereby.
3.6. COMPLIANCE WITH APPLICABLE LAW. The businesses of
the Company are not being conducted in violation of any law,
ordinance, rule, regulation, judgment, decree or order of any
Governmental Entity, except for possible violations which,
individually or in the aggregate, would not have a Material
Adverse Effect. The Company and each of its Subsidiaries possess
all domestic and foreign governmental licenses, permits,
authorizations and approvals and have made all registrations and
given all notifications required under federal, state, local or
foreign law to carry on in all respects their businesses as
currently conducted, except as otherwise disclosed in writing by
the Company to the Purchasers on or prior to the date hereof, and
except where the failure to have any such licenses, permits,
authorizations or approvals, individually or in the aggregate,
would not have a Material Adverse Effect. Except as disclosed in
the June 30, 1996 Quarterly Report on Form 10-Q of the Company
(the "June 30 Form 10-Q") no investigation or review by any
Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company,
threatened, other than those the outcome of which, individually
or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
3.7. COMPLIANCE WITH FOOD AND DRUG ACT.
(a) FDA PERMITS. The Company and each of its
Subsidiaries have all material licenses, permits, consents,
approvals and authorizations that are required under the Food and
Drug Act and any similar foreign law, rule or regulation
(collectively, the "FDA Permits") in connection with the conduct
of the businesses of the Company and each of its Subsidiaries.
The Company has obtained and owns or has the right to use the FDA
Permits in accordance with the terms thereof. Each FDA Permit is
valid and in full force and effect. The FDA Permits are
currently effective and sufficient for the operation of the
Company's businesses as currently conducted. All information
supplied by or on behalf of the Company and each of its
Subsidiaries to obtain or maintain each FDA Permit was, as of the
date given, true and complete in all material respects. The
Company and each of its Subsidiaries has complied in all material
respects with all conditions and requirements imposed by the FDA
Permits and the Company or its Subsidiaries has not received any
notice of cancellation, suspension or termination of any of the
FDA Permits and to the Knowledge of the Company no Governmental
Entity intends to cancel, suspend or terminate any of the FDA
Permits or that valid grounds for such cancellation, suspension
or termination exist.
(b) FOOD AND DRUG ACT. (i) The Company and each of
its Subsidiaries are in compliance in all material respects with
all applicable requirements of the Food and Drug Act and any
similar foreign law, rule or regulation, (ii) the Company's and
each of its Subsidiaries existing inventory of products held for
sale, and all products manufactured by the Company, any of its
Subsidiaries or any of the Company's Affiliates and sold within
the two (2) years preceding the date hereof, have been produced
in compliance in all material respects with all applicable
requirements of the Food and Drug Act and any similar foreign
law, rule or regulation, including, without limitation, all
"current good manufacturing practices" and similar requirements
thereunder and (iii) to the Knowledge of the Company there are no
events, conditions, circumstances, activities, practices,
incidents, actions or plans of the Company or any Subsidiary
which is likely to interfere with or prevent the Company's or any
of its Subsidiaries continued compliance with all applicable
requirements of the Food and Drug Act or any similar foreign law,
rule or regulation, or which may give rise to any common law or
legal liability of the Company or any Subsidiary under, or
otherwise form the basis of any Lien or any claim, action, suit,
arbitration, inquiry, proceeding or investigation by or before
any Governmental Entity based on or related to, the Food and Drug
Act or any similar foreign law, rule or regulation, other than
those the outcome of which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect.
3.8. LITIGATION. Except as disclosed in the June 30
Form 10-Q, there is no claim, action or proceeding (including any
condemnation proceeding) pending or, to the Knowledge of the
Company, threatened against or relating to the Company or any of
its Subsidiaries by or before any Governmental Entity that if
adversely determined, individually or in the aggregate, would
have a Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its
Subsidiaries that has had, or would reasonably be expected in the
future to have, a Material Adverse Effect or which might
materially adversely affect the transactions contemplated by this
Agreement. The Company does not believe at this time that the
matters disclosed in the June 30 Form 10-Q hereto would,
individually or in the aggregate, have a Material Adverse Effect.
3.9. (i) SEC DOCUMENTS, FINANCIAL STATEMENTS. The
Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act and the Company has filed all reports,
schedules, forms, statements and other documents, together with
all exhibits, financial statements and schedules thereto required
to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), (all of the foregoing,
whether heretofore or hereafter filed with the SEC, and the
Registration Statement, when declared effective, being
hereinafter referred to as the "SEC Documents"). The Company has
not provided to the Purchasers any material information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates,
the SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none
of the SEC Documents 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. As of the date of delivery by the Purchasers of the
prospectus contained in the Registration Statement in connection
with sales of Common Stock by the Purchasers, such prospectus
will comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC
promulgated thereunder, and other federal, state and local laws,
rules and regulations applicable to such prospectus. The
financial statements of the Company included (or incorporated by
reference) in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable
rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the
consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments).
(ii) During the three years preceding the date hereof,
the SEC has not issued an order preventing or suspending the use
of any prospectus relating to the offering of any shares of
Common Stock or instituted proceedings for that purpose.
3.10. NO UNDISCLOSED OR CONTINGENT LIABILITIES.
Neither the Company nor any of its Subsidiaries has any claims,
liabilities or obligations of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to
become due) that would be required to be reflected or reserved
against on a consolidated balance sheet of the Company and its
consolidated Subsidiaries under GAAP, except for claims,
liabilities or obligations (i) reflected or reserved against on
the Balance Sheet, (ii) disclosed in the Company's most recent
Form 10-K or any SEC Document filed subsequent to such Form 10-K
and prior to the date hereof or (iii) incurred by the Company or
any of its Subsidiaries since June 30, 1996 in the ordinary
course of business and consistent with past practice and that,
individually or in the aggregate, would not have a Material
Adverse Effect.
3.11. TAXES. The Company and its Subsidiaries have
timely filed all necessary Tax Returns and notices and have paid
all federal, state, county, local and foreign taxes of any nature
whatsoever for all the tax years through December 31, 1995
indicated on such Tax Returns as being due and payable, to the
extent such taxes have become due (other than taxes which are
being challenged in good faith by the Company and are adequately
reserved for). There are no tax deficiencies which would
reasonably be expected to have a Material Adverse Effect; the
Company and its Subsidiaries have paid all Taxes which have
become due, whether pursuant to any assessments, or otherwise,
and there is no further liability (whether or not disclosed on
such returns) or assessments for any such Taxes, and no interest
or penalties accrues or accruing with respect thereto, except as
may be set forth or adequately reserved for in the financial
statements included in the SEC Documents; the amounts currently
set up as provisions for Taxes or otherwise by the Company and
its Subsidiaries on their books and records are sufficient in
all material respects for the payment of all their unpaid
federal, foreign, state, county and local taxes accrued through
the dates as of which they speak, and for which the Company and
its Subsidiaries may be liable in their own right, or as
transferee of the assets of, as successor to any other
corporation, association, partnership, joint venture or other
entity.
3.12. EMPLOYEE BENEFIT PLANS. (a) All employee
benefit plans and other benefit arrangements covering the
employees of the Company and its Subsidiaries (the "Benefit
Plans") comply, to the extent applicable, in all material
respects with the requirements of ERISA and the Code, and any
Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service to be so
qualified. No Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. Neither a Benefit Plan nor the Company
has incurred any liability or penalty under Section 4975 of the
Code or Section 502(I) of ERISA. Each Benefit Plan has been
maintained and administered in all material respects in
compliance with its terms, ERISA and the Code to the extent
applicable thereto. There are no pending or, to the Knowledge of
the Company, anticipated material claims against or otherwise
involving any of the Benefit Plans and no suit, action or other
litigation (excluding claims incurred in the ordinary course of
Benefit Plan activities) has been brought against or with respect
to any such Benefit Plan, except for any of the foregoing which
would not have a Material Adverse Effect. All material
contributions required to be made as of the date hereof to the
Benefit Plans have been made or provided for. Neither the
Company nor any entity under "common control" with the Company
within the meaning of ERISA Section 4001 has contributed to, or
been required to contribute to, any "multi-employer plan" (as
defined in Section 3(37) and 4001(a)(3) of ERISA). The Company
does not maintain or contribute to any plan or arrangement which
provides or has any liability to provide life insurance, medical
or other employee welfare benefits to any employee or former
employee upon his retirement or termination of employment and it
has never represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such
benefits would be provided. The execution of, and the
performance of the transactions contemplated in, this Agreement,
the Registration Rights Agreement and the Certificate of
Designations will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any
Benefit Plan, policy, arrangement or agreement or any trust or
loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligations to
fund benefits with respect to any employee.
