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Exhibit 10.11
ASCENT PEDIATRICS, INC.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of January 31,
1997 among Ascent Pediatrics, Inc. (formerly known as Ascent Pharmaceuticals,
Inc.), a Delaware corporation (the "Company"), Triumph-Connecticut Limited
Partnership, a Connecticut limited partnership (the "Principal Purchaser"), and
the other purchasers listed on the signature pages hereto (together with the
Principal Purchaser, the "Purchasers"). Unless otherwise defined, capitalized
terms used in this Agreement are defined in Section 13; references to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement; references to a "section", a "subsection", a
"paragraph" or a "clause" are, unless otherwise specified, to a section, a
subsection, a paragraph or a clause of this Agreement.
The Company in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agrees with the Purchasers as
follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
1.1. Authorization of Issuance of Notes. The Company has duly
authorized the issuance and sale of its Subordinated Secured Notes due January
31, 2002 (the "Notes", such term to include any such notes issued in
substitution therefor pursuant to the terms of this Agreement) in the aggregate
principal amount of $7,000,000, to be acquired by the Purchasers in accordance
with the terms of this Agreement. The Notes shall be substantially in the form
set out in Exhibit A hereto, with such changes thereto, if any, as may be
approved by the Principal Purchaser and the Company.
1.2. Authorization of Issuance of Warrants. The Company has
duly authorized the issuance and sale of warrants (the "Warrants") to purchase
Common Stock of the Company to be acquired by the Purchasers in accordance with
the terms of this Agreement. The Warrants shall be comprised of two series:
Series A Warrants (the "Series A Warrants") to purchase in the aggregate 660,090
shares of Common Stock of the Company, subject to adjustment as provided in the
Warrants; and Series B Warrants (the "Series B Warrants") to purchase in the
aggregate 256,702 shares of Common Stock of the Company, subject to adjustment
as provided in the Warrants. The Series A Warrants shall be substantially in the
form set out in Exhibit B-1 hereto, with such changes thereto, if any, as may be
approved by the Principal Purchaser and the Company, and the Series B Warrants
shall be substantially in the form set out in Exhibit B-2 hereto, with such
changes thereto, if any, as may be approved by the Principal Purchaser and the
Company. The Series A Warrants and the Series B Warrants will be substantially
identical,
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except with respect to the dates of issuance thereof and the exercise price
therefor, as provided in this Agreement and the Warrants.
1.3. Issuance and Sale of Notes and Warrants at the First
Closing. At the First Closing, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, Notes in the
aggregate principal amount of $2,000,000 and Series A Warrants to purchase in
the aggregate 264,036 shares of Common Stock of the Company, subject to
adjustment as provided in the Warrants, at an aggregate purchase price (the
"Aggregate First Closing Purchase Price") of $2,000,000 payable in cash by wire
transfer of immediately available funds.
1.4. Issuance and Sale of Notes and Warrants at the Second
Closing. At the Second Closing, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, Notes in the
aggregate principal amount of $5,000,000, Series A Warrants to purchase in the
aggregate 396,054 shares of Common Stock of the Company, subject to adjustment
as provided in the Warrants, and Series B Warrants to purchase in the aggregate
256,072 shares of Common Stock of the Company, subject to adjustment as provided
in the Warrants, at an aggregate purchase price (the "Aggregate Second Closing
Purchase Price") of $5,000,000 payable in cash by wire transfer of immediately
available funds.
1.5. Allocation of Issue Price of Notes and Warrants. The
Company and the Purchasers agree that for federal income tax purposes, including
for purposes of determining original issue discount and the issue price of the
Notes under sections 1271-1275 of the Code, as amended, and the Regulations
issued thereunder (including Treasury Regulations section 1.1273-2(g)(2)(i)),
the Closing Fee referenced in Subsection 3.1(q) shall be treated as a reduction
of the issue price of the Notes and Warrants, and the remainder of the Aggregate
First Closing Purchase Price, after giving effect to such reduction, shall be
allocated among the Notes and Warrants to be issued and sold at the First
Closing as follows: $561.50 shall be allocated to each $1,000 principal amount
of Notes; and $3.17 shall be allocated to each share of the Common Stock of the
Company issuable upon the exercise of the Series A Warrants. The Company and the
Purchasers agree that such allocation of the issue price shall be binding on the
Company for purposes of any determination by the Company of the issue price of
the Notes and the Warrants. The Company and the Purchasers further agree to use
their best efforts to reach agreements with respect to the allocation of the
Aggregate Second Closing Purchase Price among the Closing Fees (as defined
below) to be paid by the Company, and the Notes and Warrants to be issued and
sold by the Company, at the Second Closing at or prior to the Second Closing
Date.
1.6. Use of Proceeds. The proceeds of the Notes and Warrants
shall be used by the Company for working capital purposes and potential
acquisitions consistent with Section 8.2(e) hereof. No part of such proceeds
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock. Neither the issuance
of the Notes or the Warrants nor the use of the proceeds thereof will violate or
be inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
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2. CLOSINGS OF THE SALES OF NOTES AND WARRANTS.
2.1. First Closing. The closing of the initial issuance and
sale of Notes and Series A Warrants pursuant to Subsection 1.3 hereof and
certain of the other transactions contemplated hereby (the "First Closing")
shall take place at the offices of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, Exchange Place,
Boston, Massachusetts, on January 31, 1997 or at such other place or on such
other date as the Principal Purchaser and the Company may agree upon (such date
on which the First Closing shall have actually occurred, the "First Closing
Date"). At the First Closing, the Company will deliver or cause to be delivered
to each Purchaser, a single Note in the principal amount specified opposite such
Purchaser's name on the signature page hereto, and a single Series A Warrant
certificate to purchase the number of shares of Common Stock specified opposite
such Purchaser's name on the signature page hereto (or such greater number of
Notes or Warrant certificates as such Purchaser may request upon four (4) days
prior notification), in each case dated the date of the First Closing and
registered in such Purchaser's name or (upon four (4) days prior notification)
that of its nominee, against payment of the purchase price therefor in the
amount specified opposite such Purchaser's name on the signature page hereto. If
at the First Closing the Company shall fail to tender to the Purchasers any of
the Notes or Series A Warrants to be purchased by the Purchasers as provided in
this Subsection 2.1, or if any of the conditions specified in Subsection 3.1
required to be satisfied at or prior to the First Closing shall not have been
satisfied or waived by the Principal Purchaser, the Purchasers shall, at their
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other respective rights they may have by reason of such
failure or such non-fulfillment.
2.2. Second Closing. The second closing of the issuance and
sale of Notes, Series A Warrants and Series B Warrants pursuant to Subsection
1.4 hereof and certain of the other transactions contemplated hereby (the
"Second Closing") shall take place at the offices of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇
LLP, Exchange Place, Boston, Massachusetts, on such date as all of the
conditions specified in Subsection 3.1 required to be satisfied at or prior to
the Second Closing shall have been satisfied or waived by the Principal
Purchaser (such date on which the Second Closing shall have actually occurred,
the "Second Closing Date"). The Company shall provide the Purchasers with thirty
days prior written notice of the proposed Second Closing Date. At the Second
Closing, the Company will deliver or cause to be delivered to each Purchaser, a
single Note in the principal amount specified opposite such Purchaser's name on
the signature page hereto, a single Series A Warrant certificate to purchase the
number of shares of Common Stock specified opposite such Purchaser's name on the
signature page hereto, and a single Series B Warrant certificate to purchase the
number of shares of Common Stock specified opposite such Purchaser's name on the
signature page hereto (or such greater number of Notes or Warrant certificates
as such Purchaser may request upon four (4) days prior notification), in each
case dated the date of the Second Closing and registered in such Purchaser's
name or (upon four (4) days prior notification) that of its nominee, against
payment of the purchase price therefor in the amount specified opposite such
Purchaser's name on the signature pages hereto. If at the Second Closing the
Company shall fail to tender to the Purchasers any of the Notes, Series A
Warrants or
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Series B Warrants to be purchased by the Purchasers as provided in this
Subsection 2.2, or if any of the conditions specified in Subsection 3.1 required
to be satisfied at or prior to the Second Closing shall not have been satisfied
or waived by the Principal Purchaser at or prior to June 30, 1997 (or such later
date as the Principal Purchaser, in its sole discretion, shall consent to in
writing), the Purchasers shall, at their election, be relieved of all further
obligations under this Agreement, without thereby waiving any other respective
rights they may have by reason of such failure or such non-fulfillment. The
Company acknowledges and agrees that the Principal Purchaser shall have the
absolute right, in its sole discretion, to waive any or all of the conditions
specified in Section 3.1 required to be satisfied at or prior to the Second
Closing, and, notwithstanding anything to the contrary set forth herein or in
any of the other Transaction Documents, the Company hereby irrevocably agrees
with the Purchasers, that upon the written request of the Principal Purchaser,
the Company shall issue and sell to the Purchasers the Notes and Warrants to be
issued and sold to the Purchasers pursuant to this Section 2.2 on such proposed
Second Closing Date as the Principal Purchaser shall specify in such request
(which proposed Second Closing Date shall be not less than seven (7) Business
Days prior to nor more than thirty (30) Business Days after such request is
delivered to the Company by the Principal Purchaser). In the event any Purchaser
(other than the Principal Purchaser) shall decline (such Purchaser being
hereinafter referred to as a "Declining Purchaser") to purchase any of the Notes
or Warrants to be issued and sold to such Declining Purchaser at the Second
Closing pursuant to the terms of this Agreement, the Principal Purchaser shall
purchase all of the Notes and Warrants that were to have been issued and sold to
such Declining Purchaser.
3. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES.
3.1 Conditions Precedent to Purchasers' Obligations at Each
Closing. The Purchasers' obligations to purchase and pay for the Notes and
Warrants to be sold to the Purchasers at each Closing is subject to the
fulfillment to its satisfaction, prior to or at each Closing, of the following
conditions; provided that any or all of the following conditions may be waived,
in whole or in part, by the Principal Purchaser with respect to this Agreement
in its sole and absolute discretion:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and in the other
Transaction Documents shall be correct in all respects when made and at the time
of such Closing, after giving effect to the sale of the Notes and Warrants and
the other transactions contemplated to be consummated at or prior to such
Closing by this Agreement and the other Transaction Documents, except that any
representations and warranties that relate to a particular date or period shall
be true in all respects as of such date or period.
(b) Performance; No Default. The Company shall have performed
and complied in all respects with all agreements and conditions contained in
this Agreement and the other Transaction Documents required to be performed or
complied with at or prior to such Closing, and at the time of such Closing,
after giving effect to the sale of the Notes and Warrants
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and the other transactions contemplated to be consummated at such Closing by
this Agreement and the other Transaction Documents, no Default or Event of
Default shall have occurred and be continuing.
(c) Compliance Certificate. The Company shall have delivered
to the Purchaser an Officer's Certificate, dated as of such Closing Date,
certifying that the conditions specified in paragraphs 3.1(a) and 3.1(b) have
been fulfilled.
(d) Good Standing Certificate. The Company shall have
delivered to the Purchaser good standing certificates from the Secretary of
State of Delaware and from the Secretary of State of The Commonwealth of
Massachusetts, evidencing the legal existence and corporate good standing of the
Company in the State of Delaware and the qualification and good standing of the
Company in The Commonwealth of Massachusetts.
(e) Secretary's Certificate. The Company shall have delivered
to the Purchasers a Certificate of the Secretary or Assistant Secretary of the
Company, in form and substance satisfactory to the Principal Purchaser and the
Principal Purchaser's Special Counsel, dated as of such Closing Date, (i)
certifying as true, complete and correct the Company's Certificate of
Incorporation and By-laws, each as amended through such Closing Date (the
"Charter Documents"), and resolutions relating to the transactions contemplated
hereby attached thereto, (ii) certifying as to the incumbency and specimen
signatures of officers who shall have executed instruments, agreements and other
documents in connection with the transactions contemplated hereby, (iii)
certifying as to the effect that certain agreements, instruments and other
documents are in the form approved in the resolutions referred to in clause (i)
above, and (iv) covering such other matters, and with such other attachments
thereto, as the Principal Purchaser and the Principal Purchaser's Special
Counsel may reasonably request.
(f) Opinion of Counsel. The Principal Purchaser shall have
received a favorable legal opinion from ▇▇▇▇ and ▇▇▇▇ LLP, counsel to the
Company, addressed to all of the Purchasers and dated as of such Closing Date,
in the form set out in Exhibit C hereto.
(g) Third Amended and Restated Voting Rights Agreement. The
Company and certain of its stockholders shall have entered into a Third Amended
and Restated Voting Rights Agreement, in form and substance satisfactory to the
Principal Purchaser, providing for (i) the total number of members of the Board
of Directors of the Company to be fixed at nine (9) and (ii) at least one (1) of
the members of the Board of Directors of the Company to be selected by the
holders of a majority of the outstanding Warrants, and such Third Amended and
Restated Voting Rights Agreement shall remain in full force and effect as of
each Closing Date;
(h) Other Documents. As of each Closing Date:
(i) the Security Documents shall have been executed and
delivered by the Company and the Collateral Agent, shall be in full force and
effect and the Collateral Agent shall
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hold valid and enforceable perfected Liens on substantially all of the
properties and assets of the Company as security for the ratable benefit of the
holders of the Note Indebtedness; and
(ii) each of the other Transaction Documents and any
other instruments, certificates, agreements and other documents contemplated
thereby and in connection therewith shall have been executed and delivered by
all respective parties thereto and shall be in full force and effect.
(i) Legal Investment; Compliance with Securities Laws. At the
time of such Closing, the Purchasers' purchase of the Notes and Warrants shall
be permitted by the laws and regulations of the jurisdiction to which each
Purchaser is subject (including, without limitation, Section 5 of the Securities
Act or Regulation G, T, U, or X of the Board of Governors of the Federal Reserve
System), and credit controls (whether voluntary or mandatory) or similar
restraints applicable to the Purchasers, and shall not subject the Purchasers to
any tax, penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and shall not be enjoined
(temporarily or permanently) under, prohibited by or contrary to any injunction,
order or decree applicable to the Purchasers. The offering, issuance and sale of
the Notes and Warrants under this Agreement shall have complied with all
applicable requirements of federal and state securities laws and the Principal
Purchaser shall have received evidence, if any, of such compliance in form and
substance reasonably satisfactory to the Principal Purchaser.
(j) Waiver of Stockholder Rights. The holders of the Preferred
Stock, the Series D Common Warrants, the Series D Preferred Warrants, the Series
E Common Warrants, the Series F Common Warrants and, to the extent applicable,
any other Capital Stock of the Company, shall have irrevocably waived in writing
any rights (including, without limitation, rights of first refusal) which they
may have under the Company's Charter Documents or under any purchase agreements
or other instruments, agreements or documents with respect to the offer and
issuance of the Notes and Warrants hereunder.
(k) Proceedings and Documents. All corporate and other
proceedings contemplated by this Agreement, including, without limitation, the
authorization of the issuance of the Notes and the Warrants, and all other
matters set forth in the Transaction Documents and all of the other documents
and instruments incident thereto, shall be reasonably satisfactory to the
Principal Purchaser and the Principal Purchaser's Special Counsel.
(l) Series F Financing. The Company shall have received (i)
cash proceeds (including proceeds received contemporaneously with the purchase
of the Notes and Warrants at the First Closing) from the Series F Financing of
not less than $10,000,000 as of the First Closing Date, and (ii) cash proceeds
from the Series F Financing of not less than $12,000,000 as of the Second
Closing Date.
(m) No Adverse U.S. Legislation, Action or Decision. No
legislation, order, rule, ruling or regulation shall have been enacted or made
by or on behalf of any governmental
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body, department or agency of the United States, nor shall any decision of any
court of competent jurisdiction within the United States have been rendered
which, in the Principal Purchaser's reasonable judgment, could materially and
adversely affect any of the Notes or the Warrants or any part thereof as an
investment. There shall be no action, suit, investigation or proceeding pending
or threatened, against or affecting the Purchasers, any of their properties or
rights, or any of their Affiliates, associates, officers or directors, before
any court, arbitrator or administrative or governmental body which (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
transactions contemplated by this Agreement and the other Transaction Documents,
or (ii) questions the validity or legality of any such transactions or seeks to
recover damages or to obtain other relief in connection with any such
transactions, and there shall be no valid basis for any such action, proceeding
or investigation.
(n) Governmental and Third Party Permits, Consents, Etc.
Except as set forth on Schedule 4.4, the Company shall have duly applied for and
obtained all approvals, orders, licenses, consents and other authorizations
(collectively, the "Approvals") from each federal, state and local government
and governmental agency, department or body, or pursuant to any agreement to
which the Company is a party or to which any of them or any of their assets is
subject, which may be required in connection with this Agreement, the other
Transaction Documents or any other agreements and documents contemplated thereby
and in connection therewith.
(o) Related Matters. The Company's Charter Documents shall not
have been modified or amended since the date of this Agreement.
(p) Payment of Closing Fees and Expenses. The Company shall
have paid prior to or on the date of such Closing a closing fee (the "Closing
Fee") to each Purchaser in an amount equal to two percent (2.0%) of the
aggregate purchase price required to be paid by such Purchaser for the Notes and
Warrants being purchased by such Purchaser at such Closing (which Closing Fee,
at the option of each Purchaser, may be applied against the purchase price for
the Notes and Warrants being purchased by such Purchaser at such Closing), all
reasonable fees, expenses and disbursements of the Purchasers and the Principal
Purchaser's Special Counsel, reflected in statements of the Purchasers and such
counsel rendered prior to or on the date of such Closing; provided, however, the
aggregate amount of such fees and expenses (other than the Closing Fee) shall
not exceed $90,000.
(q) Additional Conditions to Second Closing. Prior to the
Second Closing the Company shall have received the Primsol Solution Final FDA
Approval.
3.2. Conditions Precedent to Company's Obligations at Each
Closing. The Company's obligation to issue and sell the Notes and Warrants to be
sold by it to the Purchasers at each Closing is subject to the fulfillment to
its satisfaction, prior to or at each Closing, of the following conditions;
provided that any or all of the following conditions may be waived, in whole or
in part, by the Company with respect to this Agreement in its sole and absolute
discretion:
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(a) Representations and Warranties. The representations and
warranties of the Purchasers contained in this Agreement and in the other
Transaction Documents shall be correct in all material respects when made and at
the time of such Closing, after giving effect to the sale of the Notes and
Warrants and the other transactions contemplated to be consummated at or prior
to such Closing by this Agreement and the other Transaction Documents, except
that any representations and warranties that relate to a particular date or
period shall be true in all respects as of such date or period.
(b) Compliance With Securities Laws. The offering, issuance
and sale of the Notes and Warrants under this Agreement shall have complied with
all applicable requirements of federal securities laws and the Company shall
have received evidence, if any, of such compliance in form and substance
satisfactory to the Company.
4. REPRESENTATIONS AND WARRANTIES, ETC. In order to induce the
Purchasers to purchase the Notes and Warrants, the Company represents and
warrants that:
4.1. Organization and Qualification; Authority. The Company is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, has full corporate power and authority to own and
lease its properties and carry on its business as presently conducted, is duly
qualified, registered or licensed as a foreign corporation to do business and is
in good standing in The Commonwealth of Massachusetts and in each other
jurisdiction in which the ownership or leasing of its properties or the
character of its present operations makes such qualification, registration or
licensing necessary, except where the failure so to qualify or be in good
standing would not have a Material Adverse Effect.
4.2. Capitalization. The authorized, issued and outstanding
Capital Stock of the Company, immediately prior to the First Closing Date, will
be as set forth on Schedule 4.2 hereto. Except as set forth on Schedule 4.2,
immediately prior to the First Closing Date there will not be any outstanding
subscriptions, options, warrants, rights, convertible or exchangeable securities
or other agreements or commitments of any character obligating the Company to
issue any securities.
4.3. Subsidiaries. The Company has no Subsidiaries and does
not (a) own of record or beneficially, directly or indirectly, any shares of
Capital Stock of any other corporation which is controlled by the Company or any
interest in any partnership, joint venture or other association or business
entity which is controlled by the Company or (b) otherwise control, directly or
indirectly, any other business entity.
4.4. Stockholder List and Agreements. Set forth on Schedule
4.4 hereto is a true and complete list of the holders of Capital Stock of the
Company, the Capital Stock owned by each such holder and the consideration paid
to the Company for such Capital Stock by each such holder as of the First
Closing Date. Except as set forth on Schedule 4.4, there are no
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agreements or understandings, written or oral, to which the Company is a party
with respect to the acquisition, disposition or voting of the Capital Stock of
the Company.
4.5. Licenses. The Company holds all material licenses,
franchises, permits, consents, registrations, certificates and other approvals
(including, without limitation, those relating to environmental matters, public
and worker health and safety, buildings, highways or zoning) (individually, a
"License" and collectively, "Licenses") required for the conduct of its business
as now being conducted, and is operating in substantial compliance therewith,
except where the failure to hold any such License or to operate in compliance
therewith would not have a Material Adverse Effect. Except as set forth on
Schedule 4.19, the Company is in substantial compliance with all laws,
regulations, orders and decrees applicable to it, except in each case where the
failure so to comply would not have a Material Adverse Effect, or a material
adverse effect on the ability of the Company to perform on a timely basis any
obligation that it has or will have under any Transaction Document to which it
is a party.
4.6. Corporate and Governmental Authorization;
Non-Contravention. Except as set forth on Schedule 4.6, the execution, delivery
and performance by the Company of the Transaction Documents to which the Company
is a party and all other instruments or agreements to be executed in connection
herewith or therewith, and the issuance and sale to the Purchasers of the Notes
and Warrants pursuant to this Agreement, are within the Company's corporate
powers, having been duly authorized by all necessary corporate action on the
part of the Company; do not require any License, authorization, approval,
qualification or formal exemption from, or other action by or in respect of, or
filing of a declaration or registration with, any court, Governmental Authority,
agency or official or other Person (except such as have been obtained or as may
be required under the Securities Act or state securities or Blue Sky laws); do
not contravene or constitute a default under or violation of (i) any provision
of applicable law or regulation of any Governmental Authority, (ii) the Charter
Documents of the Company, (iii) any agreement (or require the consent of any
Person under any agreement that has not been obtained) to which the Company is a
party, or (iv) any judgment, injunction, order, decree or other instrument
binding upon the Company or any of its properties, except where such
contravention, default or violation would not have a Material Adverse Effect;
and do not and will not result in the creation or imposition of any Lien on any
asset of the Company except as contemplated hereby.
4.7. Validity and Binding Effect. Each of the Transaction
Documents to which the Company is a party has been duly executed and delivered
by the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except for (a) the effect upon
the Transaction Documents of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting the rights of creditors
generally and (b) limitations imposed by a court of competent jurisdiction under
general equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions of the Transaction Documents and upon
the availability of injunctive relief or other equitable remedies.
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4.8. Litigation; Defaults. There is no action, suit,
proceeding or investigation pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its properties before or
by any court or arbitrator or any governmental body, agency or official, which
questions the validity of the Agreement, or which might impair the ability of
the Company to perform fully on a timely basis any obligation which the Company
has or will have under this Agreement or any other Transaction Document to which
the Company is a party, or which (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. The Company is not in
violation of, or in default under (and there does not exist any event or
condition which, after notice or lapse of time or both, would constitute such a
default under), any term of its Charter Documents, or of any term of any
agreement, instrument, judgment, decree, order, statute, injunction,
governmental regulation, rule or ordinance (including without limitation, those
relating to zoning, city planning or similar matters) applicable to the Company
or to which the Company is bound, or to any properties of the Company, except in
each case to the extent that such violations or defaults, individually or in the
aggregate, could not reasonably affect the validity of any Transaction Document,
have a Material Adverse Effect, or impair the ability of the Company to perform
fully on a timely basis any material obligation which the Company has or will
have under this Agreement or any other Transaction Document to which the Company
is a party.
4.9. Outstanding Debt. Except as set forth on Schedule 4.9
hereto, at and as of each Closing, neither the Company nor any of its
Subsidiaries will have outstanding any debt for borrowed money, or obligations
or liabilities evidenced by bonds, debentures, notes or other similar
instruments or under capital leases other than short-term debt and trade
payables incurred in the ordinary course of business; provided that after the
First Closing, the Company may incur Indebtedness to the extent permitted under
Section 8.2(b). Schedule 4.9 contains a complete and accurate list of all
material guarantees, assumptions, purchase agreements and similar agreements and
arrangements whereby the Company is or may become directly or indirectly liable
or responsible for the indebtedness or other obligations of another Person,
except for negotiable instruments endorsed for collection or deposit in the
ordinary course of its business, identifying, with respect to each of the
respective parties, amounts and maturities.
4.10. No Material Adverse Change. Except as set forth on
Schedule 4.10, since December 31, 1995, there has been (i) no material adverse
change in the financial condition, assets, business or results of operations of
the Company, (ii) no material obligation or liability (contingent or other)
incurred by the Company, other than obligations and liabilities incurred in the
ordinary course of business, and no mortgage, encumbrance or Lien placed on any
of the properties of the Company which remains in existence on the date hereof,
other than Permitted Liens and Liens described on Schedule 4.20 hereto, and
(iii) no acquisition or disposition of any material assets by the Company (or
any contract or arrangement therefor) otherwise than for fair value in the
ordinary course of business.
4.11. Events Subsequent to September 30, 1996 Balance Sheet.
Except as set forth on Schedule 4.11 hereto, since September 30, 1996, the
Company has not (i) issued any stock, bond or other corporate security, (ii)
borrowed any amount or incurred or become subject
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to, or paid any obligation or liability (absolute, accrued or contingent) other
than current liabilities shown on the Financial Statements and current
liabilities incurred since the date of the Financial Statements in the ordinary
course of business, (iii) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (iv) sold, assigned, transferred or granted any exclusive license with
respect to any patent, trademark, trade name, service ▇▇▇▇, copyright, trade
secret or other intangible asset, (v) suffered any loss of property or waived
any right of substantial value other than in the ordinary course of business,
(vi) made any material change in the manner of business or operations of the
Company, or (vii) entered into any commitment (contingent or otherwise) to do
any of the foregoing, if any of the foregoing would have a Material Adverse
Effect.
4.12. Employee Programs. Schedule 4.12 sets forth a list of
every Employee Program maintained by the Company or any Current Affiliate at any
time during the six-year period ending on the First Closing Date or with respect
to which a liability of the Company or an ERISA Affiliate exists. Each Employee
Program (other than a Multiemployer Plan) which has been maintained by the
Company during the six-year period ending on the First Closing Date and which
has been intended to qualify under Section 401(a) or Section 501(c)(9) of the
Code has received a favorable determination or approval letter from the IRS
regarding its qualification under such section or the remedial amendment period
under Section 401(b) of the Code has not yet expired with respect to such
Employee Program and, to the knowledge of the Company, nothing has occurred that
would adversely affect such qualification since the date of such letter or
application for a determination or approval letter has been timely made and to
the knowledge of the Company, no reason exists why a favorable determination or
approval shall not be granted. Except as set forth on Schedule 4.12, the Company
does not know of any failure of any party to comply with any laws applicable
with respect to the Employee Programs that have been maintained by the Company
or any Current Affiliate, except for failures which would not subject the
Company to any material liability, and no such failure will result from
completion of the transactions contemplated hereby. With respect to any Employee
Program ever maintained by the Company or an ERISA Affiliate, there has been no
"prohibited transaction," as defined in Section 406 of ERISA or Code Section
4975, or breach of any duty under ERISA or other applicable law or any agreement
which in any such case could subject the Company to material liability either
directly or indirectly (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes, or any
other loss or expense. No litigation or governmental administrative proceeding
(or investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or threatened with respect to any such Employee
Program (other than a Multiemployer Plan).
The Company and its Current Affiliates have not incurred any liability
under Title IV of ERISA which has not been paid in full prior to the Closing.
Neither the Company nor any of its Current Affiliates is liable for any material
"accumulated funding deficiency" (whether or not waived) with respect to any
Employee Program ever maintained by the Company or any ERISA Affiliate and
subject to Code Section 412 or ERISA Section 302. With respect to any Employee
Program subject to Title IV of ERISA, there has been no (and the transactions
contemplated by this Agreement will not result in any) (i) "reportable event,"
within the meaning of ERISA
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Section 4043 or the regulations thereunder (for which the notice requirement is
not waived under 29 C.F.R. Part 2615) or (ii) other event or condition which
presents a material risk of plan termination or any other event that may cause
the Company or any Current Affiliate to incur material liability or have a
material Lien imposed on its assets under Title IV of ERISA. All payments and/or
contributions required to have been made by the Company and its Current
Affiliates (under the provisions of any agreements or other governing documents
or applicable law) with respect to all Employee Programs subject to Title IV of
ERISA ever maintained by the Company or any ERISA Affiliate, for all periods
prior to the Closing, have been timely made. Except as described on Schedule
4.12, no Employee Program maintained by the Company or an ERISA Affiliate and
subject to Title IV of ERISA (other than a Multiemployer Plan) has any "unfunded
benefit liabilities" within the meaning of ERISA Section 4001(a)(18), as of each
Closing Date. With respect to Multiemployer Plans maintained by the Company or
any ERISA Affiliate, Schedule 4.12 states the aggregate amount of withdrawal
liability or other termination liability that would be incurred by the Company
or any ERISA Affiliate if there were a withdrawal from any such plan as
determined by the most recent withdrawal liability calculation prepared by such
plan. Except as disclosed on Schedule 4.12, none of the Employee Programs which
is a welfare plan maintained by the Company or any ERISA Affiliate provides
health care or any other non-pension benefits to any employees after their
employment is terminated (other than as required by Part 6 of Subtitle B of
Title I of ERISA or comparable statutes or regulations) or has ever promised to
provide such post-termination benefits.
