Annex I
to
Note Purchase
Agreement
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. THE ISSUANCE 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 1933 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 UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
THIS NOTE IS ISSUED PURSUANT TO A NOTE PURCHASE AGREEMENT, DATED AS OF SEPTEMBER
8, 1997, BY AND BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THIS NOTE, AS
AMENDED FROM TIME TO TIME, AND THE HOLDER OF THIS NOTE AND THIS NOTE ARE SUBJECT
TO CERTAIN OF THE TERMS OF THE NOTE PURCHASE AGREEMENT.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 8.7.
The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of SECTION 2.3(b), following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be less than the amount stated on the face hereof.
SUGEN, INC.
5% SENIOR CUSTOM CONVERTIBLE NOTE
No. ________ $_________
New York, New York
September , 1997
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FOR VALUE RECEIVED, SUGEN, INC., a Delaware corporation (hereinafter
called the "Company"), hereby promises to pay to [INSERT NAME AND ADDRESS OF
BUYER], or registered assigns (the "Holder") or order, the sum of _________
Dollars ($_________________), on the Maturity Date, and to pay interest on the
unpaid principal balance hereof at the Applicable Rate from the date hereof,
until the same becomes due and payable, whether at maturity or upon acceleration
or by repurchase in accordance with the terms hereof or otherwise. Any amount of
principal of or interest on this Note which is not paid when due shall bear
interest at the Default Rate from the due date thereof until the same is paid
("Default Interest"). Interest shall be payable in arrears on each Interest
Payment Date, commencing on November 15, 1997, on the principal amount
outstanding on such date. Interest on this Note shall be computed on the basis
of a 360-day year of 12 30-day months and actual days elapsed. No interest shall
be payable on an Interest Payment Date on any portion of the principal amount of
this Note which shall have been converted or redeemed prior to such Interest
Payment Date so long as the Company shall have complied in full with its
obligations with respect to such conversion or redemption.
Except as otherwise specifically provided in Article VI, all payments
of principal of and premium, if any, and interest on this Note shall be made in
lawful money of the United States of America, or, at the option of the Company
and subject to the provisions of this Note, interest payable on the Interest
Payment Dates may be paid in whole or in part in fully paid and nonassessable
shares of Common Stock. All cash payments shall be made by wire transfer of
immediately available funds to such account as the Holder may from time to time
designate by written notice in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note is due on any
day which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any Interest Payment
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. Certain capitalized terms used in this
Note are defined in Article VII.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
indebtedness for borrowed money or the purchase price of property. This Note is
issued pursuant to the Note Purchase Agreement and the Holder of this Note and
the Note are subject to the terms of the Note Purchase Agreement. The aggregate
principal amount of this Note and the Other Notes is $17,500,000.00.
The following terms shall apply to this Note:
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ARTICLE I
INTEREST IN COMMON STOCK; NO PREPAYMENT
1.1 Issuance of Common Stock in Lieu of Cash Interest.
(a) If the Company exercises its option to make a payment of interest
on this Note wholly or partly in shares of Common Stock (herein sometimes called
the "Stock Payment Option"), the issuance of Payment Shares upon such exercise
of the Stock Payment Option shall have been authorized by the Board of Directors
of the Company.
(b) The Company shall not be permitted to exercise the Stock Payment
Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Payment Shares or the public resale of
such Payment Shares by the Holder would require registration with or
approval of any governmental authority under any law or regulation, and
such registration or approval has not been effected or obtained or is not
in effect and the Registration Statement is unavailable for use by the
Holder for the resale of the Payment Shares; provided, however, that with
respect to compliance with the securities or blue sky laws of the states of
the United States, the requirements of this clause (ii) shall be deemed
satisfied if at the applicable time the Company is in compliance with
Section 8(b) of the Note Purchase Agreement;
(iii) the Payment Shares shall not at the time of issuance have been
authorized for listing, upon official notice of issuance, on the principal
securities exchange on which the Common Stock is then listed and traded;
(iv) the Computed Price for the Payment Shares is less than the par
value of the Common Stock;
(v) an Event of Default has occurred and is continuing;
(vi) the Common Stock is neither (i) listed or admitted for trading on
a national securities exchange nor (ii) quoted on Nasdaq; or
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(vii) the issuance of Payment Shares would result in the Holder
(including all Aggregated Persons) beneficially owning more than 4.9% of
the Common Stock, determined as provided in the second sentence of Section
2.1.
(c) If the Stock Payment Option is elected, the Company shall issue and
dispatch or cause to be dispatched to the Holder one or more certificates for
the aggregate number of whole shares of Common Stock determined by dividing the
per share Computed Price of the Common Stock on the applicable Interest Payment
Date into the total amount of lawful money of the United States of America which
the Holder would receive if the aggregate amount of interest on this Note which
is being paid in shares of Common Stock were being paid in such lawful money;
provided, however, that if in connection with any such election the Company
shall have failed to notify the Holder on or before the particular Interest
Payment Date that the Company has elected to use the Stock Payment Option with
respect to such Interest Payment Date or to deliver the appropriate number of
shares of Common Stock to the Holder within five Trading Days after the
applicable Interest Payment Date, then the Company shall not be entitled to use
the Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in the Note, from such Interest Payment Date until paid. No
fractional shares will be issued in payment of interest on this Note. In lieu
thereof, the Company may, at its option, issue a number of shares of Common
Stock which reflects a rounding up to the next whole number or may pay lawful
money of the United States of America in lieu of issuance of such fractional
share.
(d) If the Company exercises the Stock Payment Option with respect to a
payment of interest on this Note, the Company shall deliver to the Holder, on or
prior to the date on which Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the interest payment to which the Holder is entitled, (ii)
the portion of the interest payment being made in Payment Shares, (iii) the
number of Payment Shares allocable to such payment, as calculated pursuant to
this Section 1.1, (iv) any rounding adjustment to such number or any payment
necessary to be made pursuant to Section 1.1(c), (v) a brief statement of the
facts requiring such adjustment, (vi) the number of Payment Shares issuable with
respect to each $100 of interest on this Note after such adjustment and (vii) a
brief statement that none of the conditions set forth in Section 1.1(b) has
occurred and is existing. The certificates for the Payment Shares shall be duly
issued in the name of the Holder or its nominee, representing the Payment
Shares. Such Company Certificate shall be conclusive evidence of the correctness
of the calculation of the number of Payment Shares allocable to the payments to
which such Company Certificate relates and of any adjustments to such number
made pursuant to this Section 1.1 in the absence of manifest error. In addition,
on or before the pertinent payment date, the Company shall cause the transfer
agent for the Common Stock to prepare and issue the certificates representing
the Payment Shares in
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the name of the Holder before being so delivered by the Company on the payment
date.
(e) The Payment Shares, when issued pursuant to and in compliance with
this Section 1.1, shall be, and for all purposes shall be deemed to be, validly
issued, fully paid and nonassessable shares of Common Stock; the issuance and
delivery thereof will in all respects be authorized; and the issuance thereof,
together with lawful money of the United States of America, if any, paid in lieu
of fractional shares of such Common Stock, will be, and for all purposes shall
be deemed to be, in full discharge and satisfaction of the Company's obligation
to pay the interest on this Note to which such Payment Shares relate.
(f) Upon request of the Company from time to time, the Holder shall
provide information concerning the number of Payment Shares which may be issued
to the Holder within the limitation provided in Section 1.1(b)(vii).
1.2 No Prepayment, Etc. This Note may not be prepaid, redeemed or
repurchased at the option of the Company prior to the Maturity Date.
ARTICLE II
CONVERSION; CERTAIN MANDATORY REDEMPTION
RIGHTS AND OBLIGATIONS
2.1 Conversion Right. The Holder shall have the right on and after the
date which is 90 days after the Issuance Date to the date this Note is paid in
full, to convert at any time all or from time to time any part of the
outstanding and unpaid principal amount of this Note, in each such case of at
least $10,000, or such lesser amount as shall remain unpaid at the time of the
conversion or shall be convertible within the limitation on beneficial ownership
provided in the second sentence of Section 2.1 or may be permitted from time to
time by the Company in its discretion, and in each such case accrued and unpaid
interest on the principal amount to be converted and Default Interest on any
such interest, into fully paid and nonassessable shares of Common Stock at the
Conversion Price in effect on the date the applicable Conversion Notice is given
in accordance with this Note. Notwithstanding any other provision of this Note,
in no event shall the Holder be entitled at any time to convert any portion of
the principal amount of this Note (and accrued and unpaid interest thereon and
Default Interest on any such interest) in excess of that portion of the
principal amount of this Note (and accrued and unpaid interest thereon and
Default Interest on any such interest) upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder (including
shares of Common Stock beneficially owned by all Aggregated Persons) (other than
shares of Common Stock deemed beneficially owned by the Holder or any Aggregated
Person of the Holder through the ownership of (x) the unconverted portion of the
principal
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amount of this Note and the Other Notes and accrued and unpaid interest thereon
and on any such interest and (y) the unconverted or unexercised portion of any
instrument which contains limitations similar to those set forth in this
sentence) and (2) the number of shares of Common Stock issuable upon conversion
of the portion of the principal amount of this Note and accrued and unpaid
interest thereon and Default Interest on any such interest with respect to which
the determination in this sentence is being made, would result in beneficial
ownership by the Holder and all Aggregated Persons of the Holder of more than
4.9% of the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the 1934 Act, and Regulation 13D-G thereunder, except as
otherwise provided in clause (1) of the immediately preceding sentence. For
purposes of the second preceding sentence, the Company shall be entitled to
rely, and shall be fully protected in relying, on any statement or
representation made by the Holder to the Company in connection with a particular
conversion, without any obligation on the part of the Company to make any
inquiry or investigation or to examine its records or the records of any
transfer agent for the Common Stock and without any liability of the Company
with respect thereto. The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing the sum of (1) that
portion of the principal amount of this Note to be converted plus (2) accrued
and unpaid interest on such principal amount to the date the Conversion Notice
for such conversion is given plus (3) accrued and unpaid Default Interest, if
any, on the amount referred to in the immediately preceding clause (2) to the
date such Conversion Notice is given, by the Conversion Price in effect on the
date the Conversion Notice for such conversion is given.
2.2 Authorized Shares. The Company covenants that, during the period
the conversion rights exist, the Company will reserve from its authorized and
unissued Common Stock [INSERT THE LESSER OF 20% OF THE OUTSTANDING COMMON STOCK
AND 125% OF THE AGGREGATE NUMBER OF SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
AND THE OTHER NOTES AT THE AVERAGE OF TWO LOWEST TRADING PRICES DURING THE 20
TRADING DAYS PRIOR TO DATE THE NOTE PURCHASE AGREEMENT IS SIGNED] shares, (such
amount to be subject to equitable adjustment from time to time on terms
reasonably acceptable to the Holder for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring on or after the Issuance Date) to provide for the issuance of
Common Stock upon the conversion in full of this Note and the Other Notes,
subject to reduction from time to time by the number of shares of Common Stock
issued on conversion of this Note and the Other Notes. The Company shall, from
time to time, authorize and reserve additional shares of Common Stock to be
issuable pursuant to the terms of this Note as shall be necessary to ensure that
an adequate number of shares of Common Stock are at all times authorized and
reserved for issuance upon conversion in full of this Note and the Other Notes
and the payment of interest on this Note in accordance with Section 1.1 and on
the Other Notes
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in accordance with the terms thereof. The Company shall notify the Holder
promptly, but in no event more than ten Business Days, after the Company so
reserves additional shares of Common Stock, which notice shall set forth the
number of additional shares of Common Stock so reserved. The Company represents
and warrants that upon issuance, such shares of Common Stock will be duly and
validly issued, fully paid and non-assessable. The Company agrees that its
issuance of this Note shall constitute full authority to its officers and agents
who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of and payment of interest on this Note.
