Vasogen Inc.
Material Contracts
Exhibit 1 Securities Purchase Agreements
a. Kings Road Investments Ltd.
b. Amatis Ltd. (exhibits and schedules attached to Kings Road
Investments Ltd. Security Purchase Agreement omitted)
c. Castlerigg Master Investments Ltd. (exhibits and schedules
attached to Kings Road Investments Ltd. Security Purchase
Agreement omitted)
d. Capital Ventures International (exhibits and schedules
attached to Kings Road Investments Ltd. Security Purchase
Agreement omitted)
e. Smithfield Fiduciary LLC (exhibits and schedules attached to
Kings Road Investments Ltd. Security Purchase Agreement
omitted)
Exhibit 2 Vasogen Inc. Guarantees
a. Kings Road Investments Ltd.
b. Amatis Ltd.
c. Castlerigg Master Investments Ltd.
d. Capital Ventures International
e. Smithfield Fiduciary LLC
Exhibit 3 Vasogen, Corp. Guarantees
a. Kings Road Investments Ltd.
b. Amatis Ltd.
c. Castlerigg Master Investments Ltd.
d. Capital Ventures International
e. Smithfield Fiduciary LLC
Exhibit 4 Registration Rights Agreement
Exhibit 5 Amendments to the Registration Rights Agreement
a. Kings Road Investments Ltd.
b. Amatis Ltd.
c. Castlerigg Master Investments Ltd.
d. Capital Ventures International
e. Smithfield Fiduciary LLC
Exhibit 6 Senior Convertible Notes
a. Kings Road Investments Ltd.
b. Amatis Ltd. (exhibits attached to Kings Road Investments
Ltd. Note omitted)
c. Castlerigg Master Investments Ltd. (exhibits attached to
Kings Road Investments Ltd. Note omitted)
d. Capital Ventures International (exhibits attached to Kings
Road Investments Ltd. Note omitted)
e. Smithfield Fiduciary LLC (exhibits attached to Kings Road
Investments Ltd. Note omitted)
Exhibit 7 Amendments to Senior Convertible Notes
a. Kings Road Investments Ltd.
b. Amatis Ltd.
c. Castlerigg Master Investments Ltd.
d. Capital Ventures International
e. Smithfield Fiduciary LLC
Exhibit 8 Warrants
a. Kings Road Investments Ltd.
b. Amatis Ltd. (exhibits attached to Kings Road Investments
Ltd. Warrant omitted)
c. Castlerigg Master Investments Ltd. (exhibits attached to
Kings Road Investments Ltd. Warrant omitted)
d. Capital Ventures International (exhibits attached to Kings
Road Investments Ltd. Warrant omitted)
e. Smithfield Fiduciary LLC (exhibits attached to Kings Road
Investments Ltd. Warrant omitted)
Exhibit 9 Amendments to Warrants
a. Kings Road Investments Ltd.
b. Amatis Ltd.
c. Castlerigg Master Investments Ltd.
d. Capital Ventures International
e. Smithfield Fiduciary LLC
Exhibit 1a
Securities Purchase Agreement - Kings Road Investments Ltd.
(see attached)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 7,
2005, by and among Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland, with headquarters located at Xxxxxxx Airport
House, Shannon, Co. Xxxxx, Ireland (the "Company"), Vasogen Inc., a Canadian
corporation, with headquarters located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx (the "Parent"), Vasogen, Corp., a Delaware
corporation, with its registered address at 0000 Xxxxx Xxxxxx Xxxxxx, X.X. Box
1347, Wilmington, County of Newcastle, Delaware 19801 ("Vasogen, Corp.") and the
investor listed on the Buyer Schedule attached hereto (the "Buyer").
WHEREAS:
A. The Company, the Parent, Vasogen, Corp. and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act.
B. The Company has authorized a new series of senior convertible notes of
the Company, which notes shall be convertible into the Parent's common shares
(the "Common Shares") in accordance with the terms of such notes.
C. The Company, the Parent and Vasogen, Corp. plan to enter into one or
more Other Purchase Agreements (as defined below) relating to the sale and
purchase of securities on substantially identical terms as contained in this
Agreement.
D. The Buyer wishes to purchase, and (i) the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (the
"Notes"), set forth opposite the Buyer's name in column (3) on the Buyer
Schedule (which amount when aggregated with all amounts of notes being purchased
by other buyers (the "Other Buyers") pursuant to the Other Purchase Agreements
(the "Other Notes" and together with the Notes, the "Aggregate Notes"), shall be
$40,000,000) (as converted, amortized and/or redeemed for Common Shares pursuant
to the terms of the Notes, collectively, the "Conversion Shares") and (ii) the
Parent wishes to issue, upon the terms and conditions stated in this Agreement,
warrants, in substantially the form attached hereto as Exhibit B (the "Initial
Warrants," and together with the Accelerated Payment Option Warrants (as defined
in the Notes), the "Warrants," and together with the warrants being purchased by
the Other Buyers (the "Other Warrants"), the "Aggregate Warrants"), to acquire
up to that number of additional shares of Common Shares set forth opposite the
Buyer's name in column (4) of the Buyer Schedule (as exercised, the "Initial
Warrant Shares," and together with the Common Shares issuable upon exercise of
the Accelerated Payment Option Warrants, the "Warrant Shares").
E. Contemporaneously with the execution and delivery of this Agreement,
certain of the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (as amended or
modified from time to time, the "Registration
Rights Agreement"), pursuant to which the Parent has agreed to provide certain
registration rights with respect to the Conversion Shares and the Initial
Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder.
F. The Notes, the Conversion Shares, the Warrants, the Warrant Shares and
the Guarantees (as defined in clause (G) below) collectively are referred to
herein as the "Securities".
G. The Notes will be (i) senior to all outstanding and future Indebtedness
(as defined herein) of the Company, (ii) guaranteed by the Parent pursuant to a
guarantee substantially in the form attached hereto as Exhibit D-1 (the "Parent
Guaranty") and (iii) guaranteed by Vasogen, Corp. pursuant to a guarantee
substantially in the form attached hereto as Exhibit D-2 (the "Subsidiary
Guaranty," and together with the Parent Guaranty, the "Guarantees").
NOW, THEREFORE, the Company, the Parent, Vasogen, Corp. and the Buyer
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Subject to the satisfaction (or waiver by the party entitled to
so waive) of the conditions set forth in Sections 6 and 7 below, on the Closing
Date (as defined below), (A) the Company shall issue and sell to the Buyer, and
the Buyer agrees to purchase from the Company, one or more Notes with an
aggregate principal amount as is set forth opposite the Buyer's name in column
(3) on the Buyer Schedule and (B) the Parent shall issue and sell to the Buyer
one or more Initial Warrants to acquire up to that number of Warrant Shares as
is set forth opposite the Buyer's name in column (4) on the Buyer Schedule (the
"Closing").
(ii) Purchase Price. The aggregate purchase price for the Buyer of
the Notes and the Warrants to be purchased by the Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite the Buyer's name in
column (5) of the Buyer Schedule. The purchase price for the Warrants shall be
deemed to be $0.01 per Warrant.
(b) Closing Date. The date and time of the Closing (the "Closing Date")
shall be 8:00 a.m., New York Time, on the date hereof after notification of
satisfaction (or waiver by the party entitled to so waive) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and the Buyer) at the offices of Xxxxxxx Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) Form of Payment. On the Closing Date, the Buyer shall pay its
Purchase Price to the Company or, at the written direction of the Company
delivered to the Buyer at least one (1) Business Day prior to the Closing Date
and substantially in the form attached hereto as Annex 1(c), to its designee for
the Notes to be issued and sold to the Buyer at such Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions and the Parent shall issue the Initial Warrants to the Buyer. At
the Closing, (A) the Company shall deliver to the Buyer the Notes (allocated in
the principal amounts as the Buyer shall request) that the Buyer is then
purchasing and (B) the Parent shall deliver to the Buyer the
-2-
Initial Warrants (allocated in the amounts as the Buyer shall request) that the
Buyer is purchasing, in each case duly executed on behalf of the Company or the
Parent, as applicable, and registered in the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) No Public Sale or Distribution. The Buyer is acquiring the Notes
and the Warrants and upon conversion, amortization and/or redemption of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable
upon conversion, amortization and/or redemption of the Notes and the Warrant
Shares issuable upon exercise of the Warrants for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act or
qualified for public distribution or exempted under the securities legislation
and regulations and regulations of, and the instruments, policies, rules,
orders, codes, notices and published interpretation notes of, the securities
regulatory authorities of the provinces and territories of Canada (the "Canadian
Securities Laws"), as applicable; provided, however, that by making the
representations herein, subject to compliance with Canadian Securities Laws, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and in accordance with Canadian Securities Laws. The Buyer is
acquiring the Securities hereunder in the ordinary course of its business. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities, and the Buyer
has not solicited offers for, or offered or sold, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(b) Accredited Investor Status. The Buyer is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D. The Buyer is also an "accredited investor" as that term is defined
in the National Instrument 45-106, Prospectus and Registration Exemptions. The
Buyer has executed the Accredited Investor Certificate attached hereto as
Schedule 2(b) as of the date hereof, and such certificate is true and correct as
of the date hereof.
(c) Reliance on Exemptions. The Buyer understands and acknowledges that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and Canadian Securities Laws applicable in Ontario and that the
Company and the Parent are relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and the Parent and
-3-
materials relating to the offer and sale of the Securities that have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and the Parent. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's and the Parent's representations and
warranties contained herein. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
or Canadian federal, state or provincial commission or agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such commissions or agencies passed upon or endorsed
the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that, except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws or
qualified under Canadian Securities Laws; (ii) the Buyer agrees that if it
decides to offer, sell or otherwise transfer any of the Notes, Conversion
Shares, Warrants or Warrant Shares, such Notes, Conversion Shares, Warrants and
Warrant Shares may be offered, sold or otherwise transferred only: (A) pursuant
to an effective registration statement under the 1933 Act, subject to compliance
with Canadian Securities Laws, (B) to the Company (in the case of the Notes) or
the Parent (in the case of the Warrants, the Conversion Shares and the Warrant
Shares); (C) outside the United States in accordance with Rule 904 of Regulation
S under the 1933 Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the 1933 Act
provided by Rule 144 or Rule 144A thereunder, if available, and in compliance
with any applicable state securities laws or (2) in a transaction that does not
require registration under the 1933 Act or applicable state securities laws, and
the seller has provided the Company and the Parent with reasonable assurance,
prior to such offer, sale or transfer, that such Securities may be so offered,
sold or transferred in a transaction that does not require registration under
the 1933 Act or applicable state securities laws; and (iii) any sale or transfer
of the Securities to a purchaser or transferee whose address is in Canada or who
is a resident of Canada is prohibited unless it is made in compliance with
applicable Canadian Securities Laws.
(g) Legends. The Buyer understands that the certificates or other
instruments representing the Notes and Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, and subject to Section 9(s), the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "Blue Sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE]
-4-
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING
SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT; (B)
TO THE COMPANY, (C) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT AND IN COMPLIANCE WITH
APPLICABLE LOCAL LAWS OR (D) WITHIN THE UNITED STATES (1) IN ACCORDANCE
WITH THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS OR (2) IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS PROVIDED THE COMPANY, PRIOR TO SUCH
OFFER, SALE OR TRANSFER, WITH REASONABLE ASSURANCE THAT SUCH SECURITIES
MAY BE SO OFFERED, SOLD OR TRANSFERRED IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES
LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
Subject to Section 9(s), the legend set forth above shall be removed and the
Company or the Parent, as applicable, shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with reasonable assurance that
the sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act, (iii) if the
Company or the Parent is a "foreign issuer," within the meaning of Regulation S
under the 1933 Act and the Securities are being sold pursuant to Rule 904 of
Regulation S, such legend may be removed by providing a declaration to the
Company or the Parent, as applicable, that such shares may be sold pursuant to
Rule 904 of Regulation S or (iv) such holder provides the Company or the Parent,
as applicable, with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Canadian Legends. The Buyer understands that the certificates or
other instruments representing Warrants and, if the Notes are converted or the
Warrants are exercised prior to February 8, 2006, the share certificates
representing the Conversion Shares and the Warrant Shares, shall bear a legend
set forth below:
-5-
"UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF
THESE SECURITIES SHALL NOT TRADE THE SECURITIES IN CANADA BEFORE
FEBRUARY 8, 2006."
The legend set forth above shall be removed and the Parent shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped at anytime on or after February 8, 2006, if such Securities are
qualified for distribution by prospectus under applicable Canadian Securities
Laws or if in connection with a proposed trade the holder provides the Parent
with reasonable assurance that the Securities are no longer subject to a hold
period under such laws.
(i) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and shall constitute the legal, valid and binding
obligations of the Buyer enforceable against the Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(j) No Conflicts. The execution, delivery and performance by the Buyer
of this Agreement and the Registration Rights Agreement and the consummation by
the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party or by which it is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations hereunder.
(k) Residency. The Buyer is a resident of that jurisdiction specified
below its address on the Buyer Schedule.
(l) Certain Trading Activities. Neither the Buyer nor any of its
affiliates has directly or indirectly, and no Person acting on behalf of the
Buyer or its affiliates has directly or indirectly, engaged in any transactions
in the securities of the Parent or the Company (including, without limitation,
any Short Sales involving the Parent's securities) since the time that the Buyer
was first contacted by the Parent, a placement agent or any other Person with
respect to the transactions contemplated hereby. "Short Sales" include, without
limitation, all "short sales" as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers. The
Buyer covenants that neither it, nor any of its affiliates that it exercises
investment discretion over or to which it has provided knowledge of the
transactions contemplated by the Transaction
-6-
Documents, nor any Person acting on behalf of the Buyer or any of its affiliates
that it exercises investment discretion over or to which it has provided
knowledge of the transactions contemplated by the Transaction Documents will
engage in any transactions in the securities of the Parent or the Company
(including Short Sales) prior to the time that the transactions contemplated by
this Agreement are publicly disclosed. Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.
(m) No Irish Public Offering. The Buyer has not offered or sold, and it
will not offer or sell, any Notes in Ireland in circumstances which would
constitute an offer to the public within the meaning of Irish Prospectus Law (as
defined below) or an invitation to the public (as referred to in Section 33 of
the Companies Act, 1963) to subscribe for the Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT.
Each of the Company, the Parent and Vasogen, Corp. jointly and
severally represents and warrants to the Buyer as of the date hereof as follows:
(a) Organization and Qualification. The Parent is up to date in all
filings under the Canada Business Corporations Act (the "CBCA"). The Parent and
the Parent's "Subsidiaries" (which for purposes of this Agreement means the
Company, Vasogen, Corp. and any entity in which the Parent, directly or
indirectly, owns 50% or more of the outstanding capital stock or holds an equity
or similar interest representing 50% or more of the outstanding equity or
similar interest of such entity) are entities duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which they are formed. The Parent and its Subsidiaries have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Parent and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing (if applicable) in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Vasogen, Corp. is not qualified as a foreign entity to do business in any state
and there is no jurisdiction in which Vasogen, Corp., by virtue of its ownership
of property or the nature of the business conducted by it, makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Parent, the Company or
Vasogen, Corp. to perform its obligations under the Transaction Documents (as
defined below). None of the Parent, the Company or Vasogen, Corp. holds any
equity or similar interest in any entity except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Xxxxxxxx. Each of the Parent and its
Subsidiaries has the requisite power and authority, to the extent it is a party
thereto or bound thereby, to enter into and perform its obligations under this
Agreement, the Notes, the
-7-
Guarantees, the Registration Rights Agreement, the Treasury Instructions (as
defined in Section 5(b)), the Warrants and each of the other agreements entered
into by the applicable parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and
to issue their respective Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Parent,
the Company and Vasogen, Corp. and the consummation by the Parent, the Company
and Vasogen, Corp. of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, the Warrants and the
Guarantees, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants have been duly authorized by the board of directors (or
similar governing body) of the Parent, the Company and Vasogen, Corp., as
applicable, and, other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) the filing of a Form D with respect to the Notes, the
Warrants and the Guarantees, as required under Regulation D and (iii) such
filings required under applicable securities or "Blue Sky" laws of the states of
the United States and applicable Canadian Securities Laws and applicable
requirements of the TSX (all of the foregoing, the "Required Approvals"), no
further filing, consent, or authorization is required by the Company, the
Parent, Vasogen, Corp. or any of their boards of directors and/or shareholders.
This Agreement and the other Transaction Documents to which they are a party
have been duly executed and delivered by the Parent, the Company and Vasogen,
Corp., as applicable, and constitute the legal, valid and binding obligations of
the Parent, the Company and Vasogen, Corp., as applicable, enforceable against
the Parent, the Company and Vasogen, Corp., as applicable, in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and to the extent that
rights to indemnity may be limited by applicable law, including the
indemnification and contribution provisions of the Registration Rights
Agreement.
(c) Issuance of Securities. The Notes, the Warrants and the Guarantees
are free from all taxes (other than a stamp duty charge of 0.15 Euro on the
issuance of each of the Notes, that will be paid by the Company), liens and
charges with respect to the issue thereof. As of the Closing, a number of shares
of Common Shares shall have been duly authorized and reserved for issuance which
equals or exceeds the maximum number of Common Shares: (i) issuable upon
conversion, amortization and/or redemption for Common Shares of the Notes and
(ii) issuable upon exercise of the Warrants. Upon issuance or conversion,
amortization and/or redemption in accordance with the terms of the Notes or
exercise in accordance with the terms of the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Shares. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Parent, the Company and Vasogen,
Corp. of the Securities is exempt from registration under the 1933 Act and from
the prospectus and registration requirements of applicable Canadian Securities
Laws. The Company has not offered or sold, and it will not offer, sell or
transfer the Notes in violation of Irish Securities Laws or in circumstances
that would constitute an offer to
-8-
the public within the meaning of Irish Prospectus Law or an invitation to the
public (as referred to in Section 33 of the Companies Act, 1963) to subscribe
for the Notes and nothing herein contained shall be construed as constituting an
offer of Notes to the public within the meaning of Irish Prospectus Law or an
"invitation to the public" (as referred to in Section 33 of the Companies Act,
1963) to subscribe for the Notes. As used herein, "Irish Prospectus Law" has the
meaning set out in the Investment Funds, Companies and Miscellaneous Provisions
Act, 2005 and "Irish Securities Laws" means Irish Prospectus Law, the Irish
Companies Acts, 1963 to 2005, the Central Bank Acts, 1942-1999, the Investment
Intermediaries Act, 1995 (as amended) and any regulations made thereunder (as
each of these may be amended or supplemented from time to time).
(d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Parent, the Company
and Vasogen, Corp. and the consummation by the Parent, the Company and Vasogen,
Corp. of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants and the Guarantees and
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation, any
capital stock of the Parent or any of its Subsidiaries, the Bylaws or any of the
organizational documents of the Parent or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Parent or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws or Canadian
Securities Laws and regulations and the rules and regulations (A) of the Toronto
Stock Exchange (the "TSX") and (B) either of Nasdaq National Market ("Nasdaq")
or The Nasdaq Small Cap Market ((A) and (B) collectively, the "Principal
Markets" and each individually, a "Principal Market")) applicable to the Parent
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, except in the case of clauses (ii)
and (iii) above, any breach or default that would not have a Material Adverse
Effect.
(e) Consents. Except as set forth on Schedule 3(e), none of the Parent
nor any of its Subsidiaries is required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof, except for the following consents, authorizations,
orders, filings and registrations (none of which is required to be filed or
obtained before the Closing): (i) the filing by the Parent of a listing
application and a notice for acceptance of a private placement for the
Conversion Shares and Warrant Shares with the Principal Markets, which shall be
done pursuant to the rules of the Principal Markets, (ii) as may be required
under the 1933 Act, the "Blue Sky" laws of various states or the rules and
regulations thereunder in connection with the transactions contemplated by the
Registration Rights Agreement and (iii) any notices or filings required to be
given or made with TSX and Nasdaq, which have been or will be given or made on a
timely basis by the Parent. The Parent and its Subsidiaries are unaware of any
facts or circumstances that might prevent the Parent from obtaining or effecting
any of the registration, application or filings pursuant to the preceding
sentence. The Parent is not in violation of the listing requirements of either
of the
-9-
Principal Markets and has no knowledge of any facts that would reasonably lead
to delisting or suspension of the Common Shares in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Each of
the Parent, the Company and Vasogen, Corp. acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is not (i) an officer or director of the Parent or
the Company, (ii) to the knowledge of each of the Parent and its Subsidiaries,
an "affiliate" of the Parent or any of its Subsidiaries (as defined in Rule 144
under the 1933 Act) or (iii) to the knowledge of each of the Parent and its
Subsidiaries, a "beneficial owner" of more than 10% of the shares of Common
Shares (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")). Each of the Parent, the Company and Vasogen,
Corp. further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Parent or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. Each of the Parent, the Company and Vasogen, Corp.
further represents to the Buyer that the Parent's, the Company's and Vasogen,
Corp.'s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by each of them and their representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Parent
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(including any within the meaning of Regulation D) in connection with the offer
or sale of the Securities in the United States or elsewhere or to any United
States citizen or resident. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by the Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it has
engaged XX Xxxxx & Co., LLC as placement agent (the "Agent") and any co-agents
that the Agent may engage pursuant to the Engagement Letter dated as of June 24,
2005 by and between the Agent and the Parent in connection with the sale of the
Securities. Other than the Agent, and the co-agents referred to above, if
applicable, neither the Parent nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Parent, its Subsidiaries, any
of their affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Parent or any of its Subsidiaries for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Parent are
listed or designated. None of the Parent, its Subsidiaries, their affiliates or
any Person acting on their behalf will take any action or steps
-10-
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Parent understands and acknowledges that the
number of Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Parent further acknowledges
that its obligation to issue Conversion Shares upon conversion, amortization
and/or redemption of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Transaction Documents and the Warrants is, in
each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Parent.
(j) Application of Takeover Protections; Rights Agreement. The Parent
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's Articles of Incorporation which is or
could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Parent's or
any of its Subsidiaries' issuance of the Securities and the Buyer's ownership of
the Securities. Except as set forth on Schedule 3(j), the Parent has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Shares or a change in control of the Company.
(k) SEC-CSA Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC and the
Canadian Securities Administrators (the "CSA") pursuant to the reporting
requirements of the 1934 Act and the Canadian Securities Laws (all of the
foregoing filed during the two-year period prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC-CSA Documents"). The Parent has delivered to the Buyer or their
respective representatives true, correct and complete copies of the SEC-CSA
Documents not available on the XXXXX and SEDAR systems, if any. As of their
respective dates, the SEC-CSA Documents complied in all material respects with
the requirements of the 1934 Act and the Canadian Securities Laws and the rules
and regulations of the SEC and the CSA promulgated thereunder applicable to the
SEC-CSA Documents, and none of the SEC-CSA Documents, at the time they were
filed with the SEC or the CSA as applicable, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Parent included in the SEC-CSA Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and the CSA with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles in Canada, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary
-11-
statements) and fairly present in all material respects the financial position
of the Parent as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(l) Absence of Certain Changes. Since November 30, 2004, there has been
no undisclosed material adverse change and no undisclosed material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole. Except as disclosed in Schedule 3(l), since
November 30, 2004, neither the Parent nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $500,000 outside of the ordinary course of business or
(iii) had capital expenditures outside of the ordinary course of business,
individually or in the aggregate, in excess of $500,000. Neither the Parent nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Parent, the Company or Vasogen, Corp. have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Except as disclosed in Schedule 3(l), the Parent,
individually, and the Parent and its respective Subsidiaries, taken as a whole,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), "Insolvent" means, with respect to
any Person (as defined in Section 3(s)), (i) the present fair saleable value of
such Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature, (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted or (v) such Person is "unable to pay its debts"
(as such term is defined in Section 214 of the Irish Companies Act, 1963 (as
amended by Section 2(3) of the Companies (Amendment) Act, 1990)).
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur with respect to the Parent or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Shares on the date
hereof and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Parent nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or their organizational charter or certificate of
incorporation or Bylaws, respectively. Neither the Parent nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Parent or its Subsidiaries,
except for which an acceptance or consent has been obtained, and neither the
Parent nor any of its Subsidiaries will conduct its business in violation of any
of the foregoing, except for possible violations that would not, individually or
in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Parent is not in violation of any of the rules,
-12-
regulations or requirements of either of the Principal Markets and has no
knowledge of any facts or circumstances that would reasonably be expected to
lead to delisting or suspension of the Common Shares by either of the Principal
Markets in the foreseeable future. Since December 17, 2003, (i) the Common
Shares have been designated for quotation on the Principal Markets, (ii) trading
in the Common Shares has not been suspended by the SEC, the CSA or either of the
Principal Markets and (iii) the Parent has received no communication, written or
oral, from the SEC, the CSA or either of the Principal Markets regarding the
suspension or delisting of the Common Shares from the Principal Markets. The
Parent and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Parent nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit. The Parent is a reporting issuer
not in default of any requirements under the applicable Canadian Securities Laws
and eligible to use the Short Form Prospectus System, established under National
Instrument 44-101 of the CSA (the "POP System").
(o) Foreign Corrupt Practices. Neither the Parent, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Parent or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Parent or any of its Subsidiaries (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Parent is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC-CSA
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Parent or any of its Subsidiaries is presently a
party to any transaction with the Parent or any of its Subsidiaries (other than
for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Parent or any of its Subsidiaries, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Parent consists of unlimited Common Shares, of which as of the
date hereof, 81,481,250
-13-
Common Shares are issued and outstanding, 3,997,631 Common Shares are issuable
upon the exercise of options outstanding granted under the Parent's stock option
plans, 985,237 Common Shares are issuable upon the exercise of warrants (other
than the Aggregate Warrants) outstanding, 72,856 Common Shares are issuable upon
the exercise of deferred share units outstanding granted under the Parent's
directors' deferred share unit and stock plan, 2,843,925 Common Shares are
reserved for issuance under the Parent's stock option plans, 177,144 Common
Shares are reserved for issuance under the Parent's directors' deferred share
unit and no Common Shares are reserved for issuance pursuant to securities
(other than the Aggregate Notes and the Aggregate Warrants) exercisable or
exchangeable for, or convertible into, Common Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Parent's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Parent and (ii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
set forth in the SEC-CSA Documents or as disclosed in Schedule 3(r), and other
than the Aggregate Notes and the Aggregate Warrants: (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any kind whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Parent or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Parent or any of its Subsidiaries is or may become
bound to issue additional share capital of the Parent or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Parent or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 3(s)) of the Parent or any of its
Subsidiaries or by which the Parent or any of its Subsidiaries is or may become
bound; (iii) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Parent or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which the Parent or any of its Subsidiaries is obligated to
register or qualify the sale of any of their securities under the 1933 Act or
under any applicable Canadian Securities Laws; (v) there are no outstanding
securities or instruments of the Parent or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Parent or any of its Subsidiaries is
or may become bound to redeem a security of the Parent or any of its
Subsidiaries; (vi) the Parent does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (vii)
the Parent and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC-CSA Documents but not so disclosed in the SEC-CSA
Documents, other than those incurred in the ordinary course of the Parent's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or could not reasonably be expected to have a Material Adverse
Effect. The Parent has made available to the Buyer true, correct and complete
copies of the Parent's and its Subsidiaries' Articles of Incorporation or other
organizational documents, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Parent's and its Subsidiaries' bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Shares and the material rights of the holders thereof in respect thereto.
-14-
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Parent nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Parent's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables and related accrued liabilities entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; references to Indebtedness of the
Parent or the Company shall mean Indebtedness on a consolidated basis; (y)
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by either of
the Principal Markets, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Parent
or any of its Subsidiaries, threatened against or affecting the Parent or any of
its Subsidiaries, the Common Shares or any of the Parent's or its Subsidiaries'
officers or
-15-
directors in their capacity as such which, individually or in the aggregate, if
determined adversely to the Parent or any of its Subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
(u) Insurance. The Parent and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Parent believes to be prudent and
customary in the businesses in which the Parent and its Subsidiaries are
engaged. Neither the Parent nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to insure its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or union
contract. The Parent and its Subsidiaries believe that their relations with
their employees are good. No executive officer of the Parent or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Parent
or any such Subsidiary that such officer intends to leave the Parent or any such
Subsidiary or otherwise terminate such officer's employment with the Parent or
any such Subsidiary. To the knowledge of the Parent and its Subsidiaries, no
executive officer of the Parent or any of its Subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Parent or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Parent and its Subsidiaries are in compliance with all
United States and Canadian federal, state, provincial, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Parent and its Subsidiaries have good and marketable
title to all real property and good and valid title to all personal property
owned by them which is material to the business of the Parent and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Parent and any of its Subsidiaries or as could not reasonably be expected to
have a Material Adverse Effect. Any real property and facilities held under
lease by the Parent or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made and proposed to be made of such property and buildings by the
Parent and its Subsidiaries or as could not reasonably be expected to have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Parent and its Subsidiaries own
or have licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, formulas, trade secrets, licenses,
approvals, governmental authorizations and other intellectual property rights
necessary to conduct their respective businesses as now conducted ("Intellectual
-16-
Property Rights"). Except as set forth in Schedule 3(x), none of the Parent's or
its Subsidiaries' Intellectual Property Rights have expired, terminated or have
been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. Neither the Parent nor any of its
Subsidiaries has any knowledge of any infringement by the Parent or any of its
Subsidiaries of Intellectual Property Rights of others, which infringement could
reasonably be expected to have a Material Adverse Effect. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Parent or
its Subsidiaries, being threatened against the Parent or any of its Subsidiaries
regarding any of their Intellectual Property Rights. Neither the Parent nor the
Company is aware of any facts or circumstances which might reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings. The Parent and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights, except for public disclosure in the U.S. Patent
and Trademark Office (and foreign equivalents).
(y) Environmental Laws. The Parent and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all United States, Irish and Canadian federal, state, provincial, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Parent
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Parent or such
Subsidiary.
(aa) Tax Status. Except as set forth in Schedule 3(aa), the Parent and
each of its Subsidiaries (i) has made or filed all material foreign, United
States and Canadian federal, state and provincial income and all other material
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the officers of the Parent nor the officers of its Subsidiaries know
of any reasonable basis for any such claim.
-17-
(bb) Internal Accounting and Disclosure Controls. The Parent and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Parent maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Parent in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Parent in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Parent's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Parent and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Parent in
its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Ranking of Notes. No Indebtedness of the Company is senior to the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise. No
Indebtedness of the Parent is senior to the Parent Guaranty whether with respect
of payment of redemptions, interest, damages or upon liquidation or dissolution
or otherwise. No Indebtedness of Vasogen, Corp. is senior to the Subsidiary
Guaranty whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
(ee) Shares Freely Tradeable. The Conversion Shares and the Initial
Warrant Shares will be freely tradeable under applicable Canadian laws on the
TSX from and after February 8, 2006, other than restrictions applicable in the
context of a "control distribution" as defined for the purposes of Canadian
Securities Laws.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the Buyer
hereunder will be, or will have been, fully paid or provided for by the Company
and/or the Parent (as the case may be), and all laws imposing such taxes will be
or will have been complied with.
(gg) Manipulation of Price. Neither the Parent nor the Company has, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Parent to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
-18-
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Parent.
(hh) Canadian Prospectus. The Parent (i) is qualified pursuant to
National Instrument 44-102, Alternative Forms of Prospectus ("NI44-102"), to
file a base shelf prospectus, and (ii) is entitled to include in such a
prospectus all of the Registrable Securities (as defined in the Registration
Rights Agreement).
(ii) Disclosure. Each of the Parent, the Company and Vasogen, Corp.
confirms that neither it nor any other Person acting on its behalf has provided
the Buyer or its agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. Each
of the Parent, the Company and Vasogen, Corp. understands and confirms that the
Buyer will rely on the foregoing representations in effecting transactions in
the Securities. All disclosure provided to the Buyer regarding the Parent and
its Subsidiaries, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Parent or its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Parent or its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Parent or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Parent but which
has not been so publicly announced or disclosed.
(jj) Vasogen, Corp. Vasogen, Corp. is not a party to any contract or
agreement material to the Parent and Vasogen, Corp., taken as a whole or
material to the Parent and its Subsidiaries, taken as a whole.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company and the Parent each agree to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company and
the Parent each shall, on or before the Closing Date, take such action as such
party shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Buyer at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date. Each of the Company and the Parent shall make all filings and
reports relating to the offer and sale of the Securities
-19-
required under applicable securities or "Blue Sky" laws of the states of the
United States and the applicable Canadian Securities Laws and applicable
requirements of the TSX following each such Closing Date.
(c) Reporting Status. Until the date on which the Buyer shall have sold
at least 90% of the Conversion Shares and Warrant Shares and none of the Notes
or Warrants is outstanding (the "Reporting Period"), the Parent shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
the CSA under applicable Canadian Securities Laws, and the Parent shall continue
to timely file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise no longer require such filings and will
remain in good standing under Canadian Securities Law and eligible to use the
POP System. The Buyer shall promptly notify the Parent of the occurrence of the
events causing the cessation of the Parent's obligations hereunder.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Notes and Initial Warrants for the repayment of intercompany debt to Parent
previously incurred for purposes of research and development activities and for
future research and development activities by the Company and/or the Parent as
well as for general corporate purposes. The Company will not use the proceeds
from the sale of the Notes and Initial Warrants for the (i) repayment of any
other outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Parent agrees to send the following to
the Buyer during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 40-F or Form 20-F, any Current Reports on Form 6-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information
made available or given to the shareholders of the Parent generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used herein "Business Day" means any day other than a Saturday,
Sunday, or other day on which commercial banks in New York City are authorized
or required by law to remain closed.
(f) Listing. The Parent shall promptly secure the listing of all of the
Conversion Shares and Initial Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Notes and the Warrants. The Parent shall maintain the
Common Shares' listing or authorization for quotation on each of the Principal
Markets. Neither the Parent nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Shares on either of the Principal Markets; provided, however, that
the Parent makes no covenant regarding the trading price of the Common Shares.
The Parent shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company shall
pay an expense allowance to Kings Road Investments Ltd. (a Buyer) or its
designee(s) (in addition to
-20-
any other expense amounts paid to the Buyer prior to the date of this Agreement)
to cover expenses reasonably incurred by Kings Road Investments Ltd. or any
professionals engaged by Kings Road Investments Ltd. in relation to due
diligence and investment documentation, in an amount not to exceed $70,000 (in
addition to any other expense amounts paid to the Buyer prior to the date of
this Agreement), which amount shall be withheld by Kings Road Investments Ltd.
from its Purchase Price at the Closing in satisfaction of the Company's payment
obligation. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or broker's commissions (other than for
Persons engaged by the Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and neither the Buyer nor its successor or assign thereof
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Buyer.
(i) Disclosure of Transactions and Other Material Information. On the
first Business Day following the date of this Agreement, the Parent shall file a
Current Report on Form 6-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (but excluding all schedules to this Agreement, assuming no material
non-public information is contained in such schedules), the form of each of the
Notes, the Warrants, the Registration Rights Agreement and the Guarantees) as
exhibits to such filing (including all attachments, the "6-K Filing") and a
material change report on Form 51-102F3 in accordance with National Instrument
51-102 of the CSA with respect thereto (the "Material Change Report"). Upon the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA, the Buyer shall not be in possession of any material, nonpublic information
received from the Parent or any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing and the Material Change Report. The Parent shall not, and shall cause
each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Buyer with any material, nonpublic
information regarding the Parent or any of its Subsidiaries from and after the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA without the express written consent of the Buyer. If, after the deadline for
the 6-K Filing set forth above, the Buyer has, or reasonably believes it has,
received any such material, nonpublic information regarding the Parent or any of
its Subsidiaries, it shall provide the Parent with written notice thereof. The
Parent shall, within five (5) Trading Days of receipt of such notice except
pursuant to Allowable
-21-
Grace Periods under the Registration Rights Agreement, make public disclosure of
such material, nonpublic information. In the event of a breach of the foregoing
covenant by the Parent, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Parent, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Buyer shall not have
any liability to the Parent, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Parent nor the Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, that the Parent shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 6-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Buyer shall be consulted by the Parent in connection with any such press release
or other public disclosure prior to its release). Without the prior written
consent of the Buyer, which shall be deemed to have been received in respect of
the filing of the Transaction Documents with the 6-K Filing and the filing of
the Material Change Report, neither the Parent nor any of its Subsidiaries shall
disclose the name of the Buyer in any filing, announcement, release or otherwise
other than in a prospectus for the resale of the Conversion Shares, to which
consent is deemed given hereby or as otherwise required by law to specifically
name the Buyer.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, neither the Company nor the Parent shall, directly or
indirectly, redeem, repurchase, or otherwise acquire for value or declare or pay
any dividend or distribution on, the Common Shares without the prior express
written consent of the holders of Notes representing not less than a majority of
the aggregate principal amount of the then outstanding Notes. Notwithstanding
the foregoing, nothing herein shall prevent the Company or the Parent from
satisfying its obligations under the Aggregate Notes and the Aggregate Warrants.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long
as the Buyer or any Other Buyer beneficially owns any Notes or Other Notes, as
applicable, the Company shall not issue any Notes or Other Notes other than to
the Buyers as contemplated by this Agreement or the Other Purchase Agreements,
as applicable, and neither the Company nor the Parent shall issue any other
securities that would cause a breach or default under the Notes or Other Notes,
as applicable, while such Notes or Other Notes are outstanding. Until the
earlier of three (3) years from the Closing and the date the Buyer or any Other
Buyer no longer beneficially own any Securities, neither the Company nor the
Parent shall, in any manner, issue or sell any rights, warrants or options
(other than the Aggregate Notes and Aggregate Warrants) (i) to subscribe for or
purchase Common Shares or (ii) which are directly or indirectly convertible into
or exchangeable or exercisable for Common Shares, in each of cases (i) and (ii),
at a price which varies or may vary with the market price of the Common Shares,
including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price. Until the Effectiveness Date (as defined
in the Registration Rights Agreement), neither the Company nor the Parent shall,
in any manner, enter into or effect any Dilutive Issuance (as defined in the
-22-
Notes).
(l) Corporate Existence. So long as the Buyer beneficially owns any
Notes or Warrants, neither the Company nor the Parent shall be party to any
Fundamental Transaction (as defined in the Notes) unless the Company and the
Parent, as applicable, is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Parent shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the Closing Date, the maximum number of shares of Common Shares issuable upon
conversion, amortization and/or redemption of all of the Notes and shares of
Common Shares issuable upon exercise of the Warrants.
(n) Conduct of Business. The business of the Company, the Parent and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than the Aggregate Notes, Aggregate Warrants or Options)
convertible into or exercisable or exchangeable for shares of Common
Shares.
(2) "Options" means any rights, warrants (other than the
Aggregate Warrants) or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.
(3) "Common Share Equivalents" means, collectively, Options and
Convertible Securities.
(ii) As long as 15% of the original principal amount of the Notes
issued at the Closing are outstanding, from the Closing Date until the eighteen
month anniversary of the Closing Date, the Parent will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Shares or Common Share Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement")
unless the Parent shall have first complied with this Section 4(o)(ii).
(1) The Parent shall deliver to the Buyer by facsimile a written
notice (the "Offer Notice") of any proposed or intended issuance or sale
or exchange
-23-
(the "Offer") of the securities being offered (the "Offered Securities")
in a Subsequent Placement within one Business Day of the determination
of the terms of such Subsequent Placement, which Offer Notice shall (x)
identify and describe the Offered Securities, (y) describe the price
range and other terms upon which they are expected to be issued, sold or
exchanged, and the number or amount of the Offered Securities expected
to be issued, sold or exchanged and (z) offer to issue and sell to or
exchange with the Buyer (which offer being non-transferable to any
successor to or transferee of the Buyer) a pro rata portion of 35% of
the Offered Securities allocated among the Buyer and the Other Buyers
(collectively, the "Buyers") including (a) those based on such Person's
pro rata portion of the aggregate principal amount of Notes purchased
hereunder and pursuant to the Other Purchase Agreements (the "Basic
Amount"), and (b) if the Buyer elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic
Amounts of Other Buyers as the Buyer shall indicate it will purchase or
acquire should the Other Buyers subscribe for less than their Basic
Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, the Buyer must
deliver a written notice to the Company prior to the end of the first
(1st) full Business Day after the Buyer's receipt of the Offer Notice
(for purposes of this Section 4(o)(ii)(2), notwithstanding the
provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received
such Offer Notice (the "Offer Period"), setting forth the portion of the
Buyer's Basic Amount that the Buyer elects to purchase and, if the Buyer
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that the Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be deemed to have elected to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such
Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Parent to the extent it deems reasonably necessary.
(3) The Parent shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only upon terms and conditions (including, without limitation, unit
prices and interest rates within the range specified in the Offer) that
are not more favorable to the acquiring person or persons or less
favorable to the Parent than those set forth in the Offer Notice.
(4) In the event the Parent shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in
-24-
Section 4(o)(ii)(3) above), then each Buyer may, at its sole option and
in its sole discretion, subject to the following sentence, reduce the
number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount
of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(o)(ii)(2) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Parent
actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section
4(o)(ii)(3) above prior to such reduction) and (ii) the denominator of
which shall be the original amount of the Offered Securities. In the
event that the Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Parent may not
issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(ii)(1) above.
Provided that the Buyer has been advised by the Parent electronically or
by telephone (with verbal confirmation of receipt) by 5:00pm New York
Time, the Buyer must make its election to reduce referred to above no
later than 8:00am New York Time the following Business Day.
(5) Upon the closing of the issuance, sale or exchange of all or
less than all of the Offered Securities, the Buyers shall acquire from
the Parent, and the Parent shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(o)(ii)(4) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all cases
to (i) the preparation, execution and delivery by the Parent and the
Buyers of a purchase agreement relating to such Offered Securities
substantially in the form negotiated with the purchasers of the Offered
Securities other than the Buyers but reasonably satisfactory in form and
substance to the Buyers and their respective counsel, (ii) the Buyers'
satisfaction, in their sole discretion, with both (I) the final price
and (II) the substantive final terms and/or conditions that differ from
those contained in the Offer Notice, and (iii) the Buyers' reasonable
satisfaction with the identity of the other persons or entities to which
the Offered Securities will be sold.
(6) Any Offered Securities not acquired by the Buyers or other
Persons in accordance with this Section 4(o)(ii) may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(iii) The restrictions contained in subsection (ii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes or securities issued in connection with (A) any public
offering or (B) any offering of securities convertible into Common Shares
pursuant to Rule 144A under the 1933 Act).
(p) Holding Period. For the purposes of Rule 144 and applicable
Canadian Securities Laws, the Company acknowledges that the holding period of
the Conversion Shares may be tacked onto the holding period of the Notes and the
Parent and the Company agree not to take a position contrary to this Section
4(p).
-25-
(q) Letter of Credit.
(i) On or prior to the Closing Date, the Company shall obtain an
irrevocable letter of credit (the "Letter of Credit"), in the amount of
$10,000,000 issued in favor of Kings Road Investments Ltd. (the "LC Agent") by a
bank acceptable to such LC Agent (the "Letter of Credit Bank") and in form and
substance acceptable to such LC Agent. Subject to the last three sentences of
this Section (q)(i), the Letter of Credit shall expire not earlier than 91 days
after the Maturity Date of the Notes (the "LC Expiration Date"). Upon the
occurrence and during the continuance of an Event of Default under (and as
defined in) any of the Aggregate Notes, the LC Agent shall be entitled to draw
under the Letter of Credit for the full Letter of Credit Amount (as defined in
the Aggregate Notes) then available thereunder, it being understood that the LC
Agent shall act for the benefit of the Buyers on a pro rata basis based on the
principal amount of the Aggregate Notes held by each of the Buyers and hold such
amount as collateral security for the obligations under the Aggregate Notes for
the benefit of the Buyers. The Company shall obtain such renewals, extensions or
replacements of the Letter of Credit as necessary to ensure that the Letter of
Credit shall not expire prior to the LC Expiration Date (unless the Letter of
Credit shall have been reduced to zero in accordance with the terms contained in
this Section 4(q) prior to such date). If, at any time, the Company cannot
obtain a renewal, extension or replacement of the Letter of Credit such that the
Letter of Credit will expire prior to the LC Expiration Date (a "Withdrawal
Event"), the Company and the Letter of Credit Bank shall each give the LC Agent
written notice of the occurrence of a Withdrawal Event at least forty-five (45)
days prior to the then current expiration date of the Letter of Credit.
Following a Withdrawal Event, the LC Agent shall be entitled to draw down the
Letter of Credit Amount in its entirety (whether or not an Event of Default
shall have occurred or be continuing under any of the Notes) and hold such
amount as collateral security for the obligations under the Notes for the
benefit of the Buyers.
(ii) If more than $23 million of the Aggregate Notes are converted,
redeemed or amortized pursuant to the terms of the Aggregate Notes, the Company
shall promptly deliver a notice to the LC Agent (the "LC Reduction Notice"),
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal one-half of
the difference between $17 million and the aggregate principal amount of the
Aggregate Notes then outstanding. After delivery of the initial LC Reduction
Notice, if the outstanding principal amount of the Aggregate Notes has been
reduced by $2 million or more from the time of the prior LC Reduction Notice,
the Company may deliver a subsequent LC Reduction Notice to the LC Agent
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal the difference
between (A) one-half of the difference between (i) $17 million and (ii) the
aggregate principal amount of the Aggregate Notes then outstanding and (B) the
aggregate amount of any prior reductions of the Letter of Credit Amount. Within
10 days of the receipt of any such LC Reduction Notice, the LC Agent shall issue
a written instruction to the Letter of Credit Bank to request the reduction of
the Letter of Credit Amount to the Company as set forth in the LC Reduction
Notice.
-26-
(iii) If the Company obtains FDA Approval (as defined in the Notes),
the Company shall promptly deliver a written notice to the LC Agent (the "Letter
of Credit Notice"), certifying as to the occurrence of such event and a copy of
such FDA Approval. Within 10 days of the receipt of the Letter of Credit Notice,
the LC Agent shall issue a written instruction to the Letter of Credit Bank to
request the release and return of the Letter of Credit Amount to the Company.
(iv) Notwithstanding the foregoing, if the LC Agent reasonably
disagrees with the contents of either a LC Reduction Notice or a Letter of
Credit Notice or the Company disagrees with any action taken or omitted to be
taken by the LC Agent, such party shall use the dispute resolution procedures
contained in Section 25 of the Notes.
(v) Kings Road Investments Ltd. is xxxxxx appointed as the LC Agent
for the Buyer hereunder, and the Buyer hereby authorizes the LC Agent (and its
officers, directors, employees and agents) to take any and all such actions on
behalf of the Buyer with respect to the Letter of Credit in accordance with the
terms of this Agreement. The LC Agent shall not have, by reason hereof or any of
the other Transaction Documents, a fiduciary relationship in respect of the
Buyer. Neither the LC Agent nor any of its officers, directors, employees and
agents shall have any liability to the Buyer for any action taken or omitted to
be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and the Buyer agrees to defend, protect,
indemnify and hold harmless the LC Agent and all of its officers, directors,
employees and agents (collectively, the "Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) (the "Losses") incurred by such Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of the LC Agent
pursuant hereto; provided, however, that the Buyer shall not be required to
indemnify the Indemnitees to the extent any such Losses are the result of the LC
Agent's fraud or willful misconduct.
(r) Trading Restrictions. Neither the Buyer, nor any affiliate of the
Buyer that is controlled by the Buyer or is otherwise aware of this restriction,
may purchase, sell or enter into any put option, short position or similar
arrangement with respect to securities of the Parent that violates Current
Securities Laws or otherwise trade in the securities of the Parent in violation
of applicable Current Securities Laws. In addition, during each Company
Conversion Measuring Period (as defined in the Notes) neither the Buyer, nor any
affiliate of the Buyer that is controlled by the Buyer or is otherwise aware of
this restriction, may engage in a Restricted Activity other than the sale of
Common Shares received upon a Company Conversion (as defined in the Notes), upon
a conversion, amortization or redemption of Notes pursuant to Section 3 of the
Notes, upon exercise of any Warrants, or the transfer of any Notes or Warrants
as permitted by their terms. "Restricted Activity" means, (a) any Acquisition or
Disposition, in open market transactions of (i) any Common Shares or (ii) any
securities convertible into or exchangeable for or derivative of Common Shares
and (b) any other action taken intentionally for the purpose of manipulating the
price of Common Shares. "Acquisition" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "Disposition"
means any direct or indirect voluntary sale, or monetization, including through
a Subsidiary or by means of an equity offering by any
-27-
such Subsidiary, but shall not include, any of the actions contemplated by
Section 4(h) or any disposition thereunder. "Current Securities Laws" means the
rules and regulations, existing on the date hereof, of the 1933 Act, the 1934
Act and the Canadian Securities Laws, in each case as are set forth in currently
disseminated interpretations by the SEC or the CSA, as applicable, in writing,
through rules, regulations, releases, no-action letters or published telephone
interpretations.
(s) Acknowledgement Regarding Buyer's Trading Activity. Subject to
Section 4(r) of this Agreement, it is understood and agreed by the Parent and
the Company (i) that, to the knowledge of the Parent, the Buyer has not been
asked to agree, nor has the Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Parent, or "derivative" securities based on
securities issued by the Parent or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the Buyer,
including, without limitation, Short Sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Parent's publicly-traded securities;
(iii) that the Buyer, and counter parties in "derivative" transactions to which
the Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Shares or an economically comparable position; and (iv)
that, to the knowledge of the Parent, the Buyer shall not be deemed to have any
affiliation with or control over any arm's length counter party in any
"derivative" transaction. Subject to Section 4(r) of this Agreement and
notwithstanding any other provisions of this Agreement and the provisions of the
Transaction Documents, the Parent further understands, acknowledges and agrees
that (a) the Buyer may engage in hedging and/or trading activities at any time
during the period that the Securities are outstanding, including, without
limitation, during the periods that the number and/or value of the Conversion
Shares deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities (if any) could reduce the value of the
existing stockholders' equity interests in the Parent both at and after the time
that the hedging and/or trading activities are being conducted. The Parent and
the Company acknowledge that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.
(t) Subsidiaries; Guaranty. To the extent any Subsidiary of the Parent
that comes into existence after the date hereof has assets transferred into it
having a fair market value of $1,000,000, individually, or $5,000,000 in the
aggregate, each such Subsidiary shall promptly enter into a guarantee
substantially in the form attached hereto as Exhibit D-2.
(u) Amendment to Other Security Purchase Agreements. Neither the
Company nor the Parent shall amend any of the Other Purchase Agreements without
first offering the same terms to the Buyer hereunder.
(v) No Conflicts with Irish Law. The Parent and the Company covenant
and agree that:
(i) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Section 60 nor Section 286 of the Irish Companies Act, 1963.
-28-
(ii) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Part XI of the Irish Companies Act, 1990.
(w) Change to DTC Brokerage Account Information. If the Buyer seeks at
any time to make any changes to the DTC brokerage account information which the
Buyer has provided pursuant to Section 6(d) hereof, the Buyer shall deliver to
the Parent a new form, substantially in the form of Exhibit E, setting forth
revised DTC brokerage account information. The Parent shall be obligated to use,
beginning no later than five (5) Business Days after receipt thereof, such
revised DTC brokerage account information for any delivery of Common Shares
required under the Transaction Documents.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company and the Parent shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to each holder of Securities), a register for the Notes
and the Warrants, as applicable, in which the Company and the Parent shall
record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company and the Parent shall keep the register open and available at
all times during business hours for inspection by the Buyer or its legal
representatives.
(b) Transfer Agent Instructions. The Parent shall issue treasury
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion, amortization or redemption of the Notes or exercise of the
Warrants in such amounts as specified from time to time by the Buyer to the
Parent or by the Parent, as the case may be, upon conversion, amortization
and/or redemption of the Notes or exercise of the Warrants substantially in the
form attached as Exhibit I to the Notes and Warrants, respectively (the
"Treasury Instructions"). The Parent warrants that no instruction other than the
Treasury Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Parent
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Parent and the Company as and to
the extent provided in this Agreement and the other Transaction Documents. If
the Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f) and the other provisions of the Transaction Documents, subject
to Section 9(s), the Parent and the Company shall permit the transfer and, in
the case of a transfer of Common Shares, the Parent shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by the Buyer to effect such sale, transfer or assignment. In the event
that such sale, assignment or transfer involves Conversion Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 or Rule 904, subject to Section 9(s),
-29-
the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. Each of the
Parent and the Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer. Accordingly, the Parent and
the Company acknowledge that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Parent or the Company of the provisions of this
Section 5(b), that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S AND THE PARENT'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the obligation of the Parent to issue the Initial Warrants to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's and the Parent's sole benefit and may be waived by the Company and the
Parent at any time in their sole discretion by providing the Buyer with prior
written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company and the Parent.
(b) The Buyer and each other Buyer shall have delivered to the Company
the Purchase Price (less, in the case of Kings Road Investments Ltd., the
amounts withheld pursuant to Section 4(g)) for the Notes and the Other Notes and
the Warrants and the Other Warrants being obtained by the Buyers at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
(d) The Buyer shall have completed and delivered to the Parent the DTC
brokerage account information form with respect to the Buyer in substantially
the form of Exhibit E attached hereto.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Notes and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer's sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
-30-
(a) The Company shall have duly executed and delivered to the Buyer:
(A) the Notes (in such principal amounts as the Buyer shall request) being
obtained by the Buyer at the Closing pursuant to this Agreement and (B) to the
extent it is a party thereto, each of the other Transaction Documents.
(b) The Parent shall have duly executed and delivered to the Buyer: (A)
the Warrants (in such allocations as the Buyer shall request) being received by
the Buyer at the Closing pursuant to this Agreement; (B) the Parent Guaranty,
and (C) to the extent it is a party thereto, each of the other Transaction
Documents.
(c) Vasogen, Corp. shall have duly executed and delivered to the Buyer:
(A) the Subsidiary Guaranty, and (B) to the extent it is a party thereto, each
of the other Transaction Documents.
(d) The Buyer shall have received the opinion of Lang Xxxxxxxx LLP, the
Parent's outside Canadian counsel, dated as of the Closing Date, in
substantially the form of Exhibit F-1 attached hereto.
(e) The Buyer shall have received the opinion of Xxxxxx X. Xxxxxxx
Solicitors, the Company's outside Irish counsel, dated as of the Closing Date,
in substantially the form of Exhibit F-2 attached hereto.
(f) The Buyer shall have received the opinion of Xxxx, Xxxxx, Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, the Company's outside United States counsel, dated as of
the Closing Date, in substantially the form of Exhibit F-3 attached hereto.
(g) The Parent shall have delivered to the Buyer a certificate of
compliance with the CBCA of the Parent, and the Company shall have delivered to
the Buyer a certificate evidencing the formation and status of the Company in
the Company's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(h) The Parent shall have delivered to the Buyer a certificate
evidencing the Parent's qualification as a foreign corporation (if applicable)
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Parent conducts business and such qualification
is required, as of a date within 10 days of the Closing Date. The Company shall
have delivered to the Buyer a Letter of Status from the Companies Registration
Office in Dublin, Ireland.
(i) The Parent shall have delivered to the Buyer a certified copy of
the Articles of Incorporation of the Parent, and the Company shall have
delivered to the Buyer a certified copy of its Memorandum and Articles of
Association of the Company, in each case as certified by the Secretary of State
(or equivalent) in the applicable jurisdiction of incorporation within ten (10)
days of the Closing Date.
(j) The Parent shall have delivered to the Buyer a certificate,
executed by the Secretary of the Parent and the Company shall have delivered to
the Buyer a certificate, executed by a Director of the Company, in each case
dated as of the Closing Date, as to (i) the resolutions
-31-
consistent with Section 3(b) as adopted by such entity's board of directors in a
form reasonably acceptable to the Buyer, (ii) the Articles of Incorporation, as
in effect at the Closing, of each such entity and (iii) the Bylaws, as in effect
at the Closing, of each such entity in the form attached hereto as Exhibit G.
(k) The representations and warranties of the Company and the Parent
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
and the Parent shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
and/or the Parent, as applicable at or prior to the Closing Date.
(l) The Parent shall have delivered to the Buyer a letter from the
Parent's transfer agent certifying the number of shares of Common Shares
outstanding as of a date within five days of the Closing Date.
(m) The Common Shares (i) shall be designated for quotation or listed
on each of the Principal Markets and (ii) shall not have been suspended, as of
the Closing Date, by the SEC, the CSA or either of the Principal Markets from
trading on the Principal Markets nor shall suspension by the SEC, the CSA or
either of the Principal Markets have been threatened, as of the Closing Date,
either (A) in writing by the SEC, the CSA or either of the Principal Markets or
(B) by falling below the minimum listing maintenance requirements of either of
the Principal Markets.
(n) The Company and the Parent shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(o) There shall be no Indebtedness of the Parent or any of its
Subsidiaries other than Indebtedness which is pari passu with or subordinate to
the Notes and the Guarantees, as applicable, so long as such Indebtedness does
not provide at any time for the payment, prepayment, repayment, redemption,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until 91 days after the Maturity Date (as defined in the Notes)
or later; provided, that (I) the Company, the Parent or Vasogen, Corp. may incur
Indebtedness that is secured by assets purchased with the proceeds of such
Indebtedness, (II) the Parent, the Company or Vasogen, Corp. may incur purchase
money Indebtedness for the purpose of financing the acquisition of equipment to
be acquired or held by the Company, the Parent or Vasogen, Corp. in the ordinary
course of business, provided, that the principal amount of such Indebtedness
shall not materially exceed 80% of the cost of the property so acquired, and
(III) the Company, the Parent and/or Vasogen, Corp. may incur Indebtedness owed
to the Parent or any of its Subsidiaries.
(p) The approval of each of the Principal Markets for the issuance of
the Securities contemplated hereby and conditional listing of the Conversion
Shares and the Warrant Shares shall have been obtained.
-32-
(q) The Company and the Parent shall have delivered to the Buyer such
other documents relating to the transactions contemplated by this Agreement as
the Buyer or its counsel may reasonably request.
(r) The Company shall have obtained and delivered the Letter of Credit
pursuant to the terms of Section 4(q) hereof.
(s) The Company and the Parent shall have entered into one or more
security purchase agreements (the "Other Purchase Agreements") relating to the
sale and purchase of securities on substantially identical terms to this
Agreement, that provide for the aggregate sale (when combined with this
Agreement) of $40,000,000 in aggregate principal amount of Aggregate Notes and
Aggregate Warrants.
8. TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) Business Days from the date hereof due to the Company's, the Parent's or
the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 8 due to any breach of
a representation, warranty, covenant or agreement by the Company or the Parent,
the Company shall remain obligated to reimburse the non-breaching Buyer for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company, the Parent and Vasogen, Corp. have appointed CT
Corporation System, with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as their agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
-33-
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyer, the Parent, the Company,
Vasogen, Corp., their affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parent, the Company, Vasogen, Corp. or the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Parent, the Company, Vasogen, Corp. and the
holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on the Buyer and
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
the Buyer relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
-34-
If to the Company:
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Clare
Ireland
Telephone: 000-00-000-000
Facsimile: 353-1-886-9359
Attention: Mr. Xxxxx Xxxxxxx, Director
With a copy (for informational purposes only) to:
Vasogen Inc.
Vasogen, Corp.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer: xxxxxxxx@xxxxxxx.xxx;
and
Vice President, Corporate & Legal Affairs:
xxxxxxx@xxxxxxx.xxx;
and for purposes of the Note, the Controller:
xxxxx@xxxxxxx.xxx
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
-35-
If to the Parent or Vasogen, Corp.:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer; and
Vice President, Corporate & Legal Affairs
With a copy (for informational purposes only) to:
the Company
(at the address listed above)
Lang Xxxxxxxx LLP
(at the address listed above)
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
(at the address listed above)
If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
If to the Buyer, to its address and facsimile number set forth on the Buyer
Schedule, with copies to the Buyer's representatives as set forth on the Buyer
Schedule,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
-36-
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. None of the Company, the
Parent or Vasogen, Corp. shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate principal amount of Notes issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). The Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by the Buyer of the Notes and Warrants in private transactions in
accordance with the terms thereof, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Parent, the Company, Vasogen, Corp. and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5 and 9 shall survive the Closing.
(j) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars ("US Dollars"). All amounts
owing under this Agreement or any Transaction Document shall be paid in US
Dollars. All amounts denominated in other currencies shall be converted in the
US Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Indemnification. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's and the Parent's other obligations under
the Transaction Documents, the Company
-37-
and the Parent, jointly and severally, shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Securities (other than Persons
holding only Securities purchased in open market transactions) and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any material inaccuracy in any representation or warranty made by the Company,
the Parent or Vasogen, Corp. in the Transaction Documents or any inaccuracy in
any representation or warranty made by the Company, the Parent or Vasogen, Corp.
in the Transaction Documents that is qualified by materiality or Material
Adverse Effect, (b) any breach in any material respect of any covenant,
agreement or obligation of the Company, the Parent or Vasogen, Corp. contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company, the Parent or Vasogen,
Corp.) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of the Buyer or holder of the Securities as an investor in the Company or
the Parent pursuant to the transactions contemplated by the Transaction
Documents; provided, that indemnification pursuant to this clause (iii) shall
not be available to the extent arising primarily from the Buyer's fraud, gross
negligence or willful misconduct. To the extent that the foregoing undertaking
by the Company or the Parent may be unenforceable for any reason, the Company
and the Parent shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. The Buyer and each holder of the Securities (other than
Persons holding only Securities purchased in open market transactions) shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company, the Parent and Vasogen, Corp. recognize that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to
the Buyer. The Company, the Parent and Vasogen, Corp. therefore agree that the
Buyer shall be entitled to seek temporary and permanent injunctive relief in any
such case without the
-38-
necessity of proving actual damages and without posting a bond or other
security.
(o) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Buyer exercises a right, election, demand or
option under a Transaction Document and the Company, the Parent or Vasogen,
Corp. does not timely perform its related obligations within the periods therein
provided, then the Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, the Parent or Vasogen, Corp.,
as applicable, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
(p) Payment Set Aside. To the extent that the Company, the Parent or
Vasogen, Corp. makes a payment or payments to the Buyer or pursuant to any of
the other Transaction Documents or the Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
the Parent, Vasogen, Corp., a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, United States or
Canadian federal, state or provincial law, foreign law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Independent Nature of Xxxxx's Obligations and Rights. The
obligations of the Buyer under any Transaction Document are several and not
joint with the obligations of any Other Buyer, under the Other Purchase
Agreements, and the Buyer shall not be responsible in any way for the
performance of the obligations of any Other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by the Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.
(r) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against
the Company, the Parent or Vasogen, Corp. in any court in any jurisdiction it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(r) referred to as the "Judgment Currency") an
amount due in US Dollars under this Agreement,
-39-
the conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date: or
(2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section being
hereinafter referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(r)(i)(2) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company, the Parent or Vasogen, Corp.
under this provision shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of this
Agreement.
(s) Opinion to Transfer Agent. Assuming that the Buyer (i) is a
Qualified Institutional Buyer (as such term is defined in Rule 144A under the
1933 Act) (a "QIB") as of the date hereof, (ii) will offer and sell any Common
Shares the Buyer receives upon any conversion, amortization and/or redemption of
a Note (including, without limitation, pursuant to Section 3, 5, 8, 9 or 10 of
the Note) or any exercise of a warrant (including, without limitation, pursuant
to Section 1 of the Warrant) pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act (any such method of offer
and sale, an "Approved Method"), (iii) for purposes of an offer or sale under
Rule 904 under the 1933 Act, is not an affiliate (as such term is defined in
Rule 144 under the 1933 Act) (an "Affiliate") of the Parent as of the date
hereof and (iv) will promptly notify the Parent and the Company if the Buyer
ceases to be a QIB, chooses to offer or sell such Common Shares pursuant to a
method other than an Approved Method, or becomes an Affiliate of the Parent (any
such notice, a "Notice"), then the Parent will direct Xxxx, Xxxxx, Rifkind,
Xxxxxxx & Xxxxxxxx LLP to deliver a standing opinion to the transfer agent in
substantially the form attached to the Transfer Agent Instructions on the
Effectiveness Date. The Buyer covenants that it will comply with clause (iv)
above and represents and warrants that the assumptions set forth in clauses (i)
through (iii) above are true and correct with respect to the Buyer as of the
date hereof, and will continue to be true and correct with respect to the Buyer,
except as set forth in a Notice.
[Signature Page Follows]
-40-
IN WITNESS WHEREOF, the Buyer, the Company, the Parent and Vasogen,
Corp. have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
SIGNED, SEALED AND DELIVERED BY XXXXX
XXXXXXX AS A DEED FOR AND ON BEHALF OF
VASOGEN IRELAND LIMITED PURSUANT TO A POWER
OF ATTORNEY ----------------------------------
Signature of Witness:
----------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
Occupation:
--------------------------------------
[Signature Page to Securities Purchase Agreement]
VASOGEN INC.
By:
------------------------------------
Name:
Title:
VASOGEN, CORP.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
KINGS ROAD INVESTMENTS LTD.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
BUYER SCHEDULE
(1) (2) (3) (4) (5) (6)
Aggregate
Principal Number of
Address and Amount of Warrant Legal Representative's Address
Buyer Facsimile Number Notes Shares Purchase Price and Facsimile Number
------------------------------------------------------------------------------------------------------------------------------------
Kings Road c/o Polygon Investment Partners $16,500,000 1,375,000 $16,500,000 Xxxxxxx Xxxx & Xxxxx LLP
Investments Ltd LP598 Madison Avenue, 14th Floor 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X.X. Xxxxxxxxx and Attention: Xxxxxxx Xxxxx, Esq.
Xxxxxxx X. Xxxxx Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of Parent Guaranty
Exhibit D-2 Form of Subsidiary Guaranty
Exhibit E Form of DTC Brokerage Account Information Form
Exhibit F-1 Form of Outside Canadian Counsel Opinion
Exhibit F-2 Form of Outside Irish Counsel Opinion
Exhibit F-3 Form of Outside United States Counsel Opinion
Exhibit G Form of Secretary's Certificate
SCHEDULES
---------
Schedule 2(b) Accredited Investor Certificate
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(j) Rights Plan
Schedule 3(l) Absence of Certain Changes
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(aa) Tax Status
EXHIBIT E [To be attached to the SPA]
[NAME OF XXXXX]
DTC BROKERAGE ACCOUNT INFORMATION FORM
* * *
Reference is made to the Securities Purchase Agreement, dated as of October ___,
2005 (the "Securities Purchase Agreement"), among Vasogen Inc., a Canadian
corporation (the "Parent"), Vasogen Ireland Limited, a company incorporated
under the laws of the Republic of Ireland, Vasogen, Corp., a Delaware
corporation, and the [buyer][buyers] listed on the Buyer Schedule attached
thereto. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Securities Purchase Agreement.
The undersigned Buyer hereby informs the Parent that any Common Shares to be
issued to the Buyer upon conversion, amortization and/or redemption of the Notes
or upon exercise of the Warrants, as the case may be, should be issued and
deposited into the following DTC brokerage account of the Buyer:
DTC Broker/ Participant Number:
--------------------------------
Brokerage account number (optional):
--------------------------------
Broker Name:
--------------------------------
Broker Address:
--------------------------------
--------------------------------
Broker Telephone Number:
--------------------------------
Broker Facsimile Number:
--------------------------------
Broker e-mail address:
--------------------------------
The Buyer hereby covenants that it will not make any changes to the DTC
brokerage account information set forth above unless the Buyer shall have first
provided the Parent at least ten (10) Trading Days' notice of any such change by
delivering to the Parent a new form substantially in the form of Exhibit E to
the Securities Purchase Agreement in accordance with Section 9(f) of the
Securities Purchase Agreement.
[NAME OF XXXXX]
By:
--------------------------------
Name:
Title:
Lang Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents
BCE Place, 000 Xxx Xxxxxx, Xxxxx 0000
P.O. Box 747
Toronto ON M5J 2T7
Canada
Telephone: 000-000-0000
Facsimile: 000-000-0000
October 7, 2005
Kings Road Investments Ltd.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxx / Xxxxxxx Xxxxx
XX Xxxxx & Co., LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Attention: Xxxxx Xxxxx
Dear Sirs:
Re: Vasogen Inc. - Securities Purchase Agreement dated October 7, 2005
We have acted as Canadian counsel to Vasogen Inc. (the "Company"), a
corporation continued under the laws of Canada, in connection with the issue and
sale, pursuant to the securities purchase agreement (the "Securities Purchase
Agreement") dated October 7, 2005 among Vasogen Ireland Limited, the Company and
Kings Road Investments Ltd. (the "purchaser"), of (i) US$16,500,000 principal
amount of notes of Vasogen Ireland Limited (the "Notes") which are convertible
into, redeemable for and repayable in, common shares in the capital of the
Company in accordance with the terms thereof (each, an "Underlying Note Common
Share") and (ii) 1,375,000 warrants of the Company ("Warrants"), each Warrant
entitling the holder to acquire one common share in the capital of the Company
(the "Underlying Warrant Common Shares") in accordance with the terms set out
therein. The Underlying Note Common Shares and Underlying Warrant Common Shares
are herein sometimes collectively referred to as "Underlying Common Shares".
This opinion is delivered to you pursuant to subsection 7(d) of the Securities
Purchase Agreement. Capitalized terms used herein without definition have the
meanings specified therefor in the Securities Purchase Agreement.
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 2
As such counsel, and together with Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP, special United States counsel to the Company, Goodmans LLP,
special Canadian counsel to the purchaser, and Xxxxxxx Xxxx & Xxxxx, special
United States counsel to the purchaser, we have reviewed or participated in the
preparation of the following documents:
(a) the Securities Purchase Agreement dated October 7 2005 executed by
the purchaser, Vasogen Ireland Limited, the Company and Vasogen,
Corp.;
(b) the guaranty (the "Guaranty") dated October 7, 2005 executed by the
Company;
(c) the registration rights agreement (the "Registration Rights
Agreement") dated October 7, 2005 executed by the purchaser and the
Company;
(d) the Notes dated October 7, 2005 issued to the purchaser executed by
Vasogen Ireland Limited and acknowledged and agreed to by the
Company; and
(e) the instructions (the "Instructions") dated October 7, 2005 to the
transfer agent of the Company executed by the Company;
(the Securities Purchase Agreement, Guaranty, Registration Rights
Agreement, Notes and Instructions are collectively referred to
herein as the "Transaction Documents").
We have made such investigations and examined originals or copies,
certified or otherwise identified to our satisfaction, of public and corporate
records, documents and certificates of governmental authorities and officers of
the Company and of others as we have considered necessary or appropriate to
enable us to express the opinions hereinafter set forth, including:
(a) a certificate of compliance issued in respect of the Company
pursuant to the provisions of the Canada Business Corporations Act
(the "Certificate of Compliance") dated October 6, 2005;
(b) a report available at xxx.xxxxxxxxx.xx.xx concerning the Company
(the "Strategis Report");
(c) a corporation profile report issued by the Ontario Ministry of
Consumer and Commercial Relations (Companies Branch) (the
"Corporation Profile Report") dated October 6, 2005;
(d) a certificate of the Vice-President, Corporate and Legal Affairs of
the Company as to certain factual matters (the "Officers'
Certificate");
(e) a certificate of the Ontario Securities Commission dated October 6,
2005 (the "Reporting Issuer Certificate");
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 3
(f) a certificate of CIBC Mellon Trust Company, the registrar and
transfer agent of the Company, dated October 6, 2005; and
(g) a letter from the Toronto Stock Exchange (the "TSX") dated October
5, 2005 regarding the listing of the Underlying Common Shares and a
notification letter from the Company to The NASDAQ Stock Market,
Inc. ("Nasdaq") regarding the listing of the Underlying Common
Shares;
copies of the above-referenced documents have been delivered to you. In such
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic, original documents of all documents submitted to us as copies. We
have also considered such questions of law as we have deemed relevant to enable
us to express the opinions hereinafter set forth.
In our examinations, we have assumed:
(a) the completeness, truth and accuracy of all facts set forth in any
certificate supplied by an officer of the Company, including the
Officers' Certificate;
(b) the purchaser is resident within the jurisdiction shown as the
mailing address of such purchaser in the Securities Purchase
Agreement and the representations, warranties and acknowledgements
of the person executing the Securities Purchase Agreement are true
and correct in every respect;
(c) no offering memorandum (as such term is defined in the Securities
Act (Ontario) was prepared, distributed or made available in
connection with the offering or sale contemplated by the Securities
Purchase Agreement;
(d) no order, ruling or decision of any court, regulatory or
administrative body is in effect at any material time that restricts
any trades in securities of either the Company or Vasogen Ireland
Limited or that affects any person or company who engages in such a
trade; and
(e) all underwriters involved in the offering contemplated by the
Securities Purchase Agreement have complied with applicable
securities laws in connection therewith.
We are qualified to practice law only in the Province of Ontario. We
express no opinion as to any laws, or any matters governed by any laws, other
than the laws of the Province of Ontario and the federal laws of Canada
applicable therein.
In expressing the opinion set forth in paragraph 1 below with respect to
the existence of the Company, we have relied solely upon the Certificate of
Compliance and are assuming that such Certificate of Compliance would, if
requested, be issued as of the date hereof.
In expressing the opinion set forth in paragraph 2 below with respect to
the Company being in good standing in the Province of Ontario, we have relied
solely upon a Corporation
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 4
Profile Report and are assuming that such Corporation Profile Report would, if
requested, be issued as of the date hereof.
In expressing the opinion set forth in paragraph 5 below, our opinion is
restricted to the Company's articles, by-laws, resolutions of the
securityholders or directors, or any committee of directors, any Material
Agreements and any federal laws of Canada or laws of the Province of Ontario, in
each case, as are in effect on the date of completion of the offering
contemplated by the Securities Purchase Agreement.
In expressing the opinions set forth in paragraph 8 below with respect to
the outstanding capitalization (and not authorized capitalization) of the
Company, we have relied solely upon (i) the Officers' Certificate, and (ii) a
certificate of CIBC Mellon Trust Company, the registrar and transfer agent of
the Company.
In expressing the opinion set forth in paragraph 9 below, we have relied
solely upon (i) the Reporting Issuer Certificate and are assuming that such
Reporting Issuer Certificate would, if requested, be issued as of the date
hereof, (ii) a search of the database of the Ontario Securities Commission
conducted on October 7, 2005, and assumed that such search result would be the
same if such search was conducted at the time of delivery of this opinion.
In expressing the opinion set forth in paragraph 14 below, we have relied
solely upon correspondence from the TSX, a copy of which has been delivered to
you and a copy of the notice provided to Nasdaq by the Company, a copy of which
has been delivered to you.
The knowledge referred to in the phrase "to our knowledge" is based solely
on the actual present knowledge of current partners and associates in the
Toronto office of this firm who have been actively involved in the offering
contemplated by the Securities Purchase Agreement, without a review of our
files.
Based and relying upon and subject to the foregoing and the qualifications
and limitations set out herein, we are of the opinion that, as of the date
hereof:
1. The Company is a corporation incorporated and existing under the laws of
Canada and has not been dissolved.
2. The Company has all requisite power and capacity to own, lease and operate
its property and assets and to carry on its business as, to our knowledge,
it is currently conducted. The Company is duly qualified to do business
and is in good standing in the Province of Ontario.
3. The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents
including, without limitation, the issuance of the Warrants and the
Underlying Common Shares in accordance with the terms of the Warrants and
the Notes, as the case may be.
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 5
4. All necessary action has been taken by the Company to authorize the
execution and delivery by the Company of the Transaction Documents and the
performance of its obligations under such agreements, and the Transaction
Documents have been duly executed and, to the extent that delivery is
governed by the laws of the Province of Ontario, delivered, by or on
behalf of the Company. No further consent of the Company, its board of
directors or its securityholders is required to authorize the execution
and delivery by the Company of the Transaction Documents and the
performance of its obligations thereunder.
5. The execution and delivery of the Transaction Documents, the fulfilment of
the terms of such agreements by the Company, including the issuance, sale
and delivery of the Warrants and the Underlying Common Shares:
(a) do not and will not result in a breach of or default under, and do
not and will not create a state of facts which, after notice or
lapse of time or both, will result in a breach of or default under,
and do not and will not conflict with:
(i) any of the terms, conditions or provisions of the articles,
by-laws or resolutions of the securityholders or directors, or
any committee of directors;
(ii) any material agreement, note, lease, mortgage, deed or other
instrument to which the Company is a party or by which the
Company is bound or affected that has been publicly filed on
the System for Electronic Document Analysis and Retrieval
("SEDAR") (the "Material Agreements"); or
(iii) any federal laws of Canada or laws of the Province of Ontario;
and
(b) do not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any
of the Company's properties.
6. All necessary corporate action has been taken by the Company to validly
create, allot and issue to the purchaser the Warrants and upon the Company
having received payment of the purchase price therefore in accordance with
the terms of the Securities Purchase Agreement, the Warrants will be
validly authorized and issued.
7. All necessary corporate action has been taken by the Company to reserve
for issuance the Underlying Common Shares, and such Underlying Common
Shares will, upon their issuance in accordance with the Notes and
Warrants, as the case may be, be validly authorized and issued and
outstanding as fully-paid and non-assessable common shares of the Company
and free of liens and pre-emptive or similar rights contained in the
Company's articles, by-laws, securityholder resolutions or director
resolutions or Material Agreements.
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 6
8. The authorized capital of the Company consists of an unlimited number of
common shares, of which 81,481,250 common shares of the Company were
issued and outstanding as of the close of business on October 5, 2005,
2,843,925 common shares of the Company are reserved for issuance pursuant
to the Company's stock option plans, 177,144 common shares of the Company
are reserved for issuance pursuant to the Company's directors' deferred
share unit and stock plan and 985,237 common shares of the Company are
issuable and reserved for issuance pursuant to securities (other than the
Notes and Warrants) exercisable or exchangeable for, or convertible into,
common shares of the Company. None of the common shares of the Company is
subject to pre-emptive rights or similar rights of the securityholders of
the Company pursuant to the articles or by-laws of the Company or any
Material Agreements.
9. The Company is a "reporting issuer" in the Province of Ontario and is not
included in the list of defaulting reporting issuers maintained by the
Ontario Securities Commission.
10. The offering, issue, sale and delivery of the Notes and Warrants to the
purchaser in accordance with the Securities Purchase Agreement are exempt
from the prospectus and registration requirements of the Securities Act
(Ontario) and any regulations, rules and policy statements published or
promulgated under the authority of such statute ("Securities Laws") and no
prospectus or other documents must be filed, proceeding taken or approval,
permit, consent or authorization obtained under the Securities Laws to
permit the offering, issue, sale and delivery of the Notes and Warrants to
the purchaser, except for the requirements that the Company file with the
securities regulator in the Province of Ontario Ontario within 10 days
after the date the trades are made a report on Form 45-106F1 prepared and
executed in accordance with National Instrument 45-106 Prospectus and
Registration Exemptions ("NI 45-106") of the Canadian Securities
Administrators, accompanied by the prescribed fees, and the filing of a
material change report and the filing of any material contracts on SEDAR.
11. No prospectus is required nor are any other documents required to be filed
(other than the filing with the Ontario Securities Commission by the
seller of a report on Form 45-106F1 prepared and executed in accordance
with NI 45-106, accompanied by the prescribed fee, if any), proceedings
taken or approvals, permits, consents or authorizations of regulatory
authorities obtained under the Securities Laws to permit a holder of
Warrants to trade such Warrants in the Province of Ontario, either through
registrants or dealers registered under Securities Laws who comply with
such applicable laws or in circumstances in which there is an exemption
from the registration requirements of Securities Laws, provided that:
(a) the Company is and has been a "reporting issuer" (or its equivalent)
under the Securities Laws for at least four months immediately
preceding the trade;
(b) at least four months have elapsed from the "distribution date" (as
defined in Multilateral Instrument 45-102 Resale of Securities ("MI
45-102"));
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 7
(c) the certificate evidencing the Warrants when issued carried a legend
stating that: "unless permitted under securities legislation, the
holder of the securities shall not trade the securities before
[insert date that is four months and one day after the distribution
date]";
(d) no unusual effort is made to prepare the market or to create a
demand for the Warrants that are the subject of the trade;
(e) no extraordinary commission or consideration is paid to a person or
company in respect of the trade;
(f) the trade is not a "control distribution" (as defined in MI 45-102);
and
(g) if the holder of the securities that are the subject of the trade is
an insider or officer of the Company, the holder has no reasonable
grounds to believe that the Company is in default of securities
legislation.
12. The issuance of Underlying Note Common Shares by the Company to a holder
of Notes on the conversion, at the redemption or on any repayment of the
Notes and the issuance of Underlying Warrant Common Shares by the Company
to a holder of Warrants upon exercise of the Warrants will be exempt from
the prospectus and registration requirements of the Securities Laws and no
documents are required to be filed (other than the filing of any requisite
notice and applicable fee, if any), proceedings taken or approvals,
permits, consents or authorizations of regulatory authorities obtained
under the Securities Laws in connection therewith.
13. No prospectus is required nor are any other documents required to be
filed, proceedings taken or approvals, permits, consents or authorizations
of regulatory authorities obtained under the Securities Laws to permit a
holder of Underlying Note Common Shares issuable on the conversion, at the
redemption or on any repayment of the Notes or a holder of Underlying
Warrant Common Shares issuable upon exercise of the Warrants to trade such
Common Shares in the Province of Ontario, either through registrants or
dealers registered under Securities Laws who comply with such applicable
laws or in circumstances in which there is an exemption from the
registration requirements of Securities Laws, provided that:
(a) the Company is and has been a "reporting issuer" (or its equivalent)
under the Securities Laws for at least four months immediately
preceding the trade;
(b) at least four months have elapsed from the "distribution date" (as
defined in MI 45-102);
(c) the certificate evidencing the Underlying Common Shares when issued
carried a legend stating that: "unless permitted under securities
legislation, the holder of the
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Xxxx Xxxxxxxx LLP
Lawyers - Patent & Trade Mark Agents Page 8
securities shall not trade the securities before [insert date that
is four months and one day after the distribution date]";
(d) no unusual effort is made to prepare the market or to create a
demand for the Underlying Common Shares that are the subject of the
trade;
(e) no extraordinary commission or consideration is paid to a person or
company in respect of the trade;
(f) the trade is not a "control distribution" as defined in MI 45-102;
and
(g) if the holder of the securities that are the subject of the trade is
an insider or officer of the Company, the holder has no reasonable
grounds to believe that the Company is in default of securities
legislation.
14. The TSX has conditionally approved the listing of the Underlying Common
Shares and, upon notification to the TSX of the issuance and sale thereof
and subject to satisfaction by the Company of the conditions set out in
the TSX Letter being complied with on or before November 6, 2005, will be
posted for trading on the TSX.
15. To our knowledge, no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body or any governmental agency or
self-regulatory organization is pending against the Company or any of its
property or assets.
This opinion is delivered to the addressee pursuant to the Company's
request in connection with the closing of the above-referenced transaction and
may be relied upon by the addressee and by Xxxxxxxx LLP and Xxxxxxx Xxxx &
Xxxxx, special Canadian and United States counsel, respectively, to the
purchaser, in connection therewith but not by any other person or entity or by
anyone for any other purpose, nor may it be copied or quoted by persons other
than the addressee or distributed to persons other than the addressee without
our prior written consent.
We undertake no duty to amend any of the opinions set forth herein
following the date of this opinion letter with respect to changes in matters of
law or fact which may occur following the date hereof and reliance on this
opinion letter after the date of this opinion letter must be made with the
assumption that there has been no change in the law insofar as it affects the
subject matter of this opinion.
Yours truly,
--------------------------------------------------------------------------------
xxx.xxxxxxxxxxxx.xx Toronto Vancouver Ottowa
Private and Confidential
------------------------
To/ Attn: Xxxx Xxxxxxxxx/Xxxxxxx Xxxxx
Kings Road Investments Ltd.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
XXX
Our Ref GC/CD Your Ref 7 October, 2005
Re: Vasogen Ireland Limited (the "Company")
Dear Sirs,
We have acted as Solicitors in Ireland to the Company and have been requested to
provide to you our opinion as to matters of Irish law in connection with certain
matters referable to the Company which we hereby give on the basis, under the
assumptions and subject to the reservations and qualifications set out below.
1. BASIS OF OPINION
----------------
1.1 Subject expressly as is hereafter provided for, this opinion is
addressed to the above named party only and on the basis that
its contents may be relied upon only by it, and that it will not
be used, quoted, circulated or otherwise disclosed by or to any
other person (apart from its legal advisers) without our prior
written consent. Such consent, if given, will not mean or imply
that the party, disclosure to whom may be authorised, may rely
on this opinion in the same way and to the same extent as the
party to whom it is addressed, or at all.
1.2 This opinion is confined to, and given on the basis of the laws
of Ireland currently applied by the courts of Ireland and
relevant authorities. We have made no investigation of, and
express no opinion as to, the laws of any other jurisdiction and
we have assumed, without enquiry, that there is nothing in the
laws of any such other jurisdiction which would or might affect
our opinion as stated herein. In particular, with reference to
taxes, it is expressly stated that we give no opinion as to any
tax or duty payable in Ireland in connection with the execution
or performance of the Agreements (as defined below).
Page/2
1.3 This opinion is limited strictly to the matters stated herein
and is not to be read as extending, by implication or otherwise,
to any other matter. This opinion letter is expressly given as
of the date hereof and upon the terms that no further
documentation is to be examined by us other than the
documentation specified at Section 1.4 of this opinion letter.
In expressing the opinion set forth below as to various
questions of fact material to such opinion, we have relied upon
representations and statements contained in the certificates,
instruments, agreements and documents referred to herein and
have made no independent investigations thereof. We express no
opinion and make no representation or warranty as to any matter
of fact or as to documents, events or actions not disclosed to
us in the course of our examinations or as to any changes in any
circumstances or any facts disclosed to us after the date hereof
and we shall not be obliged to update this opinion to take
account of same.
1.4 For the purpose of giving our opinion, we have examined the
following documents only:
1.4.1 the statutory books of the Company as made available to
us by Xxxxx Xxxxx & Xxxxxx, Dublin on 29 September, 2005
(the "Statutory Books");
1.4.2 a Corporate Certificate duly signed by Xxxxx Xxxxxxx, a
director of the Company dated 7 October, 2005 (the
"Certificate");
1.4.3 a Letter of Status as issued by the Companies
Registration Office in Dublin in respect of the Company
dated 6 October, 2005;
1.4.4 an e-mailed copy of a Securities Purchase Agreement
dated October 7, 2005 duly executed by the Company (the
"SPA");
1.4.5 an e-mailed copy of a Senior Convertible Note dated
October 7, 2005 in a principal amount of US$16,500,000
duly executed by the Company (the "Note");
1.4.6 minutes of a meeting of the board of directors of the
Company dated October 6, 2005 dealing with, inter alia,
the execution by the Company of the SPA and the Note;
and
1.4.7 a Power of Attorney dated 6 October, 2005 from the
Company appointing any one of the Directors of the
Company being, Xxxxxxxxxxx Xxxxxxx, Xxxx Xxxx and Xxxxx
Xxxxxxx as its attorney for the purposes of, inter alia,
the execution of the SPA and the Note.
1.5 In rendering this opinion, in addition to the documents referred
to at paragraph 1.4 of this opinion, we have relied upon
information available to us in respect of the Company at the
Companies Registration Office in Dublin, Ireland as at the date
hereof.
Page/3
1.6 Whenever a statement expressed herein is qualified by the phrase
"to the best of our knowledge" or a similar expression, it is
intended to indicate that no information that would give us
current actual knowledge of the inaccuracy of such statement or
of any facts inconsistent with such statement has come to the
attention of those solicitors in this firm who have rendered
legal services to the Company. However, we have not undertaken
any independent investigation or review whatsoever to determine
the accuracy of any such statement or of the existence or
absence of those facts and any limited enquiry undertaken by us
during the preparation of this opinion letter should not be
regarded as such an investigation or review.
1.7 For the purposes of giving this opinion we have caused to be
made the following legal searches in Dublin, Ireland against the
Company on 6 October, 2005:
1.7.1 in the Companies Registration Office for mortgages,
debentures or similar charges or notices thereof;
1.7.2 in the Judgments Office of the Central Office of the
High Court for unsatisfied judgments, orders, decrees
and the like;
1.7.3 in the Office of the Sheriff of Shannon, County Clare
for unexecuted decrees, execution orders and the like;
and
1.7.4 in the High Court Central Office for winding up
petitions,
together the "Searches".
