EXHIBIT 4.2
NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR APPLICABLE STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY SECURITY INTO
WHICH IT MAY BE CONVERTED NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF AT ANY TIME IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (B) IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT, (C) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7), OF REGULATION D UNDER THE SECURITIES
ACT THAT IS ACQUIRING THE SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT), (D) TO THE COMPANY OR
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, INCORPORATED, THE PLACEMENT AGENT, (E) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT OR (F) PURSUANT TO AN EXEMPTION FROM REGISTRATION AS CONFIRMED IN
DOCUMENTATION (WHICH AT THE COMPANY'S DISCRETION SHALL INCLUDE AN OPINION OF
COUNSEL) IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY (PROVIDED,
HOWEVER, THAT IN THE CASE OF CLAUSES (B) AND (C), EITHER THE TRANSFEREE OR A
U.S. REGISTERED BROKER-DEALER ON ITS BEHALF HAS DELIVERED TO THE COMPANY A
TRANSFEREE CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY). WITH RESPECT TO
TRANSFERS PURSUANT TO CLAUSES (A), (B) AND (C) ABOVE, THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY,
THAT IT IS (i) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (ii) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT THAT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION (WITHIN
THE MEANING OF THE SECURITIES ACT) OR (iii) A NON-U.S. PERSON THAT IS OUTSIDE
THE U.S. WITHIN THE MEANING OF (OR ACCOUNTS SATISFYING THE REQUIREMENTS OF
PARAGRAPH (O)(ii) OF RULE 902 UNDER) REGULATION S.
COMMONWEALTH BIOTECHNOLOGIES, INC.
a Virginia corporation
SUBORDINATED CONVERTIBLE NOTE
No. ____________ Richmond, Virginia
$ ______________ June ___, 1997
FOR VALUE RECEIVED, COMMONWEALTH BIOTECHNOLOGIES, INC., a Virginia
corporation (the "Company"), hereby promises to pay to ___________________
___________________________________________, (hereinafter referred to as the
"Holder"), or registered assigns, subject to conversion as described below, the
principal sum of _____________________________________ Dollars ($___________),
with interest at a rate of twenty percent (20%) per annum, subject to adjustment
as provided in paragraph 2 below.
1. The Note.
(a) Related Transaction. This Note is issued pursuant to and is
entitled to the benefits and subject to the conditions of that certain Placement
Agreement dated June __, 1997, among the Company, Holder and ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, Incorporated (the "Placement Agent"), as the same may be amended from
time to time. The Company is issuing Notes in an aggregate principal amount of
Three Million Dollars ($3,000,000).
(b) Place of Payment. Interest and principal on this Note shall be
payable at the principal office of ▇▇▇▇▇▇▇▇ & Strudwick, Incorporated (the
"Agent") or such other principal office as the Holder may from time-to-time
designate in writing to the Company solely by conversion into shares of Common
Stock as provided in Section 3, regardless of whether payment becomes due on the
Maturity Date (as defined below) or upon the occurrence of an Event of Default
(as defined below). If the Agent has been designated as Holder's
attorney-in-fact to engage directly with the Company in dealings that are
necessary or appropriate in connection with this Note, the Company shall ensure
that all notices or deliveries required to be given or made to the Holder are
made to the Agent as required by the Placement Agreement.
2. Payment of Interest. Interest shall be payable upon the conversion
of this Note into shares of the Company's common stock ("Common Stock") as
provided in paragraph 3 below. Interest will be paid through the date of
conversion in the form of additional shares of Common Stock, which shall be
issued based on the Conversion Price (as defined below). The Company shall have
no right to prepay all or any portion of this Note.
3. Conversion.
(a) Conversion Into Common Stock. This Note shall be automatically
converted into shares of the Company's Common Stock ("Conversion Shares") upon
the earlier to occur of (i) the closing of an IPO (as defined below) of the
Company's Common Stock or (ii) __________, 1998 (the "Maturity Date"). For
purposes of this Note, an "IPO" shall be an initial public offering of the
Company's Common Stock under the Securities Act of 1933, as amended, made
pursuant to a registration statement on Form SB-2 (or any similar form) that has
been declared effective by the Securities and Exchange Commission (the "SEC").