For purposes of this subsection:
(a) "Employee Program" means (A) any employee benefit plan
within the meaning of Section 3(3) of ERISA and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA, and (B) any
stock option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation arrangements, supplemental income
arrangements, vacation plans, and all other employee benefit plans, agreements,
and arrangements not described in (A) above, and (C) any trust used to fund
benefits under the foregoing maintained by the Company or any ERISA Affiliate.
(b) An entity is an "ERISA Affiliate" of the Company if it
would have ever been considered a single employer with the Company under ERISA
Section 4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA Section 302(d)(8)(C); and an entity is a "Current Affiliate"
if it currently would be considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA Section 302(d)(8)(C).
(c) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program, or
has any obligation (by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or, in
respect of such employees, their spouses, dependents, or beneficiaries).
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(d) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
4.13. Private Offerings. No form of general solicitation or
general advertising was used by the Company or any of its representatives, or,
to the knowledge of the Company, any other Person acting on behalf of the
Company, in connection with the offering of the Notes and Warrants being
purchased under this Agreement or under any other Transaction Document. Neither
the Company nor any Person acting on the Company's behalf has directly or
indirectly offered the Notes or the Warrants, or any part thereof or any other
similar securities or the securities being purchased under any other Transaction
Document, for sale to, or sold or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with any Person
or Persons other than the Purchasers and other investors who the Company
reasonably believed had such knowledge and experience in financial and business
matters that they were capable of evaluating the merits and risks of purchasing
the Notes and the Warrants. The Company further represents to the Purchasers
that, assuming the accuracy of the representations of the Purchasers as set
forth in Section 5 hereof, neither the Company nor any Person acting on the
Company's behalf has taken or will take any action which would subject the issue
and sale of the Notes and the Warrants or the securities being purchased under
any other Transaction Document to the provisions of Section 5 of the Securities
Act, except as contemplated by the Registration Rights Agreement. The Company
has not sold the Notes or the Warrants to anyone other than the Purchasers
designated in this Agreement.
4.14. Broker's or Finder's Commissions. In addition to and not
in limitation of any other rights hereunder, the Company agrees that it will
indemnify and hold harmless the Purchaser from and against any and all claims,
demands or liabilities for broker's, finder's, placement agent's or other
similar fees or commissions and any and all liabilities with respect to any
taxes (including interest and penalties) payable or incurred or alleged to have
been incurred by the Company or any Person acting or alleged to have been acting
on the Company's behalf, in connection with this Agreement, the issuance or sale
of the Notes or the Warrants, or any other transaction contemplated by any of
the Transaction Documents.
4.15. Disclosure.
(a) There is no untrue statement of material fact in this
Agreement or in any of the other Transaction Documents, and no omission of a
material fact necessary in order to make the statements contained herein and
therein not materially misleading in light of the circumstances in which such
statements were made.
(b) The historical financial and operating information
provided to the Purchasers by the Company has been derived from the consolidated
books and records of the Company based upon reasonable methods as to allocations
and calculations of such financial information.
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4.16. Intentionally Deleted.
4.17. Federal Reserve Regulations and Other Matters. The
Company will not, directly or indirectly, use any of the proceeds from the sale
of the Notes and Warrants for the purpose, whether immediate, incidental or
ultimate, of buying any "margin stock," or of maintaining, reducing or retiring
any indebtedness originally incurred to purchase any stock that is currently a
"margin stock," or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit," in each case within the meaning of
Regulation G or U of the Board of Governors of the Federal Reserve System (12
C.F.R. 207 and 221, as amended, respectively), or otherwise take or permit to be
taken any action which would involve a violation of such Regulation G or
Regulation U or of Regulations T or X of the Board of Governors of the Federal
Reserve System (12 C.F.R. 220 and 224, as amended, respectively) or any other
regulation of such Board. No indebtedness that may be maintained, reduced or
retired with the proceeds from the sale of the Notes or Warrants was incurred
for the purpose of purchasing or carrying any "margin stock" and the Company
does not own any such "margin stock" or have any present intention of acquiring,
directly or indirectly any such "margin stock."
4.18. Books and Records. The minute books of the Company
contain complete and accurate records of all meetings and other corporate
actions of the Company's stockholders and the Company's Board of Directors and
committees thereof and accurately reflect all transactions referred to therein.
The stock ledger of the Company is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of Capital Stock of the
Company.
4.19. Environmental Regulation, Etc.
(a) Except as set forth on Schedule 4.19, to the knowledge of
the Company, the Company (i) has no liability under any Environmental Law or
common law cause of action relating to or arising from environmental conditions
which could have a Material Adverse Effect, and any Property owned, operated,
leased, or used by the Company and any facilities and operations thereon comply
with and will continue to comply with all applicable Environmental Laws to the
extent that failure to comply could have a Material Adverse Effect; (ii) has
never entered into or been subject to any judgment, consent decree, compliance
order, or administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law which could, individually or in the aggregate, have a Material
Adverse Effect; and (iii) has no reason to believe that any of the items
enumerated in the foregoing clause (ii) will be forthcoming.
(b) Except as set forth on Schedule 4.19, to the knowledge of
the Company: (i) the Company has never generated, transported, used, stored,
treated, disposed of, or managed and will never generate, transport, use, store,
treat, dispose of, or manage any Hazardous Waste, except in substantial
compliance with applicable Environmental Laws; (ii) the Company is not aware of
and has not caused any Release of a Hazardous Material at any site presently or
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formerly owned, operated, leased, or used by the Company; (iii) the Company has
never had Hazardous Material transported from any site presently or formerly
owned, operated, leased, or used by the Company for treatment, storage, or
disposal at any other place, except in substantial compliance with applicable
Environmental Laws; (iv) the Company does not presently own, operate, lease, or
use any site on which underground storage tanks are or were located; (v) the
Company has never placed underground tanks on any site owned, operated, leased
or used by the Company; (vi) the Company has never removed underground tanks
from any site presently or formerly owned, operated, leased or used by the
Company; (vii) the Company has never had a Lien imposed by any Governmental
Authority on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Company in connection with the presence of any Hazardous
Material.
4.20. Properties and Assets. The Company has good record and
marketable fee title to all real Property, has good and marketable title to, or
valid leasehold interests in, or licenses to use, all other Property and assets,
whether tangible or intangible, owned by them and reasonably necessary in the
conduct of business of the Company, except defects in title which do not and
will not have a Material Adverse Effect. All of the leases necessary in any
material respect for the operation of their respective properties and assets,
under which the Company holds any Property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed possession
of the subject matter of the lease, and no material default by the Company
exists under any of the provisions thereof. All buildings, machinery and
equipment of the Company are in good repair and working order, except for
ordinary wear and tear, and except as would not have a Material Adverse Effect.
All material current uses of such Property or assets of the Company are
permitted as of right and no such regulation or ordinance interferes with such
current uses. To the actual knowledge of the Company, there is no pending change
in any such laws, regulations and ordinances which would have a Material Adverse
Effect. Except as set forth on Schedule 4.20, no condemnation proceeding is
pending or, to the knowledge of the Company, threatened against the Company. All
Property and assets of any kind (real or personal, tangible or intangible) of
the Company are free from all Liens except for (i) Liens disclosed on Schedule
4.20 hereto and (ii) Permitted Liens.
4.21. Insurance. A list of all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors under which the Company may derive any
material benefit is set forth on Schedule 4.21 hereof. There is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, reserved, denied or disputed by the underwriters of such
policies or bonds or their agents where such question, reservation, denial or
dispute would have a Material Adverse Effect. All premiums due and payable under
all such policies and bonds have been paid, and the Company is otherwise in full
compliance with the terms and conditions of all such policies and bonds. Except
as set forth on Schedule 4.21, such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) are and
have been in full force and effect for at least the last year and remain in full
force and effect. The Company knows of no threatened termination of any such
policies or bonds.
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4.22. Employment Practices. Except as set forth on Schedule
4.22 hereto, the Company is not a party to or in the process of negotiating any
collective bargaining or labor agreement or union contract. Except as set forth
on Schedule 4.22, there is no (i) charge, complaint or suit pending or, to the
knowledge of the Company, threatened against the Company respecting employment,
hiring for employment, terminating from employment, employment practices,
employment discrimination, terms and conditions of employment, safety, wrongful
termination, or wages and hours, involving more than $25,000 in any single
instance, (ii) unfair labor practice charge or complaint pending or, to the
knowledge of the Company, threatened against, or decision or order in effect and
binding on, the Company before or of the National Labor Relations Board, (iii)
grievance or arbitration proceeding arising out of or under collective
bargaining agreements pending or, to the knowledge of the Company, threatened
against the Company, (iv) strike, labor dispute, slow-down, work stoppage or
other interference with work pending or, to the knowledge of the Company,
threatened against the Company, or (v) to the knowledge of the Company, union
organizing activities or union representation question threatened or existing
with respect to any groups of employees of the Company.
4.23. Financial Statements.
(a) The Company has delivered to the Purchasers complete and
correct copies of its audited financial statements for the fiscal years ended
December 31, 1994 and 1995 and its unaudited financial statements for the fiscal
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, together
with the notes thereto (the "Financial Statements"). The Financial Statements
fairly present in all material respects the financial position of the Company on
the dates of such statements and the results of its operations for the periods
covered thereby; and have been prepared in accordance with GAAP consistently
applied, except, with respect to unaudited financial statements, the absence of
notes thereto and statements of cash flows and subject to customary year-end
adjustments.
(b) As of December 31, 1995 and as of each Closing Date, and
except as set forth in the Schedules hereto, there are no material liabilities
of the Company of any nature, whether accrued, absolute, contingent or
otherwise, asserted or, to the Company's knowledge, unasserted, except
liabilities stated or adequately reserved against in the Financial Statements or
liabilities or claims which are not required to be reflected in the Financial
Statements or in the notes thereto under GAAP.
4.24. Intellectual Property.
(a) Except as described in Schedule 4.24 hereto, the Company
has exclusive ownership of, or a license to use, all patent, copyright, trade
secret, trademark, or other proprietary rights (collectively, "Intellectual
Property") used or to be used in the business of the Company as presently
conducted. There are no claims or demands of any person pertaining to any of
such Intellectual Property and no proceedings have been instituted, or are
pending or, to the Company's knowledge, threatened, which challenge the rights
of the Company in respect thereof. No claim is known by the Company to be
pending or threatened to the effect that any
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Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company. The
Company has the right to use, free and clear of claims of other Persons, all
customer lists, designs, manufacturing or other processes, computer software,
systems, data compilations, research results, formulae and other information
required for or incident to its products or its business as presently conducted.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned or by
or licensed to the Company or used or to be used by the Company in its business
as presently conducted, and all other items of Intellectual Property which are
material to the business or operations of the Company, are listed on Schedule
4.24. All of such patents, patent applications, trademark registrations,
trademark applications and registered copyrights have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights, or the corresponding offices of other
jurisdictions as identified on said Schedule 4.24, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and each such jurisdiction.
(c) All licenses or other agreements under which the Company
is granted rights in Intellectual Property are listed on Schedule 4.24. All said
licenses or other agreements are in full force and effect and there is no
material default by any party thereto. To the Company's knowledge, the licensors
under said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and all amendments
thereto, have been provided to the Purchasers.
(d) All licenses or other agreements under which the Company
has granted rights to others in Intellectual Property owned or licensed by the
Company are listed on Schedule 4.24. All said licenses or other agreements are
in full force and effect and there is no material default by the Company, or to
the Company's knowledge, any other party thereto. True and complete copies of
all such licenses or other agreements, and all amendments thereto, have been
provided to the Purchasers.
(e) The Company has taken all steps required in accordance
with sound business practice to establish and preserve its ownership of all
Intellectual Property rights with respect to its products, services and
technology. All proprietary trade secrets developed by or belonging to the
Company which have not been patented have been kept confidential and each
current and prior employee (other than clerical staff and other employees
without access to proprietary trade secrets), consultant and Scientist (as
defined below), except as disclosed on Schedule 4.24 hereto, has executed an
agreement regarding confidentiality, proprietary information and assignment of
inventions to the Company and to the best of the Company's knowledge, no such
Person is in breach of any agreements or arrangements with employers or others
relating to proprietary information or assignments of inventions. The Company
has not made any information regarding the Company's proprietary trade secrets
available to any Person other than those employees, consultants and Scientists
who have executed such agreements
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regarding confidentiality, proprietary information and assignment of inventions.
Except as set forth on Schedule 4.24, to the best of the Company's knowledge, no
other Person, including any prior or current employer of any of the Company's
employees, consultants or Scientists, has any right to or interest in any
inventions, improvements, discoveries or other information assigned to the
Company by any of the Company's employees, consultants or Scientists. Except as
set forth on Schedule 4.24, the Company has no actual knowledge of any
infringement by others of any of the Company's Intellectual Property rights.
(f) To the Company's knowledge, the Company's products and the
business and activities presently conducted or proposed to be conducted by the
Company do not infringe or violate any Intellectual Property owned by any other
Person. No proceeding charging the Company with infringement of any adversely
held Intellectual Property has been filed or is threatened to be filed. To the
Company's knowledge, there exists no unexpired patent or patent application
which includes claims that would be infringed by the products, activities or
business of the Company. The Company is not making unauthorized use of any
confidential information or trade secrets of any Person, including without
limitation any prior or current employer of any of the Company's employees,
consultants or Scientists. Except as set forth on Schedule 4.24, neither the
Company, nor, to the Company's knowledge any employee of the Company or any of
the scientists who are performing consulting services for the Company (such
scientists being the individuals designated as "Scientists" on Schedule 4.24,
are hereinafter referred to herein as the "Scientists"), has any agreements or
arrangements with any Person other than the Company, or is obligated under any
contract (including any license, covenant or commitment of any nature) with any
Person other than the Company, or is subject to any judgment, decree or order of
any court or administrative agency, that restricts, interferes or conflicts with
the Company's business or the performance of such employee's or Scientist's
duties as an officer, employee, consultant or director of the Company.
4.25. Taxes. Except as otherwise set forth in Schedule 4.25,
the Company has filed or obtained extensions of all federal, state, local and
foreign income, excise, franchise, real estate, sales and use and other tax
returns heretofore required by law to be filed by it. Except as otherwise set
forth in Schedule 4.25, all material taxes, including, without limitation, all
federal, state, county, local, foreign or other income, Property, sales, use,
franchise, value added, employees' income withholding, social security,
unemployment and other taxes, of any nature whatsoever which have become due or
payable by the Company, including any fines or penalties with respect thereto or
interest thereon, whether disputed or not (collectively, "Taxes"), have been
paid in full or are adequately provided for in accordance with GAAP on the
financial statements of the applicable Person. Except as otherwise set forth in
Schedule 4.25, all material deposits, Taxes and other assessments and levies
required by law to be made, withheld, collected or provided for by the Company,
including deposits with respect to Taxes constituting employees' income
withholding taxes, have been duly made, withheld, collected or provided for and
have been paid over to the proper federal, state or local authority, or are held
by the Company for such payment. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company, except
for Liens for Taxes which are not yet due.
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4.26. Transactions with Affiliates. Except as otherwise set
forth on Schedule 4.26, there are no material transactions, agreements or
understandings between or among the Company and any of its officers or directors
or stockholders or any of their Affiliates or associates.
4.27. No Other Business. The Company has not and is not
engaged in any material respect in any business other than the development,
manufacturing, marketing and sale of pharmaceutical products.
4.28. Compliance with Laws. The Company is in substantial
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority, except those the non-compliance with which
would not, singly or in the aggregate, have a Material Adverse Effect, or impair
the ability of the Company to perform fully on a timely basis any material
obligation which the Company has or will have under any Transaction Document to
which the Company is a party.
4.29. Investment Company Act. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.30. Public Utility Holding Company Act. The Company is not a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
4.31. Material Contracts and Obligations. Set out on Schedule
4.31 hereto is a list of: (a) each agreement to which the Company is a party or
by which it is bound which requires future expenditures by the Company in excess
of $50,000, (b) all employment and consulting agreements, employee benefit,
bonus, pension, profit-sharing, stock option, stock purchase and similar plans
and arrangements, and distributor and sales representative agreements to which
the Company is a party or by which it is bound, and (c) any agreement to which
any stockholder, officer or director of the Company, or any "affiliate" or
"associate" of such persons (as under the Securities Act of 1933, as amended),
is presently a party, including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person or
entity. The Company has delivered to the Purchasers copies of such of the
foregoing as requested. The Company and, to the best of the Company's knowledge,
each other party thereto have in all material respects performed all the
obligations required to be performed by them to date, have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any lease, agreement or contract described in subsections (a), (b) or (c) above
or that might result in payments by the Company in excess of $50,000, now in
effect to which the Company or any subsidiary is a party or by which it or its
property may be bound. All of such agreements and contracts are valid, binding
and in full force and effect with respect to the Company.
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4.32. FDA Approvals. Set out on Schedule 4.32 hereto is a
detailed description of the United States Food and Drug Administration ("FDA")
approvals that the Company is required to obtain for each of the Company's
pharmaceutical products, the dates on which "Investigational New Drug
Applications" and "New Drug Applications" were (or are expected to be) filed by
the Company with the FDA for each such product, the dates on which clinical
tests and trials were (or are expected to be) completed by the Company for each
such product, and the dates on which FDA approvals were (or are expected to be)
obtained by the Company for each such product.
5. REPRESENTATIONS OF THE PURCHASERS.
5.1. Purchase for Investment. Each Purchaser individually and
not jointly represents that (a) it is an accredited investor as defined in
Regulation D under the Securities Act, or (b) by reason of its business and
financial experience, and the business and financial experience of those
persons, if any, retained by it to advise it with respect to its investment in
the Notes and the Warrants, such Purchaser together with such advisers have such
knowledge, sophistication and experience in business and financial matters as to
be capable of evaluating the merits and risk of the prospective investment, and
that it is purchasing the Notes and the Warrants for its own account or for one
or more separate accounts maintained by it or for the account of one or more
institutional investors on whose behalf such Purchaser has authority to make
this representation for investment and not with a view to the distribution
thereof or with any present intention of distributing or selling any of the
Notes and the Warrants except in compliance with the Securities Act and except
to one or more such institutional investors, provided that the disposition of
such Purchaser's or such investor's property shall at all times be within its
control. Each Purchaser understands and agrees that the Notes and the Warrants
have not been registered under the Securities Act and may be resold (which
resale is not now contemplated) only if registered pursuant to the provisions
thereunder or if an exemption from registration is available.
5.2. Authorization; Non-Contravention; Validity and Binding
Effect. Each Purchaser individually and not jointly represents that the
execution, delivery and performance by such Purchaser of the Transaction
Documents to which such Purchaser is a party and all other instruments or
agreements to be executed in connection herewith or therewith, and the purchase
by such Purchaser of the Notes and Warrants pursuant to this Agreement, are
within such Purchaser's powers, having been duly authorized by all necessary
action on the part of such Purchaser; do not require any License, authorization,
approval, qualification or formal exemption from, or other action by or in
respect of, or filing of a declaration or registration with, any court,
Governmental Authority, agency or official or other Person (except such as have
been obtained or as may be required under the Securities Act or state securities
or Blue Sky laws); do not contravene or constitute a default under or violation
of (i) any provision of applicable law or regulation of any Governmental
Authority, (ii) the organizational documents, if any, of such Purchaser, (iii)
any agreement (or require the consent of any Person under any agreement that has
not been obtained) to which such Purchaser is a party, or (iv) any judgment,
injunction, order,
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decree or other instrument binding upon such Purchaser or any of its properties;
and do not and will not result in the creation or imposition of any Lien on any
asset of such Purchaser. This Agreement is the legal, valid and binding
obligation of such Purchaser, and is enforceable in accordance with its terms,
except for (a) the effect upon this Agreement of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and (b) limitations imposed by a court of
competent jurisdiction under general equitable principles upon the specific
enforceability of any of the remedies, covenants or other provisions of this
Agreement and upon the availability of injunctive relief or other equitable
remedies.
5.3. Broker's or Finder's Commissions. In addition to and not
in limitation of any other rights hereunder, each Purchaser individually and not
jointly agrees that it will indemnify and hold harmless the Company from and
against any and all claims, demands or liabilities for broker's, finder's,
placement agent's or other similar fees or commissions and any and all
liabilities with respect to any taxes (including interest and penalties) payable
or incurred or alleged to have been incurred by such Purchaser or any Person
acting or alleged to have been acting on such Purchaser's behalf, in connection
with this Agreement, the issuance or sale of the Notes or the Warrants, or any
other transaction contemplated by any of the Transaction Documents.
5.4 Source of Funds. Each Purchaser individually and not
jointly represents that the funds used by such Purchaser to purchase the Notes
and Warrants to be purchased by such Purchaser either (a) consist of funds which
do not constitute assets of any employee benefit plan (other than a governmental
plan exempt from the coverage of ERISA), or (b) consist of funds which may be
deemed to constitute assets of one or more specific employee benefit plans,
complete and accurate information as to the identity of each of which employee
benefit plans has been delivered to the Company by such Purchaser. As used in
this Section 5.4, the terms "employee benefit plan" and "governmental plan"
shall have the respective meanings assigned to such terms in section 3 of ERISA.
6. TERMS OF THE NOTES; PAYMENTS AND REDEMPTION; REGISTRATION
6.1. Maturity; Principal Amount. The maximum aggregate
principal amount of the Notes to be issued to the Purchasers shall be SEVEN
MILLION DOLLARS AND NO CENTS ($7,000,000). The Notes shall mature and all
principal payments and all accrued and unpaid interest thereon and any other
payments due thereunder shall be due and payable in full, without set-off,
deduction or counterclaim, on January 31, 2002 (the "Stated Maturity Date of the
Notes").
6.2. Interest. The Notes shall not bear interest for the
period from the dates of issuance thereof through January 31, 1999. The Notes
shall bear interest on the unpaid principal amount thereof from February 1, 1999
until the Stated Maturity Date of the Notes, at the following rates: (a) from
February 1, 1999 through January 31, 2000, at a rate of seven percent
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per annum; (b) from February 1, 2000 through January 31, 2001, at a rate of
eight percent per annum; and (c) from February 1, 2001 through the Stated
Maturity Date of the Notes, at a rate of nine percent per annum. Interest on the
unpaid principal amount of the Notes shall be computed on the basis of a 360 day
year and the actual days elapsed, and shall be payable quarterly in arrears on
the last day of March, June, September and December of each year, commencing on
March 31, 1999, and upon any other payment of any principal amount of the Notes.
6.3. Default Interest and Late Charges. In the event that any
principal amount of the Notes is not paid within five (5) Business Days of when
due and payable (whether at stated maturity, by acceleration or otherwise), the
interest rate on such principal amount shall, notwithstanding anything herein to
the contrary and until all principal payments on the Notes have been brought
current, thereafter be increased by two percent (2%) per annum. Any interest on
any principal amount of the Notes that is not paid when due and payable shall
thereafter be paid, on demand by the holder of such Notes for which such
interest is owed, together with interest thereon at a rate of two percent (2%)
per annum in excess of the rate set forth in Subsection 6.2.
6.4. Payments on the Notes. All payments of principal and
interest on the Notes and any other payments due thereunder shall be made by the
Company, without set-off, deduction or counterclaim, to each Purchaser (or its
nominee) at such Purchaser's address and in accordance with the instructions set
forth on such Purchaser's signature page attached hereto, or at such other
address or by such other method as such Purchaser (or its nominee) or any
transferee or successor holder of the Notes shall have designated to the Company
in writing. All such payments shall be made in dollars and in immediately
available funds not later than 3:00 p.m. Boston time, on the date such payment
shall become due. Any payment received after such time on any Business Day shall
be deemed to have been received on the next Business Day. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
6.5. Optional Redemption. The Company may at any time and from
time to time redeem the then outstanding principal amount of the Notes, in whole
or in part, at a redemption price equal to 100% of the principal amount of Notes
to be redeemed, by giving written notice of redemption to all holders of the
Notes not less than 30 days and not more than 60 days prior to the Redemption
Date, specifying (i) the principal amount of the Notes to be redeemed, (ii) the
Redemption Date, and (iii) the accrued and unpaid interest (as of the Redemption
Date) applicable to the Notes to be redeemed. Notice of redemption having been
so given, the aggregate principal amount of Notes so specified in such notice
and all accrued and unpaid interest to the Redemption Date applicable to the
Notes to be redeemed, shall become due and payable on the Redemption Date. Any
partial redemption shall be in an aggregate principal amount of at least
$500,000 or integral multiples of $500,000 in excess thereof, and shall be
allocated among all of the Notes outstanding, pro rata, in the same proportion
as the outstanding principal amount of each Note bears to the aggregate
outstanding amount of all Notes. No redemption of the Notes pursuant to this
Subsection 6.5 shall relieve the Company from its
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obligation under Subsection 2.2 of this Agreement to issue and sell to the
Purchasers the Notes and Warrants to be issued and sold to the Purchasers at the
Second Closing. In connection with any such redemption, the holders of Notes
shall deliver the Notes to the Company, and, in connection with holders whose
Notes are redeemed only in part, the Company (at the Company's expense) shall
execute, authenticate and deliver to such holders new Notes equal in principal
amount to the unredeemed portion of the Notes surrendered.
6.6. Change of Control.
(a) If there occurs a Change of Control (the date on which a
Change of Control first occurs being referred to herein as the "Change Date"),
then the Company shall notify all holders of the Notes in writing, as provided
in subparagraph (b) below, and the Company shall promptly make an offer to
redeem the Notes (a "Change of Control Offer") at a purchase price in cash equal
to 100% of the principal amount thereof plus accrued interest, if any, to the
Change of Control Purchase Date (as defined below), in accordance with the
procedures set forth in this Subsection 6.6.
(b) Promptly, and in any event within 30 days, after the
Change Date, the Company shall send by first-class mail to each holder of Notes,
a written notice stating that, pursuant to this Subsection 6.6:
(i) a Change of Control has occurred and the holders of the
Notes may elect to have their Notes purchased by the Company either in whole or
in part, at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase;
(ii) the repurchase date (which shall be no less than 30 days
nor more than 60 days after the date such notice is mailed) (the "Change of
Control Purchase Date");
(iii) the circumstances and relevant facts known to the
Company regarding such Change of Control (including, to the extent applicable,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control) which the Company
in good faith believes will enable such holder of Notes to make an informed
decision; and
(iv) all instructions and materials necessary to tender the
Notes pursuant to the Change of Control Offer, together with the information
contained in paragraph (c) below.
(c) Each holder of Notes electing to have its Notes purchased
will be required to deliver to the Company, at the address specified in the
notice received by such holder from the Company, at least three Business Days
prior to the Change of Control Purchase Date, an election form specifying the
principal amount of Notes such holder elects to have purchased.
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(d) On the Change of Control Purchase Date, the Company shall
pay the purchase price plus accrued interest to the holders of Notes who have
elected to have their Notes purchased by the Company under this Subsection 6.6,
and upon the payment of such purchase price and accrued interest, the holders of
such purchased Notes shall deliver such purchased Notes to the Company for
cancellation. In connection with holders whose Notes are purchased only in part,
the Company (at the Company's expense) shall execute, authenticate and deliver
to such holders new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered.
6.7. Redemption Following a Qualified Public Offering.
(a) If there occurs a Qualified Public Offering (the date of
closing of such event being a "Qualified Public Offering Date"), then the
Company shall notify all holders of the Notes in writing, and the Company,
within thirty days after the Qualified Public Offering Date, shall either (i)
redeem (a "Qualified Public Offering Redemption") all of the Notes at a purchase
price in cash equal to 100% of the principal amount of the Notes plus accrued
interest, if any, to the Redemption Date (which Redemption Date shall be no
earlier than 30 days nor later than 60 days after the Qualified Public Offering
Date), or (ii) convert (a "Qualified Public Offering Conversion") all of the
Notes into new converted notes (the "Converted Notes") in a principal amount
equal to 100% of the outstanding principal amount of the Notes having the terms
described in clause (d) below. The determination of whether to redeem the Notes
for cash or convert the Notes into Converted Notes shall be made by the Company
in its sole discretion.
