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EXHIBIT 10.1
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of January 15, 1997, by
and between CEPHALON, INC., a Delaware corporation, with headquarters located at
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and
__________ (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company and the
Company wishes to sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, a promissory note of the Company having the
aggregate principal amount set forth on the signature page of this Agreement and
which will be convertible into shares of Common Stock, $.01 par value, and, if
the Company's Preferred Stock Purchase Plan is at the time still in effect, the
related Preferred Share Purchase Rights, or if any similar preferred share
purchase or similar rights are in effect at the time, such rights (together, the
"Common Stock") of the Company; and
WHEREAS, prior to the issuance of such promissory note, the
Company and Owen, Diaz & Altschul Fund I, Ltd., a British Virgin Islands
corporation as Collateral Agent (in such capacity as Collateral Agent, the
"Collateral Agent"), shall execute and deliver, one to the other, a Pledge and
Security Agreement in the form referred to herein which provides for the grant
to the Collateral Agent of a first priority perfected security interest in
certain collateral upon the terms and with the effect provided as described
therein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. PURCHASE AND SALE; PURCHASE PRICE.
(a) PURCHASE. The Buyer hereby agrees to purchase, and the
Company hereby agrees to sell to the Buyer, on the Closing Date (as defined
herein), a promissory note of the Company in the aggregate principal amount set
forth on the signature page of this Agreement and having the terms and
conditions and as set forth in the form of Senior Convertible Note attached
hereto as ANNEX I (the "Note") for the purchase price set forth on the signature
page of this Agreement. The shares of Common Stock issuable upon conversion of
the Note are herein collectively referred to as the "Shares." The Note, the
Debenture issuable on the maturity date of the Note, in the form attached as
Exhibit L to ANNEX I hereto (the "Debenture"), the shares of Common Stock
issuable upon the payment of interest on the Note (the "Interest Shares") and
the Shares are herein collectively referred to as the "Securities."
(b) FORM OF PAYMENT. Within three New York Stock Exchange
trading days after the date the Company and the Buyer execute and deliver this
Agreement, one to the other, the Buyer shall deposit the aggregate purchase
price for the Note in escrow by delivering funds in United States Dollars in the
amount set forth on the signature page of this Agreement to the escrow agent
(the "Buyer Escrow Agent") identified in the Buyer Escrow Instructions attached
hereto as ANNEX II (the "Buyer Escrow Instructions") against delivery by the
Company of the Note as provided herein on the Closing Date. Such funds shall at
all times remain the property of the Buyer, subject to the terms of the Buyer
Escrow Instructions, until required to be released to the Company in accordance
with the Buyer Escrow Instructions. By signing this Agreement, the Buyer agrees
to all of the terms and conditions of, and becomes a party to, the Buyer Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full. Neither the Company nor any creditor or
stockholder of the Company or any person claiming rights by, through or on
behalf of the Company shall have any claim, lien, equity,
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encumbrance or other right to or in respect of the funds or any other property
held pursuant to the Buyer Escrow Instructions prior to satisfaction of the
conditions to the release thereof to the Company in accordance with the terms of
this Agreement and the Buyer Escrow Instructions.
2. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER
The Buyer represents and warrants as of the date of this
Agreement to, and covenants and agrees with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Note
for its own account for investment and not with a view to, or any resale in
connection with any, distribution thereof within the meaning of the Securities
Act of 1933, as amended (the "1933 Act"); any Shares and Interest Shares
acquired by the Buyer will only be acquired for its own account for investment;
and the Buyer has no intention of making any distribution, within the meaning of
the 1933 Act, of the Shares and the Interest Shares except in compliance with
the registration requirements of the 1933 Act or pursuant to an exemption
therefrom;
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as that term is defined in Rule 501 of Regulation D ("Regulation D") under the
1933 Act by reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. The Buyer will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Securities except in compliance with the Securities Act and the rules and
regulations promulgated thereunder;
(d) COMPANY RELIANCE. The Buyer understands that the Note is
being offered and sold, the Shares and the Debenture are being offered and, upon
conversion of the Note, the Shares will be sold, and the Interest Shares will be
issued to it in reliance on one or more exemptions from the registration
requirements of the 1933 Act, including, without limitation, Regulation D, and
exemptions from state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein and in the Prospective Purchaser Questionnaire, a true and accurate
copy of which has been delivered by the Buyer to the Company (the
"Questionnaire"), in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities; and the information with
respect to the Buyer set forth in the Questionnaire is accurate and complete in
all material respects;
(e) INFORMATION PROVIDED. The Buyer and its advisors have
requested, received and considered all information relating to the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and information relating to the offer and sale of the
Note and the offer and, upon exercise of the Note, sale of the Shares deemed
relevant by them; the Buyer and its advisors have been afforded the opportunity
to ask questions of the Company concerning the terms of the Securities and the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review (1) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(the "1995 10-K"), (2) the Company's Current Reports on Form 8-K, dated January
19, 1996, February 12, 1996, February 20, 1996, March 14, 1996, April 16, 1996
and May 7, 1996, (3) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996 (the
"September 1996 10-Q") and (4) the Company's definitive
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Proxy Statement for its 1996 Annual Meeting of Stockholders (collectively, the
"SEC Reports"), in each case as filed with the Securities and Exchange
Commission (the "SEC"); the Buyer and its advisors have received and reviewed a
draft of the Registration Statement dated January 13, 1997 referred to in
Section 8(b) (the "Draft Registration Statement"), including without limitation
the risk factors set forth therein; the Buyer has, in connection with its
decision to purchase the Note, relied solely upon the SEC Reports, the Draft
Registration Statement, the representations, warranties, covenants and
agreements of the Company set forth herein and to be contained in the Note, as
well as any investigation of the Company completed by the Buyer or its advisors;
the Buyer understands that its investment in the Securities involves a high
degree of risk; and the Buyer understands that the offering of the Note is being
made to the Buyer as part of an offering without any minimum or maximum amount
of the offering (subject, however, to the right of the Company at any time prior
to execution and delivery of this Agreement by the Company, in its sole
discretion, to accept or reject an offer by the Buyer to purchase the Note);
(f) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities; and
(g) NOTE PURCHASE AGREEMENT. The Buyer has all requisite power
and authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the Buyer
in connection herewith and to consummate the transactions contemplated hereby
and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by
the Company, is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(h) BUYER STATUS. The Buyer is not a "broker" or "dealer" as
those terms are defined in the Securities Exchange Act of 1934, as amended (the
"1934 Act"), which is required to be registered with the SEC pursuant to Section
15 of the 1934 Act.