2.3 Method of Conversion.
(a) The right of the Holder to convert this Note shall be exercised by
delivering (which may be made by telephone line facsimile transmission) to the
Company and the Issuing Agent at the addresses or telephone line facsimile
transmission numbers provided in or pursuant to the Transfer Agent Agreement, a
Conversion Notice stating the principal amount of this Note which, together with
interest and Default Interest, if any, as provided in this Note, is being
converted and the number of shares of Common Stock to be issued upon such
conversion. The Holder shall make reasonable efforts to deliver a copy of such
Conversion Notice to the Company's legal counsel when such notice is delivered
to the Company and the Issuing Agent or as soon as practical thereafter,
provided that the failure to do so shall not relieve the Company or the Issuing
Agent of its obligations or prejudice the Holder's rights. The number of shares
of Common Stock to be issued upon each conversion of this Note shall be the
number set forth in the applicable Conversion Notice, which number shall be
conclusive absent manifest error. The Company shall notify the Holder of any
claim by the Company of manifest error in a Conversion Notice within two Trading
Days after the Holder gives such Conversion Notice and no such claim of error
shall limit or delay performance of the Company's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Company notifies the Holder by telephone line facsimile transmission within
two Trading Days after a Conversion Notice has been given (which notice from the
Company shall specify all defects in the Conversion Notice) and any Conversion
Notice containing any such defect shall nonetheless be effective on the date
given if the Holder promptly undertakes in writing to correct all such defects.
The Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Common Stock
or other securities or property on conversion of this Note in a name other than
that of the Holder, and the Company shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of any such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Holder shall be responsible for the
amount of any withholding tax payable in connection with any conversion of this
Note.
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(b) If the Holder elects to convert this Note in accordance with
Section 2.1, the Holder shall not be required to surrender this Note physically
unless the entire unpaid principal amount of this Note is so converted. The
Company shall maintain records showing the principal amount so converted and the
dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder, so as not to require physical surrender of this Note
upon each such conversion. In the event of any dispute or discrepancy, such
records of the Company shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if any portion of this Note is
converted without physical surrender of this Note to the Company as aforesaid,
the Holder may not transfer this Note unless (1) the Holder first physically
surrenders this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new note of like tenor, registered as
the Holder (upon payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid principal amount of
this Note and (2) such transfer is otherwise in compliance with Section 8.7
hereof. The Company may by notice to the Holder from time to time require the
Holder to surrender this Note in exchange for the issuance by the Company of a
new Note in a principal amount equal to the outstanding principal amount of this
Note and otherwise having terms identical to this Note. Such new Note shall be
delivered by the Company to the Holder within three Trading Days after the
Company receives this Note from the Holder in response to such notice. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be less than the amount stated on the face hereof.
(c) In case of any consolidation or merger of the Company with any
other corporation (other than a wholly-owned subsidiary of the Company) in which
the Company is not the surviving corporation, or in case of any sale or transfer
of all or substantially all of the assets of the Company, or in the case of any
share exchange pursuant to which all of the outstanding shares of Common Stock
are converted into other securities or property, the Company shall make
appropriate provision or cause appropriate provision to be made so that the
Holder shall have the right thereafter to convert this Note into the kind of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by the persons who were
holders of Common Stock immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the Holder on a
basis as nearly as practical as such rights existed prior to such consolidation,
merger, sale, transfer or share exchange. If, in connection with any such
consolidation, merger, sale, transfer or share exchange each holder of shares of
Common Stock is entitled to elect to receive either securities, cash or other
assets upon completion of such transaction, the Company shall provide or cause
to be provided to the Holder the right to elect the securities, cash or other
assets into which this Note shall be convertible after completion of any such
transaction on the same terms and subject
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to the same conditions applicable to holders of the Common Stock (including,
without limitation, notice of the right to elect, limitations on the period in
which such election shall be made, and the effect of failing to exercise the
election). Notwithstanding the foregoing, in connection with any such merger,
consolidation, sale, transfer or exchange, the Company shall have the right, in
lieu of making provision for preservation of the economic benefits of the
conversion rights of the Holder, to redeem this Note immediately after
completion of such transaction at a redemption price equal to the sum of (1) the
product obtained by multiplying (A) the sum of (i) the outstanding principal
amount of this Note on the date of such redemption plus (ii) accrued and unpaid
interest on such principal amount to the date of such redemption times (B) the
applicable Business Combination Redemption Percentage plus (2) accrued and
unpaid Default Interest, if any, on the amount referred to in the immediately
preceding clause (1)(A)(ii) at the rate provided in this Note to the date of
such redemption. Such right shall be exercised by notice from the Company to the
Holder stating that the Company is exercising its redemption right under this
Section 2.3(c), which notice shall be given at least 20 Trading Days (or such
lesser period as the Company gives notice of such transaction to the holders of
outstanding shares of Common Stock) prior to completion of such transaction. The
Company shall not effect any such transaction unless the provisions of this
paragraph have been complied with. The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share exchanges.
Whenever the Company shall propose to take any of the actions specified
in this Section 2.3(c), the Company shall cause a notice to be mailed to the
Holder at least 15 days prior to the date on which the books of the Company will
close or on which a record will be taken for such action. Such notice shall
specify the action proposed to be taken by the Company and the date as of which
holders of record of the Common Stock shall participate in any such actions or
be entitled to exchange their Common Stock for securities or other property, as
the case may be.
(d) Upon receipt by the Company and the Issuing Agent from the Holder
of a Conversion Notice meeting the requirements for conversion as provided in
Section 2.1 and this Section 2.3, the Company shall issue and deliver or cause
to be issued and delivered to the Holder certificates for the Common Stock
issuable upon such conversion by the close of business on the third Trading Day
after the date of such receipt, and as of the close of business on the date of
receipt of such Conversion Notice the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this Note
shall be reduced to reflect such conversion, and all rights with respect to the
portion of this Note being so converted shall forthwith terminate except the
right to receive the Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. The Holder shall also give a copy of each
Conversion Notice to the Company's legal counsel, as specified in the form of
Conversion Notice, but the
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failure to give such copy shall not affect the validity of any Conversion
Notice. If the Holder shall have given a Conversion Notice in accordance with
the terms of this Note, the Company's obligation to issue and deliver the
certificates for Common Stock shall be absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Company to the Holder, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other person of any obligation to the
Company or any violation or alleged violation of law by the Holder or any other
person, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the Holder in connection with such conversion;
provided, however, that nothing herein shall limit or prejudice the right of the
Company to pursue any such claim in any other manner permitted by applicable
law. The occurrence of an event which requires an equitable adjustment of the
Trading Price as contemplated by the definition thereof in Section 7.1 shall in
no way restrict or delay the right of the Holder to receive certificates for
Common Stock upon conversion of this Note and the Company shall use its best
efforts to implement such adjustment on terms reasonably acceptable to the
Holder within two Business Days of such occurrence. If the Company fails to
issue and deliver the certificates for the Common Stock to the Holder pursuant
to the first sentence of this Section 2.3(d) as and when required to do so, in
addition to any other liabilities the Company may have hereunder and under
applicable law, (1) the Company shall pay or reimburse the Holder on demand for
all out-of-pocket expenses including, without limitation, fees and expenses of
legal counsel incurred by the Holder as a result of such failure, (2) the
Conversion Price applicable to such conversion shall be reduced by one-tenth of
one percent of the amount thereof otherwise applicable to such conversion for
each Trading Day during the period from the date the Company was required to
deliver such certificates to the date the Company so delivers such certificates;
provided, however, that in no event shall any such reduction be made for any
Trading Day in such period which is after the date which is 120 days after the
date the Company was required to deliver such certificates in connection with
such conversion, and (3) the Holder may by written notice (which may be given by
mail, courier, personal service or telephone line facsimile transmission) or
oral notice (promptly confirmed in writing) given at any time prior to delivery
to the Holder of the certificates for the shares of Common Stock issuable upon
such conversion of this Note, rescind such conversion, whereupon the Holder
shall have the right to convert this Note thereafter in accordance herewith;
provided, however, that the Company shall not be liable to the Holder under the
preceding clause (1) or clause (2) to the extent the failure of the Company to
deliver or cause to be delivered such shares of Common Stock results from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, act of God or any similar event
outside the control of the Company (it being understood that the actions or
failure to act of the Issuing Agent shall not be deemed an event outside the
control of the Company except to the extent resulting from fire, flood, storm,
earthquake,
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shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, the bankruptcy, liquidation or reorganization of
the Issuing Agent under any bankruptcy, insolvency or other similar law or any
similar event outside the control of the Issuing Agent). The Holder shall notify
the Company in writing (or by telephone conversation, confirmed in writing) as
promptly as practicable after becoming aware that shares of Common Stock issued
on conversion of this Note have not been received as provided in this Section
2.3(d).
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of the aggregate number of such
shares converted at one time by the same holder, the Company may round the
number of shares of Common Stock issued on such conversion up to the next
highest whole share or may pay lawful money of the United States of America for
such fractional share, based on a value of one share of Common Stock being equal
to the Market Price of the Common Stock on the date the applicable Conversion
Notice is given to the Company, as reported by Bloomberg, L.P.
2.4 Limitation on Shares Issuable on Conversion; Mandatory Redemption.
(a) Notwithstanding any other provision herein, unless the Stockholder
Approval shall have been obtained from the stockholders of the Company or waived
by Nasdaq, the Company shall not be required to issue upon conversion of this
Note a number of shares of Common Stock in excess of the Maximum Share Amount
less the number of shares of Common Stock issued pursuant to Section 1.1 from
time to time in payment of interest on this Note. The Company shall maintain
records which show the number of shares of Common Stock issued by the Company
upon conversion from time to time of this Note and issued by the Company
pursuant to Section 1.1 in payment of interest on this Note, which records shall
be controlling in the absence of manifest error. Upon surrender of this Note for
transfer or re-registration hereof (or, at the option of the Holder, for
conversion pursuant to Section 2.1 of less than all of this Note), the Company
shall make a notation on the new Note issued upon such transfer or
re-registration or evidencing such unconverted portion of this Note, as the case
may be, as to the remaining number of shares of Common Stock from the Maximum
Share Amount remaining available for conversion of the Note evidenced by such
new certificate (including, without limitation, by taking into account the
number of shares of Common Stock issued by the Company pursuant to Section 1.1
in payment of interest on this Note and not previously reflected on the Note so
surrendered, as shown on the records maintained by the Company). If this Note is
surrendered for split-up into two or more Notes representing an aggregate
principal amount equal to the principal amount of this Note at the time so
surrendered (as reduced by any contemporaneous conversion of this Note), each
Note issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining portion of the Maximum Share Amount
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allocated to this Note at the time so surrendered. If any Other Note is
converted in full, repaid, repurchased or redeemed, all of the portion of the
Maximum Share Amount (as defined in such Other Note) allocated to such Other
Note which remains unissued after such conversion, repayment, repurchase or
redemption shall be re-allocated to this Note and the Other Notes outstanding at
the close of business on the date of such conversion, repayment, repurchase or
redemption of the Other Note so converted, repaid, repurchased or redeemed pro
rata based on the principal amounts outstanding at the close of business on such
date.