If the IPO is not effected by the Maturity Date, the principal amount and
accrued interest due under this Note shall nevertheless be converted into
Conversion Shares. Upon conversion, the number of Conversion Shares into which
this Note shall be converted shall equal the principal amount plus accrued
interest due under this Note divided by $6.00 (the "Conversion Price").
(b) Adjustment of Conversion Price. The Conversion Price has been
determined as $6.00 for each share of Common Stock. In the event the Company
shall be validly authorized to effect any one or more of the following (each, a
"Adjustment Event"): (i) payments of a dividend in shares of its Common Stock,
(ii) subdividing of its outstanding shares of Common Stock, (iii) combination of
its outstanding shares of Common Stock into a smaller number of shares, or (iv)
reorganization, merger or consolidation with another corporation or entity, the
Holder shall be entitled thereafter to elect that upon the conversion of this
Note he, she or it will receive the number of shares of Common Stock (or the
number and kind of applicable securities or property) as the Holder would have
been entitled to receive upon such Adjustment Event, if he, she or it had been a
holder of the number of shares of Common Stock of the Company deliverable upon
the conversion of this Note immediately prior to the time of such Adjustment
Event. In addition, if the Company shall be validly authorized to issue shares
of Common Stock, or options, warrants or other rights convertible into Common
Stock, for a per share price, exercise price or consideration of or valued at
less than $6.00 per share, then unless such issuance is an "Exempted Event," as
defined below, the Conversion Price shall be reduced to a price equal to the
lower price, exercise price or consideration. For the purposes of this Note, the
following shall be deemed to be Exempted Events if approved by a majority of the
Company's Board of Directors (or with respect to (C) below, a majority of the
members of the Compensation Committee of the Board of Directors), including a
majority of the directors of the Company who are not employees of the Company:
(A) the acquisition of another corporation or entity
by the Company by merger, purchase of substantially all the assets or other
reorganization as a result of which the Company or its shareholders prior to the
transaction own more than 50% of the voting power of the resulting corporation
or other entity;
(B) equipment leases or borrowings, direct or
indirect, from financial or other institutions regularly engaged in such
business;
(C) the issuance of shares of Common Stock, and
options, warrants or rights convertible into Common Stock, to employees,
consultants or directors of the Company pursuant to any incentive agreement or
arrangement;
(D) a transaction in which the Company licenses any
intellectual property to be used in the business of the Company; or
(E) a strategic joint venture or alliance between
the Company and another party to which the securities are issued, or an
affiliate thereof.
(c) Mechanics of Conversion. Upon conversion, the Holder shall
surrender the certificate or certificates for this Note, duly endorsed, at the
Company's principal corporate office, and shall state therein the name or names
in which the certificate or certificates for Conversion Shares are to be issued.
The Company shall, as soon as practicable thereafter, issue and deliver to the
Holder a certificate or certificates for the number of Conversion Shares to
which the Holder shall be entitled as aforesaid. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date such
Notes are delivered, and the person or persons entitled to receive the
Conversion Shares issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Conversion Shares as of such
date.
(d) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Notes against impairment.
(e) Taxes on Conversion. The issue of share certificates on
conversion of this Note shall be made without charge to the converting Holder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares in any name other than that of the Holder,
and the Company shall not be required to issue or deliver any certificate in
respect of Conversion Shares unless and until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
(f) Reservation of Conversion Securities. The Company agrees that
the Company will at all times have authorized and reserved, and will keep
available, solely for issuance or delivery upon the conversion of this Note, the
shares of Common Stock and other securities and properties as from time to time
shall be receivable upon the conversion of this Note.
(g) No Rights as Stockholders. Prior to the conversion of this Note,
the Holder of this Note shall not be entitled to any rights of a stockholder of
the Company, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein or as otherwise agreed.
4. Merger, Consolidation.
(a) Acceleration on Merger, Consolidation. In the event of (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity, or any transaction or
series of related transactions by the Company in which in excess of 50% of the
Company's voting power is issued for the purpose of combining with or
acquisition by one or more corporations or other entities or persons; or (ii) a
sale, conveyance or disposition of all or substantially all of the assets of the
Company (the events described in clauses (i) and (ii) being collectively
referred to herein as an "Event of Default"), then at the election of the
Holder, the Holder may cause the principal and accrued interest on this Note to
become immediately due and payable at the closing of any such transaction,
whereupon the principal and accrued interest under this Note shall be converted
into the kind and amount of shares of stock and other securities and property
receivable upon such consolidation, merger, reorganization, or disposition of
assets by the holders of the Company's Common Stock.
