THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THAT CERTAIN NOTE PURCHASE AGREEMENT,
DATED AS OF AUGUST 18, 1999 AS AMENDED AND MODIFIED FROM TIME TO
TIME, BETWEEN CORVAS INTERNATIONAL, INC. AND ARTISAN EQUITY
LIMITED, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER.
CORVAS INTERNATIONAL, INC.
5.5% CONVERTIBLE SENIOR
SUBORDINATED NOTE DUE 2006
October 20, 1999 Principal Amount: $3,500,000.00
San Diego, California
Corvas International, Inc., a Delaware corporation (together with its
successors, the "Company"), for value received hereby promises to pay to the
order of Artisan Equity Limited, a Bermuda company (the "Purchaser") and its
successors and permitted assigns, the sum equal to the Accreted Value (as
defined in Section 1.1 below) on August 18, 2006.
Accretion on the outstanding Principal Amount of this Convertible Note
shall accrue for the period from October 20, 1999 to August 17, 2006, compounded
semi-annually using a 360-day year composed of twelve 30-day months, at 5.5% per
annum.
This Convertible Note was issued pursuant to that certain Note Purchase
Agreement, dated as of August 18, 1999 (as amended and modified from time to
time, the "Purchase Agreement"), between the Company and the Purchaser. The
Purchase Agreement contains additional rights and obligations of the Purchaser,
and all provisions of the Purchase Agreement are hereby incorporated herein in
full by reference. Except as defined in this Convertible Note, capitalized
terms used in this Convertible Note and not otherwise defined shall have the
same meanings set forth in the Purchase Agreement.
After delivery of an indemnity in form and substance from an indemnitor
reasonably satisfactory to the Company, the Company agrees to issue a
replacement Convertible Note if this Convertible Note has been lost, stolen,
mutilated or destroyed.
1.
1. DEFINITIONS.
1.1 Certain Terms Defined. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Convertible Note shall have the respective meanings specified
below. The terms defined in this Section 1 include the plural as well as the
singular.
"Accreted Value" means, for any Specified Date, the amount calculated
pursuant to (i), (ii) or (iii), as the case may be, for the Convertible Notes
per $1,000 of the Principal Amount specified on the face hereof:
(i) if the Specified Date occurs on one of the following dates (each
a "Semi-annual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semi-annual Accrual Date:
Accreted Value
Semi-annual per $1,000 of (Without
Accrual Date Principal Amount Rounding)
-------------- ---------------- ---------
February 18, 2000 1,018 1,017.9
August 18, 2000 1,046 1,045.9
February 18, 2001 1,075 1,074.6
August 18, 2001 1,104 1,104.2
February 18, 2002 1,135 1,134.5
August 18, 2002 1,166 1,165.7
February 18, 2003 1,198 1,197.8
August 18, 2003 1,231 1,230.7
February 18, 2004 1,265 1,264.6
August 18, 2004 1,299 1,299.4
February 18, 2005 1,335 1,335.1
August 18, 2005 1,372 1,371.8
February 18, 2006 1,410 1,409.5
August 17, 2006 1,448 1,448.3
--------------------------------------------------
(ii) if the Specified Date occurs before the first Semi-annual Accrual
Date, the Accreted Value will equal the sum of (a) $1,000.00 and (b) an
amount equal to the product of (1) $17.9 multiplied by (2) a fraction, the
numerator of which is the number of days from the issue date of the
Convertible Notes to the Specified Date, using a 360-day year of twelve 30-
day months, and the denominator of which is 180; or
2.
(iii) if the Specified Date occurs between two Semi-annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-annual Accrual Date less the Accreted Value for
the immediately preceding Semi-annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180.
"Accretion Portion" means, for any Specified Date, the amount equal to
the difference between (i) the Accreted Value as of such Specified Date of a
specified Principal Amount of the Convertible Notes and (ii) such specified
Principal Amount of the Convertible Notes.
"Affiliate" of any particular Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such particular Person, where "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Company.
"Board Resolution" means a resolution duly adopted by the Board of
Directors or any duly authorized committee of such Board.
"Business Day" means any day except a Saturday, Sunday or other day in
which commercial banks in the City of New York, New York or San Diego,
California are authorized by law to close.
"Change in Control" means (i) the sale of all or substantially all of
the Company's assets, (ii) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization own less than fifty percent (50%)
of the Company's voting power immediately after such consolidation, merger or
reorganization, or (iii) individuals who on the Second Closing Date constitute
the Board of Directors (together with any new directors whose appointment by the
Board of Directors was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the Board of
Directors on the Second Closing Date or whose appointment was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Common Stock" means the shares of common stock, $0.001 par value, of
the Company as it exists on the date of this Convertible Note or any other
shares of capital stock of the Company into which the Common Stock shall be
reclassified or exchanged.
3.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Event of Default" means any event or condition specified as such in
Section 5.1 which shall have continued for the period of time, if any, therein
designated.
"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended.
"Holder" means the Purchaser and any successor or permitted assigns.
The Holder may transfer this Convertible Note to one or more Holders in minimum
increments of $1,000 provided that the Company consents to any proposed
assignments, such consent not to be withheld or delayed unreasonably; provided,
however, that no such consent shall be required in connection with any transfer
by a Holder to (i) Affiliates of such Holder or (ii) shareholders, partners or
members of such Holder.
"Indebtedness" of any Person means at a particular time, without
duplication, (i) all obligations of such Person for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money, (ii) all
obligations of such Person evidenced by any note, bond, debenture or other debt
security, (iii) all obligations for the deferred purchase price of property or
services with respect to which a Person is liable, contingently or otherwise, as
obligor or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business), (iv) all commitments by which a
Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit or other
similar instruments), (v) all obligations guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) all obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) all obligations secured by a Lien on a Person's
assets, whether or not such obligations are assumed by such Person, and (viii)
any unsatisfied obligation for "withdrawal liability" to a "multi-employer plan"
as such terms are defined under ERISA.
"Market Price" means, as of any specified date, the average of the
daily closing sales prices of one share of Common Stock as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is traded or, if the Common Stock is not listed on a
United States national or regional securities exchange, as reported by the
National Association of Securities Dealers Automated Quotation System for the 20
consecutive trading days ending one Business Day prior to such date.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
4.
"Redemption Date" means the date specified for redemption of the
Convertible Notes in accordance with the terms hereof and the Purchase
Agreement.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any similar federal law then in force.