1.8 In this opinion, all references to legislation and to sections
of legislation are to Irish legislation.
1.9 This opinion shall be governed by and interpreted and construed
in accordance with the laws of Ireland.
2. ASSUMPTIONS:
-----------
2.1 For the purpose of expressing our opinion, we have made the
following assumptions (without any responsibility on our part if
any assumption proves to have been untrue as we have not
independently verified any assumption):
2.1.1 the authenticity of all documents submitted to us as
originals;
2.1.2 the completeness and conformity to the originals of all
documents supplied to us as certified or photostatic or
telefaxed copies or copies sent by electronic mail and
the authenticity and completeness of the originals of
such documents and that such documents have been
executed in the form of the latest drafts or remain in
the form as executed and in each case as reviewed by us
for the purpose of giving this opinion;
2.1.3 the genuineness of all signatures and seals (where
applicable) upon original or copy documents;
Page/4
2.1.4 that the copies produced to us of minutes of meetings
and/or resolutions are true copies and correctly record
the proceedings at such meetings and/or the subject
matter which they purport to record; and that any
meetings referred to in such copies were duly convened
and held, that those present at any such meetings acted
bona fide throughout; that all resolutions set out in
such copies were duly passed and that no further
resolutions have been passed, or corporate or other
action taken, which would or might alter the
effectiveness thereof;
2.1.5 that the documents furnished to us as the Memorandum and
Articles of Association of the Company as referred to in
the Certificate at Section 1.4.2 of this opinion letter
(the "Memorandum and Articles of Association")
respectively were and are at the date hereof the
Memorandum and Articles of Association and that there
have been no amendments thereto;
2.1.6 that the documents listed in Section 1.4 above are the
only documents reviewed by us relating to the Company
for the purpose of giving this opinion letter and that
there are no other agreements, arrangements or
understandings in existence which amend or vary in any
way whatsoever the terms of any of the aforesaid
documents and that there is no agreement, arrangement or
understanding which would override the Memorandum and
Articles of Association;
2.1.7 that no law other than the law of Ireland affects the
basis of or any of the assumptions or the
reservations/qualifications in this opinion or the
conclusions stated below;
2.1.8 the accuracy and completeness of all information
appearing on public records and in particular but
without prejudice to the generality of the foregoing,
the accuracy and completeness of all information
disclosed pursuant to the Searches, that such
information was current on the date specified on such
public records;
2.1.9 the accuracy and completeness of all information given
to us by law searchers in respect of the Searches and
that any such Searches do not fail to disclose any
information which could affect any of our opinions in
any way;
2.1.10 the truth, completeness and accuracy of all
representations and information given to us by any party
in reply to any enquiries we have made of any party for
the purpose of giving this opinion;
2.1.11 this opinion is given as of the date hereof and we
assume no obligation to update or supplement this
opinion to reflect any facts or circumstances which may
hereafter come to our attention or any changes in the
law that may hereafter occur;
Page/5
2.1.12 that each party (other than the Company) to the SPA:
(i) has been duly incorporated and is validly
existing and has the necessary power, authority
and capacity to enter into the SPA and to
perform its respective obligations thereunder
under the laws of the jurisdiction under which
it is constituted; and
(ii) has complied with all laws and regulations
applicable to the transaction contemplated by
the SPA and has obtained all governmental and
other consents, licences and approvals required
for the execution and performance thereof by the
laws of the jurisdiction under which it or they
is or are to be performed (including such
filing, registration, recording or enrolling of
the documents with any such regulatory or other
authority in such jurisdiction as may be
required to ensure the legality, validity,
enforceability or admissibility in evidence
thereof) and that the SPA has been duly executed
by persons authorised to do so on behalf of such
parties and duly delivered in accordance with
the laws of the jurisdiction under which such
parties are constituted;
2.1.13 that the choice of law contained in the SPA and the Note
(collectively the "Agreements") is a valid choice of law
and will be upheld and will not be set aside or changed
in any manner by the courts of any applicable
jurisdiction (other than the courts of Ireland);
2.1.14 that all obligations of the parties under the SPA are
valid, legally binding upon, and enforceable against the
respective parties thereto as a matter of all relevant
laws other than the laws of Ireland, and that there is
no provision of the laws of any relevant jurisdiction
other than Ireland that would have a bearing on the
foregoing;
2.1.15 that the Statutory Books, incorporating, inter alia,
minutes of meetings and/or of resolutions, are accurate
and up-to-date and do not omit any information which
would in any way whatsoever affect any of the opinions
contained in this opinion letter;
2.1.16 that other than those which would be disclosed by the
public searches carried out and noted in Section 1.7
above:
(i) no resolution or petition for the appointment of
a liquidator or examiner has been passed or
presented in relation to the Company; and
(ii) no receiver has been appointed in relation to
any of the assets or undertakings of the
Company; and
2.1.17 the accuracy and completeness of the statements
contained in the Certificate and of each of the
documents attached to the Certificate as of the date
thereof and as at the date hereof.
Page/6
3. RESERVATIONS/QUALIFICATIONS:
---------------------------
3.1 The description of obligations, in this opinion, as
"enforceable" refers to the legal character of the obligations
assumed by the relevant party under the relevant instrument. It
implies no more than that the obligations are of a character
which the laws of Ireland recognise at the date hereof and will
in certain circumstances enforce. In particular, it does not
mean or imply that the relevant instrument will be enforced in
all circumstances in accordance with its terms or by or against
third parties or that any particular remedy will be available.
In particular (but without in any way limiting the foregoing):
3.1.1 enforcement may be limited by laws from time to time
relating to bankruptcy, insolvency, liquidation,
receivership, examination, reorganisation, moratoria,
court schemes, preferential creditors and laws of
general application relating to or affecting the rights
of creditors;
3.1.2 claims may be or become the subject of set-off or
counterclaim;
3.1.3 claims may become barred under relevant statutes of
limitation prescription or lapse of time;
3.1.4 enforcement may be limited by general principles of
equity;
3.1.5 enforcement may also be limited as a result of the
provisions of the laws of Ireland applicable to
contracts held to have become frustrated by events
happening after their execution and any breach of the
terms of any of the documents by the party seeking to
enforce same;
3.1.6 provisions (including provisions for default interest)
imposing additional obligations in the event of breach
or default, or of payment or repayment being made other
than on an agreed date, may be unenforceable to the
extent that they are subsequently adjudicated to be
penal in nature;
3.1.7 where an obligation is to be performed or observed or is
based upon a matter arising in a jurisdiction outside
Ireland, or a party's obligations are subject to the
laws of a jurisdiction outside Ireland, such obligations
may not be enforceable under the laws of Ireland if the
same would be unlawful, unenforceable or contrary to
public policy under the laws of such jurisdiction;
3.1.8 provisions in the Agreements that calculations and
certifications or acknowledgements are to be conclusive
and binding will not necessarily prevent judicial
enquiry into the merits of any claim by a party claiming
to be aggrieved by such calculations, certifications or
acknowledgements nor do such provisions exclude the
possibility of the same being amended by court order;
Page/7
3.1.9 to the extent that any of the Agreements vests a
discretion in any party, or provides for any party
determining any matter in its opinion, the exercise of
such discretion and the manner in which such opinion is
formed and the grounds on which it is based may be the
subject of judicial enquiry and review;
3.1.10 enforcement may be limited if any of the provisions of
the Agreements are held invalid on the grounds of
misrepresentation, mistake or duress;
3.1.11 in relation to the costs of any unsuccessful litigation
the courts of Ireland may refuse to give effect to any
undertaking to pay costs;
3.1.12 any clause of any of the Agreements which provides for
severance of an illegal, invalid or unenforceable
provision may not be effective - it depends on the
nature of the illegality, invalidity or unenforceability
in question;
3.1.13 the effectiveness of terms exculpating a party from a
liability or duty otherwise owed are limited by law; and
3.1.14 notwithstanding any provision in any of the Agreements
to the contrary, the Agreements may be capable of
amendment by oral agreement of the parties.
4. OPINION:
-------
On the basis described in Section 1, subject to the assumptions
described in Section 2 and to the reservations/qualifications set out in
Section 3 we are of the opinion that:
4.1 The Company is a private limited company duly incorporated and
registered under the Companies Acts, 1963 to 2005 and is validly
existing under the laws of Ireland, and is subject to suit in
its own name.
4.2 The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the
Agreements.
4.3 Based only on our examination of the Searches:
(a) no order or resolution for winding up nor any notice of
appointment of a liquidator, receiver or examiner has
been passed or filed; and
(b) there has been no creation by the Company of any
"charge", to which Section 99 of the Companies Act, 1963
applies.
4.4 The issued share capital of the Company is CA$1,400,000,
comprising 1,400,000 shares of CA$1 each and (euro)2.50,
comprising 2 shares of (euro)1.25 each. Based solely on the
Certificate and the content of the minutes of a meeting of the
board of directors of the Company held on 28 November, 2003, all
shares have been paid up. Vasogen, Inc. is the sole shareholder
in the Company.
Page/8
4.5 The execution and delivery of and the performance of its
obligations under, the Agreements by the Company has been duly
authorised by all necessary corporate action on the part of the
Company under the Memorandum and Articles of Association and the
Agreements have been duly executed and delivered by the Company.
4.6 The execution and delivery of and performance of its obligations
under the Agreements does not result in any violation of:
(a) (subject to Section 4.8 below) any existing law or
regulation of Ireland; or
(b) any provision of the Memorandum and Articles of
Association; or
(c) to the best of our knowledge, any material agreement to
which the Company is a party or any other material
requirement, restriction or obligation that the Company
has assumed or that otherwise applies to the Company.
4.7 No consent, authorisation, licence or approval of, or filing
with any governmental or other authority or agency of or in
Ireland is required or was required by the Company in relation
to the execution or delivery of the Agreements or the
performance by the Company of its obligations under the
Agreements.
4.8 Strictly without prejudice to any of the provisions of Sections
1, 2 and 3 of this opinion letter, and subject to the terms of,
and dependent upon compliance with the legal advice given by us
as referred to in, the Certificate, none of the transactions
contemplated in the Agreements would constitute an offer of
securities to the public within the meaning of the Investment
Funds, Companies and Miscellaneous Provisions Act, 2005 or an
invitation to the public to subscribe for securities as referred
to in Section 33 of the Companies Act, 1963.
4.9 The obligations of the Company under the Agreements constitute
legal, valid, binding and enforceable obligations of the
Company.
4.10 The choice of the internal laws of the State of New York to
govern the Agreements shall be upheld as a valid choice of law
in any action before the Irish Courts and ought to be applied by
such courts in proceedings thereto as the governing law thereof,
provided that:
(a) it was duly pleaded that such documents are expressed to
be governed and construed in accordance with such laws;
(b) such choice is not shown to be other than bona fide and
legal under Irish law, the law governing the Agreements
or the law governing the country or state in which the
obligations of the Agreements are to be performed and,
for the avoidance of doubt, such laws are not chosen
with the intention of evading the laws of Ireland;
Page/9
(c) such choice does not frustrate any mandatory provisions
of either Irish law (where such mandatory provisions are
intended to apply to such documents) or the law which
has in fact the closest connection with the Agreements;
or
(d) such choice is not otherwise contrary to Irish public
policy for the time being nor with any provision of any
applicable Irish legislation in a sufficiently
fundamental manner to make an Irish court disregard such
choice.
4.11 A decision of the courts of the State of New York will be
recognised and enforced in Ireland upon proper proof of the
foreign judgement without review as to its substance provided:
(a) the courts of the State of New York had jurisdiction to
adjudicate the matter under private international law
rules as accepted in Ireland;
(b) the judgement is final and conclusive;
(c) the judgement is for a definite sum;
(d) the judgement was not obtained in proceedings contrary
to Irish concepts of substantial, natural or
constitutional justice;
(e) enforcement of the judgement would not be contrary to
Irish public policy;
(f) the judgement was not of a penal, revenue or
expropriatory nature;
(g) the judgement was not obtained by fraud; and
(h) no inconsistent earlier judgement exists based on the
same cause of action which was handed down by a judicial
tribunal of competent jurisdiction.
4.12 As of the date hereof, and subject to the other statements made
in this opinion, to the best of our knowledge, we are not aware
of any circumstances concerning the transactions contemplated in
the Agreements that would give rise to an Irish court holding
that such transactions violate Irish public policy.
4.13 The Company is generally subject to common law and in Ireland
the Company does not enjoy any right to immunity from legal
proceedings in respect of the Agreements (which are in respect
of commercial transactions) and the Company is capable of being
sued in that it has corporate legal personality.
Yours faithfully,
/s/ Xxxxxx X. Xxxxxxx
-------------------------
XXXXXX X. XXXXXXX
000 000 0000
000 000-0000
October 7, 2005
To: The Purchasers on Schedule I party to the
Purchase Agreements referred to below
Vasogen Inc. and Vasogen Ireland Limited
Senior Convertible Notes and Warrants
Ladies and Gentlemen:
We have acted as special United States counsel to Vasogen Inc., a
corporation incorporated under the Canada Business Corporations Act (the
"Parent"), Vasogen Ireland Limited, a company incorporated under the laws of
Ireland (the "Company"), and Vasogen, Corp., a Delaware corporation (the
"Delaware Guarantor," and together with the Parent and the Company, the
"Principal Parties"), in connection with certain Securities Purchase Agreements,
each dated as of October 7, 2005 (the "Purchase Agreements"), by and among the
Principal Parties and each purchaser listed on each Buyer Schedule thereto (each
individually, a "Purchaser," and all such individuals collectively, the
"Purchasers"), pursuant to which (i) the Company is issuing to the
2
Purchasers senior convertible notes (the "Notes") which are convertible into the
common shares of the Parent, no par value (the "Common Shares"), and (ii) the
Parent is issuing to the Purchasers warrants (the "Warrants") which are
exercisable to purchase Common Shares. This opinion is being furnished at the
request of the Company as contemplated by Section 7(f) of the Purchase
Agreements. Capitalized terms used and not otherwise defined in this letter have
the respective meanings given those terms in the Purchase Agreements.
In connection with the furnishing of this opinion, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the following documents (the "Transaction Documents"):
1. the Purchase Agreements;
2. the Registration Rights Agreement (the "Registration Rights
Agreement");
3. the Notes issued on the date of this letter (including the form of
Treasury Instructions and Conversion Notice attached as Exhibit I
thereto) (the "Notes");
4. the Warrants issued on the date of this letter (including the form
of Treasury Instructions and Exercise Notice attached as Exhibit I
thereto) (the "Warrants");
5. the Parent Guaranties (the "Parent Guaranties"); and
6. the Subsidiary Guaranties (the "Subsidiary Guaranties," and together
with the Parent Guaranties, the "Guaranties").
In addition, we have examined: (i) such corporate records of the Delaware
Guarantor that we have considered appropriate, including the certificate of
incorporation, as amended, and by-laws of the Delaware Guarantor certified by
the Delaware Guarantor as in effect on the date of this letter (together, the
"Delaware Guarantor Charter
3
Documents") and copies of resolutions of the board of directors of the Delaware
Guarantor relating to the Purchase Agreements and the Subsidiary Guaranties; and
(ii) such other certificates, agreements and documents that we deemed relevant
and necessary as a basis for the opinions and beliefs expressed below. We have
also relied upon oral and written statements of officers and representatives of
the Principal Parties, the factual matters contained in the representations and
warranties of the Principal Parties and the Purchasers in the Purchase
Agreements and upon certificates of public officials and the officers of the
Principal Parties.
In our examination of the documents referred to above, we have assumed,
without independent investigation, (i) the genuineness of all signatures, (ii)
the legal capacity of all individuals who have executed any of the documents
reviewed by us, (iii) the authenticity of all documents submitted to us as
originals, (iv) the conformity to the originals of all documents submitted to us
as certified, photostatic, reproduced or conformed copies of valid existing
agreements or other documents, (v) the authenticity of the latter documents,
(vi) that the statements regarding matters of fact in the certificates, records,
agreements, instruments and documents that we have examined are accurate and
complete, (vii) the due authorization of the Notes and the Purchase Agreements
by the Company under the laws of Ireland, and the execution and delivery (to the
extent execution and
4
delivery are governed by the laws of Ireland) of the Notes and the Purchase
Agreements by the Company, (viii) the due authorization of the Warrants, the
Notes, the Purchase Agreements, the Parent Guaranties and the Registration
Rights Agreement by the Parent under the laws of the province of Ontario and the
federal laws of Canada applicable therein, and the execution and delivery (to
the extent execution and delivery are governed by the laws of the province of
Ontario and the federal laws of Canada applicable therein) of the Warrants, the
Notes, the Purchase Agreements, the Parent Guaranties and the Registration
Rights Agreement by the Parent, (ix) the due authorization, execution and
delivery of all such documents by, and the enforceability of all such documents
against, the Purchasers, (x) that the Company is a private limited company duly
incorporated and registered in Ireland under the Irish Companies Acts, 1963 to
2005 and is validly existing under the laws of Ireland, (xi) that the Parent is
validly existing and subsisting under the laws of the province of Ontario and
the federal laws of Canada applicable therein, (xii) that each of the Company
and the Parent has all necessary corporate power and authority to execute,
deliver and perform its obligations under each of the Transaction Documents to
which it is a party, (xiii) that the execution, delivery and performance of each
of the Transaction Documents have been duly authorized by all necessary
corporate action of and do not violate the organizational documents of the
Company and the Parent or the laws of the province of Ontario, the applicable
federal laws in Canada or the laws of Ireland, and (xiv) that each of the
parties (other than the Principal Parties) to each of the Transaction Documents
has complied with all of its obligations and covenants arising under each of the
Transaction Documents.
Whenever we indicate that our opinion is based upon our knowledge or words
of similar import, our opinion is based solely on the actual knowledge of the
attorneys in this firm who are representing the Principal Parties in connection
with the Purchase Agreements and without any independent verification.
5
Based upon the above, and subject to the stated assumptions, exceptions
and qualifications, we are of the opinion that:
1. The Delaware Guarantor has been duly organized and is validly existing
and in good standing under the laws of the State of Delaware.
2. The Delaware Guarantor has the necessary power and authority to
execute, deliver and perform its obligations under the Purchase Agreements and
the Subsidiary Guaranties.
3. The Purchase Agreements have been duly authorized, executed and
delivered by the Delaware Guarantor. The Purchase Agreements (to the extent
execution and delivery are governed by the laws of New York) have been duly
executed and delivered by the Company and the Parent. The Purchase Agreements
are a valid and legally binding obligation of each of the Principal Parties,
enforceable against each of the Principal Parties in accordance with their
terms, except that enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting enforcement of creditors' rights generally and subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
4. The Registration Rights Agreement (to the extent execution and delivery
are governed by the laws of New York) has been duly executed and delivered by
the Parent. The Registration Rights Agreement is a valid and legally binding
obligation of the Parent, enforceable against the Parent in accordance with its
terms, except that enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent
6
conveyance or transfer, moratorium or similar laws affecting enforcement of
creditors' rights generally and subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and except to the extent that the indemnification and contribution
provisions of the Registration Rights Agreement may be unenforceable.
5. The Warrants (to the extent execution and delivery are governed by the
laws of New York) have been duly executed and delivered by the Parent. The
Warrants are a valid and legally binding obligation of the Parent, enforceable
against the Parent in accordance with their terms, except that enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium or similar laws affecting enforcement of creditors'
rights generally and subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
6. The Notes (to the extent execution and delivery are governed by the
laws of New York) have been duly executed and delivered by the Company and the
Parent. The Notes are a valid and legally binding obligation of each of the
Company and the Parent, enforceable against each of the Company and the Parent
in accordance with their terms, except that enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting enforcement of creditors' rights generally
and subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
7. The Subsidiary Guaranties have been duly authorized, executed and
delivered by the Delaware Guarantor. The Subsidiary Guaranties are valid and
7
binding obligations of the Delaware Guarantor, enforceable against the Delaware
Guarantor in accordance with their terms, except that enforceability of the
Subsidiary Guaranties may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting
creditors' rights generally and subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
8. The Parent Guaranties (to the extent execution and delivery are
governed by the laws of New York) have been duly executed and delivered by the
Parent. When the Notes are duly issued and delivered by the Company against
payment as provided in the Purchase Agreements, the Parent Guaranties will be
valid and binding obligations of the Parent, enforceable against the Parent in
accordance with their terms, except that enforceability of the Parent Guaranties
may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium or similar laws affecting creditors' rights generally
and subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
9. The issuance of the Securities by the Principal Parties, as applicable,
and the compliance by the Principal Parties with the provisions of the
Transaction Documents to which they are a party and the performance of their
obligations thereunder will not (i) result in a violation of the Delaware
Guarantor Charter Documents, (ii) result in a default under any agreement or
instrument governed by the laws of the State of New York listed on Schedule II
to this opinion, or (iii) violate Applicable Law except, in the case of clauses
(ii) and (iii), where the default or violation could not reasonably be expected
to have a material adverse effect on the Parent and its
8
subsidiaries, taken as a whole. For purposes of this opinion, the term
"Applicable Law" means the General Corporation Law of the State of Delaware (the
"GCL"), those laws, rules and regulations of the United States of America and
the State of New York, in each case which in our experience are normally
applicable to the transactions of the type contemplated by the Purchase
Agreements, except that, for the purposes of this paragraph 9, "Applicable Law"
does not include the anti-fraud provisions of the securities laws of any
applicable jurisdiction.
10. Based on the representations, warranties and agreements of the
Principal Parties in Section 3 (other than the first sentence of Section 3(e))
of the Purchase Agreements and of the Purchasers in Section 2 of the Purchase
Agreements, no consent, approval, authorization or order of, or filing,
registration or qualification with, any Governmental Authority, which has not
been obtained, taken or made (other than as required by any state securities or
Blue Sky laws of the various states, as to which we express no opinion) is
required under any Applicable Law for the issuance of the Notes or the Warrants
except for the filing of any required Form D pursuant to Regulation D and the
filing of any required Current Report on Form 6-K with the SEC. For purposes of
this opinion, the term "Governmental Authority" means any executive,
legislative, judicial, administrative or regulatory body of the State of New
York, the State of Delaware or the United States of America.
11. Based on the representations, warranties and agreements of the
Principal Parties in Section 3 (other than the fourth sentence of Section 3(c))
of the Purchase Agreements and of the Purchasers in Section 2 of the Purchase
Agreements, it is not necessary in connection with the offer and sale of the
Notes and the Warrants and,
9
if the Notes were to be converted, amortized or redeemed and the Warrants were
to be exercised by the Purchasers at the Closing, the Conversion Shares issued
in accordance with the Notes and the Warrant Shares issued in accordance with
the Warrants, to register the Securities under the Act, subject to the timely
filing of any required Form D pursuant to Regulation D, it being understood that
we express no opinion as to any subsequent resale of the Securities.
12. To our knowledge, there are no legal proceedings pending or overtly
threatened against the Principal Parties in the United States which could
reasonably be expected to have a material adverse effect on the Parent and its
Subsidiaries, taken as a whole.
13. None of the Principal Parties is required to be registered as an
investment company under the Investment Company Act of 1940, as amended, and the
rules and regulations of the SEC under that statute.
The opinions expressed above are limited to the State of New York, the GCL
and the federal laws of the United States of America. No opinion is expressed in
this letter with respect to the requirements of, or compliance with, any state
securities or Blue Sky laws. Our opinions are rendered only with respect to the
laws, and the rules, regulations and orders under those laws, that are currently
in effect.
10
This letter is furnished by us solely for your benefit in
connection with the transaction referred to in the Purchase Agreements and may
not be circulated to, or relied upon by, any other person without our prior
written consent.
Very truly yours,
/s/ Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
XXXX, XXXXX, RIFKIND, XXXXXXX & XXXXXXXX LLP
Schedule I
Kings Road Investments Ltd.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Capital Ventures International
c/o Heights Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Amatis Ltd.
c/o Amaranth Advisors LLC
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Castlerigg Master Investments Ltd.
c/o Sandell Asset Management Corp.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Schedule II
None.
VASOGEN INC.
FORM OF CERTIFICATE OF OFFICER
TO: [NAME OF XXXXX]
RE: Private Placement of US$ o of Senior Convertible Notes and o Warrants
--------------------------------------------------------------------------------
I, Xxxxxxxxxx Xx Xxxx, am the duly appointed Vice-President, Corporate &
Legal Affairs of Vasogen Inc. (the "Corporation"). As such officer of the
Corporation, I certify, for and on behalf of the Corporation, and not in my
personal capacity, intending that the same may be relied upon by you without
further enquiry, that:
1. Attached as Exhibit "A" are copies of the articles of continuance of the
Corporation (the "Articles"). The Articles are in full force and effect at
this date, have not been amended or waived and neither the directors nor
the shareholders of the Corporation have passed, confirmed or consented to
any amendments or variation to the Articles.
2. Attached as Exhibit "B" are true and complete copies of all of the by-laws
(the "By-laws") of the Corporation. The By-laws comprise all of the
by-laws of the Corporation, are in full force and effect, unamended, at
this date and neither the directors nor the shareholders of the
Corporation have passed, confirmed or consented to any resolutions
amending or varying the By-laws.
3. Attached as Exhibit "C" are true and complete copies of certain
resolutions (the "Authorizing Resolutions") of the board of directors of
the Corporation, constituting, inter alia, authority for the Corporation
to execute, deliver and perform its obligations under the Documents (as
defined below) to which the Corporation is a party. The Authorizing
Resolutions have been duly and validly passed in accordance with
applicable law. The Authorizing Resolutions are the only resolutions of
the directors and shareholders of the Corporation pertaining to the
subject matter thereof and each is in full force and effect, unamended, at
this date.
4. The persons whose names are set forth in Exhibit "D" are at this date,
officers or directors of the Corporation duly appointed or elected to the
position or positions set forth opposite their respective names and are,
at the date hereof, authorized to execute the documents contemplated by
the Authorizing Resolutions (the "Documents") on behalf of the Corporation
and the signature of each person appearing opposite his or her name is a
true specimen of his or her signature.
DATED this _______day of ______________________, 2005.
-2-
-----------------------------------------
Xxxxxxxxxx Xx Xxxx
Vice-President, Corporate & Legal Affairs
EXHIBIT "A"
ARTICLES
(see attached)
Industry Canada Industrie Canada
Canada Business Loi canadienne sur
Corporations Act les societes par actions
I HEREBY CERTIFY THAT THE JE CERTIFIE, PAR LES PRESENTES,
ATTACHED IS A TRUE COPY OF THE QUE LE DOCUMENT CI-JOINT EST
DOCUMENT MAINTAINED IN THE UNE COPIE EXACTE D'UN DOCUMENT
RECORDS OF THE DIRECTOR. CONTENU DANS LES LIVRES TENUS
PAR LE DIRECTEUR.
/s/
Deputy Director - Directeur adjoint Date: Oct 04 2005 [seal]
Industry Canada Industrie Canada
Certificate Certificat
of Continuance de prorogation
Canada Business Loi canadienne sur
Corporations Act les societes par actions
VASOGEN INC. 364839-7
________________________________________ ____________________________________
Name of corporation-Denomination de la Corporation number-Numero de la
societe societe
I hereby certify that the above-named Je certifie que la societe
corporation was continued under section susmentionnee a ete prorogee en
187 of the Canada Business Corporations vertu de l'article 187 de la
Act, as set out in the attached articles Loi canadienne sur les societes
of continuance. par actions, tel qu'il est
indique dans lesclauses de
prorogation ci-jointes.
/s/ August 9, 1999 / le 9 aout 1999
Date of Continuance - Date de la
Director - Directeur prorogation
Industry Canada Industrie Canada FORM 11 FORMULE 11
Canada Business Loi regissant les societes ARTICLES OF CONTINUANCE CLAUSES DE PROROGATION
Corporations Act par actions de regime federal (SECTION 187) (ARTICLE 187)
------------------------------------------------------------------------------------------------------------------------------------
1 -- Name of corporation Denomination de la societe
VASOGEN INC.
------------------------------------------------------------------------------------------------------------------------------------
2 -- The place in Canada where the registered Lieu au Canada ou doit etre siitue le siege social
office is to be situated
City of Toronto, Province of Ontario
------------------------------------------------------------------------------------------------------------------------------------
3 -- The classes and any maximum number of Categories et tout nombre maximal d'actions que la
shares that the corporation is authorized societe est autorisee a emettre
to issue
An unlimited number of common shares without par value.
------------------------------------------------------------------------------------------------------------------------------------
4 -- Restrictions, if any, on share transfers Restrictions sur le transfert des actions, s'il y a lieu
None.
------------------------------------------------------------------------------------------------------------------------------------
5 -- Number (or minimum and maximum number) of directors Nombre (ou nombre minimal et maximal) d'administrateurs
Minimum of 3 -- maximum of 11
------------------------------------------------------------------------------------------------------------------------------------
6 -- Restrictions, if any, on business the Limites imposees a l'activite commerciale de la societe, s'il y a lieu
corporation may carry on
There are no restrictions on the business the Corporation may carry on or on the powers the Corporation may exercise.
------------------------------------------------------------------------------------------------------------------------------------
7 -- (1) If change of name effected, previous (1) S'il y a changement de denomination, denomination anterieure
name
N/A
(2) Details of incorporation (2) Details de la constitution
Incorporated under the Business Corporations Act (Ontario) on January 10, 1980.
------------------------------------------------------------------------------------------------------------------------------------
8 -- Other provisions, if any Autres dispositions, s'il y a lieu
The annexed Schedule I is incorporated in this form.
------------------------------------------------------------------------------------------------------------------------------------
Date Signature Title-Titre
July 30, 1999 /s/ Vice President, Finance and Chief Financial Officer
FOR DEPARTMENTAL USE ONLY- A L'USAGE DU MINISTERE SEULEMENT Filed-Deposee August 10 1999
Corporation No. -- No de la societe
364839-7
Schedule I
8. Other provisions, if any
The board of directors may from time to time, without authorization of the
shareholders of the Corporation, in such amounts and on such terms as it
deems expedient:
(i) borrow money upon the credit of the Corporation;
(ii) issue, reissue, sell or pledge debt obligations of the Corporation;
(iii) subject to the limitations in the Canada Business Corporations Act,
give a guarantee on behalf of the Corporation to secure performance
of an obligation of any person; and
(iv) charge, mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property and assets of the Corporation,
currently owned or subsequently acquired, including, without
limiting the generality of the foregoing, real and personal
property, moveable and immoveable property, tangible and intangible
assets, book debts, rights, powers, franchises and its undertaking,
to secure any obligation of the Corporation.
The board of directors may from time to time by resolution delegate to a
committee of directors or to one or more of the directors or officers of
the Corporation all or any of the powers hereby conferred upon the board
to such extent and in such manner as the board shall determine at the time
of each such delegation. Nothing in this section limits or restricts the
borrowing of money by the Corporation on bills of exchange or promissory
notes made, drawn, accepted or endorsed by or on behalf of the
Corporation.
The directors may appoint one or more directors, who shall hold office for
a term expiring not later than the close of the next annual meeting of
shareholders, but the total number of directors so appointed may not
exceed one third of the number of directors elected at the previous annual
meeting of shareholders.
EXHIBIT "B"
BY-LAWS
(see attached)
INDEX
to By-Law Number 4 of
VASOGEN INC.
Page
SECTION 1 INTERPRETATION 1
1.01 Definitions 1
1.02 Additional Definitions 2
1.03 Interpretations 2
SECTION 2 BUSINESS OF THE CORPORATION 3
2.01 Registered Office 3
2.02 Corporate Seal 3
2.03 Financial Year 3
2.04 Execution of Instruments 3
2.05 Banking Arrangements 3
2.06 Voting Rights in Other Bodies Corporate 4
2.07 Withholding Information from Shareholders 4
SECTION 3 BORROWING AND SECURITY 4
3.01 Borrowing Power 4
3.02 Delegation 5
SECTION 4 DIRECTORS 5
4.01 Number of Directors and Quorum 5
4.02 Qualification 6
4.03 Election and Term 6
4.04 Removal of Directors 7
4.05 Vacation of Office 7
4.06 Vacancies; Appointment of Additional Directors 7
4.07 Action by the Board 8
4.08 Canadian Residency 8
4.09 Meetings by Telephonic, Electronic or Other Communication Facility 8
4.10 Place of Meetings 9
4.11 Calling of Meetings 9
4.12 Notice of Meeting 9
4.13 First Meeting of New Board 10
4.14 Adjourned Meeting 10
4.15 Regular Meetings 10
4.16 Chairman 10
4.17 Votes to Govern 11
4.18 Conflict of Interest 11
page ii
4.19 Remuneration and Expenses 11
SECTION 5 COMMITTEES 12
5.01 Committee of Directors 12
5.02 Transaction of Business 12
5.03 Audit Committee 12
5.04 Advisory Committees 12
SECTION 6 OFFICERS 13
6.01 Appointment 13
6.02 Chairman of the Board 13
6.03 Vice-Chairman of the Board 13
6.04 Managing Director 14
6.05 President 14
6.06 Vice-President 14
6.07 Secretary 14
6.08 Treasurer 15
6.09 Powers and Duties of Other Officers 15
6.10 Variation of Powers and Duties 15
6.11 Term of Office 15
6.12 Terms of Employment and Remuneration 16
6.13 Conflict of Interest 16
6.14 Agents and Attorneys 16
6.15 Fidelity Bonds 16
SECTION 7 PROTECTION OF DIRECTORS, OFFICERS AND OTHERS 16
7.01 Limitation of Liability 16
7.02 Indemnity 17
7.03 Advance of Costs 18
7.04 Derivative Actions 18
7.05 Insurance 18
7.06 Legal Proceedings 18
SECTION 8 SHARES 19
8.01 Allotment 19
8.02 Commissions 19
8.03 Registration of Transfer 19
8.04 Transfer Agents and Registrars 20
8.05 Lien for Indebtedness 20
8.06 Non-Recognition of Trusts 21
8.07 Share Certificates 21
8.08 Replacement of Share Certificates 22
8.09 Joint Shareholders 22
page iii
8.10 Deceased Shareholders 22
SECTION 9 DIVIDENDS AND RIGHTS 23
9.01 Dividends 23
9.02 Dividend Cheques 23
9.03 Non-Receipt of Cheques 23
9.04 Record Date for Dividends and Rights 24
9.05 Unclaimed Dividends 24
SECTION 10 MEETINGS OF SHAREHOLDERS 24
10.01 Annual Meetings 24
10.02 Special Meetings 25
10.03 Place of Meetings 25
10.04 Notice of Meetings 25
10.05 List of Shareholders Entitled to Notice 26
10.06 Record Date for Notice 26
10.07 Meetings without Notice 27
10.08 Chairman, Secretary and Scrutineers 27
10.09 Persons Entitled to be Present 28
10.10 Quorum 28
10.11 Right to Vote; Record Date for Voting 28
10.12 Proxies 29
10.13 Time for Deposit of Proxies 29
10.14 Joint Shareholders 29
10.15 Votes to Govern 30
10.16 Show of Hands 30
10.17 Electronic Voting 30
10.18 Ballots 30
10.19 Adjournment 31
10.20 Resolution in Writing 31
10.21 Only One Shareholder 31
10.22 Notice of Record Dates 31
10.23 Availability of Shareholders Lists for Inspection 32
SECTION 11 DIVISIONS AND DEPARTMENTS 32
11.01 Creation and Consolidation of Divisions 32
11.02 Name of Division 32
11.03 Officers of Divisions 32
SECTION 12 NOTICES 33
12.01 Method of Giving Notice 33
12.02 Notice to Joint Shareholders 33
12.03 Computation of Time 34
page iv
12.04 Undelivered Notices 34
12.05 Omissions and Errors 34
12.06 Persons Entitled by Death or Operation of Law 34
12.07 Waiver of Notice 34
SECTION 13 EFFECTIVE DATE 35
13.01 Effective Date 35
13.02 Repeal 35
BY-LAW NO. 4
A by-law relating generally to the transaction of the business
and affairs of
VASOGEN INC.
BE IT ENACTED as a by-law of the Corporation as follows:
SECTION 1
INTERPRETATION
1.01 Definitions
In the by-laws of the Corporation, unless the context otherwise requires:
"Act" means the Canada Business Corporations Act and the regulations thereto,
and any statute that may be substituted therefor, as from time to time amended;
"articles" means the articles attached to the certificate of continuance dated
August 9, 1999 of the Corporation as from time to time amended or restated;
"board" means the board of directors of the Corporation;
"by-laws" means this by-law and all other by-laws of the Corporation from time
to time in force and effect;
"Corporation" means the corporation incorporated by certificate of continuance
under the Act and named Vasogen Inc.;
"distributing corporation" means a corporation, any of the issued securities of
which are or were part of a distribution to the public and remain outstanding
and are held by more than one person;
page 2
"meeting of shareholders" includes an annual meeting of shareholders and a
special meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day that is a holiday as
defined in the Interpretation Act (Canada);
"recorded address" means in the case of a shareholder, the shareholder's address
as recorded in the securities register; and in the case of joint shareholders,
the address appearing in the securities register in respect of such joint
holding or the first address so appearing if there are more than one; and in the
case of a director, officer, auditor or member of a committee of the board, the
latest address of such person as recorded in the records of the Corporation;
"resident Canadian" has the meaning ascribed thereto in the Act;
"signing officer" means, in relation to any instrument, any person authorized to
sign the same on behalf of the Corporation by section 2.04 or by a resolution
passed pursuant thereto; and
"special meeting of shareholders" includes a special meeting of all shareholders
entitled to vote at an annual meeting of shareholders and a meeting of any class
or classes of shareholders entitled to vote on the question at issue.
1.02 Additional Definitions
Save as aforesaid, words and expressions defined in the Act have the same
meanings when used herein.
1.03 Interpretations
Words importing the singular number include the plural and vice versa; words
importing gender include the masculine, feminine and neuter genders; and words
importing persons include individuals, bodies corporate, partnerships, trusts
and unincorporated organizations.
page 3
SECTION 2
BUSINESS OF THE CORPORATION
2.01 Registered Office
Until changed in accordance with the Act, the registered office of the
Corporation shall be in the Province of Ontario at such location therein as the
board may from time to time determine.
2.02 Corporate Seal
Until changed by the board, the corporate seal of the Corporation, if any, shall
be in the form impressed hereon.
2.03 Financial Year
Until changed by the board, the financial year of the Corporation shall end on
the 30th day of November in each year.
2.04 Execution of Instruments
Deeds, transfers, assignments, bills of sale, contracts, obligations,
certificates and other instruments may be signed on behalf of the Corporation by
any two directors or officers or any director together with any officer. In
addition, the board may from time to time direct the manner in which and the
person or persons by whom any particular instrument or class of instruments may
or shall be signed. Any signing officer may affix the corporate seal, if any, to
any instrument requiring the same.
2.05 Banking Arrangements
The banking business of the Corporation including, without limitation, the
borrowing of money and the giving of security therefor, shall be transacted with
such banks, trust companies or other bodies corporate or organizations as may
from time to time be designated by or under the authority of the board. Such
banking business or any part thereof shall be transacted under such agreements,
instructions and delegations of powers as the board may from time to time
prescribe or authorize.
page 4
2.06 Voting Rights in Other Bodies Corporate
The signing officers of the Corporation may execute and deliver proxies and
arrange for the issuance of voting certificates or other evidence of the right
to exercise the voting rights attaching to any securities held by the
Corporation. Such instruments, certificates or other evidence shall be in favour
of such person or persons as may be determined by the officers executing such
proxies or arranging for the issuance of voting certificates or such other
evidence of the right to exercise such voting rights. In addition, the board
may, from time to time, direct the manner in which and the person or persons by
whom any particular voting rights or class of voting rights may or shall be
exercised.
2.07 Withholding Information from Shareholders
Subject to the provisions of the Act, no shareholder shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation's business which, in the opinion of the board, could be inexpedient
in the interests of the shareholders or the Corporation to communicate to the
public. The board may from time to time determine whether and to what extent and
at what time and place and under what conditions or regulations the accounts,
records and documents of the Corporation or any of them shall be open to the
inspection of shareholders and no shareholder shall have any right to inspect
any account, record or document of the Corporation except as conferred by the
Act or authorized by the board.
SECTION 3
BORROWING AND SECURITY
3.01 Borrowing Power
Without limiting the borrowing powers of the Corporation as set forth in the
Act, the board may from time to time:
(a) borrow money upon the credit of the Corporation;
page 5
(b) issue, reissue, sell, pledge or hypothecate bonds, debentures, notes
or other evidence of indebtedness or guarantee of the Corporation,
whether secured or unsecured;
(c) give a guarantee on behalf of the Corporation to secure performance
of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security
interest in or charge upon all or any real or personal, movable or
immovable property of the Corporation, owned or subsequently
acquired, including book debts, rights, powers, franchises and
undertakings by way of mortgage, hypothec, pledge or otherwise, to
secure payment of any such evidence of indebtedness or guarantee
whether present or future of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
3.02 Delegation
The board may from time to time by resolution delegate to one or more directors,
a committee of directors or one or more officers of the Corporation as may be
designated by the board all or any of the powers conferred on the board by
section 3.01 or by the Act to such extent and in such manner as the board shall
determine at the time of each such delegation.
SECTION 4
DIRECTORS
4.01 Number of Directors and Quorum
Until changed in accordance with the Act, the board shall consist of not fewer
than the minimum number and not more than the maximum number of directors
provided in the articles. Subject to the Act and to section 4.08 hereof, the
quorum for the transaction of business at any meeting of
page 6
the board shall consist of a majority of directors, or such other number of
directors as the board may from time to time determine.
4.02 Qualification
A person shall not be qualified for election as a director if such person is
less than 18 years of age; if such person is of unsound mind and has been so
found by a court in Canada or elsewhere; if such person is not an individual; or
if such person has the status of a bankrupt. A director need not be a
shareholder. Any person who is elected or appointed to hold office as a
director, even where otherwise qualified to be a director, shall be deemed not
to be elected or appointed to hold office as a director unless:
(a) such person was present at the meeting when the election or
appointment took place and such individual did not refuse to hold
office as a director; or
(b) such person was not present at the meeting when the election or
appointment took place and
(i) such person consented to hold office as a director in writing
before the election or appointment or within ten days after
it; or
(ii) such person has acted as a director pursuant to the election
or appointment.
At least twenty-five percent (25%) of the directors shall be resident Canadians
unless the Corporation has less than four directors in which case, at least one
of the directors shall be a resident Canadian. For so long as the Corporation is
a distributing corporation at least two directors shall not be officers or
employees of the Corporation or its affiliates.
4.03 Election and Term
Directors shall be elected yearly to hold office until the close of the next
annual meeting of shareholders or, in the case of directors named in the notice
accompanying the articles of
page 7
incorporation, until the first meeting of shareholders. Where directors fail to
be elected at any such meeting of shareholders, then notwithstanding the
preceding sentence, the incumbent directors shall continue in office until their
successors are elected. The number of directors to be elected at any such
meeting shall be the greater of the number (or the minimum number, as the case
may be) of directors provided for in the articles and the number of directors
then in office unless the directors or the shareholders otherwise determine. The
election shall be by resolution.
4.04 Removal of Directors
Subject to the provisions of the Act, the shareholders may by resolution passed
at a special meeting remove any director from office and the vacancy created by
such removal may be filled at the same meeting failing which it may be filled by
the board.
4.05 Vacation of Office
A person ceases to hold the office of director of the Corporation when such
person dies; such person is removed from office by the shareholders; such person
ceases to be qualified for election as a director; or such person's written
resignation is sent or delivered to the Corporation, or if a time is specified
in such resignation, at the time so specified, whichever is later.
4.06 Vacancies; Appointment of Additional Directors
Subject to the Act, a quorum of the board may fill a vacancy in the board,
except a vacancy resulting from an increase in the number or minimum number of
directors or from a failure of the shareholders to elect the number or minimum
number of directors. In the absence of a quorum of the board, or if the vacancy
has arisen from a failure of the shareholders to elect the number or minimum
number of directors, the board shall without delay call a special meeting of
shareholders to fill the vacancy. If the board fails to call such meeting or if
there are no such directors then in office, any shareholder may call the
meeting. Any director appointed or elected to fill such vacancy holds office for
the unexpired term of such director's predecessor. If the articles so provide,
the directors may appoint one or more additional directors, who shall hold
office until the close of the next annual meeting, but the total number of
additional directors so appointed may not exceed one third of the number of
directors elected at the previous annual meeting of shareholders of the
Corporation.
page 8
4.07 Action by the Board
The board shall manage, or supervise the management of, the business and affairs
of the Corporation. Subject to sections 4.08 and 4.09, the powers of the board
may be exercised by resolution passed at a meeting at which a quorum is present
or by resolution in writing signed by all the directors who would have been
entitled to vote on that resolution at a meeting of the board. Where there is a
vacancy in the board, the remaining directors may exercise all the powers of the
board so long as a quorum remains in office. Where the Corporation has only one
director, that director may constitute the meeting.
4.08 Canadian Residency
The board shall not transact business at a meeting, other than filling a vacancy
in the board, unless twenty-five percent (25%) of the directors present are
resident Canadians (or, if the Corporation has fewer than four directors, at
least one of the directors present is a resident Canadian), except where:
(a) a resident Canadian director who is unable to be present approves in
writing, or by telephonic, electronic or other communication
facility, the business transacted at the meeting; and
(b) the required number of resident Canadian directors would have been
present had that director been present at the meeting.
4.09 Meetings by Telephonic, Electronic or Other Communication Facility
Subject to the Act, if all the directors consent, a director may participate in
a meeting of the board or of a committee of the board by means of a telephonic,
electronic or other communication facility that permits all persons
participating in the meeting to communicate adequately with each other during
the meeting, and a director participating in such a meeting by such means is
deemed to be present at that meeting. Any such consent shall be effective
whether given before or after the meeting to which it relates and may be given
with respect to all meetings of the board and of committees of the board held
while a director holds office.
page 9
4.10 Place of Meetings
Meetings of the board may be held at any place in or outside Canada.
4.11 Calling of Meetings
Meetings of the board shall be held from time to time and at such time at such
place as the board, the chairman of the board, the vice-chairman of the board,
the managing director, the president or any two directors may determine.
4.12 Notice of Meeting
Notice of the time and place of each meeting of the board shall be given in the
manner provided in section 12.01 to each director not less than 48 hours before
the time when the meeting is to be held. A notice of a meeting of directors need
not specify the purpose of or the business to be transacted at the meeting
except where the Act requires such purpose or business to be specified, and for
any proposal to:
(a) submit to the shareholders any question or matter requiring approval
of the shareholders;
(b) fill a vacancy among the directors or in the office of auditor or
appoint additional directors;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares of the Corporation;
(f) pay a commission for or in connection with the purchase from the
Corporation of the Corporation's shares;
(g) approve a management proxy circular;
page 10
(h) approve a take-over bid circular or directors' circular;
(i) approve any annual financial statements; or
(j) adopt, amend or repeal by-laws.
A director may in any manner waive notice of or otherwise consent to a meeting
of the board. Attendance of a director at a meeting of directors is a waiver of
notice of the meeting except where a director attends a meeting for the express
purpose of objecting to the transaction of any business on the grounds that the
meeting is not lawfully called.
4.13 First Meeting of New Board
Provided a quorum of directors is present, each newly elected board may without
notice hold its first meeting immediately following the meeting of shareholders
at which such board is elected.
4.14 Adjourned Meeting
Notice of an adjourned meeting of the board is not required if the time and
place of the adjourned meeting is announced at the original meeting.
4.15 Regular Meetings
The board may appoint a day or days in any month or months for regular meetings
of the board at a place and hour to be named. A copy of any resolution of the
board fixing the place and time of such regular meetings shall be sent to each
director forthwith after being passed, but no other notice shall be required for
any such regular meeting except where the Act requires the purpose thereof or
the business to be transacted thereat to be specified.
4.16 Chairman
The chairman of any meeting of the board shall be the first mentioned of such of
the following officers as have been appointed and who is a director and is
present at the meeting: chairman of the board, vice-chairman of the board,
managing director, president, or a vice-president who is a
page 11
director. If no such officer is present, the directors present shall choose one
of their number to be chairman.
4.17 Votes to Govern
At all meetings of the board every question shall be decided by a majority of
the votes cast on the question. In case of an equality of votes the chairman of
the meeting shall be entitled to a second or casting vote.
4.18 Conflict of Interest
A director or officer who is a party to, or who is a director or officer or an
individual acting in a similar capacity of or has a material interest in any
person who is a party to, a material contract or material transaction or
proposed material contract or material transaction with the Corporation shall
disclose the nature and extent of the individual's interest at the time and in
the manner provided by the Act. Any contract or transaction or proposed contract
or transaction in which a director or officer is interested shall be referred to
the board for approval (unless the same is referred to the shareholders for
approval) even if such contract is one that in the ordinary course of the
Corporation's business would not require approval by the board or the
shareholders, and a director interested in a contract so referred to the board
shall not vote on any resolution to approve the same except as provided by the
Act.
4.19 Remuneration and Expenses
The directors shall be paid such remuneration for their services as the board
may from time to time determine. The directors shall also be entitled to be
reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the board or any committee thereof. Nothing herein
contained shall preclude any director from serving the Corporation in any other
capacity and receiving remuneration therefor.
page 12
SECTION 5
COMMITTEES
5.01 Committee of Directors
The board may appoint from its members a committee of directors, however
designated, and delegate to such committee any of the powers of the board except
those which, under the Act, a committee of directors has no authority to
exercise.
Unless otherwise determined by the board, each committee of directors shall have
the power to fix its quorum, to elect its chairman and to regulate its
procedure.
5.02 Transaction of Business
Subject to the provisions of section 4.09, the powers of a committee of
directors may be exercised by a meeting at which a quorum of the committee is
present or by resolution in writing signed by all the members of such committee
who would have been entitled to vote on that resolution at a meeting of the
committee. Meetings of such committee may be held at any place in or outside
Canada.
5.03 Audit Committee
For so long as the Corporation is a distributing corporation, the board shall
elect annually from among its number an audit committee to be composed of not
fewer than 3 directors of whom a majority shall not be officers or employees of
the Corporation or its affiliates. The audit committee shall have the powers and
duties provided in the Act.
5.04 Advisory Committees
The board may from time to time appoint such other committees as it may deem
desirable, but the functions of any such other committees, in so far as such
functions concern the powers of the directors that may not be delegated to any
persons shall be advisory only.
page 13
SECTION 6
OFFICERS
6.01 Appointment
The board may from time to time appoint a president, one or more vice-presidents
(to which title may be added words indicating seniority or function), a
secretary, a treasurer and such other officers as the board may determine,
including one or more assistants to any of the officers so appointed. The board
may specify the duties of and, in accordance with this by-law and subject to the
provisions of the Act, delegate to such officers powers to manage the business
and affairs of the Corporation. Subject to sections 6.02 and 6.03, an officer
may but need not be a director and one person may hold more than one office.
6.02 Chairman of the Board
The board may from time to time also appoint a chairman of the board who shall
be a director. If appointed, the board may assign to the individual any of the
powers and duties that are by any provisions of this by-law capable of being
assigned to the managing director or to the president; and the individual shall,
subject to the provisions of the Act, have such other powers and duties as the
board may specify. During the absence or disability of the chairman of the
board, the individual's duties shall be performed and the individual's powers
exercised by the vice-chairman of the board, if any, or if there is no
vice-chairman of the board, by the managing director, if any, or by the
president.
6.03 Vice-Chairman of the Board
The board may from time to time appoint a vice-chairman of the board who shall
be a director. During the absence or disability of the chairman of the board,
the chairman's duties shall be performed and his powers exercised by the
vice-chairman of the board. The vice-chairman of the board shall, subject to the
provisions of the Act, have such other powers and duties as the board may
specify.
page 14
6.04 Managing Director
The board may from time to time appoint a managing director who shall be a
resident Canadian and a director. If appointed, the managing director shall be
the chief executive officer and, subject to the authority of the board, shall
have general supervision of the business and affairs of the Corporation; and the
managing director shall, subject to the provisions of the Act, have such other
powers and duties as the board may specify except for those powers of directors
which under the Act the board may not delegate to a managing director. During
the absence or disability of the president, or if no president has been
appointed, the managing director shall also have the powers and duties of that
office.
6.05 President
If appointed, the president shall be the chief operating officer, if a managing
director, or chief executive officer, has been or is to be otherwise appointed,
and if not, the president shall be the chief executive officer, unless the board
otherwise determines. Subject to the authority of the board and any limitations
the board may prescribe, if the president is the chief executive officer, the
president shall have general supervision of the business of the Corporation; and
the president shall have such other powers and duties as the board may specify.
During the absence or disability of the managing director or if no managing
director has been appointed, the president shall also have the powers and duties
of that office.
6.06 Vice-President
A vice-president shall have such powers and duties as the board or the chief
executive officer may specify.
6.07 Secretary
The secretary shall attend and be the secretary of all meetings of the board,
shareholders and committees of the board and shall enter or cause to be entered
in records kept for that purpose minutes of all proceedings thereat; the
secretary shall give or cause to be given, as and when instructed, all notices
to shareholders, directors, officers, the auditor and members of committees of
the board; the secretary shall be the custodian of the stamp or mechanical
device generally
page 15
used for affixing the corporate seal of the Corporation and of all books,
papers, records, documents and instruments belonging to the Corporation, except
when some other officer or agent has been appointed for that purpose; and the
secretary shall have such other powers and duties as the board or the chief
executive officer may specify.
6.08 Treasurer
In the absence of a chief financial officer, the treasurer shall keep proper
accounting records in compliance with the Act and shall be responsible for the
deposit of money, the safekeeping of securities and the disbursement of the
funds of the Corporation; the treasurer shall render to the board whenever
required an account of all of the treasurer's transactions as treasurer and of
the financial position of the Corporation and the treasurer shall have such
other powers and duties as the board or the chief executive officer may specify.
6.09 Powers and Duties of Other Officers
The powers and duties of all other officers shall be such as the terms of their
engagement call for or as the board or the chief executive officer may specify.
Any of the powers and duties of an officer to whom an assistant has been
appointed may be exercised and performed by such assistant, unless the board or
the chief executive officer otherwise directs.
6.10 Variation of Powers and Duties
The board may from time to time and subject to the provisions of the Act, vary,
add to or limit the powers and duties of any officer.
6.11 Term of Office
The board, in its discretion, may remove any officer of the Corporation, without
prejudice to such officer's rights under any employment contract. Otherwise,
each officer appointed by the board shall hold office until the officer's
successor is appointed.
page 16
6.12 Terms of Employment and Remuneration
The terms of employment and the remuneration of officers appointed by the board
shall be settled by it from time to time.
6.13 Conflict of Interest
An officer shall disclose the officer's interest in any material contract or
material transaction or any proposed material contract or proposed material
transaction with the Corporation in accordance with section 4.18.
6.14 Agents and Attorneys
The board shall have power from time to time to appoint agents or attorneys for
the Corporation in or outside Canada with such powers of management or otherwise
(including the power to sub-delegate) as may be thought fit.
6.15 Fidelity Bonds
The board may require such officers, employees and agents of the Corporation as
the board deems advisable to furnish bonds for the faithful discharge of their
powers and duties, in such form and with such surety as the board may from time
to time determine.
SECTION 7
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 Limitation of Liability
Every director and officer of the Corporation in exercising their powers and
discharging their duties shall act honestly and in good faith with a view to the
best interests of the Corporation and exercise the care, diligence and skill
that a reasonably prudent person would exercise in comparable circumstances.
Subject to the foregoing, no director or officer shall be liable for the acts,
receipts, neglects or defaults of any other director or officer or employee, or
for joining in any receipt or other act for conformity, or for any loss, damage
or expense happening to the Corporation through the insufficiency or deficiency
of title to any property acquired for or on behalf of the Corporation, or for
the insufficiency or deficiency of any security in or upon which
page 17
any of the moneys of the Corporation shall be invested, or for any loss or
damage arising from the bankruptcy, insolvency or tortious acts of any person
with whom any of the moneys, securities or effects of the Corporation shall be
deposited, or for any loss occasioned by any error of judgment or oversight on
their part, or for any other loss, damage or misfortune whatever which shall
happen in the execution of the duties of their office or in relation thereto,
unless the same are occasioned by their own willful neglect or default; provided
that, except as otherwise provided in the Act, nothing herein shall relieve any
director or officer from the duty to act in accordance with the Act or from
liability for any breach thereof.
7.02 Indemnity
Subject to the limitations contained in the Act, the Corporation shall indemnify
a director or officer, a former director or officer, or another individual who
acts or acted at the Corporation's request as a director or officer, or an
individual acting in a similar capacity, of another entity, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by the individual in respect of any civil,
criminal, administrative, investigative or other proceeding in which the
individual is involved because of that association with the Corporation or other
entity, if:
(a) the individual acted honestly and in good faith with a view to the
best interests of the Corporation or, as the case may be, with a
view to the best interests of the other entity for which the
individual acted as director or officer or in a similar capacity at
the Corporation's request; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, the individual had
reasonable grounds for believing that the individual's conduct was
lawful.
page 18
The Corporation shall also indemnify such person in such other circumstances as
the Act permits or requires.
7.03 Advance of Costs
The Corporation, if authorized by the board, may advance moneys to a director,
officer or other individual referred to in Section 7.02 for the costs, charges
and expenses of a proceeding referred to in Section 7.02. The individual shall
repay the moneys if the individual does not fulfil the conditions set out in
paragraphs 7.02(a) and (b).
7.04 Derivative Actions
The Corporation may with the approval of a court authorized to give such
approval by the Act, indemnify an individual referred to in Section 7.02, or
advance moneys under Section 7.03, in respect of an action by or on behalf of
the Corporation or other entity to procure a judgment in its favour, to which
the individual is made a party because of the individual's association with the
Corporation or other entity as described in Section 7.02, against all costs,
charges and expenses reasonably incurred by the individual in connection with
such action, if the individual fulfils the conditions set out in paragraphs
7.02(a) and (b).
7.05 Insurance
Subject to the limitations contained in the Act, the Corporation may purchase
and maintain insurance for the benefit of any person referred to in section 7.02
hereof.
7.06 Legal Proceedings
The board is authorized from time to time to
(a) retain and instruct legal counsel to commence or defend legal
proceedings on behalf of the Corporation and to authorize any
settlement, compromise, waiver of privilege, plea in criminal or
quasi-criminal matters, proceedings or other steps whatsoever on
behalf of the Corporation as they consider expedient; and
page 19
(b) to delegate to such directors, officers or employees of the
Corporation as the board may designate, all or any of the foregoing
powers to such extent and in such manner as the board may determine.
SECTION 8
SHARES
8.01 Allotment
Subject to the provisions of the Act, the board and, if and as authorized by the
board, a committee of the board, may from time to time grant options to purchase
or allot the whole or any part of the authorized and unissued shares of the
Corporation at such times and to such persons and for such consideration as the
board shall determine, provided that no share shall be issued until it is fully
paid as prescribed by the Act.
8.02 Commissions
The board may from time to time authorize the Corporation to pay a reasonable
commission to any person in consideration of the person's purchasing or agreeing
to purchase shares of the Corporation from the Corporation or from any other
person, or procuring or agreeing to procure purchasers for any such shares.
8.03 Registration of Transfer
Subject to the provisions of the Act, no transfer of shares shall be registered
in a securities register except:
(a) upon presentation of the certificate representing such shares with a
transfer endorsed xxxxxxx, or delivered therewith, duly executed by
the registered holder or by the registered holder's attorney or
successor duly appointed;
(b) upon the provision of such reasonable assurance or evidence of
signature, identification and authority to transfer, if any, as the
board (or the person of persons designated by the board from time to
time to make such determination)
page 20
may from time to time determine in any particular case or generally
in respect of all transfers or a particular class of transfers;
(c) where the Corporation has a duty to inquire into any adverse claims,
if such duty has been discharged;
(d) where it has been established, to the satisfaction of the board (or
the person or persons designated by the board from time to time to
make such determination) that the transfer is to a bona fide
purchaser;
(e) where it has not been established to the satisfaction of the board
(or the person or persons designated by the board from time to time
to make such determination) that the transfer is to a bona fide
purchaser, the board (or the person or persons designated by the
board from time to time to make such determination) is satisfied
that there is no evidence that the transfer is not rightful;
(f) upon payment of all applicable taxes and any fees prescribed by the
board; and
(g) upon compliance with such restrictions on transfer as are authorized
by the articles and upon satisfaction of any lien referred to in
section 8.05.
8.04 Transfer Agents and Registrars
The board may from time to time appoint a registrar to maintain the securities
register and a transfer agent to maintain the register of transfers and may also
appoint one or more branch registrars to maintain branch securities registers of
transfers, but one person may be appointed both registrar and transfer agent.
The board may at any time terminate any such appointment.
8.05 Lien for Indebtedness
If the articles provide that the Corporation shall have a lien on shares
registered in the name of a shareholder indebted to the Corporation, such lien
may be enforced, subject to any other provision of the articles, by the sale of
the shares thereby affected or by any other action, suit,
page 21
remedy or proceeding authorized or permitted by law or by equity and, pending
such enforcement, the Corporation may refuse to register a transfer of the whole
or any part of such shares.
8.06 Non-Recognition of Trusts
Subject to the provisions of the Act, the Corporation shall treat the registered
owner of a security as the person exclusively entitled to vote, to receive
notices, to receive any interest, dividend or other payments in respect of the
share, and otherwise to exercise all the rights and powers of an owner of the
share.
8.07 Share Certificates
Every holder of one or more shares of the Corporation shall be entitled, at the
holder's option, to a share certificate, or to a non-transferable written
acknowledgment of the holder's right to obtain a share certificate, stating the
number and class or series of shares held by the holder as shown on the
securities register. Share certificates and acknowledgments of a shareholder's
right to a share certificate, respectively, shall be in such form as the board
shall from time to time approve. Any share certificate shall be signed in
accordance with section 2.04 and need not be under the corporate seal; provided
that, unless the board otherwise determines, certificates representing shares in
respect of which a transfer agent and/or registrar has been appointed shall not
be valid unless countersigned by or on behalf of such transfer agent and/or
registrar. The signature of one of the signing officers or, in the case of share
certificates which are not valid unless countersigned by or on behalf of a
transfer agent and/or registrar, the signatures of both signing officers, may be
printed or mechanically reproduced in facsimile upon share certificates and
every such facsimile signature shall for all purposes be deemed to be the
signature of the officer whose signature it reproduces and shall be binding upon
the Corporation. A share certificate executed as aforesaid shall be valid
notwithstanding that one or both of the officers whose facsimile signature
appears thereon no longer holds office at the date of issue of the certificate.
page 22
8.08 Replacement of Share Certificates
The board or any officer or agent designated by the board may in its or such
person's discretion direct the issue of a new share certificate in lieu of and
upon cancellation of a share certificate that has been mutilated or in
substitution for a share certificate claimed to have been lost, destroyed or
wrongfully taken if the owner:
(a) so requests before the Corporation has notice that the security has
been acquired by a bona fide purchaser
(b) unless the board otherwise determines in a particular case,
furnishes the Corporation with an indemnity bond sufficient, in the
discretion of the board, to protect the Corporation; and
(c) satisfies any other reasonable requisites imposed by the Corporation
from time to time, whether generally or in any particular case.
8.09 Joint Shareholders
If two or more persons are registered as joint holders of any share, the
Corporation shall not be bound to issue more than one certificate or written
acknowledgment referred to in section 8.07 in respect thereof, and delivery of
such certificate to one of such persons shall be sufficient delivery to all of
them. Any one of such persons may give effectual receipts for the certificate
issued in respect thereof or for any dividend, bonus, return of capital or other
money payable or warrant issuable in respect of such share.
8.10 Deceased Shareholders
In the event of the death of a holder, or of one of the joint holders, of any
share, the Corporation shall not be required to make any entry in the securities
register in respect thereof or to make payment of any dividends thereon except
upon production of all such documents as may be required by law and upon
compliance with the reasonable requirements of the Corporation and its transfer
agents.
page 23
SECTION 9
DIVIDENDS AND RIGHTS
9.01 Dividends
The board may from time to time declare dividends payable to the shareholders
according to their respective rights and interests in the Corporation. Dividends
may be paid by issuing fully paid shares of the Corporation and, subject to the
provisions of the Act, in money or property.
9.02 Dividend Cheques
A dividend payable in cash shall be paid by cheque of the Corporation, drawn on
the Corporation's bankers or one of them or if the Corporation has appointed a
disbursement agent, by cheque of the disbursement agent drawn on the
disbursement agent's bankers or one of them (or by other means by which such
agent effects such payments in the normal course of its business as a
disbursement agent) to the order of each registered holder of shares of the
class or series in respect of which it has been declared and mailed by prepaid
ordinary mail to such registered holder at the registered holder's recorded
address, unless such holder otherwise directs. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct, be made payable to the
order of all of such joint holders and mailed to them at their recorded address.
The mailing of such cheque as aforesaid, unless the same is not paid on due
presentation, shall satisfy and discharge the liability for the dividend to the
extent of the sum represented thereby plus the amount of any tax which the
Corporation is required to and does withhold.
9.03 Non-Receipt of Cheques
In the event of non-receipt of any dividend cheque by the person to whom it is
sent as aforesaid, the Corporation shall issue to such person a replacement
cheque for a like amount on such terms as to indemnity, reimbursement of
expenses and evidence of non-receipt and of title as the board may from time to
time prescribe, whether generally or in any particular case.
page 24
9.04 Record Date for Dividends and Rights
Subject to the Act and the rules of any stock exchange on which the shares of
the Corporation are listed, the board may fix in advance within the period
prescribed by the Act a date as a record date for the determination of the
persons entitled to receive payment of any dividend or to exercise the right to
subscribe for any warrant or other evidence of right to subscribe for securities
of the Corporation, provided that, unless notice of the record date is waived in
writing by every holder of a share of the class or series affected whose name is
set out in the securities register at the close of business on the day the
directors fix the record date, the Corporation shall give notice of any such
record date within the period prescribed by the Act, by newspaper advertisement
in the manner provided in the Act and to each stock exchange in Canada on which
the shares of the Corporation are listed. Where no record date is fixed in
advance as aforesaid, the record date for the determination of the persons
entitled to receive payment of any dividend or to exercise the right to
subscribe for securities of the Corporation shall be at the close of business on
the day on which the resolution relating to such dividend or right to subscribe
is passed by the board.
9.05 Unclaimed Dividends
Subject to the Act and other applicable laws, any dividend unclaimed after a
period of 6 years from the date on which the same has been declared to be
payable shall be forfeited and shall revert to the Corporation.
SECTION 10
MEETINGS OF SHAREHOLDERS
10.01 Annual Meetings
The annual meeting of shareholders shall be held
(a) not later than eighteen months after the Corporation comes into
existence; and
page 25
(b) subsequently, not later than fifteen months after holding the last
preceding annual meeting but not later than six months after the end
of the Corporation's preceding financial year,
for the purpose of receiving and considering the financial statements and
reports required by the Act to be placed before the annual meeting, electing
directors, appointing an auditor and for the transaction of such other business
as may properly be brought before the meeting.
10.02 Special Meetings
The board shall have power to call a special meeting of shareholders at any
time.
10.03 Place of Meetings
Meetings of shareholders, both annual and special, shall be held at the
registered office of the Corporation or elsewhere in Canada as the board, or any
person to whom such decision is delegated by the board, may from time to time
determine. Any meeting of shareholders, either annual or special, may also be
held at some place outside Canada, if the place at which such meeting is to be
held is specified in the articles or if all of the shareholders entitled to vote
thereat agree that the meeting is to be held at that place.
10.04 Notice of Meetings
For so long as the Corporation is a distributing corporation, notice of the time
and place of each meeting of shareholders shall be given within the time period
prescribed by the Act. If the Corporation is not a distributing corporation,
notice of the time and place of each meeting of shareholders shall be given not
less than 10 days before the date when the meeting is to be held. In either
case, such notice shall be given, in the manner provided in section 12.01, to
each director, to the auditor and to each shareholder who at the close of
business on the record date for notice is entered in the securities register as
the holder of one or more shares carrying the right to vote at or attend the
meeting. Subject to the Act and any other applicable law, notice of a meeting of
shareholders called for any purpose, other than receiving and considering the
financial statements and auditor's report, election of directors and
reappointment of the incumbent auditor, shall state the nature of such business
in sufficient detail to permit the
page 26
shareholder to form a reasoned judgment thereon and shall state the text of any
special resolution to be submitted to the meeting. A shareholder and any other
person entitled to attend a meeting of shareholders may in any manner waive
notice of or otherwise consent to a meeting of shareholders.
10.05 List of Shareholders Entitled to Notice
For every meeting of shareholders, the Corporation shall prepare a list of
shareholders entitled to receive notice of the meeting, arranged in alphabetical
order and showing the number of shares entitled to vote at the meeting held by
each shareholder. If a record date for the determination of shareholders
entitled to notice of the meeting is fixed pursuant to section 10.06, the
shareholders listed shall be those registered at the close of business on such
record date. If no such record date is fixed, the shareholders listed shall be
those registered at the close of business on the day immediately preceding the
day on which notice of the meeting is given, or where no such notice is given,
on the day on which the meeting is held. Such list shall be prepared, if a
record date for the determination of shareholders entitled to notice of the
meeting is fixed pursuant to section 10.06, no later than the tenth day
following such record date and, if no such record date is fixed, on the day on
which notice of the meeting is given, or where no such notice is given, on the
day on which the meeting is held. Where a separate list of shareholders has not
been prepared, the names of persons appearing in the securities register at the
requisite time as the holder of one or more shares carrying the right to vote at
such meeting shall be deemed to be a list of shareholders.
10.06 Record Date for Notice
The board may fix in advance a date, within the period prescribed by Act, as a
record date for the determination of the shareholders entitled to notice of the
meeting. If no record date is so fixed, the record date for the determination of
the shareholders entitled to notice of the meeting shall be the close of
business on the day immediately preceding the day on which the notice is given
or if no notice is given, the day on which the meeting is held.
page 27
10.07 Meetings without Notice
A meeting of shareholders may be held without notice at any time and place
permitted by the Act:
(a) if all the shareholders entitled to vote or to attend thereat are
present in person or represented by proxy except where they attend
the meeting for the express purpose of objecting that the meeting is
not duly called or if those not present or represented by proxy
waive notice of or otherwise consent to such meeting being held; and
(b) if the auditor and the directors are present except where they
attend the meeting for the express purpose of objecting that the
meeting is not duly called or waive notice of or otherwise consent
to such meeting being held.
At such a meeting any business may be transacted which the Corporation at a
meeting of shareholders may transact. If the meeting is held at a place outside
Canada, and such place is not specified in the Corporation's articles,
shareholders not present or represented by proxy, but who have waived notice of
or otherwise consented to such meeting, shall also be deemed to have consented
to the meeting being held at such place.
10.08 Chairman, Secretary and Scrutineers
The chairman of any meeting of shareholders shall be the first mentioned of such
of the following officers as have been appointed and who is present at the
meeting and prepared to act as chairman: president, managing director, chairman
of the board, vice-chairman of the board or a vice-president who is a
shareholder. If none of such officers is present within 15 minutes from the time
fixed for holding the meeting or none of such officers that are present is
prepared to act as chairman, the persons present and entitled to vote shall
choose one of their number to be chairman. If the secretary of the Corporation
is absent, the chairman shall appoint some person, who need not be a
shareholder, to act as secretary of the meeting. If desired, one or more
scrutineers, who need not be shareholders, may be appointed by a resolution or
by the chairman with the consent of the meeting.
page 28
10.09 Persons Entitled to be Present
The only persons entitled to be present at a meeting of shareholders shall be
those entitled to vote thereat, the directors and the auditor of the Corporation
and others who, although not entitled to vote, are entitled or required under
any provision of the Act, the articles or by-laws of the Corporation to be
present at the meeting. Any other person may be admitted only on the invitation
of the chairman of the meeting or with the consent of the meeting.
10.10 Quorum
A quorum for the transaction of business at any meeting of shareholders shall be
the lesser of the number of shareholders or two persons present in person, each
being a shareholder or representative duly authorized in accordance with the Act
entitled to vote thereat or a duly appointed proxy for a shareholder so
entitled. If a quorum is present at the opening of the meeting, the shareholders
present in person or by proxy may proceed with the business of the meeting even
if a quorum is not present throughout the meeting.
10.11 Right to Vote; Record Date for Voting
Subject to the Act, the board may establish a record date for the determination
of those shareholders entitled to vote at a meeting of shareholders of the
Corporation. If the board establishes such a record date, the Corporation shall
not later than the tenth day thereafter prepare a list of shareholders of the
Corporation holding shares entitled to be voted at such meeting arranged in
alphabetical order and showing the number of shares entitled to vote at the
meeting held by each shareholder. Subject to the provisions of the Act as to
authorized representatives of any other body corporate, at the meeting of
shareholders in respect of which the Corporation has established a record date
for the determination of those shareholders entitled to vote thereat, every
person who is named in the list prepared as a consequence of the establishment
of such record date shall be entitled to vote the shares shown thereon opposite
such person's name. If the Corporation has not established a record date for the
determination of those shareholders entitled to vote thereat, every person who
is named in the list prepared in accordance with Section 10.05 shall be entitled
to vote the shares shown thereon opposite such person's name.
page 29
In the absence of a list prepared as aforesaid in respect of the establishment
of a record date for the determination of those shareholders entitled to vote at
a meeting of shareholders, every person shall be entitled to vote at the meeting
whose name appears in the securities register as the holder of one or more
shares carrying the right to vote at such meeting.
10.12 Proxies
Every shareholder entitled to vote at a meeting of shareholders may appoint a
proxyholder, or one or more alternate proxyholders, who need not be
shareholders, to attend and act at the meeting in the manner and to the extent
authorized and with the authority conferred by the proxy. Unless the Act permits
the appointment of a proxy by electronic means, each proxy, to be effective,
must be in writing, executed by the shareholder or the shareholder's attorney
and shall conform with the requirements of the Act. If the Act permits the
appointment of a proxy by electronic means, a proxy may also be appointed in any
electronic manner so permitted by the Act.
10.13 Time for Deposit of Proxies
The board may specify in a notice calling a meeting of shareholders a time,
preceding the time of such meeting by not more than 48 hours exclusive of
non-business days, before which time proxies to be used at such meeting must be
deposited. A proxy shall be acted upon only if, prior to the time so specified,
it shall have been deposited with the Corporation or an agent thereof specified
in such notice or, if no such time is specified in such notice, unless it has
been received by the secretary of the Corporation or by the chairman of the
meeting or any adjournment thereof prior to the time of voting.
10.14 Joint Shareholders
If two or more persons hold shares jointly, any one of them present in person or
represented by proxy at a meeting of shareholders may, in the absence of the
other or others, vote the shares; but if two or more of those persons are
present in person or represented by proxy and vote, they shall vote as one on
the shares jointly held by them.
page 30
10.15 Votes to Govern
At any meeting of shareholders every question shall, unless otherwise required
by the articles or by-laws or by the Act, be determined by the majority of the
votes cast on the question. In case of an equality of votes either upon a show
of hands, a poll, or by means of a telephonic, electronic or other communication
facility, the chairman of the meeting shall be entitled to a second or casting
vote.
10.16 Show of Hands
Subject to the provisions of the Act, any question at a meeting of shareholders
shall be decided by a show of hands unless a ballot thereon is required or
demanded as hereinafter provided. Upon a show of hands every person who is
present and entitled to vote shall have one vote. Whenever a vote by show of
hands shall have been taken upon a question, unless a ballot thereon is so
required or demanded, a declaration by the chairman of the meeting that the vote
upon the question has been carried or carried by a particular majority or not
carried and an entry to that effect in the minutes of the meeting shall be prima
facie evidence of the fact without proof of the number or proportion of the
votes recorded in favour of or against any resolution or other proceeding in
respect of the said question, and the result of the vote so taken shall be the
decision of the shareholders upon the said question.
10.17 Electronic Voting
Despite section 10.16, any vote referred to in section 10.16 may be held, in
accordance with the Act, entirely by means of telephonic, electronic or other
communication facility, if the Corporation makes available such a communication
facility.
10.18 Ballots
On any question proposed for consideration at a meeting of shareholders, and
whether or not a show of hands has been taken thereon, any shareholder or
proxyholder entitled to vote at the meeting, or the chairman of the meeting, may
require or demand a ballot. A ballot so required or demanded shall be taken in
such manner as the chairman shall direct. A requirement or demand for a ballot
may be withdrawn at any time prior to the taking of the ballot. If a ballot is
taken
page 31
each person present shall be entitled, in respect of the shares which such
person is entitled to vote at the meeting upon the question, to that number of
votes provided by the Act or the articles, and the result of the ballot so taken
shall be the decision of the shareholders upon the said question.
10.19 Adjournment
If a quorum is not present at the opening of a meeting of shareholders, the
shareholders present may adjourn the meeting to a fixed time and place but may
not transact any other business. If a meeting of shareholders is adjourned for
less than 30 days, it shall not be necessary to give notice of the adjourned
meeting, other than by announcement at the earliest meeting that is adjourned.
If a meeting of shareholders is adjourned by one or more adjournments for an
aggregate of 30 days or more, notice of the adjourned meeting shall be given as
for an original meeting.
10.20 Resolution in Writing
A resolution in writing signed by all the shareholders entitled to vote on that
resolution at a meeting of shareholders is as valid as if it has been passed at
a meeting of the shareholders, unless a written statement with respect to the
subject matter of the resolution is submitted by a director or the auditor in
accordance with the Act.
10.21 Only One Shareholder
Where the Corporation has only one shareholder or only one holder of any class
or series of shares, the shareholder present in person or by proxy constitutes a
meeting.
10.22 Notice of Record Dates
Unless notice of the record date is waived in writing by every holder of a share
of the class or series affected whose name is set out in the securities register
at the close of business on the day the directors fix the record date for the
purpose of determining the shareholders entitled to notice of any meeting of
shareholders or to vote thereat, the Corporation shall give notice of any such
record date within the period prescribed by the Act, by newspaper advertisement
in the manner provided in the Act and to each stock exchange in Canada on which
the shares of the Corporation are listed.
page 32
10.23 Availability of Shareholders Lists for Inspection
Any list of shareholders prepared pursuant to sections 10.05 and 10.11 shall be
available for examination by any shareholder during usual business hours at the
registered office of the Corporation or at the place where the securities
register is maintained and at the meeting for which the list was prepared.
SECTION 11
DIVISIONS AND DEPARTMENTS
11.01 Creation and Consolidation of Divisions
The board may cause the business and operations of the Corporation or any part
thereof to be divided or to be segregated into one or more divisions upon such
basis, including without limitation, character or type of operation,
geographical territory, product manufactured or service rendered, as the board
may consider appropriate in each case. The board may also cause the business and
operations of any such division to be further divided into sub-units and the
business and operations of any such divisions or sub-units to be consolidated
upon such basis as the board may consider appropriate in each case.
11.02 Name of Division
Any division or its sub-units may be designated by such name as the board may
from time to time determine and may transact business under such name, provided
that the Corporation shall set out its name in legible characters in all
contracts, invoices, negotiable instruments and orders for goods or services
issued or made by or on behalf of the Corporation.
11.03 Officers of Divisions
From time to time the board or, if authorized by the board, the chief executive
officer, may appoint one or more officers for any division, prescribe their
powers and duties and settle their terms of employment and remuneration.
The board or, if authorized by the board, the chief executive officer, may
remove at its or the chief executive officer's pleasure any officer so
appointed, without prejudice to such officer's
page 33
rights under any employment contract. Officers of divisions or their sub-units
shall not, as such, be officers of the Corporation.
SECTION 12
NOTICES
12.01 Method of Giving Notice
Subject to the Act, any notice (which term includes any communication or
document) to be given (which term includes sent, delivered or served) pursuant
to the Act, the articles, the by-laws or otherwise to a shareholder, director,
officer, auditor or member of a committee of the board shall be sufficiently
given if delivered personally to the person to whom it is to be given or if
delivered to the person's recorded address or if mailed to the person at their
recorded address by prepaid ordinary or air mail or if sent to the person at
their recorded address by any means of prepaid transmitted or recorded
communication or if transmitted or accessed by the person in accordance with the
provisions of the Act governing electronic documents. A notice so delivered
shall be deemed to have been given when it is delivered personally or to the
recorded address as aforesaid; a notice so mailed shall be deemed to have been
given when deposited in a post office or public letter box; and a notice so sent
by any means of transmitted or recorded communication shall be deemed to have
been given when dispatched or delivered to the appropriate communication company
or agency or its representative for dispatch and a notice so given in accordance
with the provisions of the Act governing electronic documents shall be deemed to
have been given in accordance with the rules contained in such provisions. The
secretary may change or cause to be changed the recorded address of any
shareholder, director, officer, auditor or member of a committee of the board in
accordance with any information believed by the person to be reliable.
12.02 Notice to Joint Shareholders
If two or more persons are registered as joint holders of any share, any notice
shall be addressed to all of such joint holders but notice to one of such
persons shall be sufficient notice to all of them.
page 34
12.03 Computation of Time
In computing the date when notice must be given under any provision requiring a
specified number of days' notice of any meeting or other event, the date of
giving the notice and the date of the meeting or other event shall both be
excluded.
12.04 Undelivered Notices
If any notice given to a shareholder pursuant to section 12.01 is returned on
three consecutive occasions because the shareholder cannot be found, the
Corporation shall not be required to give any further notices to such
shareholder until the shareholder informs the Corporation in writing of the
shareholder's new address.
12.05 Omissions and Errors
The accidental omission to give any notice to any shareholder, director,
officer, auditor or member of a committee of the board or the non-receipt of any
notice by any such person or any error in any notice not affecting the substance
thereof shall not invalidate any action taken at any meeting held pursuant to
such notice or otherwise founded thereon.
12.06 Persons Entitled by Death or Operation of Law
Every person who, by operation of law, transfer, death of a shareholder or any
other means whatsoever, shall become entitled to any share, shall be bound by
every notice in respect of such share which shall have been duly given to the
shareholder from whom such person derives such person's title to such share
prior to such person's name and address being entered on the securities register
(whether such notice was given before or after the happening of the event upon
which the shareholder became so entitled) and prior to the individual furnishing
to the Corporation the proof of authority or evidence of the individual's
entitlement prescribed by the Act.
12.07 Waiver of Notice
Any shareholder (or the shareholder's duly appointed proxyholder), director,
officer, auditor or member of a committee of the board may at any time waive the
sending of any notice, or waive
page 35
or abridge the time for any notice, required to be given to the individual under
any provision of the Act, the regulations thereunder, the articles, the by-laws
or otherwise and such waiver or abridgement shall cure any default in the giving
or in the time of such notice, as the case may be. Any such waiver or abridgment
shall be in writing except a waiver of notice of a meeting of shareholders or of
the board which may be given in any manner.
SECTION 13
EFFECTIVE DATE
13.01 Effective Date
This by-law shall come into force when enacted by the directors, subject to the
Act.
13.02 Repeal
All prior by-laws, if any, of the Corporation, other than by-laws relating
solely to the borrowing of money by the Corporation, are repealed as of the
coming into force of this by-law. Such repeal shall not affect the previous
operation of any by-law so repealed or affect the validity of any act done or
right, privilege, obligation or liability acquired or incurred under, or the
validity of any contract or agreement made pursuant to any such by-law prior to
its repeal. All officers and persons acting under any by-law so repealed shall
continue to act as if appointed under the provisions of this by-law and all
resolutions of the shareholders or the board or a committee of the board with
continuing effect passed under any repealed by-law shall continue to be good and
valid except to the extent inconsistent with this by-law and until amended or
repealed.
page 36
ENACTED by the Board the 6th day of February, 2002.
WITNESS the corporate seal of the Corporation.
/s/ /s/
---------------------------------- -----------------------------------
President Secretary
CONFIRMED by the shareholders the 1st day of May, 2002.
/s/
-----------------------------------
Secretary
EXHIBIT "C"
AUTHORIZING RESOLUTIONS
(see attached)
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF
VASOGEN INC. HELD ON OCTOBER 3, 2005
Private Placement of Senior Convertible Notes and Warrants
WHERAS Vasogen Ireland Ltd. ("VIL") is a wholly-owned subsidiary of Vasogen Inc.
