Exhibit 1
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
November 9, 1999
Photogen Technologies, Inc.
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RE: AMENDED AND RESTATED STANDBY AGREEMENT
Gentlemen:
I understand that Photogen Technologies, Inc. (the "Company")
will be raising at least $5 million in additional financing during the fourth
quarter of 1999 to fund certain research projects and other working capital
needs. I am prepared to assure the success of that financing on the following
terms and conditions:
1. This Amended and Restated Standby Agreement, amends and
restates the Standby Agreement dated August 5, 1999 and executed August 9, 1999
by and between myself, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D., ▇▇▇▇ ▇. ▇▇▇▇▇▇ as President of
the Company and individually, ▇▇▇▇▇ ▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D.,
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D. attached hereto as Exhibit A.
2. During the fourth quarter of its 1999 fiscal year, the
Company agrees that it will offer to a number of accredited investors (within
the meaning of Regulation 501 under the Securities Act of 1933) a private
placement of Series B Convertible Preferred Stock, substantially in accordance
with the principal terms set forth in Exhibit B hereto and as set forth in the
Private Placement Memorandum dated November 15, 1999, resulting in not less than
$4 million of gross proceeds to the Company from the Preferred Stock. In
addition, at the request of the Company at any time before December 31, 2001, I
will purchase a secured term promissory note of the Company, in the principal
amount of $1 million, substantially in accordance with the principal terms set
forth in Exhibit C hereto. The total gross proceeds to the Company from the note
and Preferred Stock will be not less than $5 million. The parties to this
Agreement may change the terms of Exhibits B and C by mutual agreement.
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Photogen Technologies, Inc.
November 9, 1999
Page 2
3. I agree (directly or through trusts or related entities I
control) to purchase the $1 million note, and up to $4 million of the Preferred
Stock to make up for any shortfall if total subscriptions from private placement
investors for the Preferred Stock are less than $4 million. The precise amount
of Preferred Stock I agree to purchase will be determined by subtracting the
total gross proceeds of subscriptions the Company receives for the Preferred
Stock from $4 million. If private placement investors agree to purchase $4
million or more of Preferred Stock, I will not be obligated to purchase any
Preferred Stock; however I will continue to be obligated to purchase the $1
million note.
4. Attached to this Agreement as Exhibit D is a letter from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ confirming that I have sufficient resources to
fulfill the entire $5 million obligation under this Agreement.
5. Each of ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Tennessee Stockholders") agrees that for a period
of two years from August 9, 1999, he will not, directly or indirectly, Transfer
or agree or attempt to Transfer any interest in any common stock of the Company
now owned beneficially (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) by him without my express prior written consent. It is
agreed that consent for Transfers by the Tennessee Stockholders will be granted
for all or part of the common stock whenever a requested Transfer will not be
expected to adversely affect the best interest of the Company in my judgment.
The term "Transfer" means any offer, sale, assignment, transfer, conveyance,
pledge, hypothecation, or other similar transaction (whether for consideration
or as a gift) of any Company common stock or any interest therein, including
purchasing, granting or creating any options, warrants, security convertible
into such person's common stock, or any other type of derivative security or
derivative transaction (including short sales, sales against the box or forward
agreements), or other transactions that have the effect of reducing the economic
risk of holding the Company's common stock.
6. I agree that for a period ending December 31, 2000, I will
notify Gilford Securities Incorporated and consult with Gilford on any proposed
Transfer by any of the Tennessee Stockholders pursuant to paragraph 5 above.
7. The transactions in paragraphs 2 and 3 above are subject to
the conditions that (a) definitive documentation is developed satisfactory to
the parties to this Agreement concerning the transactions described in
paragraphs 2 and 3, and (b) each of the parties identified in paragraph 5
complies with the provisions of that paragraph.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Photogen Technologies, Inc.
November 9, 1999
Page 3
Please indicate your agreement to the foregoing by signing
below.
Very truly yours,
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Accepted and agreed to as of
November 9, 1999.
Photogen Technologies, Inc.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Ph.D.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Photogen Technologies, Inc.
November 9, 1999
Page 4
Paragraph 6 acknowledged as of
November 9, 1999.
Gilford Securities Incorporated
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Its: Senior VP
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EXHIBIT A
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
August 5, 1999
Photogen Technologies, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: STANDBY AGREEMENT
Gentlemen:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D. and I understand that Photogen Technologies, Inc.
(the "Company") will be raising at least $5 million in additional financing
during the fourth quarter of 1999 to fund certain research projects and other
working capital needs. ▇▇. ▇▇▇▇▇▇▇▇▇ and I are prepared to assure the success of
that financing on the following terms and conditions:
1. During the fourth quarter of its 1999 fiscal year, the Company agrees
that it will (a) offer to ▇▇. ▇▇▇▇▇▇▇▇▇ and me one or more secured term
promissory notes, $1 million aggregate principal amount, substantially in
accordance with the principal terms set forth in Exhibit A hereto; and (b) offer
to a number of accredited investors (within the meaning of Regulation 501 under
the Securities Act of 1933) a private placement of Series A Convertible
Preferred Stock, substantially in accordance with the principal terms set forth
in Exhibit B hereto, resulting in not less than $4 million of gross proceeds to
the Company from the Preferred Stock. The total gross proceeds to the Company
from the notes and Preferred Stock will be not less than $5 million. The parties
to this Agreement may change the terms of Exhibits A and B by mutual agreement.
2. ▇▇. ▇▇▇▇▇▇▇▇▇ and I (directly or through trusts that each of us controls)
jointly and severally agree to purchase the $1 million of notes, and up to $4
million of the Preferred Stock to make up for any shortfall if total
subscriptions from private placement investors for the Preferred Stock are less
than $4 million. The precise amount of Preferred Stock ▇▇. ▇▇▇▇▇▇▇▇▇ and I agree
to purchase will be determined by subtracting the total subscriptions
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Photogen Technologies, Inc.