"Senior Indebtedness" means all Indebtedness of the Company permitted
by the Convertible Notes and the Purchase Agreement other than the Convertible
Notes, whether outstanding on the date of execution of this instrument or
thereafter created, incurred or assumed, except (x) any such Indebtedness that
by the terms of the instrument or instruments by which such Indebtedness was
created or incurred expressly provides that it (i) is junior in right of payment
to the Convertible Notes or (ii) ranks pari passu in right of payment with the
---- -----
Convertible Notes and (y) any amendments, modifications or supplements to, or
any renewals, extensions, deferrals, refinancings and refundings of, any of the
foregoing; provided that the term "Senior Indebtedness" shall not include (a)
--------
any Indebtedness of the Company to any employee, director or Affiliate of the
Company or any of its Subsidiaries (except as required by applicable law) or (b)
any Indebtedness of the Company that is convertible or exchangeable into shares
of Common Stock.
"Specified Date" means any date of redemption or conversion of the
Convertible Notes, any date on which the Convertible Notes first become due and
payable after an Event of Default or the date of maturity of the Convertible
Notes.
"Subsidiary" means, with respect to any Person, 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 such Person.
1.2 Other Defined Terms. The following additional terms have the
respective meanings set forth in the following sections:
Term Section
---- -------
Additional Amounts 8.9
Company 1/st/ introductory paragraph
Constituent Person 7.9
Conversion Price 7.1(a)
Payment Blockage Notice 5.2
Purchase Agreement 3rd introductory paragraph
Purchaser 1/st/ introductory paragraph
Redemption Price 4.1(a)
Semi-annual Accrual Date Definition of Accreted Value
Trigger Event 7.4(d)
Withholding Taxes 8.9
5.
2. Payment of Accreted Value. No provision of the Convertible Notes shall
alter or impair the obligations of the Company, which are absolute and
unconditional, to pay the Accreted Value of the Convertible Notes at the place,
times, and rate, and in the currency, herein prescribed.
3. Method of Payment. The Company will make all payments prescribed hereunder
to the Holder who surrenders the Convertible Note to the Company. The Company
will pay cash amounts either by check or by wire transfer of immediately
available funds, to a bank account designated by such Holder in money of the
United States that, at the time of payment, is legal tender for payment of
public and private debts; provided, however, so long as the Purchaser is the
Holder, the Company shall pay such amounts by wire transfer.
4. Redemption of Convertible Notes.
4.1 Redemption at the Option of the Company
(a) The Company may, at its option, at any time after August 18, 2002,
redeem all, or from time to time any part of, this Convertible Note, in an
aggregate Principal Amount of $100,000 or an integral multiple of $1,000 in
excess thereof (or, if the Principal Amount on the Redemption Date is less than
$100,000, then the remaining Principal Amount of this Convertible Note at such
time), at a purchase price ("Redemption Price") equal to 100% of the Accreted
Value of the specified Principal Amount on such Redemption Date. Any optional
redemption of any Convertible Note pursuant to this Section 4.1 shall be made by
redeeming all Convertible Notes then outstanding in whole or in part and, if in
part, pro rata in proportion to their respective aggregate Principal Amount at
the time of such redemption.
(b) On the Redemption Date, the Company will pay to the Holder in cash
the portion of the Redemption Price equal to 100% of the specified Principal
Amount of any Convertible Notes to be redeemed pursuant to Section 4.1. The
Company at its option may, on the Redemption Date, pay the Accretion Portion of
the Redemption Price of any redeemed Convertible Notes in cash, in the number of
shares of Common Stock of the Company sufficient to pay such Accretion Portion
or a combination of cash and Common Stock. The Company shall designate, in its
redemption notice delivered pursuant to Section 4.2, whether the Company will
pay such Accretion Portion in cash, Common Stock or any combination of cash and
Common Stock, and if a combination thereof, the percentages of such Accretion
Portion to be paid in cash or Common Stock; provided that the Company will pay
--------
cash for any fractional interests of Common Stock. On the Redemption Date, the
Company will pay that portion of such Accretion Portion specified in the
redemption notice to be paid by the Company through the issuance of Common Stock
by issuing the number of shares of Common Stock equal to the quotient obtained
by dividing (i) the amount of cash that the Holder would have been entitled to
receive had the Company elected to pay that percentage of such Accretion Portion
in cash by (ii) the Market Price as of the date of the redemption notice
delivered pursuant to Section 4.2.
(c) The Company will not issue a fractional share of Common Stock in
payment of any part of such Accretion Portion. Instead the Company will pay
cash for the current market value of any such fractional share, determined by
multiplying the Market Price as
6.
of the date of the redemption notice delivered pursuant to Section 4.2 by such
fraction and rounding the product to the nearest whole cent.
(d) The Company's right to pay all or any part of such Accretion
Portion in Common Stock shall be conditioned upon (i) the registration of the
shares of Common Stock to be issued in respect of such payment under the
Securities Act, if required, and the quotation of such shares on the Nasdaq
National Market or the listing of such shares on a national securities exchange,
(ii) any necessary qualification or registration under applicable state
securities laws or the availability of an exemption from such qualification or
registration and (iii) receipt by the holder of a legal opinion from the
Company's counsel to the effect that the shares of Common Stock to be issued by
the Company in payment of all or any part of such Accretion Portion have been
duly authorized, and when issued and delivered pursuant to the terms of this
Convertible Note in payment of all or any part of such Accretion Portion will be
validly issued, fully paid and nonassessable.
(e) From and after the Redemption Date, all rights of the holders of
Convertible Notes (except the right to receive the Redemption Price) shall
terminate.
4.2 Redemption Notice. At least 45 days but not more than 60 days before
a Redemption Date, the Company shall mail a notice of redemption by first-class
mail, postage prepaid, to the Holder of the Convertible Note. The notice shall
identify the Principal Amount of the Convertible Note to be redeemed and shall
state: (1) the Redemption Date; (2) the Accreted Value of such Principal Amount
on such Redemption Date and the applicable Redemption Price; (3) whether the
Company will pay the Accretion Portion of the Redemption Price in cash, Common
Stock or any combination of cash and Common Stock, and if a combination thereof,
the percentages of such Accretion Portion to be paid in cash or Common Stock,
and the applicable Market Price; and (4) the then applicable Conversion Price.
Once notice of redemption is given, the portion of the Principal Amount called
for redemption becomes due and payable on the Redemption Date at the Redemption
Price stated in the notice, except for the Principal Amount of Convertible Notes
converted in accordance with the terms of the Convertible Notes.