(b) Each Benefit Plan that is not subject to United
States law (a "Foreign Plan") is now and has been operated in all
material respects in compliance with all applicable non-United
States laws, except for matters of non-compliance which
individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect. The fair market value of the
assets of each Foreign Plan (or the liability of each insurer for
any Foreign Plan funded through insurance) is sufficient to
procure or provide for the benefits accrued thereunder through
the date hereof according to the actuarial assumptions and
valuations most recently used to determine employer contributions
to the Foreign Plan, except insufficiencies that would not
reasonably be expected to have a Material Adverse Effect.
3.13 ABSENCE OF CERTAIN CHANGES. Except as set forth
in any SEC Document filed by the Company prior to the date
hereof, since the Balance Sheet Date the business of the Company
and its Subsidiaries has been conducted in the ordinary course
consistent with past practices and there has not been:
(i) any event, occurrence, development or state
of circumstances or facts which, individually or in the
aggregate, has had or would reasonably be expected to have a
Material Adverse Effect;
(ii) any declaration, setting aside or payment of
any dividend or other distribution with respect to any
shares of Capital Stock of the Company, other than the
normal quarterly dividend of the Company, or any repurchase,
redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of Capital Stock or
other securities of, or other ownership interests in, the
Company or any Subsidiary;
(iii) any amendment of any material term of
any outstanding security of the Company or any Subsidiary;
(iv) any incurrence, assumption or guarantee by
the Company or any Subsidiary of any indebtedness for
borrowed money, other than working lines of credit,
borrowings under existing lines of credit and the assumption
or guarantee of debt in connection with the acquisitions
described in the Registration Statement on Form S-3
originally filed by the Company with the SEC on October 4,
1996 (the "October Registration Statement");
(v) any creation or assumption by the Company or
any Subsidiary of any Lien on any material asset other than
in the ordinary course of business consistent with past
practice and other than in connection with the acquisitions
disclosed in the October Registration Statement;
(vi) other than in connection with Investments (as
defined in the Certificate of Designations) not exceeding in
the aggregate $1,000,000, any making of any loan, advance or
capital contributions to or investment in any Person other
than loans, advances or capital contributions to or
investments in wholly-owed Subsidiaries made in the ordinary
course of business consistent with past practice;
(vii) any damage, destruction or other
casualty loss (whether or not covered by insurance)
affecting the business or assets of the Company or any
Subsidiary which, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse
Effect;
(viii) any transaction or commitment made, or
any contract or agreement entered into, by the Company or
any Subsidiary relating to its assets or business (including
the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any
contract or other right, in either case, material to the
Company and the Subsidiaries, taken as a whole, other than
transactions and commitments in the ordinary course of
business consistent with past practice and those
contemplated by this Agreement; or
(ix) any change in any method of accounting or
accounting practice by the Company or any Subsidiary.
3.14. ENVIRONMENTAL MATTERS. (a) The Company and its
Subsidiaries have obtained all permits, licenses and other
authorizations, and have made all registrations and given all
notifications, that are required with respect to the operation of
their respective businesses under all applicable Environmental
Laws other than those permits, licenses, other authorizations,
registrations and notifications the failure of which to obtain or
make, individually or in the aggregate, would not have a Material
Adverse Effect.
(b) The Company and its Subsidiaries are in compliance
in all material respects with all terms and conditions of the
required permits, licenses and other authorizations referred to
in paragraph (a) above, and are also in compliance in all
material respects with any other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment,
injunction, settlement agreement, notice or demand letter issued,
entered, promulgated or approved thereunder, other than where the
failure to be in such compliance, individually or in the
aggregate, would not have a Material Adverse Effect.
(c) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter (collectively
"Actions") pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries
relating in any way to Environmental Laws or any regulation,
code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder other
than Actions that, if determined adversely to the Company or such
Subsidiaries, would not reasonably be expected to have a Material
Adverse Effect.
3.15 MATERIAL CONTRACTS. (a) Except as filed as an
exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 or as disclosed in Schedule 3.15, neither
the Company nor any Subsidiary is a party to or bound by:
(i) any partnership, joint venture or other
similar agreement or arrangement material to the Company and
its Subsidiaries taken as a whole ;
(ii) any agreement relating to any material
acquisition or disposition of any business material to the
Company and its Subsidiaries taken as a whole (whether by
merger, sale of stock, sale of assets or otherwise) under
which the Company has continuing material obligations;
(iii) any agreement relating to indebtedness
for borrowed money or the deferred purchase price of
property (in either case, whether incurred, assumed,
guaranteed or secured by any asset), except any such
agreement with an aggregate outstanding principal amount not
exceeding $5,000,000 and which may be prepaid on not more
than 30 days notice without the payment of any penalty;
(iv) any material license, supply or similar
agreement material to the Company and its Subsidiaries taken
as a whole; or
(v) any other agreement, arrangement or plan of a
type that would be required to be filed as an exhibit to the
Company's Annual Report on Form 10-K if such Annual Report
were filed on the date hereof (all of the foregoing,
"Material Contracts").
(b) Each Material Contract is in full force and effect
and constitutes a legal, valid and binding obligation of the
Company or the Subsidiary party thereto and, to the Knowledge of
the Company, each other party thereto, and is enforceable against
the Company or its Subsidiaries and, to the Knowledge of the
Company, each other party thereto in accordance with its terms,
except to the extent that such enforceability is limited by (i)
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general
principles of equity, and neither the Company nor any of its
Subsidiaries, nor, to the Knowledge of the Company, any other
party thereto is in conflict therewith or in violation or breach
thereof or default thereunder, except for such conflicts,
violations, breaches and defaults which, individually or in the
aggregate, would not have a Material Adverse Effect.
3.16. PROPERTIES; ENCUMBRANCES. Subject to the
next succeeding sentence each of the Company and its Subsidiaries
have good and valid title, and in the case of real property,
marketable title, to all material properties and assets which it
purports to own (real, personal and mixed, tangible and
intangible, including all forms of goodwill, rights, intellectual
property and intellectual property rights)(collectively, the
"Company Assets"), including, without limitation, all the
material properties and assets reflected on the Balance Sheet
(except for (i) real and personal property sold since the date of
the Balance Sheet or which was obsolete or no longer useful in
connection with the businesses of the Company and its
Subsidiaries and (ii) capital leases reflected on the Balance
Sheet), and all material properties and assets purchased by the
Company and its Subsidiaries since the date of the Balance Sheet.
All Company Assets are free and clear of all liens, mortgages,
claims, interests, charges, security interests or other
encumbrances or adverse interests of any nature whatsoever and
other title or interest retention arrangements ("Liens"), except
(a) as reflected on the Balance Sheet, (b) as set forth on
Schedule 3.16, (c) statutory Liens of carriers, warehousemen,
mechanics, workmen and materialmen for liabilities and
obligations incurred in the ordinary course of business
consistent with past practice that are not yet delinquent or are
being contested in good faith, (d) such defects, irregularities,
encumbrances and other imperfections of title as normally exist
with respect to property similar in character and that,
individually or in the aggregate together with all other such
exceptions, do not have a Material Adverse Effect, (e) Liens for
Taxes and (f) Liens that do not interfere with the present use of
the property subject to the Lien.
3.17. INSURANCE. All current primary, excess and
umbrella policies of insurance owned or held by or on behalf of
or providing insurance coverage to the Company or any of its
Subsidiaries are in full force and effect. With respect to all
such insurance policies providing insurance coverage to the
Company or any of its Subsidiaries, no premiums are in arrears,
no notice or cancellation or termination has been received with
respect to any such policy, other than notices of cancellation or
termination routinely sent at the end of a policy term. The
Company believes that the insurance coverage of the Company and
its Subsidiaries is consistent with the coverage generally
maintained by corporations of similar size and engaged in similar
lines of business except that the Company generally self-insures
against potential product liability exposure with respect to its
marketed products.
3.18. EMPLOYEE CLAIMS; LABOR MATTERS. (a) There
are no claims or actions pending or, to the Knowledge of the
Company, threatened between the Company or any of its
Subsidiaries and any of their respective employees or former
employees that would, or would be reasonably likely to,
individually or in the aggregate, have a Material Adverse Effect.
(b) There are no unfair labor practice complaints
pending against the Company or any of its Subsidiaries before the
National Labor Relations Board or any union representation
questions involving employees of the Company or any of its
Subsidiaries that would, individually or in the aggregate, have a
Material Adverse Effect. To the Knowledge of the Company there
are no strikes, slowdowns, work stoppages or lockouts, or threats
thereof, by or with respect to any employees of the Company or
any of its Subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect.
(c) The Company and each of its Subsidiaries is in
compliance in all material respects with the terms of any
collective bargaining agreements covering employees of the
Company or any Subsidiary, except for matters of non-compliance
which, individually or in the aggregate, would not be expected to
have a Material Adverse Effect. The terms and conditions of
employment for each employee of the Company or any of its
Subsidiaries complies in all material respects with the laws
applicable to the jurisdiction in which each employee works,
except for matters of non-compliance which, individually or in
the aggregate, would not be expected to have a Material Adverse
Effect.