August 5, 1999
Page 2
the Company receives for the Preferred Stock from $4 million. If private
placement investors agree to purchase $4 million or more of Preferred Stock, ▇▇.
▇▇▇▇▇▇▇▇▇ and I will not be obligated to purchase any Preferred Stock; however
we will continue to be obligated to purchase the $1 million of notes.
3. Attached to this Agreement as Exhibit C is a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ confirming that I have sufficient resources to fulfill the entire $5
million obligation under this Agreement.
4. Each of ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Tennessee Stockholders") agrees that for a period of two
years from the date hereof he will not, directly or indirectly, Transfer or
agree or attempt to Transfer any interest in any common stock of the Company now
owned beneficially (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) by him without the express prior written consent of both
▇▇. ▇▇▇▇▇▇▇▇▇ and me. It is agreed that our consent for Transfers by the
Tennessee Stockholders will be granted for all or part of the common stock
whenever a requested Transfer will not be expected to adversely affect the best
interest of the Company in our judgment. The term "Transfer" means any offer,
sale, assignment, transfer, conveyance, pledge, hypothecation, or other similar
transaction (whether for consideration or as a gift) of any Company common stock
or any interest therein, including purchasing, granting or creating any options,
warrants, security convertible into such person's common stock, or any other
type of derivative security or derivative transaction (including short sales,
sales against the box or forward agreements), or other transactions that have
the effect of reducing the economic risk of holding the Company's common stock.
5. The transactions in paragraphs 1 and 2 above are subject to the
conditions that (a) the Company's Board of Directors approves the transactions
in paragraph 1 (including the separate approval of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. as a
disinterested director), (b) definitive documentation is developed satisfactory
to the parties to this Agreement concerning the transactions described in
paragraphs 1 and 2, and (c) each of the parties identified in paragraph 4
complies with the provisions of that paragraph. The provisions of paragraph 4
will become effective immediately, and are subject to the condition subsequent
that the Company's Board approves the transactions in paragraph 1 (as set forth
in clause (a) of this paragraph).
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Photogen Technologies, Inc.
August 5, 1999
Page 3
Please indicate your agreement to the foregoing by signing below.
Very truly yours,
/S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
Accepted and agreed to as of
August 9, 1999.
Photogen Technologies, Inc.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, President
/S/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Ph.D.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D.
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D.
EXHIBIT A
TERM SHEET
$1 MILLION TERM CREDIT FACILITY
Borrower: Photogen, Inc. ("Borrower").
Lenders: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
M.D. ("Lenders").
Guarantor: Photogen Technologies, Inc. ("PTI").
Principal amount: $1,000,000.00.
Purpose: To fund working capital requirements in connection
with pre-clinical research and clinical testing of
Borrower's technologies.
Advances: The credit facility may be utilized in advances of
$100,000 increments, upon 15 days' prior written
notice to the Lenders. Once repaid, no portion of the
credit facility can be reborrowed.
Interest: The daily rate equivalent of 6% per annum calculated
on the basis of a 360-day year.
Amortization; maturity: The notes will be payable over five
years. Interest only will be payable on an
annual basis until maturity, at which time
all outstanding principal and interest will
be due and payable.
Prepayment: Prepayment will be permitted at any time and without
penalty.
1
Collateral: The credit facility will be secured by a first
priority lien on all of the Borrower's present and
future real and personal properties, including all:
- accounts, chattel paper, tax refunds,
contract rights, options, leases, leasehold
interests, letters of credit, instruments,
documents, documents of title;
- patents, trade secrets, know how, copyrights,
trademarks, trade names, software, data,
licenses, goodwill;
- general intangibles, beneficial interests;
- goods, machinery, equipment, vehicles,
furniture, inventory;
- securities, cash or cash equivalents;
- real estate and improvements, fixtures; and -
products and proceeds (including without
limitation insurance and litigation proceeds)
of the foregoing, all accessions to the
foregoing and all substitutions, renewals,
improvements and replacements of and
additions to the foregoing.
The lien will be granted to ▇▇. ▇▇▇▇▇▇▇▇▇ as collateral
agent for the Lenders. The lien will be perfected by
appropriate filings with the secretary of state, county
recorder and U.S. Patent and Trademark Office.
Events of Default: Upon the occurrence of any of the
following events, the notes will become immediately due
and payable and the Lenders will have the right to,
among other things, foreclose on the Collateral:
- failure to pay interest or principal under
the notes when due;
2
- a material default by the Borrower or PTI in any
agreement or obligation to the Lenders or to
any third party which is not cured within
the time period, if any, permitted in the
governing instrument for cure; or
- the Borrower, PTI or any of PTI's other
subsidiaries: becoming subject to bankruptcy
proceedings (which, if filed against the
Borrower, are not dismissed within 90 days),
making a general assignment for the benefit
of creditors, or authorizing such entity to
seek the protection of or relief under the
U.S. Bankruptcy Code or similar state laws
relating to insolvency, reorganization or
any other proceeding to modify or alter the
rights of such entity's creditors.
Miscellaneous: All terms, rights and other provisions of the
credit facility are subject to final negotiation and
the execution and delivery of mutually agreeable
definitive documentation, and approval by the
disinterested directors of the Borrower and PTI.
Documentation will include a loan and security
agreement, a promissory note, a collateral agency
agreement and a guaranty.
3
EXHIBIT B
TERM SHEET
SERIES A CONVERTIBLE PREFERRED STOCK
Issuer: Photogen Technologies, Inc., a Nevada corporation
(the "Company").