4.3 Redemption of Convertible Notes at the Option of the Holder upon a
Change in Control. If on or prior to the Stated Maturity, there shall have
occurred a Change in Control, the Convertible Notes shall be redeemed by the
Company, at the option of each Holder of Convertible Notes, at the Redemption
Price as of the date that is 30 Business Days after the occurrence of the Change
in Control. On the Redemption Date, the Company will pay the Redemption Price of
any Convertible Notes to be redeemed pursuant to this Section 4.3 to the Holder
in cash, or the Company may, at its option, on the Redemption Date, pay the
Accretion Portion of the Redemption Price of any Convertible Notes redeemed
pursuant to this Section 4.3 in cash, in the number of shares of Common Stock of
the Company sufficient to pay such Accretion Portion or a combination of cash
and Common Stock upon the same terms and conditions as a redemption at the
option of the Company pursuant to Section 4.1. Within ten Business Days after
the occurrence of a Change in Control, the Company shall mail a written notice
of the Change in Control to the Holder of the Convertible Note by first class
mail, postage pre-paid; provided that no failure of the Company to give such
--------
notice shall limit the rights of the Holders hereunder. The notice shall
briefly describe the events causing the Change in Control
7.
and shall specify: (1) the Redemption Date; (2) the Accreted Value of the
outstanding Principal Amount of the Convertible Notes on such Redemption Date
and the applicable Redemption Price; (3) whether the Company will pay the
Accretion Portion of the Redemption Price in cash, Common Stock or any
combination of cash and Common Stock, and if a combination thereof, the
percentages of such Accretion Portion to be paid in cash or Common Stock, and
the applicable Market Price; and (4) the then applicable Conversion Price. Any
Holder wishing to exercise its rights hereunder shall deliver to the Company, on
or before such Redemption Date, written notice of such Holder's exercise of such
right, which notice shall set forth the name of the Holder and the Principal
Amount of a Convertible Note or portion thereof which is $100,000 or integral
multiple of $1,000 in excess thereof (or, if less, the remaining Principal
Amount of such Convertible Note) held by such Holder as to which an election to
exercise its rights under this Section 4.3 is being made. The delivery of
Convertible Notes to the Company prior to, or after the Redemption Date, against
delivery of the Redemption Price shall be a condition to the receipt by a Holder
of the Redemption Price. Any Holder exercising its option to have Convertible
Notes redeemed may withdraw such exercise at any time prior to the close of
business on the Redemption Date by delivery of a written notice to the Company
of withdrawal of such exercise. Upon receipt by the Company of a notice of
exercise of the redemption option that is not withdrawn, the Holder of the
Convertible Note shall thereafter be entitled to receive the Redemption Price.
5. Subordination.
5.1 Extent of Subordination. The indebtedness evidenced by this
Convertible Note is hereby expressly subordinated and junior, to the extent and
in the manner hereinafter set forth, in right of payment to the prior payment in
full of all the Company's Senior Indebtedness.
5.2 Default on Senior Indebtedness. If there shall occur an event of
default which has been declared in writing with respect to any Senior
Indebtedness, as event of default is defined in the instrument under which it is
outstanding, permitting the holder of such Senior Indebtedness to accelerate the
maturity thereof, then, the Company shall deliver a notice of such event of
default to the Holders (a "Payment Blockage Notice") and, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of this Convertible Note, unless within one hundred eighty (180)
days after the happening of such event of default, the maturity of such Senior
Indebtedness shall not have been accelerated; provided, however, that no new
period of payment blockage on the Convertible Notes pursuant to this Section 5.2
may commence hereunder unless and until 365 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice.
5.3 Insolvency Proceedings. If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of the
Company, (a) no amount shall be paid by the Company in respect of this
Convertible Note, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (b) no claim or proof
of claim shall be filed by or on behalf of the Holders which shall assert any
right to receive any payments in respect of this Convertible
8.
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding.
5.4 Reliance of Holders of Senior Indebtedness. The Holder, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Convertible Note, and each such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and holding, or in continuing to hold, such Senior
Indebtedness.
5.5 Further Assurances. Notwithstanding any other provision herein, by its
acceptance of this Convertible Note, the Holder agrees to execute and deliver
customary forms of subordination agreements requested from time to time by the
Company or the holders or prospective holders of Senior Indebtedness and, as a
condition to the Holder's rights hereunder, the Company may require that the
Holder execute such forms of subordination agreements, provided that such forms
shall not impose on the Holder terms less favorable than those provided herein,
in order to implement the foregoing provisions of this Section 5.
5.6 Subrogation. Subject to the payment in full of all Senior
Indebtedness, the Holders shall be subrogated to the rights of the holder(s) of
such Senior Indebtedness (to the extent of payments or distributions made to the
holder(s) of such Senior Indebtedness pursuant to the provisions of Section 5.3
above) to receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness. No such payments or distributions applicable to the
Senior Indebtedness shall, as between the Company and its creditors, other than
the holders of Senior Indebtedness and the Holder, be deemed to be a payment by
the Company to or on account of this Convertible Note; and for purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which the Holder would be entitled except for the provisions of this Section
5 shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the Holder, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness.
5.7 No Impairment. Subject to the rights, if any, of the holders of Senior
Indebtedness under this Section 5 to receive cash, securities or other
properties otherwise payable or deliverable to the Holder, nothing contained in
this Section 5 shall impair, as between the Company and the Holder, the
obligation of the Company, subject to the terms and conditions hereof, to pay to
the Holder amounts as and when the same become due and payable, or shall prevent
the Holder, upon default hereunder, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law.
5.8 Lien Subordination. Any lien or security interest of the Holder,
whether now or hereafter existing in connection with the amounts due under this
Convertible Note, on any assets or property of the Company or any proceeds or
revenues therefrom which the Holder may have at any time as security for any
amounts due and obligations under this Convertible Note, shall be subordinate to
all liens or security interests now or hereafter granted to a holder of Senior
Indebtedness by the Company or by law notwithstanding the date, order or method
of attachment or perfection of any such lien or security interest or the
provisions of any applicable law.
9.
5.9 Applicability of Priorities. The priority of the holder of the Senior
Indebtedness provided for herein with respect to security interests and liens is
applicable only to the extent that such security interests and liens are
enforceable and perfected and have not been avoided; if a security interest or
lien is judicially determined to be unenforceable or unperfected or is
judicially avoided with respect to any claim of the holder of the Senior
Indebtedness or any part thereof, the priority provided for herein shall not be
available to such security interest or lien to the extent that it is avoided or
determined to be unenforceable or unperfected. The foregoing notwithstanding,
the Holder covenants and agrees that it shall not challenge, attack or seek to
avoid any security interest or lien to the extent that it secures any holder of
the Senior Indebtedness. Nothing in this Section 5.9 affects the operation of
any subordination of indebtedness or turnover of payment provisions hereof, or
of any other agreements among any of the parties hereto.