(b) If, following a Qualified Public Offering, the Company
elects to make a Qualified Public Offering Redemption, the Company shall deliver
written notice to the holders of the Notes in accordance with, and shall follow
the procedures set forth in, Subsection 6.5 of this Agreement. Upon receipt of
written notice of a Qualified Public Offering Redemption, each holder of Notes
shall have 20 days to elect to exercise its rights under Section 6.8 of this
Agreement, and to the extent any holder of Notes shall not elect to exercise its
rights under Section 6.8 within such 20 day period, the rights of such holder
under Section 6.8 shall terminate.
(c) If, following a Qualified Public Offering, the Company
elects to make a Qualified Public Offering Conversion, promptly, and in any
event within 30 days, after the Qualified Public Offering Date, the Company
shall send by first-class mail to each holder of Notes, a written notice stating
that, pursuant to this Subsection 6.7:
(i) a Qualified Public Offering has occurred and the Company
has elected to convert all of the Notes into Converted Notes having a stated
principal amount equal to 100% of the principal amount thereof;
(ii) the conversion date (which shall be the 90th day after
the Qualified Public Offering Date) (the "Conversion Date") and the Stated
Maturity of the Converted Notes;
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(iii) the Applicable Converted Note Rate as of the date of
such notice; and
(iv) all instructions and materials necessary to tender the
Notes pursuant to the Qualified Public Offering Conversion, together with the
information contained in paragraph (d) below.
(d) Converted Notes issued pursuant to a Qualified Public
Offering Conversion shall have the following terms: (i) the Converted Notes
shall have a Stated Maturity (the "Stated Maturity Date of the Converted Notes")
of not later than the earlier of (A) two years from the Conversion Date or (B)
the Stated Maturity Date of the Notes; (ii) the principal of the Converted Notes
shall be payable in not more than eight equal quarterly principal installments
commencing on the 90th day after the Conversion Date and continuing every 90th
day thereafter with a final installment due and payable on the Stated Maturity
Date of the Converted Notes; (iii) the Converted Notes shall bear interest on
the unpaid principal balance thereof at a rate per annum equal to the Applicable
Converted Note Rate; and (iv) interest on the unpaid principal amount of the
Converted Notes shall be computed on the basis of a 360 day year and the actual
days elapsed, and shall be payable quarterly in arrears commencing on the 90th
day after the Conversion Date and continuing every 90th day thereafter, and upon
any other payment of any principal amount of the Converted Notes.
(e) On the Conversion Date, the Company shall pay to all
holders of Notes all accrued and unpaid interest, if any, on the Notes through
the Conversion Date and the Company (at the Company's expense) shall execute,
authenticate and deliver to such holders Converted Notes in principal amount
equal to the principal amounts of the Notes, and upon payment of such purchase
price and accrued interest, shall deliver the Notes to the Company for
cancellation.
(f) Except as otherwise set forth in this Subsection or in the
Converted Notes, all Converted Notes issued pursuant to this Subsection shall be
deemed to be "Notes" for all purposes of this Agreement and the other
Transaction Documents and the holders of Converted Notes shall be entitled to
all rights and remedies available to the holders of Notes hereunder and under
the Security Documents and the other Transaction Documents.
6.8. Right of Holders to Convert Notes into Common Stock.
(a) Subject to Section 6.7(b) of this Agreement, if there
occurs a Qualified Public Offering, each holder of Notes shall have the right,
at any time and from time to time until the date which is two years after the
Qualified Public Offering Date, to cause the Company to convert the Notes held
by such holder, in whole or in part, into such number of shares of Common Stock
as shall equal the quotient of (i) the aggregate principal amount of the Notes
tendered for conversion divided by (ii) the Initial Qualified Public Offering
Price. Any partial conversion of any holder's Notes shall be in a principal
amount of not less than the lesser of 25% of the principal amount of each such
holder's Notes or $250,000.
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(b) Each holder of Notes electing to have all or any portion
of its Notes converted into Common Stock pursuant to this Subsection 6.8 will be
required to deliver to the Company, at its principal office, at least thirty
(30) days prior to the date of conversion, a written notice of conversion
specifying (i) the principal amount of Notes such holder elects to have
converted, (ii) the name or names in which such holder desires the certificate
or certificates for Common Stock to be issued, and (iii) the address to which
such holder desires delivery to be made of such new certificates for Common
Stock to be issued upon such conversion. On the date of conversion, the Company
shall issue and deliver to such holder or its designee, by hand delivery, by
courier or by first class mail (postage prepaid), at the address designated by
such holder, certificates for the number of shares of Common Stock to which such
holder shall be entitled as a result of the conversion of its Notes, and upon
receipt by the such holder of such certificates for shares of Common Stock, such
holder shall deliver such Notes to the Company for cancellation. In connection
with any holder whose Notes are converted into Common Stock only in part, the
Company shall execute, authenticate and deliver to such holder new Notes equal
in principal amount to the unconverted portion of the Notes surrendered. The
issuance of certificates for Common Stock upon conversion of Notes shall be made
without charge to the holders of the Notes for any issuance tax in respect
thereof or other costs incurred by the Company in connection with such
conversion and the related issuance of such Common Stock.
(c) The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for issuance upon the
conversion of Notes as herein provided, free from any preemptive rights or other
obligations, such number of shares of Common Stock, as shall from time to time
be issuable upon the conversion of all outstanding Notes. The Company shall
prepare and shall in good faith use all reasonable efforts to obtain and keep in
force such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all requirements as to registration,
qualification or listing of the Common Stock, if applicable, in order to enable
the Company lawfully to issue and deliver to each holder of Notes such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all Notes then outstanding and convertible into shares of Common
Stock. The Company shall not close its books against the transfer of Common
Stock in any manner that would interfere with the timely conversion of any of
the Notes.
6.9. Security for and Priority of Notes. The Notes shall at
all times be secured by substantially all of the property and assets of the
Company pursuant to the terms of the Security Documents. The rights and remedies
of the holders of the Notes under this Agreement and the other Transaction
Documents shall be senior in priority to any and all rights and remedies of the
holders of the Capital Stock of the Company, including, without limitation, any
right of the holders of Preferred Stock or other Capital Stock of the Company to
cause the Company to redeem, repurchase, convert into Indebtedness, or make or
pay any dividend, liquidation preference or other distribution in respect of, or
issue any Capital Stock or securities for or in respect of, any such Preferred
Stock or other Capital Stock of the Company.
6.10. Registration and Exchange of Notes.
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(a) The Company shall maintain, at its principal office, a
register for the Notes, in which the Company shall record the name and address
of each Person in whose name each Note has been issued and the name and address
of each transferee and prior owner of each Note. The Company may deem and treat
the Person in whose name a Note is so registered as the holder and owner thereof
for all purposes until due presentment of such Note for registration of transfer
as provided in this Subsection 6.10.
(b) Upon surrender for exchange or registration of transfer
any Note at the principal office of the Company, the Company shall execute and
deliver, at its expense, one or more new Notes of any denominations (of at least
$100,000 or such lesser amount as shall equal the aggregate principal amount of
all Notes held by any holder) requested by the holder of the surrendered Note,
each dated the date to which interest has been paid on the Note so surrendered
(or, if no interest has been paid, the date of such surrendered Note), but in
the same aggregate unpaid principal amount as such surrendered Note, and
registered in the name or such Person or Persons as shall be designated in
writing by such holder. Every Note surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed by the holder of such Note or by his attorney duly authorized in
writing.
(c) At the request of any holder of any Note, the Company will
issue, at its expense, in replacement of any Note or Notes lost, stolen, damaged
or destroyed, upon surrender of the mutilated portions thereof, if any, a new
Note or Notes of the same denominations, of the same unpaid principal amounts
and otherwise of the same tenor as, the Note or Notes so lost, stolen, damaged
or destroyed. The Company may condition the replacement of a Note reported by a
holder as lost, stolen, damaged or destroyed, upon the receipt from such holder
of an indemnity, security or surety bond (at the holder's expense) reasonably
satisfactory to the Company.
7. CERTAIN PROVISIONS WITH RESPECT TO THE WARRANTS.
7.1. Special Repurchase Right of the Company. If, at any time
after the Second Closing Date but prior to the first anniversary of the First
Closing Date, the Company shall have redeemed all of the Notes, the Company
shall have the right to repurchase (the "Special Repurchase Right") from each
holder of Warrants a maximum of five percent (5%) of the aggregate amount of
Warrants held by such holder, at a repurchase price (the "Repurchase Price") in
cash equal to $.01 per share of Common Stock purchasable upon exercise the
Warrants. In the event that any holder of Warrants shall hold both Series A
Warrants and Series B Warrants, the Company's Special Repurchase Right shall be
applied first against all Series B Warrants held by such holder and then, if but
only to the extent necessary, to the Series A Warrants held by such holder. If
the Company elects to exercise its Special Repurchase Right, the Company shall
give written notice of the repurchase to all holders of Warrants not less than
10 days prior to the proposed repurchase date (the "Repurchase Date"). Upon the
provision of notice of the Company's exercise of its Special Repurchase Right,
all Warrants covered by such notice shall no longer be exercisable. On the
Repurchase Date, the Company shall deliver to
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each holder of Warrants the Repurchase Price for the Warrants being repurchased
from such holder, and each holder of Warrants shall deliver to the Company the
Warrant certificate(s) evidencing such holder's Series B Warrants (and/or, if
necessary, the certificate(s) evidencing such holder's Series A Warrants), duly
endorsed for transfer to the Company. On the Repurchase Date, the Company (at
the Company's expense) shall execute, authenticate and deliver to each holder of
Warrants, a new Warrant certificate (or certificates) evidencing the
non-repurchased Warrants surrendered by such holder.
7.2. Pre-emptive Rights of Holders of Warrants.
(a) The Company hereby grants to each holder of Warrants a
right (the "Pre-emptive Right") to purchase all or any part of such holder's Pro
Rata Portion (as hereinafter defined) of any New Securities (as defined in
Subsection 7.2(b)) which the Company may, from time to time, at any time on or
after the date hereof, propose to issue and sell, subject to the terms and
conditions set forth below. A holder of Warrants' Pro Rata Portion shall mean a
fraction, the numerator of which is the number of shares of Common Stock then
held by such holder plus the number of shares of Common Stock issuable upon
exercise of any Warrants and other convertible securities, options, rights or
warrants then held by such holder, and the denominator of which is the total
number of shares of Common Stock then outstanding plus the total number of
shares of Common Stock issuable upon conversion or exercise of then outstanding
Preferred Stock, Series D Common Warrants, Series D Preferred Warrants, Series E
Common Warrants, Series F Common Warrants and other convertible securities,
options, rights or warrants; provided, however, for purposes of calculating the
Pro Rata Portion of any holder of Warrants hereunder, the number of shares of
Common Stock issued or issuable upon conversion of the Notes shall be excluded.
(b) "New Securities" shall mean any Capital Stock of the
Company whether now authorized or not, and all rights, options and warrants to
purchase capital stock, and securities of any type whatsoever which are, or may
become, convertible into Capital Stock; provided however, that the term "New
Securities" does not include (i) shares of Series F Preferred or Series F Common
Warrants issued or issuable in connection with the Series F Financing; (ii) the
Notes and Warrants issued or issuable pursuant to the terms of this Agreement,
the shares of Common Stock issued or issuable upon the conversion or exercise of
the Series A Preferred, Series B Preferred, Series D Preferred, Series E
Preferred, Series F Preferred, Series D Common Warrants, Series D Preferred
Warrants, Series E Common Warrants or the Series F Common Warrants; (iii) Common
Stock offered to the public pursuant to a Qualified Public Offering; (iv)
securities issued for the acquisition of another corporation by the Company by
merger, purchase of substantially all the assets of such corporation or other
reorganization resulting in the ownership by the Company of not less than a
majority of the voting power of such corporation; (v) not more than 850,000
shares of Common Stock or rights, options or warrants to acquire Common Stock
(such number being subject to adjustment for any stock dividend, stock split,
subdivision, combination or other recapitalization of the Common Stock of the
Company) issued to directors, employees or consultants of the Company pursuant
to a stock option plan or other similar stock plan or agreement or otherwise
and, in the case of
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rights, options or warrants, the shares of Common Stock issuable upon exercise
thereof; or (vi) securities issued as a result of any stock split, stock
dividend or reclassification of Common Stock, distributable on a pro rata basis
to all holders of Common Stock.
(c) In the event the Company intends to issue New Securities,
the Company shall give each holder of Warrants written notice of such intention,
describing the type of New Securities to be issued, the price thereof and the
general terms upon which the Company proposes to effect such issuance. Each
holder of New Warrants shall have 20 days from the date of any such notice to
agree to purchase (i) all or any part of such holder's Pro Rata Portion of such
new Securities and (ii) all or part of any other holder of Warrants' Pro Rata
Portion of such New Securities to the extent that such other holder of Warrants
does not elect to purchase its full Pro Rata Portion of such New Securities, for
the price and upon the general terms and conditions specified in the Company's
notice by giving written notice to the Company stating the quantity of New
Securities to be so purchased.
(d) In the event any holder or holders of Warrants fails to
exercise any Pre-emptive Right with respect to any New Securities within such
20-day period, the Company may within 120 days thereafter sell any or all of
such New Securities not agreed to be purchased by such holder or holders of
Warrants, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the notice given to each holder of Warrants pursuant
to paragraph (c) above. In the event the Company has not sold such New
Securities within such 120-day period, the Company shall not thereafter issue or
sell any New Securities without first offering such New Securities to the
holders of Warrants in the manner provided above.
(e) For purposes of this Subsection 7.3, a "holder of
Warrants" shall include the general partners, officers or other affiliates of a
holder of Warrants, and a holder of Warrants may apportion its Pro Rata Portion
among, itself and such general partners, officers and other affiliates in such
proportions as it deems appropriate.
(f) The Pre-emptive Rights granted to the holders of the
Warrants pursuant to this Subsection 7.3 shall expire on the date of closing of
the Company's first Qualified Public Offering.
8. COVENANTS OF THE COMPANY.
8.1. General Covenants of the Company. The Company covenants
and agrees that so long as any Notes or Warrants to purchase at least 75,000
shares of Common Stock (subject to appropriate adjustment in the event of any
stock split, stock dividend, recapitalization, reclassification or other capital
reorganization) shall remain outstanding:
(a) Financial Statements and Other Information. The Company
shall furnish to each holder of Notes or Warrants:
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(i) Annual Financial Statements - as soon as available, but in
any event within 120 days after the end of each fiscal year of the Company, an
audited consolidated balance sheet of the Company and its Subsidiaries, if any,
as at the end of such year and the related audited statements of income, changes
in shareholders' equity and cash flows of the Company and its Subsidiaries, if
any, for such year, setting forth in each case in comparative form the figures
for the previous year, by independent certified public accountants of nationally
recognized standing;
(ii) Quarterly Statements - as soon as available, but in any
event not later than 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, an unaudited consolidated balance
sheet of the Company and its Subsidiaries as at the end of each such fiscal
quarter and the related unaudited consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Subsidiaries for such
quarter and the portion of the fiscal year through such date, all in reasonable
detail and setting forth in comparative form the figures for the corresponding
period of the previous year, certified by the chief financial officer, treasurer
or controller of the Company;
(iii) Business Plan - as soon as available, but in any event
not later than 30 days after the commencement of each fiscal year, a business
plan and projected financial statements for such fiscal year;
(iv) Regulatory Filings - promptly after they become
available, copies of any regular and periodic financial information, and any
other information and reports, which the Company shall file with the Securities
and Exchange Commission, any state securities regulatory authority, or any other
regulatory agency;
(v) Shareholder Communications - promptly upon the mailing
thereof to the shareholders of the Company generally, copies of all financial
statements, reports and proxy statements so mailed;
(vi) Press Releases - promptly following the release by the
Company to the press of any material statement or other written communication, a
copy thereof;
(vii) Litigation - promptly, and in any event within three
Business Days after obtaining knowledge thereof, notice of any (i) litigation,
investigation or proceeding which has been commenced by or against the Company
or any of its Subsidiaries, which could have a Material Adverse Effect, or (ii)
any judgment or decree entered against the Company or any of its Subsidiaries
involving a liability of $100,000 or more (singly or in the aggregate) or in
which injunctive or similar relief is granted; and
(viii) Other Information - promptly any other information
reasonably requested by any holder of Notes or Warrants.
All financial statements required to be delivered pursuant to clause (i) and
(ii) of this Subsection 8.1(a) shall be complete and correct in all material
respects (subject, in the case of interim
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statements, to normal year-end audit adjustments) and to be prepared in
reasonable detail and in accordance with GAAP.
(b) Inspection. The Company shall permit each holder of Notes
or Warrants, or any authorized representative thereof, to visit and inspect the
properties of the Company and its Subsidiaries, including their corporate and
financial records, and to discuss their businesses and finances with executive
officers of the Company and its Subsidiaries, during normal business hours
following reasonable advance notice and as often as may be reasonably requested.
(c) Payment of Taxes and Other Claims. The Company shall pay
or discharge or cause to be paid or discharged, before any penalty accrues
thereon, (i) all material taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Subsidiaries upon the income, profits or
Property of the Company or any of its Subsidiaries and (ii) all material lawful
claims for labor, materials and supplies which, if unpaid, would by law become a
Lien upon the property of the Company or any of its Subsidiaries; provided that
neither the Company nor any of its Subsidiaries shall be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claims the amount, applicability or validity of which is being contested in good
faith by appropriate proceedings and for which adequate provision has been made
or where the failure to effect such payment or discharge is not adverse in any
material respect to the interests of the holders of the Notes.
(d) Corporate Existence. The Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each of
its Subsidiaries in accordance with the respective Charter Documents of such
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and each of its Subsidiaries, provided, however, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Subsidiary, if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole, and that the loss thereof will not have a
Material Adverse Effect.
(e) Indemnification of Directors; Payment of Directors'
Expenses. The Company shall (i) at all times maintain provisions in its Charter
Documents indemnifying all members of the Board of Directors of the Company
against liability to the maximum extent permitted under the laws of the State of
Delaware, and (ii) promptly reimburse any member of the Board of Directors of
the Company for his reasonable documented out-of-pocket expenses incurred in
attending each meeting of the Board of Directors of the Company.
(f) Key Man Insurance. The Company shall (i) use its best
efforts to obtain and maintain a life insurance policy with a financially sound
and reputable insurance company on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the face value
of $1,000,000, naming the Company as owner and beneficiary thereof, (ii) not
cause or permit any assignment of the proceeds of such policy, and (iii) not
borrow against such policy.
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(g) Conflicting Agreements. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any agreement or instrument
(other than agreements or instruments between the Company and the holders of
Senior Indebtedness) that by its terms expressly prohibits the Company from
repurchasing the Notes or the Warrants in accordance with the terms of this
Agreement or the other Transaction Documents.
(h) Books and Records. The Company shall, and shall cause each
of its Subsidiaries to, (i) keep true books of records and accounts in which
full and correct entries shall be made of all dealings or transactions in
relation to their businesses and affairs, in accordance with sound business
practices, and (ii) reflect in their financial statements adequate accruals and
appropriations to reserves in accordance with GAAP.
(i) Compliance with Laws. The Company shall, and shall cause
each of its Subsidiaries to, remain in substantial compliance with all statutes,
laws, ordinances, or government rules and regulations to which the Company and
its Subsidiaries are subject.
(j) Investment Company Act. The Company shall not become an
investment company subject to registration under the Investment Company Act of
1940, as amended.
(k) Payments for Consents. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, pay or cause to
be paid any consideration, whether by way of interest, fee or otherwise, to any
holder of Notes or Warrants for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Agreement or the other
Transaction Documents unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes or Warrants which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
(l) Further Instruments and Acts. The Company shall, and shall
cause each of its Subsidiaries to, execute and deliver such further instruments
and do such further acts any holder of Notes or Warrants may deem reasonably
necessary or proper to carry out more effectively the purposes of this Agreement
and the other Transaction Documents.
8.2. Covenants of the Company Applicable to the Notes. The
Company covenants and agrees that so long as any Notes shall remain outstanding:
(a) Certificates; Notices of Default and Other Information.
The Company shall furnish to each holder of the Notes:
(i) Officer's Certificate - together with the delivery of the
financial statements referenced in clause (i) of Subsection 8.1(a), an Officer's
Certificate executed by the chief executive officer, the Vice President-Finance
or principal accounting officer of the Company, stating whether or not such
Officer knows of any Default or Event of Default, containing a certification
from the chief executive officer, the Vice President-Finance or principal
accounting officer of the Company as to his or her knowledge of the Company's
compliance with all
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conditions and covenants under this Agreement and the other Transaction
Documents (for purposes of this clause (i) such compliance shall be determined
without regard to any period of grace or requirement of notice provided under
this Agreement, and, if such Officer knows of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default,
and its status; and
(ii) Notice of Default - within five Business Days of any
Officer becoming aware of (i) any Default, Event of Default or default in the
performance of any covenant, agreement or condition contained in this Agreement
or the other Transaction Documents or (ii) any event of default under any other
mortgage, indenture or instrument, an Officers' Certificate specifying such
Default, Event of Default, default or event of default and what action the
Company is taking or proposes to take with respect thereto.
(b) Limitation on Additional Indebtedness. The Company shall
not, and shall not permit any of its Subsidiaries to, Incur, directly or
indirectly, any Indebtedness (including Acquired Indebtedness), other than (a)
the Indebtedness evidenced by the Notes, (b) Senior Indebtedness, and (c) the
Series A Preferred, the Series B Preferred, the Series D Preferred, the Series E
Preferred and the Series F Preferred, and (d) Indebtedness in an aggregate
amount not in excess of $500,000 secured by Capitalized Leases or Purchase Money
Liens.
(c) Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly,
approve, declare, authorize, issue, make, agree to make, or set aside any funds
for the payment of any Restricted Payment, except (a) dividends, payments or
other distributions with respect to any Capital Stock by any Subsidiary to the
Company or to any Wholly-Owned Subsidiary of the Company, and (b) the
redemption, repurchase, retirement or conversion by the Company of the Notes and
the Warrants in accordance with the terms of this Agreement and the Warrants.
(d) Transactions with Affiliates. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction or
series of transactions to sell, lease, transfer, exchange or otherwise dispose
of any of its properties or assets to or to purchase any property or assets
from, or for the direct or indirect benefit of, an Affiliate of the Company or
of any Subsidiary of the Company, make any Investment in or enter into any
contract, agreement, understanding, loan, advance or Guarantee with, or for the
direct or indirect benefit of, an Affiliate of the Company or of any Subsidiary
of the Company (each, including any series of transactions with one or more
Affiliates, an "Affiliate Transaction"), (i) unless such Affiliate Transaction
is on terms that are no less favorable to the Company or the relevant Subsidiary
than those that could have been obtained at that time in a comparable
transaction by the Company or such Subsidiary with an unrelated Person, and (ii)
if such Affiliate Transaction involves or has a potential aggregate value of
more than $100,000, unless such Affiliate Transaction has been approved by a
majority of the Board of Directors who have no direct or indirect interest in
the Affiliate Transaction or in the Affiliate that is a party to the Affiliate
Transaction, or in any other party that is an Affiliate of any such Affiliate.
The provisions of this Subsection 8.2(d) shall not apply to any Restricted
Payment that is made in compliance with the provisions of this
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Agreement, to the reasonable and customary fees and compensation paid or
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Subsidiary, as determined by the Board of Directors of the
Company or such Subsidiary or the senior management thereof in good faith, and
to transactions exclusively between or among the Company and any Wholly-Owned
Subsidiary or exclusively between or among Wholly-Owned Subsidiaries provided
such transactions are not otherwise prohibited by this Agreement.
(e) Restrictions on Certain Mergers and Acquisitions. The
Company shall not, and shall not permit any of its Subsidiaries to, become a
party to any merger or consolidation with any Person, or purchase or enter into
any definitive agreement to purchase, in one or more related transactions, any
property or assets of, or any Capital Stock of or other interests in, any Person
(or any affiliated group of Persons), without the prior written consent of the
holders of a majority of the outstanding principal amount of the Notes, except
that (i) any Person may merge or consolidate with the Company so long as the
Company is the surviving corporation, such transaction does not adversely affect
the consolidated financial condition of the Company and its Subsidiaries, and
the fair market value of the aggregate consideration paid (including all
Indebtedness assumed) by the Company and its Subsidiaries in connection with
such transaction and all other transactions permitted under clauses (i), (ii)
and (iii) of this Subsection 8.2(e) does not exceed (A) $6,000,000 prior to the
closing of a Qualified Public Offering and (B) $12,000,000 after the closing of
a Qualified Public Offering, (ii) any Person (other than the Company) may merge
or consolidate with any Wholly-Owned Subsidiary of the Company so long as such
Wholly-Owned Subsidiary of the Company is the surviving corporation, such
transaction does not adversely affect the consolidated financial condition of
the Company and its Subsidiaries, and the fair market value of the aggregate
consideration paid (including all Indebtedness assumed) by the Company and its
Subsidiaries in connection with such transaction and all other transactions
permitted under clauses (i), (ii) and (iii) of this Subsection 8.2(e) does not
exceed (A) $6,000,000 prior to the closing of a Qualified Public Offering and
(B) $12,000,000 after the closing of a Qualified Public Offering, (iii) the
Company may purchase property or assets of, or Capital Stock of, another Person
(other than the assets proposed to be acquired by the Company in connection with
the Feverall Acquisition) so long as the fair market value of the aggregate
consideration paid (including all Indebtedness assumed) by the Company and its
Subsidiaries in connection with such transaction and all other transactions
permitted under clauses (i), (ii) and (iii) of this Subsection 8.2(e) does not
exceed (A) $6,000,000 prior to the closing of a Qualified Public Offering and
(B) $12,000,000 after the closing of a Qualified Public Offering, and (iv) after
the closing of a Qualified Public Offering the Company may consummate the
Feverall Acquisition for aggregate consideration (including all Indebtedness
assumed) of not more than $12,000,000 (plus the fair market value of inventory).
(f) Maintenance of Properties and Insurance. The Company shall
(i) cause all material properties owned by or leased to it or any of its
Subsidiaries and used or useful in the conduct of its business or the business
of such Subsidiary to be maintained and kept in normal condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in
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connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Subsection 8.2(f) shall prevent the
Company or any of its Subsidiaries from discontinuing the maintenance of any
such properties, if such discontinuance is desirable in the conduct of its
business or the business of such Subsidiary, and (ii) provide or cause to be
provided, for itself and its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, public liability insurance, with reputable insurers in such
amounts with such deductibles and by such methods as shall be customary for
corporations similarly situated in the industry.
8.3 Covenants of the Company Applicable to the Warrants. The
Company covenants and agrees that so long as Warrants to purchase at least
75,000 shares of Common Stock (subject to appropriate adjustment in the event of
any stock split, stock dividend, recapitalization, reclassification or other
capital reorganization) shall remain outstanding:
(a) Board of Directors. The Company shall at all times from
the date of this Agreement until the later of (i) the date on which all of the
Note Indebtedness shall have been paid in full, and (ii) two and one-half years
after the Qualified Public Offering Date, use its best efforts to cause (A) the
total number of members of the Board of Directors of the Company to be fixed at
nine (9); and (B) such person as shall be designated from time to time by the
holders of a majority of the outstanding Warrants to be nominated, elected and
maintained as one (1) of the members of the Board of Directors of the Company.
(b) Restrictions on Certain Sales and Mergers. The Company
shall not, and shall not permit any of its shareholders or Subsidiaries to,
become a party to any merger or consolidation of the Company or any of its
Subsidiaries with or into any Person (or any affiliated group of Persons), or
sell or enter into any definitive agreement to sell, in one or more related
transactions, all or substantially all of the property, assets or Capital Stock
of the Company or any of its Subsidiaries, without the prior written consent of
the holders of a majority of the outstanding Warrants, except that (i) any
Person may merge or consolidate with the Company so long as the Company is the
surviving corporation and such merger is not otherwise prohibited by this
Agreement and (ii) the Company or the shareholders may sell all or substantially
all of the property, assets or Capital Stock of the Company so long as each
holder of Warrants receives cash in exchange for each Warrant Share (as defined
in the Warrants) that would be issuable to such holder upon the exercise by such
holder of the Warrants held by such holder, in an amount equal to $10.00
(subject to appropriate adjustment in the event of any stock split, stock
dividend, recapitalization or other capital reorganization) less the applicable
Purchase Price (as defined in the Warrants) required to be paid by such holder
for the issuance of such Warrant Share upon exercise of such Warrant.