(b) (1) If a Maximum Share Amount Inconvertibility or a Registration
Restriction Inconvertibility occurs, then the Company shall promptly, but in no
event later than three Business Days after each such occurrence, give an
Inconvertibility Notice to the Holder (by telephone line facsimile transmission
at such number as the Holder has specified in writing to the Company for such
purposes or, if the Holder shall not have specified any such number, by
overnight courier or first class mail, postage prepaid, at the Holder's address
as the same appears on the records of the Company) and the Holder may at any
time after such occurrence give an Inconvertibility Notice to the Company. If
the Company shall have given or been required to give any Inconvertibility
Notice, or if the Holder shall have given any Inconvertibility Notice, then
within the applicable Redemption Election Period the Holder shall have the right
by a Redemption Election given to the Company (which may be contained in the
Inconvertibility Notice given by the Holder) to direct the Company to redeem the
portion of this Note (which, if applicable, shall be all of this Note) as shall
not, on the Business Day prior to the applicable Redemption Date, (x) be
convertible into shares of Common Stock by reason of a Maximum Share Amount
Inconvertibility or (y) be available for sale by the Holder pursuant to the
Registration Statement by reason of a Registration Restriction Inconvertibility,
in each such case, on the applicable Redemption Date, at a price equal to the
Redemption Price; provided, however, that (1) no such redemption shall be made
with respect to a Registration Restriction Inconvertibility if, prior to the
expiration of the applicable Redemption Election Period, the Company and the
Holder shall, by a Mandatory Redemption Waiver, waive the Company's obligation
to make such redemption and (2) no such redemption shall be made with respect to
a Registration Restriction Inconvertibility if (i) the Registration Statement is
effective and available for use by the Holder for resale of the shares of Common
Stock which are covered by the Registration Statement, (ii) the Company files
with an additional Registration Statement as and when required by Section
8(b)(1) and (iii) the Company maintains Net Cash, Cash Equivalent and Short-Term
Investment Balances of at least $15,000,000, then the Company shall not be
required to redeem any portion of this Note prior to the date which is 30 days
after such Registration Restriction Inconvertibility occurs. If the Holder gives
a Redemption Election to the Company by reason of a Maximum Share Amount
Inconvertibility and, prior to the date the Company is required to redeem this
Note or any portion hereof, the Company would have been able, within the
limitations set forth in Section 2.4(a), to convert all of this Note (determined
without regard to the limitation, if any, contained in the second sentence of
Section 2.1 and
12
regardless of whether this Note is, by its terms, convertible at such time) on
any two Trading Days within any period of three consecutive Trading Days
commencing after the period of ten consecutive Trading Days which gave rise to
the applicable Inconvertibility Notice from the Company or the Holder, as the
case may be, had the Holder given a Conversion Notice for conversion in full of
this Note on each of such two Trading Days within such three-Trading Day period,
then the Company shall not be required to redeem any of this Note by reason of
such Redemption Election.
(2) An Inconvertibility Notice or a Redemption Election given by the
Holder shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder in writing within three Business Days after an
Inconvertibility Notice or a Redemption Election has been given (which notice
shall specify all defects in the Inconvertibility Notice or Redemption
Election), and any Inconvertibility Notice or Redemption Election containing any
such defect shall nonetheless be effective on the date given if the Holder
promptly undertakes in writing to correct all such defects. In the absence of
any such undertaking from the Holder, no such claim of error shall limit or
delay performance of the Company's obligation to redeem the full amount of the
Inconvertible Portion as to which a Redemption Election has been given and which
is not in dispute.
(c) Notwithstanding the giving of any Inconvertibility Notice by the
Company to the Holder or the giving or the absence of any Inconvertibility
Notice or Redemption Election by the Holders or any redemption of an
Inconvertible Portion pursuant to Section 2.4(b), thereafter the provision of
Section 2.4(b) shall continue to be applicable on any occasion unless, in the
case of a Maximum Share Amount Inconvertibility, the Stockholder Approval shall
have been obtained or waived by the Nasdaq.
(d) On each Redemption Date, the Company shall make payment in
immediately available funds of the applicable Redemption Price to or upon the
order of the Holder as specified by the Holder in writing to the Company at
least one Business Day prior to such Redemption Date. If the Company is required
to redeem any Inconvertible Portion pursuant to this Section 2.4, the Company
shall make payment to the Holder of an amount equal to the Redemption Price.
Upon redemption of less than all of this Note, promptly, but in no event later
than three Business Days after surrender of this Note to the Company, the
Company shall issue a replacement Note of like tenor having a principal amount
equal to the principal amount of this Note remaining after such redemption.
(e) If the Company shall have failed to pay in full the Redemption
Price (other than by reason of a Maximum Share Amount Inconvertibility) or the
Registration Redemption Price when the same is due and payable, without in any
way relieving the Company of its obligation to pay such amount, the Holder shall
have the right to convert into Common Stock
13
the portion of this Note in respect of which such payment was not made into
Common Stock in accordance with Section 2.1 (subject to the numerical limit
contained in the second sentence of Section 2.1); provided, however, that the
shares of Common Stock received by the Holder upon any such conversion in
certain circumstances may be subject to restrictions on resale by the Holder
arising under applicable securities laws to the extent not registered for resale
by the Holder pursuant to the Registration Statement.
(f) If the Company shall have failed to pay in full the Redemption
Price for any portion (which, if applicable, may be all) of any Inconvertible
Portion when the same is due and payable by reason of a Maximum Share Amount
Inconvertibility and the Stockholder Approval shall not have been obtained,
without in any way relieving the Company of its obligation to pay such amount in
accordance with Sections 2.4(b) and 2.4(d), upon the written request of the
Majority Holders, the Company shall use its commercially reasonable best efforts
to obtain a waiver from the NASD of the requirement for Stockholder Approval for
issuance of all shares of Common Stock issuable upon conversion of this Note and
the Other Notes. If such a waiver, in form reasonably satisfactory to the
Majority Holders, is not obtained within 15 days after the Company's receipt of
such request from the Majority Holders, the Company promptly shall call a
special meeting of its stockholders, to be held not later than 60 days after the
expiration of the foregoing 15-day period, to seek the Stockholder Approval for
issuance of all shares of Common Stock issuable upon conversion of this Note and
the Other Notes in accordance with Section 2.1.
(g) If the Holder converts all or any portion of this Note pursuant to
Section 2.4(e), the amount of the Redemption Price or the Registration
Redemption Price, as the case may be, due to the Holder with respect to the
portion of this Note so converted shall be reduced by the principal amount of
this Note so converted and the Company shall remain liable for payment of the
premium, if any, included in such Redemption Price or Registration Repurchase
Price, as the case may be.
ARTICLE III
CERTAIN COVENANTS
So long as at least $1,500,000 aggregate principal amount of this Note
and the Other Notes remains outstanding:
3.1 Limitations on Certain Indebtedness. The Company will not itself,
and will not permit any Subsidiary to, create, assume, incur or in any manner
become liable in respect of, including, without limitation, by reason of any
business combination transaction (all
14
of which are referred to herein as "incurring"), any Indebtedness other than
Permitted Indebtedness.
3.2 Tender Offers. The Company will not itself, and will not permit any
Subsidiary to (1) make any Tender Offer for outstanding shares of Common Stock
unless the Company contemporaneously therewith makes an offer, or (2) enter into
an agreement regarding a Tender Offer for outstanding shares of Common Stock by
any person other than the Company or any Subsidiary, unless such person agrees
with the Company to make an offer, in either such case, to the Holder to
purchase the same percentage of the outstanding principal amount of this Note
held by the Holder as the percentage of outstanding shares of Common Stock
offered to be purchased in such Tender Offer, at a price equal to the greater of
(i) an amount equal to the sum of (1) the sum of (A) the outstanding principal
amount of this Note plus (B) accrued and unpaid interest on such principal
amount to the date of payment plus (C) accrued and unpaid Default Interest, if
any, on the amount referred to in the immediately preceding clause (B) at the
rate provided in this Note to the date of purchase pursuant to such Tender Offer
plus (2) an amount equal to the product obtained by multiplying (a) the sum of
the amounts stated in the immediately preceding clauses (1)(A) and (1)(B) times
(b) either (I) if the date of purchase pursuant to such Tender Offer is on or
before the date which is 120 days after the Issuance Date, 12.5%, (II) if the
date of purchase pursuant to such Tender Offer is on or after the date which is
121 days after the Issuance Date and on or before the date which is 270 days
after the Issuance Date, 15.0%, and (III) if the date of purchase pursuant to
such Tender Offer is on or after the 271st day after the Issuance Date, 20.0%
and (ii) an amount equal to the product obtained by multiplying (x) the number
of shares of Common Stock which would, but for the purchase pursuant to such
Tender Offer, be issuable on conversion in accordance with Section 2.1 of the
portion of this Note tendered by the Holder and any accrued and unpaid interest
thereon and any accrued and unpaid Default Interest if a Conversion Notice were
given by the Holder on the date of purchase pursuant to such Tender Offer
(determined without regard to any limitation on conversion contained in the
second sentence of Section 2.1) times (y) the highest price per share of Common
Stock paid or payable pursuant to such Tender Offer.
3.3 Payment of Obligations. The Company will pay and discharge, and
will cause each Significant Subsidiary to pay and discharge, all their
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.
3.4 Maintenance of Property; Insurance.
(a) The Company will keep, and will cause each Significant Subsidiary
to keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted.
15
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance in at least such amounts and against such risks as is
reasonably adequate for the conduct of their respective businesses and the value
of their respective properties.
3.5 Conduct of Business and Maintenance of Existence. The Company will
continue, and will cause each Subsidiary to continue, to engage in business of
the same general type as now conducted by the Company, and will preserve, renew
and keep in full force and effect, and will cause each Significant Subsidiary to
preserve, renew and keep in full force and effect their respective corporate
existence and their respective rights, privileges and franchises necessary or
desirable in the normal conduct of business.
3.6 Compliance with Laws. The Company will comply, and will cause each
Significant Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, decisions, orders and requirements of
governmental authorities and courts (including, without limitation,
environmental laws) except (i) where compliance therewith is contested in good
faith by appropriate proceedings or (ii) where non-compliance therewith could
not reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
3.7 Investment Company Act. The Company will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
ARTICLE IV
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
4.1 Failure to Pay Principal or Interest. The Company fails (a) to pay
the principal, Redemption Price, Repurchase Price or Registration Repurchase
Price hereof when due, whether at maturity, upon redemption, upon acceleration
or otherwise, as applicable, or (b) to pay any installment of interest hereon
when due and, in the case of this clause (b) of this Section 4.1 only, such
failure continues for a period of five Business Days after the due date thereof;
or
16
4.2 Conversion and the Shares. The Company fails to issue or cause to
be issued shares of Common Stock to the Holder upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of this Note or
upon exercise of the Warrants or fails to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Note or in payment of
interest on this Note or upon exercise of the Warrants as and when required by
this Note, the Note Purchase Agreement, the Transfer Agent Agreement and the
Warrants; or
4.3 Breach of Covenant. The Company (a) fails to comply with Section
3.1 or 3.2 or (b) fails to comply in any material respect with any provision of
Article III of this Note (other than Section 3.1 or 3.2) or breaches any other
material covenant or other material term or condition of this Note (other than
as specifically provided in Sections 4.1, 4.2, 4.3(a)), the Note Purchase
Agreement, the Transfer Agent Agreement or the Warrants, and in the case of this
clause (b) of this Section 4.3 only, such breach continues for a period of
fifteen (15) days after written notice thereof to the Company from the Holder or
within 30 days after delivery of such notice if, and only if, such default is
reasonably capable of cure within 30 days after such notice and at all times
during such 30-day period the Company has been diligently taking action to cure
such default and such cure cannot be completed within such 15-day period; or
4.4 Breach of Representations and Warranties. Any material
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Note Purchase Agreement, the
Transfer Agent Agreement and the Warrants) shall be false or misleading in any
material respect when made; or
4.5 Certain Voluntary Proceedings. The Company or any Significant
Subsidiary shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due or shall admit in writing its
inability generally to pay its debts as they become due; or
4.6 Certain Involuntary Proceedings. An involuntary case or other
proceeding shall be commenced against the Company or any Significant Subsidiary
seeking liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its
17
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of sixty (60) consecutive days; or
4.7 Judgments. Any court of competent jurisdiction shall enter one or
more final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
$750,000, which is not vacated, bonded, stayed, discharged, satisfied or waived
for a period of thirty (30) consecutive days; or
4.8 Default Under Other Agreements. (a) The Company or any Subsidiary
shall (i) default in any payment with respect to any indebtedness for borrowed
money (other than this Note) which indebtedness has an outstanding principal
amount in excess of $1,000,000 individually or $2,500,000 in the aggregate for
the Company and its Subsidiaries, beyond the period of grace, if any, provided
in the instrument or agreement under which such indebtedness was created or (ii)
default in the observance or performance of any agreement, covenant or condition
relating to any such indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such indebtedness to
become due prior to its stated maturity and such default or event shall continue
beyond the period of grace, if any, provided in the instrument or agreement
under which such indebtedness was created (after giving effect to any consent or
waiver obtained and then in effect thereunder); provided, however, that the
events and conditions described in the preceding clauses (i) and (ii) shall not
constitute an Event of Default unless and until the Company fails to take the
action necessary to correct such event or condition within five (5) Business
Days of becoming aware of such event or condition; or (b) any indebtedness of
the Company or any of its Subsidiaries which has an outstanding principal amount
in excess of $1,500,000 individually or $3,500,000 in the aggregate shall, in
accordance with its terms, be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled or required payment prior to the
stated maturity thereof; provided, however, that the acceleration of any
indebtedness as a result of the Company's relocation from its current facilities
shall not constitute an Event of Default unless and until an event of default is
declared under the instrument or agreement under which such indebtedness was
created and such default is not cured by the Company within five Business Days
of receipt of notice of such event of default; or
4.9 Delisting of Common Stock. The Common Stock shall cease to be
listed on any of Nasdaq, the NYSE or the AMEX and shall remain unlisted for a
period of three (3) days;
then, (X) upon the occurrence and during the continuation of any Event of
Default specified in
18
Section 4.1, 4.2, 4.3, 4.4, 4.7, 4.8, or 4.9 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 4.5 or 4.6, the Company shall, pay to the Holder an amount equal to the
sum of (1) the product obtained by multiplying (a) the sum of (A) the
outstanding principal amount of this Note plus (B) accrued and unpaid interest
on such principal amount to the date of payment times (b) the applicable
Acceleration Percentage plus (2) accrued and unpaid Default Interest, if any, on
the amount referred to in the immediately preceding clause (B) at the rate
provided in this Note to the date of payment, and (Y) all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, reasonable legal fees and expenses, of
collection, and (Z) the Holder shall be entitled to exercise all other rights
and remedies available at law or in equity; provided, however, that if in
connection with any Event of Default the Company shall not at such time be in
compliance with Section 2.3(c), then in lieu of payment of the amount provided
in the preceding clause (X) the Company shall pay to the Holder an amount equal
to the amount which would be payable by the Company upon redemption of this Note
in accordance with Section 2.3(c) as if the Company had exercised its right to
redeem this Note pursuant to Section 2.3(c) on the date of such payment pursuant
hereto.