3.19. MATERIAL DISCLOSURE. To the Knowledge of the
Company, there is no fact, transaction or development which the
Company has not disclosed to the Purchasers in writing (including
pursuant to the SEC Documents filed prior to the date hereof and
pursuant to the Form S-1 originally filed by the Company on
September 14, 1994, as amended (File No. 33-83952), the
Registration Statement on Form S-3 originally filed by the
Company on August 22, 1996 (File No. 333-10661) and the October
Registration Statement) which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect. This Agreement (including any Exhibit or Schedule
hereto) and any written statements, documents or certificates
furnished to the Purchasers by the Company or its Subsidiaries
prior to the date hereof in connection with the transactions
contemplated hereby, taken as a whole, do not and will not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated herein or therein or
necessary to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
3.20. BROKERS. The Purchasers shall not be
responsible for any fees of any broker, finder, commission agent
or other Person incurred by the Company in connection with this
Agreement and the transactions contemplated hereby.
3.21. INTELLECTUAL PROPERTY. The Company and its
Subsidiaries own or possess adequate patent rights or licenses or
other rights to use patent rights, inventions, trademarks,
service marks, trade names and copyrights necessary to conduct
the general business now operated by them and neither the Company
nor any of its Subsidiaries has received any notice of
infringement or conflict with asserted rights of others with
respect to any patent, patent rights, inventions, trademarks,
service marks, trade names or copyrights which, individually or
in the aggregate, would reasonably be expected to have a Material
Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser hereby, severally but not jointly,
represents and warrants to the Company as follows:
4.1. ORGANIZATION; AUTHORIZATION. Such Purchaser is
duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has full power and
authority to execute and deliver this Agreement and the
Registration Rights Agreement, to purchase the Preferred Stock
and to consummate the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the Registration
Rights Agreement, the purchase by such Purchaser of the Preferred
Stock and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by such Purchaser,
and no other proceedings on the part of such Purchaser are
necessary to approve and authorize the execution and delivery of
this Agreement and the Registration Rights Agreement, the
purchase by such Purchaser of the Preferred Stock and the
consummation of the transactions by such Purchaser contemplated
hereby and thereby in accordance with the terms hereof and
thereof. This Agreement and the Registration Rights Agreement
constitute valid and binding agreements of such Purchaser,
enforceable against such Purchaser in accordance with their
terms, except to the extent limited by (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or
similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity.
4.2. NO VIOLATION; CONSENTS. (a) Assuming the making
or receipt of all filings, notices, registrations, consents,
approvals, permits and authorizations described in the following
paragraph, neither the execution and delivery by such Purchaser
of this Agreement and the Registration Rights Agreement, nor the
purchase by such Purchaser of the Preferred Stock nor the
consummation by such Purchaser of the transactions contemplated
hereby or thereby will (i) conflict with, violate or result in a
breach of the agreement of limited partnership or other governing
documents of such Purchaser, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or
both) a default or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of
any Lien on or against any of the properties of such Purchaser
pursuant to, any of the terms or conditions of any note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation to which such Purchaser is a party or by which it or
any of its properties or assets may be bound, or (iii) violate
any statute, law, rule, regulation, writ, injunction, judgment,
order or decree of any Governmental Entity, binding on such
Purchaser or any of its properties or assets, excluding from the
foregoing clause (ii) violations, breaches and defaults that
individually or in the aggregate, would not prevent or materially
delay consummation of or justify recission of the transactions
contemplated hereby.
(b) Except for the filing of a Registration Statement
for the resale of the Common Stock contemplated by the
Registration Rights Agreement, no filing, consent, approval,
permit, authorization, notice, registration or other action of or
with any Governmental Entity is required to be made or obtained
by or with respect to such Purchaser in connection with the
execution and delivery of this Agreement and the Registration
Rights Agreement, the purchase of the Preferred Stock or the
consummation by such Purchaser of the transactions contemplated
hereby and thereby.
4.3. FUNDS. Such Purchaser has the funds necessary to
consummate the purchase of the Preferred Stock to be purchased by
it hereunder.
4.4. STATUS. Such Purchaser is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D
promulgated under the Securities Act ("Regulation D")) and an
accredited investor (as defined in Rule 501 of Regulation D), and
such Purchaser has such experience in business and financial
matters so that it is capable of evaluating the merits and risks
of an investment in the Preferred Stock . Such Purchaser
acknowledges that the Preferred Stock are speculative and involve
a high degree of risk.
4.5 INVESTMENT REPRESENTATION. Such Purchaser is
purchasing the Preferred Stock for its own account. Such
Purchaser has no present intention to sell any Preferred Stock or
the Common Stock received upon conversion of or as dividends on
the Preferred Stock in accordance with the terms of the
Certificate of Designations, and such Purchaser has no present
arrangement (whether or not legally binding) at any time to sell
Preferred Stock or such Common Stock to or through any Person or
entity; PROVIDED, HOWEVER, that by making the representations
herein, no Purchaser agrees to hold the Preferred Stock or the
Common Stock received upon conversion of the Preferred Stock in
accordance with the terms of the Certificate of Designations for
any minimum or other specific term and each Purchaser reserves
the right to dispose of all Preferred Stock or Common Stock at
any time in accordance with Federal securities laws applicable to
any such disposition.
ARTICLE V
COVENANTS OF THE COMPANY
5.1. SECURITIES COMPLIANCE.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law,
rule and regulation for the legal and valid issuance of the
Preferred Stock to the Purchasers.
(b) The Company will cause the Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the
Securities Exchange Act (or successor provision of such act or
successor act), will comply in all material respects with its
reporting and filing obligations pursuant to the Securities
Exchange Act, and will not take any action to terminate or
suspend its reporting and filing obligations under the Securities
Exchange Act. The Company will take all action necessary to
continue the listing or trading of the Common Stock on the NYSE
or on the NASDAQ National Market System; and will comply in all
material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NYSE or the NASDAQ
National Market System.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES
6.1. DISCLOSURE AND PUBLIC ANNOUNCEMENTS. (a) The
Company shall not disclose the identity of the Purchasers or the
Person or Persons for whom the Purchasers act as nominee in any
document, except where such disclosure is (i) required by law or
court order, (ii) required by the rules and regulations of the
SEC, (iii) required by the rules and regulations of the NYSE,
(iv) subsequent to the disclosure of such information by the
Purchasers or (v) approved by the Purchasers. If such disclosure
(other than under clause (ii) above) is required by law or court
order, the Company shall, to the extent it is reasonably able,
notify the Purchasers prior to making such disclosure.
(b) Except as may be otherwise required by law, the
Purchasers and the Company shall consult with each other before
issuing any press release or otherwise making any public
statements with respect to this Agreement and shall not issue any
such press release or make any such public statement prior to
such consultation.
6.2. RESTRICTIVE LEGEND. Each certificate representing
the Preferred Stock shall contain a legend relating to
restrictions on resale arising under the Securities Act and Blue
Sky Laws substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND MAY
NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
6.3. DAILY LOW PRICE. Each Purchaser covenants and
agrees that it will not, directly or through any Affiliate,
create any daily low price in the Common Stock.
6.4. OTHER OFFERINGS. (a) During the period
expiring 90 days following the date hereof (the "Block Period"),
the Company will not offer, sell, contract to sell or otherwise
dispose of any common stock, preferred stock convertible into
common stock, any debt or warrant convertible into or
exchangeable or exercisable for, or other right to purchase, any
common stock singly or together with other securities or rights
at an effective discount to the purchaser thereof from the then
Current Market Price Per Common Share (as defined in the
Certificate of Designations), unless (i) the aggregate amount of
all such offers, sales, contracts to sell or other dispositions
does not exceed $5,000,000 during the Block Period, (ii) any such
offer of sale is as consideration for an acquisition by the
Company or one of its Subsidiaries or (iii) any such offer or
sale is consistent with the provisions of paragraphs (8)(e)(y)
and (9)(d)(iii) of the Certificate of Designations.
(b) For a period of one year following the date
hereof, if the Company offers, sells, contracts to sell or
otherwise issues any common stock, preferred stock convertible
into common stock, any debt or warrant convertible into or
exchangeable or exercisable for, or other right to purchase, any
common stock singly or together with other securities or rights
on terms more favorable than those contained in the Certificate
of Designations (a "New Issuance"), then the Company shall give
the Purchasers (and their transferees) within one Trading Day
following such New Issuance written notice of any such New
Issuance and shall provide with such notice copies of the
documentation, with the economic terms of the transaction
specified, pursuant to which the New Issuance was effected. Each
Purchaser (or transferee), by written notice executed by such
Purchaser (or transferee) within 60 days of any such New
Issuance, shall then have the right to exchange all, but not less
than all, of the Preferred Stock then held by such Purchaser (or
transferee) for securities of the Company having terms identical
to the terms of the securities in such New Issuance, except that
the mandatory conversion date for the new securities shall be the
Mandatory Conversion Date specified in the Certificate of
Designations (as may be extended from time to time as specified
herein). The Registration Rights Agreement shall be deemed
automatically amended to cover the resale of the Common Stock
issuable upon conversion of and as dividends or interest on the
new securities. To the extent required to permit the resale in
accordance with the Securities Act, upon the expiration of the 60
day period following a New Issuance the registration statement
for the Common Stock shall be amended or, if required by the
applicable regulations of the SEC, a new registration statement
shall be filed with the SEC to permit such resale.