9. DEFAULTS AND REMEDIES
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9.1. Events of Default. The occurrence of any one of the
following shall constitute an "Event of Default" hereunder:
(a) The Company shall fail to pay any interest on any Note or
any Put Note when the same becomes due and payable and the continuance of such
failure for a period of five (5) Business Days;
(b) The Company shall fail (i) to pay any principal of, or
premium, if any, on any Note when and as the same becomes due and payable at
maturity, acceleration, on any Redemption Date, on any Change in Control
Purchase Date, or otherwise, (ii) to repurchase any Warrants on any Put Purchase
Date, or (iii) to pay any principal of, or premium, if any on any Put Note when
and as the same becomes due and payable;
(c) The Company shall fail to perform or comply with any
covenant or agreement contained in this Agreement, the Warrant, the Security
Documents or any of the other Transaction Documents (other than the covenants
referred to in paragraphs (a) or (b) above), and such failure shall not have
been cured or waived within a period of thirty (30) days;
(d) The Company defaults with respect to any Indebtedness with
a principal amount then outstanding in excess of $500,000, individually or in
the aggregate, and such default results in such Indebtedness becoming due and
payable prior to its Stated Maturity;
(e) Any representation or warranty made by the Company in
connection with this Agreement or any of the other Transaction Documents or any
certificate or financial information delivered pursuant to this Agreement or any
of the other Transaction Documents shall prove to have been incorrect in any
material respect when made;
(f) The Company shall, pursuant to or within the meaning of
any Bankruptcy Law, (i) commence a voluntary case or proceeding; (ii) consent to
the entry of an order for relief against it in an involuntary case or
proceeding; (iii) consent to the appointment of a Custodian of it or for all or
substantially all of its property; (iv) make a general assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
generally as they become due;
(g) A court of competent jurisdiction shall enter an order or
decree under any Bankruptcy Law that remains unstayed and in effect for a period
of 60 days and (i) is for relief against the Company in an involuntary case or
proceeding; (ii) appoints a Custodian of the Company for all or substantially
all of its Property; or (iii) orders the liquidation of the Company; or
(h) Any judgment or decree for the payment of money in excess
of $250,000 (to the extent not covered by insurance) shall be rendered against
the Company and shall not be discharged and either (A) an enforcement proceeding
shall have been commenced by a creditor upon such judgment or decree or (B)
there shall have occurred a period of 45 days following
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such judgment or decree during which such judgment or decree is not discharged,
waived or the execution thereof stayed.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether such Event of Default is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
The term "Bankruptcy Law" means ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any
similar federal or state law for the relief of debtors. "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator, custodian or similar
official under any Bankruptcy Law.
9.2. Remedies on Default, Etc. After an Event of Default has
occurred, the Company shall promptly notify all of the holders of the Notes in
writing of such occurrence. Upon the occurrence of an Event of Default, and at
any time thereafter while such Event of Default is continuing, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding, by
written notice to the Company, may declare (a "Declaration") due and payable an
amount equal to all unpaid principal of, premium, if any, and accrued interest
on, all Notes issued and outstanding (the "Default Amount"). If an Event of
Default specified in clause (f) or (g) of Subsection 9.1 occurs, the Default
Amount shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of any of the holders of the Notes. The
holders of a majority in aggregate principal amount of the Notes, by written
notice to the Company, may rescind any Declaration if all Events of Default then
continuing (other than any Events of Default with respect to the nonpayment of
principal of or interest on any Note which has become due solely as a result of
such Declaration) have been cured.
In addition, if holders of a majority in aggregate principal amount of
Notes make a Declaration which is not rescinded, any holder of any of the Notes
may proceed to enforce its rights by suit in equity, action at law and/or other
appropriate means to collect the payment of principal or interest on the Notes
or to enforce the performance of any provision hereunder or under the Notes or
the other Transaction Documents.
The Company hereby agrees to pay on demand reasonable costs and
expenses, including without limitation reasonable attorneys' fees, Incurred or
paid by any holder of the Notes in enforcing such holders rights upon the
occurrence of an Event of Default.
No provision of this Agreement, the other Transaction Documents or the
Notes shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal and interest on the Notes at the times,
places and rates, and in the currency provided.
9.3. Waiver of Past Defaults. The holders of a majority in
aggregate principal amount of the Notes at the time outstanding, by notice to
the Company (and without notice to any other holders of the Notes), may waive
any existing Default or Event of Default and its
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consequences. When a Default is waived, it is deemed cured and shall cease to
exist, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
10. RESTRICTIONS ON TRANSFER.
10.1. Restrictive Legends. Except as otherwise permitted by
this Section 10, each Note and Warrant certificate (or Common Stock certificate
issued on exercise thereof or in exchange therefor) issued pursuant to this
Agreement shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to any holder of Notes or Warrants upon such holder's request.
Whenever the legend requirement imposed by this Subsection 10.1 shall
terminate, as provided in Subsection 10.2 hereof, the respective holders of
Notes and Warrants for which such legend requirements have terminated shall be
entitled to receive from the Company, at the Company's expense, new Notes or
Warrant certificates, as applicable, without such legend.
10.2. Notice of Transfer; Opinions of Counsel. The holder of
each Note or Warrant certificate bearing the restrictive legend set forth in
Subsection 10.1 above (a "Restricted Security") agrees with respect to any
transfer of such Restricted Security, upon reasonable request from the Company
to such holder, to give to the Company (a) written information describing the
transferee and the circumstances of such transfer necessary to establish the
availability of an exemption from the registration requirements of the
Securities Act and/or (b) an opinion of counsel (at the expense of such holder),
which is knowledgeable in securities law
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matters, in form and substance reasonably satisfactory to the Company, to the
effect that the transfer of such Restricted Security may be effected without
registration of such Restricted Security under the Securities Act. If the
Company fails to request any such information or opinion, or if for any reason
the Company (after having been furnished with the information and/or opinion
requested by the Company pursuant to this Subsection 10.2) shall fail to provide
such holder within 5 days with written notice that, in the opinion of the
Company or its counsel, the transfer may not be legally effected (the "Illegal
Transfer Notice"), such holder shall thereupon be entitled to have the transfer
of the Restricted Security registered on the books of the Company, or its
transfer agent, as the case may be. If the holder of the Restricted Security
delivers to the Company an opinion of counsel (including regular counsel to such
holder or its investment adviser) in form and substance reasonably satisfactory
to the Company that subsequent transfers of such Restricted Security will not
require registration under the Securities Act, or if the Company does not
provide the holders with an Illegal Transfer Notice as set forth above, the
Company will promptly after such contemplated transfer deliver new certificates
for such Restricted Security which do not bear the Securities Act legend set
forth in Subsection 10.1 above. The restrictions imposed by this Section 10 upon
the transferability of any particular Restricted Security shall cease and
terminate when such Restricted Security has been sold pursuant to an effective
registration statement under the Securities Act or transferred pursuant to Rule
144 promulgated under the Securities Act. The holder of any Restricted Security
as to which such restrictions shall have terminated shall be entitled to receive
from the Company a new security of the same type but not bearing the restrictive
Securities Act legend set forth in Subsection 10.1 and not containing any other
reference to the restrictions imposed by this Subsection 10.2. Notwithstanding
any of the foregoing, no opinion of counsel will be required to be rendered
pursuant to this Subsection 10.2 with respect to the transfer of any securities
on which the restrictive legend has been removed in accordance with this
Subsection 10.2. As used in this Subsection 10.2, the term "transfer"
encompasses any sale, transfer or other disposition of any of the Notes or
Warrants referred to herein. Notwithstanding any provisions contained herein to
the contrary, no transfer of the Notes shall be permitted if such transfer would
be deemed to be a violation of any applicable law, including, without
limitation, a "prohibited transaction" as defined in Section 406 of ERISA or
Section 4975 of the Code.
11. SUBORDINATION.
11.1 Agreement to Subordinate. The Company agrees, and each
holder of Notes by accepting a Note agrees, any provision of this Agreement, the
Notes or the Warrants to the contrary notwithstanding, that all Indebtedness of
the Company under and in respect of the Notes, the Put Notes (as defined in the
Warrants) or this Agreement (collectively, the "Note Indebtedness") is
subordinated in right of payment, to the extent and in the manner provided in
this Article 11, to the prior payment in full of all Senior Indebtedness of the
Company, and that the subordination of all Note Indebtedness pursuant to this
Article 11 is for the benefit of all holders of all Senior Indebtedness of the
Company, whether outstanding on the date of this Agreement or Incurred
thereafter.
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11.2 Liquidation; Dissolution; Bankruptcy. Upon any
distribution of cash, securities or other property of the Company to creditors
upon any Insolvency or Liquidation Proceeding with respect to the Company, the
holders of any Senior Indebtedness will be entitled to receive payment in full
in cash or Cash Equivalents of all Senior Indebtedness (including Post-Petition
Interest) before the holders of the Note Indebtedness will be entitled to
receive any payment or distribution (other than in Reorganization Securities) on
account of the Note Indebtedness and until all Senior Indebtedness is paid in
full in cash or Cash Equivalents, any payment or distribution (other than in
Reorganization Securities) on account of the Note Indebtedness to which the
holders of the Note Indebtedness would be entitled shall be made to the holders
of the Senior Indebtedness on a pro rata basis. Upon any Insolvency or
Liquidation Proceeding with respect to the Company, any payment or distribution
(other than in Reorganization Securities), to which the holders of the Note
Indebtedness would be entitled on account of the Note Indebtedness but for the
provisions of this Article 11 shall be paid by the Company, any other Person
making such payment or distribution, or by the holders of the Note Indebtedness
if received by them, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the amounts of Senior Indebtedness held by
them) or their Representative, as their interests may appear, for application to
the payment of all outstanding Senior Indebtedness until all such Senior
Indebtedness has been paid in full in cash, after giving effect to all other
payments or distributions to, or provisions made for, holders of Senior
Indebtedness.
11.3. Default on Senior Indebted. The Company shall not make
any payment or distribution (other than in Reorganization Securities) on account
of any of the Note Indebtedness if (a) a default in the payment of the principal
of, or premium, if any, or interest on, or any other amount owing with respect
to any Senior Indebtedness (a "Payment Default") occurs and is continuing,
whether at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, or (b) the Company has received written notice (a
"Payment Blockage Notice") from any holder of Senior Indebtedness that a
Nonpayment Default (as defined below) has occurred and is continuing; provided,
however, that payments and distributions on account of the Note Indebtedness
shall resume, and all past due amounts in respect of the Note Indebtedness shall
be paid (i) in the case of a Payment Default, on the date on which such default
is cured or waived or shall have ceased to exist and all Senior Indebtedness
shall have been paid in full in cash or Cash Equivalents and (ii) in the case of
a Nonpayment Default, on the earliest of (A) the date on which such Nonpayment
Default is cured or waived or shall have ceased to exist, (B) 179 days after the
date on which the Payment Blockage Notice with respect to such Nonpayment
Default was received by the Company, or (C) the date on which such blockage
period shall have been terminated by written notice to the Company from the
holder of the Senior Indebtedness which issued the Payment Blockage Notice
unless the maturity of any Senior Indebtedness has been accelerated and the
Company has defaulted with respect to the payment of such Senior Indebtedness.
No more than one Payment Blockage Notice may be given during any consecutive
365-day period and during any consecutive 365-day period, the aggregate number
of days in which payments due in respect of the Note Indebtedness may not be
made as a result of Nonpayment Defaults on Senior Indebtedness shall not exceed
179 days and there shall be a period of at least 186 consecutive days in each
consecutive 365-day
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period when such payments are not prohibited. If any holder of Senior
Indebtedness delivers a Payment Blockage Notice to the holders of the Note
Indebtedness in respect of any Nonpayment Default, no Nonpayment Default that
existed or was continuing on the date of delivery of such notice shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been waived or cured for a period of not less than 90 days.
"Nonpayment Default" means any event of default under the terms of any
instrument governing any Senior Indebtedness permitting one or more holders of
such Senior Indebtedness (or a Representative on behalf of the holders thereof)
to declare all or part of such Senior Indebtedness due and payable prior to the
date on which it would otherwise become due and payable.
11.4. Acceleration of Note Indebtedness. If payment of the
Note Indebtedness is accelerated because of an Event of Default, the Company
shall promptly notify the holders of the Senior Indebtedness of the
acceleration.
11.5. When Distributions Must be Paid Over.
(a) If the Company shall make any payment or distribution on
account of the Note Indebtedness at a time when such payment is prohibited by
this Section 11, then and in such event the holders of the Note Indebtedness
shall hold such payment or distribution in trust for the benefit of, and shall
pay over and deliver to, the holders of the Senior Indebtedness (pro rata as to
each of such holders on the basis of the respective amounts of such Senior
Indebtedness held by them) or their Representative, as their respective
interests may appear, for application to the payment of all outstanding Senior
Indebtedness until all such Senior Indebtedness has been paid in full in cash or
Cash Equivalents, after giving effect to all other payments or distributions to,
or provisions made for, the holders of Senior Indebtedness.
(b) Nothing contained in this Section 11 or elsewhere in this
Agreement or in the Notes or the Warrants shall prevent the Company, at any time
except during the pendency of any Insolvency or Liquidation Proceeding or under
the conditions described in Subsection 11.3, from making payments or
distributions on account of the Note Indebtedness.
(c) With respect to the holders of Senior Indebtedness, the
holders of the Note Indebtedness undertake to perform only such obligations on
their part as are specifically set forth in this Section 11, and no implied
covenants or obligations with respect to any holders of Senior Indebtedness
shall be read into this Agreement against the holders of the Note Indebtedness.
The holders of the Note Indebtedness shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness.
11.6. Notice.
(a) The holders of the Note Indebtedness shall not at any time
be charged with the knowledge of the existence of any facts that would prohibit
the making of any payment to the holders of the Note Indebtedness under this
Section 11, unless and until the holders of the Note Indebtedness shall have
received written notice thereof from the Company,
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one or more holders of Senior Indebtedness or a Representative of any holders of
Senior Indebtedness; and, prior to the receipt of any such written notice, the
holders of the Note Indebtedness shall be entitled to assume conclusively that
no such facts exist. The holders of the Note Indebtedness shall be entitled to
rely on the delivery to the holders of the Note Indebtedness of written notice
by a Person representing itself as a holder of Senior Indebtedness (or a
Representative thereof) to establish that such notice has been given.
(b) The Company shall promptly notify the holders of the Note
Indebtedness in writing of any facts it knows that would cause a payment of
principal of, or premium, if any, or interest on, the Note Indebtedness to
violate this Section 11, but failure to give such notice shall not affect the
subordination of the Note Indebtedness to the Senior Indebtedness provided in
this Section 11 or the rights of holders of such Senior Indebtedness under this
Section 11.
11.7. Subrogation. After all Senior Indebtedness has been paid
in full in cash or Cash Equivalents and until the Note Indebtedness is paid in
full, the holders of the Note Indebtedness shall be subrogated to the rights of
holders of such Senior Indebtedness to receive distributions applicable to such
Senior Indebtedness to the extent that distributions otherwise payable to the
holders of the Note Indebtedness have been applied to the payment of such Senior
Indebtedness. A distribution made under this Section 11 to holders of Senior
Indebtedness that otherwise would have been made to the holders of the Note
Indebtedness is not, as among the Company, its creditors other than holders of
Senior Indebtedness and the holders of the Note Indebtedness, a payment or
distribution by the Company to or on account of its Senior Indebtedness.
11.8 Relative Rights.
(a) The provisions of this Article 11 are and are intended
solely for the purpose of defining the relative rights of the holders of the
Note Indebtedness on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Article 11 or elsewhere in this Agreement
or in the Notes is intended to or shall (i) impair, as among the Company, its
creditors other then holders of Senior Indebtedness and the holders of the Note
Indebtedness, the obligation of the Company, which is absolute and
unconditional, to pay principal of, and premium, if any, and interest in respect
of, the Note Indebtedness in accordance with its terms; (ii) affect the relative
rights of the holders of the Note Indebtedness and the Company's creditors other
than their rights in relation to holders of Senior Indebtedness; or (iii)
prevent any holder of Note Indebtedness from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders of Senior
Indebtedness to receive payment and distributions otherwise payable or
distributable to the holders of Note Indebtedness.
(b) The failure to make a payment on account of principal of,
or premium, if any, or interest in respect of the Note Indebtedness by reason of
any provision of this Section 11 shall not be construed as preventing the
occurrence of an Event of Default under Subsection 9.1.
11.9. No Impairment of Subordination.
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(a) No right of any holder of Senior Indebtedness to enforce
the subordination as provided in this Article 11 shall at any time or in any way
be prejudiced or impaired by any act or failure to act by the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Agreement, the Notes, the Warrants or any other Transaction Document or any
other agreement regardless of any knowledge thereof which any such holder may
have or be otherwise charged with.
(b) Without in any way limiting Subsection 11.9(a), the
holders of any Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to any holders of Note Indebtedness, without
incurring any liabilities to any holder of Note Indebtedness and without
impairing or releasing the subordination and other benefits provided in this
Agreement or the obligations of the holders of Note Indebtedness to the holders
of such Senior Indebtedness, even if the right of reimbursement or subrogation
or other right or remedy of any holder of Note Indebtedness is affected,
impaired or extinguished thereby, do any one or more of the following: (i)
amend, renew, exchange, extend, modify, increase or supplement in any manner
such Senior Indebtedness or any instrument evidencing or guaranteeing or
securing such Senior Indebtedness or any agreement under which such Senior
Indebtedness is outstanding (including, but not limited to, changing the manner,
place or terms of payment or changing or extending the time of payment of, or
renewing, exchanging, amending, increasing, releasing, terminating or altering,
(1) the terms of such Senior Indebtedness, (2) any security for, or any
guarantee of, such Senior Indebtedness, (3) any liability of any obligor on such
Senior Indebtedness (including any guarantor) or any liability Incurred in
respect of such Senior Indebtedness); (ii) sell, exchange, release, surrender,
realize upon, enforce or otherwise deal with in any manner and in any order any
property pledged, mortgaged or otherwise securing such Senior Indebtedness or
any liability of any obligor thereon, to such holder, or any liability incurred
in respect thereof; (iii) settle or compromise any such Senior Indebtedness or
any other liability of any obligor of such Senior Indebtedness to such holder or
any security therefor or any liability incurred in respect thereof and apply any
sums by whomsoever paid and however realized to any liability (including,
without limitation, payment of any of Senior Indebtedness) in any manner or
order; and (iv) release, terminate or otherwise cancel, or fail to take or to
record or otherwise perfect, for any reason or for no reason, any Lien or
security interest securing such Senior Indebtedness by whomsoever granted,
exercise or delay in or refrain from exercising any right or remedy against any
obligor or any guarantor or any other Person, elect any remedy and otherwise
deal freely with any obligor and any security for such Senior Indebtedness or
any liability of any obligor to the holders of such Senior Indebtedness or any
liability incurred in respect of such Senior Indebtedness.
(c) No amendment or modification of the terms or provisions of
the Note Indebtedness shall be made without the consent of the holders of the
Senior Indebtedness if such amendment or modification would have a material
adverse effect on the rights or remedies of the holders of Senior Indebtedness.
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11.10 Representatives of Holders of Senior Indebtedness.
Whenever a distribution is to be made, or a notice given, to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative, if any. If any payment or distribution of the Company's assets
is required to be made to holders of any Senior Indebtedness pursuant to this
Article 11, the holders of Note Indebtedness shall be entitled to rely upon any
order or decree of any court of competent jurisdiction, or upon any certificate
of a Representative of such Senior Indebtedness, in ascertaining the holders of
such Senior Indebtedness entitled to participate in any such payment or
distribution, the amount to be paid or distributed to holders of such Senior
Indebtedness and all other facts pertinent to such payment or distribution or to
this Article 11.
11.11 Payment. For all purposes of this Article 11, a "payment
or distribution on account of Note Indebtedness" shall include, without
limitation, any direct or indirect payment or distribution on account of the
purchase, prepayment, redemption, retirement, defeasance or acquisition of any
Note or Put Note, any recovery by the exercise of any right of set-off or
redemption on collateral, any direct or indirect payment of principal, premium
or interest with respect to or in connection with any mandatory or optional
redemption or purchase provisions, any direct or indirect payment or
distribution payable or distributable by reason of any other Indebtedness being
subordinated to any Note Indebtedness, and any direct or indirect payment or
recovery on any claim (including claims for indemnification or liquidated
damages) relating to or arising out of this Agreement, any Note or Put Note, or
any other Transaction Document or any of the transactions contemplated by or
referred to therein.
11.12. Lien Subordination. The Company agrees, and each holder
of Notes by accepting a Note agrees, any provision of this Agreement, the Notes
or the Warrants to the contrary notwithstanding, that upon the request of the
holders of Senior Indebtedness or their Representative, the holders of Note
Indebtedness and the Collateral Agent shall enter into an appropriate
intercreditor agreement or similar document with the holders of Senior
Indebtedness or their Representative containing customary terms and conditions
providing for, among other things, the Liens on the assets of the Company
securing the Senior Indebtedness to be senior in priority to the Liens on the
assets of the Company securing the Note Indebtedness, and restrictions on the
exercise of remedies by the holders of Note Indebtedness; and shall amend the
Security Agreement to conform with the terms of such intercreditor agreement.
12. REGISTRATION RIGHTS.
12.1. Required Registrations.
(a) At any time after the earlier of December 31, 1998 or the
closing of the Company's first Qualified Public Offering, holders of in the
aggregate at least 35% of the Registrable Shares may request, in writing, that
the Company effect the registration on Form S-1 or Form S-2 (or any successor
form) of Registrable Shares owned by such holders having an aggregate offering
price of at least $2,000,000 (based on the then current market price or fair
value), provided that, to the extent the Company is eligible to effect a
registration or qualification on Form S-3 (or any successor Form), the Company
shall be entitled to use such Form S-3 in lieu
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of Form S-1 or S-2. If the holders initiating the registration intend to
distribute the Registrable Shares by means of an underwriting, they shall so
advise the Company in their request. In the event such registration is
underwritten, the holders of a majority of the Registrable Shares to be sold in
such offering may designate the managing underwriter of such offering, such
managing underwriter to be reasonably acceptable to the Company. In the event
such registration is underwritten, the right of other holders of Registrable
Shares to participate shall be conditioned on such other holders' participation
in such underwriting. Upon receipt of any such request, the Company shall
promptly give written notice of such proposed registration to all holders of
Registrable Shares and all such holders shall have the right, by giving written
notice to the Company within 30 days after the Company provides its notice, to
elect to have included in such registration such of their Registrable Shares as
such holders may request in such notice of election, subject to the approval of
the underwriter managing the offering as provided below. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-1 or Form S-2 (or any successor form), or Form S-3 (or
any successor form) to the extent the Company is eligible to effect a
registration or qualification on such Form S-3 and so elects, of all Registrable
Shares which the Company has been requested to so register.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), holders of in the aggregate at least 35% of the Registrable Shares
may request the Company, in writing, to effect the registration on Form S-3 (or
such successor form), of Registrable Shares having an aggregate offering price
of at least $500,000 (based on the current public market price). Upon receipt of
any such request, the Company shall promptly give written notice of such
proposed registration to all holders of Registrable Shares and all such holders
shall have the right, by giving written notice to the Company within 30 days
after the Company provides its notice, to elect to have included in such
registration such of their Registrable Shares as such holders may request in
such notice of election. Thereupon, the Company shall, as expeditiously as
possible, use its best efforts to effect the registration on Form S-3, or such
successor form, of all Registrable Shares which the Company has been requested
to register.
(c) The Company shall not be required to effect more than two
registrations pursuant to paragraph (a) above or more than four registrations
pursuant to paragraph (b) above, provided, however, that the Company's
obligations shall be deemed satisfied only when a Registration Statement
covering all shares of Registrable Shares specified in notices received as
aforesaid (or such lower number of shares as the managing underwriter shall
require under paragraph (e)), for sale in accordance with the method of
disposition specified by the requesting holders, shall have become effective
and, if such method of disposition is a firm commitment underwritten public
offering, all such shares shall have been sold pursuant thereto (other than
shares provided for in over-allotment option(s)). In addition, the Company shall
not be required to effect any registration (other than as to a public offering
that is not underwritten on Form S-3 or any successor Form) within six months
after the effective date of any other Registration Statement of the Company.
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(d) Notwithstanding any other provision of this Agreement, the
Company agrees that as soon as practicable after the Company becomes eligible to
file a Registration Statement on Form S-3 (or any successor form relating to
secondary offerings), the Company shall prepare and file with the Commission a
"shelf" registration statement (the "Shelf Registration Statement") on the
appropriate form for an offering to be made on a continuous basis pursuant to
Rule 415 under the Securities Act (or such successor rule or similar provision
then in effect) covering all of the Registrable Securities. The Company shall
use its best efforts to have the Shelf Registration Statement declared effective
as soon as practicable after filing with the Commission and to keep the Shelf
Registration Statement continuously effective through the third anniversary of
the date on which the Shelf Registration Statement is declared effective. The
Company agrees, if necessary, to supplement or amend the Shelf Registration
Statement, as required by the rules, regulations or instructions applicable to
the registration forms used by the Company for the Shelf Registration Statement
or by the Securities Act, and the Company agrees to furnish to all holders of
Registrable Securities copies of any such supplement or amendment prior to its
being used and/or filed with the Commission. Each holder of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities held by such holder from the Shelf Registration Statement at any time
prior to the effective date of the Shell Registration Statement. If any holder
of Registrable Securities so elects, the offering of Registrable Securities
pursuant to the Shelf Registration Statement shall be in the form of an
underwritten offering. If they so elect, the holders of Registrable Securities
participating in such Shelf Registration Statement shall select one or more
nationally recognized firms of investment bankers to act as the book-running
managing underwriter or underwriters in connection with such offering and shall
select any additional investment bankers and mangers to be used in connection
with the offering.
(e) If at the time of any request to register Registrable
Shares pursuant to this Section 12.1, the Company is engaged or has fixed plans
to engage within 30 days of the time of the request in a registered public
offering as to which the Stockholders may include Registrable Shares pursuant to
Section 12.2, subject to the limitations set forth therein, or is engaged in any
other activity which, in the good faith determination of the Company's Board of
Directors, would be adversely affected by the requested registration to the
material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any two-year period.
(f) Notwithstanding any other provision of this Section 12.1,
if the managing underwriter advises the holders of Registrable Shares initiating
the registration in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the holders of Registrable Shares
initiating the registration shall so advise all holders of Registrable Shares
which would otherwise be included in the underwriting and the number of
Registrable Shares that may be included in the underwriting shall be allocated
among all such holders of Registrable Shares, including the holders of
Registrable Shares initiating the registration, in proportion (as nearly as
practicable) to the amount of Registrable Shares of the Company owned
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by each such holder. If the managing underwriter does not limit the number of
Registrable Shares to be underwritten, the Company or other holders of
securities of the company who have registration rights similar to those set
forth in this Section 12.1 may include Common Stock for their respective
accounts in such registration if the managing underwriter states that such
inclusion would not adversely affect the offering of Registrable Shares and if
the number of Registrable Shares which would otherwise have been included in
such registration and underwriting will not thereby be limited or reduced.
(g) Except as set forth in paragraph (d) above and except for
Registration Statements on Form S-4 or Form S-8 or any successor thereto, the
Company will not file with the Commission any other Registration Statement with
respect to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from requesting holders
pursuant to this Subsection 12.1 until the completion of the period of
distribution of the registration contemplated thereby; provided, however, that
this limitation shall apply only to the two registrations pursuant to paragraph
(a) above.
12.2 Incidental Registration.
(a) Whenever the Company proposes to file a Registration
Statement (other than pursuant to Subsection 12.1) at any time and from time to
time, the Company will, prior to such filing, give written notice to all holders
of Registrable Shares of its intention to do so and, upon the written request of
any holder or holders of Registrable Shares given within 20 days after the
Company provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
holder or holders to register to be registered under the Securities Act to the
extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of such holder or
holders; provided that the Company shall have the right to postpone or withdraw
any registration effected pursuant to this Subsection 12.2 without obligation to
any holder of Registrable Shares.
(b) In connection with any offering under this Subsection 12.2
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. If in the opinion of the managing underwriter the registration of all,
or part of, the Registrable Shares which the holders have requested to be
included would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares which the holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have requested
registration and other holders of shares of Common Stock entitled to include
shares of Common Stock in such registration shall participate in the
underwriting pro
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rata based upon their total ownership of shares of Common Stock of the Company
on an as if-converted basis. If any holder would thus be entitled to include
more shares than such holder requested to be registered, the excess shall be
allocated among other requesting holders pro rata based upon their total
ownership of Registrable Shares.