6. Events Of Default.
6.1 Definition. For purposes of this Convertible Note, an "Event of
Default" shall be deemed to have occurred if:
(a) the Company fails to timely pay any amounts that become due and
payable on the Convertible Note, as and when the same shall become due and
payable, whether at maturity, upon any redemption, by declaration or otherwise
if such default is not cured by the Company within two (2) Business Days after
the Purchaser has given the Company written notice of such default; or
(b) the Company fails to deliver to the Holder shares of Common Stock
or cash in lieu thereof when such Common Stock or cash is required to be
delivered upon redemption or conversion of all or any portion of the Convertible
Notes and such default continues to exist for a period of five (5) Business Days
after written notice specifying such failure is given to the Company; or
(c) the Company fails to comply with any of the other covenants or
agreements of the Company contained in this Convertible Note or in the Purchase
Agreement (other than those covered by clauses (a) or (b) above) for a period of
45 days after written notice specifying such failure is given to the Company,
provided that no Event of Default shall be deemed to have occurred under this
subparagraph (c) if the Company has exercised, and continues to exercise,
commercially reasonable efforts to expeditiously cure the Event of Default (if
cure is possible) and cures such Event of Default within 90 days after the
original notice of such default; or
(d) the Company shall fail to make any payment at maturity in respect
of any Indebtedness of the Company (other than the Convertible Notes) in a
principal amount exceeding $1,000,000 individually or in the aggregate if such
default is not cured within 30 days after such payment is due and payable; or
(e) any event or condition shall occur which results in the
acceleration of the maturity of any Indebtedness of the Company in a principal
amount in excess of $1,000,000;
10.
(f) if a final judgment or order (not otherwise covered by the
Company's insurance) is rendered for the payment of money against the Company in
excess of $1,000,000 in the aggregate which continues unsatisfied and unstayed
for a period of 60 days; or
(g) the Company makes an assignment for the benefit of creditors; or
an order, judgment or decree is entered adjudicating the Company bankrupt or
insolvent; or any order for relief with respect to the Company is entered under
the Federal Bankruptcy Code; or the Company petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company, or of any substantial part of the assets of the Company, or commences
any proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Subsidiary) relating to the Company under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Company and such
petition, application or proceeding is not dismissed within 90 days; or
(h) any representation or warranty made by the Company pursuant to the
Purchase Agreement or in any certificate, financial statement or other document
delivered pursuant to the Purchase Agreement is proven to have been incorrect
when made and such breach is material to the financial condition, operations or
assets of the Company or to the validity or enforceability of the Convertible
Notes or the Company's performance of its obligations under the Convertible
Notes or the Purchase Agreement.
The foregoing shall constitute Events of Default whatever the reason or
cause for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
6.2 Consequences of Events of Default.
(a) If an Event of Default of the type described in Section 5.1(g)
occurs, the Accreted Value of this Convertible Note (together with all such
other amounts due thereon (if any)) shall become immediately due and payable
without any action on the part of the Holder, and the Company shall immediately
pay to the Holder all amounts due and payable with respect to this Convertible
Note.
(b) If an Event of Default (other than under Section 5.1(g)) has
occurred and is continuing, the Holder may declare all or any portion of the
Accreted Value of the outstanding Principal Amount of this Convertible Note to
be immediately due and payable and may demand immediate payment of all or any
portion of the Accreted Value of the outstanding Principal Amount of this
Convertible Note (together with all such other amounts then due and payable). If
the Holder demands immediate payment of all or any portion of this Convertible
Note, the Company shall immediately pay to the Holder all amounts due and
payable with respect to this Convertible Note or such portion hereof.
(c) The Holder shall also have any other rights that the Holder may
have been afforded under any contract or agreement at any time and any other
rights that the Holder may have pursuant to applicable law. No right or remedy
herein conferred upon or reserved to any
11.
Holder is intended to be exclusive of any other right or remedy, and every right
and remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of any
Holder to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and every power and remedy given by the Convertible Notes
or by law may be exercised from time to time, and as often as shall be deemed
expedient, by any Holder.
(d) The Company hereby waives diligence, presentment, protest and
demand and notice of protest and demand, dishonor and nonpayment of this
Convertible Note, and expressly agrees that this Convertible Note, or any
payment hereunder, may be extended from time to time and that the Holder may
accept security for this Convertible Note or release security for this
Convertible Note, all without in any way affecting the liability of the Company
hereunder.
6.3 Waiver of Past Defaults. The Holder may, by notice to the Company and
in accordance with Section 9, waive an existing Default or Event of Default
hereunder and its consequences. Upon any such waiver, such Default shall cease
to exist and be deemed to have been cured and not to have occurred, and any
Event of Default arising therefrom shall be deemed to have been cured, and not
to have occurred for every purpose of the Convertible Notes, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right.
7. Conversion.
7.1 Optional Conversion. (a) The Holder of this Convertible Note is
entitled, at its option, at any time until the close of business on August 18,
2006, or in case this Convertible Note or a portion hereof is called for
redemption, then in respect of this Convertible Note or such portion hereof,
until and including but (unless the Company defaults in making the payment due
upon redemption) not after, the close of business on the Redemption Date, to
convert this Convertible Note (or any portion of the Principal Amount hereof
which is $100,000 or an integral multiple of $1,000 in excess thereof (or, if
the Principal Amount on the conversion date is less than $100,000, then the
remaining Principal Amount of this Convertible Note)) at the Accreted Value of
such Principal Amount, or of such portion, into that number of fully paid shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock obtained by dividing such Accreted Value by a conversion price (the
''Conversion Price") equal to $3.25 (or at the current adjusted Conversion Price
if an adjustment has been made as provided herein) by surrender of this
Convertible Note to the Company accompanied by written notice to the Company
that such Holder elects to convert this Convertible Note, or if less than the
entire Principal Amount of this Convertible Note is to be converted, the portion
thereof to be converted, which shall be $100,000 or integral multiple of $1,000
in excess thereof (or, if the Principal Amount on the conversion date is less
than $100,000, then the remaining Principal Amount of this Convertible Note) in
accordance with Section 7.2.
12.