(i) SHORT POSITION. As of the date of this Agreement, the
Buyer does not, directly or indirectly, maintain a short position in the Common
Stock or own any puts, calls, options or other derivative securities in respect
of the Common Stock.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
COMPANY.
The Company represents and warrants as of the date of this
Agreement to, and covenants and agrees with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to (i)
own, lease and operate its properties and to carry on its business as described
in the SEC Reports and as currently conducted, and (ii) to execute, deliver and
perform its obligations under this Agreement, the Note and the other agreements
executed and delivered by the Company in connection herewith, and to consummate
the transactions contemplated hereby and thereby.
(b) SUBSIDIARIES. The Company has no subsidiaries other than
those subsidiaries listed in Exhibit 21 to the 1995 10-K (the "Subsidiaries")
and other subsidiaries of the Company which, individually and in the aggregate,
do not have any material assets or
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liabilities. The Company either owns directly or indirectly through a Subsidiary
all of the outstanding capital stock of each of the Subsidiaries free and clear
of all liens, security interests and other encumbrances of any nature
whatsoever. Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own or lease and
operate its properties and to conduct its business as described in the SEC
Reports and as currently conducted. There are no options or warrants for the
purchase of, or other rights to purchase or subscribe for, or outstanding voting
securities convertible into or exchangeable for, any capital stock or other
securities of any of the Subsidiaries.
(c) QUALIFICATIONS. The Company and the Subsidiaries are each
duly qualified to do business as a foreign corporation and are in good standing
in all jurisdictions wherein such qualification is necessary and where failure
so to qualify could have a material adverse effect on the condition (financial
or other), results of operations or prospects of the Company and its
Subsidiaries taken as a whole.
(d) CAPITALIZATION. The authorized capital of the Company
consists of (a) 100,000,000 shares of Common Stock, of which 24,618,220 shares
were outstanding as of December 31, 1996 and (b) 5,000,000 shares of Preferred
Stock, $.01 par value, of which 1,000,000 shares have been designated Series A
Junior Participating Preferred Shares and none are outstanding; on the Closing
Date there will be no material increase in the number of shares of Common Stock
and preferred stock outstanding, except for shares issued upon the exercise of
options and warrants outstanding on the date hereof or options or similar rights
granted subsequent to the date of this Agreement pursuant to the Company's stock
option plans in effect on the date of this Agreement. The September 1996 10-Q
discloses as of September 30, 1996 all outstanding options or warrants for the
purchase of, or other rights to purchase or subscribe for, or securities
convertible into or exchangeable for, Common Stock or other capital stock of the
Company, or any contracts or commitments to issue or sell Common Stock or other
capital stock of the Company or any such options, warrants, rights or other
securities; and from such date to the date hereof there has been no material
change in the amount or terms of any of the foregoing except for the grant of
514,416 shares of Common Stock pursuant to the Company's stock option plans. The
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable and all of such options, warrants and other
rights have been duly authorized by the Company. None of the holders of such
outstanding shares of Common Stock is subject to personal liability solely by
reason of being such a holder. None of the outstanding shares of Common Stock
and options, warrants and other rights to acquire Common Stock has been issued
in violation of the preemptive rights of any securityholder of the Company. The
offers and sales of the outstanding shares of Common Stock and options, warrants
and other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement (as defined in Section 8).
(e) MATERIAL LOSSES. Since the date as of which information is
given in the 1995 10-K or the September 1996 10-Q, the Company and the
Subsidiaries have not sustained any loss or interference with their respective
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which loss or interference would be
material to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries
taken as a whole.
(f) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares
have been duly authorized and, when issued upon conversion of the Note, will be
duly and validly issued,
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fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. The holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or other
rights to subscribe for the Shares or the Note. The Shares have been duly
reserved by the Company for issuance upon conversion of the Note, and shall
remain so reserved as long as the Note may be converted. The Common Stock is
listed for trading on the Nasdaq National Market ("Nasdaq") and (1) the Company
and the Common Stock meet the criteria for continued listing and trading on
Nasdaq; (2) the Company has not been notified since January 1, 1995 by the
National Association of Securities Dealers, Inc. (the "NASD") of any failure or
potential failure to meet the criteria for continued listing and trading on
Nasdaq and (3) no suspension of trading in the Common Stock is in effect.
(g) CORPORATE AUTHORIZATION; PERMITS AND LICENSES. This
Agreement, the Pledge and Security Agreement in the form attached hereto as
ANNEX III (the "Security Agreement"), the Note and the Debentures have been duly
and validly authorized by the Company; this Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by the Buyer,
this Agreement is, the Security Agreement will be, when executed and delivered
by the Company and the Buyer, and the Note and the Debenture will be, when
executed and delivered by the Company, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law.
(h) NON-CONTRAVENTION. The execution and delivery of this
Agreement, the Security Agreement, the Note and the Debenture by the Company and
the consummation by the Company of the issuance of the Securities and the other
transactions contemplated by this Agreement, the Security Agreement, the Note
and the Debenture do not and will not, with or without the giving of notice or
the lapse of time, or both, (i) result in any violation of any term of the
certificate of incorporation or by-laws of the Company, (ii) conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, or result in the modification of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of the Subsidiaries
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets are bound or affected (other than a loan in the outstanding principal
amount at December 31, 1996 of $3,750,000 to the Company from Sumitomo Bank,
Ltd. (the "Sumitomo Loan"), with regard to which the Company shall either (x)
repay such loan on or prior to the Closing Date or (y) obtain a written waiver
in form, scope and substance reasonably acceptable to the Buyer), or (iii)
violate or contravene any applicable law, rule or regulation or any applicable
decree, judgment or order of any court, United States federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any Subsidiary or any of their respective
properties or assets or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company or any of the Subsidiaries to own or lease and operate any of
their respective properties and to conduct any of their respective businesses or
the ability of the Company or any of the Subsidiaries to make use thereof.