ARTICLE VII
CONDITIONS TO THE SALE CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS UNDER
THE SALE CLOSING. The obligation of the Purchasers to purchase
the Preferred Stock hereunder pursuant to the Sale Transaction is
subject to the satisfaction or waiver at, or prior to, the Sale
Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; AGREEMENTS AND
COVENANTS. (i) The representations and warranties of the
Company contained in this Agreement and in any certificate or
agreement of the Company delivered pursuant hereto shall be true
and correct in all material respects as of the date hereof, (ii)
the Company shall have performed or complied with in all material
respects all agreements and covenants contained in this Agreement
and in any certificate or agreement of the Company delivered
pursuant hereto to be performed or complied with by the Company
at or before the Sale Closing, and (iii) the Purchasers shall
have received a certificate of the Company, signed by the
President or a Vice President thereof, on behalf of the Company,
as to the fulfillment of the conditions set forth in the
foregoing clauses (i) and (ii).
(b) PRINCIPAL MARKET. Trading in the Common Stock
shall not have been suspended by the SEC or the NYSE, (expect for
any suspension of trading of limited duration agreed to between
the Company and the NYSE, solely to permit dissemination of
material information regarding the Company), and trading in
securities generally as reported by NYSE shall not have been
suspended or limited or minimum prices shall not have been
established on securities whose trades are reported by the NYSE.
(c) LITIGATION. There shall have been no order or
preliminary or permanent injunction entered in any action or
proceeding before any Governmental Entity, nor other action taken
by any Governmental Entity, nor any statute, rule, regulation,
legislation, interpretation, judgment or order enacted, entered,
enforced, promulgated, amended, issued or deemed applicable to
the Purchasers, the Company or any of its Subsidiaries, by any
Governmental Entity that shall have remained in effect and that
in the good faith judgment of a majority of the Purchasers shall
have had, or threaten to have or would be reasonably likely to
have the effect of (i) making illegal, materially delaying or
otherwise directly or indirectly prohibiting or materially
restraining or making materially more costly the Sale
Transaction, (ii) prohibiting or materially limiting the
ownership or operation by the Company or any of its Subsidiaries
of all or any material portion of its respective businesses or
assets, or compelling the Company or any of its Subsidiaries to
dispose of or hold separate all or any material portion of its
respective businesses or assets, (iii) imposing or confirming
material limitations on the ability of the Purchasers to
effectively exercise full rights of ownership of the Preferred
Stock to be acquired pursuant to this Agreement, including,
without limitation, the right to vote any Common Stock
subsequently acquired upon conversion of or as dividends on the
Preferred Stock on all matters properly presented to
stockholders; (iv) requiring divestiture by the Purchasers of any
of the Preferred Stock; or (v) causing a Material Adverse Effect.
(d) NO ACTION OR PROCEEDING. No action, suit, claim
or proceeding by or before any Governmental Entity shall have
been commenced and be pending that seeks to have, or is
reasonably likely to have, any of the effects described in
clauses (i) through (v) of Section 7.1(c) above.
(e) BANKRUPTCY; INSOLVENCY; ETC. The Company or any
of its Subsidiaries shall not be the subject of a case under the
Bankruptcy Code, and no proceeding shall have been instituted
(and not dismissed) or consented to by or against the Company or
any of its Subsidiaries seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief or debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee,
custodian or other similar official for any of the Company or of
its Subsidiaries or any substantial part of any of their property
and neither the Company nor any of its Subsidiaries shall have
taken any corporate action to authorize any such proceeding.
(f) MATERIAL ADVERSE CHANGE. No change, condition or
event shall have occurred that has had, or would be reasonably
likely to have, a Material Adverse Effect.
(g) OPINION OF COUNSEL, ETC. The Purchasers shall
have received a written opinion in form and substance (including
qualifications) satisfactory to the Purchasers, dated the date
hereof, from 1) Fried, Frank, Harris, Shriver & Jacobson and 2)
David C. Watt, Esq., substantially in the forms of Exhibits C-1
and C-2 hereto, and such other certificates, opinions of other
counsel, and documents, as the Purchasers or their counsel shall
reasonably require.
(h) REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement shall have been duly executed and delivered by
the Company and the other parties thereto, if any, other than the
Purchasers.
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to issue and sell the Preferred Stock
hereunder pursuant to the Sale Transaction is subject to the
satisfaction or waiver at, or prior to, the Sale Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES, AGREEMENTS AND
COVENANTS. (i) The representations and warranties of the
Purchasers contained in this Agreement and in any certificate or
agreement of the Purchasers delivered pursuant hereto shall be
true and correct in all material respects as of the date hereof
and (ii) the Purchasers shall have performed or complied with in
all material respects all agreements and covenants contained in
this Agreement and in any certificate or agreement of the
Purchasers delivered pursuant hereto to be performed or complied
with by the Purchasers, at or before the Sale Closing.
(b) LITIGATION. There shall have been no order or
preliminary or permanent injunction entered in any action or
proceeding before any Governmental Entity, nor other action taken
by any Governmental Entity nor any statute, rule, regulation,
legislation, interpretation, judgment or order enacted, entered,
enforced, promulgated, amended, issued or deemed applicable to
the Company or any of its Subsidiaries by any Governmental Entity
that shall have remained in effect and that shall have had the
effect of making illegal, materially delaying or otherwise
directly or indirectly prohibiting or materially restraining or
making materially more costly the Sale Transaction.
ARTICLE VIII
MISCELLANEOUS
8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the
execution of this Agreement until the date that the Purchasers
have sold or otherwise disposed of all shares of Preferred Stock
and Common Stock issuable on conversion of or as dividends on the
Preferred Stock.
8.2. NOTICES. Any notices or other communications
required or permitted pursuant to this Agreement, the
Registration Rights Agreement or the Certificate of Designations,
shall be given in writing and shall be delivered by facsimile
transmission to the below listed facsimile numbers, with a
confirmation of such facsimile transmission sent by certified or
registered mail, postage prepaid, to the following addresses:
If to the Purchasers:
At their facsimile number and address specified on
Annex A hereto
Copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Fax No.: (212) 593-5955
Attention: Burton Lehman, Esq.
If to the Company:
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California
Fax No.: (714) 641-7206
Attention: David C. Watt, Esq.
Copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, N.Y. 10004
Fax No.: (212) 859-8586
Attention: Jeffrey Bagner, Esq.
and thereafter at such other facsimile number or address, notice
of which has been given in accordance with this Section 8.2.
Each such notice or communication shall be deemed to be effective
when such facsimile transmission is transmitted to the facsimile
number specified in this Section 8.2 and the appropriate
answerback is received.
8.3. COMPLETE AGREEMENT. This Agreement, the
Registration Rights Agreement, the Certificate of Designations
and that certain Letter Agreement, dated as of July 26, 1996,
between the Company and Schulte Roth and Zabel LLP, as amended by
the Amendment to Letter Agreement dated as of August 30, 1996
(the "SRZ Letter Agreement"), contain the entire understanding of
the parties with respect to the transactions contemplated hereby
and supersede all prior agreements, arrangements or
understandings with respect thereto. There are no restrictions,
agreements, promises, representations, warranties, covenants or
undertakings by or on behalf of any party hereto with respect to
the transactions contemplated hereby or thereby, other than those
expressly set forth herein or therein.
8.4. BINDING NOTICE OF AGREEMENT; NO THIRD PARTY
BENEFICIARY. This Agreement shall be binding upon and inure to
the benefits of the parties hereto, their successors and
permitted assigns. Nothing herein express or implied is intended
to or shall be construed to confer upon or give to any Person,
corporation, group or other entity (of any nature) other than the
parties hereto, their successors or permitted assigns any rights
or remedies under or by reason of this Agreement.