(b) At the option of the Company, in lieu of converting the Accretion
Portion of the Principal Amount of a Convertible Note to be converted into
shares of Common Stock in accordance with Section 7.1(a), the Company may (i)
pay the Holder an amount in cash equal to such Accretion Portion, or (ii) issue
to the Holder the number of shares of Common Stock equal to the quotient
obtained by dividing the amount of the Accretion Portion by the Market Price as
of the date of the conversion notice delivered pursuant to Section 7.2, or (iii)
pay the Holder an amount in cash equal to a part of such Accretion Portion and
issue to the Holder the number of shares of Common Stock equal to the quotient
obtained by dividing the amount of the remaining Accretion Portion by the Market
Price as of the date of the conversion notice delivered pursuant to Section 7.2.
(c) No fractional shares of Common Stock shall be issued upon
conversion of Convertible Notes. If more than one Convertible Note shall be
surrendered for conversion at one time by the same Holder, the number of fully
paid shares of Common Stock which shall be issuable upon conversion thereof
shall be computed on the basis of the aggregate Accreted Value of the
Convertible Notes (or specified portions thereof) so surrendered. Instead of any
fractional share of Common Stock that would otherwise be issuable upon
conversion of any Convertible Note or Convertible Notes (or specified portions
thereof), the Company shall pay a cash adjustment in respect of such fractional
share in an amount equal to such fraction multiplied by the closing sales price
of one share of Common Stock as reported in the composite transactions for the
principal United States securities exchange on which the Common Stock is traded
or, if the Common Stock is not listed on a United States national or regional
securities exchange, as reported by the National Association of Securities
Dealers Automated Quotation System, on the day of conversion (or, if such day is
not a trading day on such exchange or quotation system, on the trading day
immediately preceding such day).
7.2 Exercise of Conversion Right. To convert the Convertible Note, the
holder must complete and manually sign a conversion notice and deliver such
notice to the Company and surrender the Convertible Note to the Company. The
notice shall identify the Principal Amount of the Convertible Note to be
converted.
7.3 Effect of Conversion. (a) Convertible Notes shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Convertible Notes for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such
Convertible Notes as Holders shall cease, and the Person or Persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
and after such time. On the conversion date, the Company shall cause the shares
of Common Stock issued on conversion to be registered in the name of the Holders
of such Convertible Notes. Within five Business Days after the conversion date,
the Company shall issue and shall deliver a certificate or certificates (or
shareholding statement) for the number of fully paid shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 7.1(b).
(b) In the case of any Convertible Note which is converted in part only,
upon such conversion the Company shall execute and deliver to the Holder
thereof, at the expense of
13.
the Company, a new Convertible Note or Convertible Notes in aggregate Accreted
Value equal to the unconverted portion of the Accreted Value of such Convertible
Note.
(c) The Company shall at all times reserve and keep available, free
from preemptive rights, out of the authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of Convertible Notes, the
full number of shares of Common Stock then issuable upon the conversion of all
outstanding Convertible Notes, assuming that the Accreted Value of the
Convertible Notes at the Stated Maturity is converted at $3.25 per share.
7.4 Adjustment of Conversion Price.
(a) Stock Dividends. In case the Company shall make a dividend or
other distribution on the Common Stock exclusively in shares of Common Stock,
the Conversion Price shall be reduced by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for such
dividend or distribution by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and the denominator shall be the sum of such
number of shares of Common Stock and the total number of shares of Common Stock
constituting such dividend or other distribution, such reduction to become
effective immediately prior to the opening of business on the day following such
date.
(b) Subdivisions and Combinations. In case outstanding shares of
Common Stock shall be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect immediately prior to the close of business
on the date such subdivision becomes effective shall be proportionately reduced,
and, conversely, in case outstanding shares of Common Stock shall be combined
into smaller number of shares of Common Stock, the Conversion Price in effect
immediately prior to the close of business on the date such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which subdivision or combination becomes
effective.
(c) Distributions in Kind. Subject to the last sentence of this
paragraph (c) and the last sentence of paragraph (d) of this Section 7.4, in
case the Company shall, by dividend or otherwise, distribute to holders of
Common Stock evidences of its indebtedness, shares of any class of its capital
stock, cash or other assets (including securities, but excluding (i) any
outstanding rights or warrants, (ii) any dividend or distribution paid
exclusively in cash and (iii) any dividend or distribution referred to in
paragraph (a) of this Section 7.4), the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
such distribution by a fraction of which the numerator shall be (i) the "current
market price" (determined as provided in paragraph (e) of this Section 7.4) on
such date less (ii) the aggregate fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) on such date of the evidences of indebtedness, shares of capital
stock, cash and other assets to be distributed divided by the number of shares
of Common Stock outstanding at the close of business on such date, and the
denominator shall be such current market price, such reduction to become
effective immediately prior to the opening of business on the day following such
date. If the Board of Directors determines the fair market value of any
14.
distribution for purposes of this paragraph (c) by reference to the actual or
when-issued trading market for any securities comprising part or all of such
distribution, it must in doing so consider to the extent possible, the prices in
such market over the same period used in computing the current market price
pursuant to paragraph (e) of this Section 7.4.
(d) Stock Reclassifications. The reclassification of Common Stock into
securities which include securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which Section 7.9 applies)
shall be deemed to involve (i) a distribution of such securities other than
Common Stock to all holders of Common Stock within the meaning of paragraph (c)
of this Section 7.4 (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of shareholders entitled to
such distribution" within the meaning of paragraph (c) of this Section 7.4), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter within the
meaning of paragraph (b) of this Section 7.4 (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (b) of this Section 7.4).
Rights or warrants issued by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common
Stock (either initially or under certain circumstances), which rights or
warrants (i) are deemed to be transferred with such shares of Common Stock, (ii)
are not exercisable and (iii) are also issued in respect of future issuances of
Common Stock, in each case in clauses (i) through (iii) until the occurrence of
a specified event or events ("Trigger Event"), shall for the purposes of this
Section 7.4 not be deemed issued until the occurrence of the earliest Trigger
Event.
(e) Current Market Price. For the purpose of any computation under
paragraph (c) of this Section 7.4, the "current market price" per share of
Common Stock on any date shall be deemed to be the Market Price as of the date
of determination of shareholders entitled to the distribution or dividend
specified in subsection (c) above (or, if earlier, the related ex date).
(f) Sales of Shares Below $2.50.