(i) APPROVALS. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company in connection with the execution,
delivery and performance of this Agreement, the Security Agreement, the Note and
the Debenture and the issuance and sale of the Securities as contemplated by
this Agreement and the terms of the Note, other than (1) listing of the Shares
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and the Interest Shares on Nasdaq, (2) registration of the Shares and the
Interest Shares under the 1933 Act as contemplated by Section 8, (3) as may be
required under applicable state securities or "blue sky" laws, (4) the filing of
appropriate financing statements under the Uniform Commercial Code and (5)
filing of one or more Forms D with respect to the Securities as required under
Regulation D.
(j) INFORMATION PROVIDED. The information provided by or on
behalf of the Company to the Buyer and referred to in Section 2(e) of this
Agreement does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading, it
being understood that for purposes of this Section 3(j), any statement contained
in such information shall be deemed to be modified or superseded for purposes of
this Section 3(j) to the extent that a statement in any document included in
such information which was prepared or filed with the SEC on a later date
modifies or replaces such statement, whether or not such later prepared or filed
statement so states.
(k) CONDUCT OF BUSINESS. Except as set forth in the SEC
Reports, since the date as of which information is given in the 1995 10-K,
neither the Company nor any of the Subsidiaries has (i) incurred any material
obligation or liability (absolute or contingent) other than in the ordinary
course of business; (ii) canceled, without payment in full, any material notes,
loans or other obligations receivable or other debts or claims held by it other
than in the ordinary course of business; (iii) sold, assigned, transferred,
abandoned, mortgaged, pledged or subjected to lien any of its material
properties, tangible or intangible, or rights under any material contract,
permit, license, franchise or other agreement; (iv) conducted its business in a
manner materially different from its business as conducted on such date; (v)
declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any agreement with respect to, any transaction or event which would
constitute a "Repurchase Event" (as defined in the Note). Except as disclosed in
the SEC Reports, the Company and each of the Subsidiaries owns, possesses or has
obtained all governmental, administrative and third party licenses, permits,
certificates, registrations, approvals, consents and other authorizations
necessary to own or lease (as the case may be) and operate its properties,
whether tangible or intangible, and to conduct its business or operations as
currently conducted, except such licenses, permits, certificates, registrations,
approvals, consents and authorizations the failure of which to obtain would not
have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company, and the Subsidiaries taken as a whole.
(l) SEC FILINGS. The Company has timely filed all reports
required to be filed under the 1934 Act and any other material reports or
documents required to be filed with the SEC since January 1, 1994. All of such
reports and documents complied, when filed, in all material respects, with all
applicable requirements of the 1933 Act and the 1934 Act. The Company meets the
requirements for the use of Form S-3 for the registration of the resale of the
Shares by the Buyer and any Investor (as defined in Section 8).
(m) ABSENCE OF LITIGATION. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened against or affecting the Company
or any of the Subsidiaries wherein an unfavorable decision, ruling or finding is
reasonably likely and would reasonably be expected to have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiaries taken as
a whole or the transactions contemplated by this Agreement, the Security
Agreement, the Note, the Debenture or any of the documents contemplated thereby
or which would reasonably be expected to materially adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations
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under, this Agreement, the Security Agreement, the Note, the Debenture or any of
such other documents.
(n) LIABILITIES. Except as and to the extent disclosed,
reflected or reserved against in the consolidated financial statements of the
Company and the notes thereto included in the 1995 10-K or the September 1996
10-Q, as of the respective dates thereof the Company and the Subsidiaries had no
material (individually or in the aggregate) liabilities, debts or obligations
whether accrued, absolute, contingent or otherwise, and whether due or to become
due of a type required to be reflected on a consolidated corporate balance sheet
prepared in accordance with generally accepted accounting principles. Subsequent
to September 30, 1996, neither the Company nor any of the Subsidiaries has
incurred any liabilities, debts or obligations of any nature whatsoever, other
than those incurred in the ordinary course of its business, which are
individually or in the aggregate material to the Company and the Subsidiaries
taken as a whole.
(o) TRANSFER AGENT INSTRUCTIONS. No instruction other than the
instructions referred to in Section 8(c)(12) will be given by the Company to its
transfer agent for the Common Stock with respect to the Shares and the Shares
shall be freely transferable on the books and records of the Company as and to
the extent provided in this Agreement and the Note.
(p) INTELLECTUAL PROPERTY. Except as disclosed in the SEC
Reports, the Company and the Subsidiaries own, or possess adequate rights to
use, all patents, patent rights, inventions, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights described or referred to in the SEC Reports or
owned or used by them or which are necessary for the conduct of their respective
businesses as they are presently conducted, except where the failure to own or
possess adequate rights to use such patents, patent rights, inventions, trade
secrets, service marks, trade names and copyrights would not have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries,
taken as a whole. Except as disclosed in the SEC Reports, neither the Company
nor any of the Subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to, any patents, patent
rights, inventions, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to materially adversely affect
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries, taken as a whole,
as presently being conducted or as proposed to be conducted.
(q) INTERNAL ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls meeting the requirements of Section
13(b)(2) of the 1934 Act in all material respects.
(r) COMPLIANCE WITH LAW. Neither the Company nor any of the
Subsidiaries is in violation of any statute, law, rule, regulation, ordinance,
decision or order of any governmental agency or body or any court, domestic or
foreign, including, without limitation, those relating to the use, operation,
handling, transportation, disposal or release of hazardous or toxic substances
or wastes or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances or wastes, except where such
violation would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiaries taken as
a whole; and the Company is not aware of any pending investigation which would
reasonably be expected to lead to such a claim.