ARTICLE V
REPURCHASE UPON A REPURCHASE EVENT OR
REGISTRATION REPURCHASE EVENT
5.1 Repurchase Right Upon Repurchase Event. If there shall occur a
Repurchase Event, then the Holder shall have the right, at the Holder's option,
to require the Company to repurchase all of this Note, or any portion hereof (in
a minimum principal amount of $100,000 or integral multiples thereof (or such
lesser remaining principal amount of this Note)), on the repurchase date that is
five Business Days after the date of the Holder Notice delivered with respect to
such Repurchase Event. The Holder shall have the right to require the Company to
repurchase all or any such portion of this Note if a Repurchase Event occurs at
any time while any portion of the principal amount of this Note is outstanding
at a price equal to the Repurchase Price; provided, however, that if such right
to require repurchase of this Note arises in connection with a transaction that
(i) is intended to qualify as a pooling of interests under the Pooling Standards
and (ii) but for the exercise of repurchase rights under Section 5.1 of this
Note and Section 5.1 of the Other Notes, may qualify as a pooling of interests
under the Pooling Standards, then the Company may, in the reasonable exercise of
its discretion, elect not to repurchase such Note in order to comply with the
Pooling Standards.
19
5.2 Notices; Method of Exercising Repurchase Rights, Etc.
(a) On or before the fifth (5th) Business Day after the occurrence of a
Repurchase Event, the Company shall give to the Holder a Company Notice of the
occurrence of the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
(ii) a description of the procedure (set forth below) which the Holder
must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver to the
Company on or before the thirtieth (30th) day after a Company Notice (or if no
such Company Notice has been given, within forty (40) days after the Holder
first learns of the Repurchase Event) (i) a Holder Notice setting forth the name
of the Holder and the principal amount of this Note to be repurchased, and (ii)
this Note, duly endorsed for transfer to the Company of the portion of the
principal amount of this Note to be repurchased. A Holder Notice may be revoked
by the Holder at any time prior to the time the Company pays the applicable
Repurchase Price to the Holder.
5.3 Repurchase Right Upon Registration Repurchase Event. Upon the
occurrence of a Registration Repurchase Event, the Holder shall have the right,
at the Holder's option, to require the Company to repurchase all of this Note,
or from time to time any portion hereof (in a minimum principal amount of
$100,000 or integral multiples thereof (or such lesser remaining principal
amount of this Note)), on the repurchase date that is five (5) Business Days
after the date a Holder Registration Repurchase Notice is given by the Holder.
The Holder shall exercise its right to require repurchase pursuant to this
Section 5.3 by giving a Holder Registration Repurchase Notice as follows: (i) if
the Registration Repurchase Event occurs by reason of the Company's failure to
timely file the Registration Statement with the SEC, within 30 days after such
event or (ii) if the Registration Repurchase Event occurs by reason of the
non-occurrence of the SEC Effective Date within 90 days after the Issuance Date,
at any time prior to the SEC Effective Date. If the Holder shall have given a
Holder Registration Repurchase Notice, the Company shall repurchase this Note or
the portion of this Note as stated in such Holder Registration Repurchase Notice
at a purchase price equal to the Registration Repurchase Price. A Holder
Registration Repurchase Notice may be revoked by the Holder at
20
any time prior to the time the Company pays the applicable Registration
Repurchase Price.
5.4 Other.
(a) If the Company fails to repurchase on the applicable repurchase
date this Note (or portion hereof) as to which the repurchase right has been
properly exercised pursuant to this Article V, then the Repurchase Price or the
Registration Repurchase Price, as the case may be, for the portion (which, if
applicable, may be all) of this Note which is required to have been so
repurchased shall bear interest to the extent not prohibited by applicable law
from the applicable repurchase date until paid at the Default Rate.
(b) If a portion of this Note is to be repurchased, upon surrender of
this Note to the Company in accordance with the terms of this Article V, the
Company shall execute and deliver to the Holder without service charge, a new
Note or Notes, having the same date hereof and containing identical terms and
conditions, in such denomination or denominations as requested by the Holder in
aggregate principal amount equal to, and in exchange for, the unrepurchased
portion of the principal amount of the Note so surrendered.
(c) The Company shall notify the Holder of any claim by the Company of
manifest error in a Holder Notice or a Holder Registration Repurchase Notice
within three Business Days after the Holder gives such notice and no such claim
of error shall limit or delay performance of the Company's obligation to
repurchase such portion of the Note which is not in dispute and (ii) such notice
shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder within one Business Day after such notice has been given
(which notice from the Company shall specify all defects in such notice) and any
Holder Notice or Holder Registration Repurchase Notice containing any such
defect shall nonetheless be effective on the date given if the Holder promptly
undertakes in writing to correct all such defects.
ARTICLE VI
PAYMENT AT MATURITY
6.1 Holder Election. The Holder shall have the right, exercisable at
any time prior to the Maturity Date (or such later date as the Company may
permit) by giving a Final Conversion Election, to elect that upon the Maturity
Date the outstanding amount of this Note shall be converted into shares of
Common Stock in accordance with Section 2.1. The Holder may make such election
by giving notice of the Final Conversion Election at any time prior to the
Maturity Date. If the Holder gives a Final Conversion Election, then on the
Maturity Date the outstanding amount of this Note shall be converted into the
number of shares of Common
21
Stock determined in accordance with Section 2.1 (determined without regard to
the limitation, if any, on the Holder contained in the second sentence of
Section 2.1). Such conversion, however, shall be subject to the limitations
contained in Section 2.4. The Company shall notify the Holder of any claim by
the Company of manifest error in a Final Conversion Election within one Business
Day after the Holder gives such Final Conversion Election and no such claim or
error shall limit or delay performance of the Company's obligation to issue upon
such conversion the number of shares of Common Stock which are not in dispute. A
Final Conversion Election shall be deemed for all purposes to be in proper form
unless the Company notifies the Holder within one Business Day after a Final
Conversion Election has been given (which notice shall specify all defects in
the Final Conversion Election) and any Final Conversion Election containing any
such defect shall nonetheless be effective on the date given if the Holder
promptly undertakes in writing to correct all such defects.
6.2 Final Maturity Note Issuance.
(a) If the Holder fails timely to make the Final Conversion Election,
then as of the Maturity Date of this Note, the Company shall issue to the Holder
a Final Maturity Note in the principal amount herein provided. The principal
amount of the Final Maturity Note shall be (a) the sum of (1) the outstanding
principal amount of this Note, (2) the amount of accrued and unpaid interest on
such principal amount to the Maturity Date and (3) Default Interest, if any, on
the amount referred to in the immediately preceding clause (2) to the Maturity
Date less (b) the sum of (1) the principal amount of this Note, if any, which on
the Maturity Date is inconvertible pursuant to Section 2.4, (2) accrued and
unpaid interest on such principal amount to the Maturity Date and (3) Default
Interest, if any, on the amount referred to in the immediately preceding clause
(2) to the Maturity Date. Notwithstanding the issuance of the Final Maturity
Note, the Company shall remain liable for payment of all unpaid amounts due
under this Note which are not included in the principal amount of the Final
Maturity Note, including, without limitation, the Redemption Price and the
Repurchase Price. If the Holder shall have failed to give a Final Conversion
Election prior to the Maturity Date, then prior to issuance of the Final
Maturity Note, the Company shall have the right within 15 days after the
Maturity Date to contact the Holder and for a period of 15 days after such
notice to seek a Final Conversion Election from the Holder; provided, however,
that if the Holder fails to give a Final Conversion Election within such 15
days, the Company shall immediately issue the Final Maturity Note, which shall
be dated the Maturity Date.
(b) The Holder of this Note by its acceptance hereof, acknowledges and
agrees that the Final Maturity Note shall bear a restrictive legend in
substantially the following form (and a stop-transfer order to such effect may
be placed against transfer of the Final Maturity Note):
22
This Final Maturity Note has not been registered under the Securities Act of
1933, as amended or any state securities laws. This Final Maturity Note has been
acquired for investment only and may not be sold, transferred or assigned in the
absence of such registration or an opinion of counsel reasonably satisfactory in
form, scope and substance to the Company that such registration is not required.
This Final Maturity Note may not be transferred except as provided in
Section 3.7 of the Final Maturity Note.
ARTICLE VII
DEFINITIONS
7.1 Certain Defined Terms.
(a) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Note.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Acceleration Percentage" means with respect to the date of payment in
full of the amount due in respect of this Note as set forth in clause (X) of
Article IV, the applicable percentage set forth below determined with respect to
such date as follows:
Date Percentage
---- ----------
Issuance Date to and including the 120th day thereafter 115.0%
121st through 270th day after the Issuance Date 117.5%
On and after the 271st day after the Issuance Date 122.5%
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate", the term "control" (including the terms "controlling",
"controlled by" and "under common control with") means
23
the possession, direct or indirect, of the power to direct or to cause the
direction of the management and policies of a Person, whether through the
ownership of securities, by contract or otherwise.
"Aggregated Person" means any person whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means five percent (5%) per annum.
"Business Combination Redemption Percentage" means for any redemption
of this Note in accordance with Section 2.3(c) the applicable percentage set
forth below:
Redemption Date Percentage
--------------- ----------
Issuance Date through 180th day thereafter the Issuance Date 125.0%
On and after the 181st day after the Issuance Date 130.0%
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or required
by law or executive order to remain closed.
"Cash, Cash Equivalent and Short-Term Investment Balances" of the
Company at any date shall be determined from the Company's books maintained in
accordance with Generally Accepted Accounting Principles, and shall mean,
without duplication, the sum of (1) the cash owned by the Company on such date,
(2) all assets which would on a balance sheet of the Company prepared as of such
date in accordance with Generally Accepted Accounting Principles be classified
as cash or cash equivalents and (3) all assets which would on a balance sheet of
the Company prepared as of such date in accordance with Generally Accepted
Accounting Principles be classified as short-term investments.
"Common Stock" shall mean the Common Stock, $.01 par value, together
with the related Preferred Share Purchase Rights or similar rights, of the
Company or any shares of capital stock and related rights of the Company into
which such stock shall be changed or reclassified after the Issuance Date.