(the "Corporation");
AND WHEREAS XXX proposes to issue by way of private placement (the "Private
Placement") and sell up to an aggregate principal amount not exceeding US$40
million of senior convertible notes, with the terms set out therein ("Senior
Convertible Notes");
AND WHEREAS pursuant to the terms thereof, the Senior Convertible Notes shall be
convertible into and repayable in common shares ("Common Shares") in the capital
of the Corporation;
AND WHEREAS the Corporation will guarantee the obligations of VIL under the
Senior Convertible Notes;
AND WHEREAS in connection with and as part of the Private Placement, the
Corporation proposes to issue warrants ("Warrants") entitling the holder to
purchase, for a period of five (5) years from the closing date of the Private
Placement, one Common Share of the Corporation at an exercise price (the
"Exercise Price") equal to the conversion price under the Convertible Notes as
described in the notice of the Private Placement to be given to the Toronto
Stock Exchange ("TSX");
AND WHEREAS pursuant to the terms of the Senior Convertible Notes, the
Corporation is required, in certain circumstances, to issue warrants
("Accelerated Payment Option Warrants") entitling the holder to purchase, for a
period of five (5) years from the issuance of such Accelerated Payment Option
Warrants, one Common Share of the Corporation at an exercise price (the
"Accelerated Payment Option Warrant Exercise Price") determined pursuant to the
terms of the Senior Convertible Notes;
AND WHEREAS XX Xxxxx & Co., LLC (the "Agent") will provide assistance to VIL and
the Corporation in completing the Private Placement and in consideration of
providing such services, the Agent will receive a placement fee in accordance
with the Engagement Letter dated June 24, 2005;
THEREFORE BE IT RESOLVED THAT:
1. the acceptance by the Corporation of the engagement letter, dated June 24,
2005 between the Corporation and the Agent in respect of the Private
Placement is hereby ratified and
-2-
confirmed and the execution and delivery of the engagement letter by the
Chief Financial Officer of the Corporation is xxxxxx ratified and
confirmed;
2. the entering into by the Corporation of a cash collateral agreement (the
"Cash Collateral Agreement") with the Royal Bank of Canada, Royal Bank
Mortgage Corporation, Royal Trust Corporation of Canada, and The Royal
Trust Company is hereby authorized and approved and any one of the Chief
Executive Officer, the Chief Operating Officer or the Vice-President,
Corporate & Legal Affairs of the Corporation is hereby authorized and
directed to negotiate and settle the terms of, and to execute and deliver
the Securities Purchase Agreement, in such form and on such terms as such
officer may approve, such approval to be conclusively evidenced by his or
her execution thereof;
3. the entering into by the Corporation of a securities purchase agreement
(the "Securities Purchase Agreement") with each subscriber who subscribes
for Senior Convertible Notes and Warrants pursuant to the Private
Placement is hereby authorized and approved and any one of the Chief
Executive Officer, the Chief Operating Officer or the Vice-President,
Corporate & Legal Affairs of the Corporation is hereby authorized and
directed to negotiate and settle the terms of, and to execute and deliver
the Securities Purchase Agreement, in such form and on such terms as such
officer may approve, such approval to be conclusively evidenced by his or
her execution thereof;
4. the entering into by the Corporation of a guaranty (the "Guaranty") with
each subscriber who subscribes for Senior Convertible Notes pursuant to
the Private Placement is hereby authorized and approved and any one of the
Chief Executive Officer, the Chief Operating Officer or the
Vice-President, Corporate & Legal Affairs of the Corporation is hereby
authorized and directed to negotiate and settle the terms of, and to
execute and deliver the Guaranty in such form and on such terms as such
officer may approve, such approval to be conclusively evidenced by his or
her execution thereof;
5. the provision of treasury instructions ("Treasury Instructions") by the
Corporation to CIBC Mellon Trust Company is hereby authorized and approved
and any one of the Chief Executive Officer, the Chief Operating Officer or
the Vice-President, Corporate & Legal Affairs of the Corporation is hereby
authorized and directed to negotiate and settle the terms of, and to
execute and deliver the Treasury Instructions in such form and on such
terms as such officer may approve, such approval to be conclusively
evidenced by his or her execution thereof;
6. the Corporation make application to the Royal Bank of Canada for a letter
of credit (the "Letter of Credit") pursuant to the terms of the Securities
Purchase Agreement and any one of the Chief Executive Officer, the Chief
Operating Officer or the Vice-President, Corporate & Legal Affairs of the
Corporation is hereby authorized and directed to negotiate and settle the
terms of, and to execute and deliver the Letter of Credit in such form and
on such terms as such officer may approve, such approval to be
conclusively evidenced by his or her execution thereof;
-3-
7. the entering into by the Corporation of a registration rights agreement
(the "Registration Rights Agreement") between the Corporation and each
subscriber who subscribes for Senior Convertible Notes and Warrants
pursuant to the Private Placement is hereby authorized and approved and
any one of the Chief Executive Officer, the Chief Operating Officer or the
Vice-President, Corporate & Legal Affairs of the Corporation is hereby
authorized and directed to negotiate and settle the terms of, and to
execute and deliver the Registration Rights Agreement in such form and on
such terms as such officer may approve, such approval to be conclusively
evidenced by his or her execution thereof;
8. the Senior Convertible Notes are hereby authorized and approved and any
one of the Chief Executive Officer, the Chief Operating Officer or the
Vice-President, Corporate & Legal Affairs of the Corporation is hereby
authorized and directed to negotiate and settle the terms of, and to
execute and deliver the Senior Convertible Notes in such form and on such
terms as such officer may approve, such approval to be conclusively
evidenced by his or her execution thereof;
9. the issuance of Senior Convertible Notes pursuant to the terms of the
Securities Purchase Agreements is hereby authorized and approved;
10. the maximum number of Common Shares of the Corporation issuable pursuant
to the terms of the Senior Convertible Notes are hereby duly authorized,
allotted, and reserved for issuance to the holders of such Senior
Convertible Notes, and upon conversion or repayment of such Senior
Convertible Notes, from time to time, in accordance with the provisions
thereof, the said Common Shares hereby allotted for the purpose and
issuable upon conversion or repayment of the Senior Convertible Notes,
will be validly issued as fully paid and non-assessable common shares in
the capital of the Corporation, and the transfer agent and registrar of
the Common Shares be and is hereby authorized and directed to countersign,
issue and deliver to such holders or to their order certificates for such
Common Shares;
11. the Warrants are hereby authorized and approved and any one of the Chief
Executive Officer, the Chief Operating Officer or the Vice-President,
Corporate & Legal Affairs of the Corporation is hereby authorized and
directed to negotiate and settle the terms of, and to execute and deliver
the Warrants in such form and on such terms as such officer may approve,
such approval to be conclusively evidenced by his or her execution
thereof;
12. the issuance of Warrants pursuant to the terms of the Securities Purchase
Agreements is hereby authorized and approved;
13. 3,494,280 Common Shares of the Corporation issuable pursuant to the terms
of the Warrants, are hereby duly authorized, allotted, at the Exercise
Price, and reserved for issuance to the holders of such Warrants, and upon
exercise of such Warrants, from time to time, in accordance with the
provisions thereof, the said Common Shares hereby allotted for the purpose
and issuable upon exercise of the Warrants, will be validly issued as
fully paid and non-assessable common shares in the capital of the
Corporation, and the transfer agent and registrar of the Common Shares be
and is hereby authorized and
-4-
directed to countersign, issue and deliver to such holders or to their
order certificates for such Common Shares;
14. the Accelerated Payment Option Warrants are hereby authorized and approved
and any one of the Chief Executive Officer, the Chief Operating Officer or
the Vice-President, Corporate & Legal Affairs of the Corporation is hereby
authorized and directed to negotiate and settle the terms of, and to
execute and deliver the Accelerated Payment Option Warrants in such form
and on such terms as such officer may approve, such approval to be
conclusively evidenced by his or her execution thereof;
15. the issuance of the Accelerated Payment Option Warrants, from time to
time, pursuant to the terms of the Senior Convertible Notes, is hereby
authorized and approved;
16. the maximum number of Common Shares of the Corporation issuable pursuant
to the terms of the Accelerated Payment Option Warrants are hereby duly
authorized, allotted, at the Accelerated Payment Option Warrant Exercise
Price, and reserved for issuance to the holders of such Accelerated
Payment Option Warrants and upon exercise of such Accelerated Payment
Option Warrants, from time to time, in accordance with the provisions
thereof, the said Common Shares hereby allotted for the purpose and
issuable upon exercise of the Accelerated Payment Option Warrants, will be
validly issued as fully paid and non-assessable common shares in the
capital of the Corporation, and the transfer agent and registrar of the
Common Shares be and is hereby authorized and directed to countersign,
issue and deliver to such holders or to their order certificates for such
Common Shares;
17. the Corporation hereby waives the application of the Corporation's
shareholder rights plan (the "Rights Plan") in the event that the Rights
Plan may have otherwise applied to the Private Placement or any event or
issuance of Common Shares occurring in connection with or as a result of
the Private Placement;
18. the Corporation is hereby authorized to list on the TSX the Common Shares
as may be issued, from time to time, to holders of Senior Convertible
Notes, Warrants or Accelerated Payment Option Warrants;
19. the Corporation make application to the Nasdaq National Market (the
"NASDAQ") to have the Common Shares as may be issued from time to time
pursuant to the terms of the Senior Convertible Notes, the Warrants or the
Accelerated Payment Option Warrants approved for listing and trading on
the NASDAQ; and that the Chief Executive Officer, the Chief Operating
Officer and the Vice-President, Corporate & Legal Affairs of the
Corporation be, and each of them hereby is, authorized and directed, for
and on behalf and in the name of the Corporation, to prepare and execute
such application and any form, agreement or other documents as may be
necessary to effect the listing and trading on the NASDAQ of the Common
Shares, and to make such changes in any of the same as may be necessary to
comply with the requirements of the NASDAQ for listing, and that the
execution by the Chief Executive Officer, the Chief Operating Officer and
the Vice-President, Corporate & Legal Affairs of the Corporation, or any
of them, of any such
-5-
application, form, agreement or other document shall conclusively,
establish their authority therefore from the Corporation and the approval
and ratification by the Corporation of the applications, forms, agreements
and other documents so executed and the action so taken;
20. the Chief Executive Officer, the Chief Operating Officer and the
Vice-President, Corporate & Legal Affairs of the Corporation by, and each
of them hereby is, authorized and directed, for and on behalf and in the
name of the Corporation, to appear (if requested) before the officials of
the NASDAQ and to make any changes required by the NASDAQ in the
application of the Corporation or in the Corporation's agreements with the
NASDAQ and to do any and all things which such Chief Executive Officer,
the Chief Operating Officer or the Vice-President, Corporate & Legal
Affairs of the Corporation may deem necessary, appropriate or desirable to
effect the listing and trading of the Common Shares as may be issued from
time to time pursuant to the terms of the Senior Convertible Notes, the
Warrants or the Accelerated Payment Option Warrants, including, without
limitation, the payment, for and on behalf and in the name of the
Corporation, of filing, listing or application fees and the preparation of
temporary and definitive stock certificates, and that the doing by such
Chief Executive Officer, the Chief Operating Officer or the
Vice-President, Corporate & Legal Affairs of the Corporation of any act in
connection with the foregoing matters shall conclusively establish their
authority therefore from the Corporation and the approval and ratification
by the Corporation of the action so taken;
-6-
Resale Shelf Prospectus
21. the shelf prospectus, in preliminary and final form, and any and all
prospectus supplements (the "Shelf Prospectus"), to be filed under
National Instruments 44-101 and 44-102 and the United States
Multijurisdictional Disclosure System and the Form F-10 Registration
Statement (the "Registration Statement") to be filed under the United
States Securities Act of 1933, as amended (the "Securities Act"), relating
to the qualification for resale in the United States and Canada of the
Common Shares as may be issued from time to time pursuant to the Senior
Convertible Notes, the Warrants or the Accelerated Payment Option
Warrants, in such forms as approved by the Chief Executive Officer and
Chief Financial Officer, be and the same are hereby approved, subject to
such additions, deletions, modifications and amendments therein and
thereto as the persons authorized to sign same shall approve, such
approval to be conclusively evidenced by their signing of the certificates
or signature pages thereto;
22. the Chief Executive Officer and Chief Financial Officer (as Principal
Financial and Accounting Officer) and a majority of the directors of the
Corporation which may include the Chief Executive Officer, be and they are
hereby authorized on behalf of the Board of Directors and the Corporation
to sign either personally or by attorney or attorneys previously appointed
on the signature pages of the Registration Statement to be filed with the
United States Securities and Exchange Commission (the "SEC") with such
amendments and supplements thereto which such officers and directors
executing the same shall approve, such approval to be conclusively
evidenced by their execution thereof, and to execute under the corporate
seal of the Corporation or otherwise all such other documents and to take
all such steps, including the payment of any required filing fees, as may
be required to be made to comply with the requirements of the SEC and such
other appropriate federal or state regulatory authorities in the United
States;
23. the Chief Executive Officer and the Chief Financial Officer of the
Corporation, and on behalf of the Corporation, any two directors of the
Corporation other than the Chief Executive Officer, be and they are hereby
authorized to sign the certificate, if any, of the Corporation forming
part of the Shelf Prospectus to be filed under National Instruments 44-101
and 44-102 and the United States Multijurisdictional Disclosure System
with such additions, deletions, modifications and amendments therein and
thereto and to execute under the corporate seal of the Corporation or
otherwise all such documents and to take such steps, if any, as may be
required to be made to comply with the requirements of the applicable
securities commission or other regulatory authority;
24. the Corporation be and it is hereby authorized to deliver and file or
cause to be delivered and filed with the SEC, and any other appropriate
federal or state regulatory authority in the United States, the
Registration Statement, together with all such other documents, including
additions, deletions and modifications to the Registration Statement as
the officers executing the Registration Statement in accordance with these
resolutions may deem necessary or desirable;
-7-
25. the officers of the Corporation be, and each of them hereby is, authorized
to determine the states in which appropriate action shall be taken to
qualify or register for sale all or such part of the Common Shares as may
be issued from time to time pursuant to the terms of the Senior
Convertible Notes, the Warrants or the Accelerated Payment Option Warrants
and Registration Statement as said officers may deem advisable; and each
such officer is hereby authorized to perform on behalf of the Corporation
any and all such acts as he or she may deem necessary or advisable in
order to issue, offer or trade the Common Shares under Blue Sky or state
securities laws and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments
of attorneys for service of process and the execution by any such officer
of any such paper or document or the doing by him or her of any act in
connection with the foregoing matters shall conclusively establish his or
her authority therefor from the Corporation and the approval and
ratification by the Corporation of the papers and documents so executed
and the action so taken. The officers of the Corporation be, and each of
them hereby is, authorized to certify the adoption of any resolution or
resolutions which may be required by the Blue Sky or other securities laws
of any state or states in which the offering is made as if adopted herein
in full, and to attach such resolution or resolutions to the minutes of
this meeting. Any one of the officers of the Corporation is also
authorized to take any and all further action as he or she deems necessary
or advisable for any such registration or qualification (or exemption) for
as long as he or she deems necessary or desirable or as may be required by
law;
26. the directors of the Corporation hereby adopt the form of any resolution
required by any authority of any such state or other jurisdiction, or by
the United States Securities and Exchange Commission or the National
Association of Securities Dealers, Inc. or any such further regulatory
authority to be filed, if any, in connection with any such application,
certificate, affidavit, consent to service of process or any other
document in connection with matters authorized by this resolution if (i)
in the opinion of any of the officers of the Corporation the adoption of
such resolution is necessary or advisable in order to carry out the intent
of the foregoing resolutions, and (ii) any one of the officers of the
Corporation evidences such adoption by inserting after the minutes of the
meeting at which these resolutions are approved copies of such
resolution(s) which will thereupon be deemed to be adopted by the
directors of the Corporation with the same force and effect as if
presented to the directors;
27. the officers of the Corporation be, and each of them hereby is, authorized
on behalf of the Corporation and in its name to execute and cause to be
filed with the SEC any and all amendments and supplements to the
Registration Statement whether before or after the Registration Statement
is declared effective, which the officer or officers executing the same on
its behalf shall approve, such approval to be conclusively evidenced by
his or her or their execution thereof;
28. the Corporation be and it is hereby authorized to deliver and file or
cause to be delivered and filed under National Instruments 44-101 and
44-102 the Shelf Prospectus, together with all such other documents,
including additions, deletions, modifications and
-8-
amendments to the Shelf Prospectus, as the officers and directors
executing the certificate of the Corporation forming part of the Shelf
Prospectus in accordance with these resolutions may deem necessary or
desirable;
29. the officers of the Corporation be, and each of them hereby is, authorized
on behalf of the Corporation and in its name to execute and cause to be
filed under National Instruments 44-101 and 44-102 any and all amendments
and supplements to the Shelf Prospectus whether before or after the Shelf
Prospectus is filed, which the officer or officers executing the same on
its behalf shall approve, such approval to be conclusively evidenced by
his or her or their execution thereof;
30. CT Corporation System be and is hereby authorized and appointed agent for
service of process on the Corporation and shall be named as such in Form
F-X and in the Registration Statement and all amendments, including
post-effective amendments and supplements thereto, with authority to
receive all notices and communications which may be issued by the SEC in
connection with the Registration Statement and the registration of the
Common Shares under the Securities Act and with all other powers which are
conferred upon a person designated as agent for service under the
Securities Act and the rules and regulations of the SEC thereunder, and
any officer of the Corporation is hereby authorized on behalf of the
Corporation and in its name to take any and all actions, including the
execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of CT
Corporation System in full force and effect so long as may be required
pursuant to applicable United States securities laws;
31. the Form F-X, to be filed under the Securities Act relating to the
appointment of CT Corporation System as agent for service of process and
undertaking, in the required form, be and the same is hereby approved, and
any officer be and is hereby authorized and directed for and on behalf of
the Corporation to execute and deliver the Form F-X, such approval to be
conclusively evidenced by his or her execution and delivery thereof;
32. the officers or directors of the Corporation be, and each of them hereby
is, authorized and directed on behalf of the Corporation to do and perform
all such acts, deeds and things and to execute and deliver under the
corporate seal of the Corporation or otherwise and to deliver and file or
cause to be executed, delivered or filed in the name and on behalf of the
Corporation or otherwise, all such documents (including documents in
amendment of such Registration Statement or Shelf Prospectus), deeds or
any other writings, which they in their discretion acting in the premises
shall deem necessary, desirable or proper in order to give effect to the
true intent of these resolutions; and
33. all actions previously taken by any director, officer, employee or agent
of the Corporation in connection with or related to the matters set forth
in, or reasonably contemplated or implied by the foregoing resolution, be,
and each of them hereby is, adopted, ratified, confirmed and approved in
all respects as the acts and deeds of the Corporation.
EXHIBIT "D"
INCUMBENCY
Name Title Signature
---- ----- ---------
XXXXXXXXXX XX XXXX VICE-PRESIDENT,
CORPORATE & LEGAL
AFFAIRS -----------------------
VASOGEN, CORP.
SECRETARY'S CERTIFICATE
-----------------------
October 7, 2005
This Certificate is delivered pursuant to Section 7(j) of the Securities
Purchase Agreements, dated as of October 7, 2005 (as amended, restated,
supplemented or modified from time to time, the "Agreements"), by and among
Vasogen Inc., a Canadian corporation, Vasogen Ireland Limited, a company
incorporated under the laws of the Republic of Ireland, Vasogen, Corp., a
Delaware corporation (the "Company"), and each buyer named on each Buyer
Schedule attached to each such agreement. Capitalized terms used but not defined
in this Certificate shall have the meanings ascribed to them in the Agreements.
The undersigned, in his capacity as the Secretary of the Company, hereby
certifies in the name and on behalf of the Company as follows:
1. Attached hereto as Exhibit A is a certified copy of the Articles of
Incorporation of the Company, as certified by the Secretary of State of
Delaware, which remain unamended and in full force and effect on the date
hereof.
2. Attached hereto as Exhibit B is a complete and correct copy of the
Bylaws of the Company, which remain unamended and in full force and effect on
the date hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of the
resolutions of the board of directors of the Company approving the Agreements
and the transactions contemplated thereby, which remain unamended and in full
force and effect on the date hereof.
[Signature page follows]
2
IN WITNESS WHEREOF, the undersigned has signed this Certificate as of the
date above first written.
VASOGEN, CORP.
By:
--------------------------------
Name: Xxxxxxxxxxx Xxxxxxx
Title: VP, Secretary & Treasurer
EXHIBIT A
---------
Articles of Incorporation of
VASOGEN, CORP.
--------------
DELAWARE PAGE 1
----------------------
The First State
I, XXXXXXX XXXXX XXXXXXX, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "VASOGEN, INC.", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY
OF APRIL, A.D. 2004, AT 5:07 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
3795269 8100 SEAL /s/ Xxxxxxx Xxxxx Xxxxxxx
-----------------------------------------
Xxxxxxx Xxxxx Xxxxxxx, Secretary of State
040302613 AUTHENTICATION: 3075317
DATE: 04-27-04
CERTIFICATE OF INCORPORATION
OF
VASOGEN, INC.
FIRST: The name of the corporation is Vasogen, Inc.
SECOND: The address of the corporation's registered office in the
State of Delaware is 0000 Xxxxx Xxxxxx Xxxxxx, Post Office Box 0000, xx xxx Xxxx
xx Xxxxxxxxxx, Xxxxxx xx Xxx Xxxxxx. The name of the corporation's registered
agent at such address is Delaware Corporation Organizers, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is one thousand (1,000) shares of common stock, having a par
value of one cent ($0.01) per share.
FIFTH: The business and affairs of the corporation shall be managed
by or under the direction of the board of directors, and the directors need not
be elected by ballot unless required by the by-laws of the corporation.
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the board of directors is expressly
authorized to make, amend and repeal the by-laws.
SEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
EIGHTH: The corporation reserves the right to amend and repeal any
provision contained in this Certificate of Incorporation in the manner from time
to time prescribed by the laws of the State of Delaware. All rights herein
conferred are granted subject to this reservation.
NINTH: The name and mailing address of the incorporator is as
follows:
Delaware Corporation Organizers, Inc.
P.O. Box 1347
Wilmington, Delaware 19899
I, the undersigned, for the purpose of forming a corporation under
the laws of the State of Delaware do make, file and record this Certificate of
Incorporation, and, accordingly, have hereto set my hand this 26th day of April,
2004.
DELAWARE CORPORATION ORGANIZERS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx, Vice President
- 2 -
DELAWARE PAGE 1
--------------------
The First State
I, XXXXXXX XXXXX XXXXXXX, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "VASOGEN, INC.", CHANGING ITS NAME FROM "VASOGEN, INC." TO
"VASOGEN, CORP.", FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY OF NOVEMBER,
A.D. 2004, AT 3:56 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
3795269 8100 SEAL /s/ Xxxxxxx Xxxxx Xxxxxxx
-----------------------------------------
Xxxxxxx Xxxxx Xxxxxxx, Secretary of State
040850682 AUTHENTICATION: 3507070
DATE: 11-30-04
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VASOGEN, INC.
Vasogen, Inc., a Delaware corporation (the "Corporation"), does
hereby certify that:
FIRST: Article FIRST of the Certificate of Incorporation of
the Corporation is hereby amended to read in its entirety as follows:
FIRST: The name of the corporation is Vasogen, Corp.
SECOND: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to be signed by its duly authorized officer, this 24th day of
November, 2004.
VASOGEN, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: President
EXHIBIT B
---------
Bylaws of
VASOGEN, CORP.
--------------
VASOGEN, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
------------------------
Section 1: Annual Meeting.
---------------
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months of the last annual meeting of stockholders
or, if no such meeting has been held, the date of incorporation.
Section 2: Special Meetings.
----------------
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
or the chief executive officer and shall be held at such place, on such date,
and at such time as they or he or she shall fix.
Section 3: Notice of Meetings.
------------------
Notice of the place, if any, date, and time of all meetings of the
stockholders and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at
such meeting, shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter,
as required from time to time by the Delaware General Corporation Law or the
Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place, if any, thereof, and the
means of remote communications, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at such adjourned meeting are
announced at the meeting at which the adjournment is taken; provided, however,
that if the date of any adjourned meeting is more than thirty (30) days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, notice of the place, if any, date, and time
of the adjourned meeting and the means of remote communications, if any, by
which stockholders and proxyholders may be deemed to be present in person and
vote at such adjourned meeting, shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4: Quorum.
------
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes or series is required, a majority of the
shares of such class or classes or series present in person or represented by
proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
- 2 -
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, if
any, date, or time.
Section 5: Organization.
------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman of the meeting appoints.
Section 6: Conduct of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The date and time of the opening and closing of the polls for each matter upon
which the stockholders will vote at the meeting shall be announced at the
meeting.
Section 7: Proxies and Voting.
------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of
- 3 -
the original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
The Corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting may, and to the extent required by law, shall, appoint
one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. Every vote taken by ballots shall be counted by an
inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
Section 8: Stock List.
----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder for a
period of at least ten (10) days prior to the meeting in the manner provided by
law.
- 4 -
The stock list shall also be open to the examination of any stockholder
during the whole time of the meeting as provided by law. This list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
Section 9: Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the date
the earliest dated consent is delivered to the Corporation, a written consent or
consents signed by a sufficient number of holders to take action are delivered
to the Corporation in the manner prescribed in the first paragraph of this
Section. A telegram, cablegram or other
- 5 -
electronic transmission consenting to an action to be taken and transmitted by a
stockholder or proxyholder, or by a person or persons authorized to act for a
stockholder or proxyholder, shall be deemed to be written, signed and dated for
the purposes of this Section to the extent permitted by law. Any such consent
shall be delivered in accordance with Section 228(d)(1) of the Delaware General
Corporation Law.
Any copy, facsimile or other reliable reproduction of a consent in writing
may be substituted or used in lieu of the original writing for any and all
purposes for which the original writing could be used, provided that such copy,
facsimile or other reproduction shall be a complete reproduction of the entire
original writing.
ARTICLE II - BOARD OF DIRECTORS
-------------------------------
Section 1: Number and Term of Office.
-------------------------
The number of directors who shall constitute the whole Board of Directors
shall be such number as the Board of Directors shall from time to time have
designated, except that in the absence of any such designation, such number
shall be one (1). Each director shall be elected for a term of one year and
until his or her successor is elected and qualified, except as otherwise
provided herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then
- 6 -
in office unless, at the time of such decrease, there shall be vacancies on the
board which are being eliminated by the decrease.
Section 2: Vacancies.
---------
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected and
qualified.
Section 3: Regular Meetings.
----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4: Special Meetings.
----------------
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the President and shall be held at such place, on such date, and at such
time as they or he or she shall fix. Notice of the place, date, and time of each
such special meeting shall be given to each director by whom it is not waived by
mailing written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile or electronic transmission of the same
not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
- 7 -
Section 5: Quorum.
------
At any meeting of the Board of Directors, a majority of the total number
of the whole Board of Directors shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may adjourn
the meeting to another place, date, or time, without further notice or waiver
thereof.
Section 6: Participation in Meetings By Conference Telephone.
-------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board of Directors or committee by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
Section 7: Conduct of Business.
-------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board of Directors may from time to time determine,
and all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law. Action may be
taken by the Board of Directors without a meeting if all members thereof consent
thereto in writing or by electronic transmission, and the writing or writings or
electronic transmission or transmissions are filed with the minutes of
proceedings of the Board of Directors. Such filing shall be in paper form if the
minutes are maintained in paper form and shall be in electronic form if the
minutes are maintained in electronic form.
- 8 -
Section 8: Compensation of Directors.
-------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
------------------------
Section 1: Committees of the Board of Directors.
------------------------------------
The Board of Directors may from time to time designate committees of the
Board of Directors, with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the Board of Directors and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
any committee and any alternate member in his or her place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 2: Conduct of Business.
-------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one
- 9 -
(1) member shall constitute a quorum; and all matters shall be determined by a
majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing or by
electronic transmission, and the writing or writings or electronic transmission
or transmissions are filed with the minutes of the proceedings of such
committee. Such filing shall be in paper form if the minutes are maintained in
paper form and shall be in electronic form if the minutes are maintained in
electronic form.
ARTICLE IV - OFFICERS
---------------------
Section 1: Generally.
---------
The officers of the Corporation shall consist of a President, one or more
Vice Presidents, a Secretary, a Treasurer and such other officers as may from
time to time be appointed by the Board of Directors. Officers shall be elected
by the Board of Directors, which shall consider that subject at its first
meeting after every annual meeting of stockholders. Each officer shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person.
Section 2: President.
---------
The President shall be the chief executive officer of the Corporation.
Subject to the provisions of these By-laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock
- 10 -
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation.
Section 3: Vice President.
--------------
Each Vice President shall have such powers and duties as may be delegated
to him or her by the Board of Directors. One (1) Vice President shall be
designated by the Board of Directors to perform the duties and exercise the
powers of the President in the event of the President's absence or disability.
Section 4: Treasurer.
---------
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. He or she shall make such disbursements of the funds
of the Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 5: Secretary.
---------
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
- 11 -
Section 6: Delegation of Authority.
-----------------------
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 7: Removal.
-------
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 8: Action with Respect to Securities of Other Corporations.
-------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
-----------------
Section 1: Certificates of Stock.
---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
- 12 -
Section 2: Transfers of Stock.
------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3: Record Date.
-----------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or
- 13 -
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action without a meeting, (including by telegram, cablegram
or other electronic transmission as permitted by law), the Board of Directors
may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall be not more than ten (10) days after the date upon which
the resolution fixing the record date is adopted. If no record date has been
fixed by the Board of Directors and no prior action by the Board of Directors is
required by the Delaware General Corporation Law, the record date shall be the
first date on which a consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in the manner prescribed by Article I,
Section 9 hereof. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by the Delaware General
Corporation Law with respect to the proposed action by consent of the
stockholders without a meeting, the record date for determining stockholders
entitled to consent to corporate action without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
- 14 -
Section 4: Lost, Stolen or Destroyed Certificates.
--------------------------------------
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5: Regulations.
-----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
--------------------
Section 1: Notices.
-------
If mailed, notice to stockholders shall be deemed given when deposited in
the mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the Corporation. Without limiting the
manner by which notice otherwise may be given effectively to stockholders, any
notice to stockholders may be given by electronic transmission in the manner
provided in Section 232 of the Delaware General Corporation Law.
Section 2: Waivers.
-------
A written waiver of any notice, signed by a stockholder or director, or
waiver by electronic transmission by such person, whether given before or after
the time of the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such person. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
- 15 -
ARTICLE VII - MISCELLANEOUS
---------------------------
Section 1: Facsimile Signatures.
--------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2: Corporate Seal.
--------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3: Reliance upon Books, Reports and Records.
----------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
- 16 -
Section 4: Fiscal Year.
-----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5: Time Periods.
------------
In applying any provision of these By-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------------------------------------------------------
Section 1: Right to Indemnification.
------------------------
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, or trustee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer or
trustee, or in any other capacity while serving as a director, officer or
trustee, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the
- 17 -
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, XXXXX excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this ARTICLE VIII with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
Section 2: Right to Advancement of Expenses.
--------------------------------
In addition to the right to indemnification conferred in Section 1 of this
ARTICLE VIII, an indemnitee shall also have the right to be paid by the
Corporation the expenses (including attorney's fees) incurred in defending any
such proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of
such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Section 2 or otherwise.
- 18 -
Section 3: Right of Indemnitee to Bring Suit.
---------------------------------
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full
by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its directors
who are not parties to such action, a committee of such directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its directors who are not parties to
such action, a committee of such directors, independent legal counsel, or its
- 19 -
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE VIII or otherwise shall be on the Corporation.
Section 4: Non-Exclusivity of Rights.
-------------------------
The rights to indemnification and to the advancement of expenses conferred
in this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation, By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5: Insurance.
---------
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6: Indemnification of Employees and Agents of the Corporation.
----------------------------------------------------------
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses
- 20 -
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article with respect to the indemnification and advancement
of expenses of directors and officers of the Corporation.
Section 7: Nature of Rights.
----------------
The rights conferred upon indemnitees in this ARTICLE VIII shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer or trustee and shall inure to the benefit of
the indemnitee's heirs, executors and administrators. Any amendment, alteration
or repeal of this ARTICLE VIII that adversely affects any right of an indemnitee
or its successors shall be prospective only and shall not limit or eliminate any
such right with respect to any proceeding involving any occurrence or alleged
occurrence of any action or omission to act that took place prior to such
amendment, alteration or repeal.
ARTICLE IX - AMENDMENTS
-----------------------
These By-laws may be amended or repealed by the Board of Directors at any
meeting or by the stockholders at any meeting.
- 21 -
EXHIBIT C
---------
Resolutions of
VASOGEN, CORP.
--------------
Resolutions of the Board of Directors of
Vasogen, Corp.
WHEREAS, Vasogen, Corp. (the "Company") and Vasogen Ireland Limited, a
-------
company incorporated under the laws of the Republic of Ireland ("VIL"), are
---
subsidiaries of Vasogen Inc., a corporation incorporated under the laws of
Canada (the "Parent");
------
WHEREAS, pursuant to certain Securities Purchase Agreements, to be dated
on or about October 7, 2005 (the "Purchase Agreements"), among the Company, VIL,
-------------------
the Parent and each purchaser listed on each Buyer Schedule thereto (each
individually, a "Purchaser," and all such individuals collectively, the
---------
"Purchasers"), (i) VIL proposes to issue to the Purchasers an aggregate
----------
principal amount of $40,000,000 of senior convertible notes (the "Notes") which
-----
will be convertible into the common shares of the Parent, no par value (the
"Common Shares"), and (ii) the Parent proposes to issue to the Purchasers
-------------
warrants (the "Warrants"), which will be exercisable to purchase Common Shares
--------
(clauses (i) and (ii) above shall be referred to together herein as the
"Offering");
--------
WHEREAS, in connection with the Offering, the Purchasers have requested
that the Parent and the Company each guarantee the obligations of VIL under the
Notes and the Purchase Agreements;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company to enter into such
guarantees (each individually, a "Subsidiary Guaranty," and all such guarantees
-------------------
collectively, the "Subsidiary Guaranties"); and
---------------------
WHEREAS, the Board desires to approve certain documents to be executed and
certain actions to be taken by the Company and direct the Company and certain of
the officers of the Company, including, without limitation, the Chief Executive
Officer, the President, the Chief Operating Officer, any Vice President, the
General Counsel and the Secretary of the Company (each, a "Designated Officer"),
------------------
to execute such documents and take such actions in the name and on behalf of the
Company, in each case, in connection with the foregoing transactions.
NOW, THEREFORE, IT IS:
1. Purchase Agreements
-------------------
RESOLVED, that the Company be, and it hereby is, authorized to enter into,
and perform its obligations under, the Purchase Agreements substantially in the
form heretofore presented to the Board, with such additions, deletions, changes
or modifications therein as may be approved or deemed necessary, appropriate or
desirable by the Designated Officer executing the same, the execution thereof by
such Designated Officer to be conclusive evidence of such approval and
determination.
2. Subsidiary Guaranties
---------------------
RESOLVED, that, to induce the Purchasers to enter into the Purchase
Agreements and to purchase the Notes from VIL and the Warrants from the Parent,
the Company be, and it hereby is, authorized (i) to agree to fully and
unconditionally guarantee the payment and performance of the obligations,
liabilities and indebtedness of VIL arising under, out of or in connection with
the Notes and the Purchase Agreements, as such Notes and Purchase Agreements may
be revised, modified or amended from time to time in accordance with their
terms, (ii) in furtherance of the foregoing, to enter into a separate Subsidiary
Guaranty relating to each Purchase Agreement or such other agreements as may be
required in connection with the Notes and Purchase Agreements, on such terms and
conditions and in such form as are approved or deemed necessary, appropriate or
desirable by the Designated Officers executing the same (the execution thereof
by such officers, which is hereby authorized, shall be conclusive evidence of
such officers' approval and determination) and (iii) to enter into and perform
its obligations under any agreement which relates to each Subsidiary Guaranty.
3. General
-------
RESOLVED, that in connection with the transactions contemplated in the
preceding resolutions, the Designated Officers be, and each of them hereby is,
authorized to take all such further action to execute and deliver all such
further agreements, instruments and documents, in the name and on behalf of the
Company, to pay or cause to be paid all expenses, and to take all such other
actions as they or any one of them shall deem necessary or desirable in order to
carry out fully the intent and accomplish the purposes of the foregoing
resolutions; and the execution and delivery of such agreements, instruments and
documents and the performance of any such action shall be conclusive evidence
that the same is authorized hereby; and that any and all such actions heretofore
or hereafter taken by any such Designated Officers within the terms of these
resolutions be, and they hereby are, adopted, affirmed, approved and ratified in
all respects as the act and deed of the Company; and it is further
RESOLVED, that in connection with the transactions contemplated in the
preceding resolutions, the Designated Officers be, and each of them hereby is,
authorized in the name and on behalf of the Company to certify any more formal
or detailed resolutions as any such Designated Officer may deem necessary or
appropriate to effectuate the intent of the foregoing resolutions; and that such
Designated Officers be, and each of them hereby is, authorized and directed to
annex such resolutions to the minutes of the Company and thereupon such
resolutions shall be deemed adopted as and for the resolutions of the Board as
if set forth at length in these resolutions.
CERTIFICATE
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Xxxxx
Date: 7 October, 2005
To: UBS Securities LLC - F/B/O Kings Road Investments Ltd.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
XXX
This Certificate is delivered pursuant to Section 7(j) of a Securities Purchase
Agreement, dated as of October 7, 2005 (as amended, restated, supplemented or
modified from time to time) by and among Vasogen Inc., a Canadian corporation,
Vasogen Ireland Limited (the "Company"), Vasogen, Corp., a Delaware corporation
and you.
I, Xxxx Xxxx, hereby certify that I am a director of the Company, a private
limited company incorporated under the laws of Ireland, and do hereby further
certify that:
(a) Attached hereto as Annex A is a certified true and correct copy of the
certificate of incorporation and of the certificate of incorporation on change
of name of the Company as amended to date;
(b) Attached hereto as Annex B is a certified true and correct copy of the
memorandum and articles of association of the Company as amended to date;
(c) No action for the amendment of the constitutional documents of the Company
has been taken or is pending;
(d) Attached hereto as Annex C is a certified true and correct copy of the
resolutions duly adopted by the board of directors of the Company on 6 October,
2005, authorising the issuance of the U.S.$16,500,000 Senior Convertible Note to
Kings Road Investments Ltd. and the entry into of the related Transaction
Documents. Such resolutions have not been amended, modified or rescinded.
IN WITNESS WHEREOF, I have hereunto executed this certificate as of the date
written above.
For and on behalf of
Vasogen Ireland Limited
By: /s/ Xxxx Xxxx
-------------
Name: Xxxx Xxxx
Title: Director
CERTIFICATE
RE:
VASOGEN IRELAND LIMITED
(the "Company")
BY: XXXX XXXX
ANNEX A
Certified true and correct copy of the certificate of incorporation and
certificate of incorporation on change of name of the Company.
/s/ Xxxx Xxxx
----------------------
Xxxx Xxxx
Director
Dated 7 October, 2005
NUMBER
273933
Certificate of Incorporation
I hereby certify that
PIERREPONT LIMITED
is this day incorporated under
the Companies Acts 1963 to 1990
and that the company is limited.
Given under my hand at Dublin, this
Friday, the 17th day of October, 1997
/s/ X. Xxxxxx
For Registrar of Companies
Certificate received by:
KPMG Services
Signed: /s/ Date: 21/10/97
DUPLICATE FOR THE FILE
NUMBER
273933 0013 CNC
Certificate of Incorporation
on Change of Name
I hereby certify that
PIERREPONT LIMITED
having, by a Special Resolution of the Company,
and with the approval of the Minister for
Enterprise, Trade and Employment, changed its name, is now
incorporated as a limited company under the name
VASOGEN IRELAND LIMITED
and I have entered such name on the Register accordingly.
Given under my hand at Dublin, this
Friday, the 9th day of January, 1998
/s/ X. Xxxxxx
-------------
For Registrar of Companies
Certificate received by: KPMG Services
Signed: /s/ Date: 13/1/98
CERTIFICATE
RE:
VASOGEN IRELAND LIMITED
(the "Company")
BY: XXXX XXXX
ANNEX B
Certified true and correct copy of the Memorandum and Articles of Association of
the Company.
/s/ Xxxx Xxxx
---------------
Xxxx Xxxx
Director
Dated 7 October, 2005
Memorandum and Articles of Association
Of
Vasogen Ireland Limited
Company Number 273933
Incorporated 17 October 1997
Articles of Association as amended by Special Resolution dated 29 July 2003
COMPANIES ACTS, 1963 to 2001
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
VASOGEN IRELAND LIMITED
1. The name of the Company is: Vasogen Ireland Limited
2. The objects for which the Company is established are:
(a)(1) To apply for and take out, purchase or otherwise acquire any right or
interest in any patent, brevets d'invention, licences, copyrights,
trademarks, utility models, concessions, any other form of intellectual
property and the like conferring an exclusive or non-exclusive or limited
right to use, or any secret or other information which may seem to the
company capable of being dealt in and to use, exercise, turn to account
develop or grant licences or other rights in respect of any such,
patents, brevets d'invetion, licences, copyrights, trademarks, utility
models, concession, any other form of intellectual property and the like
and any information aforesaid.
(2) Either independently or jointly with other businesses, or industrial,
academic or governmental bodies, to carry out research and to design,
create, develop, test and manufacture new or improved products, processes
and technologies and to license, sell or otherwise turn to account or
deal with all or any part of the property, rights or information of the
Company in such products, processes or technologies.
(3) To carry on business as advisers and consultants and to provide services
in relation to the creation, development and implementation of new or
improved products, processes or technologies and to advise on the use of
science and technology to extend, develop or improve all types of
business or industry.
(4) To promote scientific and technological research and training as
aforesaid by creating fellowships, establishing scholarships, employing
scientists, technologists and others, making grants and other
benefactions, and providing equipment and other facilities for such
research training.
(5) To provide for the delivery and holding of lectures, courses,
exhibitions, public meetings, classes and conferences and organisation of
study groups and seminars calculated directly or indirectly to advance
scientific, technical or general knowledge in science, engineering and
allied subjects and to organise, sponsor, provide for and encourage
attendance at and participation in such lectures, courses, exhibitions,
public meetings, classes, conferences, study groups and seminars
wheresoever held by whomever provided or organised.
(b) To invest the capital and other monies of the Company in the purchase or
upon the security of shares, stocks, debentures, debenture stock, bonds,
bills, mortgages,
obligations and securities of any kind issued or guaranteed by any
company, corporation or undertaking of whatever nature and wheresoever
constituted or carrying on business and in the purchase or upon the
security of shares, stocks, debentures, debenture stock, bonds, bills,
mortgages, obligations, and securities of any kind issued or guaranteed
by any government, state, dominion, colony, sovereign, ruler,
commissioners, trust, public, municipal, local or other authority or body
of whatsoever nature wheresoever situated.
(c) To acquire any such shares, stocks, debentures, debenture stock, bonds,
bills, mortgages, obligations and securities by subscription, syndicate
participation, tender, purchase, exchange or otherwise, and to subscribe
for the same, either conditionally or otherwise, and to guarantee the
subscription thereof and to exercise and enforce all rights and powers
conferred by or incident to the ownership thereof.
(d) To sell, realise, vary and transpose any investments or other property
for the time being of the Company as may be deemed expedient.
(e) To act as managers, consultants, supervisors and agents of other
companies or undertakings and to provide for such companies or
undertakings, managerial, advisory, technical, purchasing, selling and
other services; and to enter into such agreements as are necessary or
advisable in connection with the foregoing.
(f) To establish or promote or concur in establishing or promoting any
company or companies for the purposes of acquiring all or any of the
property, rights and liabilities of the Company or for any other purpose
which may seem directly or indirectly calculated to benefit the Company
and to place or guarantee the placing of, underwrite, subscribe for or
otherwise acquire all or any part of the shares, debentures or other
securities of any such other company.
(g) To undertake and carry on all kinds of trust and agency business and to
act as managers of any syndicate.
(h) To employ experts to investigate and examine into the conditions,
prospects, value, character and circumstances of any business concerns
and undertakings, and generally of any assets, property or rights.
(i) To purchase, take on lease or in exchange, or otherwise acquire and hold
for investment any estate or interest in any lands, buildings, easements,
rights, privileges, concessions, grants, patents, trade marks and any
real and personal property of any kind.
To borrow and raise money and to secure or discharge in any manner any
debt or obligation of any kind of or binding on the Company and in
particular but without limitation by mortgages of or charges upon all or
any part of the undertaking, property and assets (present and future) and
the uncalled capital of the Company or by the creation and issue on such
terms and conditions as may be thought expedient of debentures, debenture
stock or other securities of any description.
(k) To draw, make, accept, endorse, discount, negotiate, execute and issue
and to buy, sell and deal with bills of exchange, promissory notes and
other negotiable or transferable
instruments. Provided always that nothing herein contained shall empower
the Company to act as stock and share brokers or dealers.
(l) To amalgamate or enter into partnership or any joint purpose or
profit-sharing arrangement with and to co-operate in any way with or
assist or subsidise any company, firm or person, and to purchase or
otherwise acquire and undertake all or any part of the business, property
and liabilities of any person, body or company carrying on any business
which this Company is authorised to carry on or possessed of any
investments or other property suitable for the purposes of the Company.
(m) To lend money and grant or provide credit and financial accommodation to
any company firm or person.
(n) To enter into any guarantee or contract of indemnity or suretyship and in
particular (without limitation) to guarantee, support or secure, with or
without consideration, whether by personal obligation or by mortgaging or
charging all or any part of the undertaking, property and assets (present
and future) and uncalled capital of the Company or by both such methods
or in any other manner, the performance of any obligations or commitments
of, and the repayment or payment of the principal amounts of and any
premiums, interest, dividends and other moneys payable on or in respect
of any securities or liabilities of any person, firm or company.
(o) To procure the registration or incorporation of the Company in or under
the laws of any place outside the State.
(p) To subscribe or guarantee money for any national, charitable, benevolent,
public, general or useful object or for any exhibition, or for any
purpose which may be considered likely directly or indirectly to further
the objects of the Company or the interests of its members.
(q) To grant pensions or gratuities to any employees or ex-employees and to
officers and ex-officers (including directors and ex-directors) of the
Company or its predecessors in business, or the relations, connections,
or dependants of any such persons, and to establish or support
associations, institutions, clubs, funds and trusts which may be
considered calculated to benefit any such persons or otherwise advance
the interests of the Company or of its members.
(r) As an object of the Company and as a pursuit in itself or otherwise, and
whether for the purpose of making a profit or avoiding a loss or for any
other purpose whatsoever, to engage in currency and interest rate
transactions and any other financial or other transactions of whatever
nature, including any transaction for the purposes of, or capable of
being for the purposes of, avoiding, reducing, minimising, hedging
against or otherwise managing the risk of any loss, cost, expense or
liability arising, or which may arise, directly or indirectly, from a
change or changes in any interest rate or currency exchange rate or in
the price or value of any property, asset, commodity, index or liability
or from any other risk or factor affecting the Company's business,
including but not limited to dealings, whether involving purchase, sales
or otherwise, in foreign and Irish
currency spot and forward exchange rate contracts, forward rate
agreements, caps, floors and collars, futures, options, swaps, and any
other currency interest rate and other hedging arrangements and such
other instruments as are similar to, or derivatives of, any of the
foregoing.
(s) To do all or any other the things and matters aforesaid in any part of
the world, and either as principles, agents, contractors, trustees or
otherwise, and by or through trustees, agents or otherwise, and either
alone or in conjunction with others.
(t) To do all such other things as may be considered to be incidental or
conducive to the above objects or any of them.
3. The liability of the members is limited.
4. The share capital of the Company is CDN$2,000,000 and (euro)2.50 divided
into 2,000,000 Ordinary Shares of CDN$1 each and 2 Ordinary Shares of
(euro)1.25 each.
--------------------------------------------------------------------------------
NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS
--------------------------------------------------------------------------------
Xxxxxxx Limited
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Limited Liability Company
Iditarod Limited
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Limited Liability Company
--------------------------------------------------------------------------------
Dated this 9th day of October 1997.
Witness to the above signatures:
X. X. Xxxxxxx,
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Secretarial Assistant
COMPANIES ACTS, 1963 to 2001
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
VASOGEN IRELAND LIMITED
PRELIMINARY
1. The regulations contained in Part II of Table A in the First Schedule to
the Companies Act, 1963, (which Table is hereinafter called "Table A")
shall be deemed to be incorporated with these Articles and shall apply to
the Company save insofar as they are inconsistent with these presents.
2. Unless the contrary is clearly stated, reference to any section of any
act is to such section as same may be amended, extended or re-enacted
(whether before or after the date hereof) from time to time.
SHARE CAPITAL
3. The share capital of the Company is CDN$2,000,000 and (euro)2.50 divided
into 2,000,000 Ordinary Shares of CDN$1 each and 2 Ordinary Shares of
(euro)1.25 each.
4. The directors are generally and unconditionally authorised from time to
time to exercise all powers of the Company to allot relevant securities
(as such expression is defined in Section 20 of the Companies (Amendment)
Act, 1983) up to a maximum aggregate of the number of authorised but
unissued relevant securities in the capital of the Company (whether
forming part of the original or any increased capital) but this authority
shall not extend beyond such date as shall be five years from the date of
incorporation of the Company provided always that the directors shall
have power, notwithstanding that the date aforesaid shall have expired,
to allot relevant securities in pursuance of an offer or agreement made
before the expiry of such date as aforesaid as if the authority conferred
hereby had not expired. Section 23(1) of the Companies (Amendment) Act,
1983 is hereby excluded in its application in relation to all allotments
by the Company of relevant securities as defined for the purposes of that
section.
PURCHASE OF OWN SHARES
5. Subject to the provisions of the Companies Acts, 1963 to 1990 the Company
may purchase its own shares (including any redeemable shares).
FINANCIAL ASSISTANCE
6. The Company may give any form of financial assistance which is permitted
by the Companies Acts, 1963 to 1990 for the purpose of or in connection
with a purchase or
subscription made or to be made by any person of or for any shares in the
Company or in the Company's holding company and Regulation 10 of Part I
of Table A will be modified accordingly.
TRANSFER OF SHARES
7. The instrument of transfer of a fully paid up share need not be signed by
or on behalf of the transferee and Regulation 22 of Part I of Table A
will be modified accordingly.
GENERAL MEETINGS
8. Annual general meetings shall be held in Ireland unless in respect of any
particular meeting either all the Members entitled to attend and vote at
such meeting consent in writing to its being held elsewhere or a
resolution providing that it be held elsewhere has been passed at the
preceding annual general meeting. Extraordinary general meetings may be
held in or outside Ireland. Regulation 47 of Part I of Table A will not
apply and Regulation 50 will be construed as if the words "within the
State" were deleted therefrom.
9. An extraordinary general meeting shall be convened upon the requisition
of the auditors under the circumstances described in Section 186 of the
Companies Act, 1990 as well as upon the requisition described in
Regulation 50 of Part I of Table A.
10. In Regulation 59(b) of Part I of Table A the words "one Member" shall be
substituted for the words "three Members".
11. Subject to Section 141 of the Act, a resolution in writing signed by all
the members for the time being entitled to attend and vote on such
resolution at a general meeting (or being bodies corporate by their duly
authorised representatives) shall be as valid and effective for all
purposes as if the resolution had been passed at a general meeting of the
Company duly convened and held, and if described as a Special Resolution
shall be deemed to be a Special Resolution within the meaning of the Act.
Any such resolution may consist of several documents in the like form
each signed by one or more of such members (or their duly authorised
representatives). Regulation 6 of Part II of Table A shall not apply.
SINGLE-MEMBER COMPANY
12. (i) If at any time all the issued shares of the Company are registered
in the name of a sole person (whether a natural person or a body
corporate), it will be a single-member company within the meaning
of the European Communities (Single-Member Private Limited
Companies) Regulations, 1994 (the single-member company
regulations). If and so long as the company is a single-member
company, the following provisions will apply notwithstanding
anything to the contrary in these Articles or Table A:
(a) Annual General Meetings
The sole member may decide to dispense with the holding of
annual general meetings. Such decision will be effective
for the year in which it is made and subsequent years, but
nevertheless the sole member or the auditors may require
the holding of an annual general meeting in any such year
in accordance with the procedure laid down in the
Single-Member Company Regulations.
(b) Where a decision to dispense with the holding of an annual
general meeting is in force, the accounts and the
directors' and auditors' reports that would otherwise be
laid before an annual general meeting shall be sent to the
sole member as provided in the Single-Member Company
Regulations, and the provisions of the Companies Acts, 1963
to 1990 with regard to the annual return and the financial
statements which apply by reference to the date of the
annual general meeting will be construed as provided in the
Single-Member Company Regulations.
(c) Quorum at General Meetings
The sole member, present in person or by proxy, is a
sufficient quorum at a general meeting.
(d) Resolutions of Shareholders
All matters requiring a resolution of the Company in
general meeting (except the removal of the auditors from
office) may be validly dealt with by a decision of the sole
member. The sole member must provide the Company with a
written record of any such decision or, if it is dealt with
by a written resolution under Regulation 6 of Part II of
Table A, with a copy of that resolution, and the decision
or resolution shall be recorded and retained by the
Company.
(e) Contracts with Sole Member
Where the Company enters into a contract with the sole
member which is not in the ordinary course of business and
which is not in writing, and the sole member also
represents the Company in the transaction (whether as a
director or otherwise), the directors shall ensure that the
terms of the contract are forthwith set out in a written
memorandum or are recorded in the minutes of the next
directors' meeting.
(ii) If and whenever the Company becomes a single-member company or
ceases to be a single-member company, it shall notify the
Registrar of Companies as provided in the single-member company
regulations.
13. In Regulation 70 of Part I of Table A the words "not less than 48 hours
before the time for holding" and "not less than 48 hours before the time
appointed for" will be deleted and there shall be substituted therefor
the words "before the commencement of" on both occasions.
14. For so long as:
(a) the Company holds shares as treasury shares; or
(b) any subsidiary of the Company holds shares in the Company
the Company or the subsidiary as the case may be shall not
exercise any voting rights in respect of the shares and
Regulations 63 to 73 of Part I of Table A will be modified
accordingly.
DIRECTORS
15. Notwithstanding anything to the contrary contained in the Companies Acts,
1963 to 2001 or any provision of these Articles of Association, the
following matters must be consented to in writing by all of the directors
or authorised by a resolution unanimously passed by the directors at a
duly constituted meeting at which all directors are present:
(a) any expenditure greater than (euro)50,000
(b) the entering into of any contract or commitment expected to have a
duration of more than 1 year; and
(f) the sale, transfer, assignment or encumbrance of any patent held
by the Company.
16. No contract will be entered into by the Company for the employment of, or
the provision of services by, a director or a director of a holding
company of the Company containing a term to which Section 28 of the 1990
Act applies without obtaining the approval provided for in that Section,
and Regulation 85 of Part I of Table A will be modified accordingly.
17. The directors will not retire by rotation, or require to be re-elected in
general meeting following appointment by the directors. Regulations 92 to
100 inclusive of Part I of Table A will be modified accordingly.
18. Until otherwise determined by a general meeting the number of directors
shall not be less than two. The first directors will be the persons named
in the Statement delivered to the Registrar of Companies in accordance
with Section 3 of the Companies (Amendment) Act, 1982. Regulation 75 of
Part I of Table A shall not apply.
19. A resolution in writing signed by all the directors for the time being
entitled to receive notice of a meeting of the directors shall be as
valid and effective for all purposes as a resolution of the directors as
if it had been passed at a meeting of the directors duly convened and
held and may consist of several documents in the like form each signed by
one or more of the directors. For the purpose of this Article, the
signature of an alternate director shall suffice in lieu of the signature
of the director appointing him. Regulation 109 of Part I of Table A shall
not apply.
20. Any director (including an alternate) or any member of a committee of
directors may participate in a meeting of the directors or a committee of
directors of which he is a
member by means of a conference telephone or similar communicating
equipment whereby all persons participating in the meeting can hear each
other, and participation in a meeting in this manner will be deemed to
constitute presence in person (or, as the case may be, by alternate) at
such meeting but, for the purposes of determining whether the quorum for
the transaction of business exists, any director or committee member in
telephonic communication with a meeting of directors or of a committee as
the case may be will not be counted in the quorum, and Regulation 102 of
Part I of Table A will be modified accordingly.
21. The directors shall be entitled to receive notice of and to attend and
speak at any general meeting of the Company or separate meeting of the
holders of any class of shares and Regulation 136 of Part I of Table A
shall be modified accordingly.
22. (a) Each director shall have the power to nominate any other director
or any other person to act as alternate director in his place, at
any meeting of the directors at which he is unable to be present
or during his inability to act as such director and at his
discretion to remove such alternate director and on such
appointment being made the alternate director shall (except as
regards the power to appoint an alternate and the requirement, if
any, of a share qualification) be subject in all respects to the
terms and conditions existing with reference to the other
directors of the Company.
(b) The appointee, whilst he holds office as an alternate director,
shall be entitled to receive notices of all meetings of the
directors and in the absence from meetings of the director
appointing him, shall be entitled to attend, speak and vote at
meetings of the directors, and, whilst he holds office as an
alternate director, shall exercise and discharge all the powers,
rights, duties and authorities of the director he represents, but
shall look to such director solely for his remuneration as
alternate director.
(c) Any director of the Company who is appointed an alternate director
shall be entitled to an additional vote at a meeting of the
directors for each director for whom he acts as alternate director
as distinct from the vote to which he is entitled in his own
capacity as a director of the Company, and shall also be
considered as two or more directors, as the case may be, for the
purpose of making a quorum of directors, provided always that not
less then two individuals are present in person at the meeting. A
person may act as an alternate for more than one director.
(d) An alternate director shall not be counted in reckoning the
maximum number of directors allowed by the Articles of Association
for the time being.
(e) If a director shall die or cease to hold the office of director
the appointment of his alternate shall thereupon cease and
determine, provided always that in the event of these Articles
providing for the retirement of directors by rotation or
otherwise, if any director so retires but is re-elected at the
meeting at which such retirement took effect any appointment made
by him pursuant to this Article which was in
force immediately prior to his retirement shall continue to
operate after his re-election as if he had not so retired.
(f) An alternate director, in the absence from general meetings of the
director appointing him, shall be entitled to attend at general
meetings of the Company.
(g) Any instrument appointing or removing an alternate director shall
be posted or delivered to the secretary or the registered office
of the Company or a meeting of the directors and shall not take
effect unless and until so posted or delivered and all such
instruments shall be retained by the Company. The failure to so
post or deliver the instrument shall not affect the validity of
the appointment or removal of the alternate director. Regulation 9
of Part II of Table A shall not apply.
23. The meetings and proceedings of any committee formed by the directors
will be governed by the provisions of these Articles regulating the
meetings and proceedings of directors so far as the same are applicable
and are not superseded by any regulations imposed on such committee by
the directors and Regulation 105 of Part I of Table A will be modified
accordingly.
24. The directors may from time to time appoint one or more of themselves to
be managing director or any other category of executive director for such
period and on such terms as to remuneration or otherwise as they think
fit, and, subject to the terms of any agreement entered into in any
particular case, may revoke such appointment. Regulations 110 and 111 of
Part I of Table A will not apply and Regulation 112 will apply to all
executive directors as it applies to a managing director.
25. The office of a director shall be vacated ipso facto if the director:
(a) is adjudged bankrupt in the State or in Northern Ireland, or in
Great Britain, or makes any arrangement with his creditors
generally; or
(b) is found to be a lunatic or becomes of unsound mind; or
(c) is for more than six months absent without permission of the
directors from meetings of the directors held during that period
and the directors so determine; or
(d) resigns his office by notice in writing to the Company; or
(e) is convicted of an indictable offence other than an offence under
the Road Traffic Acts 1961 and 1968 or any amending Act or Acts
and the directors so determine; or
(f) becomes restricted or disqualified to act as a director pursuant
to the provisions of the Companies Act, 1990.
Regulation 91 of Part I of Table A shall not apply.
ACCOUNTS
26. The Company will comply with the provisions of the Companies Acts, 1963
to 1990 and all other relevant legislation with regard to accounts, and
Regulations 125 to 129 of Part I of Table A are modified accordingly.
CAPITALISATION OF PROFITS
27. The reference in Regulation 130 to Section 64 of the Companies Act, 1963
will be construed as a reference to Section 207 of the Companies Act,
1990.
AUDITORS
28. The auditors will be appointed and removed and their rights and duties
regulated in accordance with the Companies Acts, 1963 to 1990 and
Regulation 132 of Part I of Table A will not apply.
BORROWING POWERS
29. The directors may from time to time at their discretion raise or borrow
or secure the payment of any sum or sums of money for the purposes or the
benefit of the Company or any other person upon such terms as to interest
or otherwise as they may deem fit and subject to Section 20 of the
Companies (Amendment) Act, 1983 may for the purpose of securing the same
and interest, or for any other purpose, create and issue any perpetual or
redeemable debentures or debenture stock, bonds, securities or
obligations of the Company at any time and in any form or manner and for
any amount, and may raise or borrow or secure the payment of any sum or
sums of money either by mortgage or charge upon the undertaking of the
whole or any part of the property, present or future, or uncalled capital
of the Company, and any debentures, debenture stock or other securities
may be made assignable free from any equities between the Company and the
person to whom the same may be issued; and any debentures, debenture
stock and other securities may be issued at a premium or otherwise, and
with any special privileges as to redemption, surrender, transfer,
drawings, allotments of shares, attending and voting at general meetings
of the Company, appointment of directors and otherwise. Regulation 79 of
Part I of Table A will not apply.
We, the several persons whose names, addresses and descriptions are subscribed,
wish to be formed into a Company in pursuance of this Memorandum of Association
and we agree to take the number of shares in the capital of the Company set
opposite our respective names.
--------------------------------------------------------------------------------
NAMES, ADDRESSES AND DESCRIPTIONS NUMBER OF SHARES
OF SUBSCRIBERS TAKEN BY EACH
SUBSCRIBER
--------------------------------------------------------------------------------
Xxxxxxx Limited One
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Limited Liability Company
Iditarod Limited One
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Limited Liability Company
--------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES TAKEN UP TWO
--------------------------------------------------------------------------------
Dated this 9th day of October 1997
Witness to the above signatures:
X. X. Xxxxxxx,
0 Xxxxxx Xxxxx,
Xx. Xxxxxxx'x Xxxxx,
Xxxxxx 0.
Secretarial Assistant
--------------------------------------------------------------------------------
CERTIFICATE
RE:
VASOGEN IRELAND LIMITED
(the "Company")
BY: XXXX XXXX
ANNEX C
Certified true and correct copy of minutes of Board Meeting of the Company dated
6 October, 2005
/s/ Xxxx Xxxx
---------------------
Xxxx Xxxx
Director
Dated 7 October, 2005
Company No: 273933
Vasogen Ireland Limited
(The "Company")
MINUTES OF A MEETING OF DIRECTORS HELD AT 0 XXXXXXXXXX XXXX, XXXXXX
4 BY MEANS OF A CONFERENCE CALL PURSUANT TO ARTICLE 20 OF THE
ARTICLES OF ASSOCIATION OF THE COMPANY ON THE 6TH DAY OF OCTOBER,
2005 AT 3:10 P.M.
PRESENT: Xxxxx Xxxxxxx (In person)
Xxxx Xxxx (In person)
Xxxxxxxxxxx Xxxxxxx (By conference call)
IN ATTENDANCE: Xxxxxx Xxxx and Xxxxx Xxxxxxx, Xxxxxx X. Xxxxxxx, Solicitors
1. CHAIRMAN It was decided that Xxxxx Xxxxxxx take the Chair for the
duration of the meeting.
2. QUORUM It was noted that all of the Directors of the Company
were participating in the conference call and
accordingly in accordance with the Articles of
Association of the Company, participation in the
conference call is deemed to constitute presence in
person at a meeting of the board of directors of the
Company and that a quorum was therefore present and that
the meeting was otherwise duly convened in accordance
with the Memorandum and Articles of Association of the
Company to transact business. It was further noted that
all the directors deemed present were, pursuant to the
Articles of Association of the Company, entitled to vote
and be counted in the quorum.
The meeting proceeded to business.
3. DECLARATION It was noted that each of the directors present had
OF INTERESTS disclosed to the Secretary the manner (if any) in which
he is interested in the business to be transacted at the
meeting whether as a director of any company which is a
party to such business or otherwise for the purposes of
Section 194 of the Companies Act, 1963 (as amended by
Section 47 of the Companies Act, 1990 (the "1990 Act")).
It was noted that pursuant to the Company's Articles of
Association, a director may vote and form part of the
quorum in relation to any matter in which he is
interested. It was further noted that pursuant to
Section 43 of the Companies (Amendment) (No. 2) Act,
1999 (the "1999 Act"), at least one of the directors of
the Company is resident in Ireland and that each
director present did not individually hold more than
twenty-five directorships, for the purposes of
1
Section 45 of the 1999 Act, and was therefore eligible
to vote on all board resolutions brought before the
meeting.
4. SECTION 150 OF The Chairman informed the meeting that no person who is
THE COMPANIES the subject of a declaration under Section 150 of the
ACT, 1990 1990 Act as amended by Section 41 of the Company Law
(RESTRICTIONS Enforcement Act, 2001 (the "2001 Act") nor the subject
ON DIRECTORS of a disqualification order under Section 160 of the
AND OTHER 1990 Act as amended by Section 42 of the 2001 Act is
OFFICERS) appointed or acts in any way, directly, or indirectly,
as a director or secretary of the Company.
5. PURPOSE OF The Chairman referred to the discussions held on behalf
MEETING of the Company with UBS Securities LLC - F/B/O Kings
Road Investments Ltd. (the "Buyer"), a corporation
incorporated under the laws of the Cayman Islands which
had culminated in the issuing on behalf of the Buyer of
drafts of (a) a form of Securities Purchase Agreement
("SPA") and (b) a form of Senior Convertible Note
("Note"), the former of which it is proposed the Company
will be a party to together with the Buyer, the holding
company of the Company, Vasogen Inc. (the "Parent") and
Vasogen, Corp. (a subsidiary of the Parent) and the
latter of which it is proposed will be issued by the
Company in favour of the Buyer (the form of SPA and the
form of Note are hereafter collectively called the
"Agreements").
A draft of each of the Agreements was before the
meeting.
In addition, it was noted that in relation to the
Agreements, a legal opinion was to be issued by the
Irish solicitors to the Company, Xxxxxx X. Xxxxxxx, and
that so as to enable the aforesaid opinion to be issued,
Xxxxxx X. Xxxxxxx had submitted a draft of a Corporate
Certificate to be completed by a director of the Company
(the "Opinion Certificate").
A draft of the Opinion Certificate was before the
meeting.
The Chairman advised that it was intended to execute a
power of attorney (the "Power of Attorney") authorising
and empowering any one of the Directors of the Company
being Xxxxxxxxxxx Xxxxxxx, Xxxx Xxxx and Xxxxx Xxxxxxx
to undertake actions on behalf of and in the name of the
Company in accordance with the terms of the Power of
Attorney in the form presented to the meeting.
It was noted that pursuant to Section 7(j) of the SPA,
the Company was required to deliver to the Buyer a
certificate executed by a Director of the Company in
respect of the matters specified in Section 7(j) of the
SPA (the "SPA Certificate").
2
A draft of the SPA Certificate was before the meeting.
(The Opinion Certificate and the SPA Certificate are
hereafter collectively called the "Certificates").
In addition, it was noted that it may be a requirement
pursuant to Section 7(k) of the SPA, that a Director of
the Company should complete a certificate in respect of
the matters specified in Section 7(k) of the SPA (the
"Section 7(k) Certificate").
In addition, the Chairman advised the meeting that it
was proposed that the Company would issue a direction to
the Buyer, authorising and directing the Buyer on an
irrevocable and unconditional basis to pay directly to
the Parent the purchase price payable to the Company by
the Buyer on the issuance by the Company of the Senior
Convertible Notes pursuant to the Note (the
"Direction"). It was further noted that the aforesaid
monies were to be applied by the Parent in discharging
existing inter-company indebtedness due by the Company
to the Parent.
A draft of the Direction was before the meeting.
The Chairman explained that it was necessary to consider
and, if thought fit, approve the execution and delivery
by, or on behalf of, the Company of the Agreements, the
Power of Attorney, the Certificates, the Section 7(k)
Certificate (if required) and the Direction. In
particular, it was noted that before the Company could
accept and execute the Agreements, the Certificates, the
Section 7(k) Certificate and the Direction, the board
had to consider whether it was in the interests of the
Company to accept and to execute the Agreements, the
Certificates, the Section 7(k) Certificate and the
Direction.
The meeting then considered the drafts of the
Agreements, the Power of Attorney, the Certificates, the
Section 7(k) Certificate and the Direction and in
particular the Chairman referred to the following:
(a) the covenants that the Company would be required to
provide;
(b) the representations and warranties that the Company
would be required to make;
(c) the Events of Default (as defined in the form of
Senior Convertible Note); and
(d) the content of the Certificates, the Section 7(k)
Certificate and in particular the provisions of
paragraphs 4, 5, 6 and 11 of the
3
Opinion Certificate and the implications arising
for the Company and the Parent in circumstances
where the participation by the Company in the
Agreements would be held to have constituted an
offer of securities to the public and/or an
invitation to the public to subscribe for
securities.
The directors carefully considered the benefits that
would accrue to the Company should it execute and
deliver the Agreements, the Certificates, the Section
7(k) Certificate and the Direction and execute the Power
of Attorney. The directors considered the following:
(a) that the Memorandum and Articles of Association of
the Company empower the Company to draw, make,
accept, endorse, discount, negotiate, execute and
issue and to buy, sell and deal with bills of
exchange, promissory notes and other negotiable or
transferable instruments;
(b) that the participation by the Company in the
Agreements will enable the Company and the Parent
to carry on their respective businesses in a
profitable and efficient manner and consequently
this will be for the direct and indirect benefit of
the Company;
(c) that the benefits to be derived by the Company from
its participation in the Agreements are at least
the fair equivalent of the obligations to be
undertaken by the Company under the Agreements;
(d) that the Company is to enter into the Agreements in
good faith, for its legitimate business purposes,
for full commercial consideration and for its own
commercial benefit commensurate with the risks it
is taking thereunder and the conclusions as to
commercial justification for the execution and
delivery of the Agreements by the Company were
reached by each director in good faith and for the
benefit of the Company and are conclusions at which
such director could reasonably arrive; and
(e) the issuing by the Company of the Direction will
enable the Company to reduce the indebtedness which
it owes to the Parent.
6. RESOLUTIONS After careful consideration and review of the
Agreements, the Certificates, the Section 7(k)
Certificate, the Power of Attorney and the Direction,
the meeting unanimously noted that it was in the best
interests and to the corporate benefit of the Company to
participate
4
and to enter into the Agreements, the Power of Attorney,
the Direction, to grant the Certificates and, if
required, to grant the Section 7(k) Certificate.
The directors resolved that the Common Seal of the
Company be affixed to the Power of Attorney where
required and in accordance with the Articles of
Association of the Company and the Companies Acts, 1963
to 2005 and that the affixing of the Common Seal be
witnessed in accordance with the Articles of Association
of the Company.
The directors further resolved as follows:
(a) Each of the Agreements, the Certificates, the
Section 7(k) Certificate, the Power of Attorney and
the Direction and the transactions contemplated
thereby be and are hereby approved and that in
accordance with, and pursuant to, the Power of
Attorney any director of the Company is hereby
authorised and empowered to execute each of the
Agreements under his seal so as to have the same
effect as if same were under the Common Seal of the
Company, and to execute the Certificates, the
Section 7(k) Certificate and the Direction,
respectively and agree such variations or
amendments and modifications to the Agreements, the
Certificates, the Section 7(k) Certificate and the
Direction as he shall in his absolute discretion
consider appropriate and that, with such amendments
and modifications (if any), any director or
directors of the Company be and are hereby
empowered, directed, authorised and appointed for
and on behalf of the Company to execute the
Agreements, the Certificates, the Section 7(k)
Certificate (if required) and the Direction; and
(b) that any director or directors of the Company be
and are hereby empowered, directed, authorised and
appointed on behalf of the Company to execute, date
and deliver such other documents and to do such
other acts as he or they consider necessary or
desirous in connection with or arising out of the
execution of the Agreements and/or the Certificates
and/or the Section 7(k) Certificate and/or the
Direction and the transactions contemplated
thereby.
7. OTHER BUSINESS There being no other business, the meeting then
concluded.
/s/ Xxxxx Xxxxxxx
----------------------------
Chairman
5
SCHEDULE 2B
ACCREDITED INVESTOR CERTIFICATE
The Purchaser certifies that it/he/she and any beneficial purchaser are each a
resident of Canada or is otherwise subject to the Securities Legislation of
Canada, and the Purchaser or the disclosed beneficial purchaser, as applicable,
is an "accredited investor" as defined in National Instrument 45-106 -
Prospectus and Registration Exemptions ("NI 45-106") and, as at the Closing, the
Purchaser or the beneficial purchaser, as applicable, qualifies as one of more
of the following and acknowledges that the Issuer is relying on this certificate
in determining to sell securities to the undersigned. (Please insert a checkmark
in the box beside each applicable paragraph)
"accredited investor" means
(a) a Canadian financial institution, or a Schedule III bank; |_|
(b) the Business Development Bank of Canada incorporated under |_|
the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or |_|
(b), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to
be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a |_|
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one
or both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
(e) an individual registered or formerly registered under the |_|
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any |_|
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a |_|
metropolitan community, school board, the Comite de gestion
de la taxe scolaire de l'ile de Montreal or an intermunicipal
management board in Quebec;
(h) any national, federal, state, provincial, territorial or |_|
municipal government of or in any foreign jurisdiction, or
any agency of that government;
(i) a pension fund that is regulated by either the Office of the |_|
Superintendent of Financial Institutions (Canada) or a
pension commission or similar regulatory authority of a
jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, |_|
beneficially owns, directly or indirectly, financial assets
having an aggregate realizable value that before taxes, but
net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 |_|
in each of the 2 most recent calendar years or whose net
income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who,
in either case, reasonably expects to exceed that net income
level in the current calendar year;
D-1
(l) an individual who, either alone or with a spouse, has net |_|
assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that |X|
has net assets of at least $5,000,000 as shown on its most
recently prepared financial statements;
(n) an investment fund that distributes or has distributed its |_|
securities only to
(i) a person that is or was an accredited investor at the
time of the distribution,
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(being that (I) the person purchases as principal, (II)
the security has an acquisition cost to the purchaser of
not less than $150,000 paid in cash at the time of the
trade, and (III) the trade is in the security of a
single issuer), and section 2.19 of NI 45-106 (being a
trade by an investment fund in a security of its own
issue to a security holder of the investment fund where
(I) the security holder initially acquired securities of
the investment fund as principal for an acquisition cost
of not less than $150,000 paid in cash at the time of
the trade, (II) the subsequent trade is for a security
of the same class or series as the initial trade, and
(III) the security holder, as at the date of the
subsequent trade, holds securities of the investment
fund that have an acquisition cost of not less than
$150,000 or a net asset value of not less than
$150,000); or
(iii) a person described in paragraph (i) or (ii) that
acquires or acquired securities under section 2.18 of
NI 45-106 [Investment fund reinvestment];
(o) an investment fund that distributes or has distributed |_|
securities under a prospectus in a jurisdiction of Canada for
which the regulator or, in Quebec, the securities regulatory
authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized |_|
to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of
Canada or a foreign jurisdiction, acting on behalf of a fully
managed account managed by the trust company or trust
corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed |_|
by that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction, and
(ii) in Ontario, is purchasing a security that is not a
security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, |_|
in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the
securities legislation of the jurisdiction of the registered
charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is |_|
analogous to any of the entities referred to in paragraphs
(a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, |_|
direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that
are accredited investors;
(u) an investment fund that is advised by a person registered as |_|
an adviser or a person that is exempt from registration as an
adviser; or
D-2
(v) a person that is recognized or designated by the securities |_|
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia after
National Instrument 45-106 comes into force.
The following definitions are included for convenience only; reference
should be had to the applicable legislation:
(a) "director" means
(i) a member of the board of directors of a company or an individual
who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual
who performs functions similar to those of a director of a
company;
(b) "eligibility adviser" means
(i) a person that is registered as an investment dealer or in an
equivalent category of registration under the securities
legislation of the jurisdiction of a purchaser and authorized to
give advice with respect to the type of security being
distributed, and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a
jurisdiction of Canada or a public accountant who is a member
in good standing of an institute or association of chartered
accountants, certified general accountants or certified
management accountants in a jurisdiction of Canada provided
that the lawyer or public accountant must not
(a) have a professional, business or personal relationship with
the issuer, or any of its directors, executive officers,
founders, or control persons, and
(b) have acted for or been retained personally or otherwise as
an employee, executive officer, director, associate or
partner of a person that has acted for or been retained by
the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
(c) "entity" means a company, syndicate, partnership, trust or
unincorporated organization;
(d) "financial assets" means
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities
legislation;
(e) "fully managed account" means an account of a client for which a
person makes the investment decisions if that person has full
discretion to trade in securities for the account without requiring
the client's express consent to a transaction;
(f) "investment fund" has the same meaning as in National Instrument
81-106 Investment Fund Continuous Disclosure;
(g) "person" includes
(i) an individual,
(ii) a corporation,
(iii) a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether
incorporated or not, and
(iv) an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or other legal
representative;
D-3
(h) "related liabilities" means
(i) liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets;
(i) "spouse" means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the
other individual,
(ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between
individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or
(ii), or is an adult interdependent partner within the meaning
of the Adult Interdependent Relationships Act (Alberta); and
(j) "subsidiary" means an issuer that is controlled directly or
indirectly by another issuer and includes a subsidiary of that
subsidiary.
An issuer is an "affiliate" of another issuer if (i) one of them is the
subsidiary of the other, or (ii) each of them is controlled by the same person.
In National Instrument 45-106 a person (first person) is considered to
"control" another person (second person) if
(i) the first person, directly or indirectly, beneficially owns or
exercises control or direction over securities of the second person
carrying votes which, if exercised, would entitle the first person to
elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an obligation,
(ii) the second person is a partnership, other than a limited partnership,
and the first person holds more than 50% of the interests of the
partnership, or
(iii) the second person is a limited partnership and the general partner
of the limited partnership is the first person.
The foregoing representation, warranty and certificate is true and
accurate as of the date of this certificate and will be true and accurate as of
Closing. If any such representation, warranty or certificate shall not be true
and accurate prior to Closing, the undersigned shall give immediate written
notice of such fact to the Issuer.
Dated: 07 October 2005 Signed: /s/ Xxxx Xxxxxxxxx
--------------- ------------------------
/s/ Xxxxx Xxxxxxxx KINGS ROAD INVESTMENTS LTD.
---------------------------------------- -------------------------------
Witness (If Purchaser is an Individual) Print the name of Purchaser
Xxxxx Xxxxxxxx Xxxx Xxxxxxxxx
---------------------------------------- -------------------------------
Print Name of Witness If Purchaser is a Corporation,
print name and title of
Authorized Signing Officer
D-4
Schedule 3(a)
Subsidiaries
------------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
----------------------- ----------------------- -------------------------
Vasogen Ireland Limited None None
(100%)
Vasogen, Corp. (100%)
Schedule 3(d)
No Conflicts
------------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
------------------------ ------------------------- ------------------------
No additional disclosure. No additional disclosure. No additional disclosure.
Schedule 3(e)
Consents
--------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
----------------------- ----------------------- -------------------------
None None None
Schedule 3(j)
Rights Plan
-----------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
------------------------ ------------------------- ------------------------
Shareholder Rights Plan None None
Agreement, dated as of
November 22, 2000, by and
between Vasogen Inc. and
CIBC Mellon Trust
Company
Schedule 3(l)
Absence of Certain Changes
--------------------------
Absence of Vasogen Ireland
Certain Changes Vasogen Inc. Limited Vasogen, Corp.
------------------ ------------ ----------------------- --------------
(i) None None None
(ii) None None None
(iii) None None None
Schedule 3(r)
Capitalization**
----------------
Absence of Vasogen Ireland
Certain Changes Vasogen Inc. Limited Vasogen, Corp.
------------------ ------------ ----------------------- --------------
(i)* No N/A N/A
(ii) None None None
(i) None None None
(ii) None None None
(iii) None None None
(iv) None None None
(v) None None None
(vi) None None None
(vii) None None None
--------------------
* Only considered for the parent
** Excludes any obligations undertaken under the transaction documents
Schedule 3(s)
Indebtedness and Other Contracts
--------------------------------
Indebtedness
and Other Vasogen Ireland
Contracts Vasogen Inc. Limited Vasogen, Corp.
------------------ ------------ ----------------------- --------------
(i) (A) None Intercompany Intercompany
Debt** Debt**
(i)(B) None None None
(i)(C)* None None None
(i)(D) None None None
(i)(E) None None None
(i)(F) None None None
(i)(G) None None None
(i)(H) None None None
(ii) None None None
(iii) None None None
(iv) None None None
-----------------------
* Excludes obligations undertaken under the transaction documents
** For information only, it being understood that Intercompany debt does not
constitute indebtedness
Schedule 3(t)
Litigation
----------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
----------------------- ----------------------- -------------------------
None None None
Schedule 3(x)
Intellectual Property
---------------------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
----------------------- -------------------------- -------------------------
None 001 Patent Cases None
(Apparatus for Oxygenating
Blood) in Australia
(613333), Canada
(1291707), U.K. (2242367),
Ireland (61311), New
Zealand (223211), and
United States (4968483)
004-CA Canadian Industrial
Design Registration "Blood
Sample Treating Machine"
024 Patent Cases
(Treatment of IL-10
Deficiencies) in Canada
(2379088), U.K.
(202410.7), and United
States (10/030,418)
030-US Patent Case
(Transforming Growth
Factor Regulation)
077-PCT Patent Case (PG
Receptor)
Schedule 3(z)
Subsidiary Rights
-----------------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
------------------------ ------------------------- ------------------------
No additional disclosure. No additional disclosure. No additional disclosure.
Schedule 3(aa)
Tax Status
----------
Vasogen Inc. Vasogen Ireland Limited Vasogen, Corp.
------------------------ ------------------------- ------------------------
No additional disclosure. No additional disclosure. No additional disclosure.
Exhibit 1b
Securities Purchase Agreement - Amatis Ltd.
(exhibits and schedules attached to Kings Road Investments Ltd.
Security Purchase Agreement omitted)
(see attached)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 7,
2005, by and among Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland, with headquarters located at Xxxxxxx Airport
House, Shannon, Co. Xxxxx, Ireland (the "Company"), Vasogen Inc., a Canadian
corporation, with headquarters located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx (the "Parent"), Vasogen, Corp., a Delaware
corporation, with its registered address at 0000 Xxxxx Xxxxxx Xxxxxx, X.X. Box
1347, Wilmington, County of Newcastle, Delaware 19801 ("Vasogen, Corp.") and the
investor listed on the Buyer Schedule attached hereto (the "Buyer").
WHEREAS:
A. The Company, the Parent, Vasogen, Corp. and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act.
B. The Company has authorized a new series of senior convertible notes of
the Company, which notes shall be convertible into the Parent's common shares
(the "Common Shares") in accordance with the terms of such notes.
C. The Company, the Parent and Vasogen, Corp. plan to enter into one or
more Other Purchase Agreements (as defined below) relating to the sale and
purchase of securities on substantially identical terms as contained in this
Agreement.
D. The Buyer wishes to purchase, and (i) the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (the
"Notes"), set forth opposite the Buyer's name in column (3) on the Buyer
Schedule (which amount when aggregated with all amounts of notes being purchased
by other buyers (the "Other Buyers") pursuant to the Other Purchase Agreements
(the "Other Notes" and together with the Notes, the "Aggregate Notes"), shall be
$40,000,000) (as converted, amortized and/or redeemed for Common Shares pursuant
to the terms of the Notes, collectively, the "Conversion Shares") and (ii) the
Parent wishes to issue, upon the terms and conditions stated in this Agreement,
warrants, in substantially the form attached hereto as Exhibit B (the "Initial
Warrants," and together with the Accelerated Payment Option Warrants (as defined
in the Notes), the "Warrants," and together with the warrants being purchased by
the Other Buyers (the "Other Warrants"), the "Aggregate Warrants"), to acquire
up to that number of additional shares of Common Shares set forth opposite the
Buyer's name in column (4) of the Buyer Schedule (as exercised, the "Initial
Warrant Shares," and together with the Common Shares issuable upon exercise of
the Accelerated Payment Option Warrants, the "Warrant Shares").
E. Contemporaneously with the execution and delivery of this Agreement,
certain of the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (as amended or
modified from time to time, the "Registration
Rights Agreement"), pursuant to which the Parent has agreed to provide certain
registration rights with respect to the Conversion Shares and the Initial
Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder.
F. The Notes, the Conversion Shares, the Warrants, the Warrant Shares and
the Guarantees (as defined in clause (G) below) collectively are referred to
herein as the "Securities".
G. The Notes will be (i) senior to all outstanding and future Indebtedness
(as defined herein) of the Company, (ii) guaranteed by the Parent pursuant to a
guarantee substantially in the form attached hereto as Exhibit D-1 (the "Parent
Guaranty") and (iii) guaranteed by Vasogen, Corp. pursuant to a guarantee
substantially in the form attached hereto as Exhibit D-2 (the "Subsidiary
Guaranty," and together with the Parent Guaranty, the "Guarantees").
NOW, THEREFORE, the Company, the Parent, Vasogen, Corp. and the Buyer
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Subject to the satisfaction (or waiver by the party entitled to
so waive) of the conditions set forth in Sections 6 and 7 below, on the Closing
Date (as defined below), (A) the Company shall issue and sell to the Buyer, and
the Buyer agrees to purchase from the Company, one or more Notes with an
aggregate principal amount as is set forth opposite the Buyer's name in column
(3) on the Buyer Schedule and (B) the Parent shall issue and sell to the Buyer
one or more Initial Warrants to acquire up to that number of Warrant Shares as
is set forth opposite the Buyer's name in column (4) on the Buyer Schedule (the
"Closing").
(ii) Purchase Price. The aggregate purchase price for the Buyer of
the Notes and the Warrants to be purchased by the Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite the Buyer's name in
column (5) of the Buyer Schedule. The purchase price for the Warrants shall be
deemed to be $0.01 per Warrant.
(b) Closing Date. The date and time of the Closing (the "Closing Date")
shall be 8:00 a.m., New York Time, on the date hereof after notification of
satisfaction (or waiver by the party entitled to so waive) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and the Buyer) at the offices of Xxxxxxx Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) Form of Payment. On the Closing Date, the Buyer shall pay its
Purchase Price to the Company or, at the written direction of the Company
delivered to the Buyer at least one (1) Business Day prior to the Closing Date
and substantially in the form attached hereto as Annex 1(c), to its designee for
the Notes to be issued and sold to the Buyer at such Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions and the Parent shall issue the Initial Warrants to the Buyer. At
the Closing, (A) the Company shall deliver to the Buyer the Notes (allocated in
the principal amounts as the Buyer shall request) that the Buyer is then
purchasing and (B) the Parent shall deliver to the Buyer the
-2-
Initial Warrants (allocated in the amounts as the Buyer shall request) that the
Buyer is purchasing, in each case duly executed on behalf of the Company or the
Parent, as applicable, and registered in the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) No Public Sale or Distribution. The Buyer is acquiring the Notes
and the Warrants and upon conversion, amortization and/or redemption of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable
upon conversion, amortization and/or redemption of the Notes and the Warrant
Shares issuable upon exercise of the Warrants for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act or
qualified for public distribution or exempted under the securities legislation
and regulations and regulations of, and the instruments, policies, rules,
orders, codes, notices and published interpretation notes of, the securities
regulatory authorities of the provinces and territories of Canada (the "Canadian
Securities Laws"), as applicable; provided, however, that by making the
representations herein, subject to compliance with Canadian Securities Laws, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and in accordance with Canadian Securities Laws. The Buyer is
acquiring the Securities hereunder in the ordinary course of its business. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities, and the Buyer
has not solicited offers for, or offered or sold, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(b) Accredited Investor Status. The Buyer is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D. The Buyer is also an "accredited investor" as that term is defined
in the National Instrument 45-106, Prospectus and Registration Exemptions. The
Buyer has executed the Accredited Investor Certificate attached hereto as
Schedule 2(b) as of the date hereof, and such certificate is true and correct as
of the date hereof.
(c) Reliance on Exemptions. The Buyer understands and acknowledges that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and Canadian Securities Laws applicable in Ontario and that the
Company and the Parent are relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and the Parent and
-3-
materials relating to the offer and sale of the Securities that have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and the Parent. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's and the Parent's representations and
warranties contained herein. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
or Canadian federal, state or provincial commission or agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such commissions or agencies passed upon or endorsed
the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that, except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws or
qualified under Canadian Securities Laws; (ii) the Buyer agrees that if it
decides to offer, sell or otherwise transfer any of the Notes, Conversion
Shares, Warrants or Warrant Shares, such Notes, Conversion Shares, Warrants and
Warrant Shares may be offered, sold or otherwise transferred only: (A) pursuant
to an effective registration statement under the 1933 Act, subject to compliance
with Canadian Securities Laws, (B) to the Company (in the case of the Notes) or
the Parent (in the case of the Warrants, the Conversion Shares and the Warrant
Shares); (C) outside the United States in accordance with Rule 904 of Regulation
S under the 1933 Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the 1933 Act
provided by Rule 144 or Rule 144A thereunder, if available, and in compliance
with any applicable state securities laws or (2) in a transaction that does not
require registration under the 1933 Act or applicable state securities laws, and
the seller has provided the Company and the Parent with reasonable assurance,
prior to such offer, sale or transfer, that such Securities may be so offered,
sold or transferred in a transaction that does not require registration under
the 1933 Act or applicable state securities laws; and (iii) any sale or transfer
of the Securities to a purchaser or transferee whose address is in Canada or who
is a resident of Canada is prohibited unless it is made in compliance with
applicable Canadian Securities Laws.
(g) Legends. The Buyer understands that the certificates or other
instruments representing the Notes and Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, and subject to Section 9(s), the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "Blue Sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE]
-4-
[EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT; (B) TO THE COMPANY, (C) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT AND
IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN
ACCORDANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (2) IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND THE
HOLDER HAS PROVIDED THE COMPANY, PRIOR TO
SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES
MAY BE SO OFFERED, SOLD OR TRANSFERRED IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Subject to Section 9(s), the legend set forth above shall be removed and the
Company or the Parent, as applicable, shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with reasonable assurance that
the sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act, (iii) if the
Company or the Parent is a "foreign issuer," within the meaning of Regulation S
under the 1933 Act and the Securities are being sold pursuant to Rule 904 of
Regulation S, such legend may be removed by providing a declaration to the
Company or the Parent, as applicable, that such shares may be sold pursuant to
Rule 904 of Regulation S or (iv) such holder provides the Company or the Parent,
as applicable, with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Canadian Legends. The Buyer understands that the certificates or
other instruments representing Warrants and, if the Notes are converted or the
Warrants are exercised prior to February 8, 2006, the share certificates
representing the Conversion Shares and the Warrant Shares, shall bear a legend
set forth below:
-5-
"UNLESS PERMITTED UNDER CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THESE SECURITIES
SHALL NOT TRADE THE SECURITIES IN CANADA
BEFORE FEBRUARY 8, 2006."
The legend set forth above shall be removed and the Parent shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped at anytime on or after February 8, 2006, if such Securities are
qualified for distribution by prospectus under applicable Canadian Securities
Laws or if in connection with a proposed trade the holder provides the Parent
with reasonable assurance that the Securities are no longer subject to a hold
period under such laws.
(i) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and shall constitute the legal, valid and binding
obligations of the Buyer enforceable against the Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(j) No Conflicts. The execution, delivery and performance by the Buyer
of this Agreement and the Registration Rights Agreement and the consummation by
the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party or by which it is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations hereunder.
(k) Residency. The Buyer is a resident of that jurisdiction specified
below its address on the Buyer Schedule.