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(s) PROPERTIES. The Company and the Subsidiaries have good and
marketable title to all the properties and assets reflected in the consolidated
financial statements subject to no liens, mortgages, pledges, charges or
encumbrances of any kind except those reflected in such financial statements or
described in the 1995 10-K and the September 1996 10-Q or which are not material
in amount. The Company and the Subsidiaries occupy their leased properties under
valid and binding leases conforming to the description thereof set forth in the
SEC Reports. All material leases, contracts and agreements referred to in or
filed as exhibits to the SEC Reports to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries is
bound, are in full force and effect or have expired or terminated in accordance
with their terms or have been superseded by other leases, contracts or
agreements.
(t) LABOR RELATIONS. Neither the Company nor any of the
Subsidiaries is involved in any labor disputes which, either individually or in
the aggregate, could reasonably be expected to have a material adverse effect on
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries taken as a whole,
nor, to the knowledge of the Company, is any such dispute threatened.
(u) INSURANCE. The Company and the Subsidiaries maintain
insurance against loss or damage by fire or other casualty and such other
insurance, including but not limited to, product liability insurance, in such
amounts and covering such risks as the Company believes is commercially
reasonable.
4. CERTAIN COVENANTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees
that (1) the Note to be issued to it hereunder and the Debenture which may be
issued pursuant to the Note have not been and are not being registered under the
provisions of the 1933 Act or any state securities laws and, except as provided
in Section 8, the Shares and the Interest Shares have not been and are not being
registered under the 1933 Act or any state securities laws, and that the Note
and the Debenture may not be transferred unless the Buyer shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Note or the Debenture to be
transferred may be transferred without such registration; (2) no sale,
assignment or other transfer of the Note or the Debenture or any interest
therein may be made except to a Permitted Transferee (as defined in the Note and
the Debenture, respectively); (3) the Shares and the Interest Shares are not
transferable in the absence of registration under the 1933 Act, or applicable
state securities laws, or applicable exemptions therefrom; (4) any sale of the
Shares or the Interest Shares under the Registration Statement shall be made
only in compliance with the terms of this Section 4 and Section 8, including,
without limitation, the prospectus delivery requirements of the 1933 Act; (5)
any sale of the Securities made in reliance on Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any Securities to sell securities of the Company to the
public without registration ("Rule 144") may be made only in accordance with the
terms of said Rule and further, if the exemption provided by Rule 144 is not
available, any resale of the Securities under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (6) the Company is under no obligation to register the Securities (other
than registration of the Shares and the Interest Shares in accordance with
Section 8) under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder. The Buyer may not transfer the Shares or Interest Shares
in a transaction which does not constitute a transfer thereof pursuant to the
Registration Statement in accordance with the plan of distribution set forth
therein unless the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
that such Shares or Interest Shares may be transferred without registration
under the 1933 Act.
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(b) RESTRICTIVE LEGENDS. The Buyer acknowledges and agrees
that the Note shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Note):
This Note has not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws. The sale to the holder
of this Note of the Shares of Common Stock issuable upon conversion of this
Note and in payment of interest on this Note are not covered by a
registration statement under the Act or registration under state securities
laws. This Note has been acquired, and such shares must be acquired, for
investment only and may not be sold, transferred or assigned in the absence
of registration of the resale thereof or an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that such
registration is not required.
(c) NASDAQ LISTING; REPORTING STATUS. On or before the date
which is 15 days prior to the Closing Date, the Company will file with Nasdaq an
application or other document required by Nasdaq for the listing of the Shares
with Nasdaq and shall provide evidence of such filing to the Buyer. So long as
the Buyer beneficially owns any portion of the Note or any Shares, the Company
will use its best efforts to maintain the listing of the Common Stock on Nasdaq
or another national securities exchange. So long as the Company is required to
maintain effectiveness of the Registration Statement in accordance with Section
8 and its shares of Common Stock are publicly traded, the Company shall timely
file all reports required to be filed with the SEC pursuant to Section 13 or
15(d) of the 1934 Act, and the Company shall not, during the period the Company
is required to keep the Registration Statement effective pursuant to Section
8(c), terminate its status as an issuer required to file reports under the 1934
Act even if the 1934 Act or the rules and regulations thereunder would permit
such termination.
(d) FORM D. The Company agrees to file one or more Forms D
with respect to the Securities as required under Regulation D to claim the
exemption provided by Rule 506 of Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
(e) SECURITY AGREEMENT; FINANCING STATEMENTS. The Company
agrees to execute and deliver to the collateral agent named therein (the
"Pledgee") the Security Agreement in the form attached hereto as ANNEX III on or
before the Closing Date. The Company shall prepare, and on or before the Closing
Date, file with the appropriate officials, Uniform Commercial Code financing
statements on Form UCC-1 relating to the collateral in which the Company is
granting a security interest to the Buyer pursuant to the Security Agreement.
The Company shall provide evidence of such filings and customary search reports
of the records of the relevant Uniform Commercial Code filing offices on or
prior to the Closing Date.
(f) STATE SECURITIES LAWS. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Note for sale to the Buyer pursuant to this Agreement and the
Shares for sale upon conversion of the Note under such of the securities laws of
jurisdictions in the United States as shall be applicable to the sale of the
Note to the Buyer pursuant to this Agreement and issuance of the Shares upon
conversion of the Note. Prior to the issuance of the Debenture, the Company
shall take such actions under applicable state securities laws as shall be
necessary to qualify, or to obtain an exemption for, the Debenture under such
laws. In connection with the foregoing obligations of the Company in this
Section 4(f), the Company shall not be required (1) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 4(f), (2) to subject itself to general taxation in any such
jurisdiction, (3) to file a general consent to service of process in any such
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company or (5) to make any change in its charter or
by-laws which the Board of Directors of the Company determines to be contrary to
the best interests of
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the Company and its stockholders. The Company shall furnish the Buyer with
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities laws on or before the Closing Date.
(g) LIMITATION ON CERTAIN SALES OF COMMON STOCK. The Buyer
agrees not to make, directly or indirectly, any short sales of shares of Common
Stock or purchase, acquire or hold any puts, calls or other options or
derivative securities in respect of the Common Stock until the date the
Registration Statement is declared effective by the SEC.
(h) CERTAIN FUTURE FINANCINGS. The Company shall not issue any
equity securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any equity securities of the Company which
would, for purposes of Section 4460(i)(1)(D) of the rules of the NASD, be
integrated with the sale of the Note and the issuance of Shares upon conversion
of the Note.