Series and class: Series A Convertible Preferred Stock, $.01 par
value per share ("Series A Preferred Stock").
Number of shares offered: A minimum of 400,000 shares and a maximum of
1,000,000 shares.
Price: Shares to be priced at 110% of the Common Stock
market price on the date of pricing. The Company
will receive a minimum of $4 million in gross
proceeds.
Offering: The Series A Preferred Stock will be offered
through a private placement only to accredited
investors.
Use of proceeds: - Purchasing clinical trial treatment systems;
- Conducting clinical trials; - Designing and
building clinical trial equipment;
- Developing manufacturing process and
formulate clinical trial supplies of drug;
- Hiring FDA consultants and preparing FDA
submissions;
- Funding addition of business development
personnel;
- Adding temporary space to house new staff;
- Other general operating expenses.
Dividends: Dividends will be paid-in-kind in additional
shares of Series A Preferred Stock at the rate of
6% per annum, resulting in each share of Series A
Preferred Stock receiving an annual dividend of
0.06 additional shares of Series A Preferred
Stock. Dividends will be payable annually
beginning on the first anniversary of the closing.
-1-
Liquidation: The Series A Preferred Stock will be entitled to
a liquidation preference in an amount equal to the
purchase price per share of Series A Preferred
Stock.
Redemption: At any time after January 1, 2002, the Company may
redeem the Series A Preferred Stock for an amount
equal to 1.4 times the Series A Preferred Stock
purchase price per share.
Voting rights: Each share of Series A Preferred Stock
will be entitled to one vote per share. Holders of
Series A Preferred Stock vote together with the
Common Stock, except as provided by the Articles
of Incorporation (see "Protective provisions,"
below) or by law.
Conversion: The Series A Preferred Stock will be convertible
into Common Stock at any time at the election of
the holder thereof, at the following ratios:
ONE SHARE OF SERIES A
IF THE CONVERSATION TAKES PLACE: PREFERRED WILL CONVERT INTO:
-------------------------------- ----------------------------
Before the first anniversary of the 1.0 shares of common stock
closing
After the first and before the 1.2 shares of common stock
second anniversary of the closing
After the second and before the 1.4 shares of common stock
fifth anniversary of the closing
The Series A Preferred Stock will be automatically
and mandatorily converted into Common Stock:
- Upon the approval of 66.66% of the holders
Series A Preferred Stock;
- Immediately prior to the closing of a firm
commitment underwritten public offering of
the Company's Common Stock (however, if the
public offering occurs before the first
anniversary of the closing, the conversion
ratio will be 1.2 shares of Common Stock for
each share of Series A Preferred Stock,
rather than 1.0);
-2-
- At the discretion of the Board of Directors,
if the holders of a majority of the
outstanding Series A Preferred Stock do not
approve the issuance of a security senior to
the Series A Preferred Stock, or any other
transaction by the requisite vote (including
those described in "Protective provisions,"
below), which has been approved by the
Company's directors; or
- At the discretion of the Board of Directors
at any time after the fifth anniversary of
the closing at a conversion ratio of 1.3
shares of Common Stock for each share of
Series A Preferred Stock.
Anti-dilution: Shares of Series A Preferred Stock will be subject
to typical proportional adjustment in the event of
a stock split, stock dividend or similar event.
The Series A Preferred Stock is also protected
from dilution resulting from the Company issuing
Common Stock (or equivalent securities) at a lower
price than the Series A Preferred Stock, based on
the "weighted average" method of anti-dilution
adjustment. No anti-dilution adjustments will be
made for issuances of Common Stock: upon
conversion of Series A Preferred Stock; to
officers, directors, employees, or consultants to
the Company pursuant to an option plan approved by
the Board of Directors covering up to 2 million
shares; to vendors, licensors, lenders and others
up to 500,000 shares of Common Stock; and similar
transactions.
Protective provisions: In addition to matters requiring a class vote
under Nevada corporate law, the approval or
consent of the holders of 66.66% or more of the
Series A Preferred Stock, voting separately as a
class, is required for the Company to: redeem any
of its Common Stock (with exceptions for
redemptions from terminating employees, etc.);
sell all or substantially all of the Company's
assets, merge or consolidate (except where no
change of control is effected); reclassify or
recapitalize its stock; permit any subsidiary to
sell any stock that will result in a change of
control of that subsidiary; increase or decrease
the number of authorized shares of Series A
Preferred Stock; amend the Company's Articles of
Incorporation or Bylaws; or reduce the dividend
rates, liquidation preference or redemption price
on the Series A Preferred Stock.
Short sale restriction: No holder of Series A Preferred Stock may engage
in short sales of the Company's Common Stock.
-3-
Miscellaneous: No fractional shares of Series A Preferred Stock
or Common Stock will be recognized or issued.
Closing to occur on or about October 15, 1999.
All terms, rights, preferences, etc. of the Series
A Preferred Stock are subject to final negotiation
between the Company and the private placement
investors, and to Board approval.
-4-
EXHIBIT B
CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
PHOTOGEN TECHNOLOGIES, INC.
We, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the President and the
Secretary, respectively, of Photogen Technologies, Inc., a corporation organized
and existing under the Nevada Revised Statutes (the "Corporation"), in
accordance with the provisions of Title 7, Chapter 78 of the Nevada Revised
Statutes thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board of Directors") by the Restated Articles
of Incorporation of the said Corporation, the said Board of Directors on
November ___, 1999 adopted the following resolutions, pursuant to Article Fourth
of the Corporation's Restated Articles of Incorporation and Title 7, Chapter 78
of the Nevada Revised Statutes, creating one series of shares of Preferred Stock
designated as Series B Convertible Preferred Stock:
"RESOLVED, that pursuant to Article Fourth of the
Corporation's Restated Articles of Incorporation, a series of the class of
authorized Preferred Stock be, and it hereby is, created and the voting powers,
designation, preferences, limitations, restrictions, relative rights of the
shares of such series are as follows:
1. GENERAL MATTERS.
a. TITLE OF SERIES. A series of Preferred Stock (as defined in
the Restated Articles of the Corporation) shall be designated as the Series B
Convertible Preferred Stock (the "Series B Preferred Stock").
b. NUMBER OF SHARES. The number of authorized shares of Series
B Preferred Stock shall be ____________________ (_____________) shares, par
value $.01 per share.
c. FRACTIONAL SHARES. For purposes of dividends and the Series
B Liquidation Preference (as defined below) only, the Corporation will recognize
fractional shares. For all other purposes (including Conversion Rights (as
defined below), voting rights or otherwise) all calculations resulting in a
fractional share with respect to Series B Preferred Stock, or Common Stock (as
defined in the Restated Articles of Incorporation) issuable in connection
therewith, provided for in this Certificate of Designation shall be increased to
the nearest whole share of Series B Preferred Stock or Common Stock, as the case
may be (after aggregating all shares of Series B Preferred Stock or Common Stock
into which such shares are convertible, as applicable). Under no circumstances
will any fractional share or scrip, or cash in lieu thereof, be issued or
recognized; provided, however, that to the extent fractional shares are
recognized for purposes of dividends and the Series B Liquidation Preference,
such fractional shares will be reflected as a book entry on the stock transfer
records of the Corporation (which records shall be conclusive and binding absent
manifest error).
d. PROHIBITION AGAINST SHORT SALES. No holder of Series B
Preferred Stock shall, so long as such person is a holder of Series B Preferred
Stock, engage in or agree or attempt to engage in any "short sale" (as such term
is defined in Rule 3b-3 promulgated under the Securities Exchange Act of 1934,
as amended, or any successor rule thereto) of the Corporation's Common Stock. As
a condition to the ability or right of any holder of Series B Preferred Stock to
participate in any redemption or conversion (whether voluntary or, to the extent
provided in Section 6(d)(iii) below, mandatory conversion), notwithstanding any
contrary provision in this Certificate of Designation or otherwise, such holder
shall certify to the Corporation's reasonable satisfaction that such holder has
complied with this Section 1(d).
e. SENIOR SECURITIES. The Board of Directors is authorized to
fix or alter the rights, preferences, privileges, and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or of any of them.
Subject to compliance with applicable protective voting rights which have been
or may be granted to the Preferred Stock or any series thereof in Certificates
of Designation (including Section 10 hereof), the Corporation's Restated
Articles of Incorporation or the Nevada General Corporation Law ("Protective
Provisions"), the rights, privileges, preferences, and restrictions of any such
additional series of Preferred Stock may be subordinated to, PARI PASSU with, or
senior in any respect to any of those of the Series B Preferred Stock or any
future class or series of Preferred Stock. Such senior securities are referred
to as "Senior Securities."
-2-
2. DIVIDENDS.
a. The holders of record on the Series B Dividend Record Date
(as defined below) of the outstanding Series B Preferred Stock shall be entitled
to receive dividends, as and when declared by the Board of Directors out of
funds legally available therefor. Record holders of Series B Preferred Stock on
a Series B Dividend Record Date shall be entitled to one dividend-in-kind
payable each year in additional shares of Series B Preferred Stock at the rate
of six percent (6%) per annum, resulting in the holder of each share of Series B
Preferred receiving a dividend of 0.06 additional shares of Series B Preferred
Stock with respect to each share of Series B Preferred Stock. Each such dividend
shall be payable on or about each January 15 (a "Series B Dividend-in-Kind
Payment Date") (or if such date is not a business day, the dividends due on such
Series B Dividend-in-Kind Payment Date shall be paid on the next succeeding
business day) beginning on January 15, 2001. Such dividends shall be cumulative
and shall accrue on each share of Series B Preferred Stock from the date of such
share's issuance; provided, however, that dividends shall cease to accrue on a
share of Series B Preferred Stock following such share's redemption or
conversion, as the case may be. Dividends on the Series B Preferred Stock shall
be payable to holders of record as they appear on the stock register of the
Corporation on such record date, not less than 15 nor more than 60 days
preceding a dividend payment date (including a Series B Dividend-in-Kind Payment
Date), as shall be fixed by the Board of Directors (a "Series B Dividend Record
Date"). Except in the case of a redemption under Section 4 or mandatory
conversion under Section 6(c), below (in which case dividends shall accrue and
be paid through the date of such event), no dividends shall be payable on the
Series B Preferred Stock for any partial dividend period.
b. Subject to any rights of Senior Securities, no dividends or
other distributions shall be made with respect to the Common Stock unless at the
same time a dividend or distribution is paid with respect to all outstanding
shares of Series B Preferred Stock in an amount equal to the amount paid with
respect to a share of Common Stock as though the holders of the Series B
Preferred Stock were the holders of the number of shares of Common Stock of the
Corporation into which their respective shares of Series B Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
c. In the event the Corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by the
Corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then,
subject to any rights of Senior Securities, in each such case the holders of the
Series B Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series B Preferred Stock were the
holders of the number
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of shares of Common Stock of the Corporation into which their respective shares
of Series B Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
3. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Series
B Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, but after and
subject to the payment in full of all amounts required to be distributed to the
holders of the Corporation's Series A Convertible Exchangeable Preferred Stock
(the "Series A Preferred Stock") and any other Senior Securities ranking on
liquidation prior and in preference to the Series B Preferred Stock, the amount
of $__ per share [THE PURCHASE PRICE PER SHARE FOR THE SERIES B PREFERRED STOCK]
(as adjusted for any stock dividends, combinations or splits with respect to
such shares) ("Series B Liquidation Preference"), respectively. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid Series B Liquidation Preference,
then the entire assets and funds of the Corporation legally available for
distribution to the holders of Series B Preferred Stock shall be distributed
ratably among the holders of the Series B Preferred Stock in proportion to the
Series B Liquidation Preference each such holder is otherwise entitled to
receive.