8.5. MODIFICATIONS, AMENDMENTS AND WAIVERS. Any term
or provision of this Agreement may be waived by the party which
is entitled to the benefits thereof. No waiver shall be deemed
to have been made by any party hereto of any of its rights
hereunder or any provision or term hereof unless the same shall
be in writing and is signed on its behalf by its authorized
officer or representative. Any such waiver or extension shall
constitute a waiver or extension only with respect to the
specific matter described in such writing and shall in no way
impair the rights of the party granting such waiver in any other
respect or any other time. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that
any party may otherwise have in law or equity. The rights and
remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracies in or breach of any representation,
warranty, covenant or agreement contained in this Agreement shall
in no way be limited by the fact that the act, omission,
occurrence or other state of fact upon which any claim of any
such inaccuracy or breach is based may also be the subject matter
of any other representation, warranty, covenant or agreement
contained in this Agreement as to which there is no inaccuracy or
breach. The representations and warranties of the Company
contained in this Agreement shall not be affected or deemed
waived by reason of any investigation made by or on behalf of the
Purchasers or its representatives or by reason of the fact that
the Purchasers or such representatives knew or should have known
that any such representation or warranty is or might be
inaccurate. The Company shall not offer, or agree to pay, any
fee or other consideration to any Purchaser, in connection with
any amendment or waiver of any provision of this Agreement, the
Registration Rights Agreement or the Certificate of Designations
unless such amendment or waiver relates solely to the rights of
remedies of such Purchaser and does not adversely affect any
rights or remedies of any other holder of Preferred Stock or such
fee or other consideration is offered and paid to all Purchasers
pro-rata to their holdings of Preferred Stock. In addition, the
Company shall not directly or indirectly repurchase or retire any
Preferred Stock (other than pursuant to the terms of the
Certificate of Designations) except on terms and conditions
offered to all Purchasers pro-rata to their holdings of Preferred
Stock.
8.6. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement and each of which shall be deemed an
original.
8.7. EXPENSES. The fees and expenses of counsel for
the Purchasers shall be paid by the Company pursuant to the terms
of the SRZ Letter Agreement. The foregoing payments shall be in
addition to, and not in lieu of, the fees and expenses of
counsel, other experts and the related expenses payable by the
Company to the holders of Preferred Stock pursuant to the terms
of the Registration Rights Agreement.
8.8 INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless each Purchaser, its directors and
officers and each Person, if any, who controls each Purchaser
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against any
and all losses, claims, suits, damages, causes of action,
liabilities, costs and expenses (including, without limitation,
any legal or other expenses reasonably incurred in connection
with defending or investigating any such action or claim) to
which such Purchaser or other Person may become subject to under
the Securities Act or under the Securities Exchange Act or
otherwise, arising from or relating to the Company's breach of
any representation, warranty, covenant or agreement contained in
this Agreement.
(b) Each Purchaser agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors and
officers and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section
20 of the Securities Exchange Act, from and against any and all
losses, claims, suits, damages, causes of action, liabilities,
costs and expenses (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending
or investigating any such action or claim) to which the Company
or such Person may become subject to under the Securities Act or
under the Securities Exchange Act or otherwise, arising from or
relating to the Purchasers' breach of any representation,
warranty, covenant or agreement contained in this Agreement.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to paragraph
(a) or (b) of this Section 8.8, such Person (the "indemnified
party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party shall retain counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such indemnified party
unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of other counsel or (ii)
the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing
interests between them; PROVIDED, HOWEVER, that it is understood
that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm
(in addition to one firm of local counsel in any jurisdiction)
for all indemnified parties, their directors, officers and all
Persons, if any, who control such indemnified parties within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act. In the case of any such separate firm, such
firm shall be designated in writing by a majority of all the
indemnified parties. All such fees and expenses shall be
reimbursed as they are incurred; PROVIDED, HOWEVER, that if it is
subsequently determined that such indemnified party was not
entitled to such indemnification, then the indemnified party
shall promptly reimburse the indemnifying party for all such fees
and expenses previously paid by the indemnifying party. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall
have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by this
paragraph, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified
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.
(d) The indemnity provisions contained in this Section
8.8 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Purchasers, its
officers or directors or any Person controlling the Purchasers;
or the Company, its officer or directors or any Person
controlling the Company and (iii) acceptance of any payment for
any of the Preferred Stock.
8.9. NOMINEE; BENEFITS. All references to Purchasers
in this Agreement shall include the Person or Persons for whom
the Purchasers are a nominee, and the benefits of and rights and
obligations under the Agreement shall accrue to such Person or
Persons which have a beneficial interest in the Preferred Stock
being acquired hereunder and for whom the Purchasers are a
nominee.
8.10. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without regard to applicable principles of
conflicts of law thereof.
8.11. HEADINGS. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.12. SEVERABILITY. Whenever possible, each
provision of this Agreement will be interpreted in such a manner
as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective
only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement, except to the
extent that such prohibition or invalidity would constitute a
material change in the terms of this Agreement taken as a whole.
8.13. ASSIGNMENT. The Purchasers may assign their
rights hereunder to any of their Affiliates, provided that such
assignment shall not release the Purchasers from their
obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
COMPANY:
ICN PHARMACEUTICALS, INC.
By:
-------------------------------
Name:
Title:
STOCK SUBSCRIPTION AGREEMENT
PURCHASER:
By:
----------------------
Name:
Title:
ANNEX A
NOTICES
CIBC Wood Gundy
Securities Corp.
425 Lexington Avenue
New York, NY 10017
Facsimile Number: (212) 885-4998
Attention: Walter F. McLallen IV
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Ramius Fund Limited
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Palladin Partners, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Gershon Partners, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, 10019
Facsimile Number: (212) 698-0554
Attention: Jeffrey Devers
Cerberus Partners, L.P.
950 Third Avenue
20th Floor
New York, NY 10022
Facsimile Number: (212) 421-2947
Attention: Michael Hisler
Hare & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
Cypress & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
Daffodil & Co.
c/o MacKay- Shields
Financial Corporation
9 West 57th Street
New York, NY 10019
Facsimile Number: (212) 758-4737
Attention: Linda Grillo
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCKEXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C-1
OPINION OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
EXHIBIT C-1
[Letterhead of Fried, Frank, Harris, Shriver &
Jacobson]
October 9, 1996
To the Purchasers named in the
Stock Subscription Agreement dated
as of October 9, 1996, by and among
the Company and such Purchasers
Ladies and Gentlemen:
We have acted as special counsel for ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), in
connection with the issuance by the Company of 50,000 shares of
its Series B Convertible Preferred Stock (the "Preferred Stock")
pursuant to the Stock Subscription Agreement (the "Agreement")
dated as of October 9, 1996 among you and the Company. This
opinion is delivered to you pursuant to Section 7.1.(g) of the
Agreement. All capitalized terms used herein that are defined
in, or by reference in, the Agreement have the meanings assigned
to such terms therein, or by reference therein, unless otherwise
defined herein. With your permission, all assumptions and
statements of reliance herein have been made without any
independent investigation or verification on our part except to
the extent otherwise expressly stated, and we express no opinion
with respect to the subject matter or accuracy of such
assumptions or items relied upon.
In connection with this opinion, we have (i)
investigated such questions of law, (ii) examined originals or
certified, conformed or reproduction copies of such agreements,
instruments, documents and records of the Company, such
certificates of public officials and such other documents, and
(iii) received such information from officers and representatives
of the Company as we have deemed necessary or appropriate for the
purposes of this opinion. We have examined, among other
documents, the following:
(a) the Certificate of Designations, Preferences and
Rights of Series B Convertible Preferred Stock
(the "Certificate of Designations");
(b) the Agreement; and
(c) the Registration Rights Agreement for Securities
(the "Registration Rights Agreement") dated as of
October 9,1996 among you and the Company.
The documents referred to in items (a) through (c)
above, inclusive, are referred to herein collectively as the
"Documents".
In all such examinations, we have assumed the legal
capacity of all natural persons executing documents, the
genuineness of all signatures, the authenticity of original and
certified documents and the conformity to original or certified
copies of all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to the opinions
expressed herein, we have relied upon, and assume the accuracy
of, representations and warranties contained in the Documents and
certificates and oral or written statements and other information
of or from representatives of the Company and others and assume
compliance on the part of all parties to the Documents with their
covenants and agreements contained therein. Insofar as
statements herein are based upon our knowledge, such phrase means
and is limited to the conscious awareness of facts or other
information by lawyers in this firm who gave substantive
attention to representation of the Company in connection with the
Agreement. With reference to our opinion in paragraph (vi)
below, our opinion is limited to our review of only those laws
and regulations that, in our experience, are normally applicable
to transactions of the type contemplated by the Documents.