(b) Notices. The Company shall give the Holder written notice of
such impending transaction not later than twenty (20) days prior to the
stockholders' meeting called to approve such transaction, or twenty (20) days
prior to the closing of such transaction, whichever is earlier. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 4 and the Company shall
thereafter give the Holder prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Company has given the first notice provided for herein or sooner than ten (10)
days after the Company has given the notice provided for herein of any material
changes, provided, however, that such periods may be shortened upon the written
consent of the holders of the majority of the principal amount of Notes then
outstanding.
5. Registration Rights. The Holder shall be entitled to the
registration rights with respect to the Conversion Shares that are described on
Exhibit A to this Note.
6. Transfer. Upon surrender of this Note for transfer or exchange, a
new Note or new Notes of the same tenor, dated the date to which interest has
been paid on the surrendered Note and in an aggregate principal amount equal to
the unpaid principal amount of the Note so surrendered, will be issued to and
registered in the name of the transferee or transferees. The Company may treat
the person in whose name this Note is registered as the owner hereof for the
purpose of receiving payments and for all other purposes.
7. Note Register. This Note is transferable only upon the books of the
Company which it shall cause to be maintained for such purpose. Subject to
Section 1(b) above, the Company may treat the registered holder of this Note as
the Holder appears on the Company's books at any time as the Holder for all
purposes.
8. Defaults and Remedies. In case an Event of Default shall happen and
be continuing, the principal and accrued, but unpaid, interest may be declared
due and payable by the Holder.
9. Parity of Notes. In the event any other holder of Notes issued
contemporaneously with this Note elects to accelerate the Notes held by such
holder as a result of an Event of Default, the Company shall notify the Holder
of this Note of such event and all holders of Notes issued contemporaneously
with this Note shall be deemed to have equal parity.
10. Loss, Etc., of Note. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Note, and of
indemnity reasonably satisfactory to the Company if lost, stolen or destroyed,
and upon surrender and cancellation of this Note if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Note of like date, tenor and
denomination.
11. Amendment, Waiver Etc., By Holders. The terms of this Note may be
amended or waived upon the written consent of the Company and the Holder.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
The Company hereby waives presentment, demand, notice of nonpayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Note. If an action is brought for
collection under this Note, the Holder shall be entitled to receive all costs of
collection, including, but not limited to, its reasonable attorneys' fees.
WITNESS the following signature and seal:
COMMONWEALTH BIOTECHNOLOGIES, INC.
a Virginia corporation
By:
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Name:
----------------------------------
Title:
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[Corporate Seal]
EXHIBIT A
Registration Rights
For the purposes of this Exhibit, the following terms shall have the following
meanings. All capitalized terms used in this Exhibit and not otherwise defined
in this Exhibit shall have the meanings given them in this Note.
"1933 Act" shall mean the Securities Act of 1933, as amended
prior to or after the date of this Agreement, or any federal statute or statutes
which shall be enacted to take the place of such act, together with all rules
and regulations promulgated thereunder.
"Conversion Shares" shall mean at any time, the then
outstanding Conversion Shares owned by the Holders.
"Demand Notice" shall have the meaning given in Section 2(a).
"Holder" shall mean any of the investors in the Notes, and any
donee, executor, administrator, personal representative, testate or intestate
successor or other lawful assignee of any of the investors in the Notes, that
from time to time owns Notes or Conversion Shares.
"Initiating Holders" shall mean any Holder or Holders of not
less than two-thirds of the Conversion Shares.
"Notes" shall mean the $3,000,000 in Subordinated Convertible
Notes issued by the Company.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, or other entity, or a government or any agency, authority or
political subdivision thereof.
"Prospectus" shall mean any prospectus that is a part of a
Registration Statement, together with all amendments or supplements thereto.
"Public Offering" shall mean any public offering of Common
Stock by means of a Registration Statement that has become effective, including
an IPO.
"Registration" shall mean (a) a registration effected by
preparing and filing a Registration Statement, and the declaration or ordering
of the effectiveness of such Registration Statement, and (b) any contemporaneous
registration or qualification of Conversion Shares under any state securities or
blue sky laws.
"Registration Statement" shall mean any registration statement
filed with the SEC in accordance with the Securities Act, together with all
amendments or supplements thereto.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor to the functions of such agency.