b. After payment to the holders of the Series A Preferred
Stock, the Series B Preferred Stock and any Senior Securities of the amounts set
forth in Section 3(a) above, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed pro
rata among the holders of the Common Stock and all classes and Series of
Preferred Stock in proportion to the shares of Common Stock then held by them
and the shares of Common Stock which they have the right to acquire upon
conversion of the shares of Preferred Stock then held by them.
c. For purposes of this Section 3, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include, (i) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including any reorganization,
merger or consolidation, but excluding any merger effected exclusively to change
the domicile of the Corporation), or (ii) a sale of all or substantially all of
the assets of the Corporation, unless in either case (1) shareholders of record
of the Corporation as constituted immediately prior to such acquisition or sale
will, immediately after such acquisition or sale (by virtue of securities issued
as consideration for the acquisition or sale or
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otherwise) hold a majority of the voting power of the surviving or acquiring
entity, or (2) the holders of a majority of the outstanding Series B Preferred
Stock agree by vote or consent to exclude such acquisition or sale from this
provision.
d. Whenever the distribution provided for in this Section 3
shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
4. REDEMPTION.
a. Provided shares of Common Stock issuable on conversion of
Series B Preferred Stock may be resold by the holder thereof either (i) without
registration pursuant to Rule 144(k) under the Securities Act of 1933, as
amended, (the "Securities Act"), or (ii) pursuant to an effective registration
statement, and provided further that an amount equal to the liquidation
preference of all Senior Securities (including the Series A Preferred Stock) is
paid in full, the Corporation may at any time after January 1, 2002 at its
option and in its sole discretion, redeem, from any source of funds legally
available therefor, all or any part of the issued and outstanding Series B
Preferred Stock. To effect such redemption, the Corporation shall pay in cash in
exchange for the shares of Series B Preferred Stock to be redeemed a sum equal
to $_________ [PURCHASE PRICE X 1.4] per share of Series B Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) plus all declared or accumulated but unpaid dividends on such shares
(the "Series B Redemption Price"). Any redemption effected pursuant to this
Section 4 shall be made on a PRO RATA basis among the holders of the Series B
Preferred Stock in proportion to the shares of Series B Preferred Stock then
held by them.
b. The term "Series B Redemption Date" shall refer to the
effective date on which the Corporation redeems shares of Series B Preferred
Stock. At least 30 but no more than 60 days prior to each Series B Redemption
Date, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of the Series B Preferred Stock to be
redeemed, at the address last shown on the records of the Corporation or its
transfer agent for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Series B Redemption Date, the Series B Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section 4(c), on or after the Series B Redemption Date,
each holder of Series B Preferred Stock to be redeemed shall surrender to this
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
aggregate Series B
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Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
c. From and after the Series B Redemption Date, unless there
shall have been a default in payment of the Series B Redemption Price, all
rights of the holders of shares of Series B Preferred Stock designated for
redemption in the Redemption Notice as holders of Series B Preferred Stock
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or its transfer agent or be deemed to be outstanding for any purpose
whatsoever.
5. VOTING RIGHTS. Each holder of shares of the Series B
Preferred Stock shall be entitled to one vote for each share of Common Stock
into which such Series B Preferred Stock could then be converted (subject to
Section 1(c) above regarding fractional shares). Except as otherwise expressly
provided in this Certificate of Designation, the Restated Articles of
Incorporation or as required by the Nevada General Corporation Law, the holders
of Series B Preferred Stock shall vote together with the Common Stock as a
single class and shall (subject to Section 6(e) below) be entitled to notice of
any stockholders' meeting in the same manner as holders of Common Stock in
accordance with the Bylaws of the Corporation.
6. CONVERSION.
a. CONVERSION RIGHTS. Each holder of Series B Preferred Stock
shall have the right to convert the Series B Preferred Stock into Common Stock
on and subject to the provisions of Section 6 and Section 7 of this Certificate
of Designation ("Series B Conversion Rights"). In the event of a liquidation of
the Corporation, all Series B Conversion Rights shall terminate at the close of
business on the fifth full business day preceding the date fixed for the payment
of any amounts distributable on liquidation to the holders of Series B Preferred
Stock.
b. OPTIONAL CONVERSION. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share and on or prior to the fifth day prior to the
Series B Redemption Date, if any, as may have been fixed in any Redemption
Notice with respect to the Series B Preferred Stock, at the office of the
Corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing (i) (x)
the Series B Conversion Price times 1.0 by (y) the Series B Conversion Price if
the conversion takes place at any time on or before December 31, 2000; (ii) (x)
the Series B Conversion Price times 1.2 by
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(y) the Series B Conversion Price if the conversion takes place at any time
between January 1, 2001 through December 31, 2001; and (iii) (x) the Series B
Conversion Price times 1.4 by (y) the Conversion Price if the conversion takes
place at any time on or after January 1, 2002. The "Series B Conversion Price"
shall initially be $____ [the Series B Preferred Stock purchase price], and
shall be adjusted as provided in Section 7, below (provided, however, that the
Series B Conversion Price shall not exceed $_____ per share).