To the extent it may be relevant to the opinions
expressed herein, we have assumed that the parties to the
Documents other than the Company have the power to enter into and
perform the Documents and to consummate the transactions
contemplated thereby and that the Documents have been duly
authorized, executed and delivered by, and constitute legal,
valid and binding obligations of, such parties. We have also
assumed that (1) sufficient authorized but unissued and
unreserved shares (other than shares reserved for this purpose)
of the Company's common stock, par value $0.01 per share ("Common
Stock"), will be available for issuance at the time of and for
use in connection with the issuance of Common Stock upon
conversion of or as dividends on the Preferred Stock, (2) the
Company will have sufficient surplus under the General
Corporation Law of the State of Delaware (the "DGCL") to declare
and pay dividends on the Preferred Stock or to redeem the
Preferred Stock in accordance with the terms of the Certificate
of Designations, and (3) in the case of a redemption of the
Preferred Stock, the capital of the Company will not be impaired
nor will the capital of the Company become impaired as a result
of such redemption. The payment of dividends on the Preferred
Stock is subject to the declaration of such dividends, and the
determination to pay such dividends in either cash or shares of
Common Stock, by the Board of Directors of the Company.
Based upon the foregoing, and subject to the
limitations, qualifications and assumptions set forth herein, we
are of the opinion that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the
laws of the State of Delaware, and has the
corporate power and authority to own, lease or
operate its properties and to conduct its business
as presently conducted.
(ii) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value
$0.01 per share.
(iii) The Company has all requisite corporate power
and authority to execute and deliver the
Agreement, the Registration Rights Agreement and
the Certificate of Designations and to consummate
the transactions contemplated thereby in
accordance with the terms thereof and to issue the
Preferred Stock and the Common Stock issuable upon
conversion of or as dividends on the Preferred
Stock in accordance with the terms of the
Certificate of Designations. The execution and
delivery of the Agreement and the Registration
Rights Agreement, the execution, delivery and
filing of the Certificate of Designations and the
issuance of the Preferred Stock and of the Common
Stock issuable upon conversion of the Preferred
Stock have been duly authorized by the Board of
Directors of the Company and no other corporate
proceedings on the part of the Company are
necessary to approve and authorize the execution
and delivery of the Agreement and the Registration
Rights Agreement, the execution, delivery and
filing of the Certificate of Designations, the
issuance of the Preferred Stock and the Common
Stock issuable upon conversion of the Preferred
Stock and the consummation of the transactions
contemplated by the Agreement, the Registration
Rights Agreement and the Certificate of
Designations in accordance with the terms thereof.
The Agreement and the Registration Rights
Agreement have been duly executed and delivered by
the Company, the Certificate of Designations has
been duly executed and filed by the Company in
accordance with the DGCL and each of the Agreement
and the Registration Rights Agreement constitute
valid and binding obligations of the Company
enforceable against the Company in accordance with
their terms, subject to (x) bankruptcy,
insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws now or hereafter
in effect relating to or affecting creditors'
rights generally and (y) general principles of
equity (regardless of whether considered in a
proceeding in equity or at law).
(iv) The Preferred Stock, when issued and delivered by
the Company against payment by the Purchasers
pursuant to the Agreement, will be validly issued,
fully paid and non-assessable.
(v) The shares of Common Stock issuable upon
conversion of or as dividends on the Preferred
Stock have been duly authorized and reserved for
issuance upon conversion of or as dividends on the
Preferred Stock to the extent required by
paragraph (7)(d)(i) of the Certificate of
Designations, are free of preemptive rights and,
when issued upon conversion of or as dividends on
the Preferred Stock in accordance with the terms
of the Certificate of Designations, will be
validly issued, fully paid and non-assessable
(assuming the dividend is properly declared and
paid from funds legally available therefor under
the DGCL).
(vi) Assuming (x) the accuracy of the representations
and warranties of the Purchasers set forth in
Sections 4.4 and 4.5 of the Agreement and (y)
offers of the Preferred Stock were not made to
more than ten prospective purchasers and only
prospective purchasers were solicited who could
have made the representations and warranties set
forth in Sections 4.4 and 4.5 of the Agreement,
except for (a) the filing of the Certificate of
Designations with the Secretary of State of the
State of Delaware, (b) applicable requirements, if
any, under Blue Sky Laws and (c) the filing of a
registration statement by the Company with the
Securities and Exchange Commission covering the
shares of Common Stock issuable upon conversion of
or as dividends on the Preferred Stock, no filing,
consent, approval, permit, authorization, notice,
registration or other action of or with any
Governmental Entity of the United States or the
State of New York, is required to be made or
obtained by or with respect to the Company or any
of its Subsidiaries in connection with the
execution and delivery of the Agreement and the
Registration Rights Agreement by the Company, the
issuance of the Preferred Stock and the Common
Stock issuable upon conversion of or as dividends
on the Preferred Stock by the Company or the
consummation by the Company of the transactions
contemplated by the Agreement and the Registration
Rights Agreement.
In addition, we express no opinion (a) as to the
enforceability of any provision in the Documents (i) relating to
indemnification, contribution or exculpation in connection with
violations of any statutory duties or public policy, or in
connection with willful, reckless or unlawful acts or gross acts
of negligence of the indemnified or exculpated party or the party
receiving contribution or (ii) relating to choice of governing
law to the extent that the enforceability of any such provision
is to be determined by any court other than a court of the State
of New York; or (b) as to the effect on enforceability of the
Documents and the documents contemplated thereby of any decision
of an arbitration tribunal or an arbitrator to the extent such
decision does not give effect to the terms of the Documents.
The opinions expressed herein are limited to the laws
of the United States of America, the laws of the State of New
York and, to the extent relevant to the opinions expressed
herein, the DGCL as currently in effect. We assume no obligation
to supplement this opinion if any applicable laws change after
the date hereof or if we become aware of any facts that might
change the opinions expressed herein after the date hereof.
The opinions expressed herein are solely for your
benefit in connection with the Agreement and may not be relied on
in any manner or for any purpose by any other person or entity
and may not be quoted in whole or in part without our prior
written consent.
Very truly yours,
EXHIBIT C-2
OPINION OF DAVID WATT
EXHIBIT C-2
[Letterhead of ICN Pharmaceuticals, Inc.]
October 9, 1996
To the Purchasers named in the
Stock Subscription Agreement dated
as of October 9, 1996, by and among
the Company and such Purchasers
Ladies and Gentlemen:
I am General Counsel for ICN Pharmaceuticals, Inc., a
Delaware corporation (the "Company"). This opinion is delivered
to you pursuant to Section 7.1.(g) of the Stock Subscription
Agreement (the "Stock Subscription Agreement") dated as of
October 9, 1996 among you and the Company in connection with the
issuance by the Company of 50,000 shares of its Series B
Convertible Preferred Stock (the "Preferred Stock"). All
capitalized terms used herein that are defined in, or by
reference in, the Stock Subscription Agreement have the meanings
assigned to such terms therein, or by reference therein, unless
otherwise defined herein. With your permission, all assumptions
and statements of reliance herein have been made without any
independent investigation or verification on my part except to
the extent otherwise expressly stated, and I express no opinion
with respect to the subject matter or accuracy of such
assumptions or items relied upon.
In connection with this opinion, I have (i)
investigated such questions of law, (ii) examined originals or
certified, conformed or reproduction copies of such agreements,
instruments, documents and records of the Company, such
certificates of public officials and such other documents, and
(iii) received such information from officers and representatives
of the Company as I have deemed necessary or appropriate for the
purposes of this opinion. I have examined, among other
documents, the following:
(a) the Certificate of Designations, Preferences and
Rights of Series B Convertible Preferred Stock
(the "Certificate of Designations");
(b) the Stock Subscription Agreement; and
(c) the Registration Rights Agreement for Securities
(the "Registration Rights Agreement") dated as of
October 9, 1996 among you and the Company.
The documents referred to in items (a) through (c)
above, inclusive, are referred to herein collectively as the
"Documents".
In all such examinations, I have assumed the
authenticity of original and certified documents and the
conformity to original or certified copies of all copies
submitted to me as conformed or reproduction copies. As to
various questions of fact relevant to the opinions expressed
herein, I have relied upon, and assume the accuracy of,
representations and warranties contained in the Documents and
certificates and oral or written statements and other information
of or from representatives of the Company and others and assume
compliance on the part of all parties to the Documents with their
covenants and agreements contained therein. With reference to my
opinion in paragraph (vi) below, my opinion is limited to my
review of only those laws and regulations that, in my experience,
are normally applicable to transactions of the type contemplated
by the Documents.
To the extent it may be relevant to the opinions
expressed herein, I have assumed that the parties to the
Documents other than the Company have the power to enter into and
perform the Documents and to consummate the transactions
contemplated thereby and that the Documents have been duly
authorized, executed and delivered by, and constitute legal,
valid and binding obligations of, such parties. I have also
assumed that (1) sufficient authorized but unissued and
unreserved shares (other than shares reserved for this purpose)
of the Company's common stock, par value $0.01 per share ("Common
Stock"), will be available for issuance at the time of and for
use in connection with the issuance of Common Stock upon
conversion of or as dividends on the Preferred Stock, and (2) the
Company will have sufficient surplus under the General
Corporation Law of the State of Delaware (the "DGCL") to declare
and pay dividends on the Preferred Stock or to redeem the
Preferred Stock in accordance with the terms of the Certificate
of Designations. The payment of dividends on the Preferred Stock
is subject to the declaration of such dividends, and the
determination to pay such dividends in either cash or shares of
Common Stock, by the Board of Directors of the Company.