(l) Certain Trading Activities. Neither the Buyer nor any of its
affiliates has directly or indirectly, and no Person acting on behalf of the
Buyer or its affiliates has directly or indirectly, engaged in any transactions
in the securities of the Parent or the Company (including, without limitation,
any Short Sales involving the Parent's securities) since the time that the Buyer
was first contacted by the Parent, a placement agent or any other Person with
respect to the transactions contemplated hereby. "Short Sales" include, without
limitation, all "short sales" as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers. The
Buyer covenants that neither it, nor any of its affiliates that it exercises
investment discretion over or to which it has provided knowledge of the
transactions contemplated by the Transaction
-6-
Documents, nor any Person acting on behalf of the Buyer or any of its affiliates
that it exercises investment discretion over or to which it has provided
knowledge of the transactions contemplated by the Transaction Documents will
engage in any transactions in the securities of the Parent or the Company
(including Short Sales) prior to the time that the transactions contemplated by
this Agreement are publicly disclosed. Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.
(m) No Irish Public Offering. The Buyer has not offered or sold, and it
will not offer or sell, any Notes in Ireland in circumstances which would
constitute an offer to the public within the meaning of Irish Prospectus Law (as
defined below) or an invitation to the public (as referred to in Section 33 of
the Companies Act, 1963) to subscribe for the Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT.
Each of the Company, the Parent and Vasogen, Corp. jointly and
severally represents and warrants to the Buyer as of the date hereof as follows:
(a) Organization and Qualification. The Parent is up to date in all
filings under the Canada Business Corporations Act (the "CBCA"). The Parent and
the Parent's "Subsidiaries" (which for purposes of this Agreement means the
Company, Vasogen, Corp. and any entity in which the Parent, directly or
indirectly, owns 50% or more of the outstanding capital stock or holds an equity
or similar interest representing 50% or more of the outstanding equity or
similar interest of such entity) are entities duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which they are formed. The Parent and its Subsidiaries have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Parent and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing (if applicable) in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Vasogen, Corp. is not qualified as a foreign entity to do business in any state
and there is no jurisdiction in which Vasogen, Corp., by virtue of its ownership
of property or the nature of the business conducted by it, makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Parent, the Company or
Vasogen, Corp. to perform its obligations under the Transaction Documents (as
defined below). None of the Parent, the Company or Vasogen, Corp. holds any
equity or similar interest in any entity except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Xxxxxxxx. Each of the Parent and its
Subsidiaries has the requisite power and authority, to the extent it is a party
thereto or bound thereby, to enter into and perform its obligations under this
Agreement, the Notes, the
-7-
Guarantees, the Registration Rights Agreement, the Treasury Instructions (as
defined in Section 5(b)), the Warrants and each of the other agreements entered
into by the applicable parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and
to issue their respective Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Parent,
the Company and Vasogen, Corp. and the consummation by the Parent, the Company
and Vasogen, Corp. of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, the Warrants and the
Guarantees, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants have been duly authorized by the board of directors (or
similar governing body) of the Parent, the Company and Vasogen, Corp., as
applicable, and, other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) the filing of a Form D with respect to the Notes, the
Warrants and the Guarantees, as required under Regulation D and (iii) such
filings required under applicable securities or "Blue Sky" laws of the states of
the United States and applicable Canadian Securities Laws and applicable
requirements of the TSX (all of the foregoing, the "Required Approvals"), no
further filing, consent, or authorization is required by the Company, the
Parent, Vasogen, Corp. or any of their boards of directors and/or shareholders.
This Agreement and the other Transaction Documents to which they are a party
have been duly executed and delivered by the Parent, the Company and Vasogen,
Corp., as applicable, and constitute the legal, valid and binding obligations of
the Parent, the Company and Vasogen, Corp., as applicable, enforceable against
the Parent, the Company and Vasogen, Corp., as applicable, in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and to the extent that
rights to indemnity may be limited by applicable law, including the
indemnification and contribution provisions of the Registration Rights
Agreement.
(c) Issuance of Securities. The Notes, the Warrants and the Guarantees
are free from all taxes (other than a stamp duty charge of 0.15 Euro on the
issuance of each of the Notes, that will be paid by the Company), liens and
charges with respect to the issue thereof. As of the Closing, a number of shares
of Common Shares shall have been duly authorized and reserved for issuance which
equals or exceeds the maximum number of Common Shares: (i) issuable upon
conversion, amortization and/or redemption for Common Shares of the Notes and
(ii) issuable upon exercise of the Warrants. Upon issuance or conversion,
amortization and/or redemption in accordance with the terms of the Notes or
exercise in accordance with the terms of the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Shares. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Parent, the Company and Vasogen,
Corp. of the Securities is exempt from registration under the 1933 Act and from
the prospectus and registration requirements of applicable Canadian Securities
Laws. The Company has not offered or sold, and it will not offer, sell or
transfer the Notes in violation of Irish Securities Laws or in circumstances
that would constitute an offer to
-8-
the public within the meaning of Irish Prospectus Law or an invitation to the
public (as referred to in Section 33 of the Companies Act, 1963) to subscribe
for the Notes and nothing herein contained shall be construed as constituting an
offer of Notes to the public within the meaning of Irish Prospectus Law or an
"invitation to the public" (as referred to in Section 33 of the Companies Act,
1963) to subscribe for the Notes. As used herein, "Irish Prospectus Law" has the
meaning set out in the Investment Funds, Companies and Miscellaneous Provisions
Act, 2005 and "Irish Securities Laws" means Irish Prospectus Law, the Irish
Companies Acts, 1963 to 2005, the Central Bank Acts, 1942-1999, the Investment
Intermediaries Act, 1995 (as amended) and any regulations made thereunder (as
each of these may be amended or supplemented from time to time).
(d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Parent, the Company
and Vasogen, Corp. and the consummation by the Parent, the Company and Vasogen,
Corp. of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants and the Guarantees and
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation, any
capital stock of the Parent or any of its Subsidiaries, the Bylaws or any of the
organizational documents of the Parent or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Parent or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws or Canadian
Securities Laws and regulations and the rules and regulations (A) of the Toronto
Stock Exchange (the "TSX") and (B) either of Nasdaq National Market ("Nasdaq")
or The Nasdaq Small Cap Market ((A) and (B) collectively, the "Principal
Markets" and each individually, a "Principal Market")) applicable to the Parent
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, except in the case of clauses (ii)
and (iii) above, any breach or default that would not have a Material Adverse
Effect.
(e) Consents. Except as set forth on Schedule 3(e), none of the Parent
nor any of its Subsidiaries is required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof, except for the following consents, authorizations,
orders, filings and registrations (none of which is required to be filed or
obtained before the Closing): (i) the filing by the Parent of a listing
application and a notice for acceptance of a private placement for the
Conversion Shares and Warrant Shares with the Principal Markets, which shall be
done pursuant to the rules of the Principal Markets, (ii) as may be required
under the 1933 Act, the "Blue Sky" laws of various states or the rules and
regulations thereunder in connection with the transactions contemplated by the
Registration Rights Agreement and (iii) any notices or filings required to be
given or made with TSX and Nasdaq, which have been or will be given or made on a
timely basis by the Parent. The Parent and its Subsidiaries are unaware of any
facts or circumstances that might prevent the Parent from obtaining or effecting
any of the registration, application or filings pursuant to the preceding
sentence. The Parent is not in violation of the listing requirements of either
of the
-9-
Principal Markets and has no knowledge of any facts that would reasonably lead
to delisting or suspension of the Common Shares in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Each of
the Parent, the Company and Vasogen, Corp. acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is not (i) an officer or director of the Parent or
the Company, (ii) to the knowledge of each of the Parent and its Subsidiaries,
an "affiliate" of the Parent or any of its Subsidiaries (as defined in Rule 144
under the 1933 Act) or (iii) to the knowledge of each of the Parent and its
Subsidiaries, a "beneficial owner" of more than 10% of the shares of Common
Shares (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")). Each of the Parent, the Company and Vasogen,
Corp. further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Parent or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. Each of the Parent, the Company and Vasogen, Corp.
further represents to the Buyer that the Parent's, the Company's and Vasogen,
Corp.'s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by each of them and their representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Parent
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(including any within the meaning of Regulation D) in connection with the offer
or sale of the Securities in the United States or elsewhere or to any United
States citizen or resident. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by the Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it has
engaged XX Xxxxx & Co., LLC as placement agent (the "Agent") and any co-agents
that the Agent may engage pursuant to the Engagement Letter dated as of June 24,
2005 by and between the Agent and the Parent in connection with the sale of the
Securities. Other than the Agent, and the co-agents referred to above, if
applicable, neither the Parent nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Parent, its Subsidiaries, any
of their affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Parent or any of its Subsidiaries for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Parent are
listed or designated. None of the Parent, its Subsidiaries, their affiliates or
any Person acting on their behalf will take any action or steps
-10-
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Parent understands and acknowledges that the
number of Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Parent further acknowledges
that its obligation to issue Conversion Shares upon conversion, amortization
and/or redemption of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Transaction Documents and the Warrants is, in
each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Parent.
(j) Application of Takeover Protections; Rights Agreement. The Parent
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's Articles of Incorporation which is or
could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Parent's or
any of its Subsidiaries' issuance of the Securities and the Buyer's ownership of
the Securities. Except as set forth on Schedule 3(j), the Parent has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Shares or a change in control of the Company.
(k) SEC-CSA Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC and the
Canadian Securities Administrators (the "CSA") pursuant to the reporting
requirements of the 1934 Act and the Canadian Securities Laws (all of the
foregoing filed during the two-year period prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC-CSA Documents"). The Parent has delivered to the Buyer or their
respective representatives true, correct and complete copies of the SEC-CSA
Documents not available on the XXXXX and SEDAR systems, if any. As of their
respective dates, the SEC-CSA Documents complied in all material respects with
the requirements of the 1934 Act and the Canadian Securities Laws and the rules
and regulations of the SEC and the CSA promulgated thereunder applicable to the
SEC-CSA Documents, and none of the SEC-CSA Documents, at the time they were
filed with the SEC or the CSA as applicable, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Parent included in the SEC-CSA Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and the CSA with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles in Canada, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary
-11-
statements) and fairly present in all material respects the financial position
of the Parent as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(l) Absence of Certain Changes. Since November 30, 2004, there has been
no undisclosed material adverse change and no undisclosed material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole. Except as disclosed in Schedule 3(l), since
November 30, 2004, neither the Parent nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $500,000 outside of the ordinary course of business or
(iii) had capital expenditures outside of the ordinary course of business,
individually or in the aggregate, in excess of $500,000. Neither the Parent nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Parent, the Company or Vasogen, Corp. have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Except as disclosed in Schedule 3(l), the Parent,
individually, and the Parent and its respective Subsidiaries, taken as a whole,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), "Insolvent" means, with respect to
any Person (as defined in Section 3(s)), (i) the present fair saleable value of
such Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature, (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted or (v) such Person is "unable to pay its debts"
(as such term is defined in Section 214 of the Irish Companies Act, 1963 (as
amended by Section 2(3) of the Companies (Amendment) Act, 1990)).
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur with respect to the Parent or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Shares on the date
hereof and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Parent nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or their organizational charter or certificate of
incorporation or Bylaws, respectively. Neither the Parent nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Parent or its Subsidiaries,
except for which an acceptance or consent has been obtained, and neither the
Parent nor any of its Subsidiaries will conduct its business in violation of any
of the foregoing, except for possible violations that would not, individually or
in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Parent is not in violation of any of the rules,
-12-
regulations or requirements of either of the Principal Markets and has no
knowledge of any facts or circumstances that would reasonably be expected to
lead to delisting or suspension of the Common Shares by either of the Principal
Markets in the foreseeable future. Since December 17, 2003, (i) the Common
Shares have been designated for quotation on the Principal Markets, (ii) trading
in the Common Shares has not been suspended by the SEC, the CSA or either of the
Principal Markets and (iii) the Parent has received no communication, written or
oral, from the SEC, the CSA or either of the Principal Markets regarding the
suspension or delisting of the Common Shares from the Principal Markets. The
Parent and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Parent nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit. The Parent is a reporting issuer
not in default of any requirements under the applicable Canadian Securities Laws
and eligible to use the Short Form Prospectus System, established under National
Instrument 44-101 of the CSA (the "POP System").
(o) Foreign Corrupt Practices. Neither the Parent, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Parent or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Parent or any of its Subsidiaries (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Parent is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC-CSA
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Parent or any of its Subsidiaries is presently a
party to any transaction with the Parent or any of its Subsidiaries (other than
for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Parent or any of its Subsidiaries, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Parent consists of unlimited Common Shares, of which as of the
date hereof, 81,481,250
-13-
Common Shares are issued and outstanding, 3,997,631 Common Shares are issuable
upon the exercise of options outstanding granted under the Parent's stock option
plans, 985,237 Common Shares are issuable upon the exercise of warrants (other
than the Aggregate Warrants) outstanding, 72,856 Common Shares are issuable upon
the exercise of deferred share units outstanding granted under the Parent's
directors' deferred share unit and stock plan, 2,843,925 Common Shares are
reserved for issuance under the Parent's stock option plans, 177,144 Common
Shares are reserved for issuance under the Parent's directors' deferred share
unit and no Common Shares are reserved for issuance pursuant to securities
(other than the Aggregate Notes and the Aggregate Warrants) exercisable or
exchangeable for, or convertible into, Common Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Parent's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Parent and (ii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
set forth in the SEC-CSA Documents or as disclosed in Schedule 3(r), and other
than the Aggregate Notes and the Aggregate Warrants: (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any kind whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Parent or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Parent or any of its Subsidiaries is or may become
bound to issue additional share capital of the Parent or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Parent or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 3(s)) of the Parent or any of its
Subsidiaries or by which the Parent or any of its Subsidiaries is or may become
bound; (iii) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Parent or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which the Parent or any of its Subsidiaries is obligated to
register or qualify the sale of any of their securities under the 1933 Act or
under any applicable Canadian Securities Laws; (v) there are no outstanding
securities or instruments of the Parent or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Parent or any of its Subsidiaries is
or may become bound to redeem a security of the Parent or any of its
Subsidiaries; (vi) the Parent does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (vii)
the Parent and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC-CSA Documents but not so disclosed in the SEC-CSA
Documents, other than those incurred in the ordinary course of the Parent's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or could not reasonably be expected to have a Material Adverse
Effect. The Parent has made available to the Buyer true, correct and complete
copies of the Parent's and its Subsidiaries' Articles of Incorporation or other
organizational documents, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Parent's and its Subsidiaries' bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Shares and the material rights of the holders thereof in respect thereto.
-14-
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Parent nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Parent's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables and related accrued liabilities entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; references to Indebtedness of the
Parent or the Company shall mean Indebtedness on a consolidated basis; (y)
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by either of
the Principal Markets, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Parent
or any of its Subsidiaries, threatened against or affecting the Parent or any of
its Subsidiaries, the Common Shares or any of the Parent's or its Subsidiaries'
officers or
-15-
directors in their capacity as such which, individually or in the aggregate, if
determined adversely to the Parent or any of its Subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
(u) Insurance. The Parent and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Parent believes to be prudent and
customary in the businesses in which the Parent and its Subsidiaries are
engaged. Neither the Parent nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to insure its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or union
contract. The Parent and its Subsidiaries believe that their relations with
their employees are good. No executive officer of the Parent or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Parent
or any such Subsidiary that such officer intends to leave the Parent or any such
Subsidiary or otherwise terminate such officer's employment with the Parent or
any such Subsidiary. To the knowledge of the Parent and its Subsidiaries, no
executive officer of the Parent or any of its Subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Parent or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Parent and its Subsidiaries are in compliance with all
United States and Canadian federal, state, provincial, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Parent and its Subsidiaries have good and marketable
title to all real property and good and valid title to all personal property
owned by them which is material to the business of the Parent and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Parent and any of its Subsidiaries or as could not reasonably be expected to
have a Material Adverse Effect. Any real property and facilities held under
lease by the Parent or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made and proposed to be made of such property and buildings by the
Parent and its Subsidiaries or as could not reasonably be expected to have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Parent and its Subsidiaries own
or have licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, formulas, trade secrets, licenses,
approvals, governmental authorizations and other intellectual property rights
necessary to conduct their respective businesses as now conducted ("Intellectual
-16-
Property Rights"). Except as set forth in Schedule 3(x), none of the Parent's or
its Subsidiaries' Intellectual Property Rights have expired, terminated or have
been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. Neither the Parent nor any of its
Subsidiaries has any knowledge of any infringement by the Parent or any of its
Subsidiaries of Intellectual Property Rights of others, which infringement could
reasonably be expected to have a Material Adverse Effect. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Parent or
its Subsidiaries, being threatened against the Parent or any of its Subsidiaries
regarding any of their Intellectual Property Rights. Neither the Parent nor the
Company is aware of any facts or circumstances which might reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings. The Parent and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights, except for public disclosure in the U.S. Patent
and Trademark Office (and foreign equivalents).
(y) Environmental Laws. The Parent and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all United States, Irish and Canadian federal, state, provincial, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Parent
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Parent or such
Subsidiary.
(aa) Tax Status. Except as set forth in Schedule 3(aa), the Parent and
each of its Subsidiaries (i) has made or filed all material foreign, United
States and Canadian federal, state and provincial income and all other material
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the officers of the Parent nor the officers of its Subsidiaries know
of any reasonable basis for any such claim.
-17-
(bb) Internal Accounting and Disclosure Controls. The Parent and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Parent maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Parent in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Parent in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Parent's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Parent and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Parent in
its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Ranking of Notes. No Indebtedness of the Company is senior to the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise. No
Indebtedness of the Parent is senior to the Parent Guaranty whether with respect
of payment of redemptions, interest, damages or upon liquidation or dissolution
or otherwise. No Indebtedness of Vasogen, Corp. is senior to the Subsidiary
Guaranty whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
(ee) Shares Freely Tradeable. The Conversion Shares and the Initial
Warrant Shares will be freely tradeable under applicable Canadian laws on the
TSX from and after February 8, 2006, other than restrictions applicable in the
context of a "control distribution" as defined for the purposes of Canadian
Securities Laws.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the Buyer
hereunder will be, or will have been, fully paid or provided for by the Company
and/or the Parent (as the case may be), and all laws imposing such taxes will be
or will have been complied with.
(gg) Manipulation of Price. Neither the Parent nor the Company has, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Parent to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
-18-
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Parent.
(hh) Canadian Prospectus. The Parent (i) is qualified pursuant to
National Instrument 44-102, Alternative Forms of Prospectus ("NI44-102"), to
file a base shelf prospectus, and (ii) is entitled to include in such a
prospectus all of the Registrable Securities (as defined in the Registration
Rights Agreement).
(ii) Disclosure. Each of the Parent, the Company and Vasogen, Corp.
confirms that neither it nor any other Person acting on its behalf has provided
the Buyer or its agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. Each
of the Parent, the Company and Vasogen, Corp. understands and confirms that the
Buyer will rely on the foregoing representations in effecting transactions in
the Securities. All disclosure provided to the Buyer regarding the Parent and
its Subsidiaries, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Parent or its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Parent or its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Parent or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Parent but which
has not been so publicly announced or disclosed.
(jj) Vasogen, Corp. Vasogen, Corp. is not a party to any contract or
agreement material to the Parent and Vasogen, Corp., taken as a whole or
material to the Parent and its Subsidiaries, taken as a whole.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company and the Parent each agree to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company and
the Parent each shall, on or before the Closing Date, take such action as such
party shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Buyer at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date. Each of the Company and the Parent shall make all filings and
reports relating to the offer and sale of the Securities
-19-
required under applicable securities or "Blue Sky" laws of the states of the
United States and the applicable Canadian Securities Laws and applicable
requirements of the TSX following each such Closing Date.
(c) Reporting Status. Until the date on which the Buyer shall have sold
at least 90% of the Conversion Shares and Warrant Shares and none of the Notes
or Warrants is outstanding (the "Reporting Period"), the Parent shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
the CSA under applicable Canadian Securities Laws, and the Parent shall continue
to timely file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise no longer require such filings and will
remain in good standing under Canadian Securities Law and eligible to use the
POP System. The Buyer shall promptly notify the Parent of the occurrence of the
events causing the cessation of the Parent's obligations hereunder.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Notes and Initial Warrants for the repayment of intercompany debt to Parent
previously incurred for purposes of research and development activities and for
future research and development activities by the Company and/or the Parent as
well as for general corporate purposes. The Company will not use the proceeds
from the sale of the Notes and Initial Warrants for the (i) repayment of any
other outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Parent agrees to send the following to
the Buyer during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 40-F or Form 20-F, any Current Reports on Form 6-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information
made available or given to the shareholders of the Parent generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used herein "Business Day" means any day other than a Saturday,
Sunday, or other day on which commercial banks in New York City are authorized
or required by law to remain closed.
(f) Listing. The Parent shall promptly secure the listing of all of the
Conversion Shares and Initial Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Notes and the Warrants. The Parent shall maintain the
Common Shares' listing or authorization for quotation on each of the Principal
Markets. Neither the Parent nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Shares on either of the Principal Markets; provided, however, that
the Parent makes no covenant regarding the trading price of the Common Shares.
The Parent shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company shall
pay an expense allowance to Kings Road Investments Ltd. (a Buyer) or its
designee(s) (in addition to
-20-
any other expense amounts paid to the Buyer prior to the date of this Agreement)
to cover expenses reasonably incurred by Kings Road Investments Ltd. or any
professionals engaged by Kings Road Investments Ltd. in relation to due
diligence and investment documentation, in an amount not to exceed $70,000 (in
addition to any other expense amounts paid to the Buyer prior to the date of
this Agreement), which amount shall be withheld by Kings Road Investments Ltd.
from its Purchase Price at the Closing in satisfaction of the Company's payment
obligation. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or broker's commissions (other than for
Persons engaged by the Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and neither the Buyer nor its successor or assign thereof
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Buyer.
(i) Disclosure of Transactions and Other Material Information. On the
first Business Day following the date of this Agreement, the Parent shall file a
Current Report on Form 6-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (but excluding all schedules to this Agreement, assuming no material
non-public information is contained in such schedules), the form of each of the
Notes, the Warrants, the Registration Rights Agreement and the Guarantees) as
exhibits to such filing (including all attachments, the "6-K Filing") and a
material change report on Form 51-102F3 in accordance with National Instrument
51-102 of the CSA with respect thereto (the "Material Change Report"). Upon the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA, the Buyer shall not be in possession of any material, nonpublic information
received from the Parent or any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing and the Material Change Report. The Parent shall not, and shall cause
each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Buyer with any material, nonpublic
information regarding the Parent or any of its Subsidiaries from and after the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA without the express written consent of the Buyer. If, after the deadline for
the 6-K Filing set forth above, the Buyer has, or reasonably believes it has,
received any such material, nonpublic information regarding the Parent or any of
its Subsidiaries, it shall provide the Parent with written notice thereof. The
Parent shall, within five (5) Trading Days of receipt of such notice except
pursuant to Allowable
-21-
Grace Periods under the Registration Rights Agreement, make public disclosure of
such material, nonpublic information. In the event of a breach of the foregoing
covenant by the Parent, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Parent, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Buyer shall not have
any liability to the Parent, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Parent nor the Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, that the Parent shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 6-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Buyer shall be consulted by the Parent in connection with any such press release
or other public disclosure prior to its release). Without the prior written
consent of the Buyer, which shall be deemed to have been received in respect of
the filing of the Transaction Documents with the 6-K Filing and the filing of
the Material Change Report, neither the Parent nor any of its Subsidiaries shall
disclose the name of the Buyer in any filing, announcement, release or otherwise
other than in a prospectus for the resale of the Conversion Shares, to which
consent is deemed given hereby or as otherwise required by law to specifically
name the Buyer.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, neither the Company nor the Parent shall, directly or
indirectly, redeem, repurchase, or otherwise acquire for value or declare or pay
any dividend or distribution on, the Common Shares without the prior express
written consent of the holders of Notes representing not less than a majority of
the aggregate principal amount of the then outstanding Notes. Notwithstanding
the foregoing, nothing herein shall prevent the Company or the Parent from
satisfying its obligations under the Aggregate Notes and the Aggregate Warrants.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long
as the Buyer or any Other Buyer beneficially owns any Notes or Other Notes, as
applicable, the Company shall not issue any Notes or Other Notes other than to
the Buyers as contemplated by this Agreement or the Other Purchase Agreements,
as applicable, and neither the Company nor the Parent shall issue any other
securities that would cause a breach or default under the Notes or Other Notes,
as applicable, while such Notes or Other Notes are outstanding. Until the
earlier of three (3) years from the Closing and the date the Buyer or any Other
Buyer no longer beneficially own any Securities, neither the Company nor the
Parent shall, in any manner, issue or sell any rights, warrants or options
(other than the Aggregate Notes and Aggregate Warrants) (i) to subscribe for or
purchase Common Shares or (ii) which are directly or indirectly convertible into
or exchangeable or exercisable for Common Shares, in each of cases (i) and (ii),
at a price which varies or may vary with the market price of the Common Shares,
including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price. Until the Effectiveness Date (as defined
in the Registration Rights Agreement), neither the Company nor the Parent shall,
in any manner, enter into or effect any Dilutive Issuance (as defined in the
-22-
Notes).
(l) Corporate Existence. So long as the Buyer beneficially owns any
Notes or Warrants, neither the Company nor the Parent shall be party to any
Fundamental Transaction (as defined in the Notes) unless the Company and the
Parent, as applicable, is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Parent shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the Closing Date, the maximum number of shares of Common Shares issuable upon
conversion, amortization and/or redemption of all of the Notes and shares of
Common Shares issuable upon exercise of the Warrants.
(n) Conduct of Business. The business of the Company, the Parent and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than the Aggregate Notes, Aggregate Warrants or Options)
convertible into or exercisable or exchangeable for shares of Common
Shares.
(2) "Options" means any rights, warrants (other than the
Aggregate Warrants) or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.
(3) "Common Share Equivalents" means, collectively, Options and
Convertible Securities.
(ii) As long as 15% of the original principal amount of the Notes
issued at the Closing are outstanding, from the Closing Date until the eighteen
month anniversary of the Closing Date, the Parent will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Shares or Common Share Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement")
unless the Parent shall have first complied with this Section 4(o)(ii).
(1) The Parent shall deliver to the Buyer by facsimile a written
notice (the "Offer Notice") of any proposed or intended issuance or sale
or exchange
-23-
(the "Offer") of the securities being offered (the "Offered Securities")
in a Subsequent Placement within one Business Day of the determination
of the terms of such Subsequent Placement, which Offer Notice shall (x)
identify and describe the Offered Securities, (y) describe the price
range and other terms upon which they are expected to be issued, sold or
exchanged, and the number or amount of the Offered Securities expected
to be issued, sold or exchanged and (z) offer to issue and sell to or
exchange with the Buyer (which offer being non-transferable to any
successor to or transferee of the Buyer) a pro rata portion of 35% of
the Offered Securities allocated among the Buyer and the Other Buyers
(collectively, the "Buyers") including (a) those based on such Person's
pro rata portion of the aggregate principal amount of Notes purchased
hereunder and pursuant to the Other Purchase Agreements (the "Basic
Amount"), and (b) if the Buyer elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic
Amounts of Other Buyers as the Buyer shall indicate it will purchase or
acquire should the Other Buyers subscribe for less than their Basic
Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, the Buyer must
deliver a written notice to the Company prior to the end of the first
(1st) full Business Day after the Buyer's receipt of the Offer Notice
(for purposes of this Section 4(o)(ii)(2), notwithstanding the
provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received
such Offer Notice (the "Offer Period"), setting forth the portion of the
Buyer's Basic Amount that the Buyer elects to purchase and, if the Buyer
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that the Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be deemed to have elected to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such
Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Parent to the extent it deems reasonably necessary.
(3) The Parent shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only upon terms and conditions (including, without limitation, unit
prices and interest rates within the range specified in the Offer) that
are not more favorable to the acquiring person or persons or less
favorable to the Parent than those set forth in the Offer Notice.
(4) In the event the Parent shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in
-24-
Section 4(o)(ii)(3) above), then each Buyer may, at its sole option and
in its sole discretion, subject to the following sentence, reduce the
number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount
of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(o)(ii)(2) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Parent
actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section
4(o)(ii)(3) above prior to such reduction) and (ii) the denominator of
which shall be the original amount of the Offered Securities. In the
event that the Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Parent may not
issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(ii)(1) above.
Provided that the Buyer has been advised by the Parent electronically or
by telephone (with verbal confirmation of receipt) by 5:00pm New York
Time, the Buyer must make its election to reduce referred to above no
later than 8:00am New York Time the following Business Day.
(5) Upon the closing of the issuance, sale or exchange of all or
less than all of the Offered Securities, the Buyers shall acquire from
the Parent, and the Parent shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(o)(ii)(4) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all cases
to (i) the preparation, execution and delivery by the Parent and the
Buyers of a purchase agreement relating to such Offered Securities
substantially in the form negotiated with the purchasers of the Offered
Securities other than the Buyers but reasonably satisfactory in form and
substance to the Buyers and their respective counsel, (ii) the Buyers'
satisfaction, in their sole discretion, with both (I) the final price
and (II) the substantive final terms and/or conditions that differ from
those contained in the Offer Notice, and (iii) the Buyers' reasonable
satisfaction with the identity of the other persons or entities to which
the Offered Securities will be sold.
(6) Any Offered Securities not acquired by the Buyers or other
Persons in accordance with this Section 4(o)(ii) may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(iii) The restrictions contained in subsection (ii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes or securities issued in connection with (A) any public
offering or (B) any offering of securities convertible into Common Shares
pursuant to Rule 144A under the 1933 Act).
(p) Holding Period. For the purposes of Rule 144 and applicable
Canadian Securities Laws, the Company acknowledges that the holding period of
the Conversion Shares may be tacked onto the holding period of the Notes and the
Parent and the Company agree not to take a position contrary to this Section
4(p).
-25-
(q) Letter of Credit.
(i) On or prior to the Closing Date, the Company shall obtain an
irrevocable letter of credit (the "Letter of Credit"), in the amount of
$10,000,000 issued in favor of Kings Road Investments Ltd. (the "LC Agent") by a
bank acceptable to such LC Agent (the "Letter of Credit Bank") and in form and
substance acceptable to such LC Agent. Subject to the last three sentences of
this Section (q)(i), the Letter of Credit shall expire not earlier than 91 days
after the Maturity Date of the Notes (the "LC Expiration Date"). Upon the
occurrence and during the continuance of an Event of Default under (and as
defined in) any of the Aggregate Notes, the LC Agent shall be entitled to draw
under the Letter of Credit for the full Letter of Credit Amount (as defined in
the Aggregate Notes) then available thereunder, it being understood that the LC
Agent shall act for the benefit of the Buyers on a pro rata basis based on the
principal amount of the Aggregate Notes held by each of the Buyers and hold such
amount as collateral security for the obligations under the Aggregate Notes for
the benefit of the Buyers. The Company shall obtain such renewals, extensions or
replacements of the Letter of Credit as necessary to ensure that the Letter of
Credit shall not expire prior to the LC Expiration Date (unless the Letter of
Credit shall have been reduced to zero in accordance with the terms contained in
this Section 4(q) prior to such date). If, at any time, the Company cannot
obtain a renewal, extension or replacement of the Letter of Credit such that the
Letter of Credit will expire prior to the LC Expiration Date (a "Withdrawal
Event"), the Company and the Letter of Credit Bank shall each give the LC Agent
written notice of the occurrence of a Withdrawal Event at least forty-five (45)
days prior to the then current expiration date of the Letter of Credit.
Following a Withdrawal Event, the LC Agent shall be entitled to draw down the
Letter of Credit Amount in its entirety (whether or not an Event of Default
shall have occurred or be continuing under any of the Notes) and hold such
amount as collateral security for the obligations under the Notes for the
benefit of the Buyers.
(ii) If more than $23 million of the Aggregate Notes are converted,
redeemed or amortized pursuant to the terms of the Aggregate Notes, the Company
shall promptly deliver a notice to the LC Agent (the "LC Reduction Notice"),
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal one-half of
the difference between $17 million and the aggregate principal amount of the
Aggregate Notes then outstanding. After delivery of the initial LC Reduction
Notice, if the outstanding principal amount of the Aggregate Notes has been
reduced by $2 million or more from the time of the prior LC Reduction Notice,
the Company may deliver a subsequent LC Reduction Notice to the LC Agent
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal the difference
between (A) one-half of the difference between (i) $17 million and (ii) the
aggregate principal amount of the Aggregate Notes then outstanding and (B) the
aggregate amount of any prior reductions of the Letter of Credit Amount. Within
10 days of the receipt of any such LC Reduction Notice, the LC Agent shall issue
a written instruction to the Letter of Credit Bank to request the reduction of
the Letter of Credit Amount to the Company as set forth in the LC Reduction
Notice.
-26-
(iii) If the Company obtains FDA Approval (as defined in the Notes),
the Company shall promptly deliver a written notice to the LC Agent (the "Letter
of Credit Notice"), certifying as to the occurrence of such event and a copy of
such FDA Approval. Within 10 days of the receipt of the Letter of Credit Notice,
the LC Agent shall issue a written instruction to the Letter of Credit Bank to
request the release and return of the Letter of Credit Amount to the Company.
(iv) Notwithstanding the foregoing, if the LC Agent reasonably
disagrees with the contents of either a LC Reduction Notice or a Letter of
Credit Notice or the Company disagrees with any action taken or omitted to be
taken by the LC Agent, such party shall use the dispute resolution procedures
contained in Section 25 of the Notes.
(v) Kings Road Investments Ltd. is xxxxxx appointed as the LC Agent
for the Buyer hereunder, and the Buyer hereby authorizes the LC Agent (and its
officers, directors, employees and agents) to take any and all such actions on
behalf of the Buyer with respect to the Letter of Credit in accordance with the
terms of this Agreement. The LC Agent shall not have, by reason hereof or any of
the other Transaction Documents, a fiduciary relationship in respect of the
Buyer. Neither the LC Agent nor any of its officers, directors, employees and
agents shall have any liability to the Buyer for any action taken or omitted to
be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and the Buyer agrees to defend, protect,
indemnify and hold harmless the LC Agent and all of its officers, directors,
employees and agents (collectively, the "Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) (the "Losses") incurred by such Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of the LC Agent
pursuant hereto; provided, however, that the Buyer shall not be required to
indemnify the Indemnitees to the extent any such Losses are the result of the LC
Agent's fraud or willful misconduct.
(r) Trading Restrictions. Neither the Buyer, nor any affiliate of the
Buyer that is controlled by the Buyer or is otherwise aware of this restriction,
may purchase, sell or enter into any put option, short position or similar
arrangement with respect to securities of the Parent that violates Current
Securities Laws or otherwise trade in the securities of the Parent in violation
of applicable Current Securities Laws. In addition, during each Company
Conversion Measuring Period (as defined in the Notes) neither the Buyer, nor any
affiliate of the Buyer that is controlled by the Buyer or is otherwise aware of
this restriction, may engage in a Restricted Activity other than the sale of
Common Shares received upon a Company Conversion (as defined in the Notes), upon
a conversion, amortization or redemption of Notes pursuant to Section 3 of the
Notes, upon exercise of any Warrants, or the transfer of any Notes or Warrants
as permitted by their terms. "Restricted Activity" means, (a) any Acquisition or
Disposition, in open market transactions of (i) any Common Shares or (ii) any
securities convertible into or exchangeable for or derivative of Common Shares
and (b) any other action taken intentionally for the purpose of manipulating the
price of Common Shares. "Acquisition" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "Disposition"
means any direct or indirect voluntary sale, or monetization, including through
a Subsidiary or by means of an equity offering by any
-27-
such Subsidiary, but shall not include, any of the actions contemplated by
Section 4(h) or any disposition thereunder. "Current Securities Laws" means the
rules and regulations, existing on the date hereof, of the 1933 Act, the 1934
Act and the Canadian Securities Laws, in each case as are set forth in currently
disseminated interpretations by the SEC or the CSA, as applicable, in writing,
through rules, regulations, releases, no-action letters or published telephone
interpretations.
(s) Acknowledgement Regarding Buyer's Trading Activity. Subject to
Section 4(r) of this Agreement, it is understood and agreed by the Parent and
the Company (i) that, to the knowledge of the Parent, the Buyer has not been
asked to agree, nor has the Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Parent, or "derivative" securities based on
securities issued by the Parent or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the Buyer,
including, without limitation, Short Sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Parent's publicly-traded securities;
(iii) that the Buyer, and counter parties in "derivative" transactions to which
the Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Shares or an economically comparable position; and (iv)
that, to the knowledge of the Parent, the Buyer shall not be deemed to have any
affiliation with or control over any arm's length counter party in any
"derivative" transaction. Subject to Section 4(r) of this Agreement and
notwithstanding any other provisions of this Agreement and the provisions of the
Transaction Documents, the Parent further understands, acknowledges and agrees
that (a) the Buyer may engage in hedging and/or trading activities at any time
during the period that the Securities are outstanding, including, without
limitation, during the periods that the number and/or value of the Conversion
Shares deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities (if any) could reduce the value of the
existing stockholders' equity interests in the Parent both at and after the time
that the hedging and/or trading activities are being conducted. The Parent and
the Company acknowledge that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.
(t) Subsidiaries; Guaranty. To the extent any Subsidiary of the Parent
that comes into existence after the date hereof has assets transferred into it
having a fair market value of $1,000,000, individually, or $5,000,000 in the
aggregate, each such Subsidiary shall promptly enter into a guarantee
substantially in the form attached hereto as Exhibit D-2.
(u) Amendment to Other Security Purchase Agreements. Neither the
Company nor the Parent shall amend any of the Other Purchase Agreements without
first offering the same terms to the Buyer hereunder.
(v) No Conflicts with Irish Law. The Parent and the Company covenant
and agree that:
(i) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Section 60 nor Section 286 of the Irish Companies Act, 1963.
-28-
(ii) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Part XI of the Irish Companies Act, 1990.
(w) Change to DTC Brokerage Account Information. If the Buyer seeks at
any time to make any changes to the DTC brokerage account information which the
Buyer has provided pursuant to Section 6(d) hereof, the Buyer shall deliver to
the Parent a new form, substantially in the form of Exhibit E, setting forth
revised DTC brokerage account information. The Parent shall be obligated to use,
beginning no later than five (5) Business Days after receipt thereof, such
revised DTC brokerage account information for any delivery of Common Shares
required under the Transaction Documents.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company and the Parent shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to each holder of Securities), a register for the Notes
and the Warrants, as applicable, in which the Company and the Parent shall
record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company and the Parent shall keep the register open and available at
all times during business hours for inspection by the Buyer or its legal
representatives.
(b) Transfer Agent Instructions. The Parent shall issue treasury
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion, amortization or redemption of the Notes or exercise of the
Warrants in such amounts as specified from time to time by the Buyer to the
Parent or by the Parent, as the case may be, upon conversion, amortization
and/or redemption of the Notes or exercise of the Warrants substantially in the
form attached as Exhibit I to the Notes and Warrants, respectively (the
"Treasury Instructions"). The Parent warrants that no instruction other than the
Treasury Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Parent
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Parent and the Company as and to
the extent provided in this Agreement and the other Transaction Documents. If
the Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f) and the other provisions of the Transaction Documents, subject
to Section 9(s), the Parent and the Company shall permit the transfer and, in
the case of a transfer of Common Shares, the Parent shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by the Buyer to effect such sale, transfer or assignment. In the event
that such sale, assignment or transfer involves Conversion Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 or Rule 904, subject to Section 9(s),
-29-
the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. Each of the
Parent and the Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer. Accordingly, the Parent and
the Company acknowledge that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Parent or the Company of the provisions of this
Section 5(b), that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S AND THE PARENT'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the obligation of the Parent to issue the Initial Warrants to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's and the Parent's sole benefit and may be waived by the Company and the
Parent at any time in their sole discretion by providing the Buyer with prior
written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company and the Parent.
(b) The Buyer and each other Buyer shall have delivered to the Company
the Purchase Price (less, in the case of Kings Road Investments Ltd., the
amounts withheld pursuant to Section 4(g)) for the Notes and the Other Notes and
the Warrants and the Other Warrants being obtained by the Buyers at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
(d) The Buyer shall have completed and delivered to the Parent the DTC
brokerage account information form with respect to the Buyer in substantially
the form of Exhibit E attached hereto.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Notes and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer's sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
-30-
(a) The Company shall have duly executed and delivered to the Buyer:
(A) the Notes (in such principal amounts as the Buyer shall request) being
obtained by the Buyer at the Closing pursuant to this Agreement and (B) to the
extent it is a party thereto, each of the other Transaction Documents.
(b) The Parent shall have duly executed and delivered to the Buyer: (A)
the Warrants (in such allocations as the Buyer shall request) being received by
the Buyer at the Closing pursuant to this Agreement; (B) the Parent Guaranty,
and (C) to the extent it is a party thereto, each of the other Transaction
Documents.
(c) Vasogen, Corp. shall have duly executed and delivered to the Buyer:
(A) the Subsidiary Guaranty, and (B) to the extent it is a party thereto, each
of the other Transaction Documents.
(d) The Buyer shall have received the opinion of Lang Xxxxxxxx LLP, the
Parent's outside Canadian counsel, dated as of the Closing Date, in
substantially the form of Exhibit F-1 attached hereto.
(e) The Buyer shall have received the opinion of Xxxxxx X. Xxxxxxx
Solicitors, the Company's outside Irish counsel, dated as of the Closing Date,
in substantially the form of Exhibit F-2 attached hereto.
(f) The Buyer shall have received the opinion of Xxxx, Xxxxx, Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, the Company's outside United States counsel, dated as of
the Closing Date, in substantially the form of Exhibit F-3 attached hereto.
(g) The Parent shall have delivered to the Buyer a certificate of
compliance with the CBCA of the Parent, and the Company shall have delivered to
the Buyer a certificate evidencing the formation and status of the Company in
the Company's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(h) The Parent shall have delivered to the Buyer a certificate
evidencing the Parent's qualification as a foreign corporation (if applicable)
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Parent conducts business and such qualification
is required, as of a date within 10 days of the Closing Date. The Company shall
have delivered to the Buyer a Letter of Status from the Companies Registration
Office in Dublin, Ireland.
(i) The Parent shall have delivered to the Buyer a certified copy of
the Articles of Incorporation of the Parent, and the Company shall have
delivered to the Buyer a certified copy of its Memorandum and Articles of
Association of the Company, in each case as certified by the Secretary of State
(or equivalent) in the applicable jurisdiction of incorporation within ten (10)
days of the Closing Date.
(j) The Parent shall have delivered to the Buyer a certificate,
executed by the Secretary of the Parent and the Company shall have delivered to
the Buyer a certificate, executed by a Director of the Company, in each case
dated as of the Closing Date, as to (i) the resolutions
-31-
consistent with Section 3(b) as adopted by such entity's board of directors in a
form reasonably acceptable to the Buyer, (ii) the Articles of Incorporation, as
in effect at the Closing, of each such entity and (iii) the Bylaws, as in effect
at the Closing, of each such entity in the form attached hereto as Exhibit G.
(k) The representations and warranties of the Company and the Parent
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
and the Parent shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
and/or the Parent, as applicable at or prior to the Closing Date.
(l) The Parent shall have delivered to the Buyer a letter from the
Parent's transfer agent certifying the number of shares of Common Shares
outstanding as of a date within five days of the Closing Date.
(m) The Common Shares (i) shall be designated for quotation or listed
on each of the Principal Markets and (ii) shall not have been suspended, as of
the Closing Date, by the SEC, the CSA or either of the Principal Markets from
trading on the Principal Markets nor shall suspension by the SEC, the CSA or
either of the Principal Markets have been threatened, as of the Closing Date,
either (A) in writing by the SEC, the CSA or either of the Principal Markets or
(B) by falling below the minimum listing maintenance requirements of either of
the Principal Markets.
(n) The Company and the Parent shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(o) There shall be no Indebtedness of the Parent or any of its
Subsidiaries other than Indebtedness which is pari passu with or subordinate to
the Notes and the Guarantees, as applicable, so long as such Indebtedness does
not provide at any time for the payment, prepayment, repayment, redemption,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until 91 days after the Maturity Date (as defined in the Notes)
or later; provided, that (I) the Company, the Parent or Vasogen, Corp. may incur
Indebtedness that is secured by assets purchased with the proceeds of such
Indebtedness, (II) the Parent, the Company or Vasogen, Corp. may incur purchase
money Indebtedness for the purpose of financing the acquisition of equipment to
be acquired or held by the Company, the Parent or Vasogen, Corp. in the ordinary
course of business, provided, that the principal amount of such Indebtedness
shall not materially exceed 80% of the cost of the property so acquired, and
(III) the Company, the Parent and/or Vasogen, Corp. may incur Indebtedness owed
to the Parent or any of its Subsidiaries.
(p) The approval of each of the Principal Markets for the issuance of
the Securities contemplated hereby and conditional listing of the Conversion
Shares and the Warrant Shares shall have been obtained.
-32-
(q) The Company and the Parent shall have delivered to the Buyer such
other documents relating to the transactions contemplated by this Agreement as
the Buyer or its counsel may reasonably request.
(r) The Company shall have obtained and delivered the Letter of Credit
pursuant to the terms of Section 4(q) hereof.
(s) The Company and the Parent shall have entered into one or more
security purchase agreements (the "Other Purchase Agreements") relating to the
sale and purchase of securities on substantially identical terms to this
Agreement, that provide for the aggregate sale (when combined with this
Agreement) of $40,000,000 in aggregate principal amount of Aggregate Notes and
Aggregate Warrants.
8. TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) Business Days from the date hereof due to the Company's, the Parent's or
the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 8 due to any breach of
a representation, warranty, covenant or agreement by the Company or the Parent,
the Company shall remain obligated to reimburse the non-breaching Buyer for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company, the Parent and Vasogen, Corp. have appointed CT
Corporation System, with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as their agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
-33-
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyer, the Parent, the Company,
Vasogen, Corp., their affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parent, the Company, Vasogen, Corp. or the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Parent, the Company, Vasogen, Corp. and the
holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on the Buyer and
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
the Buyer relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
-34-
If to the Company:
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Clare
Ireland
Telephone: 000-00-000-000
Facsimile: 353-1-886-9359
Attention: Mr. Xxxxx Xxxxxxx, Director
With a copy (for informational purposes only) to:
Vasogen Inc.
Vasogen, Corp.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer: xxxxxxxx@xxxxxxx.xxx;
and
Vice President, Corporate & Legal Affairs:
xxxxxxx@xxxxxxx.xxx;
and for purposes of the Note, the Controller:
xxxxx@xxxxxxx.xxx
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
-35-
If to the Parent or Vasogen, Corp.:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer; and
Vice President, Corporate & Legal Affairs
With a copy (for informational purposes only) to:
the Company
(at the address listed above)
Lang Xxxxxxxx LLP
(at the address listed above)
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
(at the address listed above)
If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
If to the Buyer, to its address and facsimile number set forth on the Buyer
Schedule, with copies to the Buyer's representatives as set forth on the Buyer
Schedule,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
-36-
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. None of the Company, the
Parent or Vasogen, Corp. shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate principal amount of Notes issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). The Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by the Buyer of the Notes and Warrants in private transactions in
accordance with the terms thereof, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Parent, the Company, Vasogen, Corp. and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5 and 9 shall survive the Closing.
(j) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars ("US Dollars"). All amounts
owing under this Agreement or any Transaction Document shall be paid in US
Dollars. All amounts denominated in other currencies shall be converted in the
US Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Indemnification. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's and the Parent's other obligations under
the Transaction Documents, the Company
-37-
and the Parent, jointly and severally, shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Securities (other than Persons
holding only Securities purchased in open market transactions) and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any material inaccuracy in any representation or warranty made by the Company,
the Parent or Vasogen, Corp. in the Transaction Documents or any inaccuracy in
any representation or warranty made by the Company, the Parent or Vasogen, Corp.
in the Transaction Documents that is qualified by materiality or Material
Adverse Effect, (b) any breach in any material respect of any covenant,
agreement or obligation of the Company, the Parent or Vasogen, Corp. contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company, the Parent or Vasogen,
Corp.) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of the Buyer or holder of the Securities as an investor in the Company or
the Parent pursuant to the transactions contemplated by the Transaction
Documents; provided, that indemnification pursuant to this clause (iii) shall
not be available to the extent arising primarily from the Buyer's fraud, gross
negligence or willful misconduct. To the extent that the foregoing undertaking
by the Company or the Parent may be unenforceable for any reason, the Company
and the Parent shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. The Buyer and each holder of the Securities (other than
Persons holding only Securities purchased in open market transactions) shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company, the Parent and Vasogen, Corp. recognize that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to
the Buyer. The Company, the Parent and Vasogen, Corp. therefore agree that the
Buyer shall be entitled to seek temporary and permanent injunctive relief in any
such case without the
-38-
necessity of proving actual damages and without posting a bond or other
security.
(o) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Buyer exercises a right, election, demand or
option under a Transaction Document and the Company, the Parent or Vasogen,
Corp. does not timely perform its related obligations within the periods therein
provided, then the Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, the Parent or Vasogen, Corp.,
as applicable, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
(p) Payment Set Aside. To the extent that the Company, the Parent or
Vasogen, Corp. makes a payment or payments to the Buyer or pursuant to any of
the other Transaction Documents or the Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
the Parent, Vasogen, Corp., a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, United States or
Canadian federal, state or provincial law, foreign law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Independent Nature of Xxxxx's Obligations and Rights. The
obligations of the Buyer under any Transaction Document are several and not
joint with the obligations of any Other Buyer, under the Other Purchase
Agreements, and the Buyer shall not be responsible in any way for the
performance of the obligations of any Other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by the Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.
(r) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against
the Company, the Parent or Vasogen, Corp. in any court in any jurisdiction it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(r) referred to as the "Judgment Currency") an
amount due in US Dollars under this Agreement,
-39-
the conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date: or
(2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section being
hereinafter referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(r)(i)(2) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company, the Parent or Vasogen, Corp.
under this provision shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of this
Agreement.
(s) Opinion to Transfer Agent. Assuming that the Buyer (i) is a
Qualified Institutional Buyer (as such term is defined in Rule 144A under the
1933 Act) (a "QIB") as of the date hereof, (ii) will offer and sell any Common
Shares the Buyer receives upon any conversion, amortization and/or redemption of
a Note (including, without limitation, pursuant to Section 3, 5, 8, 9 or 10 of
the Note) or any exercise of a warrant (including, without limitation, pursuant
to Section 1 of the Warrant) pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act (any such method of offer
and sale, an "Approved Method"), (iii) for purposes of an offer or sale under
Rule 904 under the 1933 Act, is not an affiliate (as such term is defined in
Rule 144 under the 1933 Act) (an "Affiliate") of the Parent as of the date
hereof and (iv) will promptly notify the Parent and the Company if the Buyer
ceases to be a QIB, chooses to offer or sell such Common Shares pursuant to a
method other than an Approved Method, or becomes an Affiliate of the Parent (any
such notice, a "Notice"), then the Parent will direct Xxxx, Xxxxx, Rifkind,
Xxxxxxx & Xxxxxxxx LLP to deliver a standing opinion to the transfer agent in
substantially the form attached to the Transfer Agent Instructions on the
Effectiveness Date. The Buyer covenants that it will comply with clause (iv)
above and represents and warrants that the assumptions set forth in clauses (i)
through (iii) above are true and correct with respect to the Buyer as of the
date hereof, and will continue to be true and correct with respect to the Buyer,
except as set forth in a Notice.
[Signature Page Follows]
-40-
IN WITNESS WHEREOF, the Buyer, the Company, the Parent and Vasogen,
Corp. have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
SIGNED, SEALED AND DELIVERED BY XXXXX
XXXXXXX AS A DEED FOR AND ON BEHALF OF
VASOGEN IRELAND LIMITED PURSUANT TO A POWER
OF ATTORNEY ----------------------------------
Signature of Witness:
----------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
Occupation:
--------------------------------------
[Signature Page to Securities Purchase Agreement]
VASOGEN INC.
By:
------------------------------------
Name:
Title:
VASOGEN, CORP.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
AMATIS LTD.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
BUYER SCHEDULE
(1) (2) (3) (4) (5) (6)
Aggregate
Principal Number of
Address and Amount of Warrant Legal Representative's Address
Buyer Facsimile Number Notes Shares Purchase Price and Facsimile Number
------------------------------------------------------------------------------------------------------------------------------------
Amatis Ltd. c/o Amaranth Advisors LLC $8,000,000 666,667 $8,000,000
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of Parent Guaranty
Exhibit D-2 Form of Subsidiary Guaranty
Exhibit E Form of DTC Brokerage Account Information Form
Exhibit F-1 Form of Outside Canadian Counsel Opinion
Exhibit F-2 Form of Outside Irish Counsel Opinion
Exhibit F-3 Form of Outside United States Counsel Opinion
Exhibit G Form of Secretary's Certificate
SCHEDULES
---------
Schedule 2(b) Accredited Investor Certificate
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(j) Rights Plan
Schedule 3(l) Absence of Certain Changes
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(aa) Tax Status
SCHEDULE 2B
ACCREDITED INVESTOR CERTIFICATE
The Purchaser certifies that it/he/she and any beneficial purchaser are each a
resident of Canada or is otherwise subject to the Securities Legislation of
Canada, and the Purchaser or the disclosed beneficial purchaser, as applicable,
is an "accredited investor" as defined in National Instrument 45-106 -
Prospectus and Registration Exemptions ("NI 45-106") and, as at the Closing, the
Purchaser or the beneficial purchaser, as applicable, qualifies as one of more
of the following and acknowledges that the Issuer is relying on this certificate
in determining to sell securities to the undersigned. (Please insert a checkmark
in the box beside each applicable paragraph)
"accredited investor" means
(a) a Canadian financial institution, or a Schedule III bank; |_|
(b) the Business Development Bank of Canada incorporated under |_|
the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or |_|
(b), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to
be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a |_|
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one
or both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
(e) an individual registered or formerly registered under the |_|
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any |_|
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a |_|
metropolitan community, school board, the Comite de gestion
de la taxe scolaire de l'ile de Montreal or an intermunicipal
management board in Quebec;
(h) any national, federal, state, provincial, territorial or |_|
municipal government of or in any foreign jurisdiction, or
any agency of that government;
(i) a pension fund that is regulated by either the Office of the |_|
Superintendent of Financial Institutions (Canada) or a
pension commission or similar regulatory authority of a
jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, |_|
beneficially owns, directly or indirectly, financial assets
having an aggregate realizable value that before taxes, but
net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 |_|
in each of the 2 most recent calendar years or whose net
income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who,
in either case, reasonably expects to exceed that net income
level in the current calendar year;
D-1
(l) an individual who, either alone or with a spouse, has net |_|
assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that |_|
has net assets of at least $5,000,000 as shown on its most
recently prepared financial statements;
(n) an investment fund that distributes or has distributed its |_|
securities only to
(i) a person that is or was an accredited investor at the
time of the distribution,
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(being that (I) the person purchases as principal, (II)
the security has an acquisition cost to the purchaser of
not less than $150,000 paid in cash at the time of the
trade, and (III) the trade is in the security of a
single issuer), and section 2.19 of NI 45-106 (being a
trade by an investment fund in a security of its own
issue to a security holder of the investment fund where
(I) the security holder initially acquired securities of
the investment fund as principal for an acquisition cost
of not less than $150,000 paid in cash at the time of
the trade, (II) the subsequent trade is for a security
of the same class or series as the initial trade, and
(III) the security holder, as at the date of the
subsequent trade, holds securities of the investment
fund that have an acquisition cost of not less than
$150,000 or a net asset value of not less than
$150,000); or
(iii) a person described in paragraph (i) or (ii) that
acquires or acquired securities under section 2.18 of
NI 45-106 [Investment fund reinvestment];
(o) an investment fund that distributes or has distributed |_|
securities under a prospectus in a jurisdiction of Canada for
which the regulator or, in Quebec, the securities regulatory
authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized |_|
to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of
Canada or a foreign jurisdiction, acting on behalf of a fully
managed account managed by the trust company or trust
corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed |_|
by that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction, and
(ii) in Ontario, is purchasing a security that is not a
security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, |_|
in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the
securities legislation of the jurisdiction of the registered
charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is |_|
analogous to any of the entities referred to in paragraphs
(a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, |_|
direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that
are accredited investors;
(u) an investment fund that is advised by a person registered as |X|
an adviser or a person that is exempt from registration as an
adviser; or
D-2
(v) a person that is recognized or designated by the securities |_|
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia after
National Instrument 45-106 comes into force.
The following definitions are included for convenience only; reference
should be had to the applicable legislation:
(a) "director" means
(i) a member of the board of directors of a company or an individual
who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual
who performs functions similar to those of a director of a
company;
(b) "eligibility adviser" means
(i) a person that is registered as an investment dealer or in an
equivalent category of registration under the securities
legislation of the jurisdiction of a purchaser and authorized to
give advice with respect to the type of security being
distributed, and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a
jurisdiction of Canada or a public accountant who is a member
in good standing of an institute or association of chartered
accountants, certified general accountants or certified
management accountants in a jurisdiction of Canada provided
that the lawyer or public accountant must not
(a) have a professional, business or personal relationship with
the issuer, or any of its directors, executive officers,
founders, or control persons, and
(b) have acted for or been retained personally or otherwise as
an employee, executive officer, director, associate or
partner of a person that has acted for or been retained by
the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
(c) "entity" means a company, syndicate, partnership, trust or
unincorporated organization;
(d) "financial assets" means
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities
legislation;
(e) "fully managed account" means an account of a client for which a
person makes the investment decisions if that person has full
discretion to trade in securities for the account without requiring
the client's express consent to a transaction;
(f) "investment fund" has the same meaning as in National Instrument
81-106 Investment Fund Continuous Disclosure;
(g) "person" includes
(i) an individual,
(ii) a corporation,
(iii) a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether
incorporated or not, and
(iv) an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or other legal
representative;
D-3
(h) "related liabilities" means
(i) liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets;
(i) "spouse" means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the
other individual,
(ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between
individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or
(ii), or is an adult interdependent partner within the meaning
of the Adult Interdependent Relationships Act (Alberta); and
(j) "subsidiary" means an issuer that is controlled directly or
indirectly by another issuer and includes a subsidiary of that
subsidiary.
An issuer is an "affiliate" of another issuer if (i) one of them is the
subsidiary of the other, or (ii) each of them is controlled by the same person.
In National Instrument 45-106 a person (first person) is considered to
"control" another person (second person) if
(i) the first person, directly or indirectly, beneficially owns or
exercises control or direction over securities of the second person
carrying votes which, if exercised, would entitle the first person to
elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an obligation,
(ii) the second person is a partnership, other than a limited partnership,
and the first person holds more than 50% of the interests of the
partnership, or
(iii) the second person is a limited partnership and the general partner
of the limited partnership is the first person.
The foregoing representation, warranty and certificate is true and
accurate as of the date of this certificate and will be true and accurate as of
Closing. If any such representation, warranty or certificate shall not be true
and accurate prior to Closing, the undersigned shall give immediate written
notice of such fact to the Issuer.
Dated: October 7, 2005 Signed:/s/ Xxxx Xxxxxxx
-------------------------------- -------------------------
Amaranth LLC
_______________________________________ By: Amaranth Advisors L.L.C.,
its trading advisor____________
Witness (If Purchaser is an Individual) Print the name of Purchaser
Xxxx X. Xxxxxxx
_______________________________________ Authorized Signatory
Print Name of Witness --------------------------------
If Purchaser is a Corporation,
print name and title of
Authorized Signing Officer
D-4
Exhibit 1c
Securities Purchase Agreement - Castlerigg Master Investments Ltd,
(exhibits and schedules attached to Kings Road Investments Ltd.
Security Purchase Agreement omitted)
(see attached)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 7,
2005, by and among Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland, with headquarters located at Xxxxxxx Airport
House, Shannon, Co. Xxxxx, Ireland (the "Company"), Vasogen Inc., a Canadian
corporation, with headquarters located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx (the "Parent"), Vasogen, Corp., a Delaware
corporation, with its registered address at 0000 Xxxxx Xxxxxx Xxxxxx, X.X. Box
1347, Wilmington, County of Newcastle, Delaware 19801 ("Vasogen, Corp.") and the
investor listed on the Buyer Schedule attached hereto (the "Buyer").
WHEREAS:
A. The Company, the Parent, Vasogen, Corp. and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act.
B. The Company has authorized a new series of senior convertible notes of
the Company, which notes shall be convertible into the Parent's common shares
(the "Common Shares") in accordance with the terms of such notes.
C. The Company, the Parent and Vasogen, Corp. plan to enter into one or
more Other Purchase Agreements (as defined below) relating to the sale and
purchase of securities on substantially identical terms as contained in this
Agreement.
D. The Buyer wishes to purchase, and (i) the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (the
"Notes"), set forth opposite the Buyer's name in column (3) on the Buyer
Schedule (which amount when aggregated with all amounts of notes being purchased
by other buyers (the "Other Buyers") pursuant to the Other Purchase Agreements
(the "Other Notes" and together with the Notes, the "Aggregate Notes"), shall be
$40,000,000) (as converted, amortized and/or redeemed for Common Shares pursuant
to the terms of the Notes, collectively, the "Conversion Shares") and (ii) the
Parent wishes to issue, upon the terms and conditions stated in this Agreement,
warrants, in substantially the form attached hereto as Exhibit B (the "Initial
Warrants," and together with the Accelerated Payment Option Warrants (as defined
in the Notes), the "Warrants," and together with the warrants being purchased by
the Other Buyers (the "Other Warrants"), the "Aggregate Warrants"), to acquire
up to that number of additional shares of Common Shares set forth opposite the
Buyer's name in column (4) of the Buyer Schedule (as exercised, the "Initial
Warrant Shares," and together with the Common Shares issuable upon exercise of
the Accelerated Payment Option Warrants, the "Warrant Shares").
E. Contemporaneously with the execution and delivery of this Agreement,
certain of the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (as amended or
modified from time to time, the "Registration
Rights Agreement"), pursuant to which the Parent has agreed to provide certain
registration rights with respect to the Conversion Shares and the Initial
Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder.
F. The Notes, the Conversion Shares, the Warrants, the Warrant Shares and
the Guarantees (as defined in clause (G) below) collectively are referred to
herein as the "Securities".
G. The Notes will be (i) senior to all outstanding and future Indebtedness
(as defined herein) of the Company, (ii) guaranteed by the Parent pursuant to a
guarantee substantially in the form attached hereto as Exhibit D-1 (the "Parent
Guaranty") and (iii) guaranteed by Vasogen, Corp. pursuant to a guarantee
substantially in the form attached hereto as Exhibit D-2 (the "Subsidiary
Guaranty," and together with the Parent Guaranty, the "Guarantees").
NOW, THEREFORE, the Company, the Parent, Vasogen, Corp. and the Buyer
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Subject to the satisfaction (or waiver by the party entitled to
so waive) of the conditions set forth in Sections 6 and 7 below, on the Closing
Date (as defined below), (A) the Company shall issue and sell to the Buyer, and
the Buyer agrees to purchase from the Company, one or more Notes with an
aggregate principal amount as is set forth opposite the Buyer's name in column
(3) on the Buyer Schedule and (B) the Parent shall issue and sell to the Buyer
one or more Initial Warrants to acquire up to that number of Warrant Shares as
is set forth opposite the Buyer's name in column (4) on the Buyer Schedule (the
"Closing").
(ii) Purchase Price. The aggregate purchase price for the Buyer of
the Notes and the Warrants to be purchased by the Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite the Buyer's name in
column (5) of the Buyer Schedule. The purchase price for the Warrants shall be
deemed to be $0.01 per Warrant.
(b) Closing Date. The date and time of the Closing (the "Closing Date")
shall be 8:00 a.m., New York Time, on the date hereof after notification of
satisfaction (or waiver by the party entitled to so waive) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and the Buyer) at the offices of Xxxxxxx Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) Form of Payment. On the Closing Date, the Buyer shall pay its
Purchase Price to the Company or, at the written direction of the Company
delivered to the Buyer at least one (1) Business Day prior to the Closing Date
and substantially in the form attached hereto as Annex 1(c), to its designee for
the Notes to be issued and sold to the Buyer at such Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions and the Parent shall issue the Initial Warrants to the Buyer. At
the Closing, (A) the Company shall deliver to the Buyer the Notes (allocated in
the principal amounts as the Buyer shall request) that the Buyer is then
purchasing and (B) the Parent shall deliver to the Buyer the
-2-
Initial Warrants (allocated in the amounts as the Buyer shall request) that the
Buyer is purchasing, in each case duly executed on behalf of the Company or the
Parent, as applicable, and registered in the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) No Public Sale or Distribution. The Buyer is acquiring the Notes
and the Warrants and upon conversion, amortization and/or redemption of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable
upon conversion, amortization and/or redemption of the Notes and the Warrant
Shares issuable upon exercise of the Warrants for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act or
qualified for public distribution or exempted under the securities legislation
and regulations and regulations of, and the instruments, policies, rules,
orders, codes, notices and published interpretation notes of, the securities
regulatory authorities of the provinces and territories of Canada (the "Canadian
Securities Laws"), as applicable; provided, however, that by making the
representations herein, subject to compliance with Canadian Securities Laws, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and in accordance with Canadian Securities Laws. The Buyer is
acquiring the Securities hereunder in the ordinary course of its business. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities, and the Buyer
has not solicited offers for, or offered or sold, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(b) Accredited Investor Status. The Buyer is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D. The Buyer is also an "accredited investor" as that term is defined
in the National Instrument 45-106, Prospectus and Registration Exemptions. The
Buyer has executed the Accredited Investor Certificate attached hereto as
Schedule 2(b) as of the date hereof, and such certificate is true and correct as
of the date hereof.
(c) Reliance on Exemptions. The Buyer understands and acknowledges that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and Canadian Securities Laws applicable in Ontario and that the
Company and the Parent are relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and the Parent and
-3-
materials relating to the offer and sale of the Securities that have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and the Parent. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's and the Parent's representations and
warranties contained herein. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
or Canadian federal, state or provincial commission or agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such commissions or agencies passed upon or endorsed
the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that, except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws or
qualified under Canadian Securities Laws; (ii) the Buyer agrees that if it
decides to offer, sell or otherwise transfer any of the Notes, Conversion
Shares, Warrants or Warrant Shares, such Notes, Conversion Shares, Warrants and
Warrant Shares may be offered, sold or otherwise transferred only: (A) pursuant
to an effective registration statement under the 1933 Act, subject to compliance
with Canadian Securities Laws, (B) to the Company (in the case of the Notes) or
the Parent (in the case of the Warrants, the Conversion Shares and the Warrant
Shares); (C) outside the United States in accordance with Rule 904 of Regulation
S under the 1933 Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the 1933 Act
provided by Rule 144 or Rule 144A thereunder, if available, and in compliance
with any applicable state securities laws or (2) in a transaction that does not
require registration under the 1933 Act or applicable state securities laws, and
the seller has provided the Company and the Parent with reasonable assurance,
prior to such offer, sale or transfer, that such Securities may be so offered,
sold or transferred in a transaction that does not require registration under
the 1933 Act or applicable state securities laws; and (iii) any sale or transfer
of the Securities to a purchaser or transferee whose address is in Canada or who
is a resident of Canada is prohibited unless it is made in compliance with
applicable Canadian Securities Laws.
(g) Legends. The Buyer understands that the certificates or other
instruments representing the Notes and Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, and subject to Section 9(s), the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "Blue Sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE]
-4-
[EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT; (B) TO THE COMPANY, (C) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT AND
IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN
ACCORDANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (2) IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND THE
HOLDER HAS PROVIDED THE COMPANY, PRIOR TO
SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES
MAY BE SO OFFERED, SOLD OR TRANSFERRED IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Subject to Section 9(s), the legend set forth above shall be removed and the
Company or the Parent, as applicable, shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with reasonable assurance that
the sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act, (iii) if the
Company or the Parent is a "foreign issuer," within the meaning of Regulation S
under the 1933 Act and the Securities are being sold pursuant to Rule 904 of
Regulation S, such legend may be removed by providing a declaration to the
Company or the Parent, as applicable, that such shares may be sold pursuant to
Rule 904 of Regulation S or (iv) such holder provides the Company or the Parent,
as applicable, with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Canadian Legends. The Buyer understands that the certificates or
other instruments representing Warrants and, if the Notes are converted or the
Warrants are exercised prior to February 8, 2006, the share certificates
representing the Conversion Shares and the Warrant Shares, shall bear a legend
set forth below:
-5-
"UNLESS PERMITTED UNDER CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THESE SECURITIES
SHALL NOT TRADE THE SECURITIES IN CANADA
BEFORE FEBRUARY 8, 2006."
The legend set forth above shall be removed and the Parent shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped at anytime on or after February 8, 2006, if such Securities are
qualified for distribution by prospectus under applicable Canadian Securities
Laws or if in connection with a proposed trade the holder provides the Parent
with reasonable assurance that the Securities are no longer subject to a hold
period under such laws.
(i) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and shall constitute the legal, valid and binding
obligations of the Buyer enforceable against the Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(j) No Conflicts. The execution, delivery and performance by the Buyer
of this Agreement and the Registration Rights Agreement and the consummation by
the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party or by which it is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations hereunder.
(k) Residency. The Buyer is a resident of that jurisdiction specified
below its address on the Buyer Schedule.
(l) Certain Trading Activities. Neither the Buyer nor any of its
affiliates has directly or indirectly, and no Person acting on behalf of the
Buyer or its affiliates has directly or indirectly, engaged in any transactions
in the securities of the Parent or the Company (including, without limitation,
any Short Sales involving the Parent's securities) since the time that the Buyer
was first contacted by the Parent, a placement agent or any other Person with
respect to the transactions contemplated hereby. "Short Sales" include, without
limitation, all "short sales" as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers. The
Buyer covenants that neither it, nor any of its affiliates that it exercises
investment discretion over or to which it has provided knowledge of the
transactions contemplated by the Transaction
-6-
Documents, nor any Person acting on behalf of the Buyer or any of its affiliates
that it exercises investment discretion over or to which it has provided
knowledge of the transactions contemplated by the Transaction Documents will
engage in any transactions in the securities of the Parent or the Company
(including Short Sales) prior to the time that the transactions contemplated by
this Agreement are publicly disclosed. Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.
(m) No Irish Public Offering. The Buyer has not offered or sold, and it
will not offer or sell, any Notes in Ireland in circumstances which would
constitute an offer to the public within the meaning of Irish Prospectus Law (as
defined below) or an invitation to the public (as referred to in Section 33 of
the Companies Act, 1963) to subscribe for the Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT.
Each of the Company, the Parent and Vasogen, Corp. jointly and
severally represents and warrants to the Buyer as of the date hereof as follows:
(a) Organization and Qualification. The Parent is up to date in all
filings under the Canada Business Corporations Act (the "CBCA"). The Parent and
the Parent's "Subsidiaries" (which for purposes of this Agreement means the
Company, Vasogen, Corp. and any entity in which the Parent, directly or
indirectly, owns 50% or more of the outstanding capital stock or holds an equity
or similar interest representing 50% or more of the outstanding equity or
similar interest of such entity) are entities duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which they are formed. The Parent and its Subsidiaries have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Parent and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing (if applicable) in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Vasogen, Corp. is not qualified as a foreign entity to do business in any state
and there is no jurisdiction in which Vasogen, Corp., by virtue of its ownership
of property or the nature of the business conducted by it, makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Parent, the Company or
Vasogen, Corp. to perform its obligations under the Transaction Documents (as
defined below). None of the Parent, the Company or Vasogen, Corp. holds any
equity or similar interest in any entity except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Xxxxxxxx. Each of the Parent and its
Subsidiaries has the requisite power and authority, to the extent it is a party
thereto or bound thereby, to enter into and perform its obligations under this
Agreement, the Notes, the
-7-
Guarantees, the Registration Rights Agreement, the Treasury Instructions (as
defined in Section 5(b)), the Warrants and each of the other agreements entered
into by the applicable parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and
to issue their respective Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Parent,
the Company and Vasogen, Corp. and the consummation by the Parent, the Company
and Vasogen, Corp. of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, the Warrants and the
Guarantees, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants have been duly authorized by the board of directors (or
similar governing body) of the Parent, the Company and Vasogen, Corp., as
applicable, and, other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) the filing of a Form D with respect to the Notes, the
Warrants and the Guarantees, as required under Regulation D and (iii) such
filings required under applicable securities or "Blue Sky" laws of the states of
the United States and applicable Canadian Securities Laws and applicable
requirements of the TSX (all of the foregoing, the "Required Approvals"), no
further filing, consent, or authorization is required by the Company, the
Parent, Vasogen, Corp. or any of their boards of directors and/or shareholders.
This Agreement and the other Transaction Documents to which they are a party
have been duly executed and delivered by the Parent, the Company and Vasogen,
Corp., as applicable, and constitute the legal, valid and binding obligations of
the Parent, the Company and Vasogen, Corp., as applicable, enforceable against
the Parent, the Company and Vasogen, Corp., as applicable, in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and to the extent that
rights to indemnity may be limited by applicable law, including the
indemnification and contribution provisions of the Registration Rights
Agreement.
(c) Issuance of Securities. The Notes, the Warrants and the Guarantees
are free from all taxes (other than a stamp duty charge of 0.15 Euro on the
issuance of each of the Notes, that will be paid by the Company), liens and
charges with respect to the issue thereof. As of the Closing, a number of shares
of Common Shares shall have been duly authorized and reserved for issuance which
equals or exceeds the maximum number of Common Shares: (i) issuable upon
conversion, amortization and/or redemption for Common Shares of the Notes and
(ii) issuable upon exercise of the Warrants. Upon issuance or conversion,
amortization and/or redemption in accordance with the terms of the Notes or
exercise in accordance with the terms of the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Shares. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Parent, the Company and Vasogen,
Corp. of the Securities is exempt from registration under the 1933 Act and from
the prospectus and registration requirements of applicable Canadian Securities
Laws. The Company has not offered or sold, and it will not offer, sell or
transfer the Notes in violation of Irish Securities Laws or in circumstances
that would constitute an offer to
-8-
the public within the meaning of Irish Prospectus Law or an invitation to the
public (as referred to in Section 33 of the Companies Act, 1963) to subscribe
for the Notes and nothing herein contained shall be construed as constituting an
offer of Notes to the public within the meaning of Irish Prospectus Law or an
"invitation to the public" (as referred to in Section 33 of the Companies Act,
1963) to subscribe for the Notes. As used herein, "Irish Prospectus Law" has the
meaning set out in the Investment Funds, Companies and Miscellaneous Provisions
Act, 2005 and "Irish Securities Laws" means Irish Prospectus Law, the Irish
Companies Acts, 1963 to 2005, the Central Bank Acts, 1942-1999, the Investment
Intermediaries Act, 1995 (as amended) and any regulations made thereunder (as
each of these may be amended or supplemented from time to time).
(d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Parent, the Company
and Vasogen, Corp. and the consummation by the Parent, the Company and Vasogen,
Corp. of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants and the Guarantees and
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation, any
capital stock of the Parent or any of its Subsidiaries, the Bylaws or any of the
organizational documents of the Parent or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Parent or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws or Canadian
Securities Laws and regulations and the rules and regulations (A) of the Toronto
Stock Exchange (the "TSX") and (B) either of Nasdaq National Market ("Nasdaq")
or The Nasdaq Small Cap Market ((A) and (B) collectively, the "Principal
Markets" and each individually, a "Principal Market")) applicable to the Parent
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, except in the case of clauses (ii)
and (iii) above, any breach or default that would not have a Material Adverse
Effect.
(e) Consents. Except as set forth on Schedule 3(e), none of the Parent
nor any of its Subsidiaries is required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof, except for the following consents, authorizations,
orders, filings and registrations (none of which is required to be filed or
obtained before the Closing): (i) the filing by the Parent of a listing
application and a notice for acceptance of a private placement for the
Conversion Shares and Warrant Shares with the Principal Markets, which shall be
done pursuant to the rules of the Principal Markets, (ii) as may be required
under the 1933 Act, the "Blue Sky" laws of various states or the rules and
regulations thereunder in connection with the transactions contemplated by the
Registration Rights Agreement and (iii) any notices or filings required to be
given or made with TSX and Nasdaq, which have been or will be given or made on a
timely basis by the Parent. The Parent and its Subsidiaries are unaware of any
facts or circumstances that might prevent the Parent from obtaining or effecting
any of the registration, application or filings pursuant to the preceding
sentence. The Parent is not in violation of the listing requirements of either
of the
-9-
Principal Markets and has no knowledge of any facts that would reasonably lead
to delisting or suspension of the Common Shares in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Each of
the Parent, the Company and Vasogen, Corp. acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is not (i) an officer or director of the Parent or
the Company, (ii) to the knowledge of each of the Parent and its Subsidiaries,
an "affiliate" of the Parent or any of its Subsidiaries (as defined in Rule 144
under the 1933 Act) or (iii) to the knowledge of each of the Parent and its
Subsidiaries, a "beneficial owner" of more than 10% of the shares of Common
Shares (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")). Each of the Parent, the Company and Vasogen,
Corp. further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Parent or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. Each of the Parent, the Company and Vasogen, Corp.
further represents to the Buyer that the Parent's, the Company's and Vasogen,
Corp.'s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by each of them and their representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Parent
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(including any within the meaning of Regulation D) in connection with the offer
or sale of the Securities in the United States or elsewhere or to any United
States citizen or resident. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by the Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it has
engaged XX Xxxxx & Co., LLC as placement agent (the "Agent") and any co-agents
that the Agent may engage pursuant to the Engagement Letter dated as of June 24,
2005 by and between the Agent and the Parent in connection with the sale of the
Securities. Other than the Agent, and the co-agents referred to above, if
applicable, neither the Parent nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Parent, its Subsidiaries, any
of their affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Parent or any of its Subsidiaries for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Parent are
listed or designated. None of the Parent, its Subsidiaries, their affiliates or
any Person acting on their behalf will take any action or steps
-10-
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Parent understands and acknowledges that the
number of Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Parent further acknowledges
that its obligation to issue Conversion Shares upon conversion, amortization
and/or redemption of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Transaction Documents and the Warrants is, in
each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Parent.
(j) Application of Takeover Protections; Rights Agreement. The Parent
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's Articles of Incorporation which is or
could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Parent's or
any of its Subsidiaries' issuance of the Securities and the Buyer's ownership of
the Securities. Except as set forth on Schedule 3(j), the Parent has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Shares or a change in control of the Company.
(k) SEC-CSA Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC and the
Canadian Securities Administrators (the "CSA") pursuant to the reporting
requirements of the 1934 Act and the Canadian Securities Laws (all of the
foregoing filed during the two-year period prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC-CSA Documents"). The Parent has delivered to the Buyer or their
respective representatives true, correct and complete copies of the SEC-CSA
Documents not available on the XXXXX and SEDAR systems, if any. As of their
respective dates, the SEC-CSA Documents complied in all material respects with
the requirements of the 1934 Act and the Canadian Securities Laws and the rules
and regulations of the SEC and the CSA promulgated thereunder applicable to the
SEC-CSA Documents, and none of the SEC-CSA Documents, at the time they were
filed with the SEC or the CSA as applicable, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Parent included in the SEC-CSA Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and the CSA with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles in Canada, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary
-11-
statements) and fairly present in all material respects the financial position
of the Parent as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(l) Absence of Certain Changes. Since November 30, 2004, there has been
no undisclosed material adverse change and no undisclosed material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole. Except as disclosed in Schedule 3(l), since
November 30, 2004, neither the Parent nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $500,000 outside of the ordinary course of business or
(iii) had capital expenditures outside of the ordinary course of business,
individually or in the aggregate, in excess of $500,000. Neither the Parent nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Parent, the Company or Vasogen, Corp. have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Except as disclosed in Schedule 3(l), the Parent,
individually, and the Parent and its respective Subsidiaries, taken as a whole,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), "Insolvent" means, with respect to
any Person (as defined in Section 3(s)), (i) the present fair saleable value of
such Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature, (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted or (v) such Person is "unable to pay its debts"
(as such term is defined in Section 214 of the Irish Companies Act, 1963 (as
amended by Section 2(3) of the Companies (Amendment) Act, 1990)).
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur with respect to the Parent or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Shares on the date
hereof and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Parent nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or their organizational charter or certificate of
incorporation or Bylaws, respectively. Neither the Parent nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Parent or its Subsidiaries,
except for which an acceptance or consent has been obtained, and neither the
Parent nor any of its Subsidiaries will conduct its business in violation of any
of the foregoing, except for possible violations that would not, individually or
in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Parent is not in violation of any of the rules,
-12-
regulations or requirements of either of the Principal Markets and has no
knowledge of any facts or circumstances that would reasonably be expected to
lead to delisting or suspension of the Common Shares by either of the Principal
Markets in the foreseeable future. Since December 17, 2003, (i) the Common
Shares have been designated for quotation on the Principal Markets, (ii) trading
in the Common Shares has not been suspended by the SEC, the CSA or either of the
Principal Markets and (iii) the Parent has received no communication, written or
oral, from the SEC, the CSA or either of the Principal Markets regarding the
suspension or delisting of the Common Shares from the Principal Markets. The
Parent and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Parent nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit. The Parent is a reporting issuer
not in default of any requirements under the applicable Canadian Securities Laws
and eligible to use the Short Form Prospectus System, established under National
Instrument 44-101 of the CSA (the "POP System").
(o) Foreign Corrupt Practices. Neither the Parent, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Parent or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Parent or any of its Subsidiaries (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Parent is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC-CSA
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Parent or any of its Subsidiaries is presently a
party to any transaction with the Parent or any of its Subsidiaries (other than
for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Parent or any of its Subsidiaries, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Parent consists of unlimited Common Shares, of which as of the
date hereof, 81,481,250
-13-
Common Shares are issued and outstanding, 3,997,631 Common Shares are issuable
upon the exercise of options outstanding granted under the Parent's stock option
plans, 985,237 Common Shares are issuable upon the exercise of warrants (other
than the Aggregate Warrants) outstanding, 72,856 Common Shares are issuable upon
the exercise of deferred share units outstanding granted under the Parent's
directors' deferred share unit and stock plan, 2,843,925 Common Shares are
reserved for issuance under the Parent's stock option plans, 177,144 Common
Shares are reserved for issuance under the Parent's directors' deferred share
unit and no Common Shares are reserved for issuance pursuant to securities
(other than the Aggregate Notes and the Aggregate Warrants) exercisable or
exchangeable for, or convertible into, Common Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Parent's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Parent and (ii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
set forth in the SEC-CSA Documents or as disclosed in Schedule 3(r), and other
than the Aggregate Notes and the Aggregate Warrants: (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any kind whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Parent or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Parent or any of its Subsidiaries is or may become
bound to issue additional share capital of the Parent or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Parent or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 3(s)) of the Parent or any of its
Subsidiaries or by which the Parent or any of its Subsidiaries is or may become
bound; (iii) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Parent or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which the Parent or any of its Subsidiaries is obligated to
register or qualify the sale of any of their securities under the 1933 Act or
under any applicable Canadian Securities Laws; (v) there are no outstanding
securities or instruments of the Parent or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Parent or any of its Subsidiaries is
or may become bound to redeem a security of the Parent or any of its
Subsidiaries; (vi) the Parent does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (vii)
the Parent and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC-CSA Documents but not so disclosed in the SEC-CSA
Documents, other than those incurred in the ordinary course of the Parent's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or could not reasonably be expected to have a Material Adverse
Effect. The Parent has made available to the Buyer true, correct and complete
copies of the Parent's and its Subsidiaries' Articles of Incorporation or other
organizational documents, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Parent's and its Subsidiaries' bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Shares and the material rights of the holders thereof in respect thereto.
-14-
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Parent nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Parent's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables and related accrued liabilities entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; references to Indebtedness of the
Parent or the Company shall mean Indebtedness on a consolidated basis; (y)
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by either of
the Principal Markets, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Parent
or any of its Subsidiaries, threatened against or affecting the Parent or any of
its Subsidiaries, the Common Shares or any of the Parent's or its Subsidiaries'
officers or
-15-
directors in their capacity as such which, individually or in the aggregate, if
determined adversely to the Parent or any of its Subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
(u) Insurance. The Parent and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Parent believes to be prudent and
customary in the businesses in which the Parent and its Subsidiaries are
engaged. Neither the Parent nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to insure its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or union
contract. The Parent and its Subsidiaries believe that their relations with
their employees are good. No executive officer of the Parent or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Parent
or any such Subsidiary that such officer intends to leave the Parent or any such
Subsidiary or otherwise terminate such officer's employment with the Parent or
any such Subsidiary. To the knowledge of the Parent and its Subsidiaries, no
executive officer of the Parent or any of its Subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Parent or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Parent and its Subsidiaries are in compliance with all
United States and Canadian federal, state, provincial, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Parent and its Subsidiaries have good and marketable
title to all real property and good and valid title to all personal property
owned by them which is material to the business of the Parent and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Parent and any of its Subsidiaries or as could not reasonably be expected to
have a Material Adverse Effect. Any real property and facilities held under
lease by the Parent or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made and proposed to be made of such property and buildings by the
Parent and its Subsidiaries or as could not reasonably be expected to have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Parent and its Subsidiaries own
or have licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, formulas, trade secrets, licenses,
approvals, governmental authorizations and other intellectual property rights
necessary to conduct their respective businesses as now conducted ("Intellectual
-16-
Property Rights"). Except as set forth in Schedule 3(x), none of the Parent's or
its Subsidiaries' Intellectual Property Rights have expired, terminated or have
been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. Neither the Parent nor any of its
Subsidiaries has any knowledge of any infringement by the Parent or any of its
Subsidiaries of Intellectual Property Rights of others, which infringement could
reasonably be expected to have a Material Adverse Effect. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Parent or
its Subsidiaries, being threatened against the Parent or any of its Subsidiaries
regarding any of their Intellectual Property Rights. Neither the Parent nor the
Company is aware of any facts or circumstances which might reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings. The Parent and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights, except for public disclosure in the U.S. Patent
and Trademark Office (and foreign equivalents).
(y) Environmental Laws. The Parent and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all United States, Irish and Canadian federal, state, provincial, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Parent
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Parent or such
Subsidiary.
(aa) Tax Status. Except as set forth in Schedule 3(aa), the Parent and
each of its Subsidiaries (i) has made or filed all material foreign, United
States and Canadian federal, state and provincial income and all other material
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the officers of the Parent nor the officers of its Subsidiaries know
of any reasonable basis for any such claim.
-17-
(bb) Internal Accounting and Disclosure Controls. The Parent and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Parent maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Parent in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Parent in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Parent's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Parent and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Parent in
its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Ranking of Notes. No Indebtedness of the Company is senior to the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise. No
Indebtedness of the Parent is senior to the Parent Guaranty whether with respect
of payment of redemptions, interest, damages or upon liquidation or dissolution
or otherwise. No Indebtedness of Vasogen, Corp. is senior to the Subsidiary
Guaranty whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
(ee) Shares Freely Tradeable. The Conversion Shares and the Initial
Warrant Shares will be freely tradeable under applicable Canadian laws on the
TSX from and after February 8, 2006, other than restrictions applicable in the
context of a "control distribution" as defined for the purposes of Canadian
Securities Laws.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the Buyer
hereunder will be, or will have been, fully paid or provided for by the Company
and/or the Parent (as the case may be), and all laws imposing such taxes will be
or will have been complied with.
(gg) Manipulation of Price. Neither the Parent nor the Company has, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Parent to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
-18-
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Parent.
(hh) Canadian Prospectus. The Parent (i) is qualified pursuant to
National Instrument 44-102, Alternative Forms of Prospectus ("NI44-102"), to
file a base shelf prospectus, and (ii) is entitled to include in such a
prospectus all of the Registrable Securities (as defined in the Registration
Rights Agreement).
(ii) Disclosure. Each of the Parent, the Company and Vasogen, Corp.
confirms that neither it nor any other Person acting on its behalf has provided
the Buyer or its agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. Each
of the Parent, the Company and Vasogen, Corp. understands and confirms that the
Buyer will rely on the foregoing representations in effecting transactions in
the Securities. All disclosure provided to the Buyer regarding the Parent and
its Subsidiaries, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Parent or its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Parent or its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Parent or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Parent but which
has not been so publicly announced or disclosed.