12.3 Registration Procedures.
(a) If and whenever the Company is required by the provisions
of this Agreement to use its best efforts to effect the registration of any of
the Registrable Shares under the Securities Act, the Company shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective for 120 days;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for a period of not less than 120 days from
the effective date and comply with the provisions of the Securities Act
applicable to the Company with respect to the disposition of all Registrable
Shares covered by such Registration Statement in accordance with the sellers'
intended method of disposition set forth in such Registration Statement for such
period;
(iii) as expeditiously as possible furnish to each selling
holder of Registrable Shares such reasonable numbers of copies of the
Registration Statement and the prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
documents as the selling holder may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Shares owned by such
selling holder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or "Blue Sky" laws of such states as each selling holder of
Registrable Shares shall reasonably request, and do any and all other acts and
things that may be necessary or desirable to enable each such selling holder of
Registrable Shares to consummate the public sale or other disposition in such
states of the Registrable Shares owned by such selling holder; provided,
however, that the Company shall not be required to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
(v) immediately notify each seller of Registrable Shares and
each underwriter under such Registration Statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such Registration Statement as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required
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to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing;
(vi) if the offering is underwritten and at the request of any
seller of Registrable Shares, use its best efforts to furnish on the date that
Registrable Shares are delivered to the underwriters for sale pursuant to such
registration: (A) an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, stating that such Registration Statement has become effective under the
Securities Act and that (1) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (2) the Registration Statement' the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or schedules or other financial or
statistical data contained therein) and (3) to such other effects as reasonably
may be requested by counsel for the underwriters or by such seller or its
counsel and (B) a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters and to such seller,
stating that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company included in the Registration Statement or the
prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(vii) make available for inspection by each seller of
Registrable Shares, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, in connection with such Registration Statement.
(b) If the Company has delivered preliminary or final
prospectuses to the selling holders of Registrable Shares and after having done
so the prospectus is amended to comply with the requirements of the Securities
Act, the Company shall immediately notify such selling holders and, if
requested, such selling holders shall immediately cease making offers of
Registrable Shares and return all prospectuses to the Company. The Company shall
promptly provide all selling holders of Registrable Shares with revised
prospectuses and, following receipt of the revised prospectuses, the selling
holders shall be free to resume making offers of the Registrable Shares. The
Company shall be obligated to keep the Registration Statement effective for a
period of additional days equal to the number of days during which the holders
were required to cease making offers pursuant to this paragraph.
12.4 Allocation of Expenses. The Company will pay all
Registration Expenses of all registrations under this Agreement; provided,
however, that if a registration is withdrawn at
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the request of the holders of Registrable Shares who requested such registration
(other than as a result of information concerning the business or financial
condition of the Company which is made known to such holders after the date on
which such registration was requested) and if such requesting holders elect not
to have such registration counted as a registration requested under Subsection
12.1, the requesting holders shall pay the Registration Expenses of such
registration pro rata in accordance with the number of their Registrable Shares
included in such registration. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Section 12 including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for the Company and the fees and expenses of one
counsel selected by the selling holders of Registrable Shares to represent such
selling holders, state "Blue Sky" fees and expenses, and the expense of any
special audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of any
selling holder's own counsel (other than the counsel selected to represent all
selling holders of Registrable Shares).
12.5. Indemnification.
(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such Registrable Shares, each
underwriter of such Registrable Shares, each officer and director of such seller
and underwriter, and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which such
seller, underwriter; officer or director or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or "Blue
Sky" laws or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or arise out of or are based upon any
violation or alleged violation by the Company of the Securities Act or Exchange
Act or any state securities laws or any regulation promulgated under any of
them; and the Company will reimburse such seller, underwriter, each officer and
director and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter, officer, director or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus or prospectus, or any
such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for use in the
preparation thereof.
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(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if any),
each other seller of Registrable Shares and each person, if any, who controls
the Company or any such underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company, such directors and officers, underwriter, other
seller of Registrable Shares or controlling person may become subject under the
Securities Act, Exchange Act, state securities or "Blue Sky" laws or otherwise,
to the extent that such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such seller, specifically for use in connection with the preparation
of such Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of such Stockholder hereunder shall be limited to
an amount equal to the proceeds received by such seller from the sale of
Registrable Shares covered by such Registration Statement and sold as
contemplated therein; and further provided, however, that in the event of an
underwritten offering of capital stock of the Company initiated by the Company
in which any holders sell Registrable Shares pursuant to Subsection 12.2, the
foregoing indemnity agreement is subject to the condition that, insofar that it
relates to any such untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in the preliminary prospectus but remedied in the
amended prospectus on file with the Commission at the time the Registration
Statement becomes effective or in the final prospectus, such indemnity agreement
shall not inure to the benefit of (i) the Company and (ii) any seller of
Registrable Shares, if there is no underwriter, if copy of the final prospectus
was not furnished to the person or entity asserting the loss, claim, damage or
liability at or prior to the time such furnishing is required by the Securities
Act.
(c) Each party entitled to indemnification under this
Subsection 12.5 shall give notice to the party required to provide
indemnification promptly after such indemnified party has actual knowledge of
any claim as to which indemnity may be sought, and shall permit the indemnifying
party to assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the indemnifying party, who shall conduct
the defense of such claim or litigation, shall be approved by the indemnified
party (whose approval shall not be unreasonably withheld) and provided, further
that an omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Subsection 12.5 and shall only relieve it from any liability which it may have
to such indemnified party under this Subsection 12.5 if and to the extent the
indemnifying party is prejudiced by such omission. The indemnified party may
participate in such defense at such party's expense; provided, however, that the
indemnifying party shall pay such expense if
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representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in such proceeding. No indemnifying party, in the defense of any such
claim or litigation shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation, and no indemnified party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the indemnifying party.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Agreement, or any
officer or director of any holder or any controlling person of any such holder,
makes a claim for indemnification pursuant to this Subsection 12.5 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Subsection 12.5 provides for indemnification
in such case, or (ii) contribution under the Securities Act may be required on
the part of any such selling holder or any such controlling person in
circumstances for which indemnification is provided under this Subsection 12.5;
then, and in each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
12.6 Special Indemnification with Respect to Underwritten
Offering. In the event that Registrable Shares are sold pursuant to a
Registration Statement in an underwritten offering pursuant to Subsection
12.1(a), the Company agrees to enter into an underwriting agreement containing
customary representations and warranties with respect to the business and
operations of an issuer of the securities being registered and customary
covenants and agreements to be performed by such issuer, including without
limitation customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
12.7 Information by Holder. Each holder of Registrable Shares
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Section
12.
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12.8 "Stand-Off" Agreement. Each holder of Registrable
Securities, if requested by the Company and an underwriter of Common Stock or
other securities of the Company, shall agree not to sell or otherwise transfer
or dispose of any Registrable Shares or other securities of the Company held by
such holder for a specified period of time (not to exceed 90 days) following the
effective date of a Registration Statement; provided, that such agreement shall
only apply to the first such Registration Statement covering Common Stock of the
Company to be sold on its behalf to the public in an underwritten offering. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop-transfer instructions with respect to
the Registrable Shares or other securities subject to the foregoing' restriction
until the end of the stand-off period.
12.9. Limitations on Subsequent Registration Rights. The
Company shall not, without the prior written consent of holders holding at least
a majority of the Registrable Shares, enter into any agreement (other than this
Agreement) with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include
securities of the Company in any registration filed under Subsections 12.1 or
12.2, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only on terms no
more favorable than the terms on which holders of Registrable Shares may include
shares in such registration, or (b) to make a demand registration which could
result in such registration statement being declared effective prior to December
31, 1998; provided, however, that the Company shall not enter into any agreement
with such holder or prospective holder that would give such holder or
prospective holder registration rights with respect to securities of the Company
other than shares of Common Stock issued by the Company or issued or issuable
upon conversion of convertible securities or exercise of warrants to purchase
capital stock of the Company.
12.10. Rule 144 Requirements. After the earliest of (i) the
closing of the sale of securities of the Company pursuant to a Registration
Statement, (ii) the registration by the Company of a class of securities under
Section 12 of the Exchange Act, or (iii) the issuance by the Company of an
offering circular pursuant to Regulation A under the Securities Act, the Company
agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days following the closing
of the first sale of securities by the Company pursuant to a Registration
Statement), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual
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or quarterly report of the Company, and such other reports and documents of the
Company as such holder may reasonably request to avail itself of any similar
rule or regulation of the Commission allowing it to sell any such securities
without registration.
13. DEFINITIONS.
As used herein the following terms have the following respective
meanings:
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary (or such Person is merged
into the Company or a Subsidiary) or assumed in connection with the acquisition
of properties or assets from any such Person and not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition.
"Affiliate" except as otherwise defined in this Agreement,
means with respect to any Person, any Person directly or indirectly controlling
or controlled by or under common control with such Person, provided that, for
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" means this Agreement, as amended, modified or
supplemented from time to time, together with any exhibits, schedules or other
attachments thereto.
"Applicable Converted Note Rate" means a rate of interest per
annum equal to the lesser of (i) ten percent (10%) and (ii) the Base Rate plus
three and one-half percent (3 1/2%). The term "Base Rate" as used herein shall
mean the rate of interest announced from time to time by The First National Bank
of Boston at its main office in Boston, Massachusetts as its Base Rate.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive Scheduled principal payment of such Indebtedness multiplied
by the amount of such principal payment by (ii) the sum of all such principal
payments.
"beneficial owner" has the meaning ascribed thereto in Rules
13d-3 and 13d-5 promulgated by the Commission under the Exchange Act, except
that a person shall be deemed to be the beneficial owner of all shares that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time; and the terms "beneficial ownership" and
"beneficially owns" have meanings correlative to the foregoing.
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"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which commercial banking institutions in Boston, Massachusetts are
authorized or required to be closed.
"Capital Lease Obligations" of a Person means any obligation
which is required to be classified and accounted for as a capital lease on the
face of a balance sheet of such Person prepared in accordance with GAAP; the
amount of such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Capitalized Leases" means leases which are required to be
capitalized on the balance sheet of the Company in accordance with GAAP.
"Cash Equivalents" means: (i) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (ii) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.; (iii) commercial paper maturing
no more than 360 days after the date of acquisition thereof, issued by a
corporation organized under the laws of any state of the United States or of the
District of Columbia and, at the time of acquisition, having a rating in one of
the two highest rating categories obtainable from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.; (iv) money market funds whose
investments are made solely in securities described in clause (i) maturing
within one (1) year after the date of acquisition thereof; (v) certificates of
deposit maturing within 360 days after the date of acquisition thereof, issued
by any commercial bank that is a member of the Federal Reserve System that has
capital, surplus and undivided profits (as shown on its most recent statement of
condition) aggregating not less than $100,000,000 and is rated A or better by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation; and (vi)
repurchase agreements entered into with any commercial bank of the nature
referred to in clause (i), secured by a fully perfected Lien in any obligation
of the type described in any of clauses (i) through (v), having a fair market
value at the time such repurchase agreement is entered into of not less than
100% of the repurchase obligation thereunder of such commercial bank.
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"Change of Control" means the occurrence of any of the
following events: (i) any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Exchange Act), is or becomes the "beneficial owner",
directly or indirectly, of more than 50% of the total voting power of the Voting
Stock of the Company; (ii) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company to any
"person" (as such term is used in Section 13(d) or 14(d) of the Exchange Act),
provided that the foregoing shall not apply to the granting of Liens on such
assets to the extent permitted by this Agreement; or (iii) the Company
consolidates with or merges into another corporation or any Person consolidates
with or merges into the Company, in either event pursuant to a transaction in
which either (A) the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities or other property (other than any such
transaction where the outstanding Voting Stock of the Company is changed into or
exchanged for Voting Stock of the surviving corporation which is neither
Redeemable Stock nor Exchangeable Stock) or (B) the holders of a majority of the
voting power of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, less than a majority of the voting
power of the Voting Stock of the surviving corporation immediately after such
transaction.
"Closings" shall mean the First Closing and the Second
Closing; and "Closing" shall mean either of the Closings.
"Closing Dates" shall mean the First Closing Date and the
Second Closing Date; and "Closing Date" shall mean either of the Closing Dates.
"Code" means the Internal Revenue Code of 1986, and the rules
and regulations thereunder, as amended from time to time.
"Collateral Agent" means Triumph-Connecticut Limited
Partnership, in its capacity as collateral agent for the holders from time to
time of the Note Indebtedness.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" means the common stock, $0.00004 par value per
share, of the Company and any shares of Capital Stock of the Company into which
such shares may be exchanged or converted pursuant to any recapitalization, or
reclassification of the Company's Capital Stock.
"Company" has the meaning ascribed thereto in the introduction
hereof.
"Default" means any event which is, or after notice or passage
of time, or both, would be, an Event of Default.
"Environment" means soil, surface waters, groundwaters, land,
stream sediments, surface or subsurface strata and ambient air.
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"Environmental Law(s)" means and includes any environmental or
health and safety-related law, regulation, rule, ordinance, or legally
enforceable requirement at the foreign, federal, state, or local level.
"ERISA" means the Employee Retirement Income Security Act of
1974, and the rules and regulations thereunder, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchangeable Stock" means any Capital Stock which is
exchangeable or convertible into another security (other than Capital Stock of
the Company which is neither Exchangeable Stock nor Redeemable Stock).
"Feverall Acquisition" means the acquisition by the Company
from ▇▇▇▇▇▇-▇▇▇▇▇ Laboratories, Inc. of its Feverall and Acetaminophen Uniserts
Suppository product lines and Acetaminophen Sprinkle Caps product lines pursuant
to terms and conditions approved by the Board of Directors of the Company.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination; provided, however, that these definitions and all ratios
and calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"Governmental Authority" means any governmental or
quasi-governmental authority including, without limitation, any federal, state,
territorial, county, municipal or other governmental or quasi-governmental
agency, board, branch, bureau, commission, court, department or other
instrumentality or political unit or subdivision, whether domestic or foreign.
"Guarantee" means the guarantee by a Guarantor of the
Company's obligations under the Notes.
"Guarantor" means any Person who becomes a Guarantor by
execution of a supplement to this Agreement pursuant to Subsection 8.9 hereof,
and any of their respective successors or assigns.
"Hazardous Materials" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other human health or safety, as defined
or regulated under any Environmental Law.
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"Hazardous Waste" means and includes any hazardous waste as
defined or regulated under any Environmental Law.
"Incurrence" means the incurrence, creation, assumption,
issuance, guarantee of the payment of, or in any other manner becoming liable
with respect to, the payment of, any Indebtedness. "Incur" and "Incurred" shall
have a comparable meaning.
"Indebtedness" means, with respect to any Person, without
duplication, (i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar instruments (including purchase
money obligations) for payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance, securities purchase facility or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in (i) through (iii) above) entered into in the
ordinary course of business of such Person to the extent such letters of credit
are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit; (v) all
obligations of the type referred to in clauses (i) through (iv) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable as obligor, guarantor or otherwise; (vi)
all obligations of the type referred to in clauses (i) through (v) of other
Persons secured by any Lien on any property or asset of such Person whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; and (vii) Redeemable Stock of such Person;
provided, however, that Indebtedness will not include endorsements of negotiable
instruments for collection in the ordinary course of business.
"Initial Qualified Public Offering Price" means the per share
price of Common Stock at the time it is first sold by the Company pursuant to a
Qualified Public Offering.
"Insolvency or Liquidation Proceeding" means, with respect to
any Person, (i) any insolvency or bankruptcy or similar case or proceeding, or
any reorganization, receivership, liquidation, dissolution or winding up of such
Person, whether voluntary or involuntary, or (ii) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of such Person.
"Interest Differential" means, with respect to any Insolvency
or Liquidation Proceeding involving the Company, the difference between the rate
of interest on the Notes and the rate of interest on the Senior Indebtedness
immediately prior to the commencement of such
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Insolvency or Liquidation Proceeding, excluding in each case any increase in the
rate of interest resulting from any default or event of default.
"Investment" in any Person means any loan or advance to, any
acquisition of Capital Stock of, equity interest in, obligation or other
security of, or capital contribution to or other investment in, such Person.
"IRS" means the Internal Revenue Service or any successor
agency.
"Lien" means any mortgage, lien (statutory or otherwise),
charge, pledge, hypothecation, conditional sales agreement, adverse claim, title
retention agreement or other security interest, encumbrance or other title
defect in or on any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale, trust receipt or
other title retention agreement with respect to any Property or asset of such
Person.
"Material Adverse Effect" means, any material adverse effect
on the financial condition, assets, business or results of operations of the
Company and its Subsidiaries, if any, taken as a whole.
"Net Proceeds" means, with respect to a specified transaction,
total cash proceeds net of all customary legal expenses, commissions and other
fees and expenses incurred and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP as a consequence of, and
in connection with, such transaction.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any nonconvertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into nonconvertible common
stock of such corporation which is not Redeemable Stock or Exchangeable Stock;
provided, however, that Non-Convertible Capital Stock does not include any
Redeemable Stock or Exchangeable Stock.
"Officer" means, with respect to any corporation, the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Treasurer or the Secretary of such corporation.
"Officers' Certificate" means a certificate executed on behalf
of the Company by (a) the Chairman of the Board of Directors (if an officer) or
the President or one of the Vice Presidents of the Company and (b) the Treasurer
or one of the Assistant Treasurers or the Secretary or one of the Assistant
Secretaries of the Company.
"Operating Lease" shall mean, as applied to any Person, any
lease with respect to which such Person is the lessee (including, without
limitation, leases which may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) which is not a lease which is
required to be classified and accounted for as a capital lease on the face of
the balance sheet of such Person prepared in accordance with GAAP.
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"Permitted Investments" means: (i) certificates of deposit
with a maturity of one year or less issued by U.S. commercial banks having
capital and surplus in exams of $100.0 million; (ii) commercial paper with a
minimum rating of Al and/or Pl by Standard & Poor's Corporation and/or Moodys
Investors Service, Inc., respectively; (iii) direct obligations of the United
States or of a United States agency with a maturity of one year or less; (iv)
shares of money market mutual or similar funds having assets in excess of $100.0
million; and (v) Investments by the Company in Wholly-Owned Subsidiaries.
"Permitted Liens" means, with respect to any Person, (i)
pledges or deposits by such Person under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness), utility services or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits of
cash or U.S. Government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import duties
or for the payment of rent and incurred in the ordinary course of such Person's
business; (ii) Liens determined by law, such as carriers' warehousemen's,
mechanics' and bankers' Liens and incurred in the ordinary course of such
Person's business; (iii) Liens for taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings, if adequate reserve, as may be required by GAAP, shall have been
made therefor; (iv) Liens in favor of issuers of surety bonds (other than to
satisfy any judgment or judgments) issued pursuant to the request of and for the
account of such Person in the ordinary course of its business; (v) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties and incurred in the ordinary course of such
Person's business; (vi) Liens securing the Senior Indebtedness; (vii) Purchase
Money Liens and Capitalized Leases securing Indebtedness permitted under Section
8.2(b) of this Agreement; and (viii) Liens granted in favor of ▇▇▇▇▇▇-▇▇▇▇▇
Laboratories, Inc. or its affiliates on those assets acquired by the Company
pursuant to the Feverall Acquisition.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Post-Petition Interest" means, with respect to any
Indebtedness of any Person, all interest which would accrue on such Indebtedness
after the commencement of any Insolvency or Liquidation Proceeding against such
Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is
allowable as a claim in such Insolvency or Liquidation Proceeding.
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"Preferred Stock" means, with respect to the Borrower, the
Series A Preferred, the Series B Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other Capital Stock of any class or
classes (however designated) of the Corporation which is preferred, as to the
payment of dividends or as to the dissolution of assets upon any voluntary or
involuntary liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.
"Primsol Solution Final FDA Approval" means the final approval
of the FDA for the manufacturing, labeling, marketing, sale and distribution of
the Company's Primsol Solution product for the clinical indications of both (i)
otitis media and (ii) urinary tract infection in patients over 12 years of age.
"Principal Purchaser" has the meaning ascribed thereto in the
introduction hereof.
"Principal Purchaser's Special Counsel" means ▇▇▇▇▇▇▇, Procter
& ▇▇▇▇ LLP, a limited liability partnership including professional corporations,
acting as special counsel to the Principal Purchaser in connection with the
transactions contemplated hereunder.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchase Money Liens" means Liens to secure the payment of
all or any part of the purchase price of assets or property acquired by the
Company in the ordinary course, provided that each such Lien shall at all times
be confined to the property or assets so acquired.
"Purchaser" except as defined elsewhere in this Agreement,
means any purchaser listed on the signature pages hereto.
"Purchasers" except as defined elsewhere in this Agreement,
has the meaning ascribed thereto in the introduction hereof.
"Put Note" means any promissory note issued by the Company in
connection with the exercise by any holder of Warrants of a Put Right (as
defined in the Warrants).
"Put Purchase Date" means each date on which the Company shall
be obligated under the terms of the Warrants to repurchase any of the Warrants
pursuant to an exercise by any holder of Warrants of a Put Right (as defined in
the Warrants).
"Qualified Public Offering" means an underwritten public
offering of the Common Stock of the Company, for the account of the Company,
pursuant to an effective registration statement filed pursuant to the Securities
Act, in which the gross proceeds to the Company are not less than $15,000,000.
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"Redeemable Stock" means any Capital Stock that by its terms
or otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof any time prior to the first anniversary of the Stated Maturity of the
Notes.
"Redemption Date" or "redemption date" means the Stated
Maturity Date of the Notes and such earlier date or dates as may be specified in
any notice of optional redemption of the Company delivered in accordance with
Subsection 6.5 hereof.
"Refinancing Indebtedness" shall have the meaning assigned to
it in the definition of Permitted Indebtedness.
"Registrable Shares" means (i) the shares of Common Stock
issued or issuable upon exercise or conversion of any share of the Preferred
Stock, any of the Series D Common Warrants, the Series E Common Warrants, the
Series F Common Warrants or the Warrants, (ii) the shares of Common Stock issued
or issuable upon the purchase by any holder of Preferred Stock, Series D Common
Warrants, Series D Preferred Warrants, Series E Common Warrants or Series F
Common Warrants pursuant to the conversion or exercise of any such holder's
"first refusal right" under Section 7.3 of the Series F Financing Agreement,
(iii) the shares of Common Stock issued or issuable upon the purchase by any
holder of Warrants pursuant to the conversion or exercise of any such holder's
Pre-emptive Right, and (iv) any other shares of Common Stock of the Company
issued in respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon any sale pursuant to a Registration Statement, Section
4(1) of the Securities Act or Rule 144 under the Securities Act, or any sale in
any manner to a person or entity which, by virtue of Section 9 of the Series F
Financing Agreement is not entitled to the registration rights provided by
Section 8 of the Series F Financing Agreement. Wherever reference is made in
this Agreement to a request or consent of holders of a certain percentage of
Registrable Shares or certain Registrable Shares, or a certain number of
Registrable Shares or certain Registrable Shares, the determination of such
percentage or number shall include shares of Common Stock issuable upon
conversion of the Preferred Stock.
"Registration Statement" means a registration statement filed
by the Company with the Commission for a public offering and sale of securities
of the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Release" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the Environment.
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"Reorganization Securities" means, with respect to any
Insolvency or Liquidation Proceeding involving the Company, Capital Stock or
other securities of the Company as reorganized or readjusted (or Capital Stock
or any other securities of any other Person (other than a Subsidiary of the
Company, unless the Company is no longer in existence and such Subsidiary is the
successor to the Company)), provided for by a plan of reorganization or
readjustment and the payment of all of which Capital Stock or other securities
is subordinated, at least to the same extent as the Notes, to the payment of all
outstanding Senior Indebtedness after giving effect to such plan of
reorganization or readjustment; provided, however, that (i) if Capital Stock,
such securities shall have no mandatory repurchase, redemption, prepayment,
sinking fund, or dividend obligations prior to six months following the final
scheduled maturity date of all Senior Indebtedness (as modified by such plan of
reorganization or readjustment) and (ii) if debt securities: (A) such securities
shall not provide for amortization (including sinking fund and mandatory
redemption, repurchase, retirement, defeasance or prepayment provisions)
commencing prior to six months following the final scheduled maturity of all
Senior Indebtedness of the Company (as modified by such plan of reorganization
or readjustment); (B) if the rate of interest on such securities is fixed, such
rate of interest shall not exceed the greater of (1) the rate of interest on the
Notes and (2) the sum of the rate of interest on the Senior Indebtedness on the
effective date of such plan of reorganization or readjustment and the Interest
Differential; (C) if the rate of interest on such securities floats, such rate
of interest shall not exceed at any time the sum of the interest rate on the
Senior Indebtedness at such time and the Interest Differential; (D) such
securities shall not have covenants or default provisions materially more
burdensome to the Company than those in effect with respect to the Notes as of
the date of issuance of such securities; and (E) no Subsidiary of the Company
(or any successor to the Company) has any obligation, direct or indirect, to
make, grant or Incur any Lien securing any payment or distribution of any kind
in respect of any Reorganization Securities.
"Representative" means, with respect to the Senior
Indebtedness, the agent or other representative(s), if any, of holders of such
Senior Indebtedness.
"Restricted Payment" means, with respect to any Person,
without duplication: (i) any dividend or other distribution, whether in cash or
in Property or securities, declared or paid on any shares of such Person's
Capital Stock, or the making by such Person or any of its subsidiaries of any
other distribution in respect of, such Person's Capital Stock or any warrants,
rights or options to purchase or acquire shares of any class of such Capital
Stock; (ii) the redemption, repurchase, retirement or other acquisition for
value by such Person or any of its subsidiaries, directly or indirectly, of such
person's Capital Stock; (iii) any payment to purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness (other than Senior
Indebtedness); and (iv) any Investment other than Permitted Investments.
"Rule 144" means Rule 144 as promulgated by the Commission
under the Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission
under the Securities Act, and any successor rule or regulation thereto.
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"Securities Act" means the Securities Act of 1933, and the
rules and regulations of the Commission promulgated thereunder, as amended.
"Security Documents" means the Security Agreement and such
other agreements, instruments, financing statements and documents in form and
substance satisfactory to the Principal Purchaser as the Principal Purchaser may
reasonably request that the Company execute and deliver, to provide for the
Collateral Agent to obtain, for the ratable benefit of the holders of the Note
Indebtedness, valid and enforceable perfected Liens on substantially all of the
Company's properties and assets as security for the Note Indebtedness, and all
amendments, waivers, modifications and refinancings thereof.
"Senior Indebtedness" shall mean Indebtedness of the Company
to one or more banks or other financial institutions in an aggregate principal
amount not in excess of $6,000,000 at any time outstanding, plus interest and
fees with respect thereto, which Indebtedness by its terms is senior to the
Indebtedness of the Company under and in respect of the Notes and this
Agreement.
"Series A Preferred" means the 800,000 shares of Series A
Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding on the First Closing Date, each of which shares is convertible into
one (1) share of Common Stock.
"Series B Preferred" means the 399,999 shares of Series B
Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding on the First Closing Date, all of which shares are convertible on an
aggregate basis into 415,565 shares of Common Stock.
"Series D Common Warrants" means warrants outstanding on the
First Closing Date to purchase 238,572 shares of Common Stock.
"Series D Preferred" means (i) the 1,359,522 shares of Series
D Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding on the First Closing Date, and (ii) the 40,067 shares of Series D
Convertible Preferred Stock, $.00004 par value per share, of the Company
issuable upon exercise of the Series D Preferred Warrants, each of which shares
is convertible into one (1) share of Common Stock.
"Series D Preferred Warrants" means warrants outstanding on
the First Closing Date to purchase 40,067 shares of Series D Preferred.
"Series E Common Warrants" means warrants outstanding on the
First Closing Date to purchase 122,228 shares of Common Stock.
"Series E Preferred" means the 733,371 shares of Series E
Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding on the First Closing Date, each of which shares is convertible into
one (1) share of Common Stock.
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"Series F Common Warrants" means warrants to purchase up to an
aggregate of 923,077 shares of Common Stock issued or issuable by the Company as
part of the Series F Financing.
"Series F Financing" means the issuance and sale by the
Company of up to an aggregate of 2,353,848 shares of Series F Preferred and
Series F Common Warrants to purchase up to an aggregate of 923,077 shares of
Common Stock, pursuant to the Series F Financing Agreement.
"Series F Financing Agreement" means the Series F Convertible
Preferred Stock and Warrant Purchase Agreement by and among the Company and the
purchasers parties thereto, dated as of June 28, 1996, as the same may be
amended or supplemented from time to time.
"Series F Preferred" means up to an aggregate of 2,353,848
shares of Series F Convertible Preferred Stock, $.00004 par value per share, of
the Company issued or issuable by the Company as part of the Series F Financing.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subsidiary" means with respect to any Person, any
corporation, association or other business entity of which securities
representing more than 50% of the combined voting power of the total Voting
Stock (or in the case of an association or other business entity which is not a
corporation, more than 50% of the equity interest) is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof. When used herein without reference to
any Person, Subsidiary means a Subsidiary of the Company.