Based upon the foregoing, and subject to the
limitations, qualifications and assumptions set forth herein, I
am of the opinion that:
(i) The Company is a corporation, duly incorporated,
validly existing and in good standing under the
laws of the State of Delaware, and has the
corporate power and authority to own or lease and
operate its properties and to conduct its business
as presently conducted.
(ii) To the best of my knowledge, the Company is duly
qualified to do business and is in good standing
(or such equivalent concept as may be applied in
the applicable jurisdiction) in each jurisdiction
in which the property owned, leased or operated by
it or the nature of the business so conducted by
it makes such qualification necessary, except
where the failure to be so qualified or in good
standing would not reasonably be expected to have
a Material Adverse Effect.
(iii) The Company possesses all governmental
licenses, permits, authorizations and approvals
and has made all registrations and given all
notifications required under the United States
Federal or California state law and, to the best
of my knowledge, other state, local and foreign
law to carry on in all respects its businesses as
currently conducted and except where the failure
to have any such licenses, permits, authorizations
or approvals, individually or in the aggregate,
would not have a Material Adverse Effect.
(iv) Each of the Subsidiaries of the Company organized
in the United States (the "domestic Subsidiaries")
and, to the best of my knowledge, each of the
Subsidiaries of the Company organized outside the
United States (the "foreign Subsidiaries") is a
corporation duly organized, validly existing and
in good standing under the laws of the
jurisdiction of its incorporation (or such
equivalent concept as may be applied in the
applicable jurisdiction).
(v) To the best of my knowledge, each of the
Subsidiaries of the Company is duly qualified to
do business in each jurisdiction in which the
property owned, leased or operated by it or the
nature of the business so conducted by it makes
such qualification necessary, except where the
failure to be so qualified or in good standing
would not reasonably be expected to have a
Material Adverse Effect.
(vi) The Company has the duly authorized Capital Stock
as set forth in the Stock Subscription Agreement.
(vii) (a) Assuming the making or receipt of all
filings, notices, registrations, consents,
approvals, permits and authorizations described in
the following paragraph, the execution and
delivery of the Stock Subscription Agreement and
the Registration Rights Agreement, the execution,
delivery and filing of the Certificate of
Designations by the Company, the issuance of the
Preferred Stock and the Common Stock issuable upon
conversion of or as dividends on the Preferred
Stock by the Company, the consummation of the
transactions contemplated by the Stock
Subscription Agreement, by the Registration Rights
Agreement or by the Certificate of Designations,
the compliance by the Company with any of the
provisions of the Stock Subscription Agreement or
of the Registration Rights Agreement or the
Certificate of Designations will not, except as
set forth in the Stock Subscription Agreement, (1)
conflict with, violate or result in any breach of
the Restated Certificate of Incorporation, by-laws
or other charter documents of the Company or its
Subsidiaries, (2) result in a violation or breach
of, or constitute (with or without due notice or
lapse of time or both) a default or give rise to
any right of termination, cancellation or
acceleration under, or result in the creation of
any Lien on or against any of the properties of
the Company or any of its Subsidiaries pursuant to
any of the terms or conditions of any note, bond,
mortgage, indenture, license, material agreement
or other instrument or obligation to which the
Company or any of its domestic Subsidiaries is a
party or by which any of them or any of their
properties or assets may be bound or, to the best
of my knowledge, any of the Company's foreign
Subsidiaries or by which any of them or any of
their properties or assets may be bound, or (3)
violate any statute, law, rule, regulation, writ,
injunction, judgment, order or decree of any
United States Federal or California state
Governmental Entity or, to the best of my
knowledge, any other state or foreign Governmental
Entity binding on the Company or any of its
Subsidiaries or any of their properties or assets,
excluding from the foregoing clauses (1) and (2)
conflicts, violations, breaches, defaults, rights
of termination, cancellation or acceleration, and
liens which, individually or in the aggregate,
would not have a Material Adverse Effect and would
not affect the validity of the issuance of the
Preferred Stock or of the Common Stock issuable
upon conversion of or as dividends on the
Preferred Stock.
(b) Except for (1) the filing of the Certificate
of Designations with the Secretary of State of the
State of Delaware, (2) applicable requirements, if
any, under Blue Sky Laws and (3) the filing of a
Registration Statement, no filing, consent,
approval, permit, authorization, notice,
registration or other action of or with any
Governmental Entity, is required to be made or
obtained by or with respect to the Company or any
of its Subsidiaries in connection with the
execution and delivery of the Stock Subscription
Agreement and the Registration Rights Agreement by
the Company, the issuance of the Preferred Stock
and the Common Stock issuable upon conversion of
or as dividends on the Preferred Stock by the
Company or the consummation by the Company of the
transactions contemplated thereby.
(viii) Except as set forth in the Stock Subscription
Agreement, there is no claim, action or proceeding
(including any condemnation proceeding) pending
or, to the best of my knowledge, threatened
against or relating to the Company or any of its
domestic Subsidiaries or, to the best of my
knowledge, any foreign Subsidiary by or before any
Governmental Entity that if adversely determined,
individually or in the aggregate, would have a
Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding
against the Company or any of its domestic
Subsidiaries or, to the best of my knowledge, any
foreign Subsidiary that has had, or would
reasonably be expected in the future to have, a
Material Adverse Effect or which might materially
adversely affect the transactions contemplated by
the Stock Subscription Agreement, the Registration
Rights Agreement and the Certificate of
Designations.
(ix) Except as set forth or referred to in the
Company's June 30, 1996 Form 10Q, filed with the
U.S. Securities and Exchange Commission (the "Form
10-Q"), I do not have actual knowledge of any
claim, action or proceeding (including any
condemnation proceeding) pending or threatened
against the Company or any of its subsidiaries by
or before any Governmental Entity that I believe
if adversely determined, individually or in the
aggregate, would have a Material Adverse Effect,
nor, except as set forth in the Form 10-Q, do I
have actual knowledge of any judgment, decree,
injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the
Company or any of its subsidiaries that I believe
has had, or would reasonably be expected in the
future to have, a material adverse effect on the
transactions contemplated by the Stock
Subscription Agreement or the accompanying
Registration Rights Agreement and the Certificate
of Designations.
The opinions expressed herein are limited to the laws
of the United States of America, the laws of the State of
California and, to the extent relevant to the opinions expressed
herein, the DGCL as currently in effect. To the extent that the
laws of foreign jurisdictions are relevant to the opinions
herein, I have relied on qualified outside counsel in such
jurisdictions. With respect to the opinion expressed in
paragraph (ix) above, I have relied, with your permission, on the
letter dated of even date herewith, of Proskauer Rose Goetz &
Mendelsohn LLP, a copy of which is attached hereto. I assume no
obligation to supplement this opinion if any applicable laws
change after the date hereof or if I become aware of any facts
that might change the opinions expressed herein after the date
hereof.
The opinions expressed herein are solely for your
benefit in connection with the Stock Subscription Agreement and
may not be relied on in any manner or for any purpose by any
other person or entity and may not be quoted in whole or in part
without my prior written consent, except that CIBC Wood Gundy
Securities Corporation may rely upon this opinion as if it were
addressed to it.
Very truly yours,
[Letterhead of Proskauer Rose Goetz & Mendelsohn LLP]
October 9, 1996
David C. Watt, Esq.
Executive Vice President, General
Counsel and Corporate Secretary
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626
Dear Mr. Watt:
As you know, this firm serves as litigation counsel to
ICN Pharmaceuticals, Inc. (the "Company"). We write in response
to your request for information in connection with the Stock
Subscription Agreement dated as of October 9, 1996 (the
"Agreement").
Except as set forth or referred to in the Company's
June 30, 1996 Form 10Q, filed with the U.S. Securities and
Exchange Commission (the "Form 10-Q"), we do not have actual
knowledge of any claim, action or proceeding (including any
condemnation proceeding) pending or threatened against the
Company or any of its subsidiaries by or before any Governmental
Entity (as we understand that term is defined in the Agreement)
that we believe if adversely determined, individually or in the
aggregate, would have an adverse material effect on the Company,
nor, except as set forth in the Form 10-Q, do we have actual
knowledge of any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries that we believe has had, or
would reasonably he expected in the future to have, an adverse
material effect on the transactions contemplated by the Agreement
or the accompanying Registration Rights Agreement and the
Certificate of Designation. For purposes of this confirmation,
an adverse material effect shall mean monetary damages against
the Company exceeding $1,000,000.
October 9, 1996
Page 2
You may rely on this opinion and refer to it in the
opinion you are providing of even date herewith.
Very truly yours,
Schedule 2.1 ICN PHARMACEUTICALS,
INC.