(i) If at any time or from time to time after the Second Closing
and until August 18, 2000, the Company issues or sells, or is deemed by the
express provisions of this paragraph (f) of this Section 7.4 to have issued or
sold, Additional Shares of Common Stock (as defined in paragraph (f)(iv) below),
other than as a dividend or other distribution on any class of stock as provided
in paragraphs (a) or (c) above, and other than a subdivision or combination of
shares of Common Stock as provided in paragraph (b) above, for an Effective
Price (as defined in paragraph (f)(iv) below) less than $2.50 (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares), then the existing Conversion Price shall be
automatically reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying such Conversion Price by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock deemed outstanding (as defined below) immediately prior to such issue or
sale, plus (B) the number of shares of Common Stock which the aggregate
consideration received (as defined in paragraph (f)(ii)) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Conversion Price and (ii) the denominator of which shall be (C) the number
of shares of Common Stock deemed outstanding (as defined below) immediately
prior to such issue or sale plus (D) the total number of Additional Shares of
Common Stock so issued. For the purposes of the preceding sentence, the number
of shares of Common Stock deemed outstanding as of a given date shall be the sum
of (A) the number of shares of Common Stock actually outstanding, (B) the number
of shares of
15.
Common Stock into which the then outstanding Convertible Notes could be
converted if fully converted on the date immediately preceding the given date
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required under
this paragraph (f), the consideration received by the Company for any issue or
sale of securities shall (A) to the extent it consists of cash, be computed at
the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company; (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale, but without deduction of any expenses
payable by the Company; or (C) if Additional Shares of Common Stock, Convertible
Securities (as defined in paragraph (f)(iii)) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued or
sold together with other stock or securities or other assets of the Company for
a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
paragraph (f), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amount of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amount of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amount of such consideration
cannot be ascertained, but is a function of antidilution or similar protective
clauses, the Company
16.
shall be deemed to have received the minimum amount of consideration without
reference to such clauses; provided further that if the minimum amounts of
consideration payable to the Company upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on the occurrence or
nonoccurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options, or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities.
No further adjustment of the Conversion Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, such Conversion Price as adjusted upon the issuance of such rights,
options or Convertible Securities shall be readjusted to such Conversion Price
which would have been in effect had an adjustment been made on the basis that
the only Additional Shares of Common Stock so issued were the Additional Shares
of Common Stock, if any, actually issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Convertible Notes.
(iv) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company or deemed to be issued pursuant to this
paragraph (f), whether or not subsequently reacquired or retired by the Company,
other than: (1) shares of Common Stock issued pursuant to the Stock Purchase
Agreement or to satisfy the condition set forth in Section 3.3 of the Purchase
Agreement; (2) shares of Common Stock issued upon conversion of the Convertible
Notes; (3) shares of Common Stock and/or options, warrants or other rights (as
adjusted for any stock dividends, combinations, splits, recapitalization and the
like) after the Second Closing Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board; (4) shares of Common Stock, or any warrant therefor or other convertible
security, issued in conjunction with equipment lease financing arrangements; (5)
shares issued after repurchase pursuant to any restricted stock purchase
agreement following a termination; (6) shares of Common Stock issued pursuant to
the exercise or conversion of options, warrants or convertible securities
outstanding as of the Second Closing Date, (7) shares issued for consideration
other than cash pursuant to a merger, consolidation,
17.
acquisition or similar business combination and (8) shares issued in connection
with the proposed settlement between the Company and Vascular Genomics, Inc.
The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this paragraph (f), into the aggregate consideration received, or
deemed to have been received by the Company for such issue under this paragraph
(f), for such Additional Shares of Common Stock.
(g) Miscellaneous. No adjustment in the Conversion Price shall be
required unless such adjustment (plus any other adjustments not previously made
by reason of this paragraph (g)) would require an increase or decrease of at
least 1% in the Conversion Price; provided that any adjustments which by reason
of this paragraph (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section shall be made to the nearest cent, to the nearest one-hundredth of a
percentage point or to the nearest one-hundredth of a share, as the case may be.
7.5 Notice of Adjustments of Conversion Price. Whenever the Conversion
Price is adjusted as herein provided: the Company shall compute the adjusted
Conversion Price in accordance with Section 7.4 and shall prepare a certificate
signed by the President or Chief Financial Officer of the Company setting forth
the adjusted Conversion Price and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be
delivered to each Holder.
7.6 Notice of Certain Corporate Action. In case:
(a) the Company shall declare a stock dividend (or any other
distribution) on its Common Stock or a subdivision or combination of the
outstanding shares of Common Stock; or
(b) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(d) the Company shall commence a tender offer for all or a portion of
the outstanding shares of Common Stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the amount or type of
consideration being offered therefor);
then the Company shall cause to be delivered to the Holder, at least ten days
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such stock dividend, or, if a record is not to be
18.
taken, the date as of which the holders of Common Stock of record who will be
entitled to such dividend are to be determined, (y) the date on which such
reclassification 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, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of any amendment thereto). Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (a) or (b) of this Section 7.6.
7.7 Taxes on Conversions. The Company will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of the
Convertible Notes pursuant hereto.
7.8 Covenant as to Common Stock. The Company covenants that all shares of
Common Stock which may be issued upon conversion of Convertible Notes will upon
issue be validly issued, fully paid and will rank equally and be of the same
class as the shares of Common Stock outstanding on the conversion date.
7.9 Provisions as to Consolidation, Merger or Sale of Assets. In case of
any consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company where the Company is not
the surviving person (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock) or any sale or transfer of all or substantially all of the assets
of the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to the Holder an agreement to assume the Convertible Notes providing
that the Holder of each Convertible Note then outstanding shall have the right
thereafter, during the period such Convertible Note shall be convertible as
specified in Section 7.1, to convert such Convertible Note into the kind and
amount of securities, cash and other property, if any, receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Convertible Note might have been converted
immediately prior to such consolidation, merger, sale or transfer, assuming such
holder of Common Stock (i) is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be (a "Constituent Person"), or
an Affiliate of a Constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer. Such
supplemental instrument shall provide for adjustments which, for events
subsequent to the effective date of such supplemental instrument, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section 7.9 shall similarly apply to
successive consolidations, mergers, sales or transfers.
8. Covenants. The Company agrees that, so long as any amount payable under
this Convertible Note remains unpaid:
19.
8.1 Payment of Securities. The Company shall promptly make all payments in
respect to the Convertible Notes on the dates and in the manner provided for in
the Convertible Notes or pursuant to the Purchase Agreement.
8.2 Current Public Information. The Company shall file all reports
required to be filed by it under the Securities Act and the Securities Exchange
Act and the rules and regulations adopted by the SEC thereunder to the extent
required to enable the holders of Restricted Securities to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the SEC under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the SEC or (ii) a registration statement on Form
S-3 or any similar registration form hereafter adopted by the SEC. Upon request,
the Company shall deliver to any holder of Restricted Securities a written
statement as to whether it has complied with such requirements.