(jj) Vasogen, Corp. Vasogen, Corp. is not a party to any contract or
agreement material to the Parent and Vasogen, Corp., taken as a whole or
material to the Parent and its Subsidiaries, taken as a whole.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company and the Parent each agree to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company and
the Parent each shall, on or before the Closing Date, take such action as such
party shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Buyer at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date. Each of the Company and the Parent shall make all filings and
reports relating to the offer and sale of the Securities
-19-
required under applicable securities or "Blue Sky" laws of the states of the
United States and the applicable Canadian Securities Laws and applicable
requirements of the TSX following each such Closing Date.
(c) Reporting Status. Until the date on which the Buyer shall have sold
at least 90% of the Conversion Shares and Warrant Shares and none of the Notes
or Warrants is outstanding (the "Reporting Period"), the Parent shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
the CSA under applicable Canadian Securities Laws, and the Parent shall continue
to timely file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise no longer require such filings and will
remain in good standing under Canadian Securities Law and eligible to use the
POP System. The Buyer shall promptly notify the Parent of the occurrence of the
events causing the cessation of the Parent's obligations hereunder.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Notes and Initial Warrants for the repayment of intercompany debt to Parent
previously incurred for purposes of research and development activities and for
future research and development activities by the Company and/or the Parent as
well as for general corporate purposes. The Company will not use the proceeds
from the sale of the Notes and Initial Warrants for the (i) repayment of any
other outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Parent agrees to send the following to
the Buyer during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 40-F or Form 20-F, any Current Reports on Form 6-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information
made available or given to the shareholders of the Parent generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used herein "Business Day" means any day other than a Saturday,
Sunday, or other day on which commercial banks in New York City are authorized
or required by law to remain closed.
(f) Listing. The Parent shall promptly secure the listing of all of the
Conversion Shares and Initial Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Notes and the Warrants. The Parent shall maintain the
Common Shares' listing or authorization for quotation on each of the Principal
Markets. Neither the Parent nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Shares on either of the Principal Markets; provided, however, that
the Parent makes no covenant regarding the trading price of the Common Shares.
The Parent shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company shall
pay an expense allowance to Kings Road Investments Ltd. (a Buyer) or its
designee(s) (in addition to
-20-
any other expense amounts paid to the Buyer prior to the date of this Agreement)
to cover expenses reasonably incurred by Kings Road Investments Ltd. or any
professionals engaged by Kings Road Investments Ltd. in relation to due
diligence and investment documentation, in an amount not to exceed $70,000 (in
addition to any other expense amounts paid to the Buyer prior to the date of
this Agreement), which amount shall be withheld by Kings Road Investments Ltd.
from its Purchase Price at the Closing in satisfaction of the Company's payment
obligation. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or broker's commissions (other than for
Persons engaged by the Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and neither the Buyer nor its successor or assign thereof
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Buyer.
(i) Disclosure of Transactions and Other Material Information. On the
first Business Day following the date of this Agreement, the Parent shall file a
Current Report on Form 6-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (but excluding all schedules to this Agreement, assuming no material
non-public information is contained in such schedules), the form of each of the
Notes, the Warrants, the Registration Rights Agreement and the Guarantees) as
exhibits to such filing (including all attachments, the "6-K Filing") and a
material change report on Form 51-102F3 in accordance with National Instrument
51-102 of the CSA with respect thereto (the "Material Change Report"). Upon the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA, the Buyer shall not be in possession of any material, nonpublic information
received from the Parent or any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing and the Material Change Report. The Parent shall not, and shall cause
each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Buyer with any material, nonpublic
information regarding the Parent or any of its Subsidiaries from and after the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA without the express written consent of the Buyer. If, after the deadline for
the 6-K Filing set forth above, the Buyer has, or reasonably believes it has,
received any such material, nonpublic information regarding the Parent or any of
its Subsidiaries, it shall provide the Parent with written notice thereof. The
Parent shall, within five (5) Trading Days of receipt of such notice except
pursuant to Allowable
-21-
Grace Periods under the Registration Rights Agreement, make public disclosure of
such material, nonpublic information. In the event of a breach of the foregoing
covenant by the Parent, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Parent, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Buyer shall not have
any liability to the Parent, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Parent nor the Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, that the Parent shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 6-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Buyer shall be consulted by the Parent in connection with any such press release
or other public disclosure prior to its release). Without the prior written
consent of the Buyer, which shall be deemed to have been received in respect of
the filing of the Transaction Documents with the 6-K Filing and the filing of
the Material Change Report, neither the Parent nor any of its Subsidiaries shall
disclose the name of the Buyer in any filing, announcement, release or otherwise
other than in a prospectus for the resale of the Conversion Shares, to which
consent is deemed given hereby or as otherwise required by law to specifically
name the Buyer.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, neither the Company nor the Parent shall, directly or
indirectly, redeem, repurchase, or otherwise acquire for value or declare or pay
any dividend or distribution on, the Common Shares without the prior express
written consent of the holders of Notes representing not less than a majority of
the aggregate principal amount of the then outstanding Notes. Notwithstanding
the foregoing, nothing herein shall prevent the Company or the Parent from
satisfying its obligations under the Aggregate Notes and the Aggregate Warrants.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long
as the Buyer or any Other Buyer beneficially owns any Notes or Other Notes, as
applicable, the Company shall not issue any Notes or Other Notes other than to
the Buyers as contemplated by this Agreement or the Other Purchase Agreements,
as applicable, and neither the Company nor the Parent shall issue any other
securities that would cause a breach or default under the Notes or Other Notes,
as applicable, while such Notes or Other Notes are outstanding. Until the
earlier of three (3) years from the Closing and the date the Buyer or any Other
Buyer no longer beneficially own any Securities, neither the Company nor the
Parent shall, in any manner, issue or sell any rights, warrants or options
(other than the Aggregate Notes and Aggregate Warrants) (i) to subscribe for or
purchase Common Shares or (ii) which are directly or indirectly convertible into
or exchangeable or exercisable for Common Shares, in each of cases (i) and (ii),
at a price which varies or may vary with the market price of the Common Shares,
including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price. Until the Effectiveness Date (as defined
in the Registration Rights Agreement), neither the Company nor the Parent shall,
in any manner, enter into or effect any Dilutive Issuance (as defined in the
-22-
Notes).
(l) Corporate Existence. So long as the Buyer beneficially owns any
Notes or Warrants, neither the Company nor the Parent shall be party to any
Fundamental Transaction (as defined in the Notes) unless the Company and the
Parent, as applicable, is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Parent shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the Closing Date, the maximum number of shares of Common Shares issuable upon
conversion, amortization and/or redemption of all of the Notes and shares of
Common Shares issuable upon exercise of the Warrants.
(n) Conduct of Business. The business of the Company, the Parent and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than the Aggregate Notes, Aggregate Warrants or Options)
convertible into or exercisable or exchangeable for shares of Common
Shares.
(2) "Options" means any rights, warrants (other than the
Aggregate Warrants) or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.
(3) "Common Share Equivalents" means, collectively, Options and
Convertible Securities.
(ii) As long as 15% of the original principal amount of the Notes
issued at the Closing are outstanding, from the Closing Date until the eighteen
month anniversary of the Closing Date, the Parent will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Shares or Common Share Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement")
unless the Parent shall have first complied with this Section 4(o)(ii).
(1) The Parent shall deliver to the Buyer by facsimile a written
notice (the "Offer Notice") of any proposed or intended issuance or sale
or exchange
-23-
(the "Offer") of the securities being offered (the "Offered Securities")
in a Subsequent Placement within one Business Day of the determination
of the terms of such Subsequent Placement, which Offer Notice shall (x)
identify and describe the Offered Securities, (y) describe the price
range and other terms upon which they are expected to be issued, sold or
exchanged, and the number or amount of the Offered Securities expected
to be issued, sold or exchanged and (z) offer to issue and sell to or
exchange with the Buyer (which offer being non-transferable to any
successor to or transferee of the Buyer) a pro rata portion of 35% of
the Offered Securities allocated among the Buyer and the Other Buyers
(collectively, the "Buyers") including (a) those based on such Person's
pro rata portion of the aggregate principal amount of Notes purchased
hereunder and pursuant to the Other Purchase Agreements (the "Basic
Amount"), and (b) if the Buyer elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic
Amounts of Other Buyers as the Buyer shall indicate it will purchase or
acquire should the Other Buyers subscribe for less than their Basic
Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, the Buyer must
deliver a written notice to the Company prior to the end of the first
(1st) full Business Day after the Buyer's receipt of the Offer Notice
(for purposes of this Section 4(o)(ii)(2), notwithstanding the
provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received
such Offer Notice (the "Offer Period"), setting forth the portion of the
Buyer's Basic Amount that the Buyer elects to purchase and, if the Buyer
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that the Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be deemed to have elected to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such
Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Parent to the extent it deems reasonably necessary.
(3) The Parent shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only upon terms and conditions (including, without limitation, unit
prices and interest rates within the range specified in the Offer) that
are not more favorable to the acquiring person or persons or less
favorable to the Parent than those set forth in the Offer Notice.
(4) In the event the Parent shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in
-24-
Section 4(o)(ii)(3) above), then each Buyer may, at its sole option and
in its sole discretion, subject to the following sentence, reduce the
number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount
of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(o)(ii)(2) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Parent
actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section
4(o)(ii)(3) above prior to such reduction) and (ii) the denominator of
which shall be the original amount of the Offered Securities. In the
event that the Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Parent may not
issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(ii)(1) above.
Provided that the Buyer has been advised by the Parent electronically or
by telephone (with verbal confirmation of receipt) by 5:00pm New York
Time, the Buyer must make its election to reduce referred to above no
later than 8:00am New York Time the following Business Day.
(5) Upon the closing of the issuance, sale or exchange of all or
less than all of the Offered Securities, the Buyers shall acquire from
the Parent, and the Parent shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(o)(ii)(4) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all cases
to (i) the preparation, execution and delivery by the Parent and the
Buyers of a purchase agreement relating to such Offered Securities
substantially in the form negotiated with the purchasers of the Offered
Securities other than the Buyers but reasonably satisfactory in form and
substance to the Buyers and their respective counsel, (ii) the Buyers'
satisfaction, in their sole discretion, with both (I) the final price
and (II) the substantive final terms and/or conditions that differ from
those contained in the Offer Notice, and (iii) the Buyers' reasonable
satisfaction with the identity of the other persons or entities to which
the Offered Securities will be sold.
(6) Any Offered Securities not acquired by the Buyers or other
Persons in accordance with this Section 4(o)(ii) may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(iii) The restrictions contained in subsection (ii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes or securities issued in connection with (A) any public
offering or (B) any offering of securities convertible into Common Shares
pursuant to Rule 144A under the 1933 Act).
(p) Holding Period. For the purposes of Rule 144 and applicable
Canadian Securities Laws, the Company acknowledges that the holding period of
the Conversion Shares may be tacked onto the holding period of the Notes and the
Parent and the Company agree not to take a position contrary to this Section
4(p).
-25-
(q) Letter of Credit.
(i) On or prior to the Closing Date, the Company shall obtain an
irrevocable letter of credit (the "Letter of Credit"), in the amount of
$10,000,000 issued in favor of Kings Road Investments Ltd. (the "LC Agent") by a
bank acceptable to such LC Agent (the "Letter of Credit Bank") and in form and
substance acceptable to such LC Agent. Subject to the last three sentences of
this Section (q)(i), the Letter of Credit shall expire not earlier than 91 days
after the Maturity Date of the Notes (the "LC Expiration Date"). Upon the
occurrence and during the continuance of an Event of Default under (and as
defined in) any of the Aggregate Notes, the LC Agent shall be entitled to draw
under the Letter of Credit for the full Letter of Credit Amount (as defined in
the Aggregate Notes) then available thereunder, it being understood that the LC
Agent shall act for the benefit of the Buyers on a pro rata basis based on the
principal amount of the Aggregate Notes held by each of the Buyers and hold such
amount as collateral security for the obligations under the Aggregate Notes for
the benefit of the Buyers. The Company shall obtain such renewals, extensions or
replacements of the Letter of Credit as necessary to ensure that the Letter of
Credit shall not expire prior to the LC Expiration Date (unless the Letter of
Credit shall have been reduced to zero in accordance with the terms contained in
this Section 4(q) prior to such date). If, at any time, the Company cannot
obtain a renewal, extension or replacement of the Letter of Credit such that the
Letter of Credit will expire prior to the LC Expiration Date (a "Withdrawal
Event"), the Company and the Letter of Credit Bank shall each give the LC Agent
written notice of the occurrence of a Withdrawal Event at least forty-five (45)
days prior to the then current expiration date of the Letter of Credit.
Following a Withdrawal Event, the LC Agent shall be entitled to draw down the
Letter of Credit Amount in its entirety (whether or not an Event of Default
shall have occurred or be continuing under any of the Notes) and hold such
amount as collateral security for the obligations under the Notes for the
benefit of the Buyers.
(ii) If more than $23 million of the Aggregate Notes are converted,
redeemed or amortized pursuant to the terms of the Aggregate Notes, the Company
shall promptly deliver a notice to the LC Agent (the "LC Reduction Notice"),
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal one-half of
the difference between $17 million and the aggregate principal amount of the
Aggregate Notes then outstanding. After delivery of the initial LC Reduction
Notice, if the outstanding principal amount of the Aggregate Notes has been
reduced by $2 million or more from the time of the prior LC Reduction Notice,
the Company may deliver a subsequent LC Reduction Notice to the LC Agent
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal the difference
between (A) one-half of the difference between (i) $17 million and (ii) the
aggregate principal amount of the Aggregate Notes then outstanding and (B) the
aggregate amount of any prior reductions of the Letter of Credit Amount. Within
10 days of the receipt of any such LC Reduction Notice, the LC Agent shall issue
a written instruction to the Letter of Credit Bank to request the reduction of
the Letter of Credit Amount to the Company as set forth in the LC Reduction
Notice.
-26-
(iii) If the Company obtains FDA Approval (as defined in the Notes),
the Company shall promptly deliver a written notice to the LC Agent (the "Letter
of Credit Notice"), certifying as to the occurrence of such event and a copy of
such FDA Approval. Within 10 days of the receipt of the Letter of Credit Notice,
the LC Agent shall issue a written instruction to the Letter of Credit Bank to
request the release and return of the Letter of Credit Amount to the Company.
(iv) Notwithstanding the foregoing, if the LC Agent reasonably
disagrees with the contents of either a LC Reduction Notice or a Letter of
Credit Notice or the Company disagrees with any action taken or omitted to be
taken by the LC Agent, such party shall use the dispute resolution procedures
contained in Section 25 of the Notes.
(v) Kings Road Investments Ltd. is xxxxxx appointed as the LC Agent
for the Buyer hereunder, and the Buyer hereby authorizes the LC Agent (and its
officers, directors, employees and agents) to take any and all such actions on
behalf of the Buyer with respect to the Letter of Credit in accordance with the
terms of this Agreement. The LC Agent shall not have, by reason hereof or any of
the other Transaction Documents, a fiduciary relationship in respect of the
Buyer. Neither the LC Agent nor any of its officers, directors, employees and
agents shall have any liability to the Buyer for any action taken or omitted to
be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and the Buyer agrees to defend, protect,
indemnify and hold harmless the LC Agent and all of its officers, directors,
employees and agents (collectively, the "Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) (the "Losses") incurred by such Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of the LC Agent
pursuant hereto; provided, however, that the Buyer shall not be required to
indemnify the Indemnitees to the extent any such Losses are the result of the LC
Agent's fraud or willful misconduct.
(r) Trading Restrictions. Neither the Buyer, nor any affiliate of the
Buyer that is controlled by the Buyer or is otherwise aware of this restriction,
may purchase, sell or enter into any put option, short position or similar
arrangement with respect to securities of the Parent that violates Current
Securities Laws or otherwise trade in the securities of the Parent in violation
of applicable Current Securities Laws. In addition, during each Company
Conversion Measuring Period (as defined in the Notes) neither the Buyer, nor any
affiliate of the Buyer that is controlled by the Buyer or is otherwise aware of
this restriction, may engage in a Restricted Activity other than the sale of
Common Shares received upon a Company Conversion (as defined in the Notes), upon
a conversion, amortization or redemption of Notes pursuant to Section 3 of the
Notes, upon exercise of any Warrants, or the transfer of any Notes or Warrants
as permitted by their terms. "Restricted Activity" means, (a) any Acquisition or
Disposition, in open market transactions of (i) any Common Shares or (ii) any
securities convertible into or exchangeable for or derivative of Common Shares
and (b) any other action taken intentionally for the purpose of manipulating the
price of Common Shares. "Acquisition" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "Disposition"
means any direct or indirect voluntary sale, or monetization, including through
a Subsidiary or by means of an equity offering by any
-27-
such Subsidiary, but shall not include, any of the actions contemplated by
Section 4(h) or any disposition thereunder. "Current Securities Laws" means the
rules and regulations, existing on the date hereof, of the 1933 Act, the 1934
Act and the Canadian Securities Laws, in each case as are set forth in currently
disseminated interpretations by the SEC or the CSA, as applicable, in writing,
through rules, regulations, releases, no-action letters or published telephone
interpretations.
(s) Acknowledgement Regarding Buyer's Trading Activity. Subject to
Section 4(r) of this Agreement, it is understood and agreed by the Parent and
the Company (i) that, to the knowledge of the Parent, the Buyer has not been
asked to agree, nor has the Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Parent, or "derivative" securities based on
securities issued by the Parent or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the Buyer,
including, without limitation, Short Sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Parent's publicly-traded securities;
(iii) that the Buyer, and counter parties in "derivative" transactions to which
the Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Shares or an economically comparable position; and (iv)
that, to the knowledge of the Parent, the Buyer shall not be deemed to have any
affiliation with or control over any arm's length counter party in any
"derivative" transaction. Subject to Section 4(r) of this Agreement and
notwithstanding any other provisions of this Agreement and the provisions of the
Transaction Documents, the Parent further understands, acknowledges and agrees
that (a) the Buyer may engage in hedging and/or trading activities at any time
during the period that the Securities are outstanding, including, without
limitation, during the periods that the number and/or value of the Conversion
Shares deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities (if any) could reduce the value of the
existing stockholders' equity interests in the Parent both at and after the time
that the hedging and/or trading activities are being conducted. The Parent and
the Company acknowledge that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.
(t) Subsidiaries; Guaranty. To the extent any Subsidiary of the Parent
that comes into existence after the date hereof has assets transferred into it
having a fair market value of $1,000,000, individually, or $5,000,000 in the
aggregate, each such Subsidiary shall promptly enter into a guarantee
substantially in the form attached hereto as Exhibit D-2.
(u) Amendment to Other Security Purchase Agreements. Neither the
Company nor the Parent shall amend any of the Other Purchase Agreements without
first offering the same terms to the Buyer hereunder.
(v) No Conflicts with Irish Law. The Parent and the Company covenant
and agree that:
(i) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Section 60 nor Section 286 of the Irish Companies Act, 1963.
-28-
(ii) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Part XI of the Irish Companies Act, 1990.
(w) Change to DTC Brokerage Account Information. If the Buyer seeks at
any time to make any changes to the DTC brokerage account information which the
Buyer has provided pursuant to Section 6(d) hereof, the Buyer shall deliver to
the Parent a new form, substantially in the form of Exhibit E, setting forth
revised DTC brokerage account information. The Parent shall be obligated to use,
beginning no later than five (5) Business Days after receipt thereof, such
revised DTC brokerage account information for any delivery of Common Shares
required under the Transaction Documents.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company and the Parent shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to each holder of Securities), a register for the Notes
and the Warrants, as applicable, in which the Company and the Parent shall
record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company and the Parent shall keep the register open and available at
all times during business hours for inspection by the Buyer or its legal
representatives.
(b) Transfer Agent Instructions. The Parent shall issue treasury
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion, amortization or redemption of the Notes or exercise of the
Warrants in such amounts as specified from time to time by the Buyer to the
Parent or by the Parent, as the case may be, upon conversion, amortization
and/or redemption of the Notes or exercise of the Warrants substantially in the
form attached as Exhibit I to the Notes and Warrants, respectively (the
"Treasury Instructions"). The Parent warrants that no instruction other than the
Treasury Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Parent
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Parent and the Company as and to
the extent provided in this Agreement and the other Transaction Documents. If
the Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f) and the other provisions of the Transaction Documents, subject
to Section 9(s), the Parent and the Company shall permit the transfer and, in
the case of a transfer of Common Shares, the Parent shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by the Buyer to effect such sale, transfer or assignment. In the event
that such sale, assignment or transfer involves Conversion Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 or Rule 904, subject to Section 9(s),
-29-
the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. Each of the
Parent and the Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer. Accordingly, the Parent and
the Company acknowledge that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Parent or the Company of the provisions of this
Section 5(b), that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S AND THE PARENT'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the obligation of the Parent to issue the Initial Warrants to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's and the Parent's sole benefit and may be waived by the Company and the
Parent at any time in their sole discretion by providing the Buyer with prior
written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company and the Parent.
(b) The Buyer and each other Buyer shall have delivered to the Company
the Purchase Price (less, in the case of Kings Road Investments Ltd., the
amounts withheld pursuant to Section 4(g)) for the Notes and the Other Notes and
the Warrants and the Other Warrants being obtained by the Buyers at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
(d) The Buyer shall have completed and delivered to the Parent the DTC
brokerage account information form with respect to the Buyer in substantially
the form of Exhibit E attached hereto.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Notes and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer's sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
-30-
(a) The Company shall have duly executed and delivered to the Buyer:
(A) the Notes (in such principal amounts as the Buyer shall request) being
obtained by the Buyer at the Closing pursuant to this Agreement and (B) to the
extent it is a party thereto, each of the other Transaction Documents.
(b) The Parent shall have duly executed and delivered to the Buyer: (A)
the Warrants (in such allocations as the Buyer shall request) being received by
the Buyer at the Closing pursuant to this Agreement; (B) the Parent Guaranty,
and (C) to the extent it is a party thereto, each of the other Transaction
Documents.
(c) Vasogen, Corp. shall have duly executed and delivered to the Buyer:
(A) the Subsidiary Guaranty, and (B) to the extent it is a party thereto, each
of the other Transaction Documents.
(d) The Buyer shall have received the opinion of Lang Xxxxxxxx LLP, the
Parent's outside Canadian counsel, dated as of the Closing Date, in
substantially the form of Exhibit F-1 attached hereto.
(e) The Buyer shall have received the opinion of Xxxxxx X. Xxxxxxx
Solicitors, the Company's outside Irish counsel, dated as of the Closing Date,
in substantially the form of Exhibit F-2 attached hereto.
(f) The Buyer shall have received the opinion of Xxxx, Xxxxx, Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, the Company's outside United States counsel, dated as of
the Closing Date, in substantially the form of Exhibit F-3 attached hereto.
(g) The Parent shall have delivered to the Buyer a certificate of
compliance with the CBCA of the Parent, and the Company shall have delivered to
the Buyer a certificate evidencing the formation and status of the Company in
the Company's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(h) The Parent shall have delivered to the Buyer a certificate
evidencing the Parent's qualification as a foreign corporation (if applicable)
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Parent conducts business and such qualification
is required, as of a date within 10 days of the Closing Date. The Company shall
have delivered to the Buyer a Letter of Status from the Companies Registration
Office in Dublin, Ireland.
(i) The Parent shall have delivered to the Buyer a certified copy of
the Articles of Incorporation of the Parent, and the Company shall have
delivered to the Buyer a certified copy of its Memorandum and Articles of
Association of the Company, in each case as certified by the Secretary of State
(or equivalent) in the applicable jurisdiction of incorporation within ten (10)
days of the Closing Date.
(j) The Parent shall have delivered to the Buyer a certificate,
executed by the Secretary of the Parent and the Company shall have delivered to
the Buyer a certificate, executed by a Director of the Company, in each case
dated as of the Closing Date, as to (i) the resolutions
-31-
consistent with Section 3(b) as adopted by such entity's board of directors in a
form reasonably acceptable to the Buyer, (ii) the Articles of Incorporation, as
in effect at the Closing, of each such entity and (iii) the Bylaws, as in effect
at the Closing, of each such entity in the form attached hereto as Exhibit G.
(k) The representations and warranties of the Company and the Parent
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
and the Parent shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
and/or the Parent, as applicable at or prior to the Closing Date.
(l) The Parent shall have delivered to the Buyer a letter from the
Parent's transfer agent certifying the number of shares of Common Shares
outstanding as of a date within five days of the Closing Date.
(m) The Common Shares (i) shall be designated for quotation or listed
on each of the Principal Markets and (ii) shall not have been suspended, as of
the Closing Date, by the SEC, the CSA or either of the Principal Markets from
trading on the Principal Markets nor shall suspension by the SEC, the CSA or
either of the Principal Markets have been threatened, as of the Closing Date,
either (A) in writing by the SEC, the CSA or either of the Principal Markets or
(B) by falling below the minimum listing maintenance requirements of either of
the Principal Markets.
(n) The Company and the Parent shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(o) There shall be no Indebtedness of the Parent or any of its
Subsidiaries other than Indebtedness which is pari passu with or subordinate to
the Notes and the Guarantees, as applicable, so long as such Indebtedness does
not provide at any time for the payment, prepayment, repayment, redemption,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until 91 days after the Maturity Date (as defined in the Notes)
or later; provided, that (I) the Company, the Parent or Vasogen, Corp. may incur
Indebtedness that is secured by assets purchased with the proceeds of such
Indebtedness, (II) the Parent, the Company or Vasogen, Corp. may incur purchase
money Indebtedness for the purpose of financing the acquisition of equipment to
be acquired or held by the Company, the Parent or Vasogen, Corp. in the ordinary
course of business, provided, that the principal amount of such Indebtedness
shall not materially exceed 80% of the cost of the property so acquired, and
(III) the Company, the Parent and/or Vasogen, Corp. may incur Indebtedness owed
to the Parent or any of its Subsidiaries.
(p) The approval of each of the Principal Markets for the issuance of
the Securities contemplated hereby and conditional listing of the Conversion
Shares and the Warrant Shares shall have been obtained.
-32-
(q) The Company and the Parent shall have delivered to the Buyer such
other documents relating to the transactions contemplated by this Agreement as
the Buyer or its counsel may reasonably request.
(r) The Company shall have obtained and delivered the Letter of Credit
pursuant to the terms of Section 4(q) hereof.
(s) The Company and the Parent shall have entered into one or more
security purchase agreements (the "Other Purchase Agreements") relating to the
sale and purchase of securities on substantially identical terms to this
Agreement, that provide for the aggregate sale (when combined with this
Agreement) of $40,000,000 in aggregate principal amount of Aggregate Notes and
Aggregate Warrants.
8. TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) Business Days from the date hereof due to the Company's, the Parent's or
the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 8 due to any breach of
a representation, warranty, covenant or agreement by the Company or the Parent,
the Company shall remain obligated to reimburse the non-breaching Buyer for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company, the Parent and Vasogen, Corp. have appointed CT
Corporation System, with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as their agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
-33-
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyer, the Parent, the Company,
Vasogen, Corp., their affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parent, the Company, Vasogen, Corp. or the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Parent, the Company, Vasogen, Corp. and the
holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on the Buyer and
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
the Buyer relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
-34-
If to the Company:
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Clare
Ireland
Telephone: 000-00-000-000
Facsimile: 353-1-886-9359
Attention: Mr. Xxxxx Xxxxxxx, Director
With a copy (for informational purposes only) to:
Vasogen Inc.
Vasogen, Corp.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer: xxxxxxxx@xxxxxxx.xxx;
and
Vice President, Corporate & Legal Affairs:
xxxxxxx@xxxxxxx.xxx;
and for purposes of the Note, the Controller:
xxxxx@xxxxxxx.xxx
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
-35-
If to the Parent or Vasogen, Corp.:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer; and
Vice President, Corporate & Legal Affairs
With a copy (for informational purposes only) to:
the Company
(at the address listed above)
Lang Xxxxxxxx LLP
(at the address listed above)
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
(at the address listed above)
If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
If to the Buyer, to its address and facsimile number set forth on the Buyer
Schedule, with copies to the Buyer's representatives as set forth on the Buyer
Schedule,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
-36-
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. None of the Company, the
Parent or Vasogen, Corp. shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate principal amount of Notes issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). The Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by the Buyer of the Notes and Warrants in private transactions in
accordance with the terms thereof, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Parent, the Company, Vasogen, Corp. and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5 and 9 shall survive the Closing.
(j) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars ("US Dollars"). All amounts
owing under this Agreement or any Transaction Document shall be paid in US
Dollars. All amounts denominated in other currencies shall be converted in the
US Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Indemnification. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's and the Parent's other obligations under
the Transaction Documents, the Company
-37-
and the Parent, jointly and severally, shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Securities (other than Persons
holding only Securities purchased in open market transactions) and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any material inaccuracy in any representation or warranty made by the Company,
the Parent or Vasogen, Corp. in the Transaction Documents or any inaccuracy in
any representation or warranty made by the Company, the Parent or Vasogen, Corp.
in the Transaction Documents that is qualified by materiality or Material
Adverse Effect, (b) any breach in any material respect of any covenant,
agreement or obligation of the Company, the Parent or Vasogen, Corp. contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company, the Parent or Vasogen,
Corp.) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of the Buyer or holder of the Securities as an investor in the Company or
the Parent pursuant to the transactions contemplated by the Transaction
Documents; provided, that indemnification pursuant to this clause (iii) shall
not be available to the extent arising primarily from the Buyer's fraud, gross
negligence or willful misconduct. To the extent that the foregoing undertaking
by the Company or the Parent may be unenforceable for any reason, the Company
and the Parent shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. The Buyer and each holder of the Securities (other than
Persons holding only Securities purchased in open market transactions) shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company, the Parent and Vasogen, Corp. recognize that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to
the Buyer. The Company, the Parent and Vasogen, Corp. therefore agree that the
Buyer shall be entitled to seek temporary and permanent injunctive relief in any
such case without the
-38-
necessity of proving actual damages and without posting a bond or other
security.
(o) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Buyer exercises a right, election, demand or
option under a Transaction Document and the Company, the Parent or Vasogen,
Corp. does not timely perform its related obligations within the periods therein
provided, then the Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, the Parent or Vasogen, Corp.,
as applicable, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
(p) Payment Set Aside. To the extent that the Company, the Parent or
Vasogen, Corp. makes a payment or payments to the Buyer or pursuant to any of
the other Transaction Documents or the Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
the Parent, Vasogen, Corp., a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, United States or
Canadian federal, state or provincial law, foreign law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Independent Nature of Xxxxx's Obligations and Rights. The
obligations of the Buyer under any Transaction Document are several and not
joint with the obligations of any Other Buyer, under the Other Purchase
Agreements, and the Buyer shall not be responsible in any way for the
performance of the obligations of any Other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by the Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.
(r) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against
the Company, the Parent or Vasogen, Corp. in any court in any jurisdiction it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(r) referred to as the "Judgment Currency") an
amount due in US Dollars under this Agreement,
-39-
the conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date: or
(2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section being
hereinafter referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(r)(i)(2) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company, the Parent or Vasogen, Corp.
under this provision shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of this
Agreement.
(s) Opinion to Transfer Agent. Assuming that the Buyer (i) is a
Qualified Institutional Buyer (as such term is defined in Rule 144A under the
1933 Act) (a "QIB") as of the date hereof, (ii) will offer and sell any Common
Shares the Buyer receives upon any conversion, amortization and/or redemption of
a Note (including, without limitation, pursuant to Section 3, 5, 8, 9 or 10 of
the Note) or any exercise of a warrant (including, without limitation, pursuant
to Section 1 of the Warrant) pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act (any such method of offer
and sale, an "Approved Method"), (iii) for purposes of an offer or sale under
Rule 904 under the 1933 Act, is not an affiliate (as such term is defined in
Rule 144 under the 1933 Act) (an "Affiliate") of the Parent as of the date
hereof and (iv) will promptly notify the Parent and the Company if the Buyer
ceases to be a QIB, chooses to offer or sell such Common Shares pursuant to a
method other than an Approved Method, or becomes an Affiliate of the Parent (any
such notice, a "Notice"), then the Parent will direct Xxxx, Xxxxx, Rifkind,
Xxxxxxx & Xxxxxxxx LLP to deliver a standing opinion to the transfer agent in
substantially the form attached to the Transfer Agent Instructions on the
Effectiveness Date. The Buyer covenants that it will comply with clause (iv)
above and represents and warrants that the assumptions set forth in clauses (i)
through (iii) above are true and correct with respect to the Buyer as of the
date hereof, and will continue to be true and correct with respect to the Buyer,
except as set forth in a Notice.
[Signature Page Follows]
-40-
IN WITNESS WHEREOF, the Buyer, the Company, the Parent and Vasogen,
Corp. have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
SIGNED, SEALED AND DELIVERED BY XXXXX
XXXXXXX AS A DEED FOR AND ON BEHALF OF
VASOGEN IRELAND LIMITED PURSUANT TO A POWER
OF ATTORNEY ----------------------------------
Signature of Witness:
----------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
Occupation:
--------------------------------------
[Signature Page to Securities Purchase Agreement]
VASOGEN INC.
By:
------------------------------------
Name:
Title:
VASOGEN, CORP.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
CASTLERIGG MASTER
INVESTMENTS LTD.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
BUYER SCHEDULE
(1) (2) (3) (4) (5) (6)
Aggregate
Principal Number of
Address and Amount of Warrant Legal Representative's Address
Buyer Facsimile Number Notes Shares Purchase Price and Facsimile Number
------------------------------------------------------------------------------------------------------------------------------------
Castlerigg Master c/o Sandell Asset Management Corp. $8,000,000 666,667 $8,000,000
Investments Ltd. 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Cem Hacioglu
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Curacao, Netherland
Antilles
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of Parent Guaranty
Exhibit D-2 Form of Subsidiary Guaranty
Exhibit E Form of DTC Brokerage Account Information Form
Exhibit F-1 Form of Outside Canadian Counsel Opinion
Exhibit F-2 Form of Outside Irish Counsel Opinion
Exhibit F-3 Form of Outside United States Counsel Opinion
Exhibit G Form of Secretary's Certificate
SCHEDULES
---------
Schedule 2(b) Accredited Investor Certificate
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(j) Rights Plan
Schedule 3(l) Absence of Certain Changes
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(aa) Tax Status
SCHEDULE 2B
ACCREDITED INVESTOR CERTIFICATE
The Purchaser certifies that it/he/she and any beneficial purchaser are each a
resident of Canada or is otherwise subject to the Securities Legislation of
Canada, and the Purchaser or the disclosed beneficial purchaser, as applicable,
is an "accredited investor" as defined in National Instrument 45-106 -
Prospectus and Registration Exemptions ("NI 45-106") and, as at the Closing, the
Purchaser or the beneficial purchaser, as applicable, qualifies as one of more
of the following and acknowledges that the Issuer is relying on this certificate
in determining to sell securities to the undersigned. (Please insert a checkmark
in the box beside each applicable paragraph)
"accredited investor" means
(a) a Canadian financial institution, or a Schedule III bank; |_|
(b) the Business Development Bank of Canada incorporated under |_|
the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or |_|
(b), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to
be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a |_|
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one
or both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
(e) an individual registered or formerly registered under the |_|
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any |_|
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a |_|
metropolitan community, school board, the Comite de gestion
de la taxe scolaire de l'ile de Montreal or an intermunicipal
management board in Quebec;
(h) any national, federal, state, provincial, territorial or |_|
municipal government of or in any foreign jurisdiction, or
any agency of that government;
(i) a pension fund that is regulated by either the Office of the |_|
Superintendent of Financial Institutions (Canada) or a
pension commission or similar regulatory authority of a
jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, |_|
beneficially owns, directly or indirectly, financial assets
having an aggregate realizable value that before taxes, but
net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 |_|
in each of the 2 most recent calendar years or whose net
income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who,
in either case, reasonably expects to exceed that net income
level in the current calendar year;
D-1
(l) an individual who, either alone or with a spouse, has net |_|
assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that |_|
has net assets of at least $5,000,000 as shown on its most
recently prepared financial statements;
(n) an investment fund that distributes or has distributed its |_|
securities only to
(i) a person that is or was an accredited investor at the
time of the distribution,
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(being that (I) the person purchases as principal, (II)
the security has an acquisition cost to the purchaser of
not less than $150,000 paid in cash at the time of the
trade, and (III) the trade is in the security of a
single issuer), and section 2.19 of NI 45-106 (being a
trade by an investment fund in a security of its own
issue to a security holder of the investment fund where
(I) the security holder initially acquired securities of
the investment fund as principal for an acquisition cost
of not less than $150,000 paid in cash at the time of
the trade, (II) the subsequent trade is for a security
of the same class or series as the initial trade, and
(III) the security holder, as at the date of the
subsequent trade, holds securities of the investment
fund that have an acquisition cost of not less than
$150,000 or a net asset value of not less than
$150,000); or
(iii) a person described in paragraph (i) or (ii) that
acquires or acquired securities under section 2.18 of
NI 45-106 [Investment fund reinvestment];
(o) an investment fund that distributes or has distributed |_|
securities under a prospectus in a jurisdiction of Canada for
which the regulator or, in Quebec, the securities regulatory
authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized |_|
to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of
Canada or a foreign jurisdiction, acting on behalf of a fully
managed account managed by the trust company or trust
corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed |_|
by that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction, and
(ii) in Ontario, is purchasing a security that is not a
security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, |_|
in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the
securities legislation of the jurisdiction of the registered
charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is |_|
analogous to any of the entities referred to in paragraphs
(a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, |X|
direct, indirect or beneficial, are persons that are
accredited investors;
(u) an investment fund that is advised by a person registered as |_|
an adviser or a person that is exempt from registration as an
adviser; or
D-2
(v) a person that is recognized or designated by the securities |_|
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia after
National Instrument 45-106 comes into force.
The following definitions are included for convenience only; reference
should be had to the applicable legislation:
(a) "director" means
(i) a member of the board of directors of a company or an individual
who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual
who performs functions similar to those of a director of a
company;
(b) "eligibility adviser" means
(i) a person that is registered as an investment dealer or in an
equivalent category of registration under the securities
legislation of the jurisdiction of a purchaser and authorized to
give advice with respect to the type of security being
distributed, and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a
jurisdiction of Canada or a public accountant who is a member
in good standing of an institute or association of chartered
accountants, certified general accountants or certified
management accountants in a jurisdiction of Canada provided
that the lawyer or public accountant must not
(a) have a professional, business or personal relationship with
the issuer, or any of its directors, executive officers,
founders, or control persons, and
(b) have acted for or been retained personally or otherwise as
an employee, executive officer, director, associate or
partner of a person that has acted for or been retained by
the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
(c) "entity" means a company, syndicate, partnership, trust or
unincorporated organization;
(d) "financial assets" means
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities
legislation;
(e) "fully managed account" means an account of a client for which a
person makes the investment decisions if that person has full
discretion to trade in securities for the account without requiring
the client's express consent to a transaction;
(f) "investment fund" has the same meaning as in National Instrument
81-106 Investment Fund Continuous Disclosure;
(g) "person" includes
(i) an individual,
(ii) a corporation,
(iii) a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether
incorporated or not, and
(iv) an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or other legal
representative;
D-3
(h) "related liabilities" means
(i) liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets;
(i) "spouse"means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the
other individual,
(ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between
individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or
(ii), or is an adult interdependent partner within the meaning
of the Adult Interdependent Relationships Act (Alberta); and
(j) "subsidiary" means an issuer that is controlled directly or
indirectly by another issuer and includes a subsidiary of that
subsidiary.
An issuer is an "affiliate" of another issuer if (i) one of them is the
subsidiary of the other, or (ii) each of them is controlled by the same person.
In National Instrument 45-106 a person (first person) is considered to
"control" another person (second person) if
(i) the first person, directly or indirectly, beneficially owns or
exercises control or direction over securities of the second person
carrying votes which, if exercised, would entitle the first person to
elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an obligation,
(ii) the second person is a partnership, other than a limited partnership,
and the first person holds more than 50% of the interests of the
partnership, or
(iii) the second person is a limited partnership and the general partner
of the limited partnership is the first person.
The foregoing representation, warranty and certificate is true and
accurate as of the date of this certificate and will be true and accurate as of
Closing. If any such representation, warranty or certificate shall not be true
and accurate prior to Closing, the undersigned shall give immediate written
notice of such fact to the Issuer.
Dated: ________________________________ Signed: /s/ Xxxx X. Xxxxxxx
-------------------------
CASTLERIGG MASTER INVESTMENT LTD.
_______________________________________ BY: XXXXXXX ASSET MANAGEMENT
CORP.
---------------------------------
Witness (If Purchaser is an Individual) Print the name of Purchaser
Xxxx X. Xxxxxxx
_______________________________________ Senior Managing Director
Print Name of Witness ---------------------------------
If Purchaser is a Corporation,
print name and title of
Authorized Signing Officer
D-4
Exhibit 1d
Securities Purchase Agreement - Capital Ventures International
(exhibits and schedules attached to Kings Road Investments Ltd.
Security Purchase Agreement omitted)
(see attached)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 7,
2005, by and among Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland, with headquarters located at Xxxxxxx Airport
House, Shannon, Co. Xxxxx, Ireland (the "Company"), Vasogen Inc., a Canadian
corporation, with headquarters located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx (the "Parent"), Vasogen, Corp., a Delaware
corporation, with its registered address at 0000 Xxxxx Xxxxxx Xxxxxx, X.X. Box
1347, Wilmington, County of Newcastle, Delaware 19801 ("Vasogen, Corp.") and the
investor listed on the Buyer Schedule attached hereto (the "Buyer").
WHEREAS:
A. The Company, the Parent, Vasogen, Corp. and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act.
B. The Company has authorized a new series of senior convertible notes of
the Company, which notes shall be convertible into the Parent's common shares
(the "Common Shares") in accordance with the terms of such notes.
C. The Company, the Parent and Vasogen, Corp. plan to enter into one or
more Other Purchase Agreements (as defined below) relating to the sale and
purchase of securities on substantially identical terms as contained in this
Agreement.
D. The Buyer wishes to purchase, and (i) the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (the
"Notes"), set forth opposite the Buyer's name in column (3) on the Buyer
Schedule (which amount when aggregated with all amounts of notes being purchased
by other buyers (the "Other Buyers") pursuant to the Other Purchase Agreements
(the "Other Notes" and together with the Notes, the "Aggregate Notes"), shall be
$40,000,000) (as converted, amortized and/or redeemed for Common Shares pursuant
to the terms of the Notes, collectively, the "Conversion Shares") and (ii) the
Parent wishes to issue, upon the terms and conditions stated in this Agreement,
warrants, in substantially the form attached hereto as Exhibit B (the "Initial
Warrants," and together with the Accelerated Payment Option Warrants (as defined
in the Notes), the "Warrants," and together with the warrants being purchased by
the Other Buyers (the "Other Warrants"), the "Aggregate Warrants"), to acquire
up to that number of additional shares of Common Shares set forth opposite the
Buyer's name in column (4) of the Buyer Schedule (as exercised, the "Initial
Warrant Shares," and together with the Common Shares issuable upon exercise of
the Accelerated Payment Option Warrants, the "Warrant Shares").
E. Contemporaneously with the execution and delivery of this Agreement,
certain of the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (as amended or
modified from time to time, the "Registration
Rights Agreement"), pursuant to which the Parent has agreed to provide certain
registration rights with respect to the Conversion Shares and the Initial
Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder.
F. The Notes, the Conversion Shares, the Warrants, the Warrant Shares and
the Guarantees (as defined in clause (G) below) collectively are referred to
herein as the "Securities".
G. The Notes will be (i) senior to all outstanding and future Indebtedness
(as defined herein) of the Company, (ii) guaranteed by the Parent pursuant to a
guarantee substantially in the form attached hereto as Exhibit D-1 (the "Parent
Guaranty") and (iii) guaranteed by Vasogen, Corp. pursuant to a guarantee
substantially in the form attached hereto as Exhibit D-2 (the "Subsidiary
Guaranty," and together with the Parent Guaranty, the "Guarantees").
NOW, THEREFORE, the Company, the Parent, Vasogen, Corp. and the Buyer
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Subject to the satisfaction (or waiver by the party entitled to
so waive) of the conditions set forth in Sections 6 and 7 below, on the Closing
Date (as defined below), (A) the Company shall issue and sell to the Buyer, and
the Buyer agrees to purchase from the Company, one or more Notes with an
aggregate principal amount as is set forth opposite the Buyer's name in column
(3) on the Buyer Schedule and (B) the Parent shall issue and sell to the Buyer
one or more Initial Warrants to acquire up to that number of Warrant Shares as
is set forth opposite the Buyer's name in column (4) on the Buyer Schedule (the
"Closing").
(ii) Purchase Price. The aggregate purchase price for the Buyer of
the Notes and the Warrants to be purchased by the Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite the Buyer's name in
column (5) of the Buyer Schedule. The purchase price for the Warrants shall be
deemed to be $0.01 per Warrant.
(b) Closing Date. The date and time of the Closing (the "Closing Date")
shall be 8:00 a.m., New York Time, on the date hereof after notification of
satisfaction (or waiver by the party entitled to so waive) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and the Buyer) at the offices of Xxxxxxx Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) Form of Payment. On the Closing Date, the Buyer shall pay its
Purchase Price to the Company or, at the written direction of the Company
delivered to the Buyer at least one (1) Business Day prior to the Closing Date
and substantially in the form attached hereto as Annex 1(c), to its designee for
the Notes to be issued and sold to the Buyer at such Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions and the Parent shall issue the Initial Warrants to the Buyer. At
the Closing, (A) the Company shall deliver to the Buyer the Notes (allocated in
the principal amounts as the Buyer shall request) that the Buyer is then
purchasing and (B) the Parent shall deliver to the Buyer the
-2-
Initial Warrants (allocated in the amounts as the Buyer shall request) that the
Buyer is purchasing, in each case duly executed on behalf of the Company or the
Parent, as applicable, and registered in the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) No Public Sale or Distribution. The Buyer is acquiring the Notes
and the Warrants and upon conversion, amortization and/or redemption of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable
upon conversion, amortization and/or redemption of the Notes and the Warrant
Shares issuable upon exercise of the Warrants for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act or
qualified for public distribution or exempted under the securities legislation
and regulations and regulations of, and the instruments, policies, rules,
orders, codes, notices and published interpretation notes of, the securities
regulatory authorities of the provinces and territories of Canada (the "Canadian
Securities Laws"), as applicable; provided, however, that by making the
representations herein, subject to compliance with Canadian Securities Laws, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and in accordance with Canadian Securities Laws. The Buyer is
acquiring the Securities hereunder in the ordinary course of its business. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities, and the Buyer
has not solicited offers for, or offered or sold, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(b) Accredited Investor Status. The Buyer is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D. The Buyer is also an "accredited investor" as that term is defined
in the National Instrument 45-106, Prospectus and Registration Exemptions. The
Buyer has executed the Accredited Investor Certificate attached hereto as
Schedule 2(b) as of the date hereof, and such certificate is true and correct as
of the date hereof.
(c) Reliance on Exemptions. The Buyer understands and acknowledges that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and Canadian Securities Laws applicable in Ontario and that the
Company and the Parent are relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and the Parent and
-3-
materials relating to the offer and sale of the Securities that have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and the Parent. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's and the Parent's representations and
warranties contained herein. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
or Canadian federal, state or provincial commission or agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such commissions or agencies passed upon or endorsed
the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that, except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws or
qualified under Canadian Securities Laws; (ii) the Buyer agrees that if it
decides to offer, sell or otherwise transfer any of the Notes, Conversion
Shares, Warrants or Warrant Shares, such Notes, Conversion Shares, Warrants and
Warrant Shares may be offered, sold or otherwise transferred only: (A) pursuant
to an effective registration statement under the 1933 Act, subject to compliance
with Canadian Securities Laws, (B) to the Company (in the case of the Notes) or
the Parent (in the case of the Warrants, the Conversion Shares and the Warrant
Shares); (C) outside the United States in accordance with Rule 904 of Regulation
S under the 1933 Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the 1933 Act
provided by Rule 144 or Rule 144A thereunder, if available, and in compliance
with any applicable state securities laws or (2) in a transaction that does not
require registration under the 1933 Act or applicable state securities laws, and
the seller has provided the Company and the Parent with reasonable assurance,
prior to such offer, sale or transfer, that such Securities may be so offered,
sold or transferred in a transaction that does not require registration under
the 1933 Act or applicable state securities laws; and (iii) any sale or transfer
of the Securities to a purchaser or transferee whose address is in Canada or who
is a resident of Canada is prohibited unless it is made in compliance with
applicable Canadian Securities Laws.
(g) Legends. The Buyer understands that the certificates or other
instruments representing the Notes and Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, and subject to Section 9(s), the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "Blue Sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE]
-4-
[EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT; (B) TO THE COMPANY, (C) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT AND
IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN
ACCORDANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (2) IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND THE
HOLDER HAS PROVIDED THE COMPANY, PRIOR TO
SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES
MAY BE SO OFFERED, SOLD OR TRANSFERRED IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Subject to Section 9(s), the legend set forth above shall be removed and the
Company or the Parent, as applicable, shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with reasonable assurance that
the sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act, (iii) if the
Company or the Parent is a "foreign issuer," within the meaning of Regulation S
under the 1933 Act and the Securities are being sold pursuant to Rule 904 of
Regulation S, such legend may be removed by providing a declaration to the
Company or the Parent, as applicable, that such shares may be sold pursuant to
Rule 904 of Regulation S or (iv) such holder provides the Company or the Parent,
as applicable, with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Canadian Legends. The Buyer understands that the certificates or
other instruments representing Warrants and, if the Notes are converted or the
Warrants are exercised prior to February 8, 2006, the share certificates
representing the Conversion Shares and the Warrant Shares, shall bear a legend
set forth below:
-5-
"UNLESS PERMITTED UNDER CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THESE SECURITIES
SHALL NOT TRADE THE SECURITIES IN CANADA
BEFORE FEBRUARY 8, 2006."
The legend set forth above shall be removed and the Parent shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped at anytime on or after February 8, 2006, if such Securities are
qualified for distribution by prospectus under applicable Canadian Securities
Laws or if in connection with a proposed trade the holder provides the Parent
with reasonable assurance that the Securities are no longer subject to a hold
period under such laws.
(i) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and shall constitute the legal, valid and binding
obligations of the Buyer enforceable against the Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(j) No Conflicts. The execution, delivery and performance by the Buyer
of this Agreement and the Registration Rights Agreement and the consummation by
the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party or by which it is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations hereunder.
(k) Residency. The Buyer is a resident of that jurisdiction specified
below its address on the Buyer Schedule.
(l) Certain Trading Activities. Neither the Buyer nor any of the
Buyer's affiliates that it exercises investment discretion over or to which it
has provided knowledge of the transactions contemplated by the Transaction
Documents has, directly or indirectly, and no Person acting on behalf of the
Buyer or its affiliates has directly or indirectly, engaged in any transactions
in the securities of the Parent or the Company (including, without limitation,
any Short Sales involving the Parent's securities) since the time that the Buyer
was first contacted by the Parent, a placement agent or any other Person with
respect to the transactions contemplated hereby. "Short Sales" include, without
limitation, all "short sales" as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers. The
Buyer covenants that neither it, nor any of its affiliates that it exercises
investment discretion over or to which it has provided knowledge of the
transactions contemplated by the Transaction Documents, nor any Person acting on
behalf of the
-6-
Buyer or any of its affiliates that it exercises investment discretion over or
to which it has provided knowledge of the transactions contemplated by the
Transaction Documents will engage in any transactions in the securities of the
Parent or the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed.
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.
(m) No Irish Public Offering. The Buyer has not offered or sold, and it
will not offer or sell, any Notes in Ireland in circumstances which would
constitute an offer to the public within the meaning of Irish Prospectus Law (as
defined below) or an invitation to the public (as referred to in Section 33 of
the Companies Act, 1963) to subscribe for the Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT.
Each of the Company, the Parent and Vasogen, Corp. jointly and
severally represents and warrants to the Buyer as of the date hereof as follows:
(a) Organization and Qualification. The Parent is up to date in all
filings under the Canada Business Corporations Act (the "CBCA"). The Parent and
the Parent's "Subsidiaries" (which for purposes of this Agreement means the
Company, Vasogen, Corp. and any entity in which the Parent, directly or
indirectly, owns 50% or more of the outstanding capital stock or holds an equity
or similar interest representing 50% or more of the outstanding equity or
similar interest of such entity) are entities duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which they are formed. The Parent and its Subsidiaries have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Parent and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing (if applicable) in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Vasogen, Corp. is not qualified as a foreign entity to do business in any state
and there is no jurisdiction in which Vasogen, Corp., by virtue of its ownership
of property or the nature of the business conducted by it, makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Parent, the Company or
Vasogen, Corp. to perform its obligations under the Transaction Documents (as
defined below). None of the Parent, the Company or Vasogen, Corp. holds any
equity or similar interest in any entity except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Xxxxxxxx. Each of the Parent and its
-7-
Subsidiaries has the requisite power and authority, to the extent it is a party
thereto or bound thereby, to enter into and perform its obligations under this
Agreement, the Notes, the Guarantees, the Registration Rights Agreement, the
Treasury Instructions (as defined in Section 5(b)), the Warrants and each of the
other agreements entered into by the applicable parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the
"Transaction Documents") and to issue their respective Securities in accordance
with the terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Parent, the Company and Vasogen, Corp. and the consummation by
the Parent, the Company and Vasogen, Corp. of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Notes,
the Warrants and the Guarantees, the reservation for issuance and the issuance
of the Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the reservation for issuance and issuance of Warrant
Shares issuable upon exercise of the Warrants have been duly authorized by the
board of directors (or similar governing body) of the Parent, the Company and
Vasogen, Corp., as applicable, and, other than (i) the filing with the SEC of
one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, (ii) the filing of a Form D with respect to the
Notes, the Warrants and the Guarantees, as required under Regulation D and (iii)
such filings required under applicable securities or "Blue Sky" laws of the
states of the United States and applicable Canadian Securities Laws and
applicable requirements of the TSX (all of the foregoing, the "Required
Approvals"), no further filing, consent, or authorization is required by the
Company, the Parent, Vasogen, Corp. or any of their boards of directors and/or
shareholders. This Agreement and the other Transaction Documents to which they
are a party have been duly executed and delivered by the Parent, the Company and
Vasogen, Corp., as applicable, and constitute the legal, valid and binding
obligations of the Parent, the Company and Vasogen, Corp., as applicable,
enforceable against the Parent, the Company and Vasogen, Corp., as applicable,
in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies and to the extent that rights to indemnity may be limited by applicable
law, including the indemnification and contribution provisions of the
Registration Rights Agreement.
(c) Issuance of Securities. The Notes, the Warrants and the Guarantees
are free from all taxes (other than a stamp duty charge of 0.15 Euro on the
issuance of each of the Notes, that will be paid by the Company), liens and
charges with respect to the issue thereof. As of the Closing, a number of shares
of Common Shares shall have been duly authorized and reserved for issuance which
equals or exceeds the maximum number of Common Shares: (i) issuable upon
conversion, amortization and/or redemption for Common Shares of the Notes and
(ii) issuable upon exercise of the Warrants. Upon issuance or conversion,
amortization and/or redemption in accordance with the terms of the Notes or
exercise in accordance with the terms of the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Shares. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Parent, the Company and Vasogen,
Corp. of the Securities is exempt from registration under the 1933 Act and from
the prospectus and registration requirements of applicable Canadian
-8-
Securities Laws. The Company has not offered or sold, and it will not offer,
sell or transfer the Notes in violation of Irish Securities Laws or in
circumstances that would constitute an offer to the public within the meaning of
Irish Prospectus Law or an invitation to the public (as referred to in Section
33 of the Companies Act, 1963) to subscribe for the Notes and nothing herein
contained shall be construed as constituting an offer of Notes to the public
within the meaning of Irish Prospectus Law or an "invitation to the public" (as
referred to in Section 33 of the Companies Act, 1963) to subscribe for the
Notes. As used herein, "Irish Prospectus Law" has the meaning set out in the
Investment Funds, Companies and Miscellaneous Provisions Act, 2005 and "Irish
Securities Laws" means Irish Prospectus Law, the Irish Companies Acts, 1963 to
2005, the Central Bank Acts, 1942-1999, the Investment Intermediaries Act, 1995
(as amended) and any regulations made thereunder (as each of these may be
amended or supplemented from time to time).
(d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Parent, the Company
and Vasogen, Corp. and the consummation by the Parent, the Company and Vasogen,
Corp. of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants and the Guarantees and
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation, any
capital stock of the Parent or any of its Subsidiaries, the Bylaws or any of the
organizational documents of the Parent or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Parent or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws or Canadian
Securities Laws and regulations and the rules and regulations (A) of the Toronto
Stock Exchange (the "TSX") and (B) either of Nasdaq National Market ("Nasdaq")
or The Nasdaq Small Cap Market ((A) and (B) collectively, the "Principal
Markets" and each individually, a "Principal Market")) applicable to the Parent
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, except in the case of clauses (ii)
and (iii) above, any breach or default that would not have a Material Adverse
Effect.
(e) Consents. Except as set forth on Schedule 3(e), none of the Parent
nor any of its Subsidiaries is required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof, except for the following consents, authorizations,
orders, filings and registrations (none of which is required to be filed or
obtained before the Closing): (i) the filing by the Parent of a listing
application and a notice for acceptance of a private placement for the
Conversion Shares and Warrant Shares with the Principal Markets, which shall be
done pursuant to the rules of the Principal Markets, (ii) as may be required
under the 1933 Act, the "Blue Sky" laws of various states or the rules and
regulations thereunder in connection with the transactions contemplated by the
Registration Rights Agreement and (iii) any notices or filings required to be
given or made with TSX and Nasdaq, which have been or will be given or made on a
timely basis by the Parent. The Parent and its Subsidiaries are unaware of any
facts or circumstances that might prevent the
-9-
Parent from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence. The Parent is not in violation of
the listing requirements of either of the Principal Markets and has no knowledge
of any facts that would reasonably lead to delisting or suspension of the Common
Shares in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Each of
the Parent, the Company and Vasogen, Corp. acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is not (i) an officer or director of the Parent or
the Company, (ii) to the knowledge of each of the Parent and its Subsidiaries,
an "affiliate" of the Parent or any of its Subsidiaries (as defined in Rule 144
under the 1933 Act) or (iii) to the knowledge of each of the Parent and its
Subsidiaries, a "beneficial owner" of more than 10% of the shares of Common
Shares (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")). Each of the Parent, the Company and Vasogen,
Corp. further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Parent or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. Each of the Parent, the Company and Vasogen, Corp.
further represents to the Buyer that the Parent's, the Company's and Vasogen,
Corp.'s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by each of them and their representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Parent
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(including any within the meaning of Regulation D) in connection with the offer
or sale of the Securities in the United States or elsewhere or to any United
States citizen or resident. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by the Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it has
engaged XX Xxxxx & Co., LLC as placement agent (the "Agent") and any co-agents
that the Agent may engage pursuant to the Engagement Letter dated as of June 24,
2005 by and between the Agent and the Parent in connection with the sale of the
Securities. Other than the Agent, and the co-agents referred to above, if
applicable, neither the Parent nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Parent, its Subsidiaries, any
of their affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Parent or any of its Subsidiaries for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on
-10-
which any of the securities of the Parent are listed or designated. None of the
Parent, its Subsidiaries, their affiliates or any Person acting on their behalf
will take any action or steps referred to in the preceding sentence that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Parent understands and acknowledges that the
number of Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Parent further acknowledges
that its obligation to issue Conversion Shares upon conversion, amortization
and/or redemption of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Transaction Documents and the Warrants is, in
each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Parent.
(j) Application of Takeover Protections; Rights Agreement. The Parent
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's Articles of Incorporation which is or
could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Parent's or
any of its Subsidiaries' issuance of the Securities and the Buyer's ownership of
the Securities. Except as set forth on Schedule 3(j), the Parent has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Shares or a change in control of the Company.
(k) SEC-CSA Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC and the
Canadian Securities Administrators (the "CSA") pursuant to the reporting
requirements of the 1934 Act and the Canadian Securities Laws (all of the
foregoing filed during the two-year period prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC-CSA Documents"). The Parent has delivered to the Buyer or their
respective representatives true, correct and complete copies of the SEC-CSA
Documents not available on the XXXXX and SEDAR systems, if any. As of their
respective dates, the SEC-CSA Documents complied in all material respects with
the requirements of the 1934 Act and the Canadian Securities Laws and the rules
and regulations of the SEC and the CSA promulgated thereunder applicable to the
SEC-CSA Documents, and none of the SEC-CSA Documents, at the time they were
filed with the SEC or the CSA as applicable, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Parent included in the SEC-CSA Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and the CSA with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles in Canada, consistently applied, during
the periods involved (except (i) as may be otherwise
-11-
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Parent as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
(l) Absence of Certain Changes. Since November 30, 2004, there has been
no undisclosed material adverse change and no undisclosed material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole. Except as disclosed in Schedule 3(l), since
November 30, 2004, neither the Parent nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $500,000 outside of the ordinary course of business or
(iii) had capital expenditures outside of the ordinary course of business,
individually or in the aggregate, in excess of $500,000. Neither the Parent nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Parent, the Company or Vasogen, Corp. have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Except as disclosed in Schedule 3(l), the Parent,
individually, and the Parent and its respective Subsidiaries, taken as a whole,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), "Insolvent" means, with respect to
any Person (as defined in Section 3(s)), (i) the present fair saleable value of
such Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature, (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted or (v) such Person is "unable to pay its debts"
(as such term is defined in Section 214 of the Irish Companies Act, 1963 (as
amended by Section 2(3) of the Companies (Amendment) Act, 1990)).
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur with respect to the Parent or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Shares on the date
hereof and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Parent nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or their organizational charter or certificate of
incorporation or Bylaws, respectively. Neither the Parent nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Parent or its Subsidiaries,
except for which an acceptance or consent has been obtained, and neither the
Parent nor any of its Subsidiaries will conduct its business in violation of any
of the foregoing, except for possible
-12-
violations that would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Parent is
not in violation of any of the rules, regulations or requirements of either of
the Principal Markets and has no knowledge of any facts or circumstances that
would reasonably be expected to lead to delisting or suspension of the Common
Shares by either of the Principal Markets in the foreseeable future. Since
December 17, 2003, (i) the Common Shares have been designated for quotation on
the Principal Markets, (ii) trading in the Common Shares has not been suspended
by the SEC, the CSA or either of the Principal Markets and (iii) the Parent has
received no communication, written or oral, from the SEC, the CSA or either of
the Principal Markets regarding the suspension or delisting of the Common Shares
from the Principal Markets. The Parent and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Parent nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit. The Parent is a reporting issuer not in default of any requirements
under the applicable Canadian Securities Laws and eligible to use the Short Form
Prospectus System, established under National Instrument 44-101 of the CSA (the
"POP System").
(o) Foreign Corrupt Practices. Neither the Parent, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Parent or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Parent or any of its Subsidiaries (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Parent is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC-CSA
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Parent or any of its Subsidiaries is presently a
party to any transaction with the Parent or any of its Subsidiaries (other than
for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Parent or any of its Subsidiaries, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
-13-
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Parent consists of unlimited Common Shares, of which as of the
date hereof, 81,481,250 Common Shares are issued and outstanding, 3,997,631
Common Shares are issuable upon the exercise of options outstanding granted
under the Parent's stock option plans, 985,237 Common Shares are issuable upon
the exercise of warrants (other than the Aggregate Warrants) outstanding, 72,856
Common Shares are issuable upon the exercise of deferred share units outstanding
granted under the Parent's directors' deferred share unit and stock plan,
2,843,925 Common Shares are reserved for issuance under the Parent's stock
option plans, 177,144 Common Shares are reserved for issuance under the Parent's
directors' deferred share unit and no Common Shares are reserved for issuance
pursuant to securities (other than the Aggregate Notes and the Aggregate
Warrants) exercisable or exchangeable for, or convertible into, Common Shares.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(r): (i) none of the Parent's share capital is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Parent and (ii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities. Except as set forth in the SEC-CSA Documents or as disclosed in
Schedule 3(r), and other than the Aggregate Notes and the Aggregate Warrants:
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any kind whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Parent or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Parent or any of its Subsidiaries is or may become
bound to issue additional share capital of the Parent or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Parent or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 3(s)) of the Parent or any of its
Subsidiaries or by which the Parent or any of its Subsidiaries is or may become
bound; (iii) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Parent or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which the Parent or any of its Subsidiaries is obligated to
register or qualify the sale of any of their securities under the 1933 Act or
under any applicable Canadian Securities Laws; (v) there are no outstanding
securities or instruments of the Parent or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Parent or any of its Subsidiaries is
or may become bound to redeem a security of the Parent or any of its
Subsidiaries; (vi) the Parent does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (vii)
the Parent and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC-CSA Documents but not so disclosed in the SEC-CSA
Documents, other than those incurred in the ordinary course of the Parent's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or could not reasonably be expected to have a Material Adverse
Effect. The Parent has made available to the Buyer true, correct and complete
copies of the Parent's and its Subsidiaries' Articles of Incorporation or other
organizational documents, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Parent's and its Subsidiaries' bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and
-14-
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Shares and the material rights of the holders thereof in
respect thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Parent nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Parent's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables and related accrued liabilities entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; references to Indebtedness of the
Parent or the Company shall mean Indebtedness on a consolidated basis; (y)
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by either of
the Principal Markets, any
-15-
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Parent or any of its Subsidiaries,
threatened against or affecting the Parent or any of its Subsidiaries, the
Common Shares or any of the Parent's or its Subsidiaries' officers or directors
in their capacity as such which, individually or in the aggregate, if determined
adversely to the Parent or any of its Subsidiaries, could reasonably be expected
to have a Material Adverse Effect.
(u) Insurance. The Parent and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Parent believes to be prudent and
customary in the businesses in which the Parent and its Subsidiaries are
engaged. Neither the Parent nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to insure its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or union
contract. The Parent and its Subsidiaries believe that their relations with
their employees are good. No executive officer of the Parent or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Parent
or any such Subsidiary that such officer intends to leave the Parent or any such
Subsidiary or otherwise terminate such officer's employment with the Parent or
any such Subsidiary. To the knowledge of the Parent and its Subsidiaries, no
executive officer of the Parent or any of its Subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Parent or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Parent and its Subsidiaries are in compliance with all
United States and Canadian federal, state, provincial, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Parent and its Subsidiaries have good and marketable
title to all real property and good and valid title to all personal property
owned by them which is material to the business of the Parent and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Parent and any of its Subsidiaries or as could not reasonably be expected to
have a Material Adverse Effect. Any real property and facilities held under
lease by the Parent or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made and proposed to be made of such property and buildings by the
Parent and its Subsidiaries or as could not reasonably be expected to have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Parent and its Subsidiaries own
or have licenses to use all trademarks, service marks and all applications and
registrations therefor, trade
-16-
names, patents, patent rights, copyrights, original works of authorship,
inventions, formulas, trade secrets, licenses, approvals, governmental
authorizations and other intellectual property rights necessary to conduct their
respective businesses as now conducted ("Intellectual Property Rights"). Except
as set forth in Schedule 3(x), none of the Parent's or its Subsidiaries'
Intellectual Property Rights have expired, terminated or have been abandoned, or
are expected to expire, terminate or be abandoned, within three years from the
date of this Agreement. Neither the Parent nor any of its Subsidiaries has any
knowledge of any infringement by the Parent or any of its Subsidiaries of
Intellectual Property Rights of others, which infringement could reasonably be
expected to have a Material Adverse Effect. There is no claim, action or
proceeding being made or brought, or to the knowledge of the Parent or its
Subsidiaries, being threatened against the Parent or any of its Subsidiaries
regarding any of their Intellectual Property Rights. Neither the Parent nor the
Company is aware of any facts or circumstances which might reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings. The Parent and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights, except for public disclosure in the U.S. Patent
and Trademark Office (and foreign equivalents).
(y) Environmental Laws. The Parent and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all United States, Irish and Canadian federal, state, provincial, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Parent
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Parent or such
Subsidiary.
(aa) Tax Status. Except as set forth in Schedule 3(aa), the Parent and
each of its Subsidiaries (i) has made or filed all material foreign, United
States and Canadian federal, state and provincial income and all other material
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
-17-
material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the officers of the Parent nor the officers of its Subsidiaries know
of any reasonable basis for any such claim.
(bb) Internal Accounting and Disclosure Controls. The Parent and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Parent maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Parent in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Parent in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Parent's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Parent and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Parent in
its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Ranking of Notes. No Indebtedness of the Company is senior to the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise. No
Indebtedness of the Parent is senior to the Parent Guaranty whether with respect
of payment of redemptions, interest, damages or upon liquidation or dissolution
or otherwise. No Indebtedness of Vasogen, Corp. is senior to the Subsidiary
Guaranty whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
(ee) Shares Freely Tradeable. The Conversion Shares and the Initial
Warrant Shares will be freely tradeable under applicable Canadian laws on the
TSX from and after February 8, 2006, other than restrictions applicable in the
context of a "control distribution" as defined for the purposes of Canadian
Securities Laws.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the Buyer
hereunder will be, or will have been, fully paid or provided for by the Company
and/or the Parent (as the case may be), and all laws imposing such taxes will be
or will have been complied with.
-18-
(gg) Manipulation of Price. Neither the Parent nor the Company has, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Parent to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Parent.
(hh) Canadian Prospectus. The Parent (i) is qualified pursuant to
National Instrument 44-102, Alternative Forms of Prospectus ("NI44-102"), to
file a base shelf prospectus, and (ii) is entitled to include in such a
prospectus all of the Registrable Securities (as defined in the Registration
Rights Agreement).
(ii) Disclosure. Each of the Parent, the Company and Vasogen, Corp.
confirms that neither it nor any other Person acting on its behalf has provided
the Buyer or its agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. Each
of the Parent, the Company and Vasogen, Corp. understands and confirms that the
Buyer will rely on the foregoing representations in effecting transactions in
the Securities. All disclosure provided to the Buyer regarding the Parent and
its Subsidiaries, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Parent or its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Parent or its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Parent or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Parent but which
has not been so publicly announced or disclosed.
(jj) Vasogen, Corp. Vasogen, Corp. is not a party to any contract or
agreement material to the Parent and Vasogen, Corp., taken as a whole or
material to the Parent and its Subsidiaries, taken as a whole.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company and the Parent each agree to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company and
the Parent each shall, on or before the Closing Date, take such action as such
party shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Buyer at the Closing
-19-
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyer on or prior
to the Closing Date. Each of the Company and the Parent shall make all filings
and reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States and
the applicable Canadian Securities Laws and applicable requirements of the TSX
following each such Closing Date.
(c) Reporting Status. Until the date on which the Buyer shall have sold
at least 90% of the Conversion Shares and Warrant Shares and none of the Notes
or Warrants is outstanding (the "Reporting Period"), the Parent shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
the CSA under applicable Canadian Securities Laws, and the Parent shall continue
to timely file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise no longer require such filings and will
remain in good standing under Canadian Securities Law and eligible to use the
POP System. The Buyer shall promptly notify the Parent of the occurrence of the
events causing the cessation of the Parent's obligations hereunder.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Notes and Initial Warrants for the repayment of intercompany debt to Parent
previously incurred for purposes of research and development activities and for
future research and development activities by the Company and/or the Parent as
well as for general corporate purposes. The Company will not use the proceeds
from the sale of the Notes and Initial Warrants for the (i) repayment of any
other outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Parent agrees to send the following to
the Buyer during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 40-F or Form 20-F, any Current Reports on Form 6-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information
made available or given to the shareholders of the Parent generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used herein "Business Day" means any day other than a Saturday,
Sunday, or other day on which commercial banks in New York City are authorized
or required by law to remain closed.
(f) Listing. The Parent shall promptly secure the listing of all of the
Conversion Shares and Initial Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Notes and the Warrants. The Parent shall maintain the
Common Shares' listing or authorization for quotation on each of the Principal
Markets. Neither the Parent nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Shares on either of the Principal Markets; provided, however, that
the Parent makes no covenant regarding the trading price of the Common Shares.
The Parent shall pay all fees and expenses in connection
-20-
with satisfying its obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company shall
pay an expense allowance to Kings Road Investments Ltd. (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to the Buyer prior to
the date of this Agreement) to cover expenses reasonably incurred by Kings Road
Investments Ltd. or any professionals engaged by Kings Road Investments Ltd. in
relation to due diligence and investment documentation, in an amount not to
exceed $70,000 (in addition to any other expense amounts paid to the Buyer prior
to the date of this Agreement), which amount shall be withheld by Kings Road
Investments Ltd. from its Purchase Price at the Closing in satisfaction of the
Company's payment obligation. The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions
(other than for Persons engaged by the Buyer) relating to or arising out of the
transactions contemplated hereby, including, without limitation, any fees or
commissions payable to the Agent. The Company shall pay, and hold the Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and neither the Buyer nor its successor or assign thereof
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Buyer.
(i) Disclosure of Transactions and Other Material Information. On the
first Business Day following the date of this Agreement, the Parent shall file a
Current Report on Form 6-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (but excluding all schedules to this Agreement, assuming no material
non-public information is contained in such schedules), the form of each of the
Notes, the Warrants, the Registration Rights Agreement and the Guarantees) as
exhibits to such filing (including all attachments, the "6-K Filing") and a
material change report on Form 51-102F3 in accordance with National Instrument
51-102 of the CSA with respect thereto (the "Material Change Report"). Upon the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA, the Buyer shall not be in possession of any material, nonpublic information
received from the Parent or any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing and the Material Change Report. The Parent shall not, and shall cause
each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Buyer with any material, nonpublic
information regarding the Parent or any of its Subsidiaries from and after the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA without the express written
-21-
consent of the Buyer. If, after the deadline for the 6-K Filing set forth above,
the Buyer has, or reasonably believes it has, received any such material,
nonpublic information regarding the Parent or any of its Subsidiaries, it shall
provide the Parent with written notice thereof. The Parent shall, within five
(5) Trading Days of receipt of such notice except pursuant to Allowable Grace
Periods under the Registration Rights Agreement, make public disclosure of such
material, nonpublic information. In the event of a breach of the foregoing
covenant by the Parent, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Parent, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Buyer shall not have
any liability to the Parent, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Parent nor the Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, that the Parent shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 6-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Buyer shall be consulted by the Parent in connection with any such press release
or other public disclosure prior to its release). Without the prior written
consent of the Buyer, which shall be deemed to have been received in respect of
the filing of the Transaction Documents with the 6-K Filing and the filing of
the Material Change Report, neither the Parent nor any of its Subsidiaries shall
disclose the name of the Buyer in any filing, announcement, release or otherwise
other than in a prospectus for the resale of the Conversion Shares, to which
consent is deemed given hereby or as otherwise required by law to specifically
name the Buyer.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, neither the Company nor the Parent shall, directly or
indirectly, redeem, repurchase, or otherwise acquire for value or declare or pay
any dividend or distribution on, the Common Shares without the prior express
written consent of the holders of Notes representing not less than a majority of
the aggregate principal amount of the then outstanding Notes. Notwithstanding
the foregoing, nothing herein shall prevent the Company or the Parent from
satisfying its obligations under the Aggregate Notes and the Aggregate Warrants.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long
as the Buyer or any Other Buyer beneficially owns any Notes or Other Notes, as
applicable, the Company shall not issue any Notes or Other Notes other than to
the Buyers as contemplated by this Agreement or the Other Purchase Agreements,
as applicable, and neither the Company nor the Parent shall issue any other
securities that would cause a breach or default under the Notes or Other Notes,
as applicable, while such Notes or Other Notes are outstanding. Until the
earlier of three (3) years from the Closing and the date the Buyer or any Other
Buyer no longer beneficially own any Securities, neither the Company nor the
Parent shall, in any manner, issue or sell any rights, warrants or options
(other than the Aggregate Notes and Aggregate Warrants) (i) to subscribe for or
purchase Common Shares or (ii) which are directly or indirectly convertible into
or exchangeable or exercisable for Common Shares, in each of cases (i) and (ii),
at a price which varies or may vary with the market price of the Common Shares,
including by
-22-
way of one or more reset(s) to any fixed price unless the conversion, exchange
or exercise price of any such security cannot be less than the then applicable
Conversion Price. Until the Effectiveness Date (as defined in the Registration
Rights Agreement), neither the Company nor the Parent shall, in any manner,
enter into or effect any Dilutive Issuance (as defined in the Notes).
(l) Corporate Existence. So long as the Buyer beneficially owns any
Notes or Warrants, neither the Company nor the Parent shall be party to any
Fundamental Transaction (as defined in the Notes) unless the Company and the
Parent, as applicable, is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Parent shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the Closing Date, the maximum number of shares of Common Shares issuable upon
conversion, amortization and/or redemption of all of the Notes and shares of
Common Shares issuable upon exercise of the Warrants.
(n) Conduct of Business. The business of the Company, the Parent and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than the Aggregate Notes, Aggregate Warrants or Options)
convertible into or exercisable or exchangeable for shares of Common
Shares.
(2) "Options" means any rights, warrants (other than the
Aggregate Warrants) or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.
(3) "Common Share Equivalents" means, collectively, Options and
Convertible Securities.
(ii) As long as 15% of the original principal amount of the Notes
issued at the Closing are outstanding, from the Closing Date until the eighteen
month anniversary of the Closing Date, the Parent will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Shares or Common Share Equivalents (any such offer, sale,
-23-
grant, disposition or announcement being referred to as a "Subsequent
Placement") unless the Parent shall have first complied with this Section
4(o)(ii).
(1) The Parent shall deliver to the Buyer by facsimile a written
notice (the "Offer Notice") of any proposed or intended issuance or sale
or exchange (the "Offer") of the securities being offered (the "Offered
Securities") in a Subsequent Placement within one Business Day of the
determination of the terms of such Subsequent Placement, which Offer
Notice shall (x) identify and describe the Offered Securities, (y)
describe the price range and other terms upon which they are expected to
be issued, sold or exchanged, and the number or amount of the Offered
Securities expected to be issued, sold or exchanged and (z) offer to
issue and sell to or exchange with the Buyer (which offer being
non-transferable to any successor to or transferee of the Buyer) a pro
rata portion of 35% of the Offered Securities allocated among the Buyer
and the Other Buyers (collectively, the "Buyers") including (a) those
based on such Person's pro rata portion of the aggregate principal
amount of Notes purchased hereunder and pursuant to the Other Purchase
Agreements (the "Basic Amount"), and (b) if the Buyer elects to purchase
its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of Other Buyers as the Buyer shall
indicate it will purchase or acquire should the Other Buyers subscribe
for less than their Basic Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, the Buyer must
deliver a written notice to the Company prior to the end of the first
(1st) full Business Day after the Buyer's receipt of the Offer Notice
(for purposes of this Section 4(o)(ii)(2), notwithstanding the
provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received
such Offer Notice (the "Offer Period"), setting forth the portion of the
Buyer's Basic Amount that the Buyer elects to purchase and, if the Buyer
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that the Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be deemed to have elected to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such
Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Parent to the extent it deems reasonably necessary.
(3) The Parent shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only upon terms and conditions (including, without limitation, unit
prices and interest rates within the range specified in the Offer)
-24-
that are not more favorable to the acquiring person or persons or less
favorable to the Parent than those set forth in the Offer Notice.
(4) In the event the Parent shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(o)(ii)(3) above), then each Buyer may, at
its sole option and in its sole discretion, subject to the following
sentence, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that such Buyer
elected to purchase pursuant to Section 4(o)(ii)(2) above multiplied by
a fraction, (i) the numerator of which shall be the number or amount of
Offered Securities the Parent actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to Buyers
pursuant to Section 4(o)(ii)(3) above prior to such reduction) and (ii)
the denominator of which shall be the original amount of the Offered
Securities. In the event that the Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance,
the Parent may not issue, sell or exchange more than the reduced number
or amount of the Offered Securities unless and until such securities
have again been offered to the Buyers in accordance with Section
4(o)(ii)(1) above. Provided that the Buyer has been advised by the
Parent electronically or by telephone (with verbal confirmation of
receipt) by 5:00pm New York Time, the Buyer must make its election to
reduce referred to above no later than 8:00am New York Time the
following Business Day.
(5) Upon the closing of the issuance, sale or exchange of all or
less than all of the Offered Securities, the Buyers shall acquire from
the Parent, and the Parent shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(o)(ii)(4) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all cases
to (i) the preparation, execution and delivery by the Parent and the
Buyers of a purchase agreement relating to such Offered Securities
substantially in the form negotiated with the purchasers of the Offered
Securities other than the Buyers but reasonably satisfactory in form and
substance to the Buyers and their respective counsel, (ii) the Buyers'
satisfaction, in their sole discretion, with both (I) the final price
and (II) the substantive final terms and/or conditions that differ from
those contained in the Offer Notice, and (iii) the Buyers' reasonable
satisfaction with the identity of the other persons or entities to which
the Offered Securities will be sold.
(6) Any Offered Securities not acquired by the Buyers or other
Persons in accordance with this Section 4(o)(ii) may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(iii) The restrictions contained in subsection (ii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes or securities issued in connection with (A) any public
offering or (B) any offering of securities convertible into Common Shares
pursuant to Rule 144A under the 1933 Act).
-25-
(p) Holding Period. For the purposes of Rule 144 and applicable
Canadian Securities Laws, the Company acknowledges that the holding period of
the Conversion Shares may be tacked onto the holding period of the Notes and the
Parent and the Company agree not to take a position contrary to this Section
4(p).
(q) Letter of Credit.
(i) On or prior to the Closing Date, the Company shall obtain an
irrevocable letter of credit (the "Letter of Credit"), in the amount of
$10,000,000 issued in favor of Kings Road Investments Ltd. (the "LC Agent") by a
bank acceptable to such LC Agent (the "Letter of Credit Bank") and in form and
substance acceptable to such LC Agent. Subject to the last three sentences of
this Section (q)(i), the Letter of Credit shall expire not earlier than 91 days
after the Maturity Date of the Notes (the "LC Expiration Date"). Upon the
occurrence and during the continuance of an Event of Default under (and as
defined in) any of the Aggregate Notes, the LC Agent shall be entitled to draw
under the Letter of Credit for the full Letter of Credit Amount (as defined in
the Aggregate Notes) then available thereunder, it being understood that the LC
Agent shall act for the benefit of the Buyers on a pro rata basis based on the
principal amount of the Aggregate Notes held by each of the Buyers and hold such
amount as collateral security for the obligations under the Aggregate Notes for
the benefit of the Buyers. The Company shall obtain such renewals, extensions or
replacements of the Letter of Credit as necessary to ensure that the Letter of
Credit shall not expire prior to the LC Expiration Date (unless the Letter of
Credit shall have been reduced to zero in accordance with the terms contained in
this Section 4(q) prior to such date). If, at any time, the Company cannot
obtain a renewal, extension or replacement of the Letter of Credit such that the
Letter of Credit will expire prior to the LC Expiration Date (a "Withdrawal
Event"), the Company and the Letter of Credit Bank shall each give the LC Agent
written notice of the occurrence of a Withdrawal Event at least forty-five (45)
days prior to the then current expiration date of the Letter of Credit.
Following a Withdrawal Event, the LC Agent shall be entitled to draw down the
Letter of Credit Amount in its entirety (whether or not an Event of Default
shall have occurred or be continuing under any of the Notes) and hold such
amount as collateral security for the obligations under the Notes for the
benefit of the Buyers.
(ii) If more than $23 million of the Aggregate Notes are converted,
redeemed or amortized pursuant to the terms of the Aggregate Notes, the Company
shall promptly deliver a notice to the LC Agent (the "LC Reduction Notice"),
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal one-half of
the difference between $17 million and the aggregate principal amount of the
Aggregate Notes then outstanding. After delivery of the initial LC Reduction
Notice, if the outstanding principal amount of the Aggregate Notes has been
reduced by $2 million or more from the time of the prior LC Reduction Notice,
the Company may deliver a subsequent LC Reduction Notice to the LC Agent
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal the difference
between (A) one-half of the difference between (i) $17 million and (ii) the
aggregate principal amount of the Aggregate Notes then outstanding and (B) the
aggregate amount of any prior reductions of the Letter of Credit Amount. Within
10 days of the receipt of any such LC
-26-
Reduction Notice, the LC Agent shall issue a written instruction to the Letter
of Credit Bank to request the reduction of the Letter of Credit Amount to the
Company as set forth in the LC Reduction Notice.
(iii) If the Company obtains FDA Approval (as defined in the Notes),
the Company shall promptly deliver a written notice to the LC Agent (the "Letter
of Credit Notice"), certifying as to the occurrence of such event and a copy of
such FDA Approval. Within 10 days of the receipt of the Letter of Credit Notice,
the LC Agent shall issue a written instruction to the Letter of Credit Bank to
request the release and return of the Letter of Credit Amount to the Company.
(iv) Notwithstanding the foregoing, if the LC Agent reasonably
disagrees with the contents of either a LC Reduction Notice or a Letter of
Credit Notice or the Company disagrees with any action taken or omitted to be
taken by the LC Agent, such party shall use the dispute resolution procedures
contained in Section 25 of the Notes.
(v) Kings Road Investments Ltd. is xxxxxx appointed as the LC Agent
for the Buyer hereunder, and the Buyer hereby authorizes the LC Agent (and its
officers, directors, employees and agents) to take any and all such actions on
behalf of the Buyer with respect to the Letter of Credit in accordance with the
terms of this Agreement. The LC Agent shall not have, by reason hereof or any of
the other Transaction Documents, a fiduciary relationship in respect of the
Buyer. Neither the LC Agent nor any of its officers, directors, employees and
agents shall have any liability to the Buyer for any action taken or omitted to
be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and the Buyer agrees to defend, protect,
indemnify and hold harmless the LC Agent and all of its officers, directors,
employees and agents (collectively, the "Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) (the "Losses") incurred by such Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of the LC Agent
pursuant hereto; provided, however, that the Buyer shall not be required to
indemnify the Indemnitees to the extent any such Losses are the result of the LC
Agent's fraud or willful misconduct.
(r) Trading Restrictions. Neither the Buyer nor any of the Buyer's
affiliates that it exercises investment discretion over or to which it has
provided knowledge of the transactions contemplated by the Transaction
Documents, may purchase, sell or enter into any put option, short position or
similar arrangement with respect to securities of the Parent that violates
Current Securities Laws or otherwise trade in the securities of the Parent in
violation of applicable Current Securities Laws. In addition, during each
Company Conversion Measuring Period (as defined in the Notes) neither the Buyer
nor any of the Buyer's affiliates that it exercises investment discretion over
or to which it has provided knowledge of the transactions contemplated by the
Transaction Documents, may engage in a Restricted Activity other than the sale
of Common Shares received upon a Company Conversion (as defined in the Notes),
upon a conversion of Notes pursuant to Section 3 of the Notes, upon exercise of
any Warrants, or the transfer of any Notes or Warrants as permitted by their
terms. "Restricted Activity" means, (a) any Acquisition or Disposition, in open
market transactions of (i) any Common Shares or (ii) any
-27-
securities convertible into or exchangeable for or derivative of Common Shares
and (b) any other action taken intentionally for the purpose of manipulating the
price of Common Shares. "Acquisition" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "Disposition"
means any direct or indirect voluntary sale, or monetization, including through
a Subsidiary or by means of an equity offering by any such Subsidiary, but shall
not include, any of the actions contemplated by Section 4(h) or any disposition
thereunder. "Current Securities Laws" means the rules and regulations, existing
on the date hereof, of the 1933 Act, the 1934 Act and the Canadian Securities
Laws, in each case as are set forth in currently disseminated interpretations by
the SEC or the CSA, as applicable, in writing, through rules, regulations,
releases, no-action letters or published telephone interpretations.