c. MANDATORY CONVERSION. The Corporation may at its option
require the holders of all outstanding shares of Series B Preferred Stock to
convert their Series B Preferred Stock into the number shares of Common Stock
into which such Series B Preferred Stock would be convertible pursuant to
Section 6(b) (subject, however, to the last sentence of this Section 6(c)) upon
the occurrence of any of the following:
(1) The date specified by the vote or written consent or
agreement of holders of a majority of the shares of Series B Preferred Stock
then outstanding;
(2) Immediately prior to the closing of the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act, which results in the Corporation receiving
$20,000,000 or more in gross proceeds (excluding underwriter's discounts,
commissions and similar compensation), other than a registration relating solely
to a transaction under Rule 145 under the Securities Act or to a stock option or
other type of employee benefit plan of the Corporation;
(3) At the discretion of the Board of Directors, if (A)
holders of the requisite majority of outstanding shares of Series B Preferred
Stock do not approve (by vote or written consent) of the creation, authorization
and/or issuance of any Special Senior Security (defined below) upon which such
holders are entitled to vote as a separate series or class pursuant to Section
10 below or pursuant to the Nevada General Corporation Law, but (B) such
transaction has been approved and recommended by the Board of Directors. A
"Special Senior Security" means any Senior Security or PARI PASSU security which
is issued to any vendor, licensor or other person or entity engaged in a joint
venture or other commercial or similar transaction or relationship with the
Corporation or any of the Corporation's affiliates, the bona fide purpose of
which transaction is (in the good faith business judgment of the Board of
Directors) to develop the Corporation's business and not solely to provide
financing to or invest in the securities of the Corporation;
(4) At the discretion of the Board of Directors, at any time
after January 1, 2005.
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Notwithstanding anything herein to the contrary, if any mandatory conversion
under Section 6(c) takes place pursuant to subparagraphs (ii) or (iii) hereof at
any time before December 31, 2000, the number of shares of Common Stock issuable
in connection with such conversion shall be calculated by dividing (x) Series B
Conversion Price times 1.2 by (y) the Conversion Price.
d. MECHANICS OF CONVERSION.
(1) Before any holder of Series B Preferred Stock shall be
entitled to convert the same on an optional basis pursuant to Section 6(b) into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for such stock, and shall give written notice to the Corporation
at such office that such holder elects to convert the same and shall state
therein the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation or its transfer agent, such certificates surrendered for conversion
shall be endorsed or accompanied by written instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or such
holder's attorney duly authorized in writing. Such holder shall also provide the
compliance certificate regarding short sales of the Corporation's Common Stock
referred to in Section 1(d). The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have taken place immediately prior to the close of
business on the date of surrender of the shares of Series B Preferred Stock to
be converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock after such date.
(2) If the conversion is in connection with an underwritten
offering of securities pursuant to the Securities Act, the conversion may, at
the option of any holder tendering shares of Series B Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series B Preferred Stock shall
not be deemed to have converted such Series B Preferred Stock until immediately
prior to the closing of such sale of securities.
(3) In the event of a mandatory conversion of Series B
Preferred Stock pursuant to Section 6(c) the conversion shall be deemed to
have taken place at the close of business on the effective date specified by
the Board of Directors. On such effective date, all of the outstanding
certificates which prior to that time represented shares of Series B
Preferred Stock shall be deemed for all purposes to evidence ownership of and
to represent the number of
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shares of Common Stock into which the shares of Series B Preferred Stock have
been converted. The registered owner on the books and records of the Corporation
or its transfer agent of any such outstanding Series B Preferred Stock
certificate shall, until such certificate shall have been surrendered for
exchange or transfer or otherwise accounted for to the Corporation or its
transfer agent, have and be entitled to exercise any voting and other rights
with respect to the shares of Common Stock into which such Series B Preferred
Stock shall have been converted; provided, however, that dividends or other
distributions upon shares of Common Stock resulting from the conversion of such
Series B Preferred Stock shall accrue but shall not be delivered to any such
stockholder until such stockholder has surrendered or otherwise accounted for
the Series B Preferred Stock stock certificate representing the converted shares
and has provided the compliance certificate referred to in Section 1(d). The
Corporation shall issue new certificates for Common Stock in due course as
certificates for converted Series B Preferred Stock are tendered to the
Corporation or its transfer agent for exchange or transfer or otherwise
accounted for.
e. NOTICE TO HOLDERS OF SERIES B PREFERRED STOCK. In the
event:
(1) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation;
(2) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(3) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon);
(4) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation, or an acquisition or sale of assets which has
the effect of a dissolution under Section 3(c); or
(5) of any transaction that causes a mandatory conversion
pursuant to Section 6(c);
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series B Preferred Stock, and shall cause to
be mailed to the holders of the Series B Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in Sections 6(e)(v)(1) or 6(e)(v)(2) below or
twenty days before the date specified in Section 6(e)(v)(3) below, a notice
stating:
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(a) the record date of such dividend,
distribution, subdivision or combination, or, if a record is
not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be
determined, or
(b) the effective date of any mandatory conversion
pursuant to Section 6(c), or
(c) the date on which such reclassification,
dissolution, liquidation, winding up, acquisition or sale of
assets is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
f. NO IMPAIRMENT. The Corporation will not, by amendment of
its Restated Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of Section 6 and Section 7 in the taking of all such action as may be
necessary or appropriate in order to protect the Series B Conversion Rights
against impairment.
g. ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series B Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
h. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of all shares of Series B Preferred Stock issuable pursuant to this
Certificate of Designation, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without
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limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Corporation's Restated Articles of
Incorporation.
7. ADJUSTMENT TO SERIES B CONVERSION RIGHTS FOR CERTAIN
DILUTING EVENTS.
a. DEFINITIONS.