"Threat of Release" means a substantial likelihood of a
Release which requires action to prevent or mitigate damage to the Environment
which may result from such Release.
"Transaction Documents" means, collectively, this Agreement,
the Notes, the Warrants, the Security Documents and the Third Amended and
Restated Voting Rights Agreement.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to vote for the
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election of directors, managers or trustees of any Persons (irrespective of
whether or not at the time, stock of any class or classes will have, or might
have, voting power by the reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or another Wholly Owned Subsidiary.
In addition to the foregoing, the following terms are defined in the
following Subsections of this Agreement:
Term Defined in Subsection
"Affiliate Transaction" 8.2(d)
"Approvals" 3.1(n)
"Bankruptcy Law" 9.1
"Change of Control Offer" 6.6(a)
"Change of Control Purchase Date" 6.6(b)(ii)
"Charter Documents" 3.1(e)
"Change Date" 6.6
"Closing Fee" 3.1(q)
"Converted Notes" 6.7(a)
"Current Affiliate" 4.12(b)
"Custodian" 9.1
"Declaration" 9.2
"Default Amount" 9.2
"Employee Program" 4.12(a)
"ERISA Affiliate" 4.112(b)
"Event of Default" 9.1
"FDA" 4.33
"Financial Statements" 4.23
"First Closing" 2.1
"First Closing Date" 2.1
"Illegal Transfer Notice" 10.2
"Indemnified Party" and
"Indemnified Parties" 14.1
"Intellectual Property" 4.24
"License(s)" 4.5
"Losses" 14.1
"Multiemployer Plan" 4.12(d)
"New Securities" 7.2(b)
"Nonpayment Default" 11.3
"Note Indebtedness" 11.1
"Notes" 1.1
"Payment Blockage Notice" 11.3
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"Payment Default" 11.3
"Pre-emptive Right" 7.2
"Qualified Public Offering
Conversion" 6.7(a)
"Qualified Public Offering
Date" 6.7(a)
"Qualified Public Offering
Redemption" 6.7(a)
"Repurchase Date" 7.1
"Restricted Security" 10.2
"Scientists" 4.24
"Second Closing" 2.2
"Second Closing Date" 2.2
"Series A Warrants" 1.2
"Series B Warrants 1.2
"Special Repurchase Right" 7.1
"Stated Maturity Date of the
Converted Notes" 6.7(d)
"Stated Maturity Date of the
Notes" 6.1
"Taxes" 4.25
"Warrants" 1.2
14. MISCELLANEOUS.
14.1. Indemnification; Expenses, Etc.
(a) In addition to any and all obligations of the Company to
indemnify the Purchasers hereunder or under the other Transaction Documents, the
Company agrees, without limitation as to time, to indemnify and hold harmless
each Purchaser and its Affiliates, and the employees, officers, directors, and
agents of each Purchaser and its Affiliates (individually, an "Indemnified
Party" and, collectively the "Indemnified Parties") from and against any and all
losses, claims, damages, liabilities, costs (including the costs of preparation
and attorneys' fees) and expenses (including expenses of investigation)
(collectively, "Losses") incurred or suffered by an Indemnified Party in
connection with any proceeding against the Company or any Indemnified Party
brought by any third party arising out of or in connection with this Agreement
or the other Transaction Documents or the transactions contemplated hereby or
thereby or any action taken in connection herewith or therewith (or any other
document or instrument executed herewith or pursuant hereto or thereto), whether
or not the transactions contemplated by this Agreement are consummated and
whether or not any Indemnified Party is a formal party to any Proceeding;
provided, however, that the Company shall not be liable for any losses resulting
from action on the part of any Indemnified Party which is finally determined in
such proceeding to be wrongful or which is an act of gross negligence,
recklessness, or willful misconduct by such Indemnified Party. The Company
agrees promptly to reimburse any Indemnified Party for all such Losses as they
are incurred or suffered by such Indemnified Party. Except as otherwise provided
herein, the Company agrees (for the benefit of each Purchaser) to pay, and to
hold each Purchaser harmless from and against, all costs and expenses
(including, without limitation, attorneys' fees, expenses and disbursements), if
any, in connection with the enforcement against
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the Company, as the case may be, of this Agreement or any other Transaction
Document or any other agreement or instrument furnished pursuant hereto or
thereto or in connection herewith or therewith in any action in which the
Purchaser attempting to enforce any of the foregoing shall prevail.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt notice to the Company of any
claim or of the commencement of any proceeding against the Company or any
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; provided, however, that
the failure so to notify the Company shall not relieve the Company from any
obligation or liability except to the extent the Company is prejudiced by such
failure. The Company shall have the right, exercisable by giving written notice
to an Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the expense of the
Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. The Indemnified Party or Parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The Company shall
not consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and substance
satisfactory to the Indemnified Party or Parties, from all liability in respect
of such claim, litigation or proceeding.
(c) In addition to any other obligations of the Company to
indemnify the Purchasers herein or pursuant to any of the Transaction Documents
or any other agreements or documents executed and delivered in connection
therewith, the Company will pay, and will save each Purchaser and each other
holder of any of the Notes or Warrants harmless from liability for the payment
of all expenses arising in connection with such transactions, including, without
limitation: (a) all document production and duplication charges and the
reasonable fees, charges and expenses of the Principal Purchaser's Special
Counsel (whether arising before or after any Closing Date), the transactions
contemplated hereby and any subsequent proposed modification of, or proposed
consent under, this Agreement, whether or not such proposed modification shall
be effected or proposed consent granted; (b) the costs of obtaining a private
placement number from Standard & Poor's Corporation for the Notes; (c) the costs
and expenses, including attorneys' fees, incurred by any Purchaser in enforcing
any rights under this Agreement or in responding to any subpoena or other legal
process issued in connection with this Agreement or the transactions
contemplated hereby or thereby or by reason of such Purchaser's having acquired
the Notes or Warrants, including without limitation costs and expenses incurred
by such Purchaser in any bankruptcy case; (d) the cost of delivering to such
Purchaser's principal office, insured to its satisfaction, the Notes and
Warrants delivered to such Purchaser hereunder and any Notes Warrants or Common
Stock delivered to such Purchaser upon any substitution of any of the Notes or
Warrants pursuant to the terms of this Agreement or the Transaction Documents
and of such Purchaser's delivering any Notes, Warrant certificates or Common
Stock certificates, insured to its satisfaction, upon any such substitution; and
(e) the reasonable documented out-of-
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pocket expenses incurred by such Purchaser in connection with such transactions
and any such amendments or waivers.
14.2. Survival of Representations and Warranties;
Severability. All representations and warranties contained in this Agreement or
the Transaction Documents or made in writing by or on behalf of the Company in
connection with the transactions contemplated by this Agreement or the
Transaction Documents shall survive, for the duration of any statutes of
limitation applicable thereto, the execution and delivery of this Agreement, any
investigation at any time made by any Purchaser or on such Purchaser's behalf,
the purchase of the Notes and Warrants by the Purchasers under this Agreement
and any disposition of or payment on the Notes or Warrants. Any provision of
this Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
14.3. Amendment and Waiver. This Agreement may be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may be given, provided that the same are in writing and signed
by the Company, the holders of a majority of the principal amount of the Notes
and the holders of a majority of the Warrants.
14.4. Notices, Etc. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered, or mailed by registered or certified mail,
return receipt requested, or by a nationally recognized overnight courier,
postage prepaid, addressed, (a) if to a Purchaser, at the address specified on
such Purchaser's signature page attached hereto or such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of any Note or Warrant or any part thereof, at such address as such other
holder shall have furnished to the Company in writing, or, until any such other
holder so furnishes to the Company an address, then to and at the address of the
last holder of such Note or Warrant or part thereof who has furnished an address
to the Company, or (c) if to the Company, at its address set forth at the
beginning of this Agreement, to the attention of the Chief Executive Officer, or
at such other address, or to the attention of such other Officer, as the Company
shall have furnished to the Purchasers and each such other holder in writing.
This Agreement and the other Transaction Documents and all documents delivered
in connection herewith or therewith embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof. Any notice
hereunder shall be deemed effective three (3) Business Days following deposit
with the U.S. Mail and one (1) Business Day following deposit with a nationally
recognized overnight courier, each as provided above.
14.5. Successors and Assigns. Whenever in this Agreement any
of the parties hereto are referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the respective parties which are contained in this
Agreement shall bind and inure to the benefit of the successors and assigns of
all other parties. The terms and provisions of this Agreement, and the other
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Transaction Documents shall inure to the benefit of and shall be binding upon
any assignee or transferee of the Purchasers, and in the event of such transfer
or assignment, the rights and privileges herein conferred upon the Purchasers
shall automatically extend to and be vested in, and become an obligation of,
such transferee or assignee, all subject to the terms and conditions hereof. In
connection therewith, such transferee or assignee may disclose all documents and
information which such transferee or assignee now or hereafter may have relating
to any of the Notes or Warrants or any part thereof, this Agreement, the other
Transaction Documents, the Company, any other Persons referred to herein or any
of the business of any of the foregoing entities.
14.6. Descriptive Headings. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
14.7. Satisfaction Requirement. If any agreement, certificate
or other writing, or any action taken or to be taken, is by the terms of this
Agreement or the other Transactions Documents required to be satisfactory to the
Purchasers or to the holders the Notes or the Warrants, the determination of
such satisfaction shall be made by the Principal Purchaser or such other Persons
holding a majority in aggregate principal amount of the Notes or a majority of
the Warrants, as the case may be, outstanding at such time; provided, that
nothing contained in this Section 14.7, shall be deemed to modify or limit (i)
the right of each holder of Notes and Warrants to require that the Company
repurchase, redeem or convert any of the Notes and Warrants held by such holder
upon the occurrence of certain events as provided in this Agreement and the
other Transaction Documents, or (ii) any other right or remedy which is, by the
terms of this Agreement or the other Transaction Documents, exercisable
independently by each holder of Notes or Warrants.
14.8. GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND WARRANTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.
14.9. Service of Process. The Company (a) hereby irrevocably
submits itself to the jurisdiction of the state courts of The Commonwealth of
Massachusetts and to the jurisdiction of the United States District Courts for
the District of Massachusetts, for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement, the Notes, the Warrants
or any part or parts thereof, the other Transaction Documents or the subject
matter hereof or thereof brought by any Purchaser or its successors or assigns
and (b) hereby waives, and agrees not to assert, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. The Company hereby consents to
service of process by registered mail at the address to which notices
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are to be given. The Company agrees that its submission to jurisdiction and its
consent to service of process by mail is made for the express benefit of the
Purchasers. Final judgment against the Company in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit, action or proceeding on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
or liability of the Company therein described or in any other manner provided by
or pursuant to the laws of such other jurisdiction; provided, however, that a
Purchaser may at its option bring suit or institute other judicial proceedings
against the Company or any of the Company's or its assets in any state or
federal court of the United States or in any country or place where the Company
or such assets may be found.
14.10. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
14.11. No Adverse Interpretation of Other Agreements. This
Agreement may not be used to interpret another agreement, indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such agreement,
indenture, loan or debt agreement may not be used to interpret this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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SECURITIES PURCHASE AGREEMENT
SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has
executed this Agreement on behalf of the Company as of the date first above
written.
ASCENT PEDIATRICS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇
-------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title: President and Chief Executive Officer
73
Exhibit 10.11
SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Aggregate Purchase Price to be
paid by Purchaser at First Closing: $1,685,714.29
TRIUMPH-CONNECTICUT LIMITED Credit for Closing Fee owed to
PARTNERSHIP Purchaser at First Closing: $ (33,714.29)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Net Purchase Price to be paid
----------------------- by Purchaser at First Closing: $1,652,000.00
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
Principal amount of Notes to
be purchased by Purchaser at
Address: c/o Triumph Capital First Closing: $1,685,714.29
Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Shares of Common Stock
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ issuable upon exercise of
Series A Warrants to be issued
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ to Purchaser at First Closing: 222,545
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ --------------
Aggregate Purchase Price to be paid
by Purchaser at Second Closing: $4,214,285.71
Tax ID No.: ▇▇-▇▇▇▇▇▇▇
Credit for Closing Fee owed to
Purchaser at Second Closing: $ (84,285.71)
Net Purchase Price to be paid
by Purchaser at Second Closing: $4,130,000.00
Principal amount of Notes to
be purchased by Purchaser at
Second Closing: $4,214,285.71
Wire Transfer Instructions:
Shares of Common Stock
Bank Name: Bank of Boston - Connecticut issuable upon exercise of
ABA No.: 011-100805 Series A Warrants to be issued
Acct Name: Triumph-Connecticut to Purchaser at Second Closing: 333,818
Limited Partnership --------------
Acct No.: ▇▇▇-▇▇▇-▇▇ Shares of Common Stock
Contact: ▇▇▇▇▇ ▇▇▇▇▇, Inst. Banking issuable upon exercise of
Reference: Ascent Notes Series B Warrants to be issued
to Purchaser at Second Closing: 216,363
--------------
74
SECURITIES PURCHASE AGREEMENT
SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Aggregate Purchase Price to be
paid by Purchaser at First Closing: $285,714.29
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------ Credit for Closing Fee owed to
▇▇▇▇ ▇. ▇▇▇▇▇▇ Purchaser at First Closing: $ (5,714.29)
--and-- Net Purchase Price to be paid
by Purchaser at First Closing: $280,000.00
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- Principal amount of Notes to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ be purchased by Purchaser at
First Closing: $285,714.29
Address:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Shares of Common Stock
issuable upon exercise of
Series A Warrants to be issued
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ to Purchaser at First Closing: 37,719
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -----------
Aggregate Purchase Price to be paid
by Purchaser at Second Closing: $714,285.71
▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ Tax ID No.:
###-##-#### Credit for Closing Fee owed to
Purchaser at Second Closing: $(14,285.71)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ Tax ID No.:
###-##-#### Net Purchase Price to be paid
by Purchaser at Second Closing: $700,000.00
Principal amount of Notes to
Wire Transfer Instructions: be purchased by Purchaser at
Second Closing: $714,285.71
Bank Name: Chase Manhattan Bank
ABA No.: 021-000021 Shares of Common Stock
For Credit to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. issuable upon exercise of
Acct No.: 930-1-011-483 Series A Warrants to be issued
F/F/C: ▇▇▇▇ ▇. ▇▇▇▇▇▇ and to Purchaser at Second Closing: 56,579
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ -----------
Acct No: ▇▇▇-▇▇▇▇▇-▇ Shares of Common Stock
Contact: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ issuable upon exercise of
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Series B Warrants to be issued
Reference: Ascent Notes to Purchaser at Second Closing: 36,672
----------
-
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SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Aggregate Purchase Price to be
paid by Purchaser at First Closing: $21,428.57
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ and E. ▇▇▇▇ Credit for Closing Fee owed to
▇▇▇▇▇▇, as Trustees of the Triumph Capital Purchaser at First Closing: $ (428.57)
Group, Inc. 401(k) Plan and Trust for the
account of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Net Purchase Price to be paid
--------------------------------------- by Purchaser at First Closing: $21,000.00
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, as Trustee
By: /s/ E. ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------- Principal amount of Notes to
E. ▇▇▇▇ ▇▇▇▇▇▇, as Trustee be purchased by Purchaser at
First Closing: $21,428.57
Shares of Common Stock
issuable upon exercise of
Series A Warrants to be issued
Address: c/o Triumph Capital to Purchaser at First Closing: 2,829
Group, Inc. -----------
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Aggregate Purchase Price to be paid
by Purchaser at Second Closing: $53,571.43
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Credit for Closing Fee owed to
Purchaser at Second Closing: $ (1071.43)
Tax ID No.: ▇▇-▇▇▇▇▇▇▇ Net Purchase Price to be paid
by Purchaser at Second Closing: $52,500.00
Principal amount of Notes to
Wire Transfer Instructions: be purchased by Purchaser at
Second Closing: $53,571.43
Bank Name: Chase Manhattan Bank
ABA No.: 021-000021 Shares of Common Stock
For Credit to: ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ issuable upon exercise of
Acct No.: ▇▇▇-▇-▇▇▇▇▇▇ Series A Warrants to be issued
F/F/C: DLJ a/c #212-233266 to Purchaser at Second Closing: 4,243
n/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ----------
Reference: Ascent Notes Shares of Common Stock
issuable upon exercise of
Series B Warrants to be issued
to Purchaser at Second Closing: 2,750
----------
76
SECURITIES PURCHASE AGREEMENT
SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Aggregate Purchase Price to be
paid by Purchaser at First Closing: $ 7,142.85
Credit for Closing Fee owed to
Purchaser at First Closing: $ (142.85)
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Net Purchase Price to be paid
----------------------------------- by Purchaser at First Closing: $ 7,000.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principal amount of Notes to
be purchased by Purchaser at
Address: First Closing: $ 7,142.85
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ Shares of Common Stock
Berwyn, PA 19312-2020 issuable upon exercise of
Series A Warrants to be issued
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ to Purchaser at First Closing: 943
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ -----------
Aggregate Purchase Price to be paid
by Purchaser at Second Closing: $17,857.15
Tax ID No.: ###-##-####
Credit for Closing Fee owed to
Purchaser at Second Closing: $ (357.15)
Net Purchase Price to be paid
by Purchaser at Second Closing: $17,500.00
Principal amount of Notes to
be purchased by Purchaser at
Second Closing: $17,857.15
Wire Transfer Instructions:
Shares of Common Stock
Bank Name: CoreStates Bank, N.A. issuable upon exercise of
Series A Warrants to be issued
ABA No.: 031-000011 to Purchaser at Second Closing: 1,414
Acct Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ----------
Acct No.: ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Shares of Common Stock
Reference: Accent Notes issuable upon exercise of
Series B Warrants to be issued
to Purchaser at Second Closing: 917
----------
77
EXHIBIT A -- FORM OF SUBORDINATED SECURED NOTE
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF THE
ORIGINAL ISSUE DISCOUNT IS ___% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS
_______________, 199_ AND THE YIELD TO MATURITY ON THE ISSUE DATE IS ___%,
COMPOUNDED QUARTERLY.
THIS NOTE AND THE INDEBTEDNESS REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH NOTE AND INDEBTEDNESS MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH NOTE AND INDEBTEDNESS WHICH IS EFFECTIVE UNDER
SUCH ACT, (II) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
SUBORDINATED SECURED NOTE DUE JANUARY 31, 2002
[$_________] _____________, 199_
Boston,
Massachusetts
FOR VALUE RECEIVED, the undersigned, ASCENT PEDIATRICS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to ______________
or to its order or to such persons as it may designate from time to time
(hereinafter referred to as the "Payee") the principal sum of ________________
DOLLARS ($_________).
This Note is issued pursuant to and is entitled to the benefits of a
Securities Purchase Agreement (the "Agreement"), dated as of the date hereof,
between the Company and the Payee. Terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
1. Maturity. This Note shall mature and the aggregate
principal amount of this Note and all accrued interest shall be due and payable
in full (without set-off, deduction or counterclaim) on January 31, 2002 (the
"Stated Maturity Date") unless sooner prepaid or accelerated in accordance with
the Agreement.
2. Interest. This Note shall not bear interest for the period
from the date of issuance through January 31, 1999. This Note shall bear
interest on the unpaid principal amount thereof from February 1, 1999 until the
Stated Maturity Date, at the following rates:
78
(a) from February 1, 1999 through January 31, 2000, at a rate of seven percent
per annum; (b) from February 1, 2000 through January 31, 2001, at a rate of
eight percent per annum; and (c) from February 1, 2001 through the Stated
Maturity Date, at a rate of nine percent per annum. Interest on the unpaid
principal amount of this Note shall be computed on the basis of a 360-day year
and the actual days elapsed, and shall be payable quarterly in arrears on the
last day of March, June, September and December of each year, commencing on
March 31, 1999, and upon any other payment of any principal amount of this Note.
3. Default Interest and Late Charges. In the event that any
principal amount of this Note is not paid within five (5) days of when due and
payable (whether at stated maturity, by acceleration or otherwise), the interest
rate on such principal amount shall, notwithstanding anything herein or in the
Agreement to the contrary and until all principal payments on this Note have
been brought current, thereafter be increased by two percent (2%) per annum. Any
interest not paid when due and payable shall thereafter be paid, on demand by
the Payee, together with interest thereon at a rate of two percent (2%) per
annum in excess of the rate set forth in Section 2 of this Note.
4. Payments. All payments of principal and interest on this
Note and any other payment due hereunder or under the Agreement shall be made by
the Company in accordance with the terms of the Agreement.
5. Optional Redemption. This Note may be redeemed at the
option of the Company, in whole or from time to time in part, at any time and
from time to time, without premium or penalty, in accordance with the terms of
the Agreement.
6. Requirement that the Company Offer to Redeem the Note
Following a Change of Control. Subject to the terms and conditions of the
Agreement, the Company shall become obligated to offer to redeem this Note after
the occurrence of a Change of Control of the Company, in accordance with and to
the extent provided in the Agreement.
7. Requirement that the Company Redeem the Note Following a
Qualified Public Offering. Subject to the terms and conditions of the Agreement,
the Company shall become obligated to redeem this Note after the occurrence of a
Qualified Public Offering, in accordance with and to the extent provided in the
Agreement.
8. Requirement that the Company Convert the Notes Into Common
Stock Following a Qualified Public Offering. Subject to the terms and conditions
of the Agreement, the Company shall become obligated to convert this Note into
shares of Common Stock, determined in accordance with the Agreement, at the
election of the Payee after the occurrence of a Qualified Public Offering, in
accordance with and to the extent provided in the Agreement.
9. Security for Note. This Note and the Indebtedness
represented by this Note are secured by and entitled to the benefits of Liens
granted to the Collateral Agent for the ratable benefit of the holders of the
Note Indebtedness.
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79
10. Subordination. This Note and the Indebtedness represented
by this Note are subordinated to the Senior Indebtedness (as defined in the
Agreement). To the extent provided in the Agreement, the Senior Indebtedness
must be paid before this Note may be paid. The Company agrees and the Payee and
each holder of this Note by accepting this Note agrees, to such subordination.
No provision of the Agreement or this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal and
interest on this Note at the times, places and rates, and in the currency
provided.
11. Events of Default; Acceleration. Upon the occurrence of an
Event of Default (as defined in the Agreement), the principal amount of this
Note together with all accrued interest and all other payments due hereunder or
under this Agreement may be declared to be immediately due and payable in the
manner and with the effect provided in the Agreement. Certain events of
bankruptcy or insolvency are Events of Default which will result in this Note
becoming due and payable immediately upon the occurrence of such Events of
Default. Subject to the terms of the Agreement, following the occurrence of an
Event of Default, the Payee may proceed to enforce and exercise its rights by
suit in equity, action at law and/or other appropriate means. The Company agrees
to pay on demand all reasonable costs of collection and all other reasonable
costs and expenses, including without limitation reasonable attorneys' fees,
incurred or paid by the Payee in enforcing or collecting this Note upon the
occurrence of an Event of Default.
12. No Waivers; Amendments. No failure or delay on the part of
the Company or the Payee in exercising any right, power or remedy hereunder or
under the Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein and in the Agreement are cumulative and are not
exclusive of any remedies that may be available to the Maker or the Payee at law
or in equity or otherwise. This Note may not be amended and the provisions
hereof may not be waived without the prior written consent of the holders of a
majority of the Notes outstanding at the time such action is taken by the
Company.
13. Governing Law. This Note shall be deemed to be a contract
made under the laws of The Commonwealth of Massachusetts, and for all purposes
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts without regard to principles of conflicts of laws
thereof.
[Remainder of Page Left Intentionally Blank]
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80
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered as a sealed instrument at the place and on the date set
forth above by the duly authorized representative of the Company.
ATTEST: ASCENT PEDIATRICS, INC.
____________________________ By:____________________________________
Name:
Title:
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81
Exhibit B-1
FORM OF SERIES A WARRANT
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE
WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT
WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144
OR RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION
UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY,
AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED
TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
IS AVAILABLE.
Warrant No. A-__ Number of Shares: ______
(subject to adjustment)
Date of Issuance: __________, 199_
ASCENT PEDIATRICS, INC.
Series A Warrant to Purchase Common Stock
(Void after January 31, 2004)
Ascent Pediatrics, Inc. (formerly known as Ascent Pharmaceuticals,
Inc.), a Delaware corporation (the "Company"), for value received, hereby
certifies that _____________, or its registered assigns (the "Registered
Holder"), is entitled, subject to the terms set forth below, upon exercise of
this Warrant to purchase from the Company, at any time or from time to time on
or before January 31, 2004 (the "Expiration Date"), __________________ (______)
shares of the Company's common stock, $.00004 par value per share (the "Common
Stock"), at a purchase price of $.01 per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Purchase Price," respectively.
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This Warrant is one of a series of warrants comprising the Company's
Series A Warrants (as defined in that certain Securities Purchase Agreement
dated as of January 31, 1997, among the Company and the purchasers named therein
(the "Purchase Agreement")).
1. Purchase.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, at any time and from time to time after the Date of Issuance
hereof until 5:00 p.m. (Boston, Massachusetts time) on the Expiration Date, by
surrendering this Warrant, with the purchase form appended hereto as Exhibit I
duly executed by such Registered Holder or by such Registered Holder's duly
authorized attorney, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful currency of the United States, of the Purchase Price payable in
respect of the number of shares of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay
some or all of the Purchase Price payable upon an exercise of this Warrant by
canceling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value per share of Common Stock as of the
effective date of exercise, as determined pursuant to Subsection l(c) below (the
"Exercise Date"), over the Purchase Price per share.
(c) The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) if the Common Stock is listed on a national securities
exchange, the NASDAQ National Market, the NASDAQ system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the last reported sale
price per share of Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next preceding business day
(provided that if no such price is reported on the next preceding business day,
the Fair Market Value per share of Common Stock shall be determined pursuant to
clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the NASDAQ National Market, the NASDAQ system or another nationally
recognized exchange or trading system as of the Exercise Date, (A) the Board of
Directors of the Company and the Registered Holder shall independently determine
the Fair Market Value per share of Common Stock on the basis of an assumed sale
of the Company as a whole and no effect shall be given to any discount for lack
of liquidity or to the fact that the Company has no class of equity securities
registered under the Exchange Act, if such is the case, (B) each of the Board of
Directors of the Company and the Registered Holder shall deliver to the other a
report stating the Fair Market Value of Common Stock as of a specified date and
setting forth a brief statement as to the nature
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and scope of the examination or investigation upon which the determination of
such Fair Market Value was made, (C) in the event that such reports disagree as
to such Fair Market Value, the Company and the Registered Holder shall promptly
consult with each other to resolve such disagreement, and (D) in the event the
Company and the Registered Holder cannot resolve such disagreement, the Company
and the Registered Holder shall choose a nationally-recognized, independent
investment bank mutually acceptable to such parties which shall determine the
Fair Market Value per share of Common Stock and shall deliver to each party a
fairness opinion with respect to such determination. All costs and expenses of
such investment bank shall be borne by the Company.
(d) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in Subsection 1(e) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
(e) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within 10 days thereafter, the Company, at
its expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Subsection 1(g)
below; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise as provided in Subsection l(a) above.
(f) All shares of Common Stock issuable upon the exercise of
this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and non-assessable and free from all liens and charges with respect to the
issuance thereof. The Company shall pay all expenses in connection with, and all
taxes and other governmental charges that may be imposed with respect to, the
issue or delivery thereof; provided, however, that the Company shall not be
required to pay any federal, state or local income taxes incurred by the
Registered Holder in connection with the issuance or delivery of such shares. In
addition, the Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any Warrant
Shares issuable upon exercise of this Warrant in any name other than that of the
Registered Holder, and in such case the Company shall not be required to issue
or deliver any
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84
certificate representing Warrant Shares until such tax or other charge has been
paid or it has been established to the satisfaction of Company that no such tax
or other charge is due.
(g) The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares (as determined on an aggregate basis
for each exercise pursuant to this Warrant), but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to Subsection 1(c) above.
(h) Reference is made to the Purchase Agreement with respect
to the right of the Company to repurchase a portion of the Warrants under the
circumstances more fully described therein.
(i) The Registered Holder shall have such rights with respect
to the registration of this Warrant and the Warrant Shares under the Securities
Act of 1933, as amended (the "Securities Act") as are set forth in the Purchase
Agreement.
2. Adjustments.
A. If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be declared or distributed in respect of the Common Stock or the outstanding
shares of Common Stock shall be combined or reclassified into a smaller number
of shares, the Purchase Price in effect immediately after the record date for
such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event specified above shall
occur.