1. Demand Registration.
(a) All of the Conversion Shares will be included at the Company's
sole expense (in a manner consistent with Section 3) in the Registration
Statement for the Company's initial public offering, which the Company shall use
its best efforts to cause to become effective not later than [12 months after
closing date]. In any event, the Initiating Holders may give the Company written
notice (a "Demand Notice") at any time after [12 months after closing date] that
they desire the Company to cause all or a portion of the Conversion Shares to be
registered under the 1933 Act and any applicable state securities or blue sky
laws. If a registration of the Conversion Shares takes place pursuant to a
Demand Notice, then the remainder of this Exhibit D shall be applicable.
(b) Upon receipt of a Demand Notice, the Company shall send a notice
to all Holders who are not parties to the Demand Notice and to the Agent, and
the recipients of such notice shall be entitled to have their Conversion Shares
included in the registration made pursuant to the Demand Notice if they shall
notify the Company of their intent to do so within 15 days of their receipt of
the Company notice, and if they shall fail to so notify the Company, the Company
shall have no further obligation to register their Conversion Shares. The
Company shall prepare and file a Registration Statement with the SEC under the
1933 Act covering the Conversion Shares requested to be registered as soon as
practical, but in any event within ninety (90) days after receipt of the Demand
Notice, and use its best efforts to cause such Registration Statement to become
effective. However, if the Company furnishes to the Initiating Holders a
certificate signed by the president of the Company stating that in the good
faith judgment of the board of directors of the Company (including a majority of
the non-employee directors) it would be detrimental to the Company and its
shareholders for such Registration Statement to be filed when the filing would
otherwise be required by the preceding sentences and that it is therefore
essential to defer the filing of such Registration Statement, the Company shall
have an additional period of not more than ninety (90) days within which to file
such Registration Statement.
(c) The Initiating Holders shall have the right to select the
investment banker or bankers who shall serve as the manager and/or co-managers
for the registration of the Conversion Shares under this Section 1.
(d) If at least two-thirds (2/3) of the Holders of the Conversion
Shares determine for any reason not to proceed with such Registration at any
time before a Registration Statement has been declared effective by the SEC,
then such Holders shall promptly give written notice to the Company of their
decision, and such Registration Statement, if theretofore filed with the SEC,
shall be withdrawn with respect to the Conversion Shares covered thereby.
2. Registration Procedures. Whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the Registration
of any Conversion Shares under the 1933 Act, the Company will:
(a) prepare and file with the SEC a Registration Statement under the
1933 Act with respect to the Conversion Shares requested to be registered, and
use its best efforts to cause such Registration Statement to become effective,
provided that before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, the Company will furnish to the Holders and
their counsel copies of all such documents proposed to be filed and give such
Holders and their counsel an opportunity to review and comment upon such
documents;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the 1933 Act with respect to the sale or other
disposition of all Conversion Shares included in such Registration Statement;
(c) furnish to each Holder such number of copies of such
Registration Statement, each amendment and supplement thereto, the Prospectus
included in the Registration Statement (including each preliminary Prospectus),
and such other documents, as such Holder may reasonably request in order to
enable such Holder to consummate the public sale or other disposition of the
Conversion Shares owned by such Holder included in such Registration Statement;
(d) use its best efforts to register or qualify all of the
Conversion Shares under such other securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any and all other
acts and things that may be necessary under such securities or blue sky laws to
enable such Holder to consummate the public sale or other disposition in such
jurisdiction of the Conversion Shares owned by such Holder; provided, however,
that the Company shall not be required to (i) qualify to do business as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction, (iii) consent to general service of process in any
such jurisdiction (provided that the Company shall, if required by any such
jurisdiction, consent to service of process with respect to matters arising out
of the offering of Conversion Shares then being made) or (iv) qualify as a
dealer in securities in any such jurisdiction;
(e) notify each Holder at any time when a Prospectus relating to the
Conversion Shares owned by such Holder is required to be delivered under the
Securities Act, of the happening of any event known to the Company as a result
of which the Prospectus included in such Registration Statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and at the request of any such Holder and
subject to subsection (b) above, prepare a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of the Conversion
Shares, such Prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein not
misleading;
(f) cause all the Conversion Shares to be listed on each securities
exchange or national market or quotation system on which the equity securities
of the Company of the same type or class as the Conversion Shares are then
listed, if any, or such exchange or quotation system as shall reasonably be
requested by the Initiating Holders;
(g) provide a transfer agent and registrar for the Conversion Shares
not later than the effective date of such Registration Statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Holders of
at least a majority of the Conversion Shares or underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of the Conversion