(1) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 7(b) below, deemed to be
issued) by the Corporation after the Original Issue Date (as defined in Section
7(a)(iv) below), but EXCLUDING shares of Common Stock issued or issuable:
(a) as a dividend or distribution on Series B
Preferred Stock;
(b) by reason of a dividend, stock split, or other
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by the
foregoing clause (1);
(c) upon the exercise of options excluded from the
definition of "Option" in Section 7(a)(iii);
(d) to vendors, licensors, lenders and similar
third parties engaged in commercial relationships with the
Corporation, up to 1,000,000 shares of Common Stock in the
aggregate, or Options to acquire or Convertible Securities
convertible into such Common Stock; or
(e) upon conversion of shares of Series B
Preferred Stock or any other Convertible Securities (as
defined in Section 7(a)(ii) below) outstanding as of the
date hereof (including the Series A Preferred Stock, the
Convertible Promissory Note in the principal amount of
$4,800,000 dated October 20, 1999 originally issued to Elan
International Services Ltd., the Warrant to acquire 100,000
shares of Common Stock originally issued to Elan
International Services, Ltd., and the Placement Agent's
Warrant Agreement originally issued or to be issued to
Gilford Securities Incorporated in connection with the
offering of Series B Preferred Stock).
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
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(3) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, but EXCLUDING rights, options or warrants excluded from the
definition of "Additional Shares of Common Stock" and rights, options or
warrants granted to employees, directors or consultants of the Corporation
pursuant to plans or agreements adopted or approved by the Board of Directors to
acquire up to that number of shares of Common Stock as is equal to ten (10%)
percent of the Common Stock outstanding at the time of such adoption or approval
(provided that, for purposes of this Section 7(a)(iii), all shares of Common
Stock issuable upon (1) exercise of rights, options or warrants granted or
available for grant under plans approved by the Board of Directors, (2)
conversion of shares of Preferred Stock, or (3) conversion of Preferred Stock
issuable upon conversion or exchange of any Convertible Security, shall be
deemed to be outstanding).
(4) "Original Issue Date" shall mean the date on which the
first share of Series B Preferred Stock is issued.
b. DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If
the Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue; provided, that Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 7(c)) hereof) of such Additional Shares of Common Stock
would be less than the Series B Conversion Price on the date such securities are
issued, and provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) No further adjustment in the Series B Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise of such Option or conversion or exchange of such Convertible Security;
(2) Upon the expiration or termination of any unexercised
Option, the Series B Conversion Price shall not be readjusted, but the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Series B Conversion Price; and
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(3) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Series B Conversion Price then in effect
shall forthwith be readjusted to such Series B Conversion Price as would have
obtained had the adjustment that was made upon the issuance of such Option or
Convertible Security not exercised or converted prior to such change been made
upon the basis of such change, but no further adjustment shall be made for the
actual issuance of Common Stock upon the exercise or conversion of any such
Option or Convertible Security.
c. DETERMINATION OF CONSIDERATION. For purposes of this Section 7, the
consideration received by the Corporation for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(a) insofar as it consists of cash, be computed at
the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest or accrued
dividends;
(b) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board
of Directors; and
(c) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other
assets of the Corporation for consideration which covers
both, be the proportion of such consideration so received,
computed as provided in clauses (1) and (2) above, as
determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued relating to Options and Convertible Securities, shall
be determined by dividing:
(a) the total amount, if any, received or
receivable by the Corporation as consideration for the issue
of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such consideration) payable to the
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Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, by
(b) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
d. NO ADJUSTMENT OF SERIES B CONVERSION PRICE. No adjustment
in the number of shares of Common Stock into which the Series B Preferred Stock
is convertible shall be made by adjustment in the Series B Conversion Price: (i)
unless the consideration per share (determined pursuant to Section 7(c)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the then-current Series B Conversion Price, or (ii) if
prior to such issuance, the Corporation receives written notice from the holders
of a majority of the then outstanding shares of Series B Preferred Stock
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
e. ADJUSTMENT OF SERIES B CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. If the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 7(b),
but excluding shares issued as provided in Sections 7(f) through 7(i), without
consideration or for a consideration per share less than the then-current Series
B Conversion Price, then and in such event, the Series B Conversion Price shall
be reduced, concurrently with such issue to a price (calculated to the nearest
cent) determined by multiplying the Series B Conversion Price by a fraction,
(1) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
by the Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Series B Conversion Price; and
(2) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of such Additional Shares of Common Stock so issued.
Notwithstanding the foregoing, the Series B Conversion Price shall not be
reduced if the amount of such reduction would be an amount less than $.05, but
any such amount shall be carried forward and reduction with respect thereto made
at the time of and together with any subsequent
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reduction which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $.05 or more.
f. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series B Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of Common
Stock, the Series B Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
g. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, a dividend or other distribution payable in Additional
Shares of Common Stock, then and in each such event the Series B Conversion
Price shall be decreased as of the time of such issuance, by multiplying the
Series B Conversion Price by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance plus the number of shares of Common Stock issuable in payment of
such dividend or distribution.
h. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue a dividend or other distribution payable in securities
of the Corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of shares of the Series B
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series B Preferred Stock
been converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period given application to all adjustments called for during such period, under
this paragraph with respect to the rights of the holders of the Series B
Preferred Stock.
-15-
i. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR SUBSTITUTION.
If the Common Stock issuable upon the conversion of the Series B Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for in Section 3(c) above), then and in each such event the
holder of each share of Series B Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series B Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
j. CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment or
readjustment of the Series B Conversion Price pursuant to this Section 7, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder, if
any, of Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based and shall file a copy of such certificate with its
corporate records. The Corporation shall, upon the written request at any time
of any holder of Series B Preferred Stock, furnish or cause to be furnished to
such holder a similar certificate setting forth (1) such adjustments and
readjustments, (2) the Series B Conversion Price then in effect, and (3) the
number of shares of Common Stock and the amount, if any, of other property which
then would be received upon the conversion of Series B Preferred Stock. Despite
such adjustment or readjustment, the form of each or all Series B Preferred
Stock certificates, if the same shall reflect the initial or any subsequent
Series B Conversion Price, need not be changed in order for the adjustments or
readjustments to be valued in accordance with the provisions of this Certificate
of Designation, which shall control.