(i) LIMITATION ON CERTAIN ACTIONS. From the date of execution
and delivery of this Agreement by the parties hereto to the date of issuance of
the Note, the Company (1) shall comply with Section 3.2 of the Note as if the
Note was outstanding, (2) shall not take any action which, if the Note was
outstanding, (A) would constitute an Event of Default (as defined in the Note)
or, with the giving of notice or the passage of time or both, would constitute
an Event of Default or (B) would constitute a Repurchase Event (as defined in
the Note) or, with the giving of notice or the passage of time or both, would
constitute a Repurchase Event.
(j) ESCROW RELEASE. (1) Contemporaneously with the submission
by the Company to the SEC of an acceleration request relating to the
Registration Statement (as defined herein) the Company will furnish a copy
thereof to the Buyer, together with the date and approximate time such
acceleration request was submitted to the SEC. The Company shall notify the
Buyer and the Buyer Escrow Agent (collectively, the "Company Notice") that the
Registration Statement shall have been declared effective by the SEC on the date
(the "SEC Effective Date") such event occurs. If the Company Notice shall have
been given and the conditions precedent in Section 7 shall have been satisfied
or waived by the Buyer, then promptly after the later of (x) the date the
Company Notice has been given to the Buyer, and (y) the date of satisfaction or
waiver by the Buyer of the conditions precedent in Section 7, the Buyer shall
notify the Buyer Escrow Agent that (1) the Registration Statement has been
declared effective and (2) all conditions precedent to the release of the
portion of the Escrow Funds (as defined in the Buyer Escrow Instructions) to be
released to the Company have been satisfied or waived. The Company and the Buyer
agree that, on the later of (1) the date of receipt by the Buyer Escrow Agent of
such notice from the Buyer, and (2) the date of receipt by the escrow agents
acting on behalf of the buyers in connection with the several other Note
Purchase Agreements, dated as of the date hereof, between the Company and the
several buyers named therein of the latest of the notices from such buyers to
release funds held by such escrow agents to the Company, or as promptly as
practicable thereafter, the portion of the Escrow Funds to be released to the
Company shall be released to the Company in accordance with Section 1 of the
Buyer Escrow Instructions.
(2) If the SEC Effective Date is not within 60 days after the
date the Company and the Buyer execute and deliver this Agreement, one to the
other, the Buyer shall have the right, exercisable pursuant to Section 10 to
terminate this Agreement with the effect provided in Section 10 and the right by
notice to the Buyer Escrow Agent pursuant to the Buyer Escrow Instructions, to
terminate the escrow under the Buyer Escrow Instructions as to all of the Note,
whereupon, the Buyer shall be entitled to release of all Escrow Funds (as
defined in the Buyer Escrow Instructions), together with interest thereon as
contemplated by the Buyer Escrow Instructions, from the escrow created by the
Buyer Escrow Instructions.
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5. CLOSING DATE.
The date and time of the issuance and sale of the Note (the
"Closing Date") shall be 12:00 noon, New York City time, on the SEC Effective
Date or such other mutually agreed to time. The closing shall occur at the Law
Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇, Penthouse Suite, 29 West 57th Street, New York, New
York.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Note to the Buyer pursuant to this Agreement is conditioned upon the
following (any or all of which may be waived by the Company in its sole
discretion):
(a) The release by the Buyer Escrow Agent to the Company on
the Closing Date of an amount equal to the purchase price for the Note;
(b) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(c) The representations and warranties of the Buyer contained
in this Agreement and in the Questionnaire shall have been true and correct on
the date of this Agreement and on or before the Closing Date the Buyer shall
have performed all covenants and agreements of the Buyer required to be
performed by the Buyer on or before the Closing Date;
(d) The Registration Statement shall have been declared
effective by the SEC and no stop order or similar proceeding relating to the
Registration Statement shall be pending or threatened (it being understood that
the inclusion of the closing condition set forth in this clause (d) shall not
limit the Company's obligations set forth in Section 8); and
(e) No event which, if the Note was outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage of
time or both, would constitute an Event of Default shall have occurred and be
continuing or (2) would constitute a Repurchase Event or, with the giving of
notice or the lapse of time, or both, would constitute a Repurchase Event shall
have occurred and be continuing; and
(f) the Company shall have received an opinion of the Law
Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇, dated the Closing Date, addressed to the Company,
substantially in the form of ANNEX IV attached hereto.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Note is conditioned upon the following (any or all of which may be
waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Buyer of the Note on the
Closing Date in accordance with this Agreement;
(b) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
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(c) The representations and warranties of the Company
contained in this Agreement shall have been true and correct on the date of this
Agreement, and on or before the Closing Date the Company shall have performed
all covenants and agreements of the Company contained herein required to be
performed by the Company on or before the Closing Date;
(d) The Registration Statement shall have been declared
effective by the SEC and no stop-order or similar proceeding relating to the
Registration Statement shall be pending or threatened;
(e) No event which, if the Note was outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage of
time or both, would constitute an Event of Default shall have occurred and be
continuing or (2) would constitute a Repurchase Event or, with the giving of
notice or the lapse of time, or both, would constitute a Repurchase Event shall
have occurred and be continuing;
(f) The Company shall have delivered to the Buyer its
certificate, dated the Closing Date, duly executed by its President and Chief
Executive Officer or Chief Operating Officer to the effect set forth in
subparagraphs (b), (c), (d) and (e) of this Section 7;
(g) The Buyer shall have (1) received written evidence
reasonably satisfactory to the Buyer of the repayment in full of the Sumitomo
Loan or (2) a written waiver from Sumitomo Bank, Ltd., in form, scope and
substance reasonably satisfactory to the Buyer, regarding the transactions
contemplated by this Agreement;
(h) On or prior to the Closing Date, the Buyer shall have
received written confirmation from the transfer agent of the Company that the
instructions set forth in ANNEX VII attached hereto and the form of opinion set
forth in ANNEX VIII attached hereto and required to be furnished by Company
counsel to the transfer agent pursuant to Section 8(c)(12) are satisfactory for
the purposes of causing certificates for the Shares to be issued and delivered
to or at the direction of the Buyer without further action by the Company, the
Buyer or any other person (other than completion, execution and delivery by the
Buyer of a Notice of Conversion of Convertible Note in the form attached to the
Note);
(i) On the Closing Date, the Buyer having received an opinion
of ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Company, dated the Closing Date,
addressed to the Buyer, in form, scope and substance reasonably satisfactory to
the Buyer, substantially in the form of ANNEX V attached hereto, and an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., Senior Vice President and General Counsel of the
Company, dated the Closing Date and addressed to the Buyer, in form, scope and
substance reasonably acceptable to the Buyer, substantially in the form of ANNEX
VI attached hereto;
(j) On the Closing Date, the Buyer having received an opinion
of the Law Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇, dated the Closing Date, addressed to the
Company substantially in the form of ANNEX IV attached hereto;
(k) On the Closing Date, (i) trading in securities on the New
York Stock Exchange, the American Stock Exchange or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the Commonwealth of Pennsylvania or the State of New York
shall not have been declared by either federal or state authorities; and
(l) The Pledgee shall have executed and delivered to the
Company the Security Agreement in the form attached hereto as ANNEX III.