(s) Acknowledgement Regarding Buyer's Trading Activity. Subject to
Section 4(r) of this Agreement, it is understood and agreed by the Parent and
the Company (i) that, to the knowledge of the Parent, the Buyer has not been
asked to agree, nor has the Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Parent, or "derivative" securities based on
securities issued by the Parent or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the Buyer,
including, without limitation, Short Sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Parent's publicly-traded securities;
(iii) that the Buyer, and counter parties in "derivative" transactions to which
the Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Shares or an economically comparable position; and (iv)
that, to the knowledge of the Parent, the Buyer shall not be deemed to have any
affiliation with or control over any arm's length counter party in any
"derivative" transaction. Subject to Section 4(r) of this Agreement and
notwithstanding any other provisions of this Agreement and the provisions of the
Transaction Documents, the Parent further understands, acknowledges and agrees
that (a) the Buyer may engage in hedging and/or trading activities at any time
during the period that the Securities are outstanding, including, without
limitation, during the periods that the number and/or value of the Conversion
Shares deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities (if any) could reduce the value of the
existing stockholders' equity interests in the Parent both at and after the time
that the hedging and/or trading activities are being conducted. The Parent and
the Company acknowledge that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.
(t) Subsidiaries; Guaranty. To the extent any Subsidiary of the Parent
that comes into existence after the date hereof has assets transferred into it
having a fair market value of $1,000,000, individually, or $5,000,000 in the
aggregate, each such Subsidiary shall promptly enter into a guarantee
substantially in the form attached hereto as Exhibit D-2.
(u) Amendment to Other Security Purchase Agreements. Neither the
Company nor the Parent shall amend any of the Other Purchase Agreements without
first offering the same terms to the Buyer hereunder.
(v) No Conflicts with Irish Law. The Parent and the Company covenant
and agree that:
-28-
(i) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Section 60 nor Section 286 of the Irish Companies Act, 1963.
(ii) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Part XI of the Irish Companies Act, 1990.
(w) Change to DTC Brokerage Account Information. If the Buyer seeks at
any time to make any changes to the DTC brokerage account information which the
Buyer has provided pursuant to Section 6(d) hereof, the Buyer shall deliver to
the Parent a new form, substantially in the form of Exhibit E, setting forth
revised DTC brokerage account information. The Parent shall be obligated to use,
beginning no later than five (5) Business Days after receipt thereof, such
revised DTC brokerage account information for any delivery of Common Shares
required under the Transaction Documents.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company and the Parent shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to each holder of Securities), a register for the Notes
and the Warrants, as applicable, in which the Company and the Parent shall
record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company and the Parent shall keep the register open and available at
all times during business hours for inspection by the Buyer or its legal
representatives.
(b) Transfer Agent Instructions. The Parent shall issue treasury
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion, amortization or redemption of the Notes or exercise of the
Warrants in such amounts as specified from time to time by the Buyer to the
Parent or by the Parent, as the case may be, upon conversion, amortization
and/or redemption of the Notes or exercise of the Warrants substantially in the
form attached as Exhibit I to the Notes and Warrants, respectively (the
"Treasury Instructions"). The Parent warrants that no instruction other than the
Treasury Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Parent
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Parent and the Company as and to
the extent provided in this Agreement and the other Transaction Documents. If
the Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f) and the other provisions of the Transaction Documents, subject
to Section 9(s), the Parent and the Company shall permit the transfer and, in
the case of a transfer of Common Shares, the Parent
-29-
shall promptly instruct its transfer agent to issue one or more certificates or
credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by the Buyer to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer involves
Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144 or Rule 904, subject to
Section 9(s), the transfer agent shall issue such Securities to the Buyer,
assignee or transferee, as the case may be, without any restrictive legend. Each
of the Parent and the Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer. Accordingly, the
Parent and the Company acknowledge that the remedy at law for a breach of its
obligations under this Section 5(b) will be inadequate and agrees, in the event
of a breach or threatened breach by the Parent or the Company of the provisions
of this Section 5(b), that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S AND THE PARENT'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the obligation of the Parent to issue the Initial Warrants to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's and the Parent's sole benefit and may be waived by the Company and the
Parent at any time in their sole discretion by providing the Buyer with prior
written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company and the Parent.
(b) The Buyer and each other Buyer shall have delivered to the Company
the Purchase Price (less, in the case of Kings Road Investments Ltd., the
amounts withheld pursuant to Section 4(g)) for the Notes and the Other Notes and
the Warrants and the Other Warrants being obtained by the Buyers at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
(d) The Buyer shall have completed and delivered to the Parent the DTC
brokerage account information form with respect to the Buyer in substantially
the form of Exhibit E attached hereto.
-30-
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Notes and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer's sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
(a) The Company shall have duly executed and delivered to the Buyer:
(A) the Notes (in such principal amounts as the Buyer shall request) being
obtained by the Buyer at the Closing pursuant to this Agreement and (B) to the
extent it is a party thereto, each of the other Transaction Documents.
(b) The Parent shall have duly executed and delivered to the Buyer: (A)
the Warrants (in such allocations as the Buyer shall request) being received by
the Buyer at the Closing pursuant to this Agreement; (B) the Parent Guaranty,
and (C) to the extent it is a party thereto, each of the other Transaction
Documents.
(c) Vasogen, Corp. shall have duly executed and delivered to the Buyer:
(A) the Subsidiary Guaranty, and (B) to the extent it is a party thereto, each
of the other Transaction Documents.
(d) The Buyer shall have received the opinion of Lang Xxxxxxxx LLP, the
Parent's outside Canadian counsel, dated as of the Closing Date, in
substantially the form of Exhibit F-1 attached hereto.
(e) The Buyer shall have received the opinion of Xxxxxx X. Xxxxxxx
Solicitors, the Company's outside Irish counsel, dated as of the Closing Date,
in substantially the form of Exhibit F-2 attached hereto.
(f) The Buyer shall have received the opinion of Xxxx, Xxxxx, Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, the Company's outside United States counsel, dated as of
the Closing Date, in substantially the form of Exhibit F-3 attached hereto.
(g) The Parent shall have delivered to the Buyer a certificate of
compliance with the CBCA of the Parent, and the Company shall have delivered to
the Buyer a certificate evidencing the formation and status of the Company in
the Company's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(h) The Parent shall have delivered to the Buyer a certificate
evidencing the Parent's qualification as a foreign corporation (if applicable)
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Parent conducts business and such qualification
is required, as of a date within 10 days of the Closing Date. The Company shall
have delivered to the Buyer a Letter of Status from the Companies Registration
Office in Dublin, Ireland.
(i) The Parent shall have delivered to the Buyer a certified copy of
the
-31-
Articles of Incorporation of the Parent, and the Company shall have delivered to
the Buyer a certified copy of its Memorandum and Articles of Association of the
Company, in each case as certified by the Secretary of State (or equivalent) in
the applicable jurisdiction of incorporation within ten (10) days of the Closing
Date.
(j) The Parent shall have delivered to the Buyer a certificate,
executed by the Secretary of the Parent and the Company shall have delivered to
the Buyer a certificate, executed by a Director of the Company, in each case
dated as of the Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by such entity's board of directors in a form reasonably
acceptable to the Buyer, (ii) the Articles of Incorporation, as in effect at the
Closing, of each such entity and (iii) the Bylaws, as in effect at the Closing,
of each such entity in the form attached hereto as Exhibit G.
(k) The representations and warranties of the Company and the Parent
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
and the Parent shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
and/or the Parent, as applicable at or prior to the Closing Date.
(l) The Parent shall have delivered to the Buyer a letter from the
Parent's transfer agent certifying the number of shares of Common Shares
outstanding as of a date within five days of the Closing Date.
(m) The Common Shares (i) shall be designated for quotation or listed
on each of the Principal Markets and (ii) shall not have been suspended, as of
the Closing Date, by the SEC, the CSA or either of the Principal Markets from
trading on the Principal Markets nor shall suspension by the SEC, the CSA or
either of the Principal Markets have been threatened, as of the Closing Date,
either (A) in writing by the SEC, the CSA or either of the Principal Markets or
(B) by falling below the minimum listing maintenance requirements of either of
the Principal Markets.
(n) The Company and the Parent shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(o) There shall be no Indebtedness of the Parent or any of its
Subsidiaries other than Indebtedness which is pari passu with or subordinate to
the Notes and the Guarantees, as applicable, so long as such Indebtedness does
not provide at any time for the payment, prepayment, repayment, redemption,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until 91 days after the Maturity Date (as defined in the Notes)
or later; provided, that (I) the Company, the Parent or Vasogen, Corp. may incur
Indebtedness that is secured by assets purchased with the proceeds of such
Indebtedness, (II) the Parent, the Company or Vasogen, Corp. may incur purchase
money Indebtedness for the purpose of financing the acquisition of equipment to
be acquired or held by the Company, the Parent or
-32-
Vasogen, Corp. in the ordinary course of business, provided, that the principal
amount of such Indebtedness shall not materially exceed 80% of the cost of the
property so acquired, and (III) the Company, the Parent and/or Vasogen, Corp.
may incur Indebtedness owed to the Parent or any of its Subsidiaries.
(p) The approval of each of the Principal Markets for the issuance of
the Securities contemplated hereby and conditional listing of the Conversion
Shares and the Warrant Shares shall have been obtained.
(q) The Company and the Parent shall have delivered to the Buyer such
other documents relating to the transactions contemplated by this Agreement as
the Buyer or its counsel may reasonably request.
(r) The Company shall have obtained and delivered the Letter of Credit
pursuant to the terms of Section 4(q) hereof.
(s) The Company and the Parent shall have entered into one or more
security purchase agreements (the "Other Purchase Agreements") relating to the
sale and purchase of securities on substantially identical terms to this
Agreement, that provide for the aggregate sale (when combined with this
Agreement) of $40,000,000 in aggregate principal amount of Aggregate Notes and
Aggregate Warrants.
8. TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) Business Days from the date hereof due to the Company's, the Parent's or
the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 8 due to any breach of
a representation, warranty, covenant or agreement by the Company or the Parent,
the Company shall remain obligated to reimburse the non-breaching Buyer for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and
-33-
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. The Company, the Parent and Vasogen,
Corp. have appointed CT Corporation System, with offices at 000 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, as their agent for service of process in New York.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyer, the Parent, the Company,
Vasogen, Corp., their affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parent, the Company, Vasogen, Corp. or the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Parent, the Company, Vasogen, Corp. and the
holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on the Buyer and
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
the Buyer relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
-34-
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Clare
Ireland
Telephone: 000-00-000-000
Facsimile: 353-1-886-9359
Attention: Mr. Xxxxx Xxxxxxx, Director
With a copy (for informational purposes only) to:
Vasogen Inc.
Vasogen, Corp.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer: xxxxxxxx@xxxxxxx.xxx;
and
Vice President, Corporate & Legal Affairs:
xxxxxxx@xxxxxxx.xxx;
and for purposes of the Note, the Controller:
xxxxx@xxxxxxx.xxx
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
-35-
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to the Parent or Vasogen, Corp.:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer; and
Vice President, Corporate & Legal Affairs
With a copy (for informational purposes only) to:
the Company
(at the address listed above)
Lang Xxxxxxxx LLP
(at the address listed above)
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
(at the address listed above)
If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
If to the Buyer, to its address and facsimile number set forth on the Buyer
Schedule, with copies to the Buyer's representatives as set forth on the Buyer
Schedule,
with a copy (for informational purposes only) to:
-36-
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. None of the Company, the
Parent or Vasogen, Corp. shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate principal amount of Notes issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). The Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by the Buyer of the Notes and Warrants in private transactions in
accordance with the terms thereof, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Parent, the Company, Vasogen, Corp. and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5 and 9 shall survive the Closing.
(j) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars ("US Dollars"). All amounts
owing under this Agreement or any Transaction Document shall be paid in US
Dollars. All amounts denominated in other currencies shall be converted in the
US Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other
-37-
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(l) Indemnification. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's and the Parent's other obligations under
the Transaction Documents, the Company and the Parent, jointly and severally,
shall defend, protect, indemnify and hold harmless the Buyer and each other
holder of the Securities (other than Persons holding only Securities purchased
in open market transactions) and all of their shareholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any material inaccuracy in any representation
or warranty made by the Company, the Parent or Vasogen, Corp. in the Transaction
Documents or any inaccuracy in any representation or warranty made by the
Company, the Parent or Vasogen, Corp. in the Transaction Documents that is
qualified by materiality or Material Adverse Effect, (b) any breach in any
material respect of any covenant, agreement or obligation of the Company, the
Parent or Vasogen, Corp. contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company, the Parent or Vasogen, Corp.) and arising out of or resulting
from (i) the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
(iii) the status of the Buyer or holder of the Securities as an investor in the
Company or the Parent pursuant to the transactions contemplated by the
Transaction Documents; provided, that indemnification pursuant to this clause
(iii) shall not be available to the extent arising primarily from the Buyer's
fraud, gross negligence or willful misconduct. To the extent that the foregoing
undertaking by the Company or the Parent may be unenforceable for any reason,
the Company and the Parent shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities that is permissible
under applicable law.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. The Buyer and each holder of the Securities (other than
Persons holding only Securities purchased in open market transactions) shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this
-38-
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company, the Parent and Vasogen, Corp. recognize that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyer. The Company, the Parent and Vasogen, Corp.
therefore agree that the Buyer shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.
(o) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Buyer exercises a right, election, demand or
option under a Transaction Document and the Company, the Parent or Vasogen,
Corp. does not timely perform its related obligations within the periods therein
provided, then the Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, the Parent or Vasogen, Corp.,
as applicable, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
(p) Payment Set Aside. To the extent that the Company, the Parent or
Vasogen, Corp. makes a payment or payments to the Buyer or pursuant to any of
the other Transaction Documents or the Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
the Parent, Vasogen, Corp., a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, United States or
Canadian federal, state or provincial law, foreign law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Independent Nature of Xxxxx's Obligations and Rights. The
obligations of the Buyer under any Transaction Document are several and not
joint with the obligations of any Other Buyer, under the Other Purchase
Agreements, and the Buyer shall not be responsible in any way for the
performance of the obligations of any Other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by the Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.
-39-
(r) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against
the Company, the Parent or Vasogen, Corp. in any court in any jurisdiction it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(r) referred to as the "Judgment Currency") an
amount due in US Dollars under this Agreement, the conversion shall be made at
the Exchange Rate prevailing on the Business Day immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date: or
(2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section being
hereinafter referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(r)(i)(2) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company, the Parent or Vasogen, Corp.
under this provision shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of this
Agreement.
(s) Opinion to Transfer Agent. Assuming that the Buyer (i) is a
Qualified Institutional Buyer (as such term is defined in Rule 144A under the
1933 Act) (a "QIB") as of the date hereof, (ii) will offer and sell any Common
Shares the Buyer receives upon any conversion, amortization and/or redemption of
a Note (including, without limitation, pursuant to Section 3, 5, 8, 9 or 10 of
the Note) or any exercise of a warrant (including, without limitation, pursuant
to Section 1 of the Warrant) pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act (any such method of offer
and sale, an "Approved Method"), (iii) for purposes of an offer or sale under
Rule 904 under the 1933 Act, is not an affiliate (as such term is defined in
Rule 144 under the 1933 Act) (an "Affiliate") of the Parent as of the date
hereof and (iv) will promptly notify the Parent and the Company if the Buyer
ceases to be a QIB, chooses to offer or sell such Common Shares pursuant to a
method other than an Approved Method, or becomes an Affiliate of the Parent (any
such notice, a "Notice"), then the Parent will direct Xxxx, Xxxxx, Rifkind,
Xxxxxxx & Xxxxxxxx LLP to deliver a standing opinion to the transfer agent in
substantially the form attached to the Transfer Agent Instructions on the
Effectiveness Date. The Buyer covenants that it will comply with clause (iv)
above and represents and warrants that the assumptions set forth in clauses (i)
through (iii) above are true
-40-
and correct with respect to the Buyer as of the date hereof, and will continue
to be true and correct with respect to the Buyer, except as set forth in a
Notice.
[Signature Page Follows]
-41-
IN WITNESS WHEREOF, the Buyer, the Company, the Parent and Vasogen,
Corp. have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
SIGNED, SEALED AND DELIVERED BY XXXXX
XXXXXXX AS A DEED FOR AND ON BEHALF OF
VASOGEN IRELAND LIMITED PURSUANT TO A POWER
OF ATTORNEY ----------------------------------
Signature of Witness:
----------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
Occupation:
--------------------------------------
[Signature Page to Securities Purchase Agreement]
VASOGEN INC.
By:
------------------------------------
Name:
Title:
VASOGEN, CORP.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
CAPITAL VENTURES
INTERNATIONAL
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
BUYER SCHEDULE
(1) (2) (3) (4) (5) (6)
Aggregate
Principal Number of
Address and Amount of Warrant Legal Representative's Address
Buyer Facsimile Number Notes Shares Purchase Price and Facsimile Number
------------------------------------------------------------------------------------------------------------------------------------
Capital Ventures c/o Heights Capital Management, Inc $4,500,000 375,000 $4,500,000 Drinker Xxxxxx & Xxxxx LLP
International 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000 00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000-2235
Attention: Xxxxxx Xxxxxxxx Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of Parent Guaranty
Exhibit D-2 Form of Subsidiary Guaranty
Exhibit E Form of DTC Brokerage Account Information Form
Exhibit F-1 Form of Outside Canadian Counsel Opinion
Exhibit F-2 Form of Outside Irish Counsel Opinion
Exhibit F-3 Form of Outside United States Counsel Opinion
Exhibit G Form of Secretary's Certificate
SCHEDULES
---------
Schedule 2(b) Accredited Investor Certificate
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(j) Rights Plan
Schedule 3(l) Absence of Certain Changes
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(aa) Tax Status
SCHEDULE 2B
ACCREDITED INVESTOR CERTIFICATE
The Purchaser certifies that it/he/she and any beneficial purchaser are each a
resident of Canada or is otherwise subject to the Securities Legislation of
Canada, and the Purchaser or the disclosed beneficial purchaser, as applicable,
is an "accredited investor" as defined in National Instrument 45-106 -
Prospectus and Registration Exemptions ("NI 45-106") and, as at the Closing, the
Purchaser or the beneficial purchaser, as applicable, qualifies as one of more
of the following and acknowledges that the Issuer is relying on this certificate
in determining to sell securities to the undersigned. (Please insert a checkmark
in the box beside each applicable paragraph)
"accredited investor" means
(a) a Canadian financial institution, or a Schedule III bank; |_|
(b) the Business Development Bank of Canada incorporated under |_|
the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or |_|
(b), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to
be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a |_|
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one
or both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
(e) an individual registered or formerly registered under the |_|
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any |_|
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a |_|
metropolitan community, school board, the Comite de gestion
de la taxe scolaire de l'ile de Montreal or an intermunicipal
management board in Quebec;
(h) any national, federal, state, provincial, territorial or |_|
municipal government of or in any foreign jurisdiction, or
any agency of that government;
(i) a pension fund that is regulated by either the Office of the |_|
Superintendent of Financial Institutions (Canada) or a
pension commission or similar regulatory authority of a
jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, |_|
beneficially owns, directly or indirectly, financial assets
having an aggregate realizable value that before taxes, but
net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 |_|
in each of the 2 most recent calendar years or whose net
income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who,
in either case, reasonably expects to exceed that net income
level in the current calendar year;
D-1
(l) an individual who, either alone or with a spouse, has net |_|
assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that |_|
has net assets of at least $5,000,000 as shown on its most
recently prepared financial statements;
(n) an investment fund that distributes or has distributed its |_|
securities only to
(i) a person that is or was an accredited investor at the
time of the distribution,
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(being that (I) the person purchases as principal, (II)
the security has an acquisition cost to the purchaser of
not less than $150,000 paid in cash at the time of the
trade, and (III) the trade is in the security of a
single issuer), and section 2.19 of NI 45-106 (being a
trade by an investment fund in a security of its own
issue to a security holder of the investment fund where
(I) the security holder initially acquired securities of
the investment fund as principal for an acquisition cost
of not less than $150,000 paid in cash at the time of
the trade, (II) the subsequent trade is for a security
of the same class or series as the initial trade, and
(III) the security holder, as at the date of the
subsequent trade, holds securities of the investment
fund that have an acquisition cost of not less than
$150,000 or a net asset value of not less than
$150,000); or
(iii) a person described in paragraph (i) or (ii) that
acquires or acquired securities under section 2.18 of
NI 45-106 [Investment fund reinvestment];
(o) an investment fund that distributes or has distributed |_|
securities under a prospectus in a jurisdiction of Canada for
which the regulator or, in Quebec, the securities regulatory
authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized |_|
to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of
Canada or a foreign jurisdiction, acting on behalf of a fully
managed account managed by the trust company or trust
corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed |_|
by that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction, and
(ii) in Ontario, is purchasing a security that is not a
security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, |_|
in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the
securities legislation of the jurisdiction of the registered
charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is |_|
analogous to any of the entities referred to in paragraphs
(a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, |_|
direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that
are accredited investors;
(u) an investment fund that is advised by a person registered as |_|
an adviser or a person that is exempt from registration as an
adviser; or
D-2
(v) a person that is recognized or designated by the securities |_|
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia after
National Instrument 45-106 comes into force.
(w) A Cayman Island Company
The following definitions are included for convenience only; reference
should be had to the applicable legislation:
(a) "director" means
(i) a member of the board of directors of a company or an individual
who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual
who performs functions similar to those of a director of a
company;
(b) "eligibility adviser" means
(i) a person that is registered as an investment dealer or in an
equivalent category of registration under the securities
legislation of the jurisdiction of a purchaser and authorized to
give advice with respect to the type of security being
distributed, and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a
jurisdiction of Canada or a public accountant who is a member
in good standing of an institute or association of chartered
accountants, certified general accountants or certified
management accountants in a jurisdiction of Canada provided
that the lawyer or public accountant must not
(a) have a professional, business or personal relationship with
the issuer, or any of its directors, executive officers,
founders, or control persons, and
(b) have acted for or been retained personally or otherwise as
an employee, executive officer, director, associate or
partner of a person that has acted for or been retained by
the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
(c) "entity" means a company, syndicate, partnership, trust or
unincorporated organization;
(d) "financial assets" means
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities
legislation;
(e) "fully managed account" means an account of a client for which a
person makes the investment decisions if that person has full
discretion to trade in securities for the account without requiring
the client's express consent to a transaction;
(f) "investment fund" has the same meaning as in National Instrument
81-106 Investment Fund Continuous Disclosure;
(g) "person" includes
(i) an individual,
(ii) a corporation,
(iii) a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether
incorporated or not, and
(iv) an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or other legal
representative;
D-3
(h) "related liabilities" means
(i) liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets;
(i) "spouse" means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the
other individual,
(ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between
individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or
(ii), or is an adult interdependent partner within the meaning
of the Adult Interdependent Relationships Act (Alberta); and
(j) "subsidiary" means an issuer that is controlled directly or
indirectly by another issuer and includes a subsidiary of that
subsidiary.
An issuer is an "affiliate" of another issuer if (i) one of them is the
subsidiary of the other, or (ii) each of them is controlled by the same person.
In National Instrument 45-106 a person (first person) is considered to
"control" another person (second person) if
(i) the first person, directly or indirectly, beneficially owns or
exercises control or direction over securities of the second person
carrying votes which, if exercised, would entitle the first person to
elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an obligation,
(ii) the second person is a partnership, other than a limited partnership,
and the first person holds more than 50% of the interests of the
partnership, or
(iii) the second person is a limited partnership and the general partner
of the limited partnership is the first person.
The foregoing representation, warranty and certificate is true and
accurate as of the date of this certificate and will be true and accurate as of
Closing. If any such representation, warranty or certificate shall not be true
and accurate prior to Closing, the undersigned shall give immediate written
notice of such fact to the Issuer.
Dated: 10/6/05 Signed: /s/ Xxxxxx Xxxxxxxx
-------------------------------- -------------------------
_______________________________________ ________________________________
Witness (If Purchaser is an Individual) Print the name of Purchaser
CAPITAL VENTURES INTERNATIONAL,
BY:HEIGHTS CAPITAL MANAGEMENT,
ITS AUTHORIZED SIGNATORY
XXXXXX XXXXXXXX
_______________________________________ INVESTMENT MANAGER
Print Name of Witness --------------------------------
If Purchaser is a Corporation,
print name and title of
Authorized Signing Officer
D-4
Exhibit 1e
Securities Purchase Agreement - Smithfield Fiduciary LLC
(exhibits and schedules attached to Kings Road Investments Ltd.
Security Purchase Agreement omitted)
(see attached)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 7,
2005, by and among Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland, with headquarters located at Xxxxxxx Airport
House, Shannon, Co. Xxxxx, Ireland (the "Company"), Vasogen Inc., a Canadian
corporation, with headquarters located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx (the "Parent"), Vasogen, Corp., a Delaware
corporation, with its registered address at 0000 Xxxxx Xxxxxx Xxxxxx, X.X. Box
1347, Wilmington, County of Newcastle, Delaware 19801 ("Vasogen, Corp.") and the
investor listed on the Buyer Schedule attached hereto (the "Buyer").
WHEREAS:
A. The Company, the Parent, Vasogen, Corp. and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
1933 Act.
B. The Company has authorized a new series of senior convertible notes of
the Company, which notes shall be convertible into the Parent's common shares
(the "Common Shares") in accordance with the terms of such notes.
C. The Company, the Parent and Vasogen, Corp. plan to enter into one or
more Other Purchase Agreements (as defined below) relating to the sale and
purchase of securities on substantially identical terms as contained in this
Agreement.
D. The Buyer wishes to purchase, and (i) the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate principal
amount of notes, in substantially the form attached hereto as Exhibit A (the
"Notes"), set forth opposite the Buyer's name in column (3) on the Buyer
Schedule (which amount when aggregated with all amounts of notes being purchased
by other buyers (the "Other Buyers") pursuant to the Other Purchase Agreements
(the "Other Notes" and together with the Notes, the "Aggregate Notes"), shall be
$40,000,000) (as converted, amortized and/or redeemed for Common Shares pursuant
to the terms of the Notes, collectively, the "Conversion Shares") and (ii) the
Parent wishes to issue, upon the terms and conditions stated in this Agreement,
warrants, in substantially the form attached hereto as Exhibit B (the "Initial
Warrants," and together with the Accelerated Payment Option Warrants (as defined
in the Notes), the "Warrants," and together with the warrants being purchased by
the Other Buyers (the "Other Warrants"), the "Aggregate Warrants"), to acquire
up to that number of additional shares of Common Shares set forth opposite the
Buyer's name in column (4) of the Buyer Schedule (as exercised, the "Initial
Warrant Shares," and together with the Common Shares issuable upon exercise of
the Accelerated Payment Option Warrants, the "Warrant Shares").
E. Contemporaneously with the execution and delivery of this Agreement,
certain of the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (as amended or
modified from time to time, the "Registration
Rights Agreement"), pursuant to which the Parent has agreed to provide certain
registration rights with respect to the Conversion Shares and the Initial
Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder.
F. The Notes, the Conversion Shares, the Warrants, the Warrant Shares and
the Guarantees (as defined in clause (G) below) collectively are referred to
herein as the "Securities".
G. The Notes will be (i) senior to all outstanding and future Indebtedness
(as defined herein) of the Company, (ii) guaranteed by the Parent pursuant to a
guarantee substantially in the form attached hereto as Exhibit D-1 (the "Parent
Guaranty") and (iii) guaranteed by Vasogen, Corp. pursuant to a guarantee
substantially in the form attached hereto as Exhibit D-2 (the "Subsidiary
Guaranty," and together with the Parent Guaranty, the "Guarantees").
NOW, THEREFORE, the Company, the Parent, Vasogen, Corp. and the Buyer
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Subject to the satisfaction (or waiver by the party entitled to
so waive) of the conditions set forth in Sections 6 and 7 below, on the Closing
Date (as defined below), (A) the Company shall issue and sell to the Buyer, and
the Buyer agrees to purchase from the Company, one or more Notes with an
aggregate principal amount as is set forth opposite the Buyer's name in column
(3) on the Buyer Schedule and (B) the Parent shall issue and sell to the Buyer
one or more Initial Warrants to acquire up to that number of Warrant Shares as
is set forth opposite the Buyer's name in column (4) on the Buyer Schedule (the
"Closing").
(ii) Purchase Price. The aggregate purchase price for the Buyer of
the Notes and the Warrants to be purchased by the Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite the Buyer's name in
column (5) of the Buyer Schedule. The purchase price for the Warrants shall be
deemed to be $0.01 per Warrant.
(b) Closing Date. The date and time of the Closing (the "Closing Date")
shall be 8:00 a.m., New York Time, on the date hereof after notification of
satisfaction (or waiver by the party entitled to so waive) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and the Buyer) at the offices of Xxxxxxx Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) Form of Payment. On the Closing Date, the Buyer shall pay its
Purchase Price to the Company or, at the written direction of the Company
delivered to the Buyer at least one (1) Business Day prior to the Closing Date
and substantially in the form attached hereto as Annex 1(c), to its designee for
the Notes to be issued and sold to the Buyer at such Closing, by wire transfer
of immediately available funds in accordance with the Company's written wire
instructions and the Parent shall issue the Initial Warrants to the Buyer. At
the Closing, (A) the Company shall deliver to the Buyer the Notes (allocated in
the principal amounts as the Buyer shall request) that the Buyer is then
purchasing and (B) the Parent shall deliver to the Buyer the
-2-
Initial Warrants (allocated in the amounts as the Buyer shall request) that the
Buyer is purchasing, in each case duly executed on behalf of the Company or the
Parent, as applicable, and registered in the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants that:
(a) No Public Sale or Distribution. The Buyer is acquiring the Notes
and the Warrants and upon conversion, amortization and/or redemption of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable
upon conversion, amortization and/or redemption of the Notes and the Warrant
Shares issuable upon exercise of the Warrants for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act or
qualified for public distribution or exempted under the securities legislation
and regulations and regulations of, and the instruments, policies, rules,
orders, codes, notices and published interpretation notes of, the securities
regulatory authorities of the provinces and territories of Canada (the "Canadian
Securities Laws"), as applicable; provided, however, that by making the
representations herein, subject to compliance with Canadian Securities Laws, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and in accordance with Canadian Securities Laws. The Buyer is
acquiring the Securities hereunder in the ordinary course of its business. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities, and the Buyer
has not solicited offers for, or offered or sold, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
(b) Accredited Investor Status. The Buyer is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D. The Buyer is also an "accredited investor" as that term is defined
in the National Instrument 45-106, Prospectus and Registration Exemptions. The
Buyer has executed the Accredited Investor Certificate attached hereto as
Schedule 2(b) as of the date hereof, and such certificate is true and correct as
of the date hereof.
(c) Reliance on Exemptions. The Buyer understands and acknowledges that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and Canadian Securities Laws applicable in Ontario and that the
Company and the Parent are relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and the Parent and
-3-
materials relating to the offer and sale of the Securities that have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and the Parent. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's and the Parent's representations and
warranties contained herein. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
or Canadian federal, state or provincial commission or agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such commissions or agencies passed upon or endorsed
the merits of the offering of the Securities.
(f) Transfer or Resale. The Buyer understands that, except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws or
qualified under Canadian Securities Laws; (ii) the Buyer agrees that if it
decides to offer, sell or otherwise transfer any of the Notes, Conversion
Shares, Warrants or Warrant Shares, such Notes, Conversion Shares, Warrants and
Warrant Shares may be offered, sold or otherwise transferred only: (A) pursuant
to an effective registration statement under the 1933 Act, subject to compliance
with Canadian Securities Laws, (B) to the Company (in the case of the Notes) or
the Parent (in the case of the Warrants, the Conversion Shares and the Warrant
Shares); (C) outside the United States in accordance with Rule 904 of Regulation
S under the 1933 Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the 1933 Act
provided by Rule 144 or Rule 144A thereunder, if available, and in compliance
with any applicable state securities laws or (2) in a transaction that does not
require registration under the 1933 Act or applicable state securities laws, and
the seller has provided the Company and the Parent with reasonable assurance,
prior to such offer, sale or transfer, that such Securities may be so offered,
sold or transferred in a transaction that does not require registration under
the 1933 Act or applicable state securities laws; and (iii) any sale or transfer
of the Securities to a purchaser or transferee whose address is in Canada or who
is a resident of Canada is prohibited unless it is made in compliance with
applicable Canadian Securities Laws.
(g) Legends. The Buyer understands that the certificates or other
instruments representing the Notes and Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, and subject to Section 9(s), the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "Blue Sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE]
-4-
[EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT; (B) TO THE COMPANY, (C) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT AND
IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN
ACCORDANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR (2) IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND THE
HOLDER HAS PROVIDED THE COMPANY, PRIOR TO
SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES
MAY BE SO OFFERED, SOLD OR TRANSFERRED IN A
TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Subject to Section 9(s), the legend set forth above shall be removed and the
Company or the Parent, as applicable, shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with reasonable assurance that
the sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act, (iii) if the
Company or the Parent is a "foreign issuer," within the meaning of Regulation S
under the 1933 Act and the Securities are being sold pursuant to Rule 904 of
Regulation S, such legend may be removed by providing a declaration to the
Company or the Parent, as applicable, that such shares may be sold pursuant to
Rule 904 of Regulation S or (iv) such holder provides the Company or the Parent,
as applicable, with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A.
(h) Canadian Legends. The Buyer understands that the certificates or
other instruments representing Warrants and, if the Notes are converted or the
Warrants are exercised prior to February 8, 2006, the share certificates
representing the Conversion Shares and the Warrant Shares, shall bear a legend
set forth below:
-5-
"UNLESS PERMITTED UNDER CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THESE SECURITIES
SHALL NOT TRADE THE SECURITIES IN CANADA
BEFORE FEBRUARY 8, 2006."
The legend set forth above shall be removed and the Parent shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped at anytime on or after February 8, 2006, if such Securities are
qualified for distribution by prospectus under applicable Canadian Securities
Laws or if in connection with a proposed trade the holder provides the Parent
with reasonable assurance that the Securities are no longer subject to a hold
period under such laws.
(i) Validity; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and shall constitute the legal, valid and binding
obligations of the Buyer enforceable against the Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(j) No Conflicts. The execution, delivery and performance by the Buyer
of this Agreement and the Registration Rights Agreement and the consummation by
the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party or by which it is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer to perform its obligations hereunder.
(k) Residency. The Buyer is a resident of that jurisdiction specified
below its address on the Buyer Schedule.
(l) Certain Trading Activities. Neither the Buyer nor any of its
affiliates has directly or indirectly, and no Person acting on behalf of the
Buyer or its affiliates has directly or indirectly, engaged in any transactions
in the securities of the Parent or the Company (including, without limitation,
any Short Sales involving the Parent's securities) since the time that the Buyer
was first contacted by the Parent, a placement agent or any other Person with
respect to the transactions contemplated hereby. "Short Sales" include, without
limitation, all "short sales" as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers. The
Buyer covenants that neither it, nor any of its affiliates that it exercises
investment discretion over or to which it has provided knowledge of the
transactions contemplated by the Transaction Documents, nor any Person acting on
behalf of the Buyer or any of its affiliates that it exercises investment
discretion over or to which it has provided knowledge of the transactions
contemplated by the Transaction
-6-
Documents will engage in any transactions in the securities of the Parent or the
Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed. Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall constitute a
representation or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available shares to
borrow in order to effect Short Sales or similar transactions in the future.
(m) No Irish Public Offering. The Buyer has not offered or sold, and it
will not offer or sell, any Notes in Ireland in circumstances which would
constitute an offer to the public within the meaning of Irish Prospectus Law (as
defined below) or an invitation to the public (as referred to in Section 33 of
the Companies Act, 1963) to subscribe for the Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT.
Each of the Company, the Parent and Vasogen, Corp. jointly and
severally represents and warrants to the Buyer as of the date hereof as follows:
(a) Organization and Qualification. The Parent is up to date in all
filings under the Canada Business Corporations Act (the "CBCA"). The Parent and
the Parent's "Subsidiaries" (which for purposes of this Agreement means the
Company, Vasogen, Corp. and any entity in which the Parent, directly or
indirectly, owns 50% or more of the outstanding capital stock or holds an equity
or similar interest representing 50% or more of the outstanding equity or
similar interest of such entity) are entities duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which they are formed. The Parent and its Subsidiaries have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Parent and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing (if applicable) in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Vasogen, Corp. is not qualified as a foreign entity to do business in any state
and there is no jurisdiction in which Vasogen, Corp., by virtue of its ownership
of property or the nature of the business conducted by it, makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Parent, the Company or
Vasogen, Corp. to perform its obligations under the Transaction Documents (as
defined below). None of the Parent, the Company or Vasogen, Corp. holds any
equity or similar interest in any entity except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Xxxxxxxx. Each of the Parent and its
Subsidiaries has the requisite power and authority, to the extent it is a party
thereto or bound thereby, to enter into and perform its obligations under this
Agreement, the Notes, the
-7-
Guarantees, the Registration Rights Agreement, the Treasury Instructions (as
defined in Section 5(b)), the Warrants and each of the other agreements entered
into by the applicable parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and
to issue their respective Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Parent,
the Company and Vasogen, Corp. and the consummation by the Parent, the Company
and Vasogen, Corp. of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, the Warrants and the
Guarantees, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants have been duly authorized by the board of directors (or
similar governing body) of the Parent, the Company and Vasogen, Corp., as
applicable, and, other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) the filing of a Form D with respect to the Notes, the
Warrants and the Guarantees, as required under Regulation D and (iii) such
filings required under applicable securities or "Blue Sky" laws of the states of
the United States and applicable Canadian Securities Laws and applicable
requirements of the TSX (all of the foregoing, the "Required Approvals"), no
further filing, consent, or authorization is required by the Company, the
Parent, Vasogen, Corp. or any of their boards of directors and/or shareholders.
This Agreement and the other Transaction Documents to which they are a party
have been duly executed and delivered by the Parent, the Company and Vasogen,
Corp., as applicable, and constitute the legal, valid and binding obligations of
the Parent, the Company and Vasogen, Corp., as applicable, enforceable against
the Parent, the Company and Vasogen, Corp., as applicable, in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and to the extent that
rights to indemnity may be limited by applicable law, including the
indemnification and contribution provisions of the Registration Rights
Agreement.
(c) Issuance of Securities. The Notes, the Warrants and the Guarantees
are free from all taxes (other than a stamp duty charge of 0.15 Euro on the
issuance of each of the Notes, that will be paid by the Company), liens and
charges with respect to the issue thereof. As of the Closing, a number of shares
of Common Shares shall have been duly authorized and reserved for issuance which
equals or exceeds the maximum number of Common Shares: (i) issuable upon
conversion, amortization and/or redemption for Common Shares of the Notes and
(ii) issuable upon exercise of the Warrants. Upon issuance or conversion,
amortization and/or redemption in accordance with the terms of the Notes or
exercise in accordance with the terms of the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Shares. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Parent, the Company and Vasogen,
Corp. of the Securities is exempt from registration under the 1933 Act and from
the prospectus and registration requirements of applicable Canadian Securities
Laws. The Company has not offered or sold, and it will not offer, sell or
transfer the Notes in violation of Irish Securities Laws or in circumstances
that would constitute an offer to
-8-
the public within the meaning of Irish Prospectus Law or an invitation to the
public (as referred to in Section 33 of the Companies Act, 1963) to subscribe
for the Notes and nothing herein contained shall be construed as constituting an
offer of Notes to the public within the meaning of Irish Prospectus Law or an
"invitation to the public" (as referred to in Section 33 of the Companies Act,
1963) to subscribe for the Notes. As used herein, "Irish Prospectus Law" has the
meaning set out in the Investment Funds, Companies and Miscellaneous Provisions
Act, 2005 and "Irish Securities Laws" means Irish Prospectus Law, the Irish
Companies Acts, 1963 to 2005, the Central Bank Acts, 1942-1999, the Investment
Intermediaries Act, 1995 (as amended) and any regulations made thereunder (as
each of these may be amended or supplemented from time to time).
(d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Parent, the Company
and Vasogen, Corp. and the consummation by the Parent, the Company and Vasogen,
Corp. of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants and the Guarantees and
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation, any
capital stock of the Parent or any of its Subsidiaries, the Bylaws or any of the
organizational documents of the Parent or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Parent or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws or Canadian
Securities Laws and regulations and the rules and regulations (A) of the Toronto
Stock Exchange (the "TSX") and (B) either of Nasdaq National Market ("Nasdaq")
or The Nasdaq Small Cap Market ((A) and (B) collectively, the "Principal
Markets" and each individually, a "Principal Market")) applicable to the Parent
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, except in the case of clauses (ii)
and (iii) above, any breach or default that would not have a Material Adverse
Effect.
(e) Consents. Except as set forth on Schedule 3(e), none of the Parent
nor any of its Subsidiaries is required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof, except for the following consents, authorizations,
orders, filings and registrations (none of which is required to be filed or
obtained before the Closing): (i) the filing by the Parent of a listing
application and a notice for acceptance of a private placement for the
Conversion Shares and Warrant Shares with the Principal Markets, which shall be
done pursuant to the rules of the Principal Markets, (ii) as may be required
under the 1933 Act, the "Blue Sky" laws of various states or the rules and
regulations thereunder in connection with the transactions contemplated by the
Registration Rights Agreement and (iii) any notices or filings required to be
given or made with TSX and Nasdaq, which have been or will be given or made on a
timely basis by the Parent. The Parent and its Subsidiaries are unaware of any
facts or circumstances that might prevent the Parent from obtaining or effecting
any of the registration, application or filings pursuant to the preceding
sentence. The Parent is not in violation of the listing requirements of either
of the
-9-
Principal Markets and has no knowledge of any facts that would reasonably lead
to delisting or suspension of the Common Shares in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Each of
the Parent, the Company and Vasogen, Corp. acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is not (i) an officer or director of the Parent or
the Company, (ii) to the knowledge of each of the Parent and its Subsidiaries,
an "affiliate" of the Parent or any of its Subsidiaries (as defined in Rule 144
under the 1933 Act) or (iii) to the knowledge of each of the Parent and its
Subsidiaries, a "beneficial owner" of more than 10% of the shares of Common
Shares (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")). Each of the Parent, the Company and Vasogen,
Corp. further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Parent or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. Each of the Parent, the Company and Vasogen, Corp.
further represents to the Buyer that the Parent's, the Company's and Vasogen,
Corp.'s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by each of them and their representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Parent
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(including any within the meaning of Regulation D) in connection with the offer
or sale of the Securities in the United States or elsewhere or to any United
States citizen or resident. The Company shall be responsible for the payment of
any placement agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by the Buyer or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it has
engaged XX Xxxxx & Co., LLC as placement agent (the "Agent") and any co-agents
that the Agent may engage pursuant to the Engagement Letter dated as of June 24,
2005 by and between the Agent and the Parent in connection with the sale of the
Securities. Other than the Agent, and the co-agents referred to above, if
applicable, neither the Parent nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Parent, its Subsidiaries, any
of their affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Parent or any of its Subsidiaries for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Parent are
listed or designated. None of the Parent, its Subsidiaries, their affiliates or
any Person acting on their behalf will take any action or steps
-10-
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Parent understands and acknowledges that the
number of Conversion Shares issuable upon conversion, amortization and/or
redemption of the Notes and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Parent further acknowledges
that its obligation to issue Conversion Shares upon conversion, amortization
and/or redemption of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Transaction Documents and the Warrants is, in
each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Parent.
(j) Application of Takeover Protections; Rights Agreement. The Parent
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's Articles of Incorporation which is or
could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Parent's or
any of its Subsidiaries' issuance of the Securities and the Buyer's ownership of
the Securities. Except as set forth on Schedule 3(j), the Parent has not adopted
a shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Shares or a change in control of the Company.
(k) SEC-CSA Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC and the
Canadian Securities Administrators (the "CSA") pursuant to the reporting
requirements of the 1934 Act and the Canadian Securities Laws (all of the
foregoing filed during the two-year period prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC-CSA Documents"). The Parent has delivered to the Buyer or their
respective representatives true, correct and complete copies of the SEC-CSA
Documents not available on the XXXXX and SEDAR systems, if any. As of their
respective dates, the SEC-CSA Documents complied in all material respects with
the requirements of the 1934 Act and the Canadian Securities Laws and the rules
and regulations of the SEC and the CSA promulgated thereunder applicable to the
SEC-CSA Documents, and none of the SEC-CSA Documents, at the time they were
filed with the SEC or the CSA as applicable, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Parent included in the SEC-CSA Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and the CSA with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles in Canada, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary
-11-
statements) and fairly present in all material respects the financial position
of the Parent as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(l) Absence of Certain Changes. Since November 30, 2004, there has been
no undisclosed material adverse change and no undisclosed material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Parent or the Parent and
its Subsidiaries, taken as a whole. Except as disclosed in Schedule 3(l), since
November 30, 2004, neither the Parent nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $500,000 outside of the ordinary course of business or
(iii) had capital expenditures outside of the ordinary course of business,
individually or in the aggregate, in excess of $500,000. Neither the Parent nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Parent, the Company or Vasogen, Corp. have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Except as disclosed in Schedule 3(l), the Parent,
individually, and the Parent and its respective Subsidiaries, taken as a whole,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), "Insolvent" means, with respect to
any Person (as defined in Section 3(s)), (i) the present fair saleable value of
such Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature, (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted or (v) such Person is "unable to pay its debts"
(as such term is defined in Section 214 of the Irish Companies Act, 1963 (as
amended by Section 2(3) of the Companies (Amendment) Act, 1990)).
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur with respect to the Parent or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Shares on the date
hereof and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Parent nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or their organizational charter or certificate of
incorporation or Bylaws, respectively. Neither the Parent nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Parent or its Subsidiaries,
except for which an acceptance or consent has been obtained, and neither the
Parent nor any of its Subsidiaries will conduct its business in violation of any
of the foregoing, except for possible violations that would not, individually or
in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Parent is not in violation of any of the rules,
-12-
regulations or requirements of either of the Principal Markets and has no
knowledge of any facts or circumstances that would reasonably be expected to
lead to delisting or suspension of the Common Shares by either of the Principal
Markets in the foreseeable future. Since December 17, 2003, (i) the Common
Shares have been designated for quotation on the Principal Markets, (ii) trading
in the Common Shares has not been suspended by the SEC, the CSA or either of the
Principal Markets and (iii) the Parent has received no communication, written or
oral, from the SEC, the CSA or either of the Principal Markets regarding the
suspension or delisting of the Common Shares from the Principal Markets. The
Parent and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Parent nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit. The Parent is a reporting issuer
not in default of any requirements under the applicable Canadian Securities Laws
and eligible to use the Short Form Prospectus System, established under National
Instrument 44-101 of the CSA (the "POP System").
(o) Foreign Corrupt Practices. Neither the Parent, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Parent or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Parent or any of its Subsidiaries (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Parent is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC-CSA
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Parent or any of its Subsidiaries is presently a
party to any transaction with the Parent or any of its Subsidiaries (other than
for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Parent or any of its Subsidiaries, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Parent consists of unlimited Common Shares, of which as of the
date hereof, 81,481,250
-13-
Common Shares are issued and outstanding, 3,997,631 Common Shares are issuable
upon the exercise of options outstanding granted under the Parent's stock option
plans, 985,237 Common Shares are issuable upon the exercise of warrants (other
than the Aggregate Warrants) outstanding, 72,856 Common Shares are issuable upon
the exercise of deferred share units outstanding granted under the Parent's
directors' deferred share unit and stock plan, 2,843,925 Common Shares are
reserved for issuance under the Parent's stock option plans, 177,144 Common
Shares are reserved for issuance under the Parent's directors' deferred share
unit and no Common Shares are reserved for issuance pursuant to securities
(other than the Aggregate Notes and the Aggregate Warrants) exercisable or
exchangeable for, or convertible into, Common Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Parent's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Parent and (ii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
set forth in the SEC-CSA Documents or as disclosed in Schedule 3(r), and other
than the Aggregate Notes and the Aggregate Warrants: (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any kind whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Parent or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Parent or any of its Subsidiaries is or may become
bound to issue additional share capital of the Parent or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Parent or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 3(s)) of the Parent or any of its
Subsidiaries or by which the Parent or any of its Subsidiaries is or may become
bound; (iii) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Parent or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which the Parent or any of its Subsidiaries is obligated to
register or qualify the sale of any of their securities under the 1933 Act or
under any applicable Canadian Securities Laws; (v) there are no outstanding
securities or instruments of the Parent or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Parent or any of its Subsidiaries is
or may become bound to redeem a security of the Parent or any of its
Subsidiaries; (vi) the Parent does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (vii)
the Parent and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC-CSA Documents but not so disclosed in the SEC-CSA
Documents, other than those incurred in the ordinary course of the Parent's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or could not reasonably be expected to have a Material Adverse
Effect. The Parent has made available to the Buyer true, correct and complete
copies of the Parent's and its Subsidiaries' Articles of Incorporation or other
organizational documents, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Parent's and its Subsidiaries' bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Shares and the material rights of the holders thereof in respect thereto.
-14-
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Parent nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Parent's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with generally accepted accounting principles
(other than trade payables and related accrued liabilities entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; references to Indebtedness of the
Parent or the Company shall mean Indebtedness on a consolidated basis; (y)
"Contingent Obligation" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by either of
the Principal Markets, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Parent
or any of its Subsidiaries, threatened against or affecting the Parent or any of
its Subsidiaries, the Common Shares or any of the Parent's or its Subsidiaries'
officers or
-15-
directors in their capacity as such which, individually or in the aggregate, if
determined adversely to the Parent or any of its Subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
(u) Insurance. The Parent and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Parent believes to be prudent and
customary in the businesses in which the Parent and its Subsidiaries are
engaged. Neither the Parent nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to insure its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or union
contract. The Parent and its Subsidiaries believe that their relations with
their employees are good. No executive officer of the Parent or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Parent
or any such Subsidiary that such officer intends to leave the Parent or any such
Subsidiary or otherwise terminate such officer's employment with the Parent or
any such Subsidiary. To the knowledge of the Parent and its Subsidiaries, no
executive officer of the Parent or any of its Subsidiaries, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Parent or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Parent and its Subsidiaries are in compliance with all
United States and Canadian federal, state, provincial, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Parent and its Subsidiaries have good and marketable
title to all real property and good and valid title to all personal property
owned by them which is material to the business of the Parent and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Parent and any of its Subsidiaries or as could not reasonably be expected to
have a Material Adverse Effect. Any real property and facilities held under
lease by the Parent or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made and proposed to be made of such property and buildings by the
Parent and its Subsidiaries or as could not reasonably be expected to have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Parent and its Subsidiaries own
or have licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, formulas, trade secrets, licenses,
approvals, governmental authorizations and other intellectual property rights
necessary to conduct their respective businesses as now conducted ("Intellectual
-16-
Property Rights"). Except as set forth in Schedule 3(x), none of the Parent's or
its Subsidiaries' Intellectual Property Rights have expired, terminated or have
been abandoned, or are expected to expire, terminate or be abandoned, within
three years from the date of this Agreement. Neither the Parent nor any of its
Subsidiaries has any knowledge of any infringement by the Parent or any of its
Subsidiaries of Intellectual Property Rights of others, which infringement could
reasonably be expected to have a Material Adverse Effect. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Parent or
its Subsidiaries, being threatened against the Parent or any of its Subsidiaries
regarding any of their Intellectual Property Rights. Neither the Parent nor the
Company is aware of any facts or circumstances which might reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings. The Parent and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights, except for public disclosure in the U.S. Patent
and Trademark Office (and foreign equivalents).
(y) Environmental Laws. The Parent and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all United States, Irish and Canadian federal, state, provincial, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Parent
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Parent or such
Subsidiary.
(aa) Tax Status. Except as set forth in Schedule 3(aa), the Parent and
each of its Subsidiaries (i) has made or filed all material foreign, United
States and Canadian federal, state and provincial income and all other material
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and none of the officers of the Parent nor the officers of its Subsidiaries know
of any reasonable basis for any such claim.
-17-
(bb) Internal Accounting and Disclosure Controls. The Parent and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Parent maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Parent in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Parent in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Parent's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(cc) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Parent and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Parent in
its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) Ranking of Notes. No Indebtedness of the Company is senior to the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise. No
Indebtedness of the Parent is senior to the Parent Guaranty whether with respect
of payment of redemptions, interest, damages or upon liquidation or dissolution
or otherwise. No Indebtedness of Vasogen, Corp. is senior to the Subsidiary
Guaranty whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
(ee) Shares Freely Tradeable. The Conversion Shares and the Initial
Warrant Shares will be freely tradeable under applicable Canadian laws on the
TSX from and after February 8, 2006, other than restrictions applicable in the
context of a "control distribution" as defined for the purposes of Canadian
Securities Laws.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the Buyer
hereunder will be, or will have been, fully paid or provided for by the Company
and/or the Parent (as the case may be), and all laws imposing such taxes will be
or will have been complied with.
(gg) Manipulation of Price. Neither the Parent nor the Company has, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Parent to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
-18-
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Parent.
(hh) Canadian Prospectus. The Parent (i) is qualified pursuant to
National Instrument 44-102, Alternative Forms of Prospectus ("NI44-102"), to
file a base shelf prospectus, and (ii) is entitled to include in such a
prospectus all of the Registrable Securities (as defined in the Registration
Rights Agreement).
(ii) Disclosure. Each of the Parent, the Company and Vasogen, Corp.
confirms that neither it nor any other Person acting on its behalf has provided
the Buyer or its agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. Each
of the Parent, the Company and Vasogen, Corp. understands and confirms that the
Buyer will rely on the foregoing representations in effecting transactions in
the Securities. All disclosure provided to the Buyer regarding the Parent and
its Subsidiaries, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Parent or its Subsidiaries is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Parent or its Subsidiaries during the twelve (12) months preceding the date of
this Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Parent or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Parent but which
has not been so publicly announced or disclosed.
(jj) Vasogen, Corp. Vasogen, Corp. is not a party to any contract or
agreement material to the Parent and Vasogen, Corp., taken as a whole or
material to the Parent and its Subsidiaries, taken as a whole.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company and the Parent each agree to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company and
the Parent each shall, on or before the Closing Date, take such action as such
party shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Buyer at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date. Each of the Company and the Parent shall make all filings and
reports relating to the offer and sale of the Securities
-19-
required under applicable securities or "Blue Sky" laws of the states of the
United States and the applicable Canadian Securities Laws and applicable
requirements of the TSX following each such Closing Date.
(c) Reporting Status. Until the date on which the Buyer shall have sold
at least 90% of the Conversion Shares and Warrant Shares and none of the Notes
or Warrants is outstanding (the "Reporting Period"), the Parent shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
the CSA under applicable Canadian Securities Laws, and the Parent shall continue
to timely file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise no longer require such filings and will
remain in good standing under Canadian Securities Law and eligible to use the
POP System. The Buyer shall promptly notify the Parent of the occurrence of the
events causing the cessation of the Parent's obligations hereunder.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Notes and Initial Warrants for the repayment of intercompany debt to Parent
previously incurred for purposes of research and development activities and for
future research and development activities by the Company and/or the Parent as
well as for general corporate purposes. The Company will not use the proceeds
from the sale of the Notes and Initial Warrants for the (i) repayment of any
other outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Parent agrees to send the following to
the Buyer during the Reporting Period (i) unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 40-F or Form 20-F, any Current Reports on Form 6-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information
made available or given to the shareholders of the Parent generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used herein "Business Day" means any day other than a Saturday,
Sunday, or other day on which commercial banks in New York City are authorized
or required by law to remain closed.
(f) Listing. The Parent shall promptly secure the listing of all of the
Conversion Shares and Initial Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Notes and the Warrants. The Parent shall maintain the
Common Shares' listing or authorization for quotation on each of the Principal
Markets. Neither the Parent nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Shares on either of the Principal Markets; provided, however, that
the Parent makes no covenant regarding the trading price of the Common Shares.
The Parent shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company shall
pay an expense allowance to Kings Road Investments Ltd. (a Buyer) or its
designee(s) (in addition to
-20-
any other expense amounts paid to the Buyer prior to the date of this Agreement)
to cover expenses reasonably incurred by Kings Road Investments Ltd. or any
professionals engaged by Kings Road Investments Ltd. in relation to due
diligence and investment documentation, in an amount not to exceed $70,000 (in
addition to any other expense amounts paid to the Buyer prior to the date of
this Agreement), which amount shall be withheld by Kings Road Investments Ltd.
from its Purchase Price at the Closing in satisfaction of the Company's payment
obligation. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or broker's commissions (other than for
Persons engaged by the Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by a Holder (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and neither the Buyer nor its successor or assign thereof
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Buyer.
(i) Disclosure of Transactions and Other Material Information. On the
first Business Day following the date of this Agreement, the Parent shall file a
Current Report on Form 6-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (but excluding all schedules to this Agreement, assuming no material
non-public information is contained in such schedules), the form of each of the
Notes, the Warrants, the Registration Rights Agreement and the Guarantees) as
exhibits to such filing (including all attachments, the "6-K Filing") and a
material change report on Form 51-102F3 in accordance with National Instrument
51-102 of the CSA with respect thereto (the "Material Change Report"). Upon the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA, the Buyer shall not be in possession of any material, nonpublic information
received from the Parent or any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing and the Material Change Report. The Parent shall not, and shall cause
each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide the Buyer with any material, nonpublic
information regarding the Parent or any of its Subsidiaries from and after the
6-K Filing with the SEC and the filing of the Material Change Report with the
CSA without the express written consent of the Buyer. If, after the deadline for
the 6-K Filing set forth above, the Buyer has, or reasonably believes it has,
received any such material, nonpublic information regarding the Parent or any of
its Subsidiaries, it shall provide the Parent with written notice thereof. The
Parent shall, within five (5) Trading Days of receipt of such notice except
pursuant to Allowable
-21-
Grace Periods under the Registration Rights Agreement, make public disclosure of
such material, nonpublic information. In the event of a breach of the foregoing
covenant by the Parent, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Parent, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Buyer shall not have
any liability to the Parent, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Parent nor the Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, that the Parent shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 6-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Buyer shall be consulted by the Parent in connection with any such press release
or other public disclosure prior to its release). Without the prior written
consent of the Buyer, which shall be deemed to have been received in respect of
the filing of the Transaction Documents with the 6-K Filing and the filing of
the Material Change Report, neither the Parent nor any of its Subsidiaries shall
disclose the name of the Buyer in any filing, announcement, release or otherwise
other than in a prospectus for the resale of the Conversion Shares, to which
consent is deemed given hereby or as otherwise required by law to specifically
name the Buyer.
(j) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, neither the Company nor the Parent shall, directly or
indirectly, redeem, repurchase, or otherwise acquire for value or declare or pay
any dividend or distribution on, the Common Shares without the prior express
written consent of the holders of Notes representing not less than a majority of
the aggregate principal amount of the then outstanding Notes. Notwithstanding
the foregoing, nothing herein shall prevent the Company or the Parent from
satisfying its obligations under the Aggregate Notes and the Aggregate Warrants.
(k) Additional Notes; Variable Securities; Dilutive Issuances. So long
as the Buyer or any Other Buyer beneficially owns any Notes or Other Notes, as
applicable, the Company shall not issue any Notes or Other Notes other than to
the Buyers as contemplated by this Agreement or the Other Purchase Agreements,
as applicable, and neither the Company nor the Parent shall issue any other
securities that would cause a breach or default under the Notes or Other Notes,
as applicable, while such Notes or Other Notes are outstanding. Until the
earlier of three (3) years from the Closing and the date the Buyer or any Other
Buyer no longer beneficially own any Securities, neither the Company nor the
Parent shall, in any manner, issue or sell any rights, warrants or options
(other than the Aggregate Notes and Aggregate Warrants) (i) to subscribe for or
purchase Common Shares or (ii) which are directly or indirectly convertible into
or exchangeable or exercisable for Common Shares, in each of cases (i) and (ii),
at a price which varies or may vary with the market price of the Common Shares,
including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price. Until the Effectiveness Date (as defined
in the Registration Rights Agreement), neither the Company nor the Parent shall,
in any manner, enter into or effect any Dilutive Issuance (as defined in the
-22-
Notes).
(l) Corporate Existence. So long as the Buyer beneficially owns any
Notes or Warrants, neither the Company nor the Parent shall be party to any
Fundamental Transaction (as defined in the Notes) unless the Company and the
Parent, as applicable, is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(m) Reservation of Shares. The Parent shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the Closing Date, the maximum number of shares of Common Shares issuable upon
conversion, amortization and/or redemption of all of the Notes and shares of
Common Shares issuable upon exercise of the Warrants.
(n) Conduct of Business. The business of the Company, the Parent and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than the Aggregate Notes, Aggregate Warrants or Options)
convertible into or exercisable or exchangeable for shares of Common
Shares.
(2) "Options" means any rights, warrants (other than the
Aggregate Warrants) or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.
(3) "Common Share Equivalents" means, collectively, Options and
Convertible Securities.
(ii) As long as 15% of the original principal amount of the Notes
issued at the Closing are outstanding, from the Closing Date until the eighteen
month anniversary of the Closing Date, the Parent will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Shares or Common Share Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement")
unless the Parent shall have first complied with this Section 4(o)(ii).
(1) The Parent shall deliver to the Buyer by facsimile a written
notice (the "Offer Notice") of any proposed or intended issuance or sale
or exchange
-23-
(the "Offer") of the securities being offered (the "Offered Securities")
in a Subsequent Placement within one Business Day of the determination
of the terms of such Subsequent Placement, which Offer Notice shall (x)
identify and describe the Offered Securities, (y) describe the price
range and other terms upon which they are expected to be issued, sold or
exchanged, and the number or amount of the Offered Securities expected
to be issued, sold or exchanged and (z) offer to issue and sell to or
exchange with the Buyer (which offer being non-transferable to any
successor to or transferee of the Buyer) a pro rata portion of 35% of
the Offered Securities allocated among the Buyer and the Other Buyers
(collectively, the "Buyers") including (a) those based on such Person's
pro rata portion of the aggregate principal amount of Notes purchased
hereunder and pursuant to the Other Purchase Agreements (the "Basic
Amount"), and (b) if the Buyer elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic
Amounts of Other Buyers as the Buyer shall indicate it will purchase or
acquire should the Other Buyers subscribe for less than their Basic
Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, the Buyer must
deliver a written notice to the Company prior to the end of the first
(1st) full Business Day after the Buyer's receipt of the Offer Notice
(for purposes of this Section 4(o)(ii)(2), notwithstanding the
provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received
such Offer Notice (the "Offer Period"), setting forth the portion of the
Buyer's Basic Amount that the Buyer elects to purchase and, if the Buyer
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that the Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be deemed to have elected to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such
Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Parent to the extent it deems reasonably necessary.
(3) The Parent shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only upon terms and conditions (including, without limitation, unit
prices and interest rates within the range specified in the Offer) that
are not more favorable to the acquiring person or persons or less
favorable to the Parent than those set forth in the Offer Notice.
(4) In the event the Parent shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in
-24-
Section 4(o)(ii)(3) above), then each Buyer may, at its sole option and
in its sole discretion, subject to the following sentence, reduce the
number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount
of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(o)(ii)(2) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Parent
actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section
4(o)(ii)(3) above prior to such reduction) and (ii) the denominator of
which shall be the original amount of the Offered Securities. In the
event that the Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Parent may not
issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(ii)(1) above.
Provided that the Buyer has been advised by the Parent electronically or
by telephone (with verbal confirmation of receipt) by 5:00pm New York
Time, the Buyer must make its election to reduce referred to above no
later than 8:00am New York Time the following Business Day.
(5) Upon the closing of the issuance, sale or exchange of all or
less than all of the Offered Securities, the Buyers shall acquire from
the Parent, and the Parent shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(o)(ii)(4) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all cases
to (i) the preparation, execution and delivery by the Parent and the
Buyers of a purchase agreement relating to such Offered Securities
substantially in the form negotiated with the purchasers of the Offered
Securities other than the Buyers but reasonably satisfactory in form and
substance to the Buyers and their respective counsel, (ii) the Buyers'
satisfaction, in their sole discretion, with both (I) the final price
and (II) the substantive final terms and/or conditions that differ from
those contained in the Offer Notice, and (iii) the Buyers' reasonable
satisfaction with the identity of the other persons or entities to which
the Offered Securities will be sold.
(6) Any Offered Securities not acquired by the Buyers or other
Persons in accordance with this Section 4(o)(ii) may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(iii) The restrictions contained in subsection (ii) of this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities
(as defined in the Notes or securities issued in connection with (A) any public
offering or (B) any offering of securities convertible into Common Shares
pursuant to Rule 144A under the 1933 Act).
(p) Holding Period. For the purposes of Rule 144 and applicable
Canadian Securities Laws, the Company acknowledges that the holding period of
the Conversion Shares may be tacked onto the holding period of the Notes and the
Parent and the Company agree not to take a position contrary to this Section
4(p).
-25-
(q) Letter of Credit.
(i) On or prior to the Closing Date, the Company shall obtain an
irrevocable letter of credit (the "Letter of Credit"), in the amount of
$10,000,000 issued in favor of Kings Road Investments Ltd. (the "LC Agent") by a
bank acceptable to such LC Agent (the "Letter of Credit Bank") and in form and
substance acceptable to such LC Agent. Subject to the last three sentences of
this Section (q)(i), the Letter of Credit shall expire not earlier than 91 days
after the Maturity Date of the Notes (the "LC Expiration Date"). Upon the
occurrence and during the continuance of an Event of Default under (and as
defined in) any of the Aggregate Notes, the LC Agent shall be entitled to draw
under the Letter of Credit for the full Letter of Credit Amount (as defined in
the Aggregate Notes) then available thereunder, it being understood that the LC
Agent shall act for the benefit of the Buyers on a pro rata basis based on the
principal amount of the Aggregate Notes held by each of the Buyers and hold such
amount as collateral security for the obligations under the Aggregate Notes for
the benefit of the Buyers. The Company shall obtain such renewals, extensions or
replacements of the Letter of Credit as necessary to ensure that the Letter of
Credit shall not expire prior to the LC Expiration Date (unless the Letter of
Credit shall have been reduced to zero in accordance with the terms contained in
this Section 4(q) prior to such date). If, at any time, the Company cannot
obtain a renewal, extension or replacement of the Letter of Credit such that the
Letter of Credit will expire prior to the LC Expiration Date (a "Withdrawal
Event"), the Company and the Letter of Credit Bank shall each give the LC Agent
written notice of the occurrence of a Withdrawal Event at least forty-five (45)
days prior to the then current expiration date of the Letter of Credit.
Following a Withdrawal Event, the LC Agent shall be entitled to draw down the
Letter of Credit Amount in its entirety (whether or not an Event of Default
shall have occurred or be continuing under any of the Notes) and hold such
amount as collateral security for the obligations under the Notes for the
benefit of the Buyers.
(ii) If more than $23 million of the Aggregate Notes are converted,
redeemed or amortized pursuant to the terms of the Aggregate Notes, the Company
shall promptly deliver a notice to the LC Agent (the "LC Reduction Notice"),
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal one-half of
the difference between $17 million and the aggregate principal amount of the
Aggregate Notes then outstanding. After delivery of the initial LC Reduction
Notice, if the outstanding principal amount of the Aggregate Notes has been
reduced by $2 million or more from the time of the prior LC Reduction Notice,
the Company may deliver a subsequent LC Reduction Notice to the LC Agent
certifying as to the occurrence of such event, the aggregate principal amount
then outstanding under the Aggregate Notes, and the amount by which the Letter
of Credit Amount shall be reduced, such reduction amount to equal the difference
between (A) one-half of the difference between (i) $17 million and (ii) the
aggregate principal amount of the Aggregate Notes then outstanding and (B) the
aggregate amount of any prior reductions of the Letter of Credit Amount. Within
10 days of the receipt of any such LC Reduction Notice, the LC Agent shall issue
a written instruction to the Letter of Credit Bank to request the reduction of
the Letter of Credit Amount to the Company as set forth in the LC Reduction
Notice.
-26-
(iii) If the Company obtains FDA Approval (as defined in the Notes),
the Company shall promptly deliver a written notice to the LC Agent (the "Letter
of Credit Notice"), certifying as to the occurrence of such event and a copy of
such FDA Approval. Within 10 days of the receipt of the Letter of Credit Notice,
the LC Agent shall issue a written instruction to the Letter of Credit Bank to
request the release and return of the Letter of Credit Amount to the Company.
(iv) Notwithstanding the foregoing, if the LC Agent reasonably
disagrees with the contents of either a LC Reduction Notice or a Letter of
Credit Notice or the Company disagrees with any action taken or omitted to be
taken by the LC Agent, such party shall use the dispute resolution procedures
contained in Section 25 of the Notes.
(v) Kings Road Investments Ltd. is xxxxxx appointed as the LC Agent
for the Buyer hereunder, and the Buyer hereby authorizes the LC Agent (and its
officers, directors, employees and agents) to take any and all such actions on
behalf of the Buyer with respect to the Letter of Credit in accordance with the
terms of this Agreement. The LC Agent shall not have, by reason hereof or any of
the other Transaction Documents, a fiduciary relationship in respect of the
Buyer. Neither the LC Agent nor any of its officers, directors, employees and
agents shall have any liability to the Buyer for any action taken or omitted to
be taken in connection hereof except to the extent caused by its own gross
negligence or willful misconduct, and the Buyer agrees to defend, protect,
indemnify and hold harmless the LC Agent and all of its officers, directors,
employees and agents (collectively, the "Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) (the "Losses") incurred by such Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of the LC Agent
pursuant hereto; provided, however, that the Buyer shall not be required to
indemnify the Indemnitees to the extent any such Losses are the result of the LC
Agent's fraud or willful misconduct.
(r) Trading Restrictions. Neither the Buyer, nor any affiliate of the
Buyer that is controlled by the Buyer or is otherwise aware of this restriction,
may purchase, sell or enter into any put option, short position or similar
arrangement with respect to securities of the Parent that violates Current
Securities Laws or otherwise trade in the securities of the Parent in violation
of applicable Current Securities Laws. In addition, during each Company
Conversion Measuring Period (as defined in the Notes) neither the Buyer, nor any
affiliate of the Buyer that is controlled by the Buyer or is otherwise aware of
this restriction, may engage in a Restricted Activity other than the sale of
Common Shares received upon a Company Conversion (as defined in the Notes), upon
a conversion, amortization or redemption of Notes pursuant to Section 3 of the
Notes, upon exercise of any Warrants, or the transfer of any Notes or Warrants
as permitted by their terms. "Restricted Activity" means, (a) any Acquisition or
Disposition, in open market transactions of (i) any Common Shares or (ii) any
securities convertible into or exchangeable for or derivative of Common Shares
and (b) any other action taken intentionally for the purpose of manipulating the
price of Common Shares. "Acquisition" means any direct or indirect voluntary
acquisition or purchase (other than by merger, consolidation, combination,
recapitalization or other reorganization, or by operation of law). "Disposition"
means any direct or indirect voluntary sale, or monetization, including through
a Subsidiary or by means of an equity offering by any
-27-
such Subsidiary, but shall not include, any of the actions contemplated by
Section 4(h) or any disposition thereunder. "Current Securities Laws" means the
rules and regulations, existing on the date hereof, of the 1933 Act, the 1934
Act and the Canadian Securities Laws, in each case as are set forth in currently
disseminated interpretations by the SEC or the CSA, as applicable, in writing,
through rules, regulations, releases, no-action letters or published telephone
interpretations.
(s) Acknowledgement Regarding Buyer's Trading Activity. Subject to
Section 4(r) of this Agreement, it is understood and agreed by the Parent and
the Company (i) that, to the knowledge of the Parent, the Buyer has not been
asked to agree, nor has the Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Parent, or "derivative" securities based on
securities issued by the Parent or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the Buyer,
including, without limitation, Short Sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Parent's publicly-traded securities;
(iii) that the Buyer, and counter parties in "derivative" transactions to which
the Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Shares or an economically comparable position; and (iv)
that, to the knowledge of the Parent, the Buyer shall not be deemed to have any
affiliation with or control over any arm's length counter party in any
"derivative" transaction. Subject to Section 4(r) of this Agreement and
notwithstanding any other provisions of this Agreement and the provisions of the
Transaction Documents, the Parent further understands, acknowledges and agrees
that (a) the Buyer may engage in hedging and/or trading activities at any time
during the period that the Securities are outstanding, including, without
limitation, during the periods that the number and/or value of the Conversion
Shares deliverable with respect to Securities are being determined and (b) such
hedging and/or trading activities (if any) could reduce the value of the
existing stockholders' equity interests in the Parent both at and after the time
that the hedging and/or trading activities are being conducted. The Parent and
the Company acknowledge that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.
(t) Subsidiaries; Guaranty. To the extent any Subsidiary of the Parent
that comes into existence after the date hereof has assets transferred into it
having a fair market value of $1,000,000, individually, or $5,000,000 in the
aggregate, each such Subsidiary shall promptly enter into a guarantee
substantially in the form attached hereto as Exhibit D-2.
(u) Amendment to Other Security Purchase Agreements. Neither the
Company nor the Parent shall amend any of the Other Purchase Agreements without
first offering the same terms to the Buyer hereunder.
(v) No Conflicts with Irish Law. The Parent and the Company covenant
and agree that:
(i) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Section 60 nor Section 286 of the Irish Companies Act, 1963.
-28-
(ii) The execution, delivery and performance of the Transaction
Documents to which the Company is or is to be a party and the consummation by
the Company of the transactions contemplated hereby and thereby shall not
contravene Part XI of the Irish Companies Act, 1990.
(w) Change to DTC Brokerage Account Information. If the Buyer seeks at
any time to make any changes to the DTC brokerage account information which the
Buyer has provided pursuant to Section 6(d) hereof, the Buyer shall deliver to
the Parent a new form, substantially in the form of Exhibit E, setting forth
revised DTC brokerage account information. The Parent shall be obligated to use,
beginning no later than five (5) Business Days after receipt thereof, such
revised DTC brokerage account information for any delivery of Common Shares
required under the Transaction Documents.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company and the Parent shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to each holder of Securities), a register for the Notes
and the Warrants, as applicable, in which the Company and the Parent shall
record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion, amortization and/or redemption of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company and the Parent shall keep the register open and available at
all times during business hours for inspection by the Buyer or its legal
representatives.
(b) Transfer Agent Instructions. The Parent shall issue treasury
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion, amortization or redemption of the Notes or exercise of the
Warrants in such amounts as specified from time to time by the Buyer to the
Parent or by the Parent, as the case may be, upon conversion, amortization
and/or redemption of the Notes or exercise of the Warrants substantially in the
form attached as Exhibit I to the Notes and Warrants, respectively (the
"Treasury Instructions"). The Parent warrants that no instruction other than the
Treasury Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Parent
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Parent and the Company as and to
the extent provided in this Agreement and the other Transaction Documents. If
the Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f) and the other provisions of the Transaction Documents, subject
to Section 9(s), the Parent and the Company shall permit the transfer and, in
the case of a transfer of Common Shares, the Parent shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by the Buyer to effect such sale, transfer or assignment. In the event
that such sale, assignment or transfer involves Conversion Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 or Rule 904, subject to Section 9(s),
-29-
the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. Each of the
Parent and the Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer. Accordingly, the Parent and
the Company acknowledge that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Parent or the Company of the provisions of this
Section 5(b), that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S AND THE PARENT'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the obligation of the Parent to issue the Initial Warrants to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's and the Parent's sole benefit and may be waived by the Company and the
Parent at any time in their sole discretion by providing the Buyer with prior
written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company and the Parent.
(b) The Buyer and each other Buyer shall have delivered to the Company
the Purchase Price (less, in the case of Kings Road Investments Ltd., the
amounts withheld pursuant to Section 4(g)) for the Notes and the Other Notes and
the Warrants and the Other Warrants being obtained by the Buyers at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
(d) The Buyer shall have completed and delivered to the Parent the DTC
brokerage account information form with respect to the Buyer in substantially
the form of Exhibit E attached hereto.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Notes and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer's sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
-30-
(a) The Company shall have duly executed and delivered to the Buyer:
(A) the Notes (in such principal amounts as the Buyer shall request) being
obtained by the Buyer at the Closing pursuant to this Agreement and (B) to the
extent it is a party thereto, each of the other Transaction Documents.
(b) The Parent shall have duly executed and delivered to the Buyer: (A)
the Warrants (in such allocations as the Buyer shall request) being received by
the Buyer at the Closing pursuant to this Agreement; (B) the Parent Guaranty,
and (C) to the extent it is a party thereto, each of the other Transaction
Documents.
(c) Vasogen, Corp. shall have duly executed and delivered to the Buyer:
(A) the Subsidiary Guaranty, and (B) to the extent it is a party thereto, each
of the other Transaction Documents.
(d) The Buyer shall have received the opinion of Lang Xxxxxxxx LLP, the
Parent's outside Canadian counsel, dated as of the Closing Date, in
substantially the form of Exhibit F-1 attached hereto.
(e) The Buyer shall have received the opinion of Xxxxxx X. Xxxxxxx
Solicitors, the Company's outside Irish counsel, dated as of the Closing Date,
in substantially the form of Exhibit F-2 attached hereto.
(f) The Buyer shall have received the opinion of Xxxx, Xxxxx, Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, the Company's outside United States counsel, dated as of
the Closing Date, in substantially the form of Exhibit F-3 attached hereto.
(g) The Parent shall have delivered to the Buyer a certificate of
compliance with the CBCA of the Parent, and the Company shall have delivered to
the Buyer a certificate evidencing the formation and status of the Company in
the Company's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(h) The Parent shall have delivered to the Buyer a certificate
evidencing the Parent's qualification as a foreign corporation (if applicable)
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Parent conducts business and such qualification
is required, as of a date within 10 days of the Closing Date. The Company shall
have delivered to the Buyer a Letter of Status from the Companies Registration
Office in Dublin, Ireland.
(i) The Parent shall have delivered to the Buyer a certified copy of
the Articles of Incorporation of the Parent, and the Company shall have
delivered to the Buyer a certified copy of its Memorandum and Articles of
Association of the Company, in each case as certified by the Secretary of State
(or equivalent) in the applicable jurisdiction of incorporation within ten (10)
days of the Closing Date.
(j) The Parent shall have delivered to the Buyer a certificate,
executed by the Secretary of the Parent and the Company shall have delivered to
the Buyer a certificate, executed by a Director of the Company, in each case
dated as of the Closing Date, as to (i) the resolutions
-31-
consistent with Section 3(b) as adopted by such entity's board of directors in a
form reasonably acceptable to the Buyer, (ii) the Articles of Incorporation, as
in effect at the Closing, of each such entity and (iii) the Bylaws, as in effect
at the Closing, of each such entity in the form attached hereto as Exhibit G.
(k) The representations and warranties of the Company and the Parent
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
and the Parent shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
and/or the Parent, as applicable at or prior to the Closing Date.
(l) The Parent shall have delivered to the Buyer a letter from the
Parent's transfer agent certifying the number of shares of Common Shares
outstanding as of a date within five days of the Closing Date.
(m) The Common Shares (i) shall be designated for quotation or listed
on each of the Principal Markets and (ii) shall not have been suspended, as of
the Closing Date, by the SEC, the CSA or either of the Principal Markets from
trading on the Principal Markets nor shall suspension by the SEC, the CSA or
either of the Principal Markets have been threatened, as of the Closing Date,
either (A) in writing by the SEC, the CSA or either of the Principal Markets or
(B) by falling below the minimum listing maintenance requirements of either of
the Principal Markets.
(n) The Company and the Parent shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(o) There shall be no Indebtedness of the Parent or any of its
Subsidiaries other than Indebtedness which is pari passu with or subordinate to
the Notes and the Guarantees, as applicable, so long as such Indebtedness does
not provide at any time for the payment, prepayment, repayment, redemption,
repurchase or defeasance, directly or indirectly, of any principal or premium,
if any, thereon until 91 days after the Maturity Date (as defined in the Notes)
or later; provided, that (I) the Company, the Parent or Vasogen, Corp. may incur
Indebtedness that is secured by assets purchased with the proceeds of such
Indebtedness, (II) the Parent, the Company or Vasogen, Corp. may incur purchase
money Indebtedness for the purpose of financing the acquisition of equipment to
be acquired or held by the Company, the Parent or Vasogen, Corp. in the ordinary
course of business, provided, that the principal amount of such Indebtedness
shall not materially exceed 80% of the cost of the property so acquired, and
(III) the Company, the Parent and/or Vasogen, Corp. may incur Indebtedness owed
to the Parent or any of its Subsidiaries.
(p) The approval of each of the Principal Markets for the issuance of
the Securities contemplated hereby and conditional listing of the Conversion
Shares and the Warrant Shares shall have been obtained.
-32-
(q) The Company and the Parent shall have delivered to the Buyer such
other documents relating to the transactions contemplated by this Agreement as
the Buyer or its counsel may reasonably request.
(r) The Company shall have obtained and delivered the Letter of Credit
pursuant to the terms of Section 4(q) hereof.
(s) The Company and the Parent shall have entered into one or more
security purchase agreements (the "Other Purchase Agreements") relating to the
sale and purchase of securities on substantially identical terms to this
Agreement, that provide for the aggregate sale (when combined with this
Agreement) of $40,000,000 in aggregate principal amount of Aggregate Notes and
Aggregate Warrants.
8. TERMINATION.
In the event that the Closing shall not have occurred on or before ten
(10) Business Days from the date hereof due to the Company's, the Parent's or
the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, that
if this Agreement is terminated pursuant to this Section 8 due to any breach of
a representation, warranty, covenant or agreement by the Company or the Parent,
the Company shall remain obligated to reimburse the non-breaching Buyer for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company, the Parent and Vasogen, Corp. have appointed CT
Corporation System, with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as their agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
-33-
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyer, the Parent, the Company,
Vasogen, Corp., their affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, none of the Parent, the Company, Vasogen, Corp. or the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Parent, the Company, Vasogen, Corp. and the
holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on the Buyer and
holders of Securities, as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
the Buyer relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
-34-
If to the Company:
Vasogen Ireland Limited
Xxxxxxx Airport House
Shannon
Co. Clare
Ireland
Telephone: 000-00-000-000
Facsimile: 353-1-886-9359
Attention: Mr. Xxxxx Xxxxxxx, Director
With a copy (for informational purposes only) to:
Vasogen Inc.
Vasogen, Corp.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer: xxxxxxxx@xxxxxxx.xxx;
and
Vice President, Corporate & Legal Affairs:
xxxxxxx@xxxxxxx.xxx;
and for purposes of the Note, the Controller:
xxxxx@xxxxxxx.xxx
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
-35-
If to the Parent or Vasogen, Corp.:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer; and
Vice President, Corporate & Legal Affairs
With a copy (for informational purposes only) to:
the Company
(at the address listed above)
Lang Xxxxxxxx LLP
(at the address listed above)
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
(at the address listed above)
If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
If to the Buyer, to its address and facsimile number set forth on the Buyer
Schedule, with copies to the Buyer's representatives as set forth on the Buyer
Schedule,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
-36-
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. None of the Company, the
Parent or Vasogen, Corp. shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate principal amount of Notes issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). The Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by the Buyer of the Notes and Warrants in private transactions in
accordance with the terms thereof, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Parent, the Company, Vasogen, Corp. and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5 and 9 shall survive the Closing.
(j) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars ("US Dollars"). All amounts
owing under this Agreement or any Transaction Document shall be paid in US
Dollars. All amounts denominated in other currencies shall be converted in the
US Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Indemnification. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's and the Parent's other obligations under
the Transaction Documents, the Company
-37-
and the Parent, jointly and severally, shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Securities (other than Persons
holding only Securities purchased in open market transactions) and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any material inaccuracy in any representation or warranty made by the Company,
the Parent or Vasogen, Corp. in the Transaction Documents or any inaccuracy in
any representation or warranty made by the Company, the Parent or Vasogen, Corp.
in the Transaction Documents that is qualified by materiality or Material
Adverse Effect, (b) any breach in any material respect of any covenant,
agreement or obligation of the Company, the Parent or Vasogen, Corp. contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company, the Parent or Vasogen,
Corp.) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of the Buyer or holder of the Securities as an investor in the Company or
the Parent pursuant to the transactions contemplated by the Transaction
Documents; provided, that indemnification pursuant to this clause (iii) shall
not be available to the extent arising primarily from the Buyer's fraud, gross
negligence or willful misconduct. To the extent that the foregoing undertaking
by the Company or the Parent may be unenforceable for any reason, the Company
and the Parent shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. The Buyer and each holder of the Securities (other than
Persons holding only Securities purchased in open market transactions) shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company, the Parent and Vasogen, Corp. recognize that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to
the Buyer. The Company, the Parent and Vasogen, Corp. therefore agree that the
Buyer shall be entitled to seek temporary and permanent injunctive relief in any
such case without the
-38-
necessity of proving actual damages and without posting a bond or other
security.
(o) Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Buyer exercises a right, election, demand or
option under a Transaction Document and the Company, the Parent or Vasogen,
Corp. does not timely perform its related obligations within the periods therein
provided, then the Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, the Parent or Vasogen, Corp.,
as applicable, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
(p) Payment Set Aside. To the extent that the Company, the Parent or
Vasogen, Corp. makes a payment or payments to the Buyer or pursuant to any of
the other Transaction Documents or the Buyer enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
the Parent, Vasogen, Corp., a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, United States or
Canadian federal, state or provincial law, foreign law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Independent Nature of Xxxxx's Obligations and Rights. The
obligations of the Buyer under any Transaction Document are several and not
joint with the obligations of any Other Buyer, under the Other Purchase
Agreements, and the Buyer shall not be responsible in any way for the
performance of the obligations of any Other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by the Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.
(r) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against
the Company, the Parent or Vasogen, Corp. in any court in any jurisdiction it
becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(r) referred to as the "Judgment Currency") an
amount due in US Dollars under this Agreement,
-39-
the conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date: or
(2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section being
hereinafter referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(r)(i)(2) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company, the Parent or Vasogen, Corp.
under this provision shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of this
Agreement.
(s) Opinion to Transfer Agent. Assuming that the Buyer (i) is a
Qualified Institutional Buyer (as such term is defined in Rule 144A under the
1933 Act) (a "QIB") as of the date hereof, (ii) will offer and sell any Common
Shares the Buyer receives upon any conversion, amortization and/or redemption of
a Note (including, without limitation, pursuant to Section 3, 5, 8, 9 or 10 of
the Note) or any exercise of a warrant (including, without limitation, pursuant
to Section 1 of the Warrant) pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act (any such method of offer
and sale, an "Approved Method"), (iii) for purposes of an offer or sale under
Rule 904 under the 1933 Act, is not an affiliate (as such term is defined in
Rule 144 under the 1933 Act) (an "Affiliate") of the Parent as of the date
hereof and (iv) will promptly notify the Parent and the Company if the Buyer
ceases to be a QIB, chooses to offer or sell such Common Shares pursuant to a
method other than an Approved Method, or becomes an Affiliate of the Parent (any
such notice, a "Notice"), then the Parent will direct Xxxx, Xxxxx, Rifkind,
Xxxxxxx & Xxxxxxxx LLP to deliver a standing opinion to the transfer agent in
substantially the form attached to the Transfer Agent Instructions on the
Effectiveness Date. The Buyer covenants that it will comply with clause (iv)
above and represents and warrants that the assumptions set forth in clauses (i)
through (iii) above are true and correct with respect to the Buyer as of the
date hereof, and will continue to be true and correct with respect to the Buyer,
except as set forth in a Notice.
[Signature Page Follows]
-40-
IN WITNESS WHEREOF, the Buyer, the Company, the Parent and Vasogen,
Corp. have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.
SIGNED, SEALED AND DELIVERED BY XXXXX
XXXXXXX AS A DEED FOR AND ON BEHALF OF
VASOGEN IRELAND LIMITED PURSUANT TO A POWER
OF ATTORNEY ----------------------------------
Signature of Witness:
----------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
Occupation:
--------------------------------------
[Signature Page to Securities Purchase Agreement]
VASOGEN INC.
By:
------------------------------------
Name:
Title:
VASOGEN, CORP.