"Company" shall have the meaning provided in the first paragraph of
this Note.
24
"Company Certificate" means a certificate of the Company signed by an
Officer.
"Company Notice" means a Company Notice in the form attached hereto as
Exhibit F.
"Computed Price" for any date means the arithmetic average of the
lowest per share Trading Price on the two Trading Days during the applicable
Measurement Period for such date on which the two lowest per share Trading
Prices occur.
"Conversion Notice" means a Notice of Conversion of 5% Senior Custom
Convertible Note due 2000 substantially in the form attached hereto as Exhibit
A, properly completed and duly executed by the Holder or the Holder's
attorney-in-fact.
"Conversion Price" for any date means the arithmetic average of the
lowest per share Trading Price on the two Trading Days during the applicable
Measurement Period for such date on which the two lowest per share Trading
Prices occur; provided, however, that on any date on or after January 19, 1998,
the Conversion Price shall not be greater than 115% of the arithmetic average of
the Market Price of the Common Stock for the period of twenty (20) consecutive
Trading Days ending one Trading Day prior to January 19, 1998.
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 10 percent per annum (or such lesser rate equal to
the highest rate permitted by applicable law).
"Event of Default" shall have the meaning provided in Article IV.
"Final Conversion Election" means a Holder Notice of Final Conversion
of 5% Senior Custom Convertible Note in the form attached hereto as Exhibit I.
"Final Maturity Note" shall mean a note issued by the Company in the
form attached hereto as Exhibit J.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"Holder" shall have the meaning provided in the first paragraph of this
Note.
25
"Holder Notice" means a Holder Notice in the form attached hereto as
Exhibit G.
"Holder Registration Repurchase Notice" means a Holder Registration
Repurchase Notice in the form attached hereto as Exhibit H.
"Inconvertibility Day" means any Trading Day on which (x) the Company
would not have been required to convert in accordance with Section 2.1 any
portion of this Note as a consequence of the limitations set forth in Section
2.4(a) had the Holder converted this Note in full on such Trading Day,
determined at the Conversion Price applicable on such Trading Day and without
regard to the limitation, if any on the Holder contained in the second sentence
of Section 2.1 or (y) on which the Company does not have reserved from its
authorized and unissued shares of Common Stock for purposes of conversion of
this Note and the Other Notes the number of shares of Common Stock so required
to be reserved pursuant to Section 2.2.
"Inconvertibility Notice" means a notice from the Company to the Holder
in the form set forth in Exhibit B or a notice from the Holder to the Company in
the form set forth in Exhibit C.
"Inconvertible Portion" means (1) in the case of a Maximum Share Amount
Inconvertibility, the portion of this Note (which, if applicable, shall be all
of this Note) as shall not, on the Business Day immediately preceding the
applicable Redemption Date, be convertible into shares of Common Stock by reason
of the limitations set forth in Section 2.4(a) (determined without regard to the
limitation, if any, on the Holder contained in the second sentence of Section
2.1), or (2) in the case of a Registration Restriction Inconvertibility, the
portion of this Note (which, if applicable, shall be all of this Note) as shall
not, on the Business Day immediately preceding the applicable Redemption Date,
be convertible into shares of Common Stock which are covered by the Registration
Statement and available for resale by the Holder pursuant to the Registration
Statement.
"Indebtedness" as used in reference to any Person means all
indebtedness of such person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such person or
in effect guaranteed by such person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such person, although such person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such person.
26
"Interest Payment Dates" shall mean each February 15, May 15, August 15
and November 15 and the Maturity Date.
"Issuance Date" means the date this Note was issued to the original
Holder of this Note.
"Issuing Agent" means BankBoston, N.A., its successor or such other
person who shall be serving as transfer agent and registrar for the Common Stock
and who shall have been authorized by the Company to act as conversion agent for
the Note in accordance with the Transfer Agent Agreement and the name, address
and telephone number of whom shall have been given to the Holder by notice from
the Company.
"Majority Holders" means at any time the holders of this Note and the
Other Notes which hold Notes and Other Notes which, based on the original
principal amount thereof, represent a majority of the original aggregate
principal amount of this Note and the Other Notes, whether or not outstanding at
such time.
"Mandatory Redemption Waiver" means a Mandatory Redemption Waiver in
the form attached hereto as Exhibit E.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on Nasdaq or such other securities exchange
or other market on which such security is listed for trading which constitutes
the principal securities market for such security, as reported by Nasdaq or such
exchange or other market.
"Maturity Date" means September [BEFORE SIGNING NOTE INSERT DAY OF
CLOSING DATE], 2000.
"Maximum Share Amount" means [INSERT PRO RATA PORTION OF 20% OF THE
NUMBER OF SHARES OUTSTANDING IMMEDIATELY PRIOR TO THE TIME THE NOTE IS ISSUED]
shares (such amount to be subject to equitable adjustment from time to time on
terms reasonably acceptable to the Holder for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the Issuance Date) of Common Stock.
"Maximum Share Amount Inconvertibility" means the occurrence of five or
more Inconvertibility Days ending on or after the 90th day after the Issuance
Date within any period of ten consecutive Trading Days.
"Measurement Period" means with respect to any date the period of 20
27
consecutive Trading Days ending one Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Net Cash, Cash Equivalent and Short-Term Investment Balances" means at
any time the Company's Cash and Cash Equivalent Balances less the sum of (1) the
amount of any outstanding Indebtedness of any Person which is secured in whole
or in part by Cash and Cash Equivalent Balances plus (2) the maximum amount
which is not outstanding and which may be borrowed pursuant to any revolving
credit facility or any commitment to lend of or to any Person which at the time
it becomes outstanding will be secured in whole or in part by Cash and Cash
Equivalent Balances.
"Note" means this instrument as originally executed, or if later
amended or supplemented, then as so amended or supplemented.
"Note Purchase Agreement" shall mean the Note Purchase Agreement, dated
as of September 8, 1997, by and between the Company and the original Holder of
this Note.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the President or the Chief Financial Officer of the Company.
"Other Notes" means the several 5% Senior Custom Convertible Notes due
2000 issued by the Company pursuant to the Other Note Purchase Agreements.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of the date of the Note Purchase Agreement, between the
Company and the several buyers named therein.
"Payment Shares" means the shares of Common Stock and the related
Preferred Share Purchase Rights issuable in payment of interest on this Note in
accordance with Section 1.1.
"Permitted Indebtedness" means
28
(1) Indebtedness not in excess of $8.0 million aggregate principal
amount which is either (x) outstanding on the Issuance Date and which would
be reflected on a balance sheet of the Company as of the Issuance Date
prepared in accordance with Generally Accepted Accounting Principles or (y)
Indebtedness incurred after the Issuance Date pursuant to commitments
available to the Company under its lease line in effect on the date of
execution and delivery of this Agreement;
(2) Indebtedness incurred after the Issuance Date consisting of (A)
equipment lease obligations or other equipment financings which are
required to be capitalized in accordance with Generally Accepted Accounting
Principles; (B) Indebtedness incurred in connection with the acquisition of
furnitures, fixtures and equipment; and (C) Indebtedness incurred after the
Issuance Date that is secured solely by the Company's interest in real
estate, improvements to real estate and office and laboratory facilities;
(3) Indebtedness incurred in connection with a strategic alliance,
collaboration, joint venture, partnership or other similar arrangement of
the Company with another Person which is engaged in a business similar to
or related to the business of the Company; and
(4) Indebtedness (other than as permitted by the preceding clauses (1)
through (4)) in a principal amount not in excess of $3 million outstanding
at any one time;
so long as (x) in the case of Indebtedness permitted by the preceding clauses
(2) through (4), on the date of incurrence of such Indebtedness no Event of
Default has occurred and is continuing, and (y) in the case of Indebtedness
permitted by the preceding clause (2), the aggregate amount thereof (other than
any amount thereof permitted by clause (1)(y) of this definition) outstanding at
any one time does not exceed $12 million.
"Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) a Person which
(A) has the same investment adviser as the Holder or the holder of any of the
Other Notes, (B) has an investment adviser which is under common control with
the investment adviser to the Holder or the holder of any of the Other Notes or
(C) is an Affiliate of the Holder or the holder of any Other Note.
"Person" means an individual, partnership, corporation, limited
liability company, trust or incorporated organization, and a government or a
governmental agency or political subdivision.
"Pooling Standards" means Opinion No. 16 of the Accounting Principles
Board
29
(or any successor accounting standard of the Financial Accounting Standards
Board (or any successor or replacement Person or board the accounting
pronoucements of which are applicable to issuers having a class of securities
registered pursuant to Section 12(b) or 12(g) of the 1934 Act)) and any
applicable requirements of the SEC relating to pooling of interests accounting
for business combination transactions, in each case as in effect from time to
time.
"Preferred Share Purchase Rights" means the Preferred Share Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar right
hereafter issued by the Company with respect to the Common Stock).
"Redemption Date" means the date which is five Business Days after the
date the Holder gives a Redemption Election to the Company.
"Redemption Election" means (1) a notice by the Holder to the Company
substantially in the form set forth in Exhibit D or (2) a notice by the Holder
to the Company included in the form of Inconvertibility Notice set forth in
Exhibit C.
"Redemption Election Period" means, with respect to a particular
Maximum Share Amount Inconvertibility or Registration Restriction
Inconvertibility, the period of ten Business Days after the later of (x) the
date an Inconvertibility Notice with respect to such Maximum Share Amount
Inconvertibility or Registration Restriction Inconvertibility is given or (y)
the date such Inconvertibility Notice was required to have been given by the
Company.
"Redemption Percentage" means with respect to each Redemption Date, the
applicable percentage set forth below determined with respect to such date as
follows:
Redemption Date Percentage
--------------- ----------
Issuance Date through and including the 120th day thereafter 112.5%
121st through 270th day after the Issuance Date 115.0%
On and after the 271st day after the Issuance Date 120.0%
"Redemption Price" means an amount in cash equal to the sum of (1) the
product obtained by multiplying (A) the sum of (i) the principal amount of this
Note to be redeemed on a particular Redemption Date plus (ii) accrued and unpaid
interest on such principal amount to such Redemption Date times (B) the
applicable Redemption Percentage plus (2) accrued and unpaid Default Interest,
if any, on the amount referred to in the immediately preceding clause (1)(A)(ii)
at the rate provided in this Note to such Redemption Date.
30
"Registration Repurchase Event" means the occurrence of either of the
following events:
(a) the Company fails to file the Registration Statement within the
30-day period provided in Section 8(a)(1) of the Note Purchase Agreement;
or
(b) the SEC Effective Date shall not have occurred on or before the
date which is 90 days after the Issuance Date.
"Registration Repurchase Price" means an amount in cash equal to the
sum of (1) the product obtained by multiplying (A) the sum of (i) the principal
amount of this Note to be repurchased plus (ii) accrued and unpaid interest on
such principal amount to the date of such repurchase times (B) 115%, plus (2)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (1)(A)(ii) at the rate provided in this Note to the
date of repurchase in accordance with Article V.
"Registration Restriction Inconvertibility" means that, notwithstanding
Rule 416 under the 1933 Act or the provisions of Section 8(b) of the Note
Purchase Agreement, the Registration Statement is not deemed to cover such
indeterminate number of additional shares of Common Stock as shall be issuable
upon conversion of this Note based on changes from time to time in the
Conversion Price, and on any five Trading Days ending on or after the SEC
Effective Date within any period of ten consecutive Trading Days the number of
shares of Common Stock issuable upon conversion of this Note in full had this
Note been converted in full into Common Stock on each such Trading Day,
determined at the Conversion Price applicable on each such Trading Day and
without regard to the limitation, if any, on the Holder contained in the second
sentence of Section 2.1, would exceed the number of shares of Common Stock
covered by the Registration Statement and available for sale by the Holder
pursuant to the Registration Statement.