Shares;
(i) make available for inspection by any Holder, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such Holder of at least
5% of the Conversion 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 Holder, underwriter, attorney, accountant or agent and reasonably
necessary for the purposes of such Registration Statement;
(j) as of (i) the effective date of the Registration Statement and
(ii) the date the Conversion Shares are delivered to the underwriters, if any,
for sale pursuant to such Registration Statement, obtain a cold comfort letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
Holders of at least a majority of the Conversion Shares reasonably request; and
(k) furnish, at the request of any Holder of Conversion Shares
requested to be registered on the date the Conversion Shares are delivered to
the underwriters for sale pursuant to the Registration Statement or, if the
Conversion Shares are not being sold through underwriters, on the date the
Registration Statement with respect to the Conversion Shares becomes effective,
an opinion, dated such date, of counsel representing the Company for the
purposes of such Registration, addressed to the underwriters, if any, and to the
Holder making such request, covering such legal matters with respect to the
Registration in respect of which such opinion is being given as the Holders of
such securities may reasonably request and are customarily included in such
opinions.
3. Expenses. To the fullest extent allowable under applicable state
securities and blue sky laws, all expenses incurred in effecting the
Registration provided for in Section 2(a), including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, underwriting expenses other than discounts or
commissions, expenses of any audits incident to or required by any such
Registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 2(d), shall be borne and paid by the
Company.
4. Indemnification.
(a) In the event of any Registration of the Conversion Shares under
the 1933 Act pursuant to this Agreement, the Company, to the extent permitted by
law, shall indemnify and hold harmless each Holder, each underwriter (as defined
in the 1933 Act), each other Person who participates in the offering of such
Conversion Shares, and each other Person, if any, who controls (within the
meaning of the ▇▇▇▇ ▇▇▇) each such Holder, underwriter or participating Person,
against any losses, claims, damages or liabilities, joint or several, to which
each such Person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement, or alleged untrue statement, of any material fact contained, on the
effective date thereof, in any Registration Statement under which the Conversion
Shares were registered under the 1933 Act, any preliminary Prospectus or final
Prospectus contained therein, or any summary Prospectus issued in connection
with any Conversion Shares being registered, or any amendment or supplement
thereto, or (ii) any omission or alleged omission to state in any such document
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each such Holder, or any
such underwriter, participating Person or controlling Person for any legal or
other expenses reasonably incurred by such Person in connection with
investigating or defending any such loss, damage, liability or action; provided,
however, that the Company shall not be liable to any Holder, or any such
underwriter, participating Person, or controlling Person 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 (x) that was made in such Registration
Statement, preliminary Prospectus, summary Prospectus, Prospectus, or amendment
or supplement thereto in reliance upon and in conformity with information
furnished to the Company by such Person specifically for use therein, or (y)
that was corrected in an amendment or supplement to the Registration Statement
or any preliminary Prospectus, summary Prospectus or Prospectus that the Company
made available to the Holders prior to the date of the transaction giving rise
to a claim of liability and that the Holder seeking indemnification failed to
deliver to the person asserting the claim prior to the consummation of the
transaction.
(b) Each Holder shall indemnify and hold harmless each other Holder,
the Company, their directors and officers, each underwriter (as defined in the
1933 Act), and each other Person, if any, who controls (within the meaning of
the ▇▇▇▇ ▇▇▇) each such Holder, the Company, or any underwriter, against any
losses, claims, damages or liabilities, joint or several, to which any such
other Holder, the Company, any such director or officer, any such underwriter,
or any such Person may become subject under the 1933 Act or any other statute or
at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any Registration Statement under which Conversion
Shares were registered under the Securities Act at the request of the Holders,
any preliminary Prospectus or final Prospectus contained therein, or any summary
Prospectus issued in connection with the Conversion Shares, or any amendment or
supplement thereto, or (ii) any omission or alleged omission to state in any
such document a material fact required to be stated therein or necessary to make
the statements therein not misleading, in either case to the extent, and only to
the extent, that such untrue statement or omission (x) was made in such
Registration Statement, preliminary Prospectus, final Prospectus, summary
Prospectus, amendment or supplement in reliance upon and in conformity with
information furnished by such Holder specifically for use therein, or (y) such
untrue statement or omission was corrected in an amendment or supplement to the
Registration Statement or any preliminary Prospectus, summary Prospectus or
Prospectus that the Company made available to the Holders prior to the date of
the transaction giving rise to a claim of liability and that the Holder selling
Conversion Shares in such transaction failed to deliver to the person asserting
the claim prior to the consummation of the transaction, and shall reimburse such
Person for any legal or other expenses reasonably incurred by such Person in
connection with investigating or defending any such loss, claim, damage or
liability.