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
SMITHFIELD FIDUCIARY LLC
By:
------------------------------------
Name:
Title:
[Signature Page to Securities Purchase Agreement]
BUYER SCHEDULE
(1) (2) (3) (4) (5) (6)
Aggregate
Principal Number of
Address and Amount of Warrant Legal Representative's Address
Buyer Facsimile Number Notes Shares Purchase Price and Facsimile Number
------------------------------------------------------------------------------------------------------------------------------------
Smithfield Fiduciary c/o Highbridge Capital Management, $3,000,000 250,000 $3,000,000
LLC LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx and
Xxxx X. Xxxxx
Xxxxxxxxx: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of Parent Guaranty
Exhibit D-2 Form of Subsidiary Guaranty
Exhibit E Form of DTC Brokerage Account Information Form
Exhibit F-1 Form of Outside Canadian Counsel Opinion
Exhibit F-2 Form of Outside Irish Counsel Opinion
Exhibit F-3 Form of Outside United States Counsel Opinion
Exhibit G Form of Secretary's Certificate
SCHEDULES
---------
Schedule 2(b) Accredited Investor Certificate
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(j) Rights Plan
Schedule 3(l) Absence of Certain Changes
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(aa) Tax Status
SCHEDULE 2B
ACCREDITED INVESTOR CERTIFICATE
The Purchaser certifies that it/he/she and any beneficial purchaser are each a
resident of Canada or is otherwise subject to the Securities Legislation of
Canada, and the Purchaser or the disclosed beneficial purchaser, as applicable,
is an "accredited investor" as defined in National Instrument 45-106 -
Prospectus and Registration Exemptions ("NI 45-106") and, as at the Closing, the
Purchaser or the beneficial purchaser, as applicable, qualifies as one of more
of the following and acknowledges that the Issuer is relying on this certificate
in determining to sell securities to the undersigned. (Please insert a checkmark
in the box beside each applicable paragraph)
"accredited investor" means
(a) a Canadian financial institution, or a Schedule III bank; |_|
(b) the Business Development Bank of Canada incorporated under |_|
the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or |_|
(b), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to
be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a |_|
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one
or both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
(e) an individual registered or formerly registered under the |_|
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any |_|
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a |_|
metropolitan community, school board, the Comite de gestion
de la taxe scolaire de l'ile de Montreal or an intermunicipal
management board in Quebec;
(h) any national, federal, state, provincial, territorial or |_|
municipal government of or in any foreign jurisdiction, or
any agency of that government;
(i) a pension fund that is regulated by either the Office of the |_|
Superintendent of Financial Institutions (Canada) or a
pension commission or similar regulatory authority of a
jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, |_|
beneficially owns, directly or indirectly, financial assets
having an aggregate realizable value that before taxes, but
net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 |_|
in each of the 2 most recent calendar years or whose net
income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who,
in either case, reasonably expects to exceed that net income
level in the current calendar year;
D-1
(l) an individual who, either alone or with a spouse, has net |_|
assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that |X|
has net assets of at least $5,000,000 as shown on its most
recently prepared financial statements;
(n) an investment fund that distributes or has distributed its |_|
securities only to
(i) a person that is or was an accredited investor at the
time of the distribution,
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(being that (I) the person purchases as principal, (II)
the security has an acquisition cost to the purchaser of
not less than $150,000 paid in cash at the time of the
trade, and (III) the trade is in the security of a
single issuer), and section 2.19 of NI 45-106 (being a
trade by an investment fund in a security of its own
issue to a security holder of the investment fund where
(I) the security holder initially acquired securities of
the investment fund as principal for an acquisition cost
of not less than $150,000 paid in cash at the time of
the trade, (II) the subsequent trade is for a security
of the same class or series as the initial trade, and
(III) the security holder, as at the date of the
subsequent trade, holds securities of the investment
fund that have an acquisition cost of not less than
$150,000 or a net asset value of not less than
$150,000); or
(iii) a person described in paragraph (i) or (ii) that
acquires or acquired securities under section 2.18 of
NI 45-106 [Investment fund reinvestment];
(o) an investment fund that distributes or has distributed |_|
securities under a prospectus in a jurisdiction of Canada for
which the regulator or, in Quebec, the securities regulatory
authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized |_|
to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of
Canada or a foreign jurisdiction, acting on behalf of a fully
managed account managed by the trust company or trust
corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed |_|
by that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction, and
(ii) in Ontario, is purchasing a security that is not a
security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, |_|
in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the
securities legislation of the jurisdiction of the registered
charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is |_|
analogous to any of the entities referred to in paragraphs
(a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, |X|
direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that
are accredited investors;
(u) an investment fund that is advised by a person registered as |_|
an adviser or a person that is exempt from registration as an
adviser; or
D-2
(v) a person that is recognized or designated by the securities |_|
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia after
National Instrument 45-106 comes into force.
The following definitions are included for convenience only; reference
should be had to the applicable legislation:
(a) "director" means
(i) a member of the board of directors of a company or an individual
who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual
who performs functions similar to those of a director of a
company;
(b) "eligibility adviser" means
(i) a person that is registered as an investment dealer or in an
equivalent category of registration under the securities
legislation of the jurisdiction of a purchaser and authorized to
give advice with respect to the type of security being
distributed, and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a
jurisdiction of Canada or a public accountant who is a member
in good standing of an institute or association of chartered
accountants, certified general accountants or certified
management accountants in a jurisdiction of Canada provided
that the lawyer or public accountant must not
(a) have a professional, business or personal relationship with
the issuer, or any of its directors, executive officers,
founders, or control persons, and
(b) have acted for or been retained personally or otherwise as
an employee, executive officer, director, associate or
partner of a person that has acted for or been retained by
the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;
(c) "entity" means a company, syndicate, partnership, trust or
unincorporated organization;
(d) "financial assets" means
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities
legislation;
(e) "fully managed account" means an account of a client for which a
person makes the investment decisions if that person has full
discretion to trade in securities for the account without requiring
the client's express consent to a transaction;
(f) "investment fund" has the same meaning as in National Instrument
81-106 Investment Fund Continuous Disclosure;
(g) "person" includes
(i) an individual,
(ii) a corporation,
(iii) a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether
incorporated or not, and
(iv) an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or other legal
representative;
D-3
(h) "related liabilities" means
(i) liabilities incurred or assumed for the purpose of financing the
acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets;
(i) "spouse" means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the
other individual,
(ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between
individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or
(ii), or is an adult interdependent partner within the meaning
of the Adult Interdependent Relationships Act (Alberta); and
(j) "subsidiary" means an issuer that is controlled directly or
indirectly by another issuer and includes a subsidiary of that
subsidiary.
An issuer is an "affiliate" of another issuer if (i) one of them is the
subsidiary of the other, or (ii) each of them is controlled by the same person.
In National Instrument 45-106 a person (first person) is considered to
"control" another person (second person) if
(i) the first person, directly or indirectly, beneficially owns or
exercises control or direction over securities of the second person
carrying votes which, if exercised, would entitle the first person to
elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an obligation,
(ii) the second person is a partnership, other than a limited partnership,
and the first person holds more than 50% of the interests of the
partnership, or
(iii) the second person is a limited partnership and the general partner
of the limited partnership is the first person.
The foregoing representation, warranty and certificate is true and
accurate as of the date of this certificate and will be true and accurate as of
Closing. If any such representation, warranty or certificate shall not be true
and accurate prior to Closing, the undersigned shall give immediate written
notice of such fact to the Issuer.
Dated: October 6, 2005 Signed: /s/ Xxxx X. Xxxxx
-------------------------
SMITHFIELD FIDUCIARY LLC
_______________________________________ --------------------------------
Witness (If Purchaser is an Individual) Print the name of Purchaser
Xxxx X. Xxxxx, Authorized
Signatory
_______________________________________ --------------------------------
Print Name of Witness If Purchaser is a Corporation,
print name and title of
Authorized Signing Officer
D-4
Exhibit 2a
Vasogen Inc. Guaranty - Kings Road Investments Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen
Inc. (the "Guarantor"), for the benefit of UBS Securities LLC - f/b/o Kings Road
Investments Ltd. (the "Buyer"), which Buyer is party to a securities purchase
agreement, dated as of October 7, 2005 (as such agreement may be amended,
restated or otherwise modified from time to time, the "Securities Purchase
Agreement"), among the Guarantor, Vasogen, Corp., Vasogen Ireland Limited (the
"Company"), and the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, Vasogen, Corp. and
certain other subsidiaries of the Guarantor execute and deliver a guaranty
guaranteeing all of the obligations of the Company under the Transaction
Documents;
WHEREAS, the Guarantor, Vasogen, Corp. and the Company plan to enter into
one or more other securities purchase agreements relating to the sale and
purchase of securities on substantially identical terms as contained in the
Securities Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the
Securities Purchase Agreement, the Notes and the other Transaction Documents,
including, without limitation, all interest that accrues after the commencement
of any insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(b) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(c) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(d) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(b) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of
Default, all present and future indebtedness, obligations, liabilities and
claims of the Company to the Guarantor (the "Postponed Obligations") are hereby
subordinated and postponed to the Guaranteed Obligations (provided, however,
that the Guarantor may take such actions as may be necessary to preserve its
claims against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of
the United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly
called for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
portions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its
successors and assigns, and (ii) inure, together with all rights and remedies of
the Buyer hereunder, to the benefit of the Buyer and its corporate and other
successors, pledgees, transferees and assigns to the extent the Buyer transfers
the corresponding rights and remedies of the Buyer under the Transaction
Documents to such successors, pledgees, transferees or assigns in accordance
with the terms of such Transaction Documents. The Guarantor agrees that each
participant shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the
entire agreement of the Guarantor and the Buyer with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Buyer or the Guarantor relative to the subject matter thereof
not expressly set forth or referred to herein or in the other Transaction
Documents.
(g) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against
the Guarantor in any court in any jurisdiction it becomes necessary to convert
into any other currency (such other currency being hereinafter in this Section
13(h) referred to as the "Judgment Currency") an amount due in US dollars under
this Guaranty, the conversion shall be made at the Exchange Rate prevailing on
the business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Address: 0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 2b
Vasogen Inc. Guaranty - Amatis Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen
Inc. (the "Guarantor"), for the benefit of Amatis Ltd. (the "Buyer"), which
Buyer is party to a securities purchase agreement, dated as of October 7, 2005
(as such agreement may be amended, restated or otherwise modified from time to
time, the "Securities Purchase Agreement"), among the Guarantor, Vasogen, Corp.,
Vasogen Ireland Limited (the "Company"), and the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, Vasogen, Corp. and
certain other subsidiaries of the Guarantor execute and deliver a guaranty
guaranteeing all of the obligations of the Company under the Transaction
Documents;
WHEREAS, the Guarantor, Vasogen, Corp. and the Company plan to enter into
one or more other securities purchase agreements relating to the sale and
purchase of securities on substantially identical terms as contained in the
Securities Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the
Securities Purchase Agreement, the Notes and the other Transaction Documents,
including, without limitation, all interest that accrues after the commencement
of any insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(b) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(c) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(d) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(b) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Address: 0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 2c
Vasogen Inc. Guaranty - Castlerigg Master Investments Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen
Inc. (the "Guarantor"), for the benefit of Castlerigg Master Investments Ltd.
(the "Buyer"), which Buyer is party to a securities purchase agreement, dated as
of October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among the
Guarantor, Vasogen, Corp., Vasogen Ireland Limited (the "Company"), and the
Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, Vasogen, Corp. and
certain other subsidiaries of the Guarantor execute and deliver a guaranty
guaranteeing all of the obligations of the Company under the Transaction
Documents;
WHEREAS, the Guarantor, Vasogen, Corp. and the Company plan to enter into
one or more other securities purchase agreements relating to the sale and
purchase of securities on substantially identical terms as contained in the
Securities Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(b) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(c) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(d) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(b) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Address: 0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 2d
Vasogen Inc. Guaranty - Capital Ventures International
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen
Inc. (the "Guarantor"), for the benefit of Capital Ventures International (the
"Buyer"), which Buyer is party to a securities purchase agreement, dated as of
October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among the
Guarantor, Vasogen, Corp., Vasogen Ireland Limited (the "Company"), and the
Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, Vasogen, Corp. and
certain other subsidiaries of the Guarantor execute and deliver a guaranty
guaranteeing all of the obligations of the Company under the Transaction
Documents;
WHEREAS, the Guarantor, Vasogen, Corp. and the Company plan to enter into
one or more other securities purchase agreements relating to the sale and
purchase of securities on substantially identical terms as contained in the
Securities Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(b) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(c) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(d) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(b) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Address: 0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 2e
Vasogen Inc. Guaranty - Smithfield Fiduciary LLC
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen
Inc. (the "Guarantor"), for the benefit of Smithfield Fiduciary LLC (the
"Buyer"), which Buyer is party to a securities purchase agreement, dated as of
October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among the
Guarantor, Vasogen, Corp., Vasogen Ireland Limited (the "Company"), and the
Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, Vasogen, Corp. and
certain other subsidiaries of the Guarantor execute and deliver a guaranty
guaranteeing all of the obligations of the Company under the Transaction
Documents;
WHEREAS, the Guarantor, Vasogen, Corp. and the Company plan to enter into
one or more other securities purchase agreements relating to the sale and
purchase of securities on substantially identical terms as contained in the
Securities Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(b) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(c) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(d) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(b) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of
Default, all present and future indebtedness, obligations, liabilities and
claims of the Company to the Guarantor (the "Postponed Obligations") are hereby
subordinated and postponed to the Guaranteed Obligations (provided, however,
that the Guarantor may take such actions as may be necessary to preserve its
claims against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of
the United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly
called for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
portions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its
successors and assigns, and (ii) inure, together with all rights and remedies of
the Buyer hereunder, to the benefit of the Buyer and its corporate and other
successors, pledgees, transferees and assigns to the extent the Buyer transfers
the corresponding rights and remedies of the Buyer under the Transaction
Documents to such successors, pledgees, transferees or assigns in accordance
with the terms of such Transaction Documents. The Guarantor agrees that each
participant shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the
entire agreement of the Guarantor and the Buyer with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Buyer or the Guarantor relative to the subject matter thereof
not expressly set forth or referred to herein or in the other Transaction
Documents.
(g) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against
the Guarantor in any court in any jurisdiction it becomes necessary to convert
into any other currency (such other currency being hereinafter in this Section
13(h) referred to as the "Judgment Currency") an amount due in US dollars under
this Guaranty, the conversion shall be made at the Exchange Rate prevailing on
the business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Address: 0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 3a
Vasogen, Corp. Guaranty - Kings Road Investments Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen,
Corp. (the "Guarantor"), for the benefit of UBS Securities LLC - f/b/o Kings
Road Investments Ltd. (the "Buyer"), which Buyer is party to a securities
purchase agreement, dated as of October 7, 2005 (as such agreement may be
amended, restated or otherwise modified from time to time, the "Securities
Purchase Agreement"), among Vasogen Inc. (the "Parent"), the Guarantor, Vasogen
Ireland Limited (the "Company"), and the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, the Parent and certain
other subsidiaries of the Parent execute and deliver a guaranty guaranteeing all
of the obligations of the Company under the Transaction Documents;
WHEREAS, the Guarantor, the Parent and the Company plan to enter into one
or more other securities purchase agreements relating to the sale and purchase
of securities on substantially identical terms as contained in the Securities
Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the
Securities Purchase Agreement, the Notes and the other Transaction Documents,
including, without limitation, all interest that accrues after the commencement
of any insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(a) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(b) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(c) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(a) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (ii) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN, CORP.
By:
-----------------------------
Name:
Title:
Address: c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 3b
Vasogen, Corp. Guaranty - Amatis Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen,
Corp. (the "Guarantor"), for the benefit of Amatis Ltd. (the "Buyer"), which
Buyer is party to a securities purchase agreement, dated as of October 7, 2005
(as such agreement may be amended, restated or otherwise modified from time to
time, the "Securities Purchase Agreement"), among Vasogen Inc. (the "Parent"),
the Guarantor, Vasogen Ireland Limited (the "Company"), and the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, the Parent and certain
other subsidiaries of the Parent execute and deliver a guaranty guaranteeing all
of the obligations of the Company under the Transaction Documents;
WHEREAS, the Guarantor, the Parent and the Company plan to enter into one
or more other securities purchase agreements relating to the sale and purchase
of securities on substantially identical terms as contained in the Securities
Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(a) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(b) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(c) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(a) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN, CORP.
By:
-----------------------------
Name:
Title:
Address: c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 3c
Vasogen, Corp. Guaranty - Castlerigg Master Investments Ltd.
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen,
Corp. (the "Guarantor"), for the benefit of Castlerigg Master Investments Ltd.
(the "Buyer"), which Buyer is party to a securities purchase agreement, dated as
of October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among Vasogen
Inc. (the "Parent"), the Guarantor, Vasogen Ireland Limited (the "Company"), and
the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, the Parent and certain
other subsidiaries of the Parent execute and deliver a guaranty guaranteeing all
of the obligations of the Company under the Transaction Documents;
WHEREAS, the Guarantor, the Parent and the Company plan to enter into one
or more other securities purchase agreements relating to the sale and purchase
of securities on substantially identical terms as contained in the Securities
Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(a) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(b) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(c) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(a) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN, CORP.
By:
-----------------------------
Name:
Title:
Address: c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 3d
Vasogen, Corp. Guaranty - Capital Ventures International
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen,
Corp. (the "Guarantor"), for the benefit of Capital Ventures International (the
"Buyer"), which Buyer is party to a securities purchase agreement, dated as of
October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among Vasogen
Inc. (the "Parent"), the Guarantor, Vasogen Ireland Limited (the "Company"), and
the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, the Parent and certain
other subsidiaries of the Parent execute and deliver a guaranty guaranteeing all
of the obligations of the Company under the Transaction Documents;
WHEREAS, the Guarantor, the Parent and the Company plan to enter into one
or more other securities purchase agreements relating to the sale and purchase
of securities on substantially identical terms as contained in the Securities
Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(a) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(b) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(c) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(a) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN, CORP.
By:
-----------------------------
Name:
Title:
Address: c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 3e
Vasogen, Corp. Guaranty - Smithfield Fiduciary LLC
(see attached)
GUARANTY
GUARANTY, dated as of October 7, 2005 (this "Guaranty"), made by Vasogen,
Corp. (the "Guarantor"), for the benefit of Smithfield Fiduciary LLC (the
"Buyer"), which Buyer is party to a securities purchase agreement, dated as of
October 7, 2005 (as such agreement may be amended, restated or otherwise
modified from time to time, the "Securities Purchase Agreement"), among Vasogen
Inc. (the "Parent"), the Guarantor, Vasogen Ireland Limited (the "Company"), and
the Buyer.
W I T N E S S E T H :
WHEREAS, with headquarters located at Xxxxxxx Airport House, Xxxxxx, Co.
Xxxxx, Ireland, the Company is a company incorporated under the laws of the
Republic of Ireland;
WHEREAS, it is a condition precedent to the Buyer's obligations under the
Securities Purchase Agreement that each of the Guarantor, the Parent and certain
other subsidiaries of the Parent execute and deliver a guaranty guaranteeing all
of the obligations of the Company under the Transaction Documents;
WHEREAS, the Guarantor, the Parent and the Company plan to enter into one
or more other securities purchase agreements relating to the sale and purchase
of securities on substantially identical terms as contained in the Securities
Purchase Agreement with other buyers (the "Other Buyers"); and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Guaranty will directly benefit, and are within the corporate
purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyer to perform under the Securities Purchase
Agreement, the Guarantor hereby agrees with the Buyer as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the "Notes") for a statement of
the terms thereof. All terms used in this Guaranty and not otherwise defined
herein shall have the same meanings herein as set forth in the Securities
Purchase Agreement or the Notes.
SECTION 2. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guarantees the
punctual payment and complete performance of and agrees to pay or deliver, as
and when due and payable or due and deliverable, by stated maturity or
otherwise, all obligations, liabilities and indebtedness of the Company from
time to time owing by it to the Buyer in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
insolvency proceeding of the Company or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (such obligations, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Buyer in enforcing any
rights under this Guaranty. Without limiting the generality of the foregoing,
the Guarantor's liability hereunder is continuing and shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Buyer under the Transaction Documents but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency
proceeding involving the Guarantor or the Company (each, a "Transaction Party")
and/or a breach of the Companies Acts 1963 to 2005 by the Company (including,
for the avoidance of doubt Section 60 of the Companies Act 1963, Part XI of the
Companies Act 1990). Notwithstanding the definition of "Guaranteed Obligations"
herein, the liability of the Guarantor hereunder is limited to an amount equal
to (x) the amount that would render this guaranty void, voidable or
unenforceable against the Guarantor's creditors or creditors' representatives
under any applicable fraudulent conveyance, fraudulent transfer or similar act
or under Section 544 or 548 of the Bankruptcy Code of 1978, as amended, minus
(y) $1.00.
(a) The Guarantor hereby irrevocably and unconditionally agrees to
indemnify the Buyer from time to time from and against any losses, damages,
liabilities, obligations, penalties, actions, judgments, suits, fees, costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by the Buyer as a result of any of the Guaranteed
Obligations being or becoming void, voidable, unenforceable or ineffective as
against the Company for any reason whatsoever, whether or not known to the Buyer
or any other Person, the amount of such being the amount which the Person or
Persons suffering such Losses would otherwise have been entitled to recover from
the Company.
(b) If any of the Guaranteed Obligations are not duly paid by the Company
or the Guarantor or are not receivable from the Company or the Guarantor for any
reason whatsoever, the Guarantor agrees that the Guaranteed Obligations will, as
a separate and distinct obligation, be recoverable from it under the indemnity
in Section 2(b).
(c) The Guarantor shall make payment to the Buyer the amount of the
Guaranteed Obligations and all other amounts payable by it hereunder forthwith
after demand therefor is made to it, which demand may be made following the
occurrence of an Event of Default, and such demand shall be deemed to have been
effectively made when an envelope containing such demand addressed to it at its
last address known to the Buyer, is personally delivered to such address or, if
sent by facsimile or other similar means of telecommunication, on the Business
Day next following the day on which it is sent. The liability of the Guarantor
under this guarantee shall bear interest from the date of such demand at the
rate or rates of interest then applicable to the Guaranteed Obligations under
and calculated in the manner provided in the Transaction Documents.
2
SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Transaction Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Buyer with respect thereto. The
obligations of the Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(i) any illegality, lack of validity or enforceability of any
Transaction Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Transaction Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;
(v) any contest by the Company or any other Person as to the amount of
the Guaranteed Obligations or of the legality, validity or enforceability of any
Transaction Documents;
(vi) any extension of the time or times for payment of the Guaranteed
Obligations or any other indulgences the Buyer or any other Person may grant the
Company;
(vii) the assignment of all or any part of the benefits of this
Guaranty; or
(viii) any other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the Buyer that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Buyer or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.
3
(b) This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty and shall not
terminate for any reason prior to such indefeasible cash payment (whether before
or after the Maturity Date) and (ii) be binding upon the Guarantor and its
successors and assigns. This Guaranty shall inure to the benefit of and be
enforceable by the Buyer and its successors, pledgees, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Buyer may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under the Notes to any other Person in accordance with the terms and provisions
of the Notes, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each
case as provided in the Notes.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Buyer exhaust any
right or take any action against any Transaction Party or any other Person. The
Guarantor hereby waives the benefits of division and discussion. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor
hereby waives any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Buyer
against any Transaction Party or any other guarantor, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty and corresponding guarantees
in favour of the Other Buyers (the "Other Guarantees") shall have indefeasibly
been paid in full in cash, provided that, unless an Event of Default has
occurred and is continuing, the Guarantor and the Company shall be entitled to
incur and settle inter-corporate indebtedness between them in the ordinary
course of business. If any amount shall be paid to the Guarantor in violation of
the immediately preceding sentence at any time prior to the indefeasible payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty and the Other Guarantees, such amount shall be held in trust
for the benefit of the Buyer and if applicable, the Other Buyers and shall
forthwith be paid to the Buyer and if applicable, the Other Buyers to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Notes, or to be held as collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter arising. If (a) the
Guarantor shall make payment to the Buyer of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the Other Guarantees shall indefeasibly be paid
in full in cash, the Buyer
4
will, at the Guarantor's request and expense, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly incorporated or organized and
validly existing and in good standing (if applicable) under the laws of the
jurisdiction in which it is formed, (ii) has the requisite power and authority
to carry on its business as now being conducted and to execute and deliver this
Guaranty and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by its board of directors (or similar
governing body) and will not (i) result in a violation of its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, (ii) conflict with or
constitute a default under any material agreement, indenture or instrument to
which it is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of its property or
assets is bound or affected, except in the case of clauses (ii) and (iii) above,
any breach or default that would not have a Material Adverse Effect.
(c) The Guarantor is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents to which it is a party, in each case
in accordance with the terms hereof or thereof, as applicable, except for the
consents, authorizations, orders, filings and registrations set forth in
Schedule 3(e) of the Securities Purchase Agreement, where applicable.
(d) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is a party constitute the legal, valid and binding obligations of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding affecting the Guarantor or to which any of
the properties of the Guarantor is subject, before any court, public board,
government agency, self-regulatory
5
organization or body that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
(f) The Guarantor (i) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and (ii)
has no need of, or right to obtain from the Buyer, any credit or other
information concerning the affairs, financial condition or business of the
Company.
SECTION 7. Right of Set-off. Upon the occurrence and during the
continuance of an Event of Default, the Buyer may, and is hereby authorized to,
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Buyer to or for the credit or the account of the Guarantor
against any and all obligations of the Guarantor now or hereafter existing under
this Guaranty or any other Transaction Document, irrespective of whether or not
the Buyer shall have made any demand under this Guaranty or any other
Transaction Document and although such obligations may be contingent or
unmatured. The Buyer agrees to notify the Guarantor promptly after any such
set-off and application made by the Buyer, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Buyer under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Buyer may have under this Guaranty or the Notes in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Guarantor, to it at its address set forth on the signature page hereto,
or if to the Buyer, to it at its address set forth in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. Unless otherwise provided herein,
all such notices shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.
SECTION 9. Governing Law; Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Guaranty shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Guarantor hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Guarantor has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
6
10011, as its agent for service of process in New York. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Guaranty is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Guaranty.
Nothing contained herein shall be deemed or operate to preclude the Buyer from
bringing suit or taking other legal action against the Guarantor in any other
jurisdiction to collect on the Guarantor's obligations to the Buyer, or to
enforce a judgment or other court ruling in favor of the Buyer.
SECTION 10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 11. Taxes.
(a) (i) Any and all payments made by the Guarantor hereunder shall be made
without set-off, counterclaim, deduction or other defense including any
deduction for Taxes (a "Tax Deduction"), unless a Tax Deduction is required by
law. If the Guarantor is aware that it must make a Tax Deduction (or that there
is a change in the rate or the basis of a Tax Deduction) upon a payment to the
Buyer, it must notify the Buyer promptly.
(ii) If a Tax Deduction is required by law to be made by the Guarantor,
subject to Section 11(a)(i) above, the amount of the payment due from the
Guarantor will be increased to an amount which (after making the Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. If the Guarantor is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a payment
required in connection with a Tax Deduction, the Guarantor must deliver to the
Buyer the official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Guarantor agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance or, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Guarantor must deliver
to the Buyer the official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
7
(a) If the Guarantor fails to perform any of its obligations under this
Section 11, the Guarantor shall indemnify the Buyer for any Taxes, interest or
penalties that may become payable as a result of any such failure. The
obligations of the Guarantor under this Section 11 shall survive the termination
of this Guaranty and the payment of the Guaranteed Obligations and all other
amounts payable hereunder.
SECTION 12. Subordination and Postponement.
(a) Upon the occurrence and during the continuance of an Event of Default,
all present and future indebtedness, obligations, liabilities and claims of the
Company to the Guarantor (the "Postponed Obligations") are hereby subordinated
and postponed to the Guaranteed Obligations (provided, however, that the
Guarantor may take such actions as may be necessary to preserve its claims
against the Company), and all monies received by the Guarantor in respect
thereof shall be received in trust for the Buyer and forthwith upon receipt
shall be paid over to the Buyer, without affecting the Guaranteed Obligations.
(b) The Guarantor agrees that if and when there shall have occurred an
Event of Default which is continuing, the Buyer shall be entitled: (a) at any
time to notify the Company of this postponement; (b) to collect and recover from
the Company the Postponed Obligations and apply the proceeds thereof to the
Guaranteed Obligations; and (c) to compromise any Postponed Obligations. If the
Buyer allows any payment to be made to the Guarantor and allows the Guarantor to
accept and retain such payment, the Buyer shall not consequently lose any of its
rights to deny payment of any balance of any Postponed Obligations. No waiver,
relaxation or omission on the part of the Buyer in the exercise of any of its
rights in respect of any Postponed Obligations hereunder shall prejudice or
otherwise affect the Guaranteed Obligations.
SECTION 13. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Buyer, at
such address specified by the Buyer from time to time by notice to the
Guarantor.
(b) The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent of the Required Holders shall be
required for any change or amendment to this Guaranty or the Other Guarantees.
Any change or amendment so approved shall be binding upon all existing and
future holders of this Guaranty and any Other Guarantees.
(c) No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Buyer under any Transaction Document against any party
thereto are not conditional or contingent on any attempt by the Buyer to
exercise any of its rights under any other Transaction Document against such
party or against any other Person.
8
(d) Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors
and assigns, and (ii) inure, together with all rights and remedies of the Buyer
hereunder, to the benefit of the Buyer and its corporate and other successors,
pledgees, transferees and assigns to the extent the Buyer transfers the
corresponding rights and remedies of the Buyer under the Transaction Documents
to such successors, pledgees, transferees or assigns in accordance with the
terms of such Transaction Documents. The Guarantor agrees that each participant
shall be entitled to the benefits of Section 11 with respect to its
participation in any portion of the Notes as if it was a Buyer. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Required Holders.
(f) This Guaranty and the other Transaction Documents represent the entire
agreement of the Guarantor and the Buyer with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Buyer or the Guarantor relative to the subject matter thereof not
expressly set forth or referred to herein or in the other Transaction Documents.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.
(h) (i) If for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 13(h)
referred to as the "Judgment Currency") an amount due in US dollars under this
Guaranty, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(A) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(B) such date as the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 13(h)(i)(B) being hereinafter
referred to as the "Judgment Conversion Date").
(ii) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 13(h)(i)(B) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
9
(iii) Any amount due from the Guarantor under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
VASOGEN, CORP.
By:
-----------------------------
Name:
Title:
Address: c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Exhibit 4
Registration Rights Agreement
(see attached)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 7,
2005, by and among Vasogen Inc., a corporation incorporated under the laws of
Canada, with headquarters located at 0000 Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx X0X
0X0, Xxxxxx (the "Parent"), and the undersigned buyers (each, a "Buyer", and
collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreements by and among the
Parent, Vasogen Ireland Limited ("Vasogen Ireland"), Vasogen, Corp. ("Vasogen,
Corp.") and the Buyers of even date herewith (the "Securities Purchase
Agreements"), (i) Vasogen Ireland has agreed, upon the terms and subject to the
conditions set forth in the Securities Purchase Agreements, to issue and sell to
the Buyers senior convertible notes (the "Notes"), which will, among other
things, be convertible, amortizable and/or redeemable into the Parent's common
shares (the "Common Shares", as converted, amortized and/or redeemed, the
"Conversion Shares") in accordance with the terms of the Notes, and (ii) the
Parent has agreed upon the terms and subject to the conditions set forth in the
Securities Purchase Agreements, to issue and sell to each Buyer warrants (the
"Initial Warrants"), which will be exercisable to purchase Common Shares (as
exercised collectively, the "Initial Warrant Shares").
B. Upon exercise of the Accelerated Payment Option (as defined in the
Notes) by Vasogen Ireland, the Parent shall at the direction of Vasogen Ireland
issue certain Accelerated Payment Option Warrants (as defined in the Notes) (the
"Additional Warrants," and collectively with the Initial Warrants, the
"Warrants"), which will be exercisable to purchase Common Shares (as exercised
collectively, the "Additional Warrant Shares," and collectively with the Initial
Warrant Shares, the "Warrant Shares").
C. To induce the Buyers to execute and deliver the Securities Purchase
Agreements, the Parent has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, including pursuant to the U.S.-Canadian
multijurisdictional disclosure system ("MJDS").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent and each of the Buyers
hereby agree as follows:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreements. As used
in this Agreement, the following terms shall have the following meanings:
a. "Business Day" means any day other than Saturday, Sunday or any
other day on which commercial banks in The City of New York or Toronto, as
applicable, are authorized or required by law to remain closed.
b. "Canadian Prospectus" means a prospectus or prospectuses of the
Parent filed under Ontario provincial securities laws covering the Registrable
Securities.
c. "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreements.
d. "Conversion Notice" means the Conversion Notice the form which is
contained in Exhibit I to the Notes.
e. "CSA" means the Canadian provincial and territorial securities
regulatory authorities.
f. "Effective Date" means the date a Registration Statement has been
declared effective by the SEC.
g. "Effectiveness Deadline" means the date which is 105 days after the
Closing Date.
h. "Exercise Notice" means the Exercise Notice the form which is
contained in Exhibit I to the Warrants.
i. "Filing Deadline" means 30 days after the Closing Date.
j. "Investor" means a Buyer or any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.
k. "Ontario Securities Laws" means, the Securities Act (Ontario) and
the regulations and rules made thereunder and the applicable published policy
statements issued by the Ontario Securities Commission.
l. "Person" means an individual, a limited liability company, a
partnership (general or limited), a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
m. "register," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.
n. "Registrable Securities" means (i) the Conversion Shares issued or
issuable upon conversion, amortization or redemption of the Notes, (ii) the
Warrant Shares
2
issued or issuable upon exercise of the Warrants, and (iii) any share capital of
the Parent issued or issuable with respect to the Conversion Shares, the Notes,
the Warrant Shares or the Warrants as a result of any share split, share
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Notes or exercises of the
Warrants.
o. "Registration Statement" means a registration statement or
registration statements of the Parent filed under the 1933 Act covering the
Registrable Securities, including the exhibits thereto and the documents
incorporated by reference therein, as amended at the date on which such
registration statement became effective.
p. "Required Holders" means the holders of at least a majority of the
Registrable Securities.
q. "Required Registration Amount" means 150% of the sum of (i) the
number of Conversion Shares issued and issuable pursuant to the Notes as of the
trading day immediately preceding the applicable date of determination, and (ii)
the number of Warrant Shares issued and issuable pursuant to the Warrants
(including the maximum number of Common Shares issuable pursuant to the
Additional Warrants) as of the trading day immediately preceding the applicable
date of determination, all subject to adjustment as provided in Section 2(f).
r. "Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous or delayed basis.
s. "SEC" means the United States Securities and Exchange Commission.
t. "Securities Laws" means the Canadian Securities Laws and the U.S.
Securities Laws.
u. "Transfer Agent" means the transfer agent (including any co-transfer
agent) of the Parent with respect to the Common Shares.
v. "Treasury Instructions" means (i) the Treasury Instructions the form
which is contained in Exhibit I to the Warrants, (ii) the Treasury Instructions
the form which is contained in Exhibit I to the Notes, or (iii) any other
written notice of instruction from the Parent to the Transfer Agent to issue
Common Shares in connection with the Notes or the Warrants.
w. "U.S. Securities Laws" means all of the applicable federal and state
securities laws and regulations of the United States, including without
limitation the 1933 Act, the 1934 Act and the respective rules and regulations
of the SEC thereunder.
x. "1934 Act" means the United States Securities Exchange Act of 1934,
as amended.
3
2. Registration.
a. Mandatory Registration. The Parent shall prepare as soon as
practicable and shall use its reasonable best efforts to file, prior to the
Filing Deadline, the Canadian Prospectus with the CSA in the form of a base
shelf prospectus as contemplated by National Instrument 44-102, Alternative
Forms of Prospectus ("NI44-102") and to file with the SEC the Registration
Statement on Form F-10 covering the resale of all of the Registrable Securities
pursuant to MJDS. In the event that MJDS or Form F-10 is unavailable for such a
registration, the Parent shall use such other form as is available for such a
registration, subject to the provisions of Section 2(e). The Registration
Statement prepared pursuant hereto shall register for resale at least the number
of Common Shares equal to the Required Registration Amount as to the Registrable
Securities as of date the Registration Statement is initially filed with the
SEC. Neither the Parent nor any Subsidiary or affiliate thereof shall identify
any Buyer as an underwriter in any public disclosure or filing with the SEC, the
CSA or any Principal Market or Eligible Market and any Buyer being deemed an
underwriter by the SEC shall not relieve the Parent of any obligations it has
under this Agreement or any other Transaction Document (as defined in the
relevant Securities Purchase Agreement). The Registration Statement, and to the
extent applicable, the Canadian Prospectus, shall contain (except if otherwise
directed by the Required Holders or by the Ontario Securities Commission;
provided, that if any changes are required by the Ontario Securities Commission,
such changes shall be subject to the approval of the Required Holders, such
approval not to be unreasonably withheld) the "Selling Shareholders" and "Plan
of Distribution" sections in substantially the form attached hereto as Exhibit
B. The Parent shall use its reasonable best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Effectiveness Deadline.
b. Intentionally omitted.
c. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and any increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Common Shares included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. In no event shall the Parent include any securities
other than Registrable Securities on any Registration Statement without the
prior written consent of the Required Holders.
d. Legal Counsel. Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 ("Legal Counsel"), which shall be
Xxxxxxx Xxxx & Xxxxx LLP or such other counsel as thereafter designated by the
Required Holders. The Parent shall, and the Buyers shall
4
cause Legal Counsel to, reasonably cooperate with each other in performing the
Parent's obligations under this Agreement.
e. Ineligibility for Form F-10. In the event that Form F-10 is not
available for the registration of the resale of Registrable Securities
hereunder, the Parent shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the Required
Holders and (ii) undertake to register the Registrable Securities on Form F-10
as soon as such form is available, provided that the Parent shall use reasonable
best efforts to maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form F-10 covering the
Registrable Securities has been declared effective by the SEC.
f. Sufficient Number of Shares Registered. In the event the number of
shares available under a Registration Statement filed pursuant to Section 2(a)
is insufficient to cover all of the Registrable Securities required to be
covered by such Registration Statement or an Investor's allocated portion of the
Registrable Securities pursuant to Section 2(c), the Parent shall amend the
applicable Registration Statement, or file a new Registration Statement, or both
(and make parallel amendments or filings with the CSA, to the extent necessary
or advisable), so as to cover at least the Required Registration Amount as of
the Trading Day (as defined in the Notes) immediately preceding the date of the
filing of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Parent shall use its reasonable best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of Common Shares available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Required
Registration Amount as of such time by (ii) 0.90. The calculation set forth in
the foregoing sentence shall be made without regard to any limitations on the
conversion of the Notes or the exercise of the Warrants and such calculation
shall assume that the Notes are then convertible into Common Shares at the then
prevailing Conversion Rate (as defined in the Notes) and that the Warrants are
then exercisable for Common Share at the then prevailing Exercise Price (as
defined in the Warrants).
g. Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be filed
by the Parent pursuant to this Agreement is not declared effective by the SEC on
or before the respective Effectiveness Deadline (an "Effectiveness Failure"),
(ii) on any day after the applicable Effective Date until the two year
anniversary of the Closing Date, sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(q)) pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, to disclose such information as
is necessary for sales to be made pursuant to such Registration Statement) (a
"Maintenance Failure") or (iii) any Common Shares (including the Common Shares
exercisable upon issuance of the Additional Warrants), on and after 121 days
after they are issued, are not freely tradeable under applicable Ontario
provincial securities laws (a "Qualification Failure") then, as partial
5
relief for the damages to any holder by reason of any such delay in or reduction
of its ability to sell the underlying Common Shares (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Parent shall
pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to two percent (2%) of the aggregate Purchase
Price (as such term is defined in the relevant Securities Purchase Agreement) of
such Investor's Registrable Securities included in such Registration Statement
on each of the following dates: (i) on every thirtieth day (pro rated for
periods totaling less than thirty days) after an Effectiveness Failure commences
until such Effectiveness Failure is cured; (ii) on every thirtieth day (pro
rated for periods totaling less than thirty days) after a Maintenance Failure
commences until such Maintenance Failure is cured and (iii) on every thirtieth
day (pro rated for periods totaling less than thirty days) after a Qualification
Failure commences until such Qualification Failure is cured. The payments to
which a holder shall be entitled pursuant to this Section 2(g) are referred to
herein as "Registration Delay Payments." For avoidance of doubt, the parties
acknowledge and agree that Registration Delay Payments shall apply regardless of
any action or inaction by the SEC, the CSA, the TSX (as defined in the relevant
Securities Purchase Agreement) or any applicable governmental entity (whether
considered capricious or otherwise by the Parent and whether in the control of
the Parent or otherwise (including Registration Delay Payments caused by force
majeure)). Registration Delay Payments shall be paid on the earlier of (I) the
thirtieth Business Day after the day such Registration Delay Payments are
accrued or incurred pursuant to the previous sentence and (II) the third
Business Day after the event or failure giving rise to the Registration Delay
Payments is cured. In the event the Parent fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full.
3. Related Obligations.
At such time as the Parent is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(e) or 2(f), the Parent will use its
reasonable best efforts to effect the registration of the Registrable Securities
in accordance with the intended method of disposition thereof and, pursuant
thereto, the Parent and each Investor, as applicable, shall have the following
obligations:
a. The Parent shall submit to the SEC, within two (2) Business Days
after the Parent learns that no review of a particular Registration Statement
will be made by the staff of the SEC or the Ontario Securities Commission, as
applicable, or that the staff has no further comments on a particular
Registration Statement, as the case may be, a request for acceleration of
effectiveness (or the equivalent under MJDS) of such Registration Statement to a
time and date not later than two (2) Business Days after the submission of such
request. The Parent shall use reasonable best efforts to keep each Registration
Statement effective at all times until the earlier of (i) the second anniversary
of the Closing Date and (ii) the date on which the Investors shall have sold all
of the Registrable Securities covered by such Registration Statement (the
"Registration Period"). The Parent shall ensure that each Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.
6
b. The Parent shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to one or more
Registration Statements and the prospectus used in connection with such
Registration Statements, which prospectus is to be filed pursuant to Rule 424 or
Rule 467 promulgated under the 1933 Act (or the equivalent under MJDS), as may
be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of
the 1933 Act with respect to the disposition of all Registrable Securities of
the Parent covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Parent filing a
report on Form 20-F, Form 40-F, Form 6-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Parent shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Parent to amend or supplement such Registration Statement. In addition, the
Parent shall prepare and file with the CSA such supplements and amendments to
the Canadian Prospectus as may be required under NI44-102 or applicable Ontario
provincial securities laws throughout the Registration Period, and during such
period comply with the requirements of such laws with respect to the disposition
of the Registrable Securities.
c. The Parent shall (A) permit Legal Counsel to review and comment upon
(i) mature drafts of a Registration Statement and the Canadian Prospectus (and
the final version of such documents if there have been any material changes
thereto) at least five (5) Business Days prior to its filing with the SEC or the
CSA and (ii) all amendments and supplements to all Registration Statements
(except for Reports on Form 20-F, Form 40-F and Form 6-K and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or Canadian Prospectus or
amendment or supplement thereto in a form to which Legal Counsel reasonably
objects; provided that Legal Counsel responds with substantially all comments
within two Business Days of receipt of documents. The Parent shall not submit a
request for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld. The Parent shall furnish to
Legal Counsel, without charge, (i) copies of any correspondence from the SEC or
CSA or the staff of the SEC or CSA to the Parent or its representatives relating
to any Registration Statement, (ii) promptly after the same is prepared and
filed with the SEC or CSA, as the case may be, one copy of any Registration
Statement and Canadian Prospectus and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto. The
Parent shall reasonably cooperate with Legal Counsel in performing the Parent's
obligations pursuant to this Section 3.
d. The Parent shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any
7
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, (if requested by an Investor,) all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
Notwithstanding the foregoing, the Parent shall have no obligation to furnish
such Investor any documents available on XXXXX or SEDAR if the Parent has
notified such Investor by e-mail, telephone, fax or written notice of the
availability of such filings.
e. The Parent shall use its reasonable best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Parent shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business as a foreign corporation or dealer in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Parent shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Parent of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The Parent shall notify Legal Counsel and each Investor in writing
of the happening of any event, as promptly as practicable after becoming aware
of such event, as a result of which the prospectus included in a Registration
Statement, as then in effect, or Canadian Prospectus, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, nonpublic information), and,
subject to Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement (and/or Canadian Prospectus) or file an appropriate
document that is incorporated by reference to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Parent shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each
Investor by facsimile or electronic transmission on the same day of such
effectiveness, (ii) of any request by the SEC or CSA for amendments or
supplements to a Registration Statement or
8
Canadian Prospectus, as the case may be, or related prospectus or related
information and (iii) of the Parent's reasonable determination that a
post-effective amendment to a Registration Statement or Canadian Prospectus
would be appropriate.
g. The Parent shall use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement or Canadian Prospectus, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
h. The Parent shall make available for inspection, during normal
business hours on two Business Days notice, by (i) any Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the
Investors (collectively, the "Inspectors"), all pertinent financial and other
records, and pertinent corporate documents and properties of the Parent
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Parent's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record other than public
Records, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector has knowledge. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Parent and allow the Parent, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Parent and any Investor) shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
i. The Parent shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Parent unless (i) disclosure
of such information is necessary to comply with Securities Laws, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement or Canadian Prospectus, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Parent agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
9
j. The Parent shall use its reasonable best efforts either to (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Parent are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities
covered by a Registration Statement on the Nasdaq National Market or (iii) if,
despite the Parent's reasonable best efforts to satisfy, the preceding clauses
(i) and (ii) the Parent is unsuccessful in satisfying the preceding clauses (i)
and (ii), to secure the inclusion for quotation on The Nasdaq SmallCap Market
for such Registrable Securities and, without limiting the generality of the
foregoing, to use its reasonable best efforts to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities. The Parent shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(k).
k. The Parent shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, use reasonable best
efforts to facilitate the timely preparation and delivery of certificates
(subject to Section 11(p) hereof, not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investors may reasonably request and registered in
such names as the Investors may request.
l. If reasonably requested by an Investor based on the advice of
counsel, the Parent shall (i) as soon as practicable incorporate in a prospectus
supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) as soon as practicable
make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement or
Canadian Prospectus if reasonably requested by an Investor holding any
Registrable Securities.
m. The Parent shall use its reasonable best efforts to cause the
Registrable Securities covered by a Registration Statement or Canadian
Prospectus to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of such
Registrable Securities.
n. The Parent shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with, and in
the manner provided by, the provisions of Rule 158 under the 1933 Act) covering
a twelve-month period beginning not later than the first day of the Parent's
fiscal quarter next following the effective date of a Registration Statement.
10
o. The Parent shall otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
p. Within two (2) Business Days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Parent shall
deliver, and shall cause legal counsel for the Parent to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in substantially the form attached hereto as Exhibit A.
q. Notwithstanding anything to the contrary herein, at any time after
the Registration Statement has been declared effective by the SEC, the Parent
may be in possession of material, non-public information (acknowledging that the
Parent will comply with its obligation to disclose such material, non-public
information forthwith) concerning the Parent, the disclosure of which at the
time is not, in the good faith opinion of the senior management of the Parent,
in the best interest of the Parent and, in the opinion of counsel to the Parent,
otherwise required (a "Grace Period"); provided, that the Parent shall promptly
(i) notify the Investors in writing of the existence of such material,
non-public information giving rise to a Grace Period (provided that in each
notice the Parent will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed thirty (30) days
in any ninety (90) day period; provided, that if reasonably requested by
underwriters for the Parent pursuant to an underwritten offering of the Parent,
forty-five (45) days in any ninety (90) day period, and during any three hundred
sixty five (365) day period such Grace Periods shall not exceed an aggregate of
fifty (50) days and the first day of any Grace Period must be at least two (2)
trading days after the last day of any prior Grace Period (each, an "Allowable
Grace Period"). For purposes of determining the length of a Grace Period above,
the Grace Period shall begin on and include the date the Investors receive the
notice referred to in clause (i) and shall end on and include the later of the
date the Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(g) hereof shall not be
applicable during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Parent shall again be bound by the first sentence of
Section 3(f) with respect to the information giving rise thereto unless such
material, non-public information is no longer applicable. Notwithstanding
anything to the contrary but subject to Section 11(p), the Parent shall cause
its transfer agent to deliver unlegended Common Shares to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement, if
required, prior to the Investor's receipt of the notice of a Grace Period and
for which the Investor has not yet settled.
4. Obligations of the Investors.
a. At least five (5) Business Days prior to the first anticipated
filing date of a Registration Statement or Canadian Prospectus, the Parent shall
notify each Investor in writing of the information the Parent requires from each
such Investor if such Investor elects to
11
have any of such Investor's Registrable Securities included in such Registration
Statement or Canadian Prospectus. It shall be a condition precedent to the
obligations of the Parent to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
and any penalty or default resulting from such failure, that such Investor shall
furnish to the Parent such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Parent may
reasonably request, including the Notice of Registration Statement and Selling
Securityholder Questionnaire attached as Appendix A hereto and the Non-Issuer
Form of Submission to Jurisdiction and Appointment of Agent for Service of
Process attached as Appendix B hereto.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Parent as reasonably requested by the
Parent in connection with the preparation, filing and keeping effective of any
Registration Statement or Canadian Prospectus hereunder, unless such Investor
has notified the Parent in writing of such Investor's election to exclude all of
such Investor's Registrable Securities from such Registration Statement or
Canadian Prospectus.
c. Each Investor agrees that, upon receipt of any notice from the
Parent of the happening of any event of the kind described in Section 3(g), the
first sentence of 3(f) or a Grace Period (an "Event Notice"), such Investor will
(i) immediately discontinue disposition of Registrable Securities pursuant to
any Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice
that no supplement or amendment is required, and (ii) if so requested by the
Parent, deliver to the Parent or destroy all copies of the prospectus covering
the Registrable Securities in its possession at the time of receipt of such
Event Notice. Notwithstanding anything to the contrary but subject to Section
11(p) hereof, the Parent shall cause its transfer agent to deliver unlegended
Common Shares to a transferee of an Investor in accordance with the terms of the
relevant Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale and delivered a copy of the applicable prospectus prior to the
Investor's receipt of a notice from the Parent of the happening of any event of
the kind described in Section 3(g) or the first sentence of 3(f) and for which
the Investor has not yet settled.
d. Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act and Canadian Securities Law, in
each case, as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.
e. Each Investor shall provide such information and materials as the
Parent shall reasonably request in order to permit the Parent to comply with all
applicable prospectus requirements of the Securities Laws and to effect the
registration of the resale of the Registrable Securities.
12
5. Expenses of Registration.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Parent shall be paid by the Parent.
The Parent shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $5,000.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement or Canadian Prospectus under this Agreement:
a. To the fullest extent permitted by law, the Parent will, and hereby
does, indemnify, hold harmless and defend each Investor, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC or CSA, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Parent files any amendment thereof or supplement thereto with the SEC or
CSA, as applicable) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Parent of the 1933 Act, the 1934
Act, any other law, including, without limitation, any state, provincial or
territorial securities law, or any rule or regulation thereunder relating to the
offer or sale of the Registrable Securities pursuant to a Registration Statement
or Canadian Prospectus or (iv) any violation of this Agreement by the Parent
(the matters in the foregoing clauses (i) through (iv) being, collectively,
"Violations"). Subject to Section 6(c), the Parent shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any reasonable and documented legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained
13
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Parent by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Parent pursuant to Section
3(d); (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such Person from whom the Person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any Person controlling such Person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Parent pursuant to Section 3(d); (iii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the Parent,
including a corrected prospectus, if such prospectus or corrected prospectus was
timely made available by the Parent pursuant to Section 3(d); and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Parent, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Parent, each of its directors, each of its
officers who signs the Registration Statement and each Person, if any, who
controls the Parent within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Parent by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any reasonable and documented legal or other reasonable and documented
expenses incurred by an Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld or delayed; provided,
further, however, that the Investor shall be liable under this Section 6(b) for
only that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the
14
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the reasonable and documented fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Investors holding at
least a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person reasonably apprised at all times as to
the status of the defense or any settlement negotiations with respect thereto.
No indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
15
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. Contribution.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. Reports Under the 1934 Act and Ontario Provincial Securities Laws.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Parent
to the public without registration ("Rule 144"), the Parent agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Parent under the 1933 Act and the 1934 Act so long as the Parent
remains subject to such requirements and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request such information not available on SEDAR or
XXXXX as may be reasonably requested by each Investor to permit the Investors to
sell such securities pursuant to Rule 144 without registration. The Parent will
also continue to make all filings and take all actions required to maintain its
reporting issues status under applicable Ontario provincial securities laws.
9. Assignment of Registration Rights.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee in a private transaction of all or any portion of
such Investor's Notes and/or Warrants, pursuant to the terms thereof, if: (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Parent within a
reasonable time after such assignment; (ii) the Parent is, at least two (2)
Business
16
Days prior to the date such transfer or assignment becomes effective, furnished
with written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Parent receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Parent to be bound by all of the provisions contained herein; (v) such transfer
shall have been made in accordance with the applicable requirements of the
relevant Securities Purchase Agreement; and (vi) the Parent receives from the
transferee or assignee a completed Notice of Registration Statement and Selling
Securityholder Questionnaire attached as Appendix A hereto and a Non-Issuer Form
of Submission to Jurisdiction and Appointment of Agent for Service of Process
attached as Appendix B hereto prior to the effectiveness of such transfer or
assignment.
10. Amendment of Registration Rights.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the prior written consent of the Parent and the
Required Holders. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Parent. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the Registrable Securities. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.
11. Miscellaneous.
a. A Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable Securities. If
the Parent receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Parent shall
act upon the basis of instructions, notice or election received from the such
record owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Parent:
Vasogen Inc.
17
0000 Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Vice President, Corporate and Legal Affairs
With a copy (for informational purposes only) to:
Lang Xxxxxxxx LLP
BCE Place, P.O. Box 747
Suite 0000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
and
Xxxx, Xxxxx, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to Legal Counsel:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a
18
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The Parent has appointed CT Corporation System, with offices at 000 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in New
York. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the other Transaction
Documents and the instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall inure
to the benefit of and be binding upon the permitted successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning or interpretation hereof.
When a reference is
19
made in this Agreement to a Section, such reference shall be to a Section of
this Agreement, unless otherwise clearly indicated. Whenever the word
"including" is used in this Agreement, it shall be deemed to be followed by the
words "without limitation." The use of any gender herein shall be deemed to be
or include the other genders and the use of the singular herein shall be deemed
to be or include the plural (and vice versa), wherever appropriate.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Required Holders.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
m. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States Dollars. All amounts owing under this Agreement
are payable in United States Dollars. All amounts denominated in other
currencies shall be converted in the United States dollar equivalent amount in
accordance with the Exchange Rate (as defined in the relevant Securities
Purchase Agreement) on the date of calculation.
n. The obligations of each Buyer hereunder are several and not joint
with the obligations of any other Buyer, and no provision of this Agreement is
intended to confer any obligations on any Buyer vis-a-vis any other Buyer.
Nothing contained herein, and no action taken by any Buyer pursuant hereto,
shall be deemed to constitute the Buyers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Buyers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.
o. Except as otherwise provided herein, in any other Transaction
Document or as required by applicable law or legal process, no Investor may make
any public announcement concerning this Agreement or the transactions
contemplated by this Agreement
20
without obtaining the prior written consent of the Parent and giving the Parent
no less than 48 hours to review and comment on such public announcement prior to
release.
p. Notwithstanding any other provision herein, the Parent shall have no
obligation to in any way facilitate the delivery by its transfer agent of
unlegended Common Shares to an Investor if (I) the Parent has received a notice
from such Investor stating that such Investor (a) has ceased to be a Qualified
Institutional Buyer (as such term is defined in Rule 144A under the 1933 Act),
(b) has chosen to offer or sell such Common Shares by a method other than
pursuant to an effective registration statement or pursuant to Rule 904 or Rule
144 (including 144(k)) under the 1933 Act, or (c) such Investor will offer or
sell such Common Shares pursuant to Rule 904 under the 1933 Act and has become
an affiliate (as such term is defined in Rule 144 under the 1933 Act) of the
Parent, or (II) such Investor has not made to the Parent the representations,
warranties and covenants set forth in Section 9(s) of the applicable Securities
Purchase Agreement.
* * * * * *
21
IN WITNESS WHEREOF, each Buyer and the Parent have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.
PARENT:
VASOGEN INC.
By:
-------------------------------------
Name:
Title:
BUYERS:
KINGS ROAD INVESTMENTS LTD.
By:
-------------------------------------
Name:
Title:
CAPITAL VENTURES
INTERNATIONAL
By:
-------------------------------------
Name:
Title:
AMATIS LTD.
By:
-------------------------------------
Name:
Title:
CASTLERIGG MASTER
INVESTMENTS LTD.
By:
-------------------------------------
Name:
Title:
SMITHFIELD FIDUCIARY LLC
By:
-------------------------------------
Name:
Title:
SCHEDULE OF BUYERS
Buyer's Address Buyer's Representative's Address
--------------- --------------------------------
Buyer and Facsimile Number and Facsimile Number
----- -------------------- --------------------
Kings Road c/o Polygon Investment Partners XX Xxxxxxx Xxxx & Xxxxx LLP
Investments Ltd 000 Xxxxxxx Xxxxxx, 14th Floor 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X.X. Xxxxxxxxx Attn: Xxxxxxx Xxxxx, Esq.
and Xxxxxxx X. Xxxxx Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Capital Ventures c/o Heights Capital Management, Inc. Drinker Xxxxxx & Xxxxx LLP
International 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000 00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000-2235
Attention: Xxxxxx Xxxxxxxx Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
Amatis Ltd. c/o Amaranth Advisors LLC
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Castlerigg Master c/o Sandell Asset Management Corp.
Investments Ltd. 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Cem Hacioglu
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Curacao, Netherland Antilles
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx and Xxxx X. Xxxxx
Xxxxxxxxx: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
CIBC Mellon Trust Company
000 Xxx Xxxxxx
Xxxxxxx XX
X0X 0X0
Attention: Xxxxx X. Xxxxxxx
Xxxxxx Investor Services LLC
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Re: Vasogen Inc.
Ladies and Gentlemen:
We have acted as counsel to Vasogen Inc., a corporation incorporated under
the laws of Canada (the "Parent"), Vasogen Ireland Limited, a company
incorporated under the laws of the Republic of Ireland (the "Company"), and
Vasogen, Corp., a Delaware corporation ("Vasogen, Corp."), in connection with
certain Securities Purchase Agreements (the "Securities Purchase Agreements")
entered into by and among the Parent, the Company, Vasogen, Corp. and each buyer
named on each Buyer Schedule attached to each such agreement (each individually,
a "Holder" and all such individuals collectively, the "Holders") pursuant to
which the Company issued to the Holders senior convertible notes (the "Notes")
convertible, amortizable and/or redeemable into the Parent's common shares, no
par value (the "Common Shares"), and the Parent issued to the Holders warrants
(the "Warrants") exercisable to purchase Common Shares. Pursuant to the
Securities Purchase Agreements, the Parent also entered into a Registration
Rights Agreement with the Holders (the "Registration Rights Agreement") pursuant
to which the Parent agreed, among other things, to register the resale of the
Registrable Securities (as defined in the Registration Rights Agreement),
including the
1
Common Shares issuable upon conversion, amortization and/or redemption of the
Notes and the Common Shares issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). Capitalized terms used but
not defined herein shall have the meanings set forth in the Registration Rights
Agreement.
In connection with the foregoing, we have been asked to furnish you an
opinion regarding the issuance of the Common Shares to the Holders either free
of or with restrictive legends under the 1933 Act. In connection with the
furnishing of this opinion, we have examined such certificates, agreements and
documents as we deemed relevant and necessary as a basis for the opinion and
belief expressed below. We have also relied upon oral and written statements of
officers and representatives of the Parent, the Company and Vasogen, Corp. and
upon certificates of the Parent, the Company and Vasogen, Corp.
We have also assumed that as provided in the Securities Purchase
Agreements, the Notes, the Warrants and the Registration Rights Agreement, the
Holder to which Common Shares are to be issued has, in connection with such
issuance, represented and warranted to the Parent and the Company that such
Holder is a Qualified Institutional Buyer (as such term is defined in Rule 144A
under the 1933 Act) and covenanted to the Parent and the Company that such
holder will offer or sell such Common Shares only pursuant to an effective
registration statement or pursuant to Rule 904 or Rule 144 under the 1933 Act
and that such Holder will not be an affiliate (as such term is defined in Rule
144 under the 1933 Act) of the Parent or the Company at the time of any such
offer or sale of such Common Shares pursuant to Rule 904 under the 1933 Act by
such Holder (such representations, warranties and covenants, the "Holder
Agreements").
2
In our examination of the documents referred to above, we have assumed,
without independent investigation, the genuineness of all signatures, the legal
capacity of all individuals who have executed any of the documents reviewed by
us, the authenticity of all documents submitted to us as originals, the
conformity to the originals of all documents submitted to us as certified,
photostatic, reproduced or conformed copies of valid existing agreements or
other documents, the authenticity of the latter documents and that the
statements regarding matters of fact in the certificates, records, agreements,
instruments and documents that we have examined are accurate and complete.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications set forth in this letter and assuming, in the case of a
conversion of a Note or an exercise of a Warrant by a Holder, that such Holder
has, in connection with such issuance, completed a Conversion Notice or Exercise
Notice, as applicable, correctly and accurately, then the Transfer Agent may
rely upon and act in accordance with the Treasury Instructions received from the
Parent.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications set forth in this letter, this letter shall serve as our
instruction to you that the Common Shares may be issued to such Holder free of
restrictive legends under the 1933 Act.
3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT; (B) TO THE COMPANY, (C) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE 1933 ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL
LAWS OR (D) WITHIN THE UNITED STATES (1) IN ACCORDANCE WITH
THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND IN
COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR (2) IN
A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE
1933 ACT OR APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER
HAS PROVIDED THE COMPANY, PRIOR TO SUCH OFFER, SALE OR
TRANSFER, WITH REASONABLE ASSURANCE THAT SUCH SECURITIES MAY
BE SO OFFERED, SOLD OR TRANSFERRED IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR APPLICABLE
STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
The opinion expressed above is limited to the federal laws of the United
States of America. We do not express any opinion as to any matters governed by
any other laws. Our opinions are rendered only with respect to the laws, and the
rules, regulations and orders under those laws, that are currently in effect.
This letter is furnished by us solely for your benefit and may not be circulated
to, or relied upon by, any other person without our prior written consent.
Very truly yours,
XXXX, XXXXX, RIFKIND, XXXXXXX & XXXXXXXX LLP
4
EXHIBIT B
SELLING SHAREHOLDERS
The Common Shares being offered by the selling shareholders are issuable
upon conversion of the convertible notes which were issued by Vasogen Ireland
Limited pursuant to a Securities Purchase Agreement dated as of October 7,
2005), and upon exercise of warrants. For additional information regarding the
issuance of those convertible notes and warrants, see "Private Placement of
Convertible Notes and Warrants" above. We are registering (for the purposes of
applicable Ontario securities laws, qualifying) the Common Shares in order to
permit the selling shareholders to offer the shares for resale from time to
time. Except for the ownership of the Convertible Notes of our subsidiary and
the Warrants issued pursuant to the Securities Purchase Agreement, the selling
shareholders have not had any material relationship with us within the past
three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the Common Shares by each of the selling
shareholders. The second column lists the number of Common Shares beneficially
owned by each selling shareholder, based on its ownership of the convertible
notes and warrants, as of ________, 200_, assuming conversion of all convertible
notes and exercise of the warrants held by the selling shareholders on that
date, without regard to any limitations on conversions or exercise.
The third column lists the Common Shares being offered by this prospectus
by the selling shareholders.
In accordance with the terms of registration rights agreements with the
selling shareholders, this prospectus generally covers the resale of at least
150% of the sum of (i) the number of Common Shares issuable upon conversion,
amortization or redemption of the convertible notes as of the trading day
immediately preceding the date the registration statement is initially filed
with the SEC and (ii) the number of Common Shares issuable upon exercise of the
warrants as of the trading day immediately preceding the date the registration
statement is initially filed with the SEC. Because the conversion price of the
convertible notes may be adjusted and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less
than the number of shares being offered by this prospectus. The fourth column
assumes the sale of all of the shares offered by the selling shareholders
pursuant to this prospectus.
Under the terms of the convertible notes and the warrants, a selling
shareholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling shareholder,
together with its affiliates and joint actors, to beneficially own a number of
Common Shares which would exceed 9.99% of our then outstanding Common Shares
following such conversion or exercise, excluding for purposes of such
determination Common Shares issuable upon conversion of the convertible notes
which have not been converted and upon exercise of the warrants which have not
been exercised. The number of shares in the second column does not reflect this
limitation. The selling shareholders may sell all, some or none of their shares
in this offering. See "Plan of Distribution."
1
Maximum Number of Shares
------------------------
Number of Shares Owned to be Sold Pursuant to Number of Shares
---------------------- ---------------------- ----------------
Name of Selling Shareholder Prior to Offering this Prospectus Owned After Offering
--------------------------- ----------------- --------------- --------------------
Kings Road Investments Ltd. (1) 0
(1) Polygon Investment Partners LLP and Polygon Investment Partners LP (the
"Investment Managers") and Polygon Investments Ltd. (the "Manager") each has the
right to vote and dispose of the securities held by Kings Road Investments Ltd.
Xxxxxxxxx Xxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Dear control the Investment Managers
and the Manager. The Investment Managers, the Manager, Xxxxxxxxx Xxxxxxx, Xxxxx
Xxxxxxxx and Xxxxx Dear disclaim beneficial ownership of the securities held by
Kings Road Investments Ltd.
2
PLAN OF DISTRIBUTION
We are registering (for the purposes of applicable Ontario securities
laws, qualifying) the Common Shares issuable upon conversion of the convertible
notes and upon exercise of the warrants to permit the resale of these Common
Shares by the holders of the convertible notes and warrants from time to time
after the date of this prospectus. We will not receive any of the proceeds from
the sale by the selling shareholders of the Common Shares. We will bear all fees
and expenses incident to our obligation to register the Common Shares.
The selling shareholders may sell all or a portion of the Common Shares
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers, dealers or agents. If the
Common Shares are sold through underwriters broker-dealers or dealers, the
selling shareholders will be responsible for underwriting discounts or
commissions or agent's commissions. The Common Shares may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
o on any Canadian or United States securities exchange or quotation
service on which the securities may be listed or quoted at the time
of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
o through the writing of options, whether such options are listed on
an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer or dealer solicits purchasers;
o block trades in which the broker-dealer or dealer will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer or dealer as principal and resale by
the broker-dealer or dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
1
o broker-dealers or dealers may agree with the selling securityholders
to sell a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling Common
Shares to or through underwriters, broker-dealers, dealers or agents, such
underwriters, broker-dealers, dealers or agents may receive commissions in the
form of discounts, concessions or commissions from the selling shareholders or
commissions from purchasers of the Common Shares for whom they may act as agent
or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers, dealers or agents may
be in excess of those customary in the types of transactions involved). In
connection with sales of the Common Shares or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or dealers,
which may in turn engage in short sales of the Common Shares in the course of
hedging in positions they assume. The selling shareholders may also sell Common
Shares short and deliver Common Shares covered by this prospectus to close out
short positions and to return borrowed shares in connection with such short
sales. The selling shareholders may also loan or pledge Common Shares to
broker-dealers or dealers that in turn may sell such shares.
The selling shareholders may pledge or grant a security interest in some
or all of the convertible notes, warrants, or Common Shares owned by them and,
if they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the Common Shares from time to time pursuant
to this prospectus or any amendment to this prospectus (in the case of the U.S.
prospectus, under Rule 424(b)(3), Rule 467 or other applicable provision of the
Securities Act of 1933, as amended, (or equivalent under MJDS)) amending, if
necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer and donate the Common Shares in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the Common Shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended, and any commission paid, or
any discounts or concessions allowed to, any such broker-dealer may be deemed to
be underwriting commissions or discounts under the Securities Act of 1933, as
amended. At the time a particular offering of the Common Shares is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of Common Shares being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
shareholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Under the securities laws of some U.S. states and the provinces of Canada,
the Common Shares may be sold in such states or provinces only through
registered or licensed brokers or dealers. In addition, in some states and
provinces of Canada the Common Shares may not be
2
sold unless such shares have been registered or qualified for sale in such state
or province or an exemption from registration or qualification is available and
is complied with.
There can be no assurance that any selling shareholder will sell any or
all of the Common Shares registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
The selling shareholders and any other person participating in such
distribution in the United States will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the Common Shares by
the selling shareholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution of the
Common Shares to engage in market-making activities with respect to the Common
Shares. All of the foregoing may affect the marketability of the Common Shares
and the ability of any person or entity to engage in market-making activities
with respect to the Common Shares.
We will pay all expenses of the registration of the Common Shares pursuant
to the registration rights agreement, estimated to be $[ ] in total, including,
without limitation, securities regulatory filing fees and expenses of compliance
with state securities or "blue sky" laws; provided, however, that a selling
shareholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the selling shareholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling shareholders will be entitled to contribution. We may
be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this prospectus
forms a part, the Common Shares will be freely tradable in the hands of persons
(other than, for U.S. securities law purposes, our affiliates and, for Canadian
securities law purposes, members of a control block).
All shelf information omitted from this base shelf prospectus will be
contained in a shelf prospectus supplement that will be delivered to purchasers
together with this base shelf prospectus. Each shelf prospectus supplement will
be incorporated by reference into this base shelf prospectus as of the date of
the shelf prospectus supplement and only for the purposes of the distribution to
which the shelf prospectus supplement pertains.
No underwriter or dealer involved in an "at the market distribution" as
defined under applicable Canadian securities legislation, no affiliate of such
an underwriter or dealer and no person acting jointly or in concert with such an
underwriter or dealer has over-allotted, or will over-allot, securities in
connection with the distribution to effect any other transactions that are
intended to stabilize or maintain the market price of the securities.
3
In connection with any distribution of the Common Shares, other than an
"at the market distribution", the underwriters, if any, may allot or effect
transactions which stabilize or maintain the market price of the Common Shares
offered at a level above that which might otherwise prevail in the open market.
Such transactions, if commenced, may be discontinued at any time.
4
Appendix A
NOTICE OF REGISTRATION STATEMENT
AND
SELLING SECURITYHOLDER QUESTIONNAIRE
Vasogen Inc. (the "Company") has filed or caused to be filed, as the case
may be, or intends to file or cause to be filed, as the case may be, with the
Ontario Securities Commission a shelf prospectus (the "Shelf Prospectus") under
the Canada/United States Multi-Jurisdictional Disclosure System qualifying
resales from time to time of the Company common shares, without par value (the
"Common Shares") issuable upon conversion of 6.45% Senior Convertible Notes of
Vasogen Ireland Limited (the "Notes") and warrants of the Company (the
"Warrants" and together with the Notes collectively, the "Securities") and with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form F-10 (the "Shelf Registration Statement") for the registration
under the Securities Act of 1933, as amended (the "Securities Act") of resales
of the Common Shares issuable upon conversion of the Securities, in accordance
with the terms of that certain Registration Rights Agreement between the Company
and the initial purchasers (the "Registration Rights Agreement"). A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms used and not otherwise defined
herein shall have the meanings given them in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is
entitled to the benefits of the Registration Rights Agreement. In order to sell
or otherwise dispose of any Registrable Securities pursuant to the Shelf
Prospectus and Shelf Registration Statement, a beneficial owner of Registrable
Securities generally will be required to be named as a selling securityholder in
the related prospectus, deliver a prospectus to each purchaser of Registrable
Securities and be bound by the Registration Rights Agreement (including certain
indemnification provisions, as described below).
If you wish to include the Registrable Securities beneficially owned by you
in the Shelf Prospectus and Shelf Registration Statement (or a supplement or
amendment thereto), you must complete, sign and deliver this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") and the Submission to Jurisdiction Form attached hereto as
"Appendix B" to the Company at the address set forth herein on or prior to the
fifth Business Day before the effectiveness of the Shelf Registration Statement.
If you fail to do so, you will not be named as a selling securityholder in the
Shelf Prospectus and the Shelf Registration Statement and will not be able to
use the Prospectus forming a part thereof to resell the Registrable Securities
that you hold until you are subsequently so named in accordance with the
following paragraph.
Upon receipt of a completed Notice and Questionnaire and Submission to
Jurisdiction Form from a beneficial owner following the effectiveness of the
Shelf Registration Statement, the Company will, as promptly as practicable, but
in any event upon the later of (x) ten Business Days after the date of receipt
of a completed Notice and Questionnaire and Submission to Jurisdiction Form or
(y) ten Business Days after the expiration of any period during which the
availability of the Shelf Prospectus and Shelf Registration Statement is
suspended, file or cause to be filed, as the case may be, such supplements
and/or amendments to the Shelf Prospectus and Shelf Registration Statement as
are necessary to permit such holder to deliver such Prospectus to purchasers of
Registrable Securities. However, the Company will not be obligated to file more
than one such supplement and/or amendment to the Shelf Prospectus or Shelf
Registration Statement in any 30-day period the date the Shelf Registration
Statement becomes effective for the purpose of naming additional beneficial
owners as selling securityholders.
Please be aware that various legal consequences arise from being named as
a selling securityholder in the Shelf Prospectus and the Shelf Registration
Statement. We strongly advise you to consult your own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Shelf Prospectus and the Shelf Registration Statement.
A-1
ELECTION
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include in the Shelf Prospectus and
Shelf Registration Statement the Registrable Securities beneficially owned by it
and listed below in Item (3). By signing and returning this Notice and
Questionnaire and the Submission to Jurisdiction Form, the undersigned agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire, the Submission to Jurisdiction Form and the
Registration Rights Agreement, including, without limitation, the
indemnification provisions set forth in the Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
QUESTIONNAIRE
(1) (a) Full legal name of Selling Securityholder:
---------------------------------------------------------------------
(b) Full legal name of registered holder (if not the same as in (a) above)
of Registrable Securities listed in Item (3) below:
---------------------------------------------------------------------
(c) Full legal name of DTC Participant (if applicable and if not the same
as (b) above) through which Registrable Securities listed in Item (3)
below are held:
---------------------------------------------------------------------
(2) Address for notices to Selling Securityholder:
---------------------------------------------------------------------------
Telephone:
----------------------------------------------------------------
Fax:
----------------------------------------------------------------------
Contact person:
-----------------------------------------------------------
(3) Beneficial ownership of Registrable Securities:
Except as set forth below in this Item (3), the undersigned Selling
Securityholder does not beneficially own any Registrable Securities.
(a) Principal amount of Securities beneficially owned:
----------------------------------------------------------------------
CUSIP No(s). of such Securities:
------------------------------------------
Number of Common Shares (if any) issued upon conversion, repurchase or
redemption of Securities:
----------------------------------------------------------------------
(b) Principal amount of Securities which the undersigned wishes to be
included in the Shelf Prospectus and Shelf Registration Statement:
----------------------------------------------------------------------
A-2
CUSIP No(s). of such Securities to be included in the Shelf Prospectus
and Shelf Registration Statement:
----------------------------------------------------------------------
----------------------------------------------------------------------
Number of Common Shares (if any) issued upon conversion or exchange of
Securities which the undersigned wishes to be included in the Shelf
Prospectus and Shelf Registration Statement:
----------------------------------------------------------------------
(c) Date on which the Selling Securityholder acquired the Securities to be
included in the Shelf Prospectus and Shelf Registration Statement:
----------------------------------------------------------------------
(4) Beneficial ownership of other securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any Common
Shares or any other securities of the Company, other than the Common Shares
listed above in Item (3).
State any exceptions here:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
If the other securities of the Company beneficially owned by the Selling
Securityholder are registered otherwise than in the name of the Selling
Securityholder, please set out the name of the registered holder of such
other securities of the Company:
---------------------------------------------------------------------------
(5) Prior Acquisitions of Securities of the Company:
If the Selling Securityholder acquired any common shares or other
securities of the Company within the last twelve months please indicate
below the date of purchase and the cost to the Selling Securityholder in
the aggregate and on a per security basis:
---------------------------------------------------------------------------
(6) Broker-Dealer Status:
Is the Selling Securityholder a registered broker dealer? Yes [_] No [_]
Note that in general we will be required to identify any registered
broker-dealer as an underwriter in the prospectus.
(7) Affiliation with Broker-Dealers:
Is the Selling Securityholder an affiliate(1) of a registered
broker-dealer?
------------------
(1) An "affiliate" of a specified person or entity means a person or entity
that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person or entity
specified.
A-3
Yes [_] No [_]
If so, please answer the remaining questions in this section.
(a) Please describe the affiliation between the Selling Securityholder and
any registered broker-dealers:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) If the Registrable Securities were purchased by the Selling
Securityholder other than in the ordinary course of business, please
describe the circumstances:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(c) If the Selling Securityholder, at the time of its purchase of
Registrable Securities, has had any agreements or understandings,
directly or indirectly, with any person to distribute the Registrable
Securities, please describe such agreements or understandings:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Note that if the Selling Securityholder is an affiliate of a broker-dealer
and did not purchase its Registrable Securities in the ordinary course of
business or at the time of the purchase had any agreements or
understandings, directly or indirectly, to distribute the Registrable
Securities, we must identify the Selling Securityholder as an underwriter
in the prospectus.
(8) Beneficial Ownership by Natural Persons:
If the Selling Securityholder is an entity, does any natural person have
voting or investment power over the Registrable Securities held by the
Selling Securityholder?(2)
Yes [ ] No [ ]
If so, please state that person's or persons' name(s):
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(9) Relationships with the Company:
--------------------------------------------------------------------------------
(2) Please answer "Yes" if any natural person, directly or indirectly, through
any contract, arrangement, understanding, relationship, or otherwise has or
shares: (a) voting power which includes the power to vote, or to direct the
voting of, such security and/or (b) investment power which includes the
power to dispose, or to direct the disposition of, the Registrable
Securities held by the Selling Securityholder.
A-4
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during
the past three years.
State any exceptions here:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(10) Plan of distribution: See Exhibit B to the Registration Rights Agreement
State any exceptions here:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The Selling Securityholder acknowledges that it understands its
obligation to comply, and agrees that it will comply, with any prospectus
delivery and other provisions of the Securities Act and the Exchange Act
and the rules and regulations thereunder, particularly Regulation M (or any
successor rules and regulations).
The Selling Securityholder acknowledges its obligations under the
Registration Rights Agreement to indemnify and hold harmless certain
persons as set forth therein.
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the
date on which such information is provided to the Company, the Selling
Securityholder agrees to notify the transferee(s) at the time of the
transfer of its rights and obligations under this Notice and Questionnaire,
the Submission to Jurisdiction Form and the Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (10) above and the inclusion of such information in the Shelf
Prospectus and Shelf Registration Statement. The Selling Securityholder
understands that such information will be relied upon by the Company in
connection with the preparation of the Shelf Prospectus and Shelf
Registration Statement.
If required by applicable law, in accordance with the Selling
Securityholder's obligation under the Registration Rights Agreement to
provide such information as may be required by law for inclusion in the
Shelf Prospectus and Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Shelf Prospectus and Shelf Registration
Statement remain effective. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing, by hand-delivery,
first-class mail, or air courier guaranteeing overnight delivery to the
address below.
Once this Notice and Questionnaire and the Submission to Jurisdiction
Form are executed by the Selling Securityholder and received by the
Company, the terms of this Notice and Questionnaire and the Submission to
Jurisdiction Form, and the representations and warranties contained
therein, shall be binding on, shall inure to the benefit of and shall be
enforceable by the respective successors, heirs, personal representatives,
and assigns of the Company and the Selling Securityholder (with respect to
the Registrable Securities beneficially owned by such Selling
Securityholder and listed in Item (3) above). This Agreement shall be
governed in all respects by the laws of the State of New York applicable to
agreements made and to be performed in such State.
A-5
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire and the Submission to Jurisdiction
Form to be executed and delivered either in person or by its duly
authorized agent.
Dated:
------------------------
-----------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
-------------------------------------
Name:
Title:
A-6
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND
QUESTIONNAIRE AND SUBMISSION TO JURISDICTION FORM ATTACHED HERETO AS
APPENDIX "B" TO THE COMPANY AT:
Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Vice President, Corporate & Legal Affairs
Appendix B
NON-ISSUER FORM OF SUBMISSION TO JURISDICTION AND
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS
1. Name of issuer (the "Issuer"):
Vasogen Inc.
2. Jurisdiction of incorporation of Issuer:
Canada
3. Address of principal place of business of Issuer:
0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxx X0X 0X0
4. Description of securities (the "Securities"):
Common Shares issuable upon conversion of 6.45% Senior Convertible Notes
of Vasogen Ireland Limited and on the exercise of warrants issued by the
Issuer.
5. Date of the short form prospectus (the "Short Form Prospectus") under
which the Securities are offered:
, 2005
6. Name of person filing this form (the "Filing Person"):
7. Filing Person's relationship to Issuer:
8. Jurisdiction of incorporation, or equivalent, of Filing Person, if
applicable, or jurisdiction of residence of Filing Person:
9. Address of principal place of business of Filing Person:
10. Name of agent for service of process (the "Agent"):
Vasogen Inc.
11. Address for service of process of Agent in Canada (which address may be
anywhere in Canada):
0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxx X0X 0X0
B-1
12. The Filing Person designates and appoints the Agent at the address of the
Agent stated above as its agent upon whom may be served any notice,
pleading, subpoena, summons or other process in any action, investigation
or administrative, criminal, quasi-criminal, penal or other proceeding
(the "Proceeding") arising out of, relating to or concerning the
distribution of the Securities made or purported to be made under the
Short Form Prospectus, and irrevocably waives any right to raise as a
defence in any such Proceeding any alleged lack of jurisdiction to bring
the Proceeding.
13. The Filing Person irrevocably and unconditionally submits to the
non-exclusive jurisdiction of
(a) the judicial, quasi-judicial and administrative tribunals of
Ontario; and
(b) any administrative proceeding in Ontario,
in any Proceeding arising out of or related to or concerning the
distribution of the Securities made or purported to be made under the
Short Form Prospectus.
14. Until six years after completion of the distribution of the Securities
made under the Short Form Prospectus, the Filing Person shall file a new
submission to jurisdiction and appointment of agent for service of process
in this form at least 30 days before termination of this submission to
jurisdiction and appointment of agent for service of process.
15. Until six years after completion of the distribution of the Securities
under the Short Form Prospectus, the Filing Person shall file an amended
submission to jurisdiction and appointment of agent for service of process
at least 30 days before a change in the name or above address of the
Agent.
16. This submission to jurisdiction and appointment of agent for service of
process shall be governed by and construed in accordance with the laws of
Ontario.
Dated: , 2005
---------------------------------
Signature of Filing Person
AGENT
The undersigned accepts the appointment as agent for service of process of
________________________ under the terms and conditions of the appointment of
agent for service of process stated above.
Dated: , 2005
VASOGEN INC.
Per:
B-2
Exhibit 5a
Amendments to the Registration Rights Agreement - Kings Road Investments Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
KINGS ROAD INVESTMENTS LTD.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X.X. Xxxxxxxxx and Xxxxxxx X. Xxxxx
Dear Sirs:
We refer to the Registration Rights Agreement, dated as of October 7, 2005
(the "Agreement"), by and among Vasogen Inc., a corporation incorporated under
the laws of Canada ("Vasogen"), Kings Road Investments Ltd., a Cayman Islands
company (the "Buyer"), and each other buyer listed on the signature pages
thereto. Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Agreement.
Vasogen and the Buyer hereby agree as follows:
1. Amendment of Required Registration Amount. The definition of "Required
-----------------------------------------
Registration Amount" in Section 1(q) of the Agreement shall be deleted in its
entirety and replaced with the following new definition:
"Required Registration Amount" means, until the Registration Statement
becomes effective, 25,000,000 Common Shares, which represents 150% of the
sum of the number of Conversion Shares issued or issuable pursuant to the
Notes assuming that the Notes are converted into Common Shares at the
Conversion Rate (as defined in the Notes) and the number of Initial
Warrant Shares issued or issuable pursuant to the Initial Warrants, and
thereafter means the sum of (i) the quotient of the aggregate outstanding
Principal of the Notes divided by the Conversion Price (as defined in the
Notes), rounded up to the nearest whole number, (ii) the number of Common
Shares underlying unexercised Initial Warrants and (iii) the number of
Common Shares underlying unexercised but issued Additional Warrants.
2. Amendment of Section 2(f). The penultimate sentence of Section 2(f) of
-------------------------
the Agreement shall be deleted in its entirety and replaced with the following:
2
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of Common Shares
available for resale under the Registration Statement is less than the
Required Registration Amount as at such time.
3. Expenses. Vasogen shall pay an amount to the Buyer or its designee(s)
--------
to cover legal expenses reasonably incurred by the Buyer in relation to the
review, preparation and execution of this Letter.
4. Ratification of the Agreement. Except as expressly provided herein, all
-----------------------------
of the terms and conditions of the Agreement are ratified and shall remain
unchanged and continue in full force and effect.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
--------------------------
Name:
Title:
Accepted and agreed to as of
the date first written above by:
KINGS ROAD INVESTMENTS LTD.
By:
--------------------------
Name:
Title:
Exhibit 5b
Amendments to the Registration Rights Agreement - Amatis Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
AMATIS LTD.
c/o Amaranth Advisors LLC
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Dear Sirs:
We refer to the Registration Rights Agreement, dated as of October 7, 2005
(the "Agreement"), by and among Vasogen Inc., a corporation incorporated under
the laws of Canada ("Vasogen"), Amatis Ltd., a Cayman Islands company (the
"Buyer"), and each other buyer listed on the signature pages thereto.
Capitalized terms used but not defined in this letter agreement ("Letter") have
the respective meanings set forth in the Agreement.
Vasogen and the Buyer hereby agree as follows:
1. Amendment of Required Registration Amount. The definition of "Required
-----------------------------------------
Registration Amount" in Section 1(q) of the Agreement shall be deleted in its
entirety and replaced with the following new definition:
"Required Registration Amount" means, until the Registration Statement
becomes effective, 25,000,000 Common Shares, which represents 150% of the
sum of the number of Conversion Shares issued or issuable pursuant to the
Notes assuming that the Notes are converted into Common Shares at the
Conversion Rate (as defined in the Notes) and the number of Initial
Warrant Shares issued or issuable pursuant to the Initial Warrants, and
thereafter means the sum of (i) the quotient of the aggregate outstanding
Principal of the Notes divided by the Conversion Price (as defined in the
Notes), rounded up to the nearest whole number, (ii) the number of Common
Shares underlying unexercised Initial Warrants and (iii) the number of
Common Shares underlying unexercised but issued Additional Warrants.
2. Amendment of Section 2(f). The penultimate sentence of Section 2(f) of
-------------------------
the Agreement shall be deleted in its entirety and replaced with the following:
2
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of Common Shares
available for resale under the Registration Statement is less than the
Required Registration Amount as at such time.
3. Expenses. Vasogen shall pay an amount to the Buyer or its designee(s)
--------
to cover legal expenses reasonably incurred by the Buyer in relation to the
review, preparation and execution of this Letter.
4. Ratification of the Agreement. Except as expressly provided herein, all
-----------------------------
of the terms and conditions of the Agreement are ratified and shall remain
unchanged and continue in full force and effect.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
--------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
AMATIS LTD.
By:
--------------------------
Name:
Title:
Exhibit 5c
Amendments to the Registration Rights Agreement - Castlerigg Master
Investments Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CASTLERIGG MASTER INVESTMENTS LTD.
c/o Sandell Asset Management Corp.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Cem Hacioglu
Dear Sirs:
We refer to the Registration Rights Agreement, dated as of October 7, 2005
(the "Agreement"), by and among Vasogen Inc., a corporation incorporated under
the laws of Canada ("Vasogen"), Castlerigg Master Investments Ltd., a Curacao,
Netherland Antilles company (the "Buyer"), and each other buyer listed on the
signature pages thereto. Capitalized terms used but not defined in this letter
agreement ("Letter") have the respective meanings set forth in the Agreement.
Vasogen and the Buyer hereby agree as follows:
1. Amendment of Required Registration Amount. The definition of "Required
-----------------------------------------
Registration Amount" in Section 1(q) of the Agreement shall be deleted in its
entirety and replaced with the following new definition:
"Required Registration Amount" means, until the Registration Statement
becomes effective, 25,000,000 Common Shares, which represents 150% of the
sum of the number of Conversion Shares issued or issuable pursuant to the
Notes assuming that the Notes are converted into Common Shares at the
Conversion Rate (as defined in the Notes) and the number of Initial
Warrant Shares issued or issuable pursuant to the Initial Warrants, and
thereafter means the sum of (i) the quotient of the aggregate outstanding
Principal of the Notes divided by the Conversion Price (as defined in the
Notes), rounded up to the nearest whole number, (ii) the number of Common
Shares underlying unexercised Initial Warrants and (iii) the number of
Common Shares underlying unexercised but issued Additional Warrants.