"Registration Statement" means the Registration Statement required to
be filed by the Company with the SEC pursuant to Section 8(a) of the Note
Purchase Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) For any period of five consecutive Trading Days following the date
hereof there shall be no reported sale price of the Common Stock on any of
Nasdaq, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading on Nasdaq, the
NYSE
31
or the AMEX;
(c) Any consolidation or merger of the Company or any Subsidiary with
or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately following
such transaction; or the sale of all or substantially all of the assets of
the Company and its Subsidiaries;
(d) The adoption of any amendment to the Company's Certificate of
Incorporation (other than any certificate designating a series of preferred
stock of the Company) which materially and adversely affects the rights of
the Holder or the taking of any other action which materially and adversely
affects the rights of the Holder;
(e) The inability of the Holder for (x) 20 Trading Days (whether or not
consecutive) during the period commencing on the SEC Effective Date and
ending on the first anniversary of the Issuance Date or (y) 60 Trading Days
(whether or not consecutive) during the period from the SEC Effective Date
to the Maturity Date, to sell shares of Common Stock issued upon conversion
of this Note pursuant to the Registration Statement required to be filed by
the Company pursuant to the Note Purchase Agreement (1) by reason of the
requirements of the 1933 Act, the 1934 Act or any of the rules or
regulations under either thereof or (2) due to the Registration Statement
containing any untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or other failure of the Registration
Statement to comply with the rules and regulations of the SEC; or
(f) The occurrence of any Event of Default specified in Article IV of
this Note.
"Repurchase Price" means with respect to any repurchase pursuant to
Sections 5.1 and 5.2 an amount in cash equal to the sum of (1) the product
obtained by multiplying the sum of (A) the outstanding principal amount of this
Note plus (B) accrued and unpaid interest on such principal amount to the date
of such repurchase times (x) 112.5%, if the date of such repurchase is on or
before the 120th day after the Issuance Date, (y) 115.0%, if the date of such
repurchase is on or after the 121st day after the Issuance Date and on or before
the 270th day after the Issuance Date, or (z) 120.0%, if the date of such
repurchase is on or after the 271st day after the Issuance Date plus (2) accrued
and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (1)(B) at the rate provided in this Note to the
date of such repurchase.
32
"Rights Agreement" means the Rights Agreement, dated as of August 1,
1995, by and between the Company and Boston EquiServe, as Rights Agent.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date on which the Registration Statement
is first declared effective by the SEC.
"Significant Subsidiary" means a Subsidiary which is a "significant
subsidiary," as that term is defined in Rule 1-02(w) of Regulation S-X of the
SEC as in effect on the date of this Agreement.
"Stock Payment Option" shall have the meaning provided in Section
1.1(a).
"Stockholder Approval" means the approval by a majority of the votes
cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Company (duly convened at which a quorum was
present), or a written consent of holders of shares of Common Stock entitled to
such number of votes given without a meeting, of the issuance by the Company of
20% or more of the outstanding Common Stock of the Company for less than the
greater of the book or market value of such Common Stock on conversion of the
Note and the Other Notes, as and to the extent required under Rule 4460(i) of
Nasdaq (or any successor or replacement provision thereof).
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market for
the Common Stock is open for general trading.
"Trading Price" on any date means the lowest sale price (regular way)
for one share of the Common Stock on such date, on the first applicable among
the following: (a) the national securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market for
the Common Stock, (b) Nasdaq, (c) the Nasdaq SmallCap Market or (d) such other
market as at the time constitutes the principal trading market for the Common
Stock, in any such case as reported by Bloomberg, L.P. (subject to equitable
33
adjustment from time to time on terms reasonably acceptable to the Majority
Holders for (i) stock splits, (ii) stock dividends, (iii) combinations, (iv)
capital reorganizations, (v) issuance to all holders of Common Stock of rights
or warrants to purchase shares of Common Stock at a price per share less than
the Trading Price which would otherwise be applicable, (vi) the distribution by
the Company to all holders of Common Stock of evidences of indebtedness of the
Company or cash (other than regular quarterly cash dividends), (vii) tender
offers by the Company or any subsidiary of the Company or other repurchases of
shares of Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than 10% of the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in each such
case which occur on or after the Execution Date); provided, however, that if on
any Trading Day there shall be no reported sale price (regular way) of the
Common Stock, the "Trading Price" on such Trading Day shall be the lowest sale
price (regular way) of the Common Stock on the Trading Day next preceding such
Trading Day on which a sale price (regular way) for the Common Stock has been so
reported.
"Transaction Documents" means this Note, the Note Purchase Agreement,
the Final Maturity Note, the Transfer Agent Agreement, the Warrants and the
other agreements, instruments and documents contemplated hereby and thereby.
"Transfer Agent Agreement" means the Transfer Agent Agreement, dated as
of September 8, 1997, by and among the Company, the Issuing Agent, the original
Holder of this Note and the Original Holders of the Other Notes.
"Warrants" means Common Stock Purchase Warrants of the Company issued
to the original holder of this Note pursuant to the Note Purchase Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Failure or Indulgency Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
8.2 Notices. Except as otherwise specifically provided herein, any
notice herein required or permitted to be given shall be in writing and may be
personally served, sent
34
by telephone line facsimile transmission or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served, sent by telephone line facsimile transmission or sent by
courier or three (3) days after being deposited in the United States mail,
certified, with postage pre-paid and properly addressed, if sent by mail. For
the purposes hereof, the address of the Holder shall be as shown on the records
of the Company (telephone line facsimile transmission number ____________); and
the address of the Company shall be βββ βββββββββ βββββ, βββββββ ββββ,
ββββββββββ βββββ-ββββ, Attention: Vice President, Finance (telephone line
facsimile transmission number (βββ) βββ-ββββ). A copy of any notice to the
Company pursuant to this Note shall also be provided to ββββββ Godward LLP, ββββ
ββ ββββββ ββββ, ββββ ββββ, ββββββββββ βββββ, Attention: βββββ βββββββββ and
βββββββ ββββββββ ββββββ (telephone line facsimile transmission number (650)
857-0663). The Holder or the Company may change its address for service by
service of written notice to the other as herein provided.
8.3 Amendment Provision. Neither this Note or any Other Note nor any
terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by the
Majority Holders, provided that no such change, waiver, discharge or termination
shall, without the consent of the Holder and the holders of the Other Notes
affected thereby, (i) extend the scheduled final maturity of this Note or any
Other Note, or reduce the rate or extend the time of payment of interest (other
than as a result of waiving the applicability of any post-default increase in
interest rates) hereon or thereon or reduce the principal amount hereof or
thereof or the Redemption Price, Repurchase Price or Registration Repurchase
Price, (ii) amend, modify or waive any provision of this Section 8.3, (iii)
reduce any percentage specified in, or otherwise modify, the definition of
Majority Holders or (iv) except as provided in this Note, change the method of
calculating the Conversion Price in a manner adverse to the Holder.
8.4 Assignability. This Note shall be binding upon the Company and its
successors, and shall inure to the benefit of and be binding upon the Holder and
its successors and permitted assigns. The Company may not assign its rights or
obligations under this Note.
8.5 Certain Expenses. The Company shall pay on demand all expenses
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with, (x) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (y) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
8.6 Governing Law. This Note shall be governed by the internal laws of
the
35
State of California, without regard to the principles of conflict of laws.
8.7 Transfer of Note. This Note has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws and
this Note may not be transferred unless (1) the transferee is a Permitted
Transferee and (2) the Holder shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that this Note may be sold or transferred without registration under
the 1933 Act. Prior to any such transfer, such transferee shall have represented
in writing to the Company that such transferee has requested and received from
the Company all information relating to the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity to obtain and review the Registration
Statement and the prospectus included therein, each as amended or supplemented
to the date of transfer to such transferee, and the reports and other
information concerning the Company which at the time of such transfer have been
filed by the Company with the SEC pursuant to the 1934 Act and which are
incorporated by reference in such prospectus as of the date of such transfer. If
such transfer is intended to assign the rights and obligations under Sections
5(a), 5(b) and 8 of the Note Purchase Agreement, such transfer shall otherwise
be made in compliance with Section 10.7 of the Note Purchase Agreement.
8.8 Enforceable Obligation. The Company represents and warrants that at
the time of the original issuance of this Note it received the full purchase
price payable pursuant to the Note Purchase Agreement in an amount at least
equal to the original principal amount of this Note, and that this Note is an
enforceable obligation of the Company which is not subject to any offset,
reduction, counterclaim or disallowance of any sort.
8.9 Certain Amounts. Whenever pursuant to this Note the Company is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Company and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Company and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
36
8.10 Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (b)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor. In
connection with the issuance of any such new Note, the Holder shall pay or
reimburse the Company for the reasonable and documented attorneys' fees and
expenses incurred by the Company in connection therewith (but not in excess of
$500.00 for each such issuance).
37
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer on the day and in the year first above
written.
SUGEN, INC.
By:______________________
Name:
Title:
38
Exhibit A
NOTICE OF CONVERSION
OF 5% SENIOR CUSTOM CONVERTIBLE NOTE DUE 2000
OF SUGEN, INC.
To: SUGEN, Inc. with a copy to:
βββ βββββββββ βββββ
βββββββ ββββ, ββββββββββ βββββ-ββββ ββββββ Godward LLP
5 Palo Alto Square
Attention: Vice President, Finance ββββ ββ ββββββ ββββ
ββββ ββββ, ββββββββββ βββββ
Primary Facsimile No.: (βββ) βββ-ββββ
Alternative Facsimile No. (if primary not Attention: βββββ β.
functioning): (βββ) βββ-ββββ ββββββββββ, Esq.
βββββββ ββββββββ
ββββββ, Esq.
Facsimile No.: (βββ) βββ-ββββ
BankBoston N.A.,
as Issuing Agent
βββ ββββββ ββββββ
ββββββ, βββββββββββββ βββββ
Attention: ββ. βββββ βββββββ,
Special Issuances
Facsimile No.: (βββ) βββ-ββββ
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned hereby elects to convert $___________ of the
Note, equal to the sum of $___________ principal amount of the Note,
$___________ of accrued and unpaid interest on such principal amount and
$___________ of Default Interest on such interest into shares of Common Stock of
SUGEN, INC., a Delaware corporation (the "Company"), at a Conversion Price per
share equal to $___________. Capitalized terms used herein and not otherwise
defined herein have the respective meanings provided in the Note.
(2) The number of shares of Common Stock issuable upon the conversion
of the Note to which this Notice relates is ___________.
(3) If the conversion of the Note by this Notice is based on the
Trading Prices
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during a Measurement Period, set forth below or on a schedule which accompanies
this Notice are the Trading Prices during the Measurement Period applicable to
this Notice and an indication of the two Trading Prices used to determine the
Conversion Price set forth above.
Date Trading Price
---- -------------
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
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___________, ______ $____________________
___________, ______ $____________________
___________, ______ $____________________
(4) Please issue a certificate or certificates for __________ shares of
Common Stock in the name(s) specified immediately below or, if additional space
is necessary, on an attachment hereto:
_____________________ _____________________
Name Name
_____________________ _____________________
Address Address
_____________________ _____________________
SS or Tax ID Number SS or Tax ID Number
Delivery Instructions
for Common Stock:
(5) The Holder hereby represents to the Company that the exercise of
conversion rights contained herein does not violate the provisions of Section
2.1 of the Note relating to beneficial ownership in excess of 4.9% of the Common
Stock.
(6) The Holder hereby represents and warrants that it has complied and
will comply with the applicable requirements of Sections 8(c)(3) and 8(c)(5) of
the Note Purchase Agreement with respect to the shares of Common Stock issuable
upon the conversion of the Note
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to which this Notice relates.
(7) If the shares of Common Stock issuable upon conversion of the Note
have not been registered under the Securities Act of 1933, as amended (the
"Act"), the undersigned represents and warrants that (i) the shares of Common
Stock issuable upon the conversion of the Note to which this Notice relates are
being acquired for the account of the undersigned for investment, and not with a
view to, or for resale in connection with, the distribution thereof, and that
the undersigned has no present intention of distributing or reselling such
shares and (ii) the undersigned is an "accredited investor" as defined in
Regulation D under the 1933 Act. The undersigned further agrees that (A) such
shares shall not be sold or transferred unless either (i) they first shall have
been registered under the 1933 Act and applicable state securities laws or (ii)
the Company shall have been furnished with an opinion of legal counsel
reasonably satisfactory to the Company to the effect that such sale or transfer
is exempt from the registration requirements of the 1933 Act and (B) until such
shares are registered under the 1933 Act, the Company may place a legend on the
certificate(s) for the shares to that effect and place a stop-transfer
restriction in its records relating to the shares.