8.3 Financial Statements and Other Information. The Company shall deliver
to the Holders (so long as any Holder holds any Convertible Note):
(a) as soon as available but in any event within 45 days after the end
of each quarterly accounting period in each fiscal year, unaudited statements of
operations and cash flows of the Company for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarterly
period, and unaudited balance sheets of the Company as of the end of such
quarterly period, each of which statements shall be true and correct in all
material respects prepared in accordance with generally accepted accounting
principles, consistently applied (subject to the absence of footnote disclosures
and to normal year-end adjustments for recurring adjustments) and shall be
certified by the Company's chief financial officer;
(b) within 90 days after the end of each fiscal year, audited
statements of operations and cash flows of the Company for such fiscal year, and
an audited balance sheet of the Company as of the end of such fiscal year, each
of which statements shall be true and correct in all material respects all
prepared in accordance with generally accepted accounting principles
consistently applied;
(c) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
to such Holder hereunder);
(d) promptly (but in any event within five Business Days) after the
discovery or receipt of notice of any Default or Event of Default, any default
under any other material agreement to which the Company is a party, or any other
material adverse change, event or circumstance affecting the Company (including,
without limitation, the filing of any material litigation against the Company or
the existence of any dispute with any Person which involves a reasonable
likelihood of such litigation being commenced), a certificate of the Company's
Chief Executive Officer or Chief Financial Officer specifying the nature and
period of existence thereof and what actions the Company has taken and proposes
to take with respect thereto; and
20.
(e) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files with the SEC or with any securities exchange on which any of its
securities are then listed and copies of all press releases and other statements
made available generally by the Company to the public concerning material
developments in the Company's business.
8.4 Compliance Certificate. The Company shall deliver to the Holders
within 100 days after the end of each fiscal year of the Company (beginning with
the fiscal year ending on December 31, 1999) a certificate of the Company's
Chief Executive Officer or Chief Financial Officer stating whether or not to the
best knowledge of the signer thereof the Company is in default in the
performance and observation of any of the terms, provisions and conditions of
the Convertible Notes or the Purchase Agreement (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
8.5 Use of Proceeds. The Company shall use the proceeds from the sale of
the Convertible Notes under the Purchase Agreement to fund the Company's
continued research in its cardiovascular, cancer and other major disease
programs and general working capital. The Company shall not use the proceeds
from the sale of the Convertible Notes under the Purchase Agreement, directly or
indirectly, for the purposes of purchasing or carrying any "margin securities"
within the meaning of Regulation G or T promulgated by the Board of Governors of
the Federal Reserve Board or for the purpose of arranging for the extension of
credit, secured directly or indirectly, in whole or in part by collateral that
includes any "margin securities."
8.6 Senior Indebtedness. So long as any amounts under the Convertible
Notes remaining outstanding, the Company shall not without the prior written
consent of a majority of the Holders of the Convertible Notes then outstanding,
authorize, issue, incur, assume, guarantee, suffer to exist or enter into any
agreement providing for the issuance of, any Senior Indebtedness that in the
aggregate exceeds $5,000,000. The Company shall not incur, assume, guarantee or
suffer to exist any Indebtedness, other than Indebtedness evidenced by the
Convertible Notes, that is subordinate in right of payment to any Senior
Indebtedness, unless such Indebtedness, by its terms, or the terms of the
instrument creating or evidencing it, is pari passu with or subordinate in right
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of payments to the Convertible Notes.
8.7 Consolidation or Merger. The Company shall consolidate or merge with
or into another Person only if (i) such Person shall expressly assume the due
and punctual payment of the Accreted Value of the Convertible Notes and the
performance or observance of every covenant on the part of the Company to be
performed or observed and shall have provided for the conversion rights in
accordance with the terms of the Convertible Notes, (ii) immediately after
giving effect to such transaction, no Event of Default shall have occurred and
be continuing, (iii) such consolidation, merger, conveyance, transfer or lease
does not adversely affect the validity or enforceability of the Convertible
Notes and (iv) the Person formed by such consolidation or into which the Company
is merged shall not be a United States Real Property Holding Corporation within
the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended.
21.
8.8 Nasdaq Quotation. Promptly after the Second Closing Date, the Company
shall promptly prepare and submit to the Nasdaq National Market (or any other
exchange or quotation system on which the Company's Common Stock is then traded)
a listing application covering the Common Stock to be issued to the Holders upon
conversion of the Convertible Notes.
8.9 Additional Amounts. Any and all amounts payable by the Company to each
Holder, under or with respect to the Convertible Notes will be paid without any
deduction or withholding for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge (including any interest or
penalties with respect thereto) imposed or levied by or on behalf of any
jurisdiction or by any authority or agency therein or thereof having power to
tax (hereinafter "Withholding Taxes") unless the Company or any other person is
required by any law or regulation (or by the interpretation or administration
thereof) to make any deduction or withholding from any payment with respect to
Withholding Taxes. In such an event, the Company will pay an additional amount
in cash ("Additional Amount") as will result (after deduction of such
Withholding Taxes) in the payment to the Holder of such Convertible Note of the
amount that would have been payable in respect of such Convertible Note had no
such withholding or deduction been required, except that no Additional Amount
shall be so payable for or on account of: (1) any Withholding Tax that would not
have been imposed but for the fact that such Holder was a resident, domiciliary
or national of, or engaged in business or maintained a permanent establishment
or was physically present in, the United States or otherwise has some connection
with the United States other than the mere ownership of, or receipt of payment
under, such Convertible Note; (2) subject to the provision relating to a gross
basis tax set forth below, any tax, assessment or other governmental charge
which is payable otherwise than by withholding from payments on the Convertible
Notes (which non-excluded taxes shall include only taxes imposed on a gross tax
basis by the United States or any political subdivision thereof); (3) any
Withholding Tax that is imposed or withheld by reason of the failure to comply
by the Holder of such Convertible Note after the written request by the Company,
(a) to provide information concerning the nationality, residence or identity of
such Holder or such beneficial owner or (b) to make any declaration or other
similar claim or satisfy any information or reporting requirement, which, in the
case of (a) or (b), is required or imposed by a statute, treaty, regulation or
administrative practice of the United States or any political subdivision or
taxing authority thereof or therein as a precondition to exemption from all or
part of such withholding, deduction, tax, assessment or other governmental
charge and which Holder is lawfully entitled to provide or make; or (4) any
combination of clauses (1), (2) and (3); nor shall such Additional Amounts be
paid with respect to any payment on any such Convertible Note to any such Holder
who is a fiduciary or partnership to the extent that such payment would be
required by the laws of the United States or any political subdivision or taxing
authority thereof or therein to be included in the income for tax purposes of a
settlor with respect to such fiduciary or a member of such partnership who would
not have been entitled to such Additional Amounts had it been the Holder of the
Convertible Note; nor, if such Holder is not the Purchaser, shall any Additional
Amounts be payable in excess of the Additional Amounts that would be payable if
such Holder was the Purchaser. Whenever there is mentioned, in any context, any
payment on the Convertible Notes, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof. In
addition, for these purposes, if and to the extent a gross basis tax is being
imposed on the Holder as a substitute for any Withholding Tax for
22.