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8. REGISTRATION RIGHTS.
(a) DEFINITIONS. As used in this Section 8 and Section 11(j),
the following terms shall have the following meanings:
(1) "Investor" means the Buyer and any permitted transferee or
assignee who agrees to become bound by the provisions of Sections 4(a), 4(b) and
4(g) and this Section 8 of this Agreement in accordance with Section 11(j)(2)
hereof.
(2) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
(3) "Registrable Securities" means the Shares and the Interest
Shares, in each case together with the related Preferred Share Purchase Rights
(so long as the Company's Preferred Stock Purchase Rights Plan is in effect),
and any stock or other securities into which or for which the Common Stock may
hereafter be changed, converted or exchanged by the Company or its successor, as
the case may be, and any other securities issued to holders of such Common Stock
(or such shares into which or for which such shares are so changed, converted or
exchanged) upon any reclassification, share combination, share subdivision,
share dividend, merger, consolidation or similar transaction or event.
(4) "Registration Statement" means a registration statement on
Form S-3 of the Company under the 1933 Act which names the Investors as selling
stockholders.
(b) MANDATORY REGISTRATION. The Company shall prepare and, on
or prior to the date which is 20 days after the date of this Agreement, file
with the SEC a Registration Statement on Form S-3 covering the resale of up to
[INSERT PRO RATA PORTION OF 1,440,000] shares of Common Stock (or such greater
number of shares of Common Stock as shall be included for resale by the Buyer in
the Registration Statement) which may be issued upon conversion of the Note and
the resale of such additional number of shares of Common Stock as the Company
shall in its discretion determine to register in connection with the issuance of
the Interest Shares, as Registrable Securities, and which Registration Statement
shall state that, in accordance with Rule 416 under the 1933 Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Note to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.
(c) OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(1) prepare promptly, and file with the SEC not later than 20
days after the date of this Agreement, a Registration Statement with respect to
the number of Registrable Securities provided in Section 8(b), and thereafter to
use its best efforts to cause each Registration Statement relating to
Registrable Securities to become effective within 60 days after the execution
and delivery of this Agreement by the parties hereto, and, subject to Section
8(c)(5), keep the Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (a) such time as all of the Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the Investors and (b) such date as is three years after the Closing Date (or, if
(x) the Note shall have been fully converted into shares of Common Stock, (y)
the Maturity Date (as defined in the Note) shall have occurred or (z) the Note
shall no longer remain outstanding, such date after which each Investor may sell
all Registrable Securities
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without registration under the 1933 Act pursuant to Rule 144, free of any
limitation on the volume of such securities which may be sold in any period).
The Company represents and warrants to the Investors that (a) the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it is first filed with the SEC, at the time it
is ordered effective by the SEC and at all times during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (b) the prospectus used in connection with the Registration
Statement and any amendment or supplement thereto (the "Prospectus") shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(2) subject to Section 8(c)(5), prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times until
such date as is three years after the Closing Date (or such earlier date as
shall be permitted under Section 8(c)(1)), and, during such period, comply with
the provisions of the 1933 Act applicable to the Company in order to permit the
disposition by the Investors of all Registrable Securities covered by the
Registration Statement.
(3) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each Prospectus and each amendment or supplement thereto, (2) each letter
written by or on behalf of the Company to the SEC or the staff of the SEC and
each item of correspondence from the SEC or the staff of the SEC relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
each of which the Company hereby determines to be confidential information and
which the Buyer hereby agrees to keep confidential as a confidential Record in
accordance with Section 8(c)(9) and (3) such number of copies of a Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(4) subject to Section 8(c)(5), use its best efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Investors who hold a majority in interest of the Registrable Securities
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until such date as is three years after the Closing Date (or such earlier
date as shall be permitted under Section 8(c)(1)), (iii) take such other actions
as may be necessary to maintain such registrations and qualifications in effect
at all times until such date as is three years after the Closing Date (or such
earlier date as shall be permitted under Section 8(c)(1)) and (iv) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale by the Investors in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 8(c)(4), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws which the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders;
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(5) (i) as promptly as practicable after becoming aware of
such event, notify each Investor of the happening of any event of which the
Company has knowledge, (A) as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (B) which requires the Company to amend
or supplement the Registration Statement due to the receipt of new or additional
information about an Investor or its intended plan of distribution of its
Shares, and use its best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or omission or to
reflect such new or additional information, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(ii) notwithstanding Section 8(c)(5)(i) above, if at the time
the Company notifies the Investor as contemplated by Section 8(c)(5)(i) the
event giving rise to such notice relates to a development involving the Company
which occurred subsequent to the later of (x) the SEC Effective Date and (y) the
latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment or supplement until information
concerning such development first becomes publicly available.