NAME:
Date _________________________ ___________________________________
Signature of Registered Holder
(Must be signed exactly as
name appears in the Note.)
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Exhibit B
COMPANY INCONVERTIBILITY NOTICE
(Section 2.4(b) of 5% Senior Custom Convertible Note due 2000)
TO:_______________________
(Name of Holder)
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), SUGEN, Inc., a Delaware corporation (the "Company"), hereby
notifies the above-named Holder:
(a) On _______________ (fill in date) five Inconvertibility Days had
occurred in a period of ten Trading Days and on such date $__________ (fill in
amount) of principal of the Note and the related interest, if any, became
inconvertible by reason of the occurrence of five Inconvertibility Days within a
period of ten consecutive Trading Days.
(b) The five Inconvertibility Days covered by this Notice and the
applicable Conversion Price on each such day are as follows:
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
|_| (a) Maximum Share Amount Inconvertibility
|_| (b) Registration Restriction Inconvertibility
(3) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
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Date _________________________ SUGEN, INC.
By____________________
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Exhibit C
HOLDER INCONVERTIBILITY NOTICE
(Section 2.4(b) of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned (the "Holder"), hereby notifies SUGEN, Inc.,
a Delaware corporation (the "Company"):
(a) On ____________ (fill in date) five Inconvertibility Days had
occurred in a period of ten Trading Days and on such date $___________ (fill in
amount) of principal of the Note and the related interest, if any, became
inconvertible by reason of the occurrence of five Inconvertibility Days within a
period of ten consecutive Trading Days.
(b) The five Inconvertibility Days covered by this Notice and the
applicable Conversion Price on each such day are as follows:
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
____________________, ___________ $____________
(2) The Inconvertibility Days referred to in this Notice relate to
(check (a) or (b)):
|_| (a) Maximum Share Amount Inconvertibility
|_| (b) Registration Restriction Inconvertibility
(3) If the following date and amounts are completed in this Notice, the
Holder hereby directs the Company to redeem the principal amount set forth below
(and the related interest) in accordance with Section 7(a) of the Certificate of
Designations set forth below:
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(a) Principal amount of Note to be redeemed: __________ (fill in)
(b) On ______________ (fill in Redemption Date), the Company shall pay
the Holder the Redemption Price of the portion (which, if applicable, may be
all) of the Note to be redeemed of $____________. The Redemption Price is equal
to the sum of (1) the product obtained by multiplying (A)(i) $_____________
(fill in) of principal plus (ii) $____________ of accrued and unpaid interest on
such principal amount to such Redemption Date times (B) ______________% (fill in
applicable Redemption Percentage) plus (2) $ of accrued and unpaid Default
Interest (if any) to such Redemption Date.
(4) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date _________________________ NAME OF HOLDER:
_____________________________
By___________________________
Title:
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Exhibit D
HOLDER REDEMPTION ELECTION
(Section 2.4(b) of 5% Senior Custom
Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned (the "Holder") hereby notifies SUGEN, Inc., a
Delaware corporation (the "Company"), that the Holder is exercising its right to
require the Company to redeem a portion (which, if applicable, may be all) of
the Note as set forth below in accordance with Section 2.4(b) of the Note. On
_______________ (fill in Redemption Date), the Company shall pay the Holder the
Redemption Price of $________________. The Redemption Price is equal to the sum
of (1) the product obtained by multiplying (A)(i) $________________ (fill in) of
principal plus (ii) $________________ of accrued and unpaid interest on such
principal amount to such Redemption Date times (B) ________________% (fill in
applicable Redemption Percentage) plus (2) $________________ of accrued and
unpaid Default Interest (if any) to such Redemption Date.
(2) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date NAME OF HOLDER:
_____________________________
By___________________________
D-1
Exhibit E
MANDATORY REDEMPTION WAIVER
SUGEN, Inc., a Delaware corporation (the "Company"), and the
undersigned holder (the "Holder") of the Company's 5% Senior Custom Convertible
Note due 2000 (the "Note") hereby agree as follows:
1. The Company's or the Holder's Inconvertibility Notice given on
________________ (the "Waiver Commencement Date"), if any, is hereby rescinded
and the Note shall not be redeemed pursuant to Section 2.4 of the Note by reason
of such Inconvertibility Notice or any inconvertibility of the Note which may
arise pursuant to Section 2.4 of the Note during the period ending on the date
set forth below in this Section 1 (the "Waiver Period").
Date for end of Waiver Period: _______________________ , 19___
2. If this Mandatory Redemption Waiver is given in connection with a
Registration Restriction Inconvertibility, promptly, but in no event later than
the date which is 15 days after the date of this Mandatory Redemption Waiver,
the Company shall file a Registration Statement with the SEC relating to the
resale by the Holder of the number of Registrable Securities (as defined in the
Note Purchase Agreement) set forth below in this Section 2, which Registration
Statement may be constituted in any manner which does not have the effect of
suspending or terminating the effectiveness of any and all Registration
Statements filed by the Company pursuant to Section 8(b)(1) of the Note Purchase
Agreement or otherwise with respect to the Registrable Securities which names
the Holder as a selling stockholder, and shall thereafter use its best efforts
to obtain effectiveness of such Registration Statement. Such Registration
Statement shall in all respects be deemed a Registration Statement (as defined
in the Note).
Number of Registrable Securities: ________________
3. If the Company shall default in the performance of its obligations
set forth herein, this Mandatory Redemption Waiver shall cease to be of further
force and effect and the rights, liabilities and obligations of the parties
shall be restored to those which would have existed in the absence of this
Mandatory Redemption Waiver.
4. This Agreement shall be governed by the laws of the State of
California. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided in the Note.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers or other representatives thereunto
duly authorized as of the respective dates set forth below.
SUGEN, INC.
By___________________________
Title:
Date:________________________
NAME OF HOLDER:
_____________________________
By___________________________
Title:
Date:________________________
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Exhibit F
COMPANY NOTICE
(Section 5.2(a) of 5% Senior Custom Convertible Note due 2000)
TO:______________________
(Name of Holder)
(1) A Repurchase Event described in the 5% Senior Custom Convertible
Note due 2000 (the "Note") of SUGEN, Inc., a Delaware corporation (the
"Company"), occurred on ______________, ___________. As a result of such
Repurchase Event, the Holder is entitled to exercise its repurchase rights
pursuant to Section 5.2 of the Note.
(2) The Holder's repurchase right must be exercised on or before
______________, __________.
(3) At or before the date set forth in the preceding paragraph (2), the
Holder must:
(a) deliver to the Company a Holder Notice, in the form attached as Exhibit
G to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the portion of
the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date _________________________ SUGEN, INC.
By____________________________
Title:
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Exhibit G
HOLDER NOTICE
(Section 5.2(b) of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned Holder hereby elects to exercise its right to
require repurchase by the Company pursuant to Sections 5.2(a) and 5.2(b) of
$______________ of the Note, equal to the sum of $______________ principal
amount of the Note, $______________ of accrued and unpaid interest on such
principal amount and $ of Default Interest on such interest at the Repurchase
Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By_________________________
Signature of Registered
Holder (Must be signed
exactly as name appears
in the Note.)
G-1
Exhibit H
HOLDER REGISTRATION REPURCHASE NOTICE
(Section 5.3 of 5% Senior Custom Convertible Note due 2000)
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), the undersigned Holder hereby elects to exercise its right to
require repurchase by the Company pursuant to Section 5.3 of $______________ of
the Note, equal to the sum of $______________ principal amount of the Note,
$______________ of accrued and unpaid interest on such principal amount and
$______________ of Default Interest on such interest at the Registration
Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date: ___________________ NAME OF HOLDER:
By_________________________
Signature of Registered
Holder (Must be signed
exactly as name appears
in the Note.)
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Exhibit I
HOLDER NOTICE OF FINAL CONVERSION
OF 5% SENIOR CUSTOM CONVERTIBLE NOTE DUE 2000
TO: SUGEN, INC.
(1) Pursuant to the terms of the 5% Senior Custom Convertible Note due
2000 (the "Note"), issued by SUGEN, Inc., a Delaware corporation (the
"Company"), the undersigned Holder of the Note hereby elects (check one)
|_| To convert the principal amount of the Note, accrued and unpaid
interest on such principal amount and Default Interest on such interest
into shares of Common Stock of the Company which is outstanding on the
Maturity Date.
|_| To receive a Final Maturity Note in the form attached to the Note as
Exhibit J in accordance with Section 6.2 of the Note.
(2) In connection with this certificate the Holder hereby represents to
the Company as follows:
(a) If the Holder hereby elects to exercise its conversion rights, it
will not violate the provisions of Section 2.1 of the Note relating to
beneficial ownership in excess of 4.9% of the Common Stock.
(b) If the Holder has selected conversion of the Note and the shares of
Common Stock issuable upon conversion of the Note have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), the undersigned
represents and warrants that (i) such shares of Common Stock are being acquired
for the account of the undersigned for investment, and not with a view to, or
for resale in connection with, the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares
and (ii) the undersigned is an "accredited investor" as defined in Regulation D
under the 1933 Act. The undersigned further agrees that (A) such shares shall
not be sold or transferred unless either (i) they first shall have been
registered under the 1933 Act and applicable state securities laws or (ii) the
Company first shall have been furnished with an opinion of legal counsel
reasonably satisfactory to the Company to the effect that such sale or transfer
is exempt from the
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registration requirements of the 1933 Act and (B) until such shares are
registered under the 1933 Act, the Company may place a legend on the
certificate(s) for the shares to that effect and place a stop-transfer
restriction in its records relating to the shares.
(c) It is an "accredited investor" as that term is defined in Rule 501
of Regulation D under the 1933 Act by reason of Rule 501(a)(3).
(3) Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
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NAME OF HOLDER:
Date _________________________
By______________________________
Title:__________________________
I-3
Exhibit J
THIS FINAL MATURITY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT") OR ANY STATE SECURITIES LAWS. THIS FINAL
MATURITY NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF
UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM,
SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THIS
FINAL MATURITY NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3.7.
SUGEN, INC.
FINAL MATURITY NOTE
New York, New York $________
, 2005 No.
FOR VALUE RECEIVED, SUGEN, INC., a Delaware corporation (hereinafter
called the "Company"), hereby promises to pay to , [Address], or registered
assigns (the "Holder") or order, the sum of Dollars ($ ), on [before signing the
Final Maturity Note, insert month and day of the Note's Issuance Date], 2005,
and to pay interest on the unpaid principal balance hereof at the rate of
thirteen and three quarters percent (13.75%) per annum from the date hereof,
until the same becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. Any amount of principal of or interest on this
Final Maturity Note which is not paid when due shall bear interest at the rate
of fifteen percent (15%) per annum from the due date thereof until the same is
paid ("Default Interest"). Interest shall be payable on the 1st day of each
April and October, commencing on April 1, 2001, and at maturity (the "Interest
Payment Dates"). Interest on this Final Maturity Note shall be computed on the
basis of a 360-day year of 12 30-day months and actual days elapsed.
All payments of principal of and interest on this Final Maturity Note
shall be made in lawful money of the United States of America, or, at the option
of the Company and subject to the provisions of this Final Maturity Note,
interest payable on the Interest Payment Dates may be paid in whole or in part
in fully paid and nonassessable shares of Common Stock, $.01 par value, or any
shares of capital stock and related rights of the Company into which such stock
shall hereafter be changed or reclassified (the "Common Stock"). All cash
payments shall be made by wire transfer of immediately available funds to such
account as the Holder may from
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time to time designate by written notice in accordance with the provisions of
this Final Maturity Note. Whenever any amount expressed to be due by the terms
of this Final Maturity Note is due on any day which is not a business day, the
same shall instead be due on the next succeeding day which is not a business day
and, in the case of any Interest Payment Date which is not the date on which
this Final Maturity Note is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of
interest due on such date. As used in this Final Maturity Note, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.