B. If the Company shall fix a record date for the issuance of
rights, options, warrants or convertible or exchangeable securities to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share of Common Stock less than the Fair Market
Value per share of Common Stock (as determined in accordance with Subsection
1(c) hereof) on such record date, the Purchase Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the Fair Market Value per share of Common Stock on
such record date, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall be made successively whenever such a record date is fixed. To
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85
the extent that any such rights, options, warrants or convertible or
exchangeable securities are not so issued or expire unexercised, the Purchase
Price then in effect shall be readjusted to the Purchase Price which would then
be in effect if such unissued or unexercised rights, options, warrants or
convertible or exchangeable securities had not been issuable.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of shares of Common Stock (i) of shares of any
class other than Common Stock or (ii) of evidences of its indebtedness or (iii)
of assets (excluding cash dividends or distributions (other than extraordinary
cash dividends or distributions), and dividends or distributions referred to in
Subsection 2(a) hereof) or (iv) of rights, options, warrants or convertible or
exchangeable securities (excluding those rights, options, warrants or
convertible or exchangeable securities referred to in Subsection 2(b) hereof),
then in each such case the Purchase Price in effect immediately thereafter shall
be determined by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the total number of
shares of Common Stock outstanding on such record date multiplied by the Fair
Market Value per share of Common Stock (as determined in accordance with
Subsection 1(c) hereof) on such record date, less the aggregate fair market
value as determined in good faith by the Board of Directors of the Company of
said shares or evidences of indebtedness or assets or rights, options, warrants
or convertible or exchangeable securities so distributed, and of which the
denominator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by the Fair Market Value per share of Common Stock
on such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Purchase Price then in effect shall be readjusted to the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) In case the Company shall on or after the date hereof
issue any Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (excluding Excluded Securities, as defined in Subsection 2(e)
below) at a price per share of Common Stock (determined by dividing (i) the
aggregate amount paid to the Company for such Common Stock, rights, options,
warrants or convertible or exchangeable securities, plus the aggregate
consideration or premiums stated in such rights, options, warrants or
convertible or exchangeable securities to be payable for the shares of Common
Stock covered thereby (the "Aggregate Consideration Receivable"), by (ii) the
total number of shares of Common Stock issued or covered by such rights,
options, warrants or convertible or exchangeable securities) less than the Fair
Market Value per share of Common Stock (as determined in accordance with
Subsection 1(c) hereof) on the date of such issuance, then the Purchase Price
shall be adjusted immediately thereafter so that it shall equal the price
determined by multiplying the Purchase Price in effect immediately prior thereto
by a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of
additional shares of Common Stock the Aggregate Consideration Receivable would
purchase at the Fair Market Value per share of Common Stock on such date, and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of additional shares of
Common Stock sold or offered for subscription or purchase. Such adjustment shall
be
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86
made successively whenever such issuance shall occur. To the extent that any
such shares, rights, options, warrants or convertible or exchangeable securities
are not so issued or expire unexercised, the Purchase Price then in effect shall
be readjusted to the Purchase Price which would then be in effect if such
unissued or unexercised rights, options, warrants or convertible or exchangeable
securities had not been issuable.
(e) "Excluded Securities" means (i) rights, options, warrants,
or convertible or exchangeable securities issued in any of the transactions
described in Subsections 2(b), 2(c) and 2(h) hereof, (ii) shares of Common Stock
issuable upon exercise of the Warrants, (iii) shares of Common Stock issuable
upon exercise of rights, options or warrants or conversion or exchange of
convertible or exchangeable securities issued or sold under circumstances
causing an adjustment pursuant to Subsection 2(d), (iv) the 40,067 shares of
Series D Convertible Preferred Stock, $.00004 par value per share, of the
Company (the "Series D Preferred Stock") issuable upon the exercise of certain
warrants to purchase shares of such Series D Preferred Stock outstanding as of
the Date of Issuance of this Warrant, (v) shares of Common Stock issuable upon
the exercise or conversion of any of (A) the 800,000 shares of Series A
Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding as of the Date of Issuance of this Warrant, (B) the 399,999 shares
of Series B Convertible Preferred Stock, $.00004 par value per share, of the
Company outstanding as of the Date of Issuance of this Warrant, (C) the
1,359,522 shares of Series D Preferred Stock outstanding and the 40,067 shares
of Series D Preferred Stock issuable as of the Date of this Warrant, (D) the
733,371 shares of Series E Convertible Preferred Stock, $.00004 par value per
share, of the Company (the "Series E Preferred Stock") outstanding as of the
Date of Issuance of this Warrant, (E) shares of Series F Convertible Preferred
Stock, $.00004 par value per share, of the Company (the "Series F Preferred
Stock") issued or issuable pursuant to the Series F Convertible Preferred Stock
and Warrant Purchase Agreement by and among the Company and the purchasers
parties thereto, dated as of June 28, 1996, as the same may be amended or
supplemented from time to time (the "Series F Financing Agreement"), (F) the
warrants to purchase up to 238,572 shares of Common Stock held by certain
holders of Series D Preferred Stock as of the date of this Warrant, (G) the
warrants to purchase up to 122,228 shares of Common Stock held by certain
holders of Series E Preferred Stock as of the date of this Warrant, and (H)
warrants to purchase shares of Common Stock issued or issuable to holders of
Series F Preferred Stock pursuant to the Series F Financing Agreement (such
warrants being hereinafter referred to as the "Series F Common Warrants"), and
(vi) up to 850,000 shares of Common Stock or rights, options or warrants to
acquire Common Stock issued or issuable to directors, employees or consultants
of the Company pursuant to a stock option plan, employee stock purchase plan,
restricted stock plan or other similar stock plan or agreement approved by the
Board of Directors of the Company, and, in the case of rights, options or
warrants, the shares of Common Stock issuable upon exercise thereof (the shares
of Common Stock issued or issuable as described in this clause (vi) are
hereinafter referred to as the "Employee Shares").
(f) In case the Company shall sell and issue Common Stock or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock, for a
consideration consisting, in whole or in part, of property
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(other than cash) or services or its equivalent, then in determining the "price
per share of Common Stock" referred to in Sections 2(b) and 2(d) above and the
"Aggregate Consideration Receivable" referred to in Sections 2(d) above, the
Board of Directors of the Company shall determine, in good faith and on a
reasonable basis, the fair value of said property.
(g) When any adjustment is required to be made in the Purchase
Price as a result of the operation of Subsections 2(a), 2(b), 2(c) or 2(d)
hereof, the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(h) If there shall occur any capital reorganization or
reclassification of or other change in the Common Stock (other than a change in
par value or a subdivision or combination as provided for in Subsection 2(a)
above), or any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation in which the Company is the
surviving corporation and which does not result in any reclassification of the
outstanding shares of Common Stock or the conversion of such outstanding shares
of Common Stock into shares of other stock or other securities or property), or
a transfer of all or substantially all of the assets of the Company then, as
part of any such reorganization, reclassification, consolidation, merger or
transfer, as the case may be, lawful provision shall be made so that the
Registered Holder of this Warrant shall receive upon the exercise hereof the
kind and amount of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if, immediately prior to
any such reorganization, reclassification, consolidation, merger or transfer as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant, provided
that, in all cases, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in the application
of the provisions set forth herein with respect to the rights and interests
thereafter of the Registered Holder of this Warrant, such that the provisions
set forth in this Section 2 (including provisions with respect to adjustment of
the Purchase Price) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant, and in the case of any
consolidation or merger, the successor or acquiring entity (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every provision of this Warrant.
3. Registered Holder's Put Right.
(a) In the event that the Company shall not have consummated a
Qualified Public Offering (as hereinafter defined) or a Qualified Merger (as
hereinafter defined) on or before January 31, 2002, the Registered Holder shall
have the right (a "Put Right") at any time and from time to time prior to the
Expiration Date to require the Company to purchase, and the Company shall be
obligated to purchase the Warrants, in whole or in part, with any such
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purchase (the "Put Purchase") to be made as provided in this Section 3. Upon
exercise by the Registered Holder of any Put Right, the purchase price to be
paid by the Company (the "Put Purchase Price") shall be in an amount equal to
the product of (i) the aggregate number of Warrant Shares that would be issuable
upon the exercise of this Warrant and that the Registered Holder elects to sell
to the Company pursuant to this Section 3, multiplied by (ii) the Fair Market
Value per share of Common Stock less the Purchase Price. At the option of the
Company, the Company may pay all of the Put Purchase Price in cash, or,
alternatively, may issue Put Notes (as hereinafter defined) in a principal
amount equal to not more than two-thirds of the Put Purchase Price, with the
remaining balance of the Put Purchase Price to be paid in cash as set forth
below.
(b) The Registered Holder may exercise any Put Right by
providing written notice (the "Put Notice") to the Company at least thirty (30)
days prior to the requested date of the Put Purchase (the "Put Purchase Date").
The Put Notice shall set forth the Put Purchase Date and the aggregate number of
Warrants which the Registered Holder elects to sell to the Company pursuant to
this Section 3. Any Put Notice given by the Registered Holder shall constitute a
binding agreement of the Registered Holder to sell the Warrants set forth in
such Put Notice pursuant to the terms and conditions of this Section 3.
(c) The closing of any Put Purchase (the "Put Closing")
pursuant to a duly given Put Notice shall take place on the Put Purchase Date.
On the Put Purchase Date, the Registered Holder shall deliver to the Company the
Warrants to be sold at such Put Closing, duly endorsed for transfer to the
Company, and the Company shall (i) pay, by wire transfer of immediately
available funds, to the Registered Holder, the portion of the Put Purchase Price
to be paid by the Company in cash, and (ii) issue to the Registered Holder (or
its designee), one or more Put Notes (in such denominations as the Registered
Holder shall designate) in an aggregate principal amount equal to the remaining
balance, if any, of the Put Purchase Price.
(d) As used in this Section 3, the terms: "Qualified Public
Offering" shall mean an underwritten public offering of the Common Stock of the
Company, for the account of the Company, pursuant to an effective registration
statement filed pursuant to the Securities Act, in which the gross proceeds to
the Company are not less than $15,000,000; and "Qualified Merger" shall mean a
merger of the Company with and into a corporation whose common stock is publicly
traded on a national securities exchange on terms and conditions which shall
have been approved by the holders of a majority of the outstanding Warrants.
(e) As used in this Section 3, the term "Put Notes" shall
mean, notes of the Company with a maturity date of not more than two years from
the date of the Put Closing, payable in equal quarterly installments commencing
not later than 90 days after the Put Closing and bearing interest at the
Applicable Put Note Rate (as hereinafter defined) payable quarterly in arrears
commencing not later than 90 days after the Put Closing. The Put Notes shall be
subordinated to Senior Indebtedness (as defined in the Purchase Agreement) on
substantially the same subordination terms as set forth in the Purchase
Agreement, but shall rank pari passu with all other Indebtedness (as defined in
the Purchase Agreement) of the Company. The "Applicable
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Put Note Rate" means a rate of interest per annum equal to the lesser of (i) ten
percent (10%) and (ii) the Base Rate (as hereinafter defined) plus three and
one-half percent (3 1/2%). The "Base Rate" means the rate of interest announced
from time to time by The First National Bank of Boston at its main office in
Boston, Massachusetts as its Base Rate.
4. Restrictions on Transfer.
(a) Except as otherwise permitted by this Section 4, each
certificate representing shares of Common Stock initially issued upon the
exercise of this Warrant, and each certificate representing shares of Common
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
If at any time any securities other than shares of Common Stock shall be
issuable upon the exercise of this Warrant, such securities shall bear a legend
similar to the one set forth above. Whenever the legend requirement imposed by
this Subsection 4(a) shall terminate, as provided in Subsection 4(b) hereof, the
Registered Holder of this Warrant shall be entitled to receive from the Company,
at the Company's expense, a new Warrant certificate or certificates without such
legend.
(b) The legend requirements of this Section 4 shall terminate
as to any particular shares of Common Stock issuable upon the exercise of this
Warrant (a) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (b) when
the Company shall have received an opinion of counsel to the Registered Holder
reasonably satisfactory to the Company pursuant to the requirements of Section
10.2 of the Purchase Agreement.
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5. No Impairment. The Company will not, by amendment of its Amended and
Restated Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holder of this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
(a) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right; or
(b) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
C. Of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will send or cause to be sent to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which such conversion was effective, or
(iii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable
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upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be given at least ten
(10) days, or if such advance notice is not practicable, then such shorter
period as may be practicable, prior to the record date or effective date for an
event specified in Subsections 7(a), 7(b) or 7(c). Such notice shall be given no
later than ten (10) days after the effective date of an event specified in
Subsection 7(b).
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Registered Holder, at the
Company's expense, a new Warrant or Warrants of like tenor, in the name of such
Registered Holder or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company (provided that, for purposes of this Section 10, a
letter of indemnity from an entity having total assets of at least $100,000,000
shall be deemed sufficient indemnity), or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
11. Transfers, etc.
(a) The Company will maintain a register containing the names
and addresses of the Registered Holders of the Warrants. Any Registered Holder
may change its or his address as shown on such register by written notice to the
Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
Exhibit II hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
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(d) Overseas Holders. If such Registered Holder's principal
address is a location outside of the United States of America and its
territories, such Registered Holder (an "Overseas Holder"):
(i) is not a U.S. person (as defined in Securities Act
Rule 902(o)) and is not acquiring this Warrant or any Warrant Shares purchased
hereunder for the account or benefit of any U.S. person;
(ii) will transfer this Warrant or any Warrant Shares
purchased pursuant to any exercise hereunder only (A) in accordance with the
provisions of Regulation S promulgated under the Securities Act ("Regulation
S"), (B) pursuant to an effective registration statement under the Securities
Act, or (C) pursuant to an available exemption from registration under the
Securities Act; and
(iii) will not offer or sell this Warrant or any Warrant
Shares purchased hereunder to a U.S. person or to or for the account or benefit
of a U.S. person prior to the expiration of the one-year period after the date
of this Warrant, with respect to a transfer of this Warrant, or one year after
the exercise of this Warrant, with respect to any Warrant Shares purchased
hereunder.
12. Giving of Notices, etc. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed effective (i) upon delivery by hand, (ii) two business days
after deposit with an express courier service for delivery no later than two
business days after such deposit, addressed to the Registered Holder at the
address set forth on the warrant register maintained by the Company (or at such
other address as may have been last furnished to the Company in writing by the
holder), or (iii) upon confirmation of transmittal by telecopy to the Registered
Holder, with a hard copy sent in accordance with the preceding clause (ii), to
the telecopy number set forth on the warrant register maintained by the Company
(or to such telecopy number as may have been last furnished to the Company in
writing by the holder). All notices and other communications from the Registered
Holder of this Warrant to the Company shall be in writing and shall be deemed
effective (i) upon delivery by hand, (ii) two business days after deposit with
an express courier service for delivery no later than two business days after
such deposit, addressed to the Company at its principal office set forth below,
or (iii) upon confirmation of transmittal by telecopy, with a hard copy sent in
accordance with the preceding clause (ii), to the telecopy number of the Company
set forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below or change its telecopy
number to a number other than as set forth below, it shall give prompt written
notice to the Registered Holder of this Warrant in the manner prescribed herein,
and thereafter all references in this Warrant to the location of its principal
office or telecopy number at the particular time shall be as so specified in
such notice.
13. No Rights as Stockholder. Except as otherwise expressly set forth
in the Purchase Agreement or the other Transaction Documents (as defined in the
Purchase Agreement), until the
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exercise of this Warrant, the Registered Holder of this Warrant shall not have
or exercise any rights by virtue hereof as a stockholder of the Company.
14. Change or Waiver. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of at least a majority of the Series A
Warrants and the Series B Warrants (as defined in the Purchase Agreement).
15. Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the Date of Issuance set forth on the first page hereof.
ASCENT PEDIATRICS, INC.
[Corporate Seal] By:
ATTEST: Title: Chairman of the Board
Address: ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
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EXHIBIT I
PURCHASE FORM
To: ____________ Dated: _____________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. __), hereby irrevocably elects to purchase shares of the Common
Stock covered by such Warrant and herewith makes payment of $___________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature:
Address:
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (No. __) with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature:
Dated: Signature:
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Exhibit B-2
FORM OF SERIES B WARRANT
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE
WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT
WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144
OR RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION
UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY,
AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED
TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
IS AVAILABLE.
Warrant No. B-__ Number of Shares: ______
(subject to adjustment)
Date of Issuance: __________, 199_
ASCENT PEDIATRICS, INC.
Series A Warrant to Purchase Common Stock
(Void after January 31, 2004)
Ascent Pediatrics, Inc. (formerly known as Ascent Pharmaceuticals,
Inc.), a Delaware corporation (the "Company"), for value received, hereby
certifies that _____________, or its registered assigns (the "Registered
Holder"), is entitled, subject to the terms set forth below, upon exercise of
this Warrant to purchase from the Company, at any time or from time to time on
or before January 31, 2004 (the "Expiration Date"), __________________ (______)
shares of the Company's common stock, $.00004 par value per share (the "Common
Stock"), at a purchase price of $4.50 per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Purchase Price," respectively.
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This Warrant is one of a series of warrants comprising the Company's
Series B Warrants (as defined in that certain Securities Purchase Agreement
dated as of January 31, 1997, among the Company and the purchasers named therein
(the "Purchase Agreement")).
1. Purchase.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, at any time and from time to time after the Date of Issuance
hereof until 5:00 p.m. (Boston, Massachusetts time) on the Expiration Date, by
surrendering this Warrant, with the purchase form appended hereto as Exhibit I
duly executed by such Registered Holder or by such Registered Holder's duly
authorized attorney, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful currency of the United States, of the Purchase Price payable in
respect of the number of shares of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay
some or all of the Purchase Price payable upon an exercise of this Warrant by
canceling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value per share of Common Stock as of the
effective date of exercise, as determined pursuant to Subsection l(c) below (the
"Exercise Date"), over the Purchase Price per share.
(c) The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) if the Common Stock is listed on a national securities
exchange, the NASDAQ National Market, the NASDAQ system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the last reported sale
price per share of Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next preceding business day
(provided that if no such price is reported on the next preceding business day,
the Fair Market Value per share of Common Stock shall be determined pursuant to
clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the NASDAQ National Market, the NASDAQ system or another nationally
recognized exchange or trading system as of the Exercise Date, (A) the Board of
Directors of the Company and the Registered Holder shall independently determine
the Fair Market Value per share of Common Stock on the basis of an assumed sale
of the Company as a whole and no effect shall be given to any discount for lack
of liquidity or to the fact that the Company has no class of equity securities
registered under the Exchange Act, if such is the case, (B) each of the Board of
Directors of the Company and the Registered Holder shall deliver to the other a
report stating the Fair Market Value of Common Stock as of a specified date and
setting forth a brief statement as to the nature
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and scope of the examination or investigation upon which the determination of
such Fair Market Value was made, (C) in the event that such reports disagree as
to such Fair Market Value, the Company and the Registered Holder shall promptly
consult with each other to resolve such disagreement, and (D) in the event the
Company and the Registered Holder cannot resolve such disagreement, the Company
and the Registered Holder shall choose a nationally-recognized, independent
investment bank mutually acceptable to such parties which shall determine the
Fair Market Value per share of Common Stock and shall deliver to each party a
fairness opinion with respect to such determination. All costs and expenses of
such investment bank shall be borne by the Company.
(d) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in Subsection 1(e) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
(e) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within 10 days thereafter, the Company, at
its expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Subsection 1(g)
below; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise as provided in Subsection l(a) above.
(f) All shares of Common Stock issuable upon the exercise of
this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and non-assessable and free from all liens and charges with respect to the
issuance thereof. The Company shall pay all expenses in connection with, and all
taxes and other governmental charges that may be imposed with respect to, the
issue or delivery thereof; provided, however, that the Company shall not be
required to pay any federal, state or local income taxes incurred by the
Registered Holder in connection with the issuance or delivery of such shares. In
addition, the Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any Warrant
Shares issuable upon exercise of this Warrant in any name other than that of the
Registered Holder, and in such case the Company shall not be required to issue
or deliver any
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certificate representing Warrant Shares until such tax or other charge has been
paid or it has been established to the satisfaction of Company that no such tax
or other charge is due.
(g) The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares (as determined on an aggregate basis
for each exercise pursuant to this Warrant), but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to Subsection 1(c) above.
(h) Reference is made to the Purchase Agreement with respect
to the right of the Company to repurchase a portion of the Warrants under the
circumstances more fully described therein.
(i) The Registered Holder shall have such rights with respect
to the registration of this Warrant and the Warrant Shares under the Securities
Act of 1933, as amended (the "Securities Act") as are set forth in the Purchase
Agreement.
2. Adjustments.
(a) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be declared or distributed in respect of the Common Stock or the outstanding
shares of Common Stock shall be combined or reclassified into a smaller number
of shares, the Purchase Price in effect immediately after the record date for
such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event specified above shall
occur.
(b) If the Company shall fix a record date for the issuance
of rights, options, warrants or convertible or exchangeable securities to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share of Common Stock less than the Fair Market
Value per share of Common Stock (as determined in accordance with Subsection
1(c) hereof) on such record date, the Purchase Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the Fair Market Value per share of Common Stock on
such record date, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall be made successively whenever such a record date is fixed. To
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the extent that any such rights, options, warrants or convertible or
exchangeable securities are not so issued or expire unexercised, the Purchase
Price then in effect shall be readjusted to the Purchase Price which would then
be in effect if such unissued or unexercised rights, options, warrants or
convertible or exchangeable securities had not been issuable.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of shares of Common Stock (i) of shares of any
class other than Common Stock or (ii) of evidences of its indebtedness or (iii)
of assets (excluding cash dividends or distributions (other than extraordinary
cash dividends or distributions), and dividends or distributions referred to in
Subsection 2(a) hereof) or (iv) of rights, options, warrants or convertible or
exchangeable securities (excluding those rights, options, warrants or
convertible or exchangeable securities referred to in Subsection 2(b) hereof),
then in each such case the Purchase Price in effect immediately thereafter shall
be determined by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the total number of
shares of Common Stock outstanding on such record date multiplied by the Fair
Market Value per share of Common Stock (as determined in accordance with
Subsection 1(c) hereof) on such record date, less the aggregate fair market
value as determined in good faith by the Board of Directors of the Company of
said shares or evidences of indebtedness or assets or rights, options, warrants
or convertible or exchangeable securities so distributed, and of which the
denominator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by the Fair Market Value per share of Common Stock
on such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Purchase Price then in effect shall be readjusted to the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) In case the Company shall on or after the date hereof
issue any Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (excluding Excluded Securities, as defined in Subsection 2(e)
below) at a price per share of Common Stock (determined by dividing (i) the
aggregate amount paid to the Company for such Common Stock, rights, options,
warrants or convertible or exchangeable securities, plus the aggregate
consideration or premiums stated in such rights, options, warrants or
convertible or exchangeable securities to be payable for the shares of Common
Stock covered thereby (the "Aggregate Consideration Receivable"), by (ii) the
total number of shares of Common Stock issued or covered by such rights,
options, warrants or convertible or exchangeable securities) less than the Fair
Market Value per share of Common Stock (as determined in accordance with
Subsection 1(c) hereof) on the date of such issuance, then the Purchase Price
shall be adjusted immediately thereafter so that it shall equal the price
determined by multiplying the Purchase Price in effect immediately prior thereto
by a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of
additional shares of Common Stock the Aggregate Consideration Receivable would
purchase at the Fair Market Value per share of Common Stock on such date, and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of additional shares of
Common Stock sold or offered for subscription or purchase. Such adjustment shall
be
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made successively whenever such issuance shall occur. To the extent that any
such shares, rights, options, warrants or convertible or exchangeable securities
are not so issued or expire unexercised, the Purchase Price then in effect shall
be readjusted to the Purchase Price which would then be in effect if such
unissued or unexercised rights, options, warrants or convertible or exchangeable
securities had not been issuable.
(e) "Excluded Securities" means (i) rights, options, warrants,
or convertible or exchangeable securities issued in any of the transactions
described in Subsections 2(b), 2(c) and 2(h) hereof, (ii) shares of Common Stock
issuable upon exercise of the Warrants, (iii) shares of Common Stock issuable
upon exercise of rights, options or warrants or conversion or exchange of
convertible or exchangeable securities issued or sold under circumstances
causing an adjustment pursuant to Subsection 2(d), (iv) the 40,067 shares of
Series D Convertible Preferred Stock, $.00004 par value per share, of the
Company (the "Series D Preferred Stock") issuable upon the exercise of certain
warrants to purchase shares of such Series D Preferred Stock outstanding as of
the Date of Issuance of this Warrant, (v) shares of Common Stock issuable upon
the exercise or conversion of any of (A) the 800,000 shares of Series A
Convertible Preferred Stock, $.00004 par value per share, of the Company
outstanding as of the Date of Issuance of this Warrant, (B) the 399,999 shares
of Series B Convertible Preferred Stock, $.00004 par value per share, of the
Company outstanding as of the Date of Issuance of this Warrant, (C) the
1,359,522 shares of Series D Preferred Stock outstanding and the 40,067 shares
of Series D Preferred Stock issuable as of the Date of this Warrant, (D) the
733,371 shares of Series E Convertible Preferred Stock, $.00004 par value per
share, of the Company (the "Series E Preferred Stock") outstanding as of the
Date of Issuance of this Warrant, (E) shares of Series F Convertible Preferred
Stock, $.00004 par value per share, of the Company (the "Series F Preferred
Stock") issued or issuable pursuant to the Series F Convertible Preferred Stock
and Warrant Purchase Agreement by and among the Company and the purchasers
parties thereto, dated as of June 28, 1996, as the same may be amended or
supplemented from time to time (the "Series F Financing Agreement"), (F) the
warrants to purchase up to 238,572 shares of Common Stock held by certain
holders of Series D Preferred Stock as of the date of this Warrant, (G) the
warrants to purchase up to 122,228 shares of Common Stock held by certain
holders of Series E Preferred Stock as of the date of this Warrant, and (H)
warrants to purchase shares of Common Stock issued or issuable to holders of
Series F Preferred Stock pursuant to the Series F Financing Agreement (such
warrants being hereinafter referred to as the "Series F Common Warrants"), and
(vi) up to 850,000 shares of Common Stock or rights, options or warrants to
acquire Common Stock issued or issuable to directors, employees or consultants
of the Company pursuant to a stock option plan, employee stock purchase plan,
restricted stock plan or other similar stock plan or agreement approved by the
Board of Directors of the Company, and, in the case of rights, options or
warrants, the shares of Common Stock issuable upon exercise thereof (the shares
of Common Stock issued or issuable as described in this clause (vi) are
hereinafter referred to as the "Employee Shares").
(f) In case the Company shall sell and issue Common Stock or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock, for a
consideration consisting, in whole or in part, of property
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(other than cash) or services or its equivalent, then in determining the "price
per share of Common Stock" referred to in Sections 2(b) and 2(d) above and the
"Aggregate Consideration Receivable" referred to in Sections 2(d) above, the
Board of Directors of the Company shall determine, in good faith and on a
reasonable basis, the fair value of said property.
(g) When any adjustment is required to be made in the Purchase
Price as a result of the operation of Subsections 2(a), 2(b), 2(c) or 2(d)
hereof, the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(h) If there shall occur any capital reorganization or
reclassification of or other change in the Common Stock (other than a change in
par value or a subdivision or combination as provided for in Subsection 2(a)
above), or any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation in which the Company is the
surviving corporation and which does not result in any reclassification of the
outstanding shares of Common Stock or the conversion of such outstanding shares
of Common Stock into shares of other stock or other securities or property), or
a transfer of all or substantially all of the assets of the Company then, as
part of any such reorganization, reclassification, consolidation, merger or
transfer, as the case may be, lawful provision shall be made so that the
Registered Holder of this Warrant shall receive upon the exercise hereof the
kind and amount of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if, immediately prior to
any such reorganization, reclassification, consolidation, merger or transfer as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant, provided
that, in all cases, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in the application
of the provisions set forth herein with respect to the rights and interests
thereafter of the Registered Holder of this Warrant, such that the provisions
set forth in this Section 2 (including provisions with respect to adjustment of
the Purchase Price) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant, and in the case of any
consolidation or merger, the successor or acquiring entity (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every provision of this Warrant.
3. Registered Holder's Put Right.
(a) In the event that the Company shall not have consummated a
Qualified Public Offering (as hereinafter defined) or a Qualified Merger (as
hereinafter defined) on or before January 31, 2002, the Registered Holder shall
have the right (a "Put Right") at any time and from time to time prior to the
Expiration Date to require the Company to purchase, and the Company shall be
obligated to purchase the Warrants, in whole or in part, with any such
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purchase (the "Put Purchase") to be made as provided in this Section 3. Upon
exercise by the Registered Holder of any Put Right, the purchase price to be
paid by the Company (the "Put Purchase Price") shall be in an amount equal to
the product of (i) the aggregate number of Warrant Shares that would be issuable
upon the exercise of this Warrant and that the Registered Holder elects to sell
to the Company pursuant to this Section 3, multiplied by (ii) the Fair Market
Value per share of Common Stock less the Purchase Price. At the option of the
Company, the Company may pay all of the Put Purchase Price in cash, or,
alternatively, may issue Put Notes (as hereinafter defined) in a principal
amount equal to not more than two-thirds of the Put Purchase Price, with the
remaining balance of the Put Purchase Price to be paid in cash as set forth
below.