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(7) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold (and identified in writing to the Company by
such Investors prior to the Closing Date) to review at such Investors' sole
expense the Registration Statement and all amendments and supplements thereto at
least two business days (or such shorter period as may reasonably be specified
by the Company) prior to their filing with the SEC;
(8) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the ▇▇▇▇ ▇▇▇) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(9) make available for inspection by any Investor and any
attorney, accountant or other agent retained by any such Investor (collectively,
the "Inspectors") at such Investor's sole expense, all pertinent financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary solely to enable
each Investor to exercise its due diligence responsibility with respect to
Section 11 of the 1933 Act as it relates to the Registration Statement, and
cause the Company's officers, directors and employees to supply all information
which any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction or (ii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such
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Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 8(c)(9). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Investor provided
to the Company pursuant to this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor and allow such Investor, at such Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information;
(10) use its best efforts to cause all the Registrable
Securities covered by the Registration Statement as of the SEC Effective Date to
be listed on the Nasdaq National Market or such other principal securities
market on which securities of the same class or series issued by the Company are
then listed or traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the SEC Effective
Date;
(12) cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts as the Investors may
reasonably request and registered in such names as the Investors may request;
and, not later than the day on which the Registration Statement is declared
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an instruction substantially in the
form attached hereto as ANNEX VII and an opinion of such counsel, if required by
the Company's transfer agent, in the form attached hereto as ANNEX VIII; and
(13) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 8(c)(1), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations in Rule
10b-6 under the 1934 Act, so long as it remains in effect, and Regulation M
under the 1934 Act, once it becomes effective.
(d) OBLIGATIONS OF THE BUYER AND OTHER INVESTORS. In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(1) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the
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Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. Prior
to the execution of this Agreement, the Buyer shall complete and submit to the
Company an Investor Questionnaire in the form attached hereto as ANNEX IX;
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder;
(3) Each Investor agrees that it will not effect any
disposition of the Registrable Securities except as contemplated in the
Registration Statement or as otherwise in compliance with applicable securities
laws and that it will promptly notify the Company of any material changes in the
information set forth in the Registration Statement regarding such Investor or
its plan of distribution; each Investor agrees (a) to notify the Company in
writing in the event that such Investor enters into any material agreement with
a broker or a dealer for the sale of the Registrable Securities through a block
trade, special offering, exchange distribution or a purchase by a broker or
dealer and (b) in connection with such agreement, to provide to the Company in
writing the information necessary to prepare any supplemental prospectus
pursuant to Rule 424(c) under the 1933 Act which is required with respect to
such transaction;
(4) Each Investor acknowledges that there may occasionally be
times, including such times as specified in Section 8(c)(5) or 8(c)(6), when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC
(including, without limitation, an amendment required to reflect new or
additional information about an Investor or its intended plan of distribution of
the Shares or the Interest Shares), or until such time as the Company has filed
an appropriate report with the Commission pursuant to the Exchange Act. Each
Investor hereby covenants that it will not sell any Registrable Securities
pursuant to said prospectus during the period commencing at the time at which
the Company gives such Investor notice of the suspension of the use of said
prospectus and ending at the time the Company gives such Investor notice that
such Investor may thereafter effect sales pursuant to said prospectus, or until
the Company delivers to such Investor an amended or supplemented prospectus;
(5) Each Investor agrees not to make any sale or other
transfer of the Registrable Securities pursuant to the Registration Statement
without effectively causing the prospectus delivery requirement under the ▇▇▇▇
▇▇▇ to be satisfied;
(6) Each Investor agrees to notify the Company promptly after
the event of the completion of the sale by such Investor of all Registrable
Securities to be sold by such Investor pursuant to the Registration Statement;
and
(7) Each Investor agrees not to use Registrable Securities for
the purpose of covering any short sale by such Investor of Common Stock unless
at the time of such short sale such Investor shall have complied with the
requirements of Section 8(d)(5) with respect to such short sale.
(e) EXPENSES OF REGISTRATION. All reasonable expenses incurred
in connection with registrations, filings or qualifications pursuant to this
Agreement shall be paid by the Company, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, but excluding (a) fees
and expenses of investment bankers retained by any Investor, (b) brokerage
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commissions incurred by any Investors and (c) fees and disbursements of counsel
for the Investors.
(f) INDEMNIFICATION.
(1) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities and each
Investor who sells such Registrable Securities in the manner permitted this
Agreement, the directors, if any, of such Investor, the officers, if any, of
such Investor, each person, if any, who controls any Investor within the meaning
of the 1933 Act or the 1934 Act, any underwriter (as defined in the ▇▇▇▇ ▇▇▇)
acting on behalf of an Investor who participates in the offering of Registrable
Securities of such Investor in accordance with the plan of distribution
contained in any prospectus included in the Registration Statement, the
directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may become subject under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations in
the Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) any untrue statement or alleged
untrue statement of a material fact contained in any prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading (the
matters in the foregoing clauses (i) through (ii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 8(f)(3) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such controlling person, promptly as such expenses are
incurred and are due and payable, for any documented and reasonable legal fees
or other documented and reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(f)(1): shall not apply to (I) a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
relating to an Indemnified Person furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 8(c)(3) hereof; (II) any Claim
arising out of or based on the failure of the Indemnified Person to comply with
the covenants and agreements contained in Section 4 or Section 8 hereof
respecting sales of the Registrable Securities or any statement or omission in
any prospectus which was corrected in any subsequent prospectus that was
delivered to the Indemnified Person prior to the pertinent sale or sales by the
Indemnified Person; and (III) amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 11(j)(2). The
Company and the Buyer agree that the information set forth in the Investor
Questionnaire and under the heading "Plan of Distribution" is the only
information furnished by the Buyer in writing expressly for use in connection
with preparation of the Registration Statement on or prior to the date hereof.
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(2) In connection with the Registration Statement, each
Investor agrees to indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 8(f)(1), the Company, each of its directors,
each of its officers who signs the Registration Statement, each person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 8(f)(2) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
8(f)(2) for only that amount of a Claim as does not exceed the amount of the
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 11(j)(2). Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(f)(2) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 8(f) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 8(f), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding; provided, further, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel for all
Indemnified Persons hereunder. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 8(f), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 8(f) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(g) CONTRIBUTION. To the extent any indemnification by an
indemnifying party as set forth in Section 8(f) above is applicable by its terms
but is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any
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amounts for which it would otherwise be liable under Section 8(f) to the fullest
extent permitted by law. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative fault of
each party, the parties' relative knowledge of and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances; provided, however,
that (a) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth in
Section 8(f), (b) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from
any other person who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the proceeds received by such seller from the sale of such Registrable
Securities.