The obligations of the Company under this Final Maturity Note shall
rank in right of payment on a parity with all other unsubordinated obligations
of the Company for indebtedness for borrowed money or the purchase price of
property. This Final Maturity Note is issued pursuant to a 5% Senior Custom
Convertible Note due 2000 issued by the Company (the "Note").
The following terms shall apply to this Final Maturity Note:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 Prepayment. The Company shall have the right to prepay this Final
Maturity Note in whole at any time or in any part from time to time.
1.2 Issuance of Common Stock in Lieu of Cash Interest. (a) If the
Company exercises its option to make a payment of interest on this Final
Maturity Note wholly or partly in shares of Common Stock (herein sometimes
called the "Stock Payment Option"), the issuance of shares of Common Stock upon
such exercise of the Stock Payment Option shall have been authorized by the
Board of Directors of the Company.
(b) The Company shall not be permitted to exercise the Stock Payment
Option with respect to any payment of interest on this Final Maturity Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of shares of Common Stock pursuant to
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the Stock Payment Option or the public resale of such shares by the Holder would
require registration with or approval of any governmental authority under any
law or regulation, and such registration or approval has not been effected or
obtained or is not in effect and the Registration Statement is unavailable for
use by the Holder for the resale of such shares;
(iii) the shares of Common Stock to be issued upon exercise of the
Stock Payment Option have not been authorized for listing, upon official
notice of issuance, on the principal securities exchange on which the
Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of the Common Stock;
(v) an Event of Default (as defined herein) has occurred and is
continuing; or
(vi) the Common Stock is neither (i) listed or admitted for trading on
a national securities exchange nor (ii) quoted on the Nasdaq National
Market.
(c) If the Stock Payment Option is elected, the Company shall issue and
dispatch or cause to be dispatched to the Holder one or more certificates for
the aggregate number of whole shares of Common Stock determined by dividing the
per share Computed Price of the Common Stock on the applicable Interest Payment
Date into the total amount of lawful money of the United States of America which
the Holder would receive if the aggregate amount of interest on this Final
Maturity Note which is being paid in shares of Common Stock were being paid in
such lawful money; provided, however, that if in connection with any such
election the Company shall have failed to deliver the appropriate number of
shares of Common Stock to the Holder within three business days after the
applicable Interest Payment Date, then the Company shall not be entitled to use
the Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in this Note, from such Interest Payment Date until paid. No
fractional shares will be issued in payment of interest on this Final Maturity
Note. In lieu thereof, the Company may issue a number of shares of Common Stock
which reflects a rounding up to the next whole number or may pay lawful money of
the United States of America. The shares of Common Stock issued or to be issued
by the Company in payment of interest on this Final Maturity Note are sometimes
referred to herein as the "Payment Shares."
(d) If the Company exercises the Stock Payment Option with respect to a
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payment of interest on this Final Maturity Note, the Company shall deliver to
the Holder, on or prior to the date on which Payment Shares for such payment of
interest on this Final Maturity Note are to be received by the Holder, a Company
Certificate setting forth (i) the total amount of the interest payment to which
the Holder is entitled, (ii) the portion of the interest payment being made in
Payment Shares, (iii) the number of Payment Shares allocable to such payment, as
calculated pursuant to this Section 1.2, (iv) any rounding adjustment to such
number or any payment necessary to be made pursuant to Section 1.2(c), (v) a
brief statement of the facts requiring such adjustment, (vi) the number of
Payment Shares issuable with respect to each $100 of interest on this Final
Maturity Note after such adjustment and (vii) a brief statement that none of the
conditions set forth in Section 1.2(b) has occurred and is existing. Such
Company Certificate shall be accompanied by the certificates, each duly issued
in the name of the Holder, representing the Payment Shares. Such Company
Certificate shall be conclusive evidence of the correctness of the calculation
of the number of Payment Shares allocable to the payments to which such Company
Certificate relates and of any adjustments to such number made pursuant to this
Section 1.2 in the absence of manifest error. In addition, on or before the
pertinent payment date, the Company shall cause the transfer agent for the
Common Stock to prepare and issue the certificates representing the Payment
Shares in the name of the Holder before being so delivered by the Company.
(e) The Payment Shares, when issued pursuant to and in compliance with
this Section 1.2, shall be, and for all purposes shall be deemed to be, validly
issued, fully paid and nonassessable shares of Common Stock; the issuance and
delivery thereof is in all respects hereby authorized; and the issuance thereof,
together with lawful money of the United States of America, if any, paid in lieu
of fractional shares of such Common Stock, will be, and for all purposes shall
be deemed to be, in full discharge and satisfaction of the Company's obligation
to pay the interest on this Final Maturity Note to which such Payment Shares
relate.
(f) As used in this Final Maturity Note, the following terms shall have
the meanings provided herein:
(1) "Company Certificate" means a certificate of the Company signed by
an Officer.
(2) "Computed Price" for any date means arithmetic average of the per
share Trading Price during the Measurement Period with respect to such
date.
(3) "Measurement Period" means, with respect to any date, the period of
five consecutive trading days ending three trading days prior to such date.
(4) "Officer" means the Chairman of the Board, the Chief Executive
Officer,
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the President, the Chief Operating Officer, any Senior Vice President or
the Chief Financial Officer of the Company.
(5) "Other Final Maturity Notes" means the several Final Maturity Notes
issued by the Company pursuant to the Other Notes.
(6) "Other Notes" means the several 5% Senior Custom Convertible Notes
due 2000 issued by the Company.
(7) "Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market
for the Common Stock is open for general trading.
(8) "Trading Price" on any date means the closing bid price for one
share of the Common Stock on such date, on the first applicable among the
following: (a) the national securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market
for the Common Stock or (b) the Nasdaq National Market, in either case as
reported by Bloomberg, L.P. (subject to equitable adjustment from time to
time on terms reasonably acceptable to the Holder for (i) stock splits,
(ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
issuance to all holders of Common Stock of rights or warrants to purchase
shares of Common Stock at a price per share less than the Trading Price
which would otherwise be applicable, (vi) the distribution by the Company
to all holders of Common Stock of evidences of indebtedness of the Company
or cash (other than regular quarterly cash dividends), (vii) tender offers
by the Company or any subsidiary of the Company or other repurchases of
shares of Common Stock in one or more transactions which, individually or
in the aggregate, result in the purchase of more than ten percent of the
Common Stock outstanding and (viii) similar events relating to the Common
Stock, in each such case which occur during a particular Measurement
Period).
(9) "Transaction Documents" means this Final Maturity Note, the Note,
the Note Purchase Agreement and the other agreements, instruments and
documents contemplated hereby and thereby.
ARTICLE II
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
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2.1 Failure to Pay Principal or Interest. The Company fails (a) to pay
the principal hereof when due, whether at maturity, upon redemption, upon
acceleration or otherwise or (b) to pay any installment of interest hereon when
due and, in the case of this clause (b) of this Section 2.1 only, such failure
continues for a period of ten (10) business days after the due date thereof;
2.2 Breach of Covenant. The Company breaches any material covenant or
other material term or condition of this Final Maturity Note (other than as
specifically provided in Section 2.1 hereof), and such breach continues for a
period of twenty (20) days after written notice thereof to the Company from the
Holder or within 60 days after delivery of such notice if and only if, such
default is reasonably capable of cure and during such 60-day period, the Company
has been diligently taking action to cure such default and such cure cannot be
completed within such 20-day period;
2.3 Breach of Representations and Warranties. Any representation or
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Note Purchase Agreement) shall be false or
misleading in any material respect when made;
2.4 Certain Voluntary Proceedings. The Company or any significant
subsidiary (as defined in Section 1.02(w) of Regulation S-X of the Securities
and Exchange Commission) of the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due or shall admit in writing its inability generally to pay its debts as they
become due;
2.5 Certain Involuntary Proceedings. An involuntary case or other
proceeding shall be commenced against the Company or any significant subsidiary
of the Company seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) consecutive days;
2.6 Judgments. Any court of competent jurisdiction shall enter one or
more final judgments against the Company or any subsidiary of the Company or any
of their
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respective properties or other assets in an aggregate amount in excess of
$1,500,000, which is not vacated, bonded, stayed, discharged, satisfied or
waived for a period of thirty (30) consecutive days; or
2.7 Default Under Other Agreements. (a) The Company or any subsidiary
shall (i) default in any payment with respect to any indebtedness for borrowed
money (other than this Final Maturity Note) which indebtedness has an
outstanding principal amount in excess of $2,000,000 individually or $5,000,000
in the aggregate for the Company and its subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created or (ii) default in the observance or performance of any
agreement, covenant or condition relating to any such indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any such indebtedness of the Company or any of its subsidiaries shall, in
accordance with its terms, be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled or required payment prior to the
stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Company shall, pay to the Holder an amount equal to the
sum of (A) the outstanding principal amount of this Final Maturity Note plus (B)
accrued and unpaid interest on such principal amount to the date of payment plus
(C) accrued and unpaid Default Interest, if any, on the amount referred to in
the immediately preceding clause (B) at the rate provided in this Final Maturity
Note to the date of payment and all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise all other rights and remedies available at law or in
equity.
ARTICLE III
MISCELLANEOUS
3.1 Failure or Indulgency Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver
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thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
3.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served, sent by telephone line facsimile
transmission or delivered by courier or sent by United States mail and shall be
deemed to have been given upon receipt if personally served, sent by telephone
line facsimile transmission or sent by courier or three (3) days after being
deposited in the United States mail, certified, with postage pre-paid and
properly addressed, if sent by mail. For the purposes hereof, the address of the
Holder shall be as shown on the records of the Company (telephone line facsimile
transmission number (_)______-_______ ); and the address of the Company shall be
βββ βββββββββ βββββ, βββββββ ββββ, ββββββββββ βββββ-ββββ Attention: Vice
President, Finance (telephone line facsimile transmission number (βββ) βββ-ββββ.
A copy of any notice to the Company pursuant to this Note shall also be provided
to ββββββ Godward LLP, ββββ ββ ββββββ ββββ, ββββ ββββ, ββββββββββ βββββ,
Attention: βββββ ββββββββββ and βββββββ ββββββββ ββββββ (telephone line
facsimile transmission number (βββ) βββ-ββββ). The Holder or the Company may
change the address for service by service of written notice to the other as
herein provided.
3.3 Amendment Provision. The term "Final Maturity Note" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
3.4 Assignability. This Final Maturity Note shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of and be
binding upon the Holder and its successors and permitted assigns.
3.5 Certain Expenses. The Company shall pay on demand all expenses
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with, (x) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (y) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
3.6 Governing Law. This Final Maturity Note shall be governed by the
internal laws of the State of California, without regard to the principles of
conflict of laws.
3.7 Transfer of Final Maturity Note. This Note has not been and is not
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being registered under the provisions of the 1933 Act or any state securities
laws and this Note may not be transferred unless (1) the transferee is a
Permitted Transferee and (2) the Holder shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that this Note may be sold or transferred pursuant
without registration under the 1933 Act. Prior to any such transfer, such
transferee shall have represented in writing to the Company that such transferee
has requested and received from the Company all information relating to the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company deemed relevant by such transferee; that
such transferee has been afforded the opportunity to ask questions of the
Company concerning the foregoing and has had the opportunity to obtain and
review the Registration Statement and the prospectus included therein, each as
amended or supplemented to the date of transfer to such transferee, and the
reports and other information concerning the Company which at the time of such
transfer have been filed by the Company with the SEC pursuant to the 1934 Act
and which are incorporated by reference in such prospectus as of the date of
such transfer. "Permitted Transferee" means any person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) a Person which
(A) has the same investment adviser as an Investor of the holder of any of the
Other Notes, (B) has an investment adviser which is under common control with
the investment adviser to an Investor or the holder of any of the Other Notes or
(C) is an Affiliate of any Investor of the holder of any Other Note.
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IN WITNESS WHEREOF, the Company has caused this Final Maturity Note to
be signed in its name by its duly authorized officer on the day and in the year
first above written.
SUGEN, INC.
By
Name:
Title:
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