(b) The Registered Holder may exercise any Put Right by
providing written notice (the "Put Notice") to the Company at least thirty (30)
days prior to the requested date of the Put Purchase (the "Put Purchase Date").
The Put Notice shall set forth the Put Purchase Date and the aggregate number of
Warrants which the Registered Holder elects to sell to the Company pursuant to
this Section 3. Any Put Notice given by the Registered Holder shall constitute a
binding agreement of the Registered Holder to sell the Warrants set forth in
such Put Notice pursuant to the terms and conditions of this Section 3.
(c) The closing of any Put Purchase (the "Put Closing")
pursuant to a duly given Put Notice shall take place on the Put Purchase Date.
On the Put Purchase Date, the Registered Holder shall deliver to the Company the
Warrants to be sold at such Put Closing, duly endorsed for transfer to the
Company, and the Company shall (i) pay, by wire transfer of immediately
available funds, to the Registered Holder, the portion of the Put Purchase Price
to be paid by the Company in cash, and (ii) issue to the Registered Holder (or
its designee), one or more Put Notes (in such denominations as the Registered
Holder shall designate) in an aggregate principal amount equal to the remaining
balance, if any, of the Put Purchase Price.
(d) As used in this Section 3, the terms: "Qualified Public
Offering" shall mean an underwritten public offering of the Common Stock of the
Company, for the account of the Company, pursuant to an effective registration
statement filed pursuant to the Securities Act, in which the gross proceeds to
the Company are not less than $15,000,000; and "Qualified Merger" shall mean a
merger of the Company with and into a corporation whose common stock is publicly
traded on a national securities exchange on terms and conditions which shall
have been approved by the holders of a majority of the outstanding Warrants.
(e) As used in this Section 3, the term "Put Notes" shall
mean, notes of the Company with a maturity date of not more than two years from
the date of the Put Closing, payable in equal quarterly installments commencing
not later than 90 days after the Put Closing and bearing interest at the
Applicable Put Note Rate (as hereinafter defined) payable quarterly in arrears
commencing not later than 90 days after the Put Closing. The Put Notes shall be
subordinated to Senior Indebtedness (as defined in the Purchase Agreement) on
substantially the same subordination terms as set forth in the Purchase
Agreement, but shall rank pari passu with all other Indebtedness (as defined in
the Purchase Agreement) of the Company. The "Applicable
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Put Note Rate" means a rate of interest per annum equal to the lesser of (i) ten
percent (10%) and (ii) the Base Rate (as hereinafter defined) plus three and
one-half percent (3 1/2%). The "Base Rate" means the rate of interest announced
from time to time by The First National Bank of Boston at its main office in
Boston, Massachusetts as its Base Rate.
4. Restrictions on Transfer.
(a) Except as otherwise permitted by this Section 4, each
certificate representing shares of Common Stock initially issued upon the
exercise of this Warrant, and each certificate representing shares of Common
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
If at any time any securities other than shares of Common Stock shall be
issuable upon the exercise of this Warrant, such securities shall bear a legend
similar to the one set forth above. Whenever the legend requirement imposed by
this Subsection 4(a) shall terminate, as provided in Subsection 4(b) hereof, the
Registered Holder of this Warrant shall be entitled to receive from the Company,
at the Company's expense, a new Warrant certificate or certificates without such
legend.
(b) The legend requirements of this Section 4 shall terminate
as to any particular shares of Common Stock issuable upon the exercise of this
Warrant (a) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (b) when
the Company shall have received an opinion of counsel to the Registered Holder
reasonably satisfactory to the Company pursuant to the requirements of Section
10.2 of the Purchase Agreement.
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5. No Impairment. The Company will not, by amendment of its Amended and
Restated Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holder of this Warrant against impairment.
6. Liquidating Dividends. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Shares purchased upon such exercise, the Liquidating Dividend which
would have been paid to such Registered Holder if it had been the owner of
record of such Warrant Shares immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
7. Notices of Record Date, etc. In case:
(a) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right; or
(b) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) Of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then, and in each such case, the Company will send or cause to be sent to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which such conversion was effective, or
(iii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable
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upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be given at least ten
(10) days, or if such advance notice is not practicable, then such shorter
period as may be practicable, prior to the record date or effective date for an
event specified in Subsections 7(a), 7(b) or 7(c). Such notice shall be given no
later than ten (10) days after the effective date of an event specified in
Subsection 7(b).
8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
9. Exchange of Warrants. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Registered Holder, at the
Company's expense, a new Warrant or Warrants of like tenor, in the name of such
Registered Holder or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company (provided that, for purposes of this Section 10, a
letter of indemnity from an entity having total assets of at least $100,000,000
shall be deemed sufficient indemnity), or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
11. Transfers, etc.
(a) The Company will maintain a register containing the names
and addresses of the Registered Holders of the Warrants. Any Registered Holder
may change its or his address as shown on such register by written notice to the
Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
Exhibit II hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
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(d) Overseas Holders. If such Registered Holder's principal
address is a location outside of the United States of America and its
territories, such Registered Holder (an "Overseas Holder"):
(i) is not a U.S. person (as defined in Securities Act Rule
902(o)) and is not acquiring this Warrant or any Warrant Shares purchased
hereunder for the account or benefit of any U.S. person;
(ii) will transfer this Warrant or any Warrant Shares
purchased pursuant to any exercise hereunder only (A) in accordance with the
provisions of Regulation S promulgated under the Securities Act ("Regulation
S"), (B) pursuant to an effective registration statement under the Securities
Act, or (C) pursuant to an available exemption from registration under the
Securities Act; and
(iii) will not offer or sell this Warrant or any Warrant Shares
purchased hereunder to a U.S. person or to or for the account or benefit of a
U.S. person prior to the expiration of the one-year period after the date of
this Warrant, with respect to a transfer of this Warrant, or one year after the
exercise of this Warrant, with respect to any Warrant Shares purchased
hereunder.
12. Giving of Notices, etc. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be in writing and
shall be deemed effective (i) upon delivery by hand, (ii) two business days
after deposit with an express courier service for delivery no later than two
business days after such deposit, addressed to the Registered Holder at the
address set forth on the warrant register maintained by the Company (or at such
other address as may have been last furnished to the Company in writing by the
holder), or (iii) upon confirmation of transmittal by telecopy to the Registered
Holder, with a hard copy sent in accordance with the preceding clause (ii), to
the telecopy number set forth on the warrant register maintained by the Company
(or to such telecopy number as may have been last furnished to the Company in
writing by the holder). All notices and other communications from the Registered
Holder of this Warrant to the Company shall be in writing and shall be deemed
effective (i) upon delivery by hand, (ii) two business days after deposit with
an express courier service for delivery no later than two business days after
such deposit, addressed to the Company at its principal office set forth below,
or (iii) upon confirmation of transmittal by telecopy, with a hard copy sent in
accordance with the preceding clause (ii), to the telecopy number of the Company
set forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below or change its telecopy
number to a number other than as set forth below, it shall give prompt written
notice to the Registered Holder of this Warrant in the manner prescribed herein,
and thereafter all references in this Warrant to the location of its principal
office or telecopy number at the particular time shall be as so specified in
such notice.
13. No Rights as Stockholder. Except as otherwise expressly set forth
in the Purchase Agreement or the other Transaction Documents (as defined in the
Purchase Agreement), until the
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exercise of this Warrant, the Registered Holder of this Warrant shall not have
or exercise any rights by virtue hereof as a stockholder of the Company.
14. Change or Waiver. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of at least a majority of the Series A
Warrants and the Series B Warrants (as defined in the Purchase Agreement).
15. Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the Date of Issuance set forth on the first page hereof.
ASCENT PEDIATRICS, INC.
[Corporate Seal] By:
ATTEST: Title: Chairman of the Board
Address: ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
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EXHIBIT I
PURCHASE FORM
To: ____________ Dated: _____________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. __), hereby irrevocably elects to purchase shares of the Common
Stock covered by such Warrant and herewith makes payment of $___________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature:
Address:
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (No. __) with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature:
Dated: Signature:
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Exhibit C
February 3, 1997
To each of the Purchasers set forth
on EXHIBIT A attached hereto of
Subordinated Secured Notes due
January 31, 2002 and Warrants to
Purchase Common Stock
Re: Ascent Pediatrics, Inc.
----------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.1(f) of the
Securities Purchase Agreement (the "Agreement"), dated as of January 31, 1997,
among Ascent Pediatrics, Inc., a Delaware corporation (the "Company") and the
parties listed on the signature pages thereto (the "Purchasers") in connection
with the purchase of an aggregate principal amount of $7,000,000 of Subordinated
Secured Notes, due January 31, 2002 (the "Notes"), and warrants to purchase
Common Stock (the "Warrants") of the Company. The capitalized terms used herein
but not otherwise defined herein shall have the meanings assigned to them in the
Agreement.
We have represented the Company in connection with the preparation,
execution and delivery of the Agreement and the issuance of the Notes and
Warrants. We are familiar with the proceedings taken by the Company in
connection with the foregoing.
We have examined and relied upon the following:
1. The Agreement (including the Schedules and Exhibits thereto);
2. The Notes;
3. The Security Agreement (the "Security Agreement"), dated as of January
31, 1997, between the Company and Triumph-Connecticut Limited
Partnership, a Connecticut limited partnership, as collateral agent
for the Holders of the Note Obligations (as defined in the Security
Agreement);
4. The Warrants;
5. The UCC-1 financing statements in the form annexed hereto (the
"Financing Statements") for filing in the filing offices listed on
SCHEDULE I;
114
February 3, 1997
Page 2
6. The Third Amended and Restated Voting Rights Agreement, dated as of
January 31, 1997, among the Company and certain stockholders of the
Company set forth on the signature pages thereto (the "Voting Rights
Agreement");
7. Resolutions adopted by the Board of Directors of the Company by
Written Action of Directors in Lieu of a Meeting dated various dates
during January, 1997;
8. Written Consent, Waiver and Amendment Agreement of the Stockholders of
the Company dated various dates in January 1997;
9. The Company's Amended and Restated Certificate of Incorporation, as
filed with the Secretary of State of the State of Delaware on June 28,
1996 (the "Amended and Restated Certificate");
10. The Certificate of Correction to the Company's Amended and Restated
Certificate of Incorporation, as filed with the Secretary of State of
the State of Delaware on December 11, 1996;
11. The Certificate of Amendment to the Company's Amended and Restated
Certificate of Incorporation, as filed with the Secretary of State of
the State of Delaware on February 3, 1997 (the "Certificate of
Amendment");
12. A Certificate of Good Standing and Legal Existence relating to the
Company, issued by the Office of the Secretary of State of the State
of Delaware, dated January 31, 1997 (the "Delaware Certificate");
13. A Certificate of Qualification to do Business relating to the Company,
issued by the Office of the Secretary of State of the Commonwealth of
Massachusetts, dated January 30, 1997 (the "Massachusetts
Certificate");
14. A Certificate of the Company, executed on behalf of the Company by an
officer of the Company, dated January 31, 1997, certifying as to the
correctness of representations and warranties and as to the
fulfillment of the agreements and conditions of the Company specified
in the Agreement;
15. A Certificate of the Assistant Secretary of the Company, dated
February 3, 1997;
16. A Certificate of the Vice President of Finance of the Company, dated
January 31, 1997, certifying as to payment of state and federal income
taxes;
115
February 3, 1997
Page 3
17. The Company's By-laws and corporate minute and stock record books;
18. Such other documents, corporate records, certificates and materials as
we have deemed necessary for the purposes of the opinions rendered
herein;
19. A Certificate of the Vice President, Finance of the Company, dated
January 31, 1997, certifying as to certain factual matters, attached
hereto as EXHIBIT B; and
20. A Certificate of the Chairman of the Board of the Company, dated
February 3, 1997, certifying as to certain factual matters, attached
hereto as EXHIBIT C.
The Agreement, the Notes, and the Security Agreement shall hereinafter
collectively be referred to as the "Loan Documents."
In our examination, we have assumed the completeness of the corporate
minute books and stock record books of the Company as provided to us by the
Company, the authenticity of original documents, the accuracy of all copies
(whether certified or not), the genuineness of all signatures and the legal
capacity of all persons executing all documents examined by us.
In rendering this opinion, we have relied, as to all questions of fact
material to this opinion, upon certificates of public officials and officers of
the Company and upon the representations and warranties made by you and the
Company in the Agreement. Except for our examination of the documents listed
above, we have not attempted to verify independently such facts, although we
know of no facts which lead us to question the accuracy of such information. In
particular, for purposes of the opinions expressed in Paragraphs (d) and (h)
below, we have relied solely on representations of officers of the Company, and
we have not conducted a search of any computerized or electronic databases or
the dockets of any court, administrative or other regulatory body, agency or
other filing office in any jurisdiction. Any reference to "our knowledge" or
"knowledge" or any variation thereof shall mean the conscious awareness of the
attorneys in this firm who have rendered substantive attention to this
transaction of the existence or absence of any facts which would contradict our
opinions set forth below. We have not undertaken any independent investigation
to determine the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from the
fact of our representation of the Company.
We have not made an independent review of the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts, the
federal securities laws of the United States and the General Corporation Law
statute
116
February 3, 1997
Page 4
of the State of Delaware. Accordingly, we express no opinion herein with
respect to the laws of any country, state or jurisdiction other than the state
laws of the Commonwealth of Massachusetts, the federal securities laws of the
United States and the General Corporation Law statute of the State of Delaware.
To the extent that the laws of any jurisdiction other than the state laws of the
Commonwealth of Massachusetts or the federal securities laws of the United
States or the General Corporation Law statute of the State of Delaware govern
any agreement to which the Company is a party, we have assumed that the laws of
such jurisdiction are identical to the laws of the Commonwealth of
Massachusetts. For the purposes of this opinion, we have assumed that the facts
and law governing the performance by the respective parties of their respective
obligations under the Agreement will be identical to the facts and law governing
such performance as of the date of this opinion.
We are expressing no opinion as to compliance by the Company with the
so-called "blue sky" or state securities laws (other than the securities laws of
the Commonwealth of Massachusetts) in connection with the (i) issuance and sale
of the Notes and the Warrants or (ii) issuance of shares of Common Stock of the
Company upon the conversion of the Notes or the exercise of the Warrants.
We are expressing no opinion as to the implications under United States tax
law, including all federal, state and local tax laws, or the tax laws of any
foreign jurisdiction with respect to any of the transactions contemplated by the
Agreement.
We are expressing no opinion as to the implications under the rules and
regulations of the United States Food and Drug Administration with respect to
any of the transactions contemplated by the Agreement.
We are expressing no opinion as to the implications under any applicable
antitrust or usury laws.
We are expressing no opinion as to state or federal securities antifraud
laws.
We are expressing no opinion as to the validity of the security interest
granted to you in the Company's trademarks, and our opinion in Paragraph (e) is
limited accordingly provided, Paragraph (e) does reflect our opinion of the
filing requirements necessary to perfect such security interest to the extent
permitted by applicable state and federal law.
The opinions hereinafter expressed are qualified to the extent that
they may be subject to or affected by (i) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws relating to or
affecting the rights of creditors generally, (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice or
hearing, and (iii) duties and standards imposed
117
February 3, 1997
Page 5
on creditors and parties to contracts, including, without limitation,
requirements of good faith, reasonableness and fair dealing. Furthermore, we
express no opinion as to the availability of any equitable or specific remedy
upon any breach of any of the covenants, warranties or other provisions
contained in any of such agreements, instruments or documents, or upon the
successful assertion of any equitable defense. Moreover, we express no opinion
as to the enforceability of any indemnity provision that indemnifies any person
against damages arising from its own negligence or misconduct.
The opinions hereinafter expressed are also subject to the qualification
that we render no opinion as to the validity or enforceability of any provisions
of the Loan Documents regarding the rights of the Purchasers to set-off against
the accounts of the Company, to the extent that (i) the funds on deposit in
accounts of the Company are subjected to trustee process or any other valid
claim or right of a third party, (ii) the accounts of the Company are special
accounts created solely for the benefit of another party, such as payroll or tax
escrow accounts, and (iii) the funds on deposit in accounts of the Company are
contained in a separate account containing the proceeds of collateral securing
the obligation of the Company to a secured party other than the Purchasers under
Article 9 of the Uniform Commercial Code as enacted in the Commonwealth of
Massachusetts (the "Code").
We have assumed that the Agreement has been duly authorized, executed and
delivered by the Purchasers and that each of the Purchasers has all requisite
power and authority to effect the transactions contemplated by the Agreement. We
have also assumed that the Agreement is the valid and binding obligation of each
of the Purchasers, enforceable against each of the Purchasers in accordance with
its terms. We do not render any opinion as to the application of any foreign,
federal or state law or regulation to the power, authority or competence of any
of the Purchasers.
For purposes of the opinions expressed in Paragraph (a) below as to the
valid existence and good standing of the Company in Delaware, and the
qualification and good standing of the Company in Massachusetts, we have relied
solely upon the Delaware Certificate and the Massachusetts Certificate,
respectively, and such opinions are limited accordingly and rendered as of the
respective dates thereof.
For purposes of the opinion expressed in Paragraph (b) below as to the
issued and outstanding shares of capital stock of the Company, we have relied
solely on our review of the corporate minute books and stock record books of the
Company, and such opinion is limited accordingly.
For purposes of our opinion in Paragraph (j) below, we have relied on
the accuracy of the facts set forth in the Officer's Certificate of even date
attached as EXHIBIT B. Furthermore, our opinion in Paragraph (j) below is
qualified as it is based on the analysis of the Securities and Exchange
Commission (the "SEC") set forth in
118
February 3, 1997
Page 6
the exemptive order issued to the ICOS Corporation (SEC Release No. IC-19334)
(March 16, 1993) (the "ICOS Order") pursuant to Section 3(b)(2) under the
Investment Company Act of 1940, as amended (the "1940 Act"), and in the proposed
position of the SEC set forth in SEC Release No. IC-19566 (July 8, 1993)
proposing Rule 3a-8 under the 1940 Act which proposed rule has never been
adopted). Accordingly, because of differences between the facts set forth in the
application of the ICOS Order and those set forth in the certificate, there can
be no guarantee that a court or the SEC would agree with our conclusions set
forth below.
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as to our knowledge it is presently
conducted, to enter into and perform the Agreement and to carry out the
transactions contemplated by such Agreement. The Company is duly qualified to do
business and in good standing in the Commonwealth of Massachusetts.
(b) By reason of the filing of the Certificate of Amendment with the
Secretary of State of the State of Delaware, the authorized capital stock of the
Company consists of 11,461,540 shares of Common Stock and 6,120,103 shares of
Preferred Stock, $.00004 par value per share (the "Preferred Stock"), and (based
solely on our review of the Company's stock record books and, with respect to
the number of shares of Common Stock each series of Preferred Stock is
convertible, the Officer's Certificate) 233,125 shares of Common Stock are
issued and outstanding of record. Of the 6,120,103 shares of Preferred Stock so
authorized:
(i) 800,000 shares have been designated Series A Convertible
Preferred Stock, $.00004 par value per share, and (based solely on our review of
the Company's stock record books) all of which shares are issued and outstanding
of record and convertible on an aggregate basis into 800,000 shares of Common
Stock;
(ii) 399,999 shares have been designated Series B Convertible
Preferred Stock, $.00004 par value per share, and (based solely on our review of
the Company's stock record books) all of which shares are issued and outstanding
of record and convertible on an aggregate basis into 415,565 shares of Common
Stock;
(iii) 1,399,589 shares have been designated Series D Preferred,
$.00004 par value per share ("Series D Preferred"), and (based solely on our
review of the Company's stock record books) 1,359,522 of which shares are issued
and outstanding of record and convertible on an aggregate basis into 1,359,522
shares of Common Stock;
119
February 3, 1997
Page 7
(iv) 1,166,667 shares have been designated Series E Preferred,
$.00004 par value per share ("Series E Preferred"), and (based solely on our
review of the Company's stock record books) 733,371 of which shares are issued
and outstanding of record and convertible on an aggregate basis into 733,371
shares of Common Stock; and
(v) 2,353,848 shares have been designated Series F Preferred,
and, prior to the sale and issuance of the Subsequent Purchaser First Shares and
Follow-On Funding Shares, (based solely on our review of the Company's stock
record books) 1,729,997 of which shares are issued and outstanding of record and
convertible on an aggregate basis into 1,729,997 shares of Common Stock.
In addition, (based solely on our review of the Company's stock record books)
there are outstanding warrants to purchase an aggregate of 40,067 shares of
Series D Preferred and an aggregate of 1,052,805 shares of Common Stock, as
described in Schedule 4.2 of the Agreement and excluding any outstanding options
under the Company's 1992 Equity Incentive Plan, as amended. Except as set forth
above (based solely on our review of the Company's stock record books and the
Officer's Certificate), immediately prior to the First Closing, to our
knowledge, there are no outstanding subscriptions, options, warrants, rights
convertible or exchangeable securities outstanding obligating the Company to
issue securities, other than any options under the Company's 1992 Equity
Incentive Plan, as amended.
(c) The issuance, sale and delivery of the Notes and Warrants in
accordance with the Agreement, and the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Notes or exercise of the Warrants,
have been duly authorized by all necessary corporate action on the part of the
Company, and the Notes and Warrants when so issued, sold and delivered against
payment therefor in accordance with the provisions of the Agreement, and the
shares of Common Stock issuable upon conversion of the Notes or exercise of the
Warrants, when issued upon such conversion or exercise, in accordance with the
provisions of the Notes and Warrants, will have been duly and validly issued,
fully paid and nonassessable. Neither the issuance, sale or delivery of the
Notes or Warrants is, nor will the issuance or delivery of the shares of Common
Stock upon conversion or exercise thereof be, subject to any preemptive right of
stockholders of the Company arising under the General Corporation Law statute of
the State of Delaware or the Amended and Restated Certificate, as amended by the
Certificate of Amendment, or By-laws of the Company, or, to our knowledge, under
any contractual right of first refusal or other right in favor of any person
that has not been waived or complied with.
(d) The execution, delivery and performance by the Company of the Loan
Documents and the execution and filing of the Amended and Restated Certificate,
as amended by the Certificate of Amendment, have been duly authorized
120
February 3, 1997
Page 8
by all necessary corporate action, and the Loan Documents have been duly
executed and delivered by the Company. The Loan Documents (other than
subsections 12.5 and 12.6 of the Agreement, as to which we express no opinion)
constitute the valid and binding obligation of the Company, enforceable in
accordance with their respective terms. The execution, delivery and performance
of the Loan Documents and the offer, issuance and sale of the Notes and
Warrants, and the issuance of shares of Common Stock upon conversion of the
Notes and exercise of the Warrants, will not conflict with, or result in any
breach of any of the terms, conditions, or provisions of, or constitute a
default under, the Amended and Restated Certificate, as amended, or By-laws of
the Company or under any indenture, lease, agreement, or other instrument known
to us to which the Company is a party or by which it or any of its properties
are bound and which is identified on the Schedules to the Agreement, or any
decree, judgment or order specifically naming the Company and known to us or any
statute, rule or regulation applicable to the Company.
(e) The Security Agreement creates a valid and enforceable security
interest under the Code with respect to the Collateral (as such term is defined
therein and in the Security Agreement) located in Massachusetts and the
Company's interest in patents and trademarks listed in the Security Agreement,
or Collateral as to which Massachusetts law governs perfection by virtue of the
location of the Company in Massachusetts, in which a security interest can be
created under the Code. Subject to the limitations set forth in paragraph B
below, the Purchasers' security interest in the Collateral will be perfected
under the Code by the filing of the Financing Statements in the offices listed
on SCHEDULE I and the filing of the Security Agreement with the United States
Patent and Trademark Office.
(f) Except as obtained and in effect at the First Closing and Second
Closing, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration, or filing with, any governmental
authority other than filings required to be made under applicable federal and
state securities laws, is required on the part of the Company in connection with
the execution, delivery and performance of the Agreement, Notes or Warrants and
(assuming no change in applicable facts or circumstances) the shares of Common
Stock to be issued and delivered upon exercise of the Warrants, or the other
transactions to be consummated at the First Closing and the Second Closing
pursuant to the Agreement.
(g) Based on the representations of each of the Purchasers in Section
5 of the Agreement, the offer, issuance and sale of the Notes and Warrants to be
sold at the First Closing and the Second Closing pursuant to the Agreement and
the issuance of the shares of Common Stock to be issued upon conversion or
exercise thereof, respectively, are exempt from registration under the
Securities Act of 1933, as amended.
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February 3, 1997
Page 9
(h) To our knowledge, except as set forth in the Schedules to the
Agreement, there is no action, suit or proceeding, or governmental inquiry or
investigation, pending or threatened against the Company.
(i) Based on representations made by the Company, neither the issuance
and sale of the Notes or Warrants sold at the First Closing and the Second
Closing nor the intended use of proceeds thereof will violate Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System, and it is not
necessary for a Purchaser to obtain a statement in conformity with the
requirements of Federal Reserve Form FR G-3.
(j) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
The foregoing opinions are subject to the following additional comments and
qualifications:
(A) We express no opinion as to the existence of, or the right, title
or interest of the Company in, to or under, any property in which the Company
has granted a security interest to you.
(B) We express no opinion as to the creation of security interests in
property in which a security interest cannot be created under the Code or the
perfection of security interests in fixtures or in property in which a security
interest cannot be perfected by the filing of UCC-1 financing statements
pursuant to Article 9 of the Code except with respect to the perfection of a
security interest in trademarks and patents to the extent aforesaid.
(C) Under certain circumstances, described in Section 9-306 of the
Code, the right of a secured party to enforce a perfected security interest in
the proceeds of collateral may be limited.
(D) The grant of, or any realization on, security interests in
governmental licenses, permits, authorizations and other rights, in contracts
with government or governmental instrumentalities, commissions, boards or
agencies and in the proceeds thereof are or may be subject to restrictions or
limitations set forth therein or in applicable statutes, laws, rules or
regulations, and we express no opinion as to the creation or perfection of
security interests in such rights, contracts or proceeds.
(E) We express no opinion as to the priority of any security interests
granted by the Company to the Purchasers.
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February 3, 1997
Page 10
(F) The perfection of the security interests may be terminated as to
any Collateral acquired more than four months after the Company changes its
name, identity or corporate structure so as to make the Financing Statements
seriously misleading (within in the meaning of Section 9-402(7) of the Code)
unless new, appropriate financing statements indicating the new name, identity
or corporate structure of the Company are properly filed before the expiration
of such four-month period and all fees in connection therewith are paid. The
perfection of security interests in accounts, including receivables, general
intangibles and certain other Collateral, may be terminated if the Company
changes the location of its chief executive offices outside of the Commonwealth
of Massachusetts.
(G) Pursuant to the Code, continuation statements are required from
time to time to be filed in order to preserve valid, perfected security
interests.
(H) We have assumed that the Collateral in Massachusetts is located at
the location described on SCHEDULE II hereto and that the chief executive office
of the Borrower is located in Billerica, Massachusetts.
(I) We express no opinion as to the adequacy of the description of the
Collateral as defined in the Security Agreement insofar as such description
includes terms which are not defined under Article 9 of the Code.
This opinion is provided to the Purchasers as a legal opinion only and not
as a guaranty or warranty of the matters discussed herein.
This opinion is based upon currently existing statutes, rules, regulations
and judicial decisions, and we disclaim any obligation to advise you of any
changes in any of these sources of law or subsequent developments which might
affect any matters or opinions set forth herein. Please note that we are opining
only as to the matters expressly set forth herein, and no opinion should be
inferred as to any other matters.
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February 3, 1997
Page 11
This opinion is furnished to you by us as counsel to the Company in
connection with the transactions contemplated by the Agreement, and may not be
relied upon by any other person or entity or for any other purpose without our
prior written consent. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of this firm is Secretary of the
Company.
Very truly yours,
▇▇▇▇ AND ▇▇▇▇ LLP
124
EXHIBIT A
---------
List of Purchasers:
Triumph-Connecticut Limited Partnership
▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ and
E. ▇▇▇▇ ▇▇▇▇▇▇, as Trustees of
the Triumph Capital Group, Inc.
401(k) Plan and Trust for the
account of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
c/o Triumph Capital Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
125
EXHIBIT B
---------
[Officer's Certificate]
126
SCHEDULE I
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UCC-1 Filing Offices:
Massachusetts Secretary of State
Billerica, Massachusetts Town Clerk
Wilmington, Massachusetts Town Clerk
127
SCHEDULE II
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Assumed location of collateral:
Ascent Pediatrics, Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