(c) Indemnification similar to that specified in subsections (a) and
(b) of this Section 4 (with such modifications as shall be appropriate) shall be
given by the Company or the Holder, as the case may be, under any federal or
state securities or blue sky law or regulation other than the Securities Act.
(d) Any Person that proposes to assert the right to be indemnified
under subsections (a), (b) or (c) of this Section 4 shall, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
Person in respect of which a claim is to be made against an indemnifying Person
under such subsections (a), (b) or (c), notify each such indemnifying Person of
the commencement of such action, suit or proceeding, enclosing a copy of all
papers served. The indemnifying Person shall have the right to investigate and
defend any such loss, claim, damage, liability or action and to employ separate
counsel in any such action and to control the defense thereof. The Person
seeking indemnification shall have the right to employ separate counsel in any
such action and to control the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the Person against whom
indemnification is sought; provided, however, that notwithstanding the
foregoing, in any case when indemnification is sought from a Person and (i) the
Person seeking indemnification has been advised by counsel that representation
of such Person and the indemnifying Person by the same counsel would be
inappropriate under applicable standards of professional conduct, or (ii) the
indemnifying Person has not proceeded in a timely manner to effect such defense,
then the reasonable fees and expenses of counsel for such Person shall be paid
by the Indemnifying Person and the Person seeking indemnification shall have the
right to control the defense of such action, suit or proceeding. In no event
shall a Person against whom indemnification is sought be obligated to indemnify
any Person for any settlement of any claim or action effected without the
indemnifying Person's consent. No indemnifying Person will consent to the entry
of any judgment or enter into any settlement (without the consent of the
indemnified Person) that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified Person of a release from
all liability in respect of the applicable claim or litigation.
(e) The indemnification provided for under this Section 4 will
remain in full force and effect regardless of any investigation made by or on
behalf of the Person seeking indemnification or any officer, director or
controlling Person of such Person seeking indemnification and will survive the
transfer of Conversion Shares.
(f) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified Person in respect of
any losses, claims, damages or liabilities in respect thereof referred to
herein, then each indemnifying Person shall, in lieu of indemnifying such
indemnified Person, contribute to the amount paid or payable by such indemnified
Person as a result of such losses, claims, damages or liabilities, in such
proportion as is appropriate to reflect the relative fault of the Company, on
the one hand, and the Holders, on the other, in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations, including the failure to
give the notice required hereunder. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the Company, on the one
hand, or the Holders, on the other hand, and the Persons' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 4 were determined by
pro rata allocation or by any other method of allocation that did not take
account of the equitable considerations referred to above. The amount paid or
payable by an indemnified Person as a result of the losses, claims, damages or
liabilities in respect thereof referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified Person in
connection with investigation or defending any such action or claim.
Notwithstanding the contribution provisions of this Section 4, in no event shall
the amount contributed by any Holder of Conversion Shares exceed the aggregate
gross offering proceeds received by such Holder from the sale of Conversion
Shares to which such contribution claim relates. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any Person who is not guilty of such fraudulent
misrepresentation.
5. Participation in Underwritten Registration. No Holder may
participate in any underwritten Registration hereunder unless (i) such Holder
agrees to sell such Holder's Conversion Shares on the basis provided in any
underwriting arrangements approved by the Company, (ii) such Holder completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) the Holders of a majority of the Conversion
Shares shall have designated a single agent to act for them in connection with
the Registration.
6. Assignability of Registration Rights. The registration rights set
forth in this Agreement shall accrue to each subsequent Holder of Conversion
Shares that consents in writing to be bound by the terms and conditions of this
Agreement.