which an Additional Amount would otherwise be payable, such Additional Amount
would still be payable by the Company in the form of reimbursement to Holder,
and the Company agrees to pay any interest, penalties or addition to the gross
basis tax only in the event that such interest, penalties or addition to the
gross basis tax is directly attributable to actions taken or omissions made by
or on behalf of the Company. The Company shall pay to the relevant taxing or
other authority the full amount of the deduction or withholding made by it and
promptly forward to such Holder copies of official receipt or other evidence
showing that the full amount of any such deduction or withholding has been paid
over to the relevant taxation or other authority before the date on which
penalties attach thereto.
8.10 Cash Dividends. So long as any amounts under the Convertible Notes
remain outstanding, the Company shall not authorize for issuance or pay any cash
dividend on the Common Stock of the Company until such time as the Company has
paid the accrued but unpaid Accretion Portion of any outstanding Convertible
Notes.
8.11 Incurrence of Indebtedness. So long as any amounts under the
Convertible Notes remain outstanding, the Company shall not incur any
Indebtedness that by the terms of the instrument or instruments by which such
Indebtedness was created or incurred expressly provides (A) that it (i) is
junior in right of payment to the Convertible Notes or (ii) ranks pari passu in
right of payment with the Convertible Notes and any amendments, modifications or
supplements to, or any renewals, extensions, deferrals, refinancings and
refundings of, any of the foregoing, and (B) that it is secured by any lien on
any asset or property of the Company now owned or hereafter acquired by the
Company; provided, however, this covenant shall not apply to any capital leases
or assets subject to purchase money security interests.
9. Amendment And Waiver. Except as otherwise expressly provided herein, the
provisions of this Convertible Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of Holders
of at least a majority in Accreted Value of the Convertible Notes then
outstanding; provided that no such amendment or waiver shall (i) extend the
final maturity of any Convertible Note, or reduce the Accreted Value thereof, or
reduce any amount payable on the redemption thereof, or impair or affect the
rights of any Holder to institute suit for the payment thereof or adversely
affect the ranking of the Convertible Notes with respect to the outstanding
Indebtedness of the Company, or adversely affect the right to convert any
Convertible Note, without the consent of each Holder of each Convertible Note so
affected, or (ii) reduce the aforesaid percentage of Accreted Value of the
Convertible Notes, the consent of the Holders of which is required for any such
amendment or waiver, without the consent of the Holders of all Convertible Notes
then outstanding. The Company shall promptly notify all Holders of Convertible
Notes after the making of any amendment or waiver pursuant to this Section 9.
10. Cancellation. After all amounts at any time owed on this Convertible Note
have been indefeasibly paid in full, this Convertible Note shall be surrendered
to the Company for cancellation and shall not be reissued.
11. Place Of Payment. Payments on the Convertible Notes shall be made to the
Holder at the following address:
23.
Artisan Equity Limited
c/o Island Circle Limited
P.O. Box HM 1186
Xxxxxxxx HMEX, Bermuda
Attn: President
or to such other address or to the attention of such other person or, in the
case of wire transfer, to the bank account, specified by prior written notice to
the Company.
12. Business Days. If any payment is due, or any time period for giving notice
or taking action expires, on a day that is not a Business Day, the payment shall
be due and payable on, and the time period shall automatically be extended to,
the next Business Day immediately following such day, and the principal shall
continue to accrue in value at the required rate hereunder until any such
payment is made.
13. Usury Laws. It is the intention of the Company and the Holder to conform
strictly to all applicable usury laws now or hereafter in force, and any of the
Accretion Portion payable under this Convertible Note shall be subject to
reduction to the amount not in excess of the maximum legal amount allowed under
the applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Convertible Note is
accelerated by reason of an election by the Holder resulting from an Event of
Default, voluntary prepayment by the Company or otherwise, then the Accretion
Portion may never include more than the maximum amount permitted by law,
computed from the date hereof until payment, and any Accretion Portion in excess
of the maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Holder either be rebated to the
Company or credited on the Principal Amount of this Convertible Note, or if this
Convertible Note has been paid, then the excess shall be rebated to the Company.
The aggregate of all the Accretion Portion (whether designated as Accretion
Portion, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Convertible Note shall under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of this Convertible Note
remaining unpaid from time to time. If the Accretion Portion does exceed the
maximum legal rate, it shall be deemed a mistake and such excess shall be
canceled automatically and, if theretofore paid, rebated to the Company or
credited on the principal amount of this Convertible Note, or if this
Convertible Note has been repaid, then such excess shall be rebated to the
Company.
14. Governing Law. This Convertible Note shall be governed by and construed
and enforced in accordance with the laws of the State of California, excluding
conflict of law principles, that would cause the application of laws of any
other jurisdiction.
15. Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if telegraphed or mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth
below:
24.
To Company: Corvas International, Inc.
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President or Chief Executive Officer
Phone (000) 000-0000
To Holder: Artisan Equity Limited
x/x Xxxxxx Xxxxxx Xxxxxxx
X.X. Xxx XX 0000
Xxxxxxxx XXXX, Xxxxxxx
Attn: President
Phone (000) 000-0000
Fax (000) 000-0000
or to such other address or to the attention of such other
person specified by prior notice to the Company
[THIS SPACE INTENTIONALLY LEFT BLANK]
25.
In Witness Whereof, the Company has executed and delivered this Convertible
Note on October 20, 1999.
Corporate seal Corvas International, Inc.
a Delaware corporation
By:________________________________
Name: Xxxxxxx X. Xxxxx
Its: President and Chief Executive
Officer
Artisan Equity Limited
a Bermuda company
By:________________________________
Name: Xxxxxxx X. Xxxx
Title: Director
By:________________________________
Name: Xxxxx X. Xxxxxxxxx
Title: Company Secretary
Attested:
___________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Assistant Corporate Secretary