(h) REPORTS UNDER 1934 ACT. With a view to making available to
the Investors the benefits of Rule 144, the Company agrees to:
(a) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other information as may be necessary to
permit the Investors to sell such securities pursuant to Rule 144 without
registration; and
(b) if at any time the Company is not required to file such
reports with the SEC, use its best efforts to, upon the request of an Investor,
make publicly available other information so long as is necessary to permit
publication by brokers and dealers of quotations for the Common Stock and sales
of the Registrable Securities in accordance with Rule 15c2-11 under the 1934
Act.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements of the Company
and of the Buyer contained herein will survive the execution and delivery hereof
and the Closing hereunder and delivery of and payment for the Note, and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Buyer or any person who controls the Buyer within
the meaning of the 1933 Act, or by or on behalf of the Company or any person who
controls the Company within the meaning of the 1933 Act.
10. TERMINATION.
Notwithstanding any other provision of this Agreement, if the
Registration Statement shall not have been declared effective by the SEC within
60 days after the date of execution and delivery of this Agreement by the
parties hereto, then at any time thereafter the Buyer shall have the right,
exercisable by notice to the Company, to terminate this Agreement, whereupon the
Buyer and the Company shall have no further liability or obligation of any kind
whatsoever one to the other under this Agreement or in connection with the
transactions contemplated hereby other than any liability or obligation arising
from a breach of this Agreement or any of the related agreements which breach
occurred prior to such termination. Notwithstanding any other provision of this
Agreement, if the Registration Statement shall not have been declared effective
by the SEC within 120 days after the date of execution and delivery of this
Agreement by the parties hereto, then at any time thereafter so long as at the
time the Company shall have performed all obligations required to be performed
by the Company under this Agreement and the related agreements at or prior to
such time, the Company shall have the right, exercisable by notice to the Buyer,
to terminate this Agreement, whereupon the Buyer and
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the Company shall have no further liability or obligation of any kind whatsoever
one to the other under this Agreement or in connection with the transactions
contemplated hereby other than any liability or obligation arising from a breach
of this Agreement or any of the related agreements which breach occurred prior
to such termination.
11. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) HEADINGS. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(c) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(d) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by mail, personal delivery, by
telephone line facsimile transmission or courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally, by telephone line facsimile transmission or by courier, in each case
addressed to a party at such party's address (or telephone line facsimile
transmission number) shown in the introductory paragraph or on the signature
page of this Agreement or such other address (or telephone line facsimile
transmission number) as a party shall have provided by notice to the other party
in accordance with this provision. In the case of any notice to the Company, a
copy shall also be given to: ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq. (telephone
line facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇), and in the case of any
notice to the Buyer, a copy shall be given to:
__________________________________________, Attention:, _______________, Esq.
(telephone line facsimile transmission number (___) ___-____), in each case with
a copy to: Owen, Diaz & Altschul Securities, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (telephone line facsimile transmission number (212)
751-5757).
(e) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(f) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the
Annexes hereto, constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein.
This Agreement, including the Annexes hereto, supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof. This Agreement and the terms and provisions hereof are for the sole
benefit of only the Company, the Buyer and their respective successors and
permitted assigns.
(g) WAIVER. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any
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abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or exercise of any other right or
power.
(h) AMENDMENT. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(i) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(j) ASSIGNMENT; TRANSFER OF REGISTRATION RIGHTS. (1) On or
prior to the Closing Date, the Buyer may assign its rights under this Agreement
with respect to the purchase of all or any portion of the Note to any entity of
which 70% or more of the beneficial ownership of such entity is beneficially
owned by the beneficial owners of the Buyer or which entity has the same
investment adviser as the Buyer, if such assignee shall agree in writing to make
all of the representations and warranties of the Buyer hereunder and assume in
writing all obligations of the Buyer hereunder with respect to the purchase of
the portion of the Note so assigned, in which case the Buyer shall be relieved
of any further obligation hereunder with respect to the purchase of the portion
of the Note so assigned and, thereafter, all references herein to the Buyer
shall mean, with respect to the portion of the Note so assigned, such assignee;
provided, however, in the event that such assignee shall default in its
obligation to purchase the portion of the Note so assigned to it, the Buyer
shall remain obligated under this Agreement to purchase such portion of the Note
as if such assignment had not been made.
(2) The rights to have the Company register Registrable
Securities pursuant to Section 8 shall be automatically assigned by the Buyer or
any other Investor to any Permitted Transferee (as defined in the Note) only if:
(a) the Buyer or such other Investor agrees in writing with the transferee or
assignee to assign such rights, a copy of such agreement is furnished to the
Company within a reasonable time after such assignment and the transfer has been
made in compliance with the provisions of the Agreement and the Note, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name, address and principal place of
business of such transferee or assignee and the information requested in the
Investor Questionnaire and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, and (d) at or before the time the Company received the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained in Sections 4(a), 4(b) and 4(g) and Section 8, including without
limitation the obligation to submit an Investor Questionnaire to the Company. In
connection with any such transfer, the Company shall, at its sole cost and
expense, promptly after such transfer take such actions as shall be reasonably
acceptable to the Buyer or such other Investor, as the case may be, and such
transferee to assure that the Registration Statement and related Prospectus are
available for use by such transferee for sales of the Registrable Securities in
respect of which the rights to registration have been so assigned.
(k) EXPENSES. Each of the Company and the Buyer shall bear its
own expenses in connection with this Agreement and the transactions contemplated
hereby.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
Principal Amount: $________________
Purchase Price: $________________
[NAME OF BUYER]
By ____________________________________
Date: __________________________________
Address:
Facsimile No.:
CEPHALON, INC.
By: ___________________________________
J. ▇▇▇▇▇ ▇▇▇▇▇
Senior Vice President, Finance
and Chief Financial Officer
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