$50,000,000 PRIVATE PLACEMENT
PURCHASERS OF PREFERRED STOCK
NAME ADDRESS TAXPAYER ID NUMBER DENOMINATION
Halifax Fund, c/o CITCO Fund
Services Not Applicable $9,500,000
L.P. (Cayman Islands)
Corporate Centre,
West Bay Road
P.O. Box 31106 SMB (9,500 Shares)
Grand Cayman,
Cayman Islands
Ramius Fund c/o Bank of Bermuda Not Applicable $3,000,000
Limited 6 Front Street
Hamilton, Bermuda HM11 (3,000 shares)
Palladin 40 West 57th Street 223035509 $1,500,000
Partners, New York, NY 10019
L.P. (1,500 shares)
Gershon c/o CITCO Fund Not Applicable $1,000,000
Partners, Services (Cayman Islands)
L.P. Corporate Centre,
West Bay Road
P.O. Box 31106 SMB (1,000 Shares)
Grand Cayman,
Cayman Islands
CIBC Wood Gundy 425 Lexington Avenue 135492430 $5,000,000
Securities Corp. New York, NY 10017 (5,000 Shares)
Cerberus 950 Third Avenue 133690298 $10,000,000
Partners, L.P. 20th Floor
New York, NY 10022 (10,000 Shares)
Hare & Co. c/o Bank of New York 133818793 $1,500,000
90 Washington Street
New Yorl, NY 10286 (1,500 Shares)
Hare & Co. c/o Bank of New York 135582869 $1,000,000
90 Washington Street
New York, NY 10286 (1,000 Shares)
Cypress & Co. State Street Bank & 042910779 $9,000,000
Trust Company
Palmer No. 5 North
1 Heritage Drive
North Quincy, Mass. 02127 (9,000 Shares)
Daffodil & Co. State Street Bank & 042910780 $8,500,000
Trust Company
Palmer No. 5 North
1 Heritage Drive
North Quincy, Mass. 02127 (8,500 Shares)
Schedule 3.3 SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary
Jurisdiction of Incorporation Percentage of Voting Securities
Owned by Company or Subsidiary
<S> <C> <C>
Alkaloida Chemical Company Limited Hungary 50.02
Alpha Pharmaceuticals Inc. Panama 100.00
Azeo Processing, Inc. New Jersey 100.00
Contactlens Service Nederlands B.V. Netherlands 100.00
Covoco Holding B.V. Netherlands 100.00
Especilidades Farmaceuticas Argentinas SAICF Argentina 100.00
Faraday Urban Renewal Corporation New Jersey 100.00
Finix Offset S.A. Mexico 100.00
Flow Laboratories B.V. Netherlands 100.00
Flow Laboratories, Inc. Maryland 100.00
Gly-Derm, Inc. Michigan 100.00
Hameco B.V. Netherlands 100.00
ICN Biomedicals Australasia Pty. Ltd. Australia 100.00
ICN Biomedicals B.V. Netherlands 100.00
ICN Biomedicals California, Inc. California 100.00
ICN Biomedicals GmbH Germany 100.00
ICN Biomedicals GmbH Eschwege Germany 100.00
ICN Biomedicals S.A.R.L. France 100.00
ICN Biomedicals S.L. Spain 100.00
ICN Biomedicals, Inc. Delaware 100.00
ICN Biomedicals, Ltd. Scotland 100.00
ICN Biomedicals, N.V./S.A. Belgium 100.00
ICN Biomedicals, SRL Italy 100.00
ICN Canada Holding Ltd. Canada 100.00
ICN Canada Ltd. Canada 100.00
ICN China, Inc. Delaware 100.00
ICN East, Inc. New York 100.00
ICN Farmaceutica S.A. Mexico 100.00
ICN France, SARL France 100.00
ICN Galenika DD Yugoslavia 75.00
ICN Iberica, S.A. Spain 100.00
ICN Oktyabr Russia 90.00
ICN Pharmaceuticals California, Inc. California 100.00
ICN Pharmaceuticals Holland, B.V. Netherlands 100.00
ICN Pharmaceuticals KLK Japan 100.00
ICN Pharmaceuticals Ltd. UK 100.00
ICN Southeast, Inc. Delaware 100.00
ICN Vision Care GmbH Germany 100.00
Intercon Contactlens Productions B.V. Netherlands 100.00
Kamed Financing, Inc. Delaware 40.00
Laboratorios Fedal S.A. Mexico 100.00
Laboratorios Panol, S.A. de C.V. Mexico 100.00
Laboratoris Grossman S.A. Mexico 100.00
Labsystems Benelux B.V. Netherlands 100.00
Labsystems Benelux, N.V. Belgium 100.00
Labsystems GmbH Germany 100.00
Lekstredstva Russia 88.00
Medicalex B.V. Netherlands 100.00
Mondofarma B.V. Netherlands 100.00
NYSCO de Mexico S.A. de C.V. Mexico 100.00
Oculenti B.V. Netherlands 100.00
Oculenti Productie V.V. Netherlands 100.00
Pharmon B.V. Netherlands 100.00
Polypharm Russia 65.00
Revlab Corporation Delaware 100.00
SeaLite Sciences, Inc. Georgia 40.00
SPI Pharmaceuticals California, Inc. California 100.00
Vasifal Austalt Lichtenstein 100.00
</TABLE>
Schedule 3.15 MATERIAL CONTRACTS
Joint Venture Contract between Jiangsu Wuxi
Pharmaceutical Corporation and ICN China, Inc. for the
Establishment of a Cooperative Joint Venture Company known as
Wuxi ICN Pharmaceutical Company, Ltd. dated September 25, 1996.
Asset Purchase Agreement between ICN Pharmaceuticals,
Inc. and Siemens Medical Systems, Inc. dated July 18, 1996.
Share Purchase Agreement among ICN Pharmaceuticals,
Inc., Alkaloida Chemical Company Limited and The State
Privatization and Holding Company dated August 30, 1996.
Exclusive License and Supply Agreement on the Stock
Purchase Agreement each between ICN Pharmaceuticals, Inc. and
Schering-Plough Ltd. and dated July 28, 1995.
Loan Modification Agreement, dated as of April 1, 1994,
between the Company and Crossland Federal Savings Bank.
Schedule 3.16 PROPERTIES; ENCUMBRANCES
The Company has certain ownership interests in
properties located in Russia, Yugoslavia and Hungary where
traditional Western concepts of "title" may not exist.
Exhibit 5
November 15, 1996
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California 92626
RE: Registration Statement of Form S-3
ICN Pharmaceuticals, Inc.
Common Stock
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Corporate
Secretary of ICN Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and have been involved with the registration
under the Securities Act of 1933, as amended (the "Act"), of the
shares (the "Shares") of common stock, $.01 par value of the
Company, being offered pursuant to the above described
Registration Statement.
In connection with the offering of the Shares, I have
examined the Amended and Restated Certificate of Incorporation,
By-laws, Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of the Company (the
"Certificate") and other corporate records of the Company, and
such other documents I have deemed relevant to this opinion.
Based and relying solely upon the foregoing, it is my
opinion that the Shares, when issued in accordance with the terms
of the Certificate, will be duly authorized, validly issued,
fully paid and nonassessable.
This opinion may be filed as an exhibit to the above
described Registration Statement. Consent is also given to the
reference to me under the caption "Legal Matters" in such
Registration Statement as having passed upon the validity of the
issuance of the Shares. In giving this consent, I do not hereby
admit that I come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations
of the Securities and Exchange Commission promulgated thereunder.
Respectfully submitted,
/s/ David C. Watt
David C. Watt
Executive Vice President,
General Counsel and Corporate Secretary
Exhibit 15.1
AWARENESS LETTER
November 15, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: ICN Pharmaceuticals, Inc.
Registration Statement on Form S-3 (File No. 333- )
-------------------------------------------------------
We are aware that our reports dated November 12, 1996, July
30, 1996 and April 26, 1996, on our reviews of interim financial
information of ICN Pharmaceuticals, Inc. for the three and nine
month periods ended September 30, 1996, for the three and six
month periods ended June 30, 1996 and for the three month period
ended March 31, 1996 and included in the Company's quarterly
reports on Form 10-Q for the periods then ended, are incorporated
by reference in this registration statement. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or
certified by us within the meaning of Sections 7 and 11 of that
Act.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 (File No. 333- ) of our report, which
includes, as it relates to 1994 and 1993, an emphasis of matter
paragraph related to certain transactions between affiliates,
dated February 19, 1996, appearing in the Annual Report on Form
10-K of ICN Pharmaceuticals, Inc. for the year ended December 31,
1995, on our audits of the consolidated financial statements and
financial statement schedule listed in the index on page 24 of
the Form 10-K. We also consent to the reference to our firm
under the caption "Independent Public Accountants."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Los Angeles, CA
November 15, 1996