8. NO REISSUANCE OF SERIES B PREFERRED STOCK. No share or
shares of Series B Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
9. NOTICES. Any notice required by the provisions of this
Certificate of Designation to be given to the holders of shares of Series B
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of the Corporation.
-16-
10. PROTECTIVE PROVISIONS. Subject in all cases to the
provisions of Section 6(c)(iii) above and the rights of any series of Preferred
Stock that may from time to time come into existence, so long as any shares of
Series B Preferred Stock are outstanding, the Corporation shall not, without
first obtaining the approval by vote or written consent of the holders of a
majority of the then-outstanding shares of Series B Preferred Stock, voting
separately as a series, (a) amend its Restated Articles of Incorporation so as
to adversely affect the shares of Series B Preferred Stock, (b) authorize or
issue any other equity security or security convertible into or exercisable for
any equity security having a preference over or being PARI PASSU with the Series
B Preferred Stock with respect to liquidation or dividend rights, or (c) change
the rights of the holders of the Series B Preferred Stock as set forth herein in
any other material respect."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be duly executed by its
President and Secretary as of November __, 1999.
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
-17-
STATE OF _____________ )
) SS.
COUNTY OF ___________ )
On this ____ day of November, 1999, personally appeared before
me, a Notary Public in and for the State and County aforesaid, ▇▇▇▇ ▇. ▇▇▇▇▇▇,
known to me to be the person described in and did say that he is the President
of Photogen Technologies, Inc., a Nevada corporation, and that the foregoing
Certificate of Designation, Preferences, and Rights of Series B Preferred Stock
was signed on behalf of said corporation by authority of its board of directors,
and said ▇▇▇▇ ▇. ▇▇▇▇▇▇ acknowledged to me that said instrument to be the free
act and deed of said corporation.
WITNESS my hand and official seal, the day and year first
above written.
------------------------------------
Notary Public
(Notarial Seal)
STATE OF _____________ )
) SS.
COUNTY OF ___________ )
On this ____ day of November, 1999, personally appeared before
me, a Notary Public in and for the State and County aforesaid, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
known to me to be the person described in and did say that he is the Secretary
of Photogen Technologies, Inc., a Nevada corporation, and that the foregoing
Certificate of Designation, Preferences, and Rights of Series B Preferred Stock
was signed on behalf of said corporation by authority of its board of directors,
and said ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ acknowledged to me that said instrument to be the free
act and deed of said corporation.
WITNESS my hand and official seal, the day and year first
above written.
------------------------------------
Notary Public
(Notarial Seal)
-18-
EXHIBIT C
TERM SHEET
$1 MILLION TERM CREDIT FACILITY
Borrower: Photogen, Inc. ("Borrower").
Lenders: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D. ("Lenders").
Guarantor: Photogen Technologies, Inc. ("PTI").
Principal amount: $1,000,000.00.
Purpose: To fund working capital requirements in connection with
pre-clinical research and clinical testing of Borrower's
technologies.
Advances: The credit facility may be utilized in advances of $100,000
increments, upon 15 days' prior written notice to the Lenders.
Once repaid, no portion of the credit facility can be reborrowed.
Interest: The daily rate equivalent of 6% per annum calculated on the basis
of a 360-day year.
Amortization; maturity: The notes will be payable over five
years. Interest only will be payable on an
annual basis until maturity, at which time
all outstanding principal and interest will
be due and payable.
Prepayment: Prepayment will be permitted at any time and without penalty.
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Collateral: The credit facility will be secured by a first priority lien on all of
the Borrower's present and future real and personal properties,
including all:
- accounts, chattel paper, tax refunds, contract rights,
options, leases, leasehold interests, letters of credit,
instruments, documents, documents of title;
- patents, trade secrets, know how, copyrights, trademarks,
trade names, software, data, licenses, goodwill;
- general intangibles, beneficial interests;
- goods, machinery, equipment, vehicles, furniture,
inventory;
- securities, cash or cash equivalents;
- real estate and improvements, fixtures; and
- products and proceeds (including without limitation
insurance and litigation proceeds) of the foregoing, all
accessions to the foregoing and all substitutions, renewals,
improvements and replacements of and additions to the
foregoing.
The lien will be granted to ▇▇. ▇▇▇▇▇▇▇▇▇ as collateral
agent for the Lenders. The lien will be perfected by
appropriate filings with the secretary of state, county
recorder and U.S. Patent and Trademark Office.
Events of Default: Upon the occurrence of any of the following events, the notes will become
immediately due and payable and the Lenders will have the
right to, among other things, foreclose on the Collateral:
- failure to pay interest or principal under the notes when due;
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- a material default by the Borrower or PTI in any agreement
or obligation to the Lenders or to any third party which is
not cured within the time period, if any, permitted in the
governing instrument for cure; or
- the Borrower, PTI or any of PTI's other subsidiaries:
becoming subject to bankruptcy proceedings (which, if filed
against the Borrower, are not dismissed within 90 days),
making a general assignment for the benefit of creditors, or
authorizing such entity to seek the protection of or relief
under the U.S. Bankruptcy Code or similar state laws
relating to insolvency, reorganization or any other
proceeding to modify or alter the rights of such entity's
creditors.
Miscellaneous: All terms, rights and other provisions of the credit facility
are subject to final negotiation and the execution and
delivery of mutually agreeable definitive documentation,
and approval by the disinterested directors of the Borrower
and PTI. Documentation will include a loan and security
agreement, a promissory note, a collateral agency
agreement and a guaranty.
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