2. Amendment of Section 2(f). The penultimate sentence of Section 2(f) of
-------------------------
the Agreement shall be deleted in its entirety and replaced with the following:
2
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of Common Shares
available for resale under the Registration Statement is less than the
Required Registration Amount as at such time.
3. Expenses. Vasogen shall pay an amount to the Buyer or its designee(s)
--------
to cover legal expenses reasonably incurred by the Buyer in relation to the
review, preparation and execution of this Letter.
4. Ratification of the Agreement. Except as expressly provided herein, all
-----------------------------
of the terms and conditions of the Agreement are ratified and shall remain
unchanged and continue in full force and effect.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
--------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CASTLERIGG MASTER INVESTMENTS LTD.
By:
--------------------------
Name:
Title:
Exhibit 5d
Amendments to the Registration Rights Agreement - Capital Ventures
International
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CAPITAL VENTURES INTERNATIONAL
c/o Heights Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Dear Sirs:
We refer to the Registration Rights Agreement, dated as of October 7, 2005
(the "Agreement"), by and among Vasogen Inc., a corporation incorporated under
the laws of Canada ("Vasogen"), Capital Ventures International, a Cayman Islands
company (the "Buyer"), and each other buyer listed on the signature pages
thereto. Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Agreement.
Vasogen and the Buyer hereby agree as follows:
1. Amendment of Required Registration Amount. The definition of "Required
-----------------------------------------
Registration Amount" in Section 1(q) of the Agreement shall be deleted in its
entirety and replaced with the following new definition:
"Required Registration Amount" means, until the Registration Statement
becomes effective, 25,000,000 Common Shares, which represents 150% of the
sum of the number of Conversion Shares issued or issuable pursuant to the
Notes assuming that the Notes are converted into Common Shares at the
Conversion Rate (as defined in the Notes) and the number of Initial
Warrant Shares issued or issuable pursuant to the Initial Warrants, and
thereafter means the sum of (i) the quotient of the aggregate outstanding
Principal of the Notes divided by the Conversion Price (as defined in the
Notes), rounded up to the nearest whole number, (ii) the number of Common
Shares underlying unexercised Initial Warrants and (iii) the number of
Common Shares underlying unexercised but issued Additional Warrants.
2. Amendment of Section 2(f). The penultimate sentence of Section 2(f) of
-------------------------
the Agreement shall be deleted in its entirety and replaced with the following:
2
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of Common Shares
available for resale under the Registration Statement is less than the
Required Registration Amount as at such time.
3. Expenses. Vasogen shall pay an amount to the Buyer or its designee(s)
--------
to cover legal expenses reasonably incurred by the Buyer in relation to the
review, preparation and execution of this Letter.
4. Ratification of the Agreement. Except as expressly provided herein, all
-----------------------------
of the terms and conditions of the Agreement are ratified and shall remain
unchanged and continue in full force and effect.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
--------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CAPITAL VENTURES INTERNATIONAL
By:
--------------------------
Name:
Title:
Exhibit 5e
Amendments to the Registration Rights Agreement - Smithfield Fiduciary LLC
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
SMITHFIELD FIDUCIARY LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx and Xxxx X. Xxxxx
Dear Sirs:
We refer to the Registration Rights Agreement, dated as of October 7, 2005
(the "Agreement"), by and among Vasogen Inc., a corporation incorporated under
the laws of Canada ("Vasogen"), Smithfield Fiduciary LLC, a Cayman Islands
company (the "Buyer"), and each other buyer listed on the signature pages
thereto. Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Agreement.
Vasogen and the Buyer hereby agree as follows:
1. Amendment of Required Registration Amount. The definition of "Required
-----------------------------------------
Registration Amount" in Section 1(q) of the Agreement shall be deleted in its
entirety and replaced with the following new definition:
"Required Registration Amount" means, until the Registration Statement
becomes effective, 25,000,000 Common Shares, which represents 150% of the
sum of the number of Conversion Shares issued or issuable pursuant to the
Notes assuming that the Notes are converted into Common Shares at the
Conversion Rate (as defined in the Notes) and the number of Initial
Warrant Shares issued or issuable pursuant to the Initial Warrants, and
thereafter means the sum of (i) the quotient of the aggregate outstanding
Principal of the Notes divided by the Conversion Price (as defined in the
Notes), rounded up to the nearest whole number, (ii) the number of Common
Shares underlying unexercised Initial Warrants and (iii) the number of
Common Shares underlying unexercised but issued Additional Warrants.
2. Amendment of Section 2(f). The penultimate sentence of Section 2(f) of
-------------------------
the Agreement shall be deleted in its entirety and replaced with the following:
2
For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of Common Shares
available for resale under the Registration Statement is less than the
Required Registration Amount as at such time.
3. Expenses. Vasogen shall pay an amount to the Buyer or its designee(s)
--------
to cover legal expenses reasonably incurred by the Buyer in relation to the
review, preparation and execution of this Letter.
4. Ratification of the Agreement. Except as expressly provided herein, all
-----------------------------
of the terms and conditions of the Agreement are ratified and shall remain
unchanged and continue in full force and effect.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
--------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
SMITHFIELD FIDUCIARY LLC
By:
--------------------------
Name:
Title:
Exhibit 6a
Senior Convertible Note - Kings Road Investments Ltd.
(see attached)
SENIOR CONVERTIBLE NOTE
THE COMPANY HAS NOT OFFERED OR SOLD, AND WILL NOT OFFER OR SELL, THIS NOTE IN
IRELAND IN CIRCUMSTANCES THAT WOULD CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF IRISH PROSPECTUS LAW (AS DEFINED IN THE INVESTMENT FUNDS, COMPANIES
AND MISCELLANEOUS PROVISIONS ACT, 2005) OR AN INVITATION TO THE PUBLIC (AS
REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO SUBSCRIBE FOR THIS NOTE
AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CONSTITUTING AN OFFER OF THIS
NOTE TO THE PUBLIC WITHIN THE MEANING OF IRISH PROSPECTUS LAW OR AN "INVITATION
TO THE PUBLIC" (AS REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO
SUBSCRIBE FOR THIS NOTE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN THE UNITED STATES OR TO
ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT) (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION THE HOLDER OF (A) THE
SECURITIES REPRESENTED HEREBY WILL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE
RESIDENTS OF CANADA BEFORE THE LATER OF: (I) FEBRUARY 8, 2006 AND (II) FOUR
MONTHS AND A DAY AFTER THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY OF CANADA; AND (B) THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF SHALL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA
BEFORE FEBRUARY 8, 2006.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.
VASOGEN IRELAND LIMITED
SENIOR CONVERTIBLE NOTE
Issuance Date: October 7, 2005 Principal: U.S. $16,500,000
Note Certificate Number A-1
FOR VALUE RECEIVED, Vasogen Ireland Limited, a company incorporated under
the laws of the Republic of Ireland (the "Company"), hereby promises to pay to
UBS SECURITIES LLC F/B/O KINGS ROAD INVESTMENTS LTD. or registered assigns
("Holder") the amount set out above as the Principal (as reduced pursuant to the
terms hereof pursuant to redemption, conversion or otherwise, the "Principal")
when due, whether upon the Maturity Date, on any Installment Date with respect
to the Installment Amount due on such Installment Date (each, as defined
herein), acceleration, redemption or otherwise (in each case in accordance with
the terms hereof) and to pay interest ("Interest") on any outstanding Interest
Principal Amount at the rate of 6.45% per annum (the "Interest Rate"), from the
date set out above as the Issuance Date (the "Issuance Date") until the same
becomes due and payable, whether upon an Interest Date (as defined below), any
Installment Date, the Maturity Date, acceleration, conversion, redemption or
otherwise (in each case, in accordance with the terms hereof). This Senior
Convertible Note (including all Senior Convertible Notes issued in exchange,
transfer or replacement hereof, this "Note") is one of an issue of Senior
Convertible Notes issued pursuant to the Purchase Agreements on the Closing Date
(collectively, the "Notes" and such other Senior Convertible Notes, the "Other
Notes"). Certain capitalized terms used herein are defined in Section 32.
(1) PAYMENTS OF PRINCIPAL.
(a) On each Installment Date the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date in
accordance with Section 8. On the Maturity Date, the Holder shall surrender the
Note to the Company and the Company shall pay to the Holder, (i) an amount in
Common Shares, or, at the option of the Company, in cash, representing all
outstanding Principal and (ii) an amount in cash equal to the accrued and unpaid
Interest thereon; provided that Principal shall be payable in Common Shares on
the Maturity Date if, and only if, there has been no Equity Conditions Failure.
On or prior to the eighth (8th) Trading Day prior to the Maturity Date (the
"Maturity Election Notice Due Date"), the Company shall deliver a written notice
to the Holder (x) specifying whether the Principal shall be paid on the Maturity
Date in Common Shares or cash and (y) if the Principal is to be paid in Common
Shares, certifying that there has been no Equity Conditions Failure. Principal
to be paid on the Maturity Date and on the Maturity Settlement Date (as defined
below) in Common Shares shall be paid in a number of fully paid and
nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) Common Shares.
(b) If the Company shall pay the Principal on the Maturity Date in
Common Shares, then on the Maturity Date (i) (A) provided that Xxxxxxx's
transfer agent (the "Transfer Agent") is participating in the Depository Trust
Company ("DTC") Fast Automated
-2-
Securities Transfer Program, the Company shall direct Vasogen to, and upon such
direction Vasogen shall or shall cause the Transfer Agent to, credit a number of
Common Shares equal to the quotient of the outstanding Principal due on such
date divided by the Initial Maturity Conversion Price (the "Pre-Maturity
Conversion Shares") to which the Holder shall be entitled to the Holder's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (B) if the foregoing shall not apply, Vasogen shall issue
and deliver, to the address set forth in the register maintained by Vasogen for
such purpose pursuant to the Securities Purchase Agreement or to such address as
specified by the Holder in writing to Vasogen at least three (3) Trading Days
prior to the Maturity Date, a certificate, registered in the name of the Holder
or its designee, for the number of Pre-Maturity Conversion Shares to which the
Holder shall be entitled and (ii) the Company shall pay to the Holder, in cash
by wire transfer of immediately available funds, the amount of any accrued and
unpaid interest on such Principal. On the third (3rd) Trading Day immediately
after the end of the Maturity Conversion Measuring Period (the "Maturity
Settlement Date"), the Company shall direct Vasogen to, and upon such direction
Vasogen shall or shall cause the Transfer Agent to, deliver to the Holder's
account with DTC a number of additional Common Shares, if any, equal to the
Maturity Balance Conversion Shares. If an Event of Default or Equity Conditions
Failure occurs during the Maturity Conversion Measuring Period, then, at the
Holder's option, either (x) the Holder may require the Company to pay the
Principal amount of the Note outstanding on the Maturity Date (including any
Principal amount represented by Pre-Maturity Conversion Shares that shall be
returned to the Company and which Principal amount shall be reduced to the
extent any such Common Shares are not returned to the Company) in cash on the
Maturity Settlement Date and, in conjunction with receipt of such cash payment,
shall return any Pre-Maturity Conversion Shares delivered to the Holder which
the Holder has not otherwise sold, transferred or disposed of or (y) the Company
shall pay to the Holder in cash on the Maturity Settlement Date an amount equal
to the difference between (1) the Principal outstanding on the Maturity Date
minus (2) the product of (A) the Principal outstanding on the Maturity Date
multiplied by (B) the Conversion Share Ratio and, notwithstanding Section 14(a),
in the case of this clause (y), such amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Maturity Conversion
Measuring Period.
(c) No prepayment of Principal shall be permitted except as expressly
provided herein.
(2) INTEREST; INTEREST RATE. Interest on the applicable Interest Principal
Amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 360-day year comprised of twelve 30-day months and
shall be payable on each Installment Date and on the Maturity Date (each an
"Interest Date"). Interest shall be payable on each Interest Date in cash. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate. Upon the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to twelve percent
(12.0%) (the "Default Rate"). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the Interest as
calculated at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default. Interest on overdue interest shall accrue at the same
rate compounded quarterly.
-3-
(3) CONVERSION OF NOTES. This Note shall be convertible into common shares
of Vasogen Inc. ("Vasogen"), without par value (the "Common Shares"), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d)(i), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable Common Shares in accordance with
Section 3(c), at the Conversion Rate (as defined below). Vasogen shall not issue
any fraction of a Common Share upon any conversion. If the issuance would result
in the issuance of a fraction of a Common Share, Vasogen shall round such
fraction of a Common Share up to the nearest whole share.
(b) Conversion Rate. The number of Common Shares issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (such number
of shares, the "Conversion Rate").
(i) "Conversion Amount" means the portion of the Principal to be
converted, amortized, redeemed or otherwise with respect to which this
determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination a price equal to $3.00, subject to
adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into
Common Shares on any date, the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time and
transmit by e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement, on the third (3rd) Trading Day prior to
such date (a "Conversion Date"), a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to Vasogen and
with a copy to the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the Company as soon as practicable
on or following such date (or an indemnification undertaking with respect to
this Note in the case of its loss, theft or destruction). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, Vasogen
and the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3rd) Trading Day following the date of receipt of a Conversion Notice (the
"Share Delivery Date"), (1) (x) provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, credit such aggregate number of Common Shares to which
the Holder shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system or (y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, Vasogen shall issue
-4-
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of Common
Shares to which the Holder shall be entitled and (2) the Company shall pay to
the Holder in cash an amount equal to the accrued and unpaid Interest up to and
including the Conversion Date on the Conversion Amount. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than five (5) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the Common Shares issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such Common Shares on the Conversion Date. In the event of a
partial conversion of this Note pursuant hereto, the principal amount converted
shall be deducted from the Installment Amounts relating to the Installment Dates
as set forth in the Conversion Notice.
(ii) Failure to Timely Convert. If Vasogen shall fail to issue a
certificate to the Holder or credit the Holder's balance account with DTC for
the number of Common Shares to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the Share Delivery Date (a "Conversion
Failure"), then (A) the Company shall pay damages to the Holder for each day of
such Conversion Failure in an amount equal to 1.5% of the product of (I) the
number of Common Shares not issued to the Holder on or prior to the Share
Delivery Date and to which the Holder is entitled, and (II) the Weighted Average
Price of the Common Shares on the Share Delivery Date or (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, where the
Holder has chosen not to void its Conversion Notice, if on or prior to the Share
Delivery Date, Vasogen shall fail to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of Common
Shares to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Shares to deliver in
satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the Common Shares so purchased
(the "Buy-In Price"), at which point Vasogen's obligation to deliver such
certificate (and to issue such Common Shares) shall terminate, or (ii) promptly
have Vasogen honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Common Shares times (B) the Weighted Average Price on the
Conversion Date. In the event that (1) the Holder has chosen to void its
Conversion Notice and (2) the Holder, prior to voiding such Conversion Notice,
purchased (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three
-5-
(3) Trading Days after the Holder's request, pay cash to the Holder in an amount
equal to the excess (if any) of (x) the Buy-In Price over the (y) the aggregate
consideration received by the Holder in the sale of such Common Shares.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event that the Company
and Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and Vasogen can convert some, but not all, of such
portions of the Notes submitted for conversion, subject to Section 3(d), the
Company shall direct Vasogen to, and upon such direction Vasogen shall, convert
from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such
holder relative to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number of Common
Shares issuable to the Holder in connection with a conversion of this Note,
Vasogen shall issue to the Holder the number of Common Shares not in dispute and
resolve such dispute in accordance with Section 25.
(d) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates and joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (y) for
purposes of the Securities Act (Ontario), in excess of 9.99% (the "Maximum
Percentage") of the number of Common Shares outstanding immediately after giving
effect to such conversion; provided that the Company shall nevertheless be
entitled to make payments in Common Shares pursuant to Sections 8(c), 8(d), 9
and 10. For purposes of the foregoing sentence, the number of Common Shares
beneficially owned by the Holder and its affiliates and joint actors shall
include the number of Common Shares issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of Common Shares which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates or joint actors and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of Vasogen
and the Company (including, without limitation, any Other Notes or warrants),
which in each case are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. For purposes of calculating
beneficial ownership pursuant to this Section 3(d)(i), beneficial ownership
pursuant to the Exchange Act shall be calculated in
-6-
accordance with Section 13(d) of the Exchange Act, and beneficial ownership
pursuant to the Securities Act (Ontario) shall be calculated in accordance with
section 101 of the Securities Act (Ontario), in each case except as set forth in
the preceding sentence. For purposes of this Section 3(d)(i), in determining the
number of outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (x) Vasogen's most recent Form 40-F or
Form 6-K, as the case may be, (y) a more recent public announcement by Vasogen
or (z) any other notice by the Company, Vasogen or the Transfer Agent setting
forth the number of Common Shares outstanding. For any reason at any time, upon
the written or oral request of the Holder, Vasogen shall within two (2) Trading
Days confirm orally and in writing to the Holder the number of Common Shares
then outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the actual conversion or exercise of
securities of Vasogen and the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company and Vasogen, the Holder from time
to time may increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and Vasogen, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes;
provided that the Company shall nevertheless be entitled to make payments in
Common Shares pursuant to Sections 8(c), 8(d), 9 and 10 without regard to the
Maximum Percentage as adjusted.
(ii) Principal Market Regulation. Vasogen shall not be obligated to
issue any Common Shares upon conversion, amortization or redemption of this
Note, and the Holder of this Note shall not have the right to receive upon
conversion, amortization or redemption of this Note any Common Shares (and only
such Common Shares), if the issuance of such Common Shares would exceed the
aggregate number of Common Shares which Vasogen may issue upon conversion,
amortization or redemption, or exercise, as applicable, of the Notes and
Warrants without breaching Vasogen's obligations under the rules or regulations
of the Principal Market (the "Exchange Cap"), except that such limitation shall
not apply in the event that the Company or Vasogen (A) obtains the approval of
the Principal Market (in the case of the TSX) or Vasogen's shareholders as
required by the applicable rules of the Principal Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the Purchase
Agreements (the "Purchasers") shall be issued in the aggregate, upon conversion
or exercise, as applicable, of Notes or Warrants, Common Shares in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the principal amount of Notes issued to such Purchaser
pursuant to the applicable Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Purchase Agreements on the Closing Date (with
respect to each Purchaser, the "Exchange Cap Allocation"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Notes, the
transferee shall be allocated a pro rata portion of such Purchaser's Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap
-7-
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of Common Shares actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. For purposes of clarification, with respect
to any Exchange Cap relating to the TSX, no holder of Notes shall be issued in
the aggregate upon conversion (including pursuant to any Company Conversion,
Mandatory Conversion or LC Conversion) of the Notes or exercise of the Warrants
or upon payment of Principal on the Notes on the Maturity Date, any Common
Shares at a discount to the market price (as defined for purposes of the TSX) at
the time of issuance of such shares in excess of such holder's Exchange Cap
Allocation.
(e) Payment in Lieu of Conversion Above Exchange Cap Limitation. If at
any time while this Note is outstanding, the Holder delivers a Conversion
Notice, and as a result of the application of an Exchange Cap, Vasogen is unable
to issue any Common Shares upon such conversion at the applicable Conversion
Price, then the Company shall (i) direct Vasogen to, and upon such direction
Vasogen shall, deliver to the Holder on the Conversion Date a number of Common
Shares equal to the quotient of the Conversion Amount stated in such Conversion
Notice divided by the Adjusted Conversion Price (the "Adjusted Conversion
Shares") and (ii) pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (A) the number of Exchange Cap Limitation Shares in connection with
such conversion multiplied by (B) the excess (if any) of (1) such Adjusted
Conversion Price over (2) the Conversion Price (the "Conversion Make-Whole").
Notwithstanding the foregoing, in the event that the Company is prohibited,
pursuant to the rules and regulations of any applicable Principal Market, to
honor the Holder's Conversion Notice by both the delivery of the Adjusted
Conversion Shares and the payment of the Conversion Make-Whole in cash, then the
Company shall pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (x) the number of Exchange Cap Limitation Shares and (y) the Adjusted
Conversion Price (the "Exchange Cap Redemption Payment"). If the Company shall
fail to deliver to the Holder the Adjusted Conversion Shares and pay the
Conversion Make-Whole or to pay to the Holder the Exchange Cap Redemption
Payment, as applicable, on or prior to the date such delivery and/or payment is
due, the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice or for which the Holder has not received the Adjusted Conversion Shares
and the Conversion Make-Whole or the Exchange Cap Redemption Payment, as
applicable.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"Event of Default":
(i) the failure of (A) any Common Shares issued or issuable upon
conversion, as part of any Installment Amount or as part of any Accelerated
Amount to be freely tradable under Canadian law on the TSX (subject to any
restrictions on disposition by the holder of a control block) on or after
February 8, 2006, or, thereafter, the Common Shares of any holder of Notes shall
cease to be freely tradable under Canadian law on the TSX and such lapse
-8-
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period or (B) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the applicable Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order by the SEC) or is unavailable to any holder of the Notes for sale of all
of such holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of twenty (20)
consecutive days or for more than an aggregate of forty (40) days in any 365-day
period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the suspension from trading on all of the Eligible Markets on
which the Common Shares are listed or failure of the Common Shares to be listed
on at least one Eligible Market for a period of ten (10) consecutive Trading
Days or for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(iii) Vasogen's (A) failure to cure a Conversion Failure by delivery
of the required number of Common Shares within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at
any time, of its intention not to comply with a request for conversion of any
Notes into Common Shares that is tendered in accordance with the provisions of
the Notes;
(iv) at any time following the tenth (10th) consecutive Trading Day
that the number of Common Shares that are authorized for issuance to the Holder
is less than the number of Common Shares that the Holder would be entitled to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);
(v) the Company's failure (or Vasogen's failure if any such amounts
are due in Common Shares) to pay to the Holder any amount of Principal
(including, without limitation, the Company's failure to pay any redemption or
make-whole payments), Interest or other amounts when and as due under this Note
or any other Transaction Document (as defined in the Securities Purchase
Agreement), except, in the case of a failure to pay Interest or other amounts
due under the Transaction Documents (other than Principal) when and as due, in
which case only if such failure continues for a period of at least three (3)
Trading Days;
(vi) the occurrence of (A) any material default under any
Indebtedness of Vasogen or any of its Subsidiaries (as defined in Section 3(a)
of the Securities Purchase Agreement) in an aggregate principal amount of
$5,000,000 or greater or (B) any redemption of or acceleration prior to maturity
of Indebtedness of Vasogen or any of its Subsidiaries in an aggregate principal
amount of $5,000,000 or greater, in each case of (A) or (B) other than with
respect to any Other Notes;
-9-
(vii) Vasogen or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the
Companies Creditors Arrangement Act (Canada) or any similar Federal, foreign or
state law for the relief of debtors (collectively, "Bankruptcy Law"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator
or similar official (a "Custodian"), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to
pay its debts as they become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against Vasogen or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of Vasogen or any
of its Subsidiaries or (C) orders the liquidation of Vasogen or any of its
Subsidiaries;
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against Vasogen or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $5,000,000 amount set
forth above so long as Vasogen provides the Holder a copy of its policy with
such insurer or indemnity provider where such judgment is clearly covered by
insurance or an indemnity and Vasogen will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;
(x) other than as set forth in item (xi) below, the Company, Vasogen
or any Guarantor breaches in any material respect any representation, warranty,
covenant or other term or condition of any Transaction Document, except, (A) in
the case of a breach of a representation and warranty, such representation and
warranty need only have been true and correct as of the Closing Date, and (B) in
the case of breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) consecutive Trading Days following the
earlier of (A) the day on which the Company, Vasogen or such Guarantor becomes,
or should have become, aware of such breach and (B) the day on which the Company
or Vasogen receives written notice of such breach from the Holder or any holder
of Other Notes;
(xi) any breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note (including any failure to maintain the Net Cash
Balance as required by Section 16(e)), except, in the case of a breach or
failure to comply with Sections 16(b), (c) or (d), there shall be a one (1) time
opportunity to cure a single breach or failure under one of such sections within
three (3) Business Days after the date the Company knows or should have known of
such breach or failure provided that such cure period does not exceed, in the
aggregate, six (6) Business Days from the date of the occurrence of any such
breach or failure;
(xii) (A) any Guarantee at any time for any reason shall cease to be
in full force and effect or shall cease to be enforceable in respect of its
material terms or (B) any Guarantor shall assert that its Guarantee is invalid
or unenforceable; or
-10-
(xiii) any Event of Default (as defined in the Other Notes) occurs
with respect to any Other Notes.
(b) Redemption Right. Promptly after the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of
an Event of Default Notice and the Holder becoming aware of an Event of Default,
the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice
and (B) the Weighted Average Price of the Common Shares on the date immediately
preceding such Event of Default (the "Event of Default Redemption Price").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 14. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the Event of Default Redemption Notice.
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. Neither the Company nor Vasogen shall enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company and Vasogen, as applicable, under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the Interest Rates of the Notes held by such holder,
having similar conversion rights as the Notes (specifying, without limitation,
that such security is convertible into common shares of the Successor Entity)
and having similar ranking to the Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common shares are quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the "Company" and "Vasogen", as applicable, shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and Vasogen and shall assume all of the obligations of the Company and
Vasogen under this Note with the same effect as if such Successor Entity had
been named as the Company or Vasogen, as the case maybe, herein. Upon
consummation of the Fundamental Transaction, the Successor Entity (if other than
the Company) shall deliver to the Holder confirmation that there shall be issued
upon conversion or redemption
-11-
of this Note at any time after the consummation of the Fundamental Transaction,
in lieu of the Common Shares (or other securities, cash, assets or other
property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Note; provided, however, that in the event that, pursuant to the terms
of the Fundamental Transaction, the holders of Common Shares may elect the
consideration to be received in exchange for the Common Shares in the such
Fundamental Transaction, the Holder shall elect, within the same time periods as
provided to the holders of Common Shares, the kind or amount of such shares,
securities, cash, assets or any other property (including warrants or other
purchase or subscription rights) that the Holder will, following the
consummation of such transaction, be entitled to receive upon conversion or
redemption; provided, further, however, that no such election by the Holder
shall be construed to require the conversion or redemption of this Note in
connection with such Fundamental Transaction. If the Holder is required to make
any election of the kind described in the foregoing sentence, the Company or
Vasogen, as applicable, shall deliver to the Holder all documentation,
informational materials and election forms relating to such Fundamental
Transaction contemporaneously with the delivery of such documentation, materials
and forms to the holders of the Common Shares. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Note.
(b) Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period (the "Change of
Control Period") beginning after the Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control
Redemption Notice shall indicate (i) the Conversion Amount the Holder is
electing to redeem and (ii) whether the Holder is requiring the Company to pay
the Change of Control Redemption Price in cash or by delivery of Common Shares.
The portion of this Note subject to redemption pursuant to this Section 5 shall
be redeemed by the Company in cash at a price equal to the greater of (x) 115%
of the sum of (1) the Conversion Amount being redeemed and (2) the amount of any
accrued but unpaid Interest thereon through the date of such redemption payment
and (y) the sum of (A) the product of (1) the aggregate cash consideration and
the aggregate cash value of any non-cash consideration per Common Share to be
paid to the holders of the Common Shares upon consummation of the Change of
Control and (2) the quotient determined by dividing (I) the Conversion Amount
being redeemed by (II) the Conversion Price plus (B) the amount of any accrued
but unpaid Interest on the Conversion Amount being redeemed through the date of
such redemption payment (the "Change of Control Redemption Price"). In the event
the Holder has elected to receive the Change of Control Redemption Price in
Common Shares, Vasogen shall deliver, within three (3) Trading Days of receipt
of the Holder's Change of Control Redemption Notice, to the Holder's account
with DTC on the Change of Control Redemption Date (as defined in Section 14) a
-12-
number of Common Shares equal to the quotient of (aa) the applicable Change of
Control Redemption Price divided by (bb) the Change of Control Conversion Price,
rounded to the nearest whole Common Share; provided that if the Change of
Control Redemption Date would fall on a date that is after the consummation of
the applicable Change of Control, then Vasogen shall not deliver Common Shares
to the Holder but rather the Company shall pay the Change of Control Redemption
Price to the Holder in cash. Redemptions made in cash as required by this
Section 5 shall be made in accordance with the provisions of Section 14 and
shall have priority to payments to shareholders in connection with a Change of
Control. Notwithstanding anything to the contrary in this Section 5, until the
Change of Control Redemption Price (together with any interest thereon) is paid
in full, the Conversion Amount submitted for redemption under this Section 5(c)
may be converted, in whole or in part, by the Holder into Common Shares, or in
the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Common Shares pursuant to Section 3.
(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS. If at any time Vasogen
grants, issues or sells any Options, Convertible Securities or rights to
purchase shares, warrants, securities or other property pro rata to all record
holders of any class of Common Shares (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
and upon the Holder's election, the aggregate Purchase Rights, in lieu of any
adjustments to which the Holder is otherwise entitled under Section 7 below in
respect of each Purchase Right, which the Holder could have acquired if the
Holder had held the number of Common Shares acquirable upon complete conversion
of this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Subscription Date, Vasogen issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any Common
Shares (including the issuance or sale of Common Shares owned or held by or for
the account of Vasogen, but excluding Common Shares deemed to have been issued
or sold by Vasogen in connection with any Excluded Security) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price
in effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of Common Shares Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by Vasogen upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of Common Shares Deemed
-13-
Outstanding immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section 7(a), the following
shall be applicable:
(i) Issuance of Options. If Vasogen in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by Vasogen at the time of the
granting or sale of such Option for such price per share; provided, however,
that notwithstanding the foregoing, with respect to any Options that are
Variable Price Securities (as defined below), the Conversion Price hereunder
shall only be adjusted pursuant to this Section 7(a) at such time as Vasogen
issues Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that is less
than the Applicable Price and any such adjustment shall be based on such
Variable Price and not on the lowest price per share for which one Common Share
would be issuable under the terms of such Variable Price Securities. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by Vasogen with respect to any one Common Share
upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company or Vasogen
in any manner issues or sells any Convertible Securities and the lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by the
Company or Vasogen, as the case may be, at the time of the issuance or sale of
such Convertible Securities for such price per share; provided, however, that
notwithstanding the foregoing, with respect to any Convertible Securities that
are Variable Price Securities, the Conversion Price hereunder shall only be
adjusted pursuant to this Section 7(a) at such time as Vasogen issues Common
Shares to a holder of such Variable Price Securities and such Common Shares are
issued at a Variable Price (as defined below) that is less than the Applicable
Price and any such adjustment shall be based on such Variable Price and not on
the lowest price per share for which one Common Share would be issuable under
the terms of such Variable Price Securities. For the purposes of this Section
7(a)(ii), the "lowest price per share for which one Common Share is issuable
upon such conversion or exchange or exercise" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by Vasogen with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Shares upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other
-14-
provisions of this Section 7(a), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be re-adjusted (but
to no greater extent than originally adjusted) to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of Vasogen,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by Vasogen therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by Vasogen in connection therewith. If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Vasogen will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by Vasogen will be the Weighted Average Price of such securities on the
date of receipt. If any Common Shares, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Vasogen is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Shares,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 7(d), if Xxxxxxx takes a record
of the holders of Common Shares for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Shares, Options or in
Convertible Securities
-15-
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If Vasogen at any time on or after the Subscription Date
subdivides (by any share split, share dividend, recapitalization or otherwise)
one or more classes of its outstanding Common Shares into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If Vasogen at any time on or after the
Subscription Date combines (by combination, reverse share split or otherwise)
one or more classes of its outstanding Common Shares into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment made pursuant to this Section
7(b) shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then Xxxxxxx's Board
of Directors will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(d) Abandoned Dividends or Distributions. If Vasogen shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Price shall be required by reason of the taking of such record.
(e) Xxxxxx's Right of Alternative Conversion Price Following Issuance
of Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 7, if Vasogen in any manner issues or sells any Options or Convertible
Securities (any such securities, "Variable Price Securities") after the
Subscription Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), Vasogen or the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(k) of the Securities Purchase Agreement, from and after the date Vasogen
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by it by designating in the Conversion Notice delivered upon any conversion
of this Note that
-16-
solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder's election to
rely on a Variable Price for a particular conversion of this Note shall not
obligate the Holder to rely on a Variable Price for any future conversions of
this Note.
(8) COMPANY INSTALLMENT CONVERSION OR REDEMPTION.
(a) General. Subject to and in accordance with the terms of this
Section 8, on each applicable Installment Date, the Company shall pay to the
Holder of this Note the Installment Amount as of such Installment Date by the
combination of any of the following, (i) provided that there has been no Equity
Conditions Failure, requiring the conversion of all or any portion of the
applicable Installment Amount, in accordance with this Section 8 (a "Company
Conversion"), and/or (ii) redeeming for cash all or any portion of the
applicable Installment Amount in accordance with this Section 8 (a "Company
Redemption"); provided that all of the outstanding applicable Installment Amount
as of each such Installment Date must be converted or redeemed by the Company on
the applicable Installment Date, subject to the provisions of this Section 8.
Unless the Company Installment Notice (as defined below) indicates otherwise or
if there is an Equity Conditions Failure, the entire Installment Amount to be
paid on such Installment Date shall be paid through a Company Conversion. On or
prior to the date which is the eighth (8th) Trading Day prior to each
Installment Date (each, an "Installment Notice Due Date"), the Company shall
deliver written notice (each, a "Company Installment Notice"), to the Holder
which Company Installment Notice shall state (i) the portion, if any, of the
applicable Installment Amount to be converted pursuant to a Company Conversion
(the "Company Conversion Amount"), (ii) the portion, if any, of the applicable
Installment Amount which the Company elects to redeem pursuant to a Company
Redemption (the "Company Redemption Amount") and (iii) unless the Company has
elected to pay the applicable Installment Amount entirely through a Company
Redemption, the Company Installment Notice shall certify that the Equity
Conditions have been satisfied as of the date of the Company Installment Notice.
Each Company Installment Notice whether actually given or deemed given shall be
irrevocable. Except as expressly provided in this Section 8(a), the Company
shall redeem and convert the applicable Installment Amount of this Note pursuant
to this Section 8 and the corresponding Installment Amounts of the Other Notes
pursuant to the corresponding provisions of the Other Notes in the same ratio of
the Installment Amount being redeemed and converted hereunder. The Company
Redemption Amount (whether set forth in the Company Installment Notice or by
operation of this Section 8) shall be redeemed in accordance with Section 8(b)
and the Company Conversion Amount shall be converted in accordance with Section
8(c).
(b) Mechanics of Company Redemption. If the Company elects, or is
deemed to have elected, a Company Redemption in accordance with Section 8(a),
then the Company Redemption Amount, if any, which is to be paid to the Holder on
the applicable Installment Date shall be redeemed by the Company on such
Installment Date upon payment by the Company to the Holder on such Installment
Date, by wire transfer of immediately available funds, an amount in cash (the
"Company Installment Redemption Price") equal to 100% of the Company Redemption
Amount. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any
-17-
such designation, a "Conversion Notice" for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price. Conversions required by this Section
8(b) shall be made in accordance with the provisions of Section 3(c).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any
interest thereon) is paid in full, the Company Redemption Amount (together with
any interest thereon) may be converted, in whole or in part, by the Holder into
Common Shares pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable
Installment Date as set forth in the immediately preceding sentence, the Company
Redemption Amount so converted shall be deducted from the Installment Amounts
relating to the Installment Dates as set forth in the applicable Conversion
Notice.
(c) Mechanics of Company Conversion.
(i) If the Company pays any part of an Installment Amount pursuant
to a Company Conversion in accordance with Section 8(a), then on the third (3rd)
Trading Day immediately preceding the Installment Date the Company shall (i)
direct Vasogen to, and upon such direction Vasogen shall or shall cause the
Transfer Agent to, issue to the Holder, for delivery on or prior to the
Installment Date, to the Holder's account with DTC a number of Common Shares
equal to the quotient of (x) such Company Conversion Amount (minus accrued and
unpaid Interest included in such amount) divided by (y) the Initial Company
Conversion Price (the "Pre-Installment Conversion Shares"), rounded to the
nearest whole Common Share and (ii) pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any accrued and unpaid Interest
included in such Company Conversion Amount. On the third (3rd) Trading Day
immediately after the end of the Company Conversion Measuring Period (the
"Installment Settlement Date"), the Company shall direct Vasogen to, and upon
such direction Vasogen shall or shall cause the Transfer Agent to, deliver to
the Holder's account with DTC a number of additional Conversion Shares, if any,
equal to the Installment Balance Conversion Shares. If an Event of Default
occurs during any applicable Company Conversion Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (A) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Company Conversion Amount represented by Pre-Installment Conversion Shares that
shall be returned to the Company and which Redemption Price shall be reduced to
the extent any such Common Shares are not returned to the Company), shall return
any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date to Vasogen which the Holder has not otherwise sold,
transferred or disposed of or (B) the Conversion Amount used to calculate the
Event of Default Redemption Price shall be reduced by the product of (1) the
Company Conversion Amount applicable to such Installment Date multiplied by (2)
the Conversion Share Ratio and, notwithstanding Section 14(a), in the case of
this clause (B), the Event of Default Redemption Price shall be paid by the
Company to the Holder within five (5) Trading Days after the end of the Company
Conversion Measuring Period.
(ii) Subject to the provisions of the following sentence, if there
is an Equity Conditions Failure, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to satisfy the
payment of the relevant
-18-
Installment Amount in one of the following ways or a combination of both: (x)
the Company shall redeem all or any part designated by the Holder of the
unconverted Company Conversion Amount (such designated amount is referred to as
the "First Redemption Amount") on such Installment Date or Installment
Settlement Date, as applicable, by paying to the Holder on such Installment Date
or Installment Settlement Date, as applicable, by wire transfer of immediately
available funds, an amount in cash equal to 125% of such First Redemption
Amount, or (y) the Company Conversion shall be null and void with respect to all
or any part designated by the Holder of the unconverted Company Conversion
Amount (other than any amount redeemed under clause (x) of this Section
8(c)(ii)) and the Holder shall be entitled to all the rights of a holder of this
Note with respect to such amount of the Company Conversion Amount; for the
avoidance of doubt, Xxxxxxx's failure to issue Common Shares with respect to any
Company Conversion Amount due to an Equity Conditions Failure shall not be
deemed an Event of Default hereunder so long as the Company otherwise complies
with the Holder's written designation in respect of the options set forth in (x)
and (y) above with respect to such Company Conversion Amount. In the event of an
Equity Conditions Failure, at the Holder's option, either (A) the Holder shall,
upon receipt of a First Redemption Amount (which amount includes redemption of
any portion of a Company Conversion Amount represented by Pre-Installment
Conversion Shares that shall be returned to the Company and which First
Redemption Amount shall be reduced to the extent any such Common Shares are not
returned to the Company), return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date to Vasogen which the Holder
has not otherwise sold, transferred or disposed of or (B) any related First
Redemption Amount shall be reduced by the product of (I) the Company Conversion
Amount applicable to such Installment Date multiplied by (II) the Conversion
Share Ratio and, notwithstanding the foregoing sentence, in the case of this
clause (B), such First Redemption Amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Company Conversion
Measuring Period. If the Company fails to redeem any First Redemption Amount on
or before the applicable Installment Date or Installment Settlement Date, as
applicable, by payment of such amount on the applicable Installment Date or
Installment Settlement Date, as applicable, then the Holder shall have the
rights set forth in Section 14(a) as if the Company failed to pay the applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xi)). Notwithstanding anything to the contrary in this Section
8(c), but subject to 3(d), until Vasogen delivers Common Shares representing the
Company Conversion Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Shares pursuant to Section 3. In the event
the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the Installment Dates as set forth in the
applicable Conversion Notice.
(iii) If, in connection with any Company Conversion, Vasogen is
unable to issue at the applicable Unadjusted Company Conversion Price all the
Common Shares that, but for the application of the Exchange Cap, Vasogen would
have been required to issue, then (A) Vasogen shall deliver to the Holder Common
Shares in accordance with Section 8(c)(i) and (B) the Company shall pay to the
Holder in cash, within ten (10) Trading Days of the applicable Installment
Settlement Date, an amount equal to the product of (1) the number of Exchange
Cap Limitation Shares applicable to such Installment Settlement Date and (2) the
-19-
excess (if any) of (x) such Adjusted Company Conversion Price over (y) the
Conversion Price (the "Company Conversion Make-Whole"). Notwithstanding the
foregoing, in connection with such Company Conversion, if the Company is
prohibited, pursuant to the rules and regulations of any applicable Principal
Market, to effect a Company Conversion by both the delivery by Vasogen to the
Holder of Common Shares and the payment by the Company of the Company Conversion
Make-Whole in cash, then (1) the Company shall pay to the Holder, in cash, on
the Installment Settlement Date, an amount (the "Exchange Cap Installment
Payment") equal to the product of (A) the number of Exchange Cap Limitation
Shares applicable to such Installment Settlement Date multiplied by (B) such
Adjusted Company Conversion Price and upon such payment the Company's and
Xxxxxxx's obligations to such Holder with respect to such Company Conversion
shall be deemed to be fully satisfied, and (2) such Holder shall return to
Vasogen on or before such Installment Settlement Date any Common Shares issued
to such Holder by Vasogen in connection with such Company Conversion; provided
that in the event that the Holder cannot return any such Common Shares to
Vasogen, the Company shall pay to the Holder, in lieu of the foregoing, an
amount in cash equal to the difference between (x) the Exchange Cap Installment
Payment and (y) the product of (I) the number of Pre-Installment Conversion
Shares issued to the Holder multiplied by (II) the applicable Unadjusted Initial
Company Conversion Price.
(d) Accelerated Amounts. The Company may, at its option (the
"Accelerated Payment Option"), (x) in the event that the Weighted Average Price
of the Common Shares on the most recently completed Trading Day prior to date
the of delivery of the Company Installment Notice exceeds $1.00, increase the
amount of the Installment Amount to be paid on the applicable Installment Date
by up to $3,300,000 plus accrued and unpaid Interest on such amount or (y) at
any one time during each of 2005, 2006 or 2007, in the event that the Weighted
Average Price of the Common Shares on the most recently completed Trading Day
prior to the date of delivery of the Company Installment Notice exceeds $4.00 on
NASDAQ, increase the applicable Installment Amount to be paid on the applicable
Installment Date by an amount equal to up to 40% of the aggregate Principal
amount (excluding the Letter of Credit Amount) of this Note then outstanding
plus accrued and unpaid Interest on such amount (any such amount described in
clauses (x) or (y) which exceeds the applicable Installment Amount, an
"Accelerated Amount"). In order for the Company to exercise any Accelerated
Payment Option, (1) the applicable Accelerated Amount shall be added to the
Installment Amount to be paid to the Holder in any Company Redemption and/or
Company Conversion on the applicable Installment Date pursuant to this Section 8
and (2) Vasogen shall issue the appropriate number of Accelerated Payment
Options Warrants on the applicable Installment Date. If the Company exercises
any such Accelerated Payment Option, the applicable Company Installment Notice
delivered to the holders of the Notes pursuant to Section 8(a) shall also state
that (1) the Company is exercising the Accelerated Payment Option and describe
the basis on which the Company is making such exercise, (2) state the aggregate
Accelerated Amount that shall be paid to the holders of all Notes on the
Installment Date and (3) state the number of Accelerated Payment Option Warrants
Vasogen anticipates issuing to the Holder on the applicable Installment Date.
Each Accelerated Amount shall be deducted from the Installment Amounts to be
paid on the last scheduled Installment Date hereunder.
(e) Pro Rata Acceleration Requirement. If the Company elects to
exercise the Accelerated Payment Option pursuant to Section 8(d), then it must
simultaneously
-20-
take the same action (and in the same proportion of the Accelerated Amount) with
respect to the Other Notes.
(9) COMPANY'S RIGHT OF MANDATORY REDEMPTION/CONVERSION.
(a) Mandatory Redemption/Conversion. If at any time from and after the
first (1st) anniversary of the Issuance Date (the "Mandatory
Redemption/Conversion Eligibility Date"), (i) the Weighted Average Price of the
Common Shares exceeds 175% of the Conversion Price then in effect for each of
twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the Mandatory Redemption/Conversion Eligibility Date (the "Mandatory
Redemption/Conversion Condition") and (ii) the Equity Conditions are satisfied
or waived in writing by the Holder from and including the Mandatory
Redemption/Conversion Notice Date (as defined below) through and including the
Mandatory Redemption/Conversion Date (as defined below) or through and including
the Installment Settlement Date in the case of any Mandatory Conversion, the
Company shall have the right, provided the Mandatory Redemption/Conversion is
met on and as of the Mandatory Redemption/Conversion Notice Date (as defined
below), to (i) redeem all or any portion of the Conversion Amount then remaining
under this Note (a "Mandatory Redemption") and/or (ii) require the conversion of
all or any portion of the Conversion Amount then remaining under this Note (a
"Mandatory Conversion"). The portion of this Note subject to redemption pursuant
to this Section 9 shall be redeemed by the Company in cash, if it so elects, at
a price equal to the Conversion Amount being redeemed on the Mandatory
Redemption/Conversion Date plus any accrued and unpaid Interest thereon through
the Mandatory Redemption/Conversion Date (the "Mandatory Redemption Price"). The
Company may exercise its right to require a Mandatory Redemption and/or a
Mandatory Conversion under this Section 9(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the "Mandatory Redemption/Conversion Notice" and the date all
of the holders are delivered such notice by facsimile is referred to as the
"Mandatory Redemption/Conversion Notice Date") and each Mandatory
Redemption/Conversion Notice shall be irrevocable. The Mandatory
Redemption/Conversion Notice shall state (1) the aggregate Conversion Amount of
Notes (the "Mandatory Redemption/Conversion Amount") which the Company has
elected to be subject to Mandatory Redemption and/or Mandatory Conversion from
all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes), (2) the Holder's pro rata portion, if any, of
the Mandatory Redemption/Conversion Amount that the Company is requiring to be
converted pursuant to a Mandatory Conversion, (the "Mandatory Conversion
Amount"), (3) the Holder's pro rata portion, if any, of the Mandatory
Redemption/Conversion Amount which the Company elects to redeem pursuant to a
Mandatory Redemption (the "Mandatory Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the Mandatory Redemption/Conversion
Amount which shall be paid in cash to the holders of Notes on the Mandatory
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the Mandatory Redemption/Conversion Notice and (6) the date on
which the Mandatory Redemption and/or Mandatory Conversion shall occur (the
"Mandatory Redemption/Conversion Date") which date shall be (x) in connection
with any Mandatory Redemption not less than ten (10) Trading Days nor more than
thirty (30) Trading Days after the Mandatory Redemption/Conversion Notice Date
and (y) in connection with any Mandatory Conversion not less than thirty (30)
Trading Days after the Mandatory Redemption/Conversion Notice Date; provided,
however, that the Company shall not redeem and/or convert a Conversion
-21-
Amount under this Section in excess of the Holder's Pro Rata Amount of the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Shares
on NASDAQ and the TSX combined over the ten (10) consecutive Trading Day period
ending on the Trading Day immediately preceding the Mandatory
Redemption/Conversion Notice Date. The Company may not effect more than one
Mandatory Redemption and/or Mandatory Conversion during any consecutive thirty
(30) day period. All Conversion Amounts converted by the Holder after the
Mandatory Redemption/Conversion Notice Date shall reduce the Conversion Amount
of this Note required to be redeemed and/or converted on the Mandatory
Redemption/Conversion Date. Mandatory Conversions made pursuant to this Section
9 shall be made in accordance with Section 8(c) (including Section 8(c)(iii))
and references in Section 8(c) to (I) the Installment Amount shall be deemed to
refer to the Mandatory Redemption/Conversion Amount (plus accrued and unpaid
Interest thereon), (II) the Company Conversion shall be deemed to refer to the
Mandatory Conversion, (III) the Company Conversion Amount shall be deemed to
refer to the Mandatory Conversion Amount (plus accrued and unpaid Interest
thereon), (IV) the Installment Date shall be deemed to refer to the Mandatory
Redemption/Conversion Date, (V) the Initial Company Conversion Price shall be
deemed to refer to Initial Mandatory Conversion Price, (VI) the Company
Conversion Measuring Period shall be deemed to refer to the Mandatory Conversion
Measuring Period, (VII) the Company Conversion Price shall be deemed to refer to
Mandatory Conversion Price, (VIII) the Adjusted Company Conversion Price shall
be deemed to refer to the Adjusted Mandatory Conversion Price and (IX) the
Unadjusted Company Conversion Price shall be deemed to refer to the Unadjusted
Mandatory Conversion Price. Mandatory Redemptions made pursuant to this Section
9 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause a Mandatory Redemption and/or Mandatory Conversion pursuant to Section
9(a), then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Mandatory Redemption and/or Mandatory
Conversion pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require redemption and/or conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(i) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be redeemed and/or converted pursuant to Section 9(a), multiplied by
(ii) the fraction, the numerator of which is the sum of the aggregate initial
principal amount of the Notes purchased by such holder and the denominator of
which is the sum of the aggregate initial principal amount of the Notes
purchased by all holders (such fraction with respect to each holder is referred
to as its "Redemption/Conversion Allocation Percentage", and such amount with
respect to each holder is referred to as its "Pro Rata Redemption/Conversion
Amount"). In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder's Notes, the transferee shall be allocated
a pro rata portion of such holder's Redemption/Conversion Allocation Percentage
and Pro Rata Redemption/Conversion Amount.
(10) COMPANY'S RIGHT OF REDEMPTION/CONVERSION OF THE LETTER OF CREDIT
AMOUNT.
(a) Letter of Credit Amount Redemption. If at any time from and after
the Issuance Date (the "LC Conversion Eligibility Date"), (i) the Weighted
Average Price of
-22-
the Common Shares exceeds 150% of the Conversion Price then in effect for each
of twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the LC Conversion Eligibility Date (the "LC Redemption/Conversion
Condition") and (ii) the Equity Conditions are satisfied or waived in writing by
the Holder from and including the LC Redemption/Conversion Notice Date (as
defined below) through and including the LC Redemption/Conversion Date (as
defined below) or through and including the Installment Settlement Date in the
case of any LC Conversion, the Company shall have the right, provided the LC
Redemption/Conversion Condition is met on and as of the LC Redemption/Conversion
Notice Date (as defined below), to (i) redeem all or any portion of a principal
amount of this Note then outstanding that is not in excess of the Letter of
Credit Amount (the "Available Conversion Amount") (such redemption, an "LC
Redemption") and/or (ii) require the conversion of all or any portion of such
amount (an "LC Conversion"). The portion of this Note subject to redemption
pursuant to this Section 10 shall be redeemed by the Company in cash, if it so
elects, at a price equal to the Conversion Amount being redeemed plus any
accrued and unpaid Interest thereon through the LC Redemption/Conversion Date
(the "LC Redemption Price"). The Company may exercise its right to require an LC
Redemption and/or an LC Conversion under this Section 10(a) by delivering a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of Notes (the "LC Redemption/Conversion Notice" and the
date all of the holders are delivered such notice by facsimile is referred to as
the "LC Redemption/Conversion Notice Date") and each LC Redemption/Conversion
Notice shall be irrevocable. The LC Redemption/Conversion Notice shall state (1)
the aggregate Conversion Amount of Notes (the "LC Redemption/Conversion Amount")
which the Company has elected to be subject to an LC Redemption and/or an LC
Conversion from all of the holders of the Notes pursuant to this Section 9 (and
analogous provisions under the Other Notes), (2) the portion, if any, of the
Available Conversion Amount that the Company is requiring to be converted
pursuant to an LC Conversion, (the "LC Conversion Amount"), (3) the portion, if
any, of the Available Conversion Amount which the Company elects to redeem
pursuant to an LC Redemption (the "LC Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the LC Redemption/Conversion Amount
which shall be paid in cash to the holders of Notes on the LC
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the LC Redemption/Conversion Notice and (6) the date on which
the LC Redemption and/or LC Conversion shall occur (the "LC
Redemption/Conversion Date") which date shall be (x) in connection with any LC
Redemption not less than fifteen (15) Trading Days nor more than thirty (30)
Trading Days after the LC Redemption/Conversion Notice Date and (y) in
connection with any LC Conversion not less than thirty (30) Trading Days after
the LC Redemption/Conversion Notice Date; provided, however, that the Company
shall not redeem any aggregate Conversion Amount under this Section in excess of
the Holder's Pro Rata Amount of the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Shares on NASDAQ and the TSX combined over the
fifteen (15) consecutive Trading Day period ending on the Trading Day
immediately preceding the LC Redemption/Conversion Notice Date. The Company may
not effect more than one LC Redemption and/or LC Conversion during any
consecutive thirty (30) day period. All Conversion Amounts converted by the
Holder after the LC Redemption/Conversion Notice Date shall reduce the
Conversion Amount of this Note required to be redeemed and/or converted on the
LC Redemption/Conversion Date. LC Conversions made pursuant to this Section 10
shall be made in accordance with Section 8(c) (including Section 8(c)(iii)) and
references in Section 8(c)
-23-
to (I) the Installment Amount shall be deemed to refer to the LC
Redemption/Conversion Amount (plus accrued and unpaid Interest thereon), (II)
the Company Conversion shall be deemed to refer to the LC Conversion, (III) the
Company Conversion Amount shall be deemed to refer to the LC Conversion Amount
(plus accrued and unpaid Interest thereon), (IV) the Installment Date shall be
deemed to refer to the LC Redemption/Conversion Date, (V) the Initial Company
Conversion Price shall be deemed to refer to Initial Mandatory Conversion Price,
(VI) the Company Conversion Measuring Period shall be deemed to refer to the
Mandatory Conversion Measuring Period, (VII) the Company Conversion Price shall
be deemed to refer to Mandatory Conversion Price, (VIII) the Adjusted Company
Conversion Price shall be deemed to refer to the Adjusted Mandatory Conversion
Price and (IX) the Unadjusted Company Conversion Price shall be deemed to refer
to the Unadjusted Mandatory Conversion Price. LC Redemptions made pursuant to
this Section 10 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause an LC Redemption and/or LC Conversion pursuant to Section 10(a), then
it must simultaneously take the same action with respect to the Other Notes. If
the Company elects to cause a LC Redemption and/or LC Conversion pursuant to
Section 10(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the
Company shall require redemption and/or conversion of a Conversion Amount from
each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be redeemed
and/or converted pursuant to Section 10(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder and the denominator of which is the sum of the
aggregate initial principal amount of the Notes purchased by all holders (such
fraction with respect to each holder is referred to as its "LC Amount Allocation
Percentage", and such amount with respect to each holder is referred to as its
"Pro Rata LC Amount"). In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such xxxxxx'x XX Amount Allocation Percentage
and Pro Rata LC Amount.
(11) GUARANTY. Vasogen and Vasogen, Corp. shall guarantee the obligations
under this Note and the Other Notes to the extent and in the manner set forth in
the Guarantees (as defined in the Securities Purchase Agreement).
(12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Memorandum and Articles of Association or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(13) AUTHORIZED SHARES.
(a) Reservation. Vasogen shall have sufficient authorized and unissued
Common Shares for each of the Notes equal to the number of Common Shares
necessary to effect the conversion at the Conversion Rate with respect to the
Conversion Amount
-24-
of each such Note as of the Issuance Date. So long as any of the Notes are
outstanding, Vasogen shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Shares, solely for the
purpose of effecting the conversion of the Notes, the number of Common Shares as
shall from time to time be necessary to effect the conversion of all of the
Notes then outstanding; provided that at no time shall the number of Common
Shares so available be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the
"Required Amount").
(b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding Vasogen does not have a sufficient number of authorized
and unissued Common Shares to satisfy its obligation to have available for
issuance upon conversion of the Notes at least a number of Common Shares equal
to the Required Amount (an "Authorized Share Failure"), then Vasogen shall as
promptly as practicable take all action necessary to increase Vasogen's
authorized Common Shares to an amount sufficient to allow Vasogen to have
available the Required Amount for the Notes then outstanding.
(14) HOLDER'S REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Trading Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to be paid in cash to the Holder concurrently with the
consummation of such Change of Control if such notice is received at least five
(5) Trading Days prior to the consummation of such Change of Control and within
five (5) Trading Days after the Company's receipt of such notice otherwise (the
"Change of Control Redemption Date"). The Company shall deliver the Mandatory
Redemption Price to the Holder on the Mandatory Redemption/Conversion Date. The
Company shall deliver the LC Redemption Price to the Holder on the LC
Redemption/Conversion Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to, by providing written notice to the Company, require the
Company to promptly return to the Holder all or any portion of this Note
representing the Conversion Amount that was submitted for redemption and for
which the applicable Redemption Price has not been paid. Upon the Company's
receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to such Conversion Amount and (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount.
(b) Redemption by Other Holders. Upon the Company's receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(b) (each, an "Other
Redemption Notice"), the Company shall immediately, but no later than one (1)
Trading Day of its receipt thereof, forward to the Holder by facsimile a copy of
-25-
such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Trading Day period beginning on and
including the date which is three (3) Trading Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Trading Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Trading Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Trading Day period.
(15) VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as provided by law, the Canada Business Corporations Act
and as expressly provided in this Note.
(16) COVENANTS.
(a) Rank. All payments due under this Note (a) shall rank pari passu
with all Other Notes and (b) neither Vasogen nor any of its Subsidiaries shall
incur Indebtedness that is senior to the Notes or the Guarantees as applicable.
(b) Incurrence of Indebtedness. So long as this Note is outstanding,
Vasogen shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of Liens. So long as this Note is outstanding, Vasogen
shall not, and Vasogen shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by Vasogen or any of its
Subsidiaries (collectively, "Liens") other than Permitted Liens.
(d) Restricted Payments. Vasogen shall not, and Vasogen shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness, whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness if at the time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Net Cash Balance Test. If the ACCLAIM trial fails to meet its
primary endpoint, then, beginning on September 1, 2006 until the earlier of (x)
the Maturity Date or (y) such time as the Notes have been otherwise converted or
redeemed in full, Vasogen and the Company, on a consolidated basis, shall
maintain, at all times, a Net Cash Balance equal to or exceeding the applicable
Net Cash Balance Threshold (the "Net Cash Balance Test").
-26-
(i) On any date (or within four (4) Business Days thereafter) on
which the Net Cash Balance Test is not satisfied (a "Failure Date"), Vasogen
shall publicly disclose (on a Current Report on Form 6-K or otherwise and
through analogous legal disclosure means under Canadian securities laws) the
fact that Vasogen has failed to satisfy the Net Cash Balance Test. On the date
of any such disclosure, Vasogen shall also provide to the Holder a
certification, executed on behalf of Vasogen by the Chief Financial Officer of
Vasogen or his or her designate who shall also be an executive officer or the
controller, as to the amount of the Net Cash Balance as of the Failure Date and
disclose such amount in the Current Report on Form 6-K.
(ii) Vasogen shall announce its operating results (the "Operating
Results") for each Fiscal Quarter no later than the forty-fifth (45th) day after
the end of each Fiscal Quarter or, with respect to the last Fiscal Quarter, the
ninetieth (90th) day after such quarter (the "Announcement Date") and, in the
event Vasogen shall have satisfied the Net Cash Balance Test at all times during
such Fiscal Quarter, such announcement shall include a statement to the effect
that Vasogen satisfied the Net Cash Balance Test at all times throughout such
Fiscal Quarter; provided, however, that in the event Vasogen is delayed in
announcing its Operating Results for any Fiscal Quarter, on the Announcement
Date Vasogen shall, in lieu of the foregoing, (A) make a statement to the effect
that it has complied with all of its covenants under the Notes, including,
without limitation, the Net Cash Balance Test and (B) provide to the holders of
Notes a certification, in accordance with terms of the next sentence, certifying
the same. On the Announcement Date, Vasogen shall also provide to the holders of
Notes a certification, executed on behalf of Vasogen by the Chief Financial
Officer of Vasogen or his or her designate who shall also be an executive
officer or the controller, certifying that Vasogen satisfied the Net Cash
Balance Test at all times throughout such Fiscal Quarter.
(17) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if Vasogen shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Note, then, in each such case any Conversion Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Conversion Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the Common Shares on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by Xxxxxxx's Board of Directors) applicable to one
Common Share, and (ii) the denominator shall be the Weighted Average Price of
the Common Shares on the trading day immediately preceding such record date (but
such fraction shall not be greater than one); provided, however, that in no
event shall the Conversion Price be reduced pursuant to this Section 17 with
respect to any portion of a Distribution for which the Conversion Price is also
being reduced pursuant to any of the provisions of Section 7 hereof in respect
of the same portion of such Distribution.
(18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
-27-
affirmative vote of the Required Holders at a meeting duly called for such
purpose or the written consent of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. Any change or amendment so
approved shall be binding upon all existing and future holders of this Note and
any Other Notes; provided, however, that no such change, amendment, alteration
or amendment, as applied to any of the Notes held by any particular holder of
Notes, shall, without the written consent of that particular holder, (i) reduce
the Interest Rate, extend the time for payment of Interest or change the manner
or rate of accrual of Interest on the Notes, (ii) reduce the amount of
Principal, or extend the Maturity Date, of the Notes, (iii) make any change that
impairs or adversely affects the conversion rights of the Notes, (iv) impair the
right of any holder of Notes to receive payment of principal or Interest or
other payments due under the Notes, if any, on or after the due dates therefor;
or (v) modify any of the provisions of, or impair the right of any holder of
Notes under, this Section 18.
(19) TRANSFER. This Note and any Common Shares issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company on two (2) Trading Days' written notice, subject only
to the provisions of Section 2(f) of the Securities Purchase Agreement;
provided, that the Holder may not transfer any outstanding Principal and accrued
and unpaid Interest of this Note, in part, to the extent such Principal and
Interest is less than the lesser of (a) $2,000,000 and (b) the remaining
outstanding Principal and accrued and unpaid Interest of this Note; provided,
further, however, that any transferee of all or any portion of this Note agrees
to comply with all applicable securities laws; provided, also, that any
transferee of all or any portion of this Note that wishes to avail itself of the
benefits contemplated by Section 9(s) of the Securities Purchase Agreement
(including, for the avoidance of doubt, any subsequent transferee of any
transferee) shall make to Vasogen the representations and warranties made by the
Purchaser in, and give the Notice as contemplated pursuant to, Section 9(s) of
the Securities Purchase Agreement. Prior to the effectiveness of any such sale,
assignment or transfer pursuant to this Section 19, and only if such transferee
seeks to receive Common Shares through DTC's Deposit Withdrawal Agent Commission
system, such transferee shall have completed and delivered to the Company the
DTC brokerage account information with respect to such transferee in
substantially the form of Exhibit E as attached to the Securities Purchase
Agreement.
(20) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of
-28-
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 20(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 20(a) or Section 20(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest on the Principal of this Note, from the Issuance Date.
(21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to,
-29-
attorneys' fees and disbursements.
(23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
(24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(25) DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Weighted Average Price or the arithmetic calculation of the Conversion
Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Trading
Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Trading Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Trading Days submit via facsimile (a) the disputed
determination of the Weighted Average Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Rate or the Redemption Price
to the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Trading Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
(26) NOTICES; CURRENCY; TAXES; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven (7) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
-30-
(b) Currency. All principal, interest and other amounts owing under
this Note or any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in US dollars. All amounts denominated in other
currencies shall be converted in the US dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Note, the US dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date
of calculation shall be the final date of such period of time).
(c) Taxes.
(i) Any and all payments made by the Company hereunder, including
any amounts received on a conversion or redemption of the Note and any amounts
on account of interest or deemed interest, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 26(c)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to the Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 26(c) shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.
(d) Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via
-31-
overnight courier service to such Person at such address as previously provided
to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Buyer Schedule attached to the Purchase
Agreements); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Trading Day, the same shall instead be due on
the next succeeding day which is a Trading Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.
(27) CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
(28) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices otherwise
required pursuant to applicable law in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(29) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Note shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
-32-
XXXXXX IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(30) JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 30
referred to as the "Judgment Currency") an amount due in US dollars under this
Note, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 30(a)(ii) being hereinafter
referred to as the "Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Note.
(31) MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
(32) CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "Accelerated Payment Option Warrants" means warrants exercisable
for a number of Common Shares equal to 65% of the quotient of (x) the
Accelerated Amount being paid pursuant to Section 8 minus accrued and unpaid
Interest
-33-
included in such amount divided by (y) the Conversion Price on the applicable
Installment Date, rounded up to the nearest whole Common Share. Such warrants
shall be in substantially the form of the Warrant attached as Exhibit B to the
Securities Purchase Agreement, except that the expiration date of such warrants
shall be five (5) years from the issuance date thereof. The exercise price of
the Accelerated Payment Option Warrants shall be the same as the Conversion
Price then in effect; provided, however, that if on the applicable Installment
Date on which such warrants are issued the Weighted Average Price of the Common
Shares is greater than the Conversion Price that would become the exercise price
of the Accelerated Payment Option Warrants, (i) the Company shall pay to the
Purchasers, in Common Shares within three (3) Trading Days of the applicable
Installment Date or, at the option of the Company, in cash, the product of (A)
the difference between (1) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) Trading Days ending on the
Trading Day immediately prior to the applicable Installment Date (the "Exercise
Price Measuring Period") and (2) such Conversion Price and (B) the number of
Common Shares for which such Accelerated Payment Option Warrants are exercisable
(such product, the "Adjustment Amount") and (ii) the exercise price for such
Accelerated Payment Option Warrants will be adjusted to equal such arithmetic
average of the Weighted Average Price of the Common Shares during the Exercise
Price Measuring Period. In the event the Company shall pay the Adjustment Amount
in Common Shares, the number of Common Shares to be delivered shall be equal to
the quotient of the Adjustment Amount divided by the Company Conversion Price
for the applicable Installment Date, rounded up to the nearest whole Common
Share; provided, however that the Company shall not be entitled to pay the
Adjustment Amount in Common Shares if the Equity Conditions are not satisfied.
(b) "Adjusted Conversion Price" means, as of any date of determination,
the price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Conversion Date.
(c) "Approved Share Plan" means any employee benefit plan which has
been approved by the Board of Directors of Vasogen, pursuant to which Xxxxxxx's
securities may be issued to any employee, consultant, officer or director in
connection with services provided or to be provided to Vasogen or any Subsidiary
thereof.
(d) "Bloomberg" means Bloomberg Financial Markets.
(e) "Canadian Prospectus" shall have the meaning set forth in the
Registration Rights Agreement.
(f) "Change of Control" means any Fundamental Transaction other than
(A) any reorganization, recapitalization or reclassification of the Common
Shares in which holders of Vasogen's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger
-34-
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or Vasogen.
(g) "Change of Control Conversion Price" means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Shares during each of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the delivery of the Change of Control Redemption Notice (such period,
the "Change of Control Measuring Period"); provided, however, that if such
arithmetic average of the Weighted Average Price during the Change of Control
Measuring Period shall yield a price that is less than $1.00, then the Change of
Control Conversion Price shall be computed as 90% of the arithmetic average of
the Weighted Average Price of the Common Shares during the Change of Control
Measuring Period. Notwithstanding the foregoing, in the event that as a result
of the application of the Exchange Cap the Company is unable to issue Common
Shares on the applicable date using the Change of Control Conversion Price as
calculated pursuant to the foregoing sentence, then the Change of Control
Conversion Price shall be the price equal to the arithmetic average of the
Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
delivery of the Change of Control Redemption Notice (such price, the "Adjusted
Change of Control Conversion Price").
(h) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement, which date is the date the Company initially issued Notes
pursuant to the terms of the Securities Purchase Agreement.
(i) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of Vasogen or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.
(j) "Company Conversion Price" means, as of any date of determination,
that price which shall be the lower of (i) the applicable Conversion Price and
(ii) the price computed as 95% of the arithmetic average of the Weighted Average
Price of the Common Shares during each of the twelve (12) consecutive Trading
Days commencing on the Trading Day immediately after the applicable Installment
Date (such period, the "Company Conversion Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Company Conversion Measuring Period shall yield a price that is less than
$1.00, then the Company Conversion Price shall be computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Shares during the
Company Conversion Measuring Period. Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap the Company is unable to
issue Common Shares on an Installment Settlement Date using the Company
Conversion Price as calculated pursuant to the foregoing sentence (the
"Unadjusted Company Conversion Price"), then the Company Conversion Price shall
be the price equal to the arithmetic average of the Weighted Average Price of
the Common Shares during each of the five (5) consecutive Trading Days ending on
the
-35-
Trading Day immediately prior to the applicable Installment Settlement Date
(such price, the "Adjusted Company Conversion Price").
(k) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
(l) "Conversion Share Ratio" means, as to any applicable date of
determination, the quotient of (i) the number of Pre-Installment Conversion
Shares or Pre-Maturity Conversion Shares, as applicable, delivered in connection
with an Installment Date or the Maturity Date, as applicable divided by (ii) the
number of Post-Installment Conversion Shares or Post Maturity Conversion Shares,
as applicable, relating to such Installment Settlement Date or Maturity
Settlement Date, as the case may be.
(m) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(n) "Effectiveness Time" means January 20, 2006.
(o) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc. or the American Stock Exchange.
(p) "Equity Conditions" means that each of the following conditions is
satisfied: (i) either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and a Grace Period (as defined in the Registration
Rights Agreement) shall not be in progress or (y) all Common Shares issuable
upon conversion or redemption of the Notes and payment of Installment Amounts
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws and such
shares shall be freely tradable on both the NASDAQ and the TSX, other than any
restrictions on disposition by (I) a holder of a control block, where the Holder
has become such a holder or (II) an affiliate; (ii) the Common Shares are
designated for quotation or listed on both of the Principal Markets and shall
not have been suspended from trading on either of such exchanges or markets
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by Vasogen or the
Company) nor shall delisting or suspension by either of such exchanges or
markets have been threatened or pending either (A) in writing by such exchanges
or markets or (B) by falling below the minimum listing maintenance requirements
of such exchanges or markets; provided, however, that no threatened or pending
delisting or suspension that has been publicly announced and which shall not
occur within one (1) month of the applicable date of determination shall be
considered when determining whether the Company has satisfied the condition set
forth in this clause (ii); (iii) during the one (1) year period ending on and
including
-36-
the date immediately preceding the applicable date of determination (or such
lesser period of time since the Issuance Date), Vasogen shall have delivered
Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise
of the Warrants to the holders on a timely basis as set forth in Section
3(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections
1(c) of the Warrants, unless such failure to deliver shall have occurred only
once and shall have been remedied by Vasogen with three (3) Business Days; (iv)
any applicable Common Shares to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules and regulations of the Principal Markets; (v) on each day during the
period beginning three (3) months prior to the applicable date of determination
and ending on and including the applicable date of determination (the "Equity
Conditions Measuring Period"), the Company (or Vasogen if any such payment was
due in Common Shares) shall not have failed to timely make any payments within
five (5) Trading Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not
have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, rejected publicly
by the board of directors (or similar governing body) of Vasogen or the Company,
as applicable, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) neither Vasogen nor the Company shall have any knowledge of any
fact (other than facts relating exclusively to the Holder that would require
updating of the Selling Shareholders or Plan of Distribution section of the
Registration Statement) that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of all remaining Registrable Securities in accordance
with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion or redemption of the Notes or payment of Installment
Amounts not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws, other than any restrictions on
disposition by (I) a holder of a control block, where the Holder has become such
a holder or (II) an affiliate; (viii) Vasogen and the Company shall be in
material compliance with and shall not be in breach of any material provision or
covenant, and shall not have breached, as of the Closing Date, any
representation or warranty contained in any Transaction Document; and (ix) at
the applicable date of determination, Vasogen is not Insolvent (as defined in
the Securities Purchase Agreement).
(q) "Equity Conditions Failure" means that during any period commencing
with (i) the delivery of the Company Installment Notice through the applicable
Installment Date or Installment Settlement Date, as applicable, or (ii) the
delivery of the Maturity Election Notice through the Maturity Settlement Date,
the Equity Conditions have not been satisfied (or waived in writing by the
Holder).
(r) "Exchange Cap Limitation Shares" means (i) with respect to any
conversion required pursuant to a Conversion Notice, a number of Common Shares
equal to the quotient of the Conversion Amount set forth in such Conversion
Notice divided by the Conversion Price and (ii) with respect to any Company
Conversion, Mandatory Conversion or LC Conversion, a number of Common Shares
equal to the quotient of the Conversion Amount subject to conversion divided by
the applicable Unadjusted Company Conversion Price or the applicable Unadjusted
Mandatory Conversion Price.
-37-
(s) "Excluded Securities" means any Common Shares issued or issuable:
(i) in connection with any Approved Share Plan; (ii) upon conversion of the
Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering which generates gross proceeds to the
Company of at least $50,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with any strategic acquisition or strategic transaction, including a
licensing partnership, development or marketing agreement, whether through an
acquisition of shares or a merger of any business, assets or technologies, the
primary purpose of which is not to raise equity capital; and (v) upon conversion
of any Options or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date and have been disclosed in Schedule
3(r) to the Securities Purchase Agreement, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date.
(t) "FDA Approval" means the pre-market approval granted by the U.S.
Food and Drug Administration for the marketing of Celacade for use in treatment
of chronic heart failure.
(u) "Fiscal Quarter" means each of the fiscal quarters adopted by the
Company for financial reporting purposes that correspond to the Company's fiscal
year that ends on November 30, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(v) "Fundamental Transaction" means that the Company shall no longer be
a wholly-owned subsidiary of Vasogen or that the Company or Vasogen shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company or Vasogen, as applicable, is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
Vasogen or Vasogen and its Subsidiaries to another Person other than in
connection with a strategic transaction involving a licensing of intellectual
property and related assets of the Company or Vasogen or relating to a
partnership arrangement with respect to any such intellectual property and
related assets, in each case where such licensing or partnership arrangements
contain terms and conditions that are customary in Vasogen's industry for such
type of transactions and where the board of directors of Vasogen determines, in
good faith, that Vasogen shall retain a material financial participation in the
exploitation of such intellectual property and related assets, or (iii) be
subject to an offer from another Person or group of related Persons (as defined
in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or
(iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other
Person or group acquires more than the 50% of the outstanding Voting Shares (not
including any Voting Shares held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such share purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify the Common Shares.
-38-
(w) "GAAP" means Canadian generally accepted accounting principles,
consistently applied, as in effect on the Issuance Date.
(x) "Holder Pro Rata Amount" means a fraction (i) the numerator of
which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Purchase Agreements on the Closing Date.
(y) "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables and related accrued liabilities
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. References to Indebtedness of the Company or Vasogen shall
mean Indebtedness on a consolidated basis.
(z) "Initial Company Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the fourth (4th) Trading Day immediately
prior to the Installment Date (such period, the "Initial Company Measuring
Period"); provided, however, that if such arithmetic average of the Weighted
Average Price during the Initial Company Measuring Period shall yield a price
that is less than $1.00, then the Initial Company Conversion Price shall be
computed as 90% of the arithmetic average of the Weighted Average Price of the
Common Shares during the Initial Company Measuring Period (the "Unadjusted
Initial Company Conversion Price"). Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap, the Company is unable
to issue Common Shares on an Installment Date using the Initial Company
Conversion Price as calculated pursuant to the foregoing sentence to determine
the number of Common Shares to be issued to the Holder as payment of any Company
Conversion Amount on any Installment Date, then the Initial Company Conversion
Price shall be the price equal to the
-39-
arithmetic average of the Weighted Average Price of the Common Shares during
each of the five (5) consecutive Trading Days ending on the fourth (4th) Trading
Day immediately prior to the applicable Installment Date.
(aa) "Initial Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) consecutive Trading Days ending
on the third (3rd) Trading Day immediately prior to the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the
applicable Mandatory Redemption/Conversion Date or LC Redemption/Conversion Date
using the Initial Mandatory Conversion Price as calculated pursuant to the
foregoing sentence, then the Initial Mandatory Conversion Price shall be the
price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Mandatory Redemption/Conversion
Date or LC Redemption/Conversion Date.
(bb) "Initial Maturity Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately prior to the
Maturity Date (such period, the "Initial Maturity Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Initial Maturity Measuring Period shall yield a price that is less than
$1.00, then the Initial Maturity Conversion Price shall be computed as 90% of
the arithmetic average of the Weighted Average Price of the Common Shares during
the Initial Maturity Measuring Period. Notwithstanding the foregoing, in the
event that as a result of the application of the Exchange Cap the Company is
unable to issue Common Shares on the Maturity Date using the Initial Maturity
Conversion Price as calculated pursuant to the foregoing sentence, then the
Maturity Conversion Price shall be the price equal to the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
Maturity Date.
(cc) "Installment Amount" means, as to the initial Installment Date
(and, unless otherwise required herein, such amount shall be the Installment
Amount to be paid on each subsequent Installment Date), an amount equal to the
lesser of (i) (A) the quotient of (x) the aggregate outstanding Principal of
this Note divided by (y) the number of whole months from such Installment Date
through the Maturity Date and (ii) the Principal amount outstanding under the
Note, in each case, plus any accrued and unpaid interest on such amount, as any
such Installment Amount may be reduced pursuant to the terms of this Note,
whether upon conversion, redemption or otherwise; provided that, for any
scheduled Installment Date following the date on which the Maturity Date is
extended to October 7, 2010, the Installment Amount shall be recalculated
pursuant to the formula in clause (i) using such new Maturity Date and such
amount shall be the Installment Amount to be paid on such Installment Date and
on each subsequent Installment Date. For any Installment Date on which an
Accelerated Amount is
-40-
to be paid, such Accelerated Amount shall be added to, and considered part of,
the applicable Installment Amount.
(dd) "Installment Balance Conversion Shares" means, for any Installment
Date, a number of Common Shares equal to (i) the Post-Installment Conversion
Shares for such date minus (ii) the amount of any Pre-Installment Conversion
Shares delivered on such date; provided that in the event that the amount of
Pre-Installment Conversion Shares exceeds the Post-Installment Conversion Shares
for such date (such excess, the "Installment Conversion Shares Excess"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Installment Conversion Share Excess and (y) the Company Conversion Price and the
Installment Balance Conversion Shares shall equal zero (0).
(ee) "Installment Date" means, initially, the first (1st) day of the
calendar month following the month during which the Canadian Prospectus has
become effective and, thereafter, the first (1st) day of each calendar month
prior to the Maturity Date.
(ff) "Interest Principal Amount" means, for any date of determination,
the amount equal to (i) the outstanding Principal of this Note on such date
minus (ii) the Letter of Credit Amount on such date.
(gg) "Letter of Credit Amount" means the Holder's Pro Rata Amount of
the amount of the letter of credit (the "Letter of Credit") issued in favor of
the LC Agent (as defined in the Securities Purchase Agreement), which amount
shall initially be $10,000,000, which amount may be reduced pursuant to Section
4(q) of the Securities Purchase Agreement.
(hh) "Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the twelve (12) consecutive Trading Days
commencing on the Trading Day immediately after the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be
(such period, the "Mandatory Conversion Measuring Period"). Notwithstanding the
foregoing, in the event that as a result of the application of the Exchange Cap
the Company is unable to issue Common Shares on the applicable Installment
Settlement Date pursuant to Section 8(c) using the Mandatory Conversion Price as
calculated pursuant to the foregoing sentence (the "Unadjusted Mandatory
Conversion Price"), then the Mandatory Conversion Price shall be the price equal
to the arithmetic average of the Weighted Average Price of the Common Shares
during each of the five (5) consecutive Trading Days ending on the Trading Day
immediately prior to the applicable Installment Settlement Date (such price, the
"Adjusted Mandatory Conversion Price").
(ii) "Maturity Balance Conversion Shares" means a number of Common
Shares equal to (i) the Post-Maturity Conversion Shares for such date minus (ii)
the amount of any Pre-Maturity Conversion Shares delivered on such date;
provided that in the event that the amount of Pre-Maturity Conversion Shares
exceeds the Post-Maturity Conversion Shares for such date (such excess, the
"Maturity Conversion Shares Excess"), then the Maturity Balance Conversion
Shares shall equal zero (0).
-41-
(jj) "Maturity Conversion Price" means that price which shall be the
lower of (i) the applicable Conversion Price and (ii) the price computed as 95%
of the arithmetic average of the Weighted Average Price of the Common Shares
during each of the twelve (12) consecutive Trading Days beginning on the Trading
Day immediately following the Maturity Date (such period, the "Maturity
Conversion Measuring Period"); provided, however, that if such arithmetic
average of the Weighted Average Price during the Maturity Conversion Measuring
Period shall yield a price that is less than $1.00, then the Maturity Conversion
Price shall be computed as 90% of the arithmetic average of the Weighted Average
Price of the Common Shares during the Maturity Conversion Measuring Period.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the Maturity
Settlement Date using the Maturity Conversion Price as calculated pursuant to
the foregoing sentence, then the Maturity Conversion Price shall be the price
equal to the arithmetic average of the Weighted Average Price of the Common
Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately preceding the Maturity Settlement Date.
(kk) "Maturity Date" means October 7, 2007; provided that such date
shall be extended to October 7, 2010 in the event that the FDA Approval is
granted; provided, however, that the Maturity Date may be extended at the option
of the Holder (i) in the event that, and for so long as, an Event of Default
shall have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice is delivered prior to the
Maturity Date; provided, further, that such date shall be shortened by the
number of months equal to the quotient of (A) any Accelerated Amount (less the
amount of any accrued and unpaid interest included in such amount) paid on any
Installment Date hereunder divided by (B) the applicable Installment Amount paid
on the Installment Date related to such Accelerated Amount (less the amount of
any accrued and unpaid interest included in such amount and less any Accelerated
Amount that would otherwise be included therein) on the Installment Date related
to such Accelerated Amount, rounded down to the nearest whole number.
(ll) "NASDAQ" means whichever of the Nasdaq National Market or The
Nasdaq SmallCap Market on which the Common Shares are traded.
(mm) "Net Cash Balance" means, at any date, (i) an amount equal to the
aggregate amount of cash, cash equivalents (including cash collateralizing the
Letter of Credit and not including other restricted cash) and marketable
securities, consisting of corporate bonds, commercial paper and medium-term
notes, as shown or reflected in the notes to Vasogen's consolidated balance
sheet as at such date minus (ii) the unpaid principal balance of any
Indebtedness for borrowed money (excluding Indebtedness under the Notes).
(nn) "Net Cash Balance Threshold" means, for any date of determination,
an amount equal to 110% of the outstanding aggregate Principal amount of the
Notes on such date.
-42-
(oo) "Options" means any rights, warrants or options to subscribe for
or purchase Common Shares or Convertible Securities.
(pp) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security are quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(qq) "Permitted Indebtedness" means (i) Indebtedness incurred by the
Company, Vasogen or their Subsidiaries that is pari passu with, or is made
expressly subordinate in right of payment to the Indebtedness evidenced by this
Note (any such subordination to be reflected in a written agreement acceptable
to the Required Holders and approved by the Required Holders in writing) and
which Indebtedness does not provide at any time for the payment, prepayment,
repayment, redemption, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later, (ii) Indebtedness secured by Xxxxxxxxx Xxxxx, (iii)
Indebtedness to trade creditors incurred in the ordinary course of business,
(iv) intercompany Indebtedness amongst the Company, Vasogen and their respective
Subsidiaries which Indebtedness is subordinate in right of payment to the
Indebtedness evidenced by this Note and (v) Indebtedness the proceeds of which
are used to redeem, repay or otherwise retire the Notes, in whole or in part;
provided that in the event such Indebtedness is not used to redeem, repay or
retire the Notes in full, such Indebtedness shall rank junior to the Notes in
accordance with Section 16(a).
(rr) "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) Liens (A) upon or in any
equipment, inventory or other assets acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment, inventory or
other assets or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment,
inventory or other assets at the time of its acquisition, provided that the Lien
is confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, inventory or other assets.
(ss) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(tt) "Post-Installment Conversion Shares" means, for any Installment
Date, that number of Common Shares equal to the applicable Company Conversion
Amount for such Installment Date divided by the Company Conversion Price
(without taking
-43-
into account the delivery of any Pre-Installment Conversion Shares), rounded up
to the nearest whole Common Share.
(uu) "Post-Maturity Conversion Shares" means that number of Common
Shares equal to the outstanding Principal on the Maturity Date divided by the
Maturity Conversion Price (without taking into account the delivery of any
Pre-Maturity Conversion Shares), rounded up to the nearest whole Common Share.
(vv) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(ww) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Subscription Date, by and among the Company, Vasogen, Vasogen, Corp. and the
initial holders of the Other Notes.
(xx) "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, Change of Control Redemption Notices, any Company
Installment Notices (in the event a Company Redemption is elected in any such
notices), Mandatory Redemption/Conversion Notices (in the event a Mandatory
Redemption is elected in any such notices) and LC Redemption/Conversion Notices
(in the event an LC Redemption is elected in any such notice) and, each of the
foregoing, individually, a Redemption Notice.
(yy) "Redemption Premium" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.
(zz) "Redemption Prices" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, any Company Installment
Redemption Price (in the event a Company Redemption is elected with respect to
any Installment Date), Mandatory Redemption Price and LC Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(aaa) "Registration Rights Agreement" means that certain registration
rights agreement dated as of the Subscription Date by and among Vasogen and the
initial holders of the Notes relating to, among other things, the registration
of the resale of the Common Shares issuable upon conversion of the Notes and
exercise of the Warrants.
(bbb) "Required Holders" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.
(ccc) "SEC" means the United States Securities and Exchange Commission.
(ddd) "Securities Purchase Agreement" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company,
Vasogen, Vasogen, Corp. and the initial Holder of this Note pursuant to which
the Company issued this Note.
-44-
(eee) "Subscription Date" means October 7, 2005.
(fff) "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common shares or equivalent
equity security are quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person's Parent Entity.
(ggg) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(hhh) "Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment under the Note.
(iii) "TSX" means the Toronto Stock Exchange.
(jjj) "Trading Day" means any day on which the Common Shares is traded
on the Principal Markets, or, if the Principal Markets are not the principal
trading market for the Common Shares, then on the principal securities exchange
or securities market on which the Common Shares is then traded; provided that
"Trading Day" shall not include any day on which the Common Shares is scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Shares is suspended from trading during the final hour of trading on
any such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(kkk) "Voting Shares" of a Person means capital shares of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(lll) "Warrants" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
(mmm) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-weighted
-45-
average price of such security on another Principal Market for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as such Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such other time as such market publicly announces is the official close of
trading) as reported by Bloomberg, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
(33) VASOGEN'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of Vasogen to issue Common
Shares to the Holder's account with DTC so long as Vasogen has sent a copy of
such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), Vasogen shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
(34) DISCLOSURE. Upon receipt or delivery by the Company or Vasogen of any
notice in accordance with the terms of this Note, unless Vasogen has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to Vasogen or its Subsidiaries, Vasogen
shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 6-K or
otherwise and through analogous legal disclosure in accordance with Canadian
securities laws. In the event that Xxxxxxx believes that a notice contains
material, nonpublic information, relating to Vasogen or its Subsidiaries,
Vasogen shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to Vasogen or its Subsidiaries.
[Signature Page Follows]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Issuance Date set out above.
SIGNED, SEALED AND DELIVERED BY
XXXXX XXXXXXX AS A DEED FOR AND
ON BEHALF OF VASOGEN IRELAND
LIMITED PURSUANT TO A POWER OF
ATTORNEY
----------------------------------------
Signature of Witness:
-------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
Occupation:
-----------------------------------
ACKNOWLEDGED AND AGREED:
VASOGEN INC.
By:
------------------------------------------
Name:
Title:
Address:
EXHIBIT I
VASOGEN INC. AND
VASOGEN IRELAND LIMITED
TREASURY INSTRUCTIONS
* * *
Instruction for electronic delivery of unrestricted shares (DWAC)
Vasogen Inc. (the "Parent") hereby instructs Mellon Investor Services LLC (the
"Co-Transfer Agent") to issue the amount of Common Shares of the Parent, without
par value (the "Common Shares") to the holder set forth below. Such Common
Shares are to be issued without any restrictive legends. The Parent advises the
Co-Transfer Agent that such Common Shares are fully paid and non-assessable. The
Parent hereby instructs the Co-Transfer Agent to issue such Common Shares from
the Common Shares reserved for the conversion of Senior Convertible Notes
(Reserve #19) as follows:
Note Number (Broker's reference number):
---------------------------------
Number of Common Shares to be issued:
---------------------------------
DTC Broker/Participant Number:
---------------------------------
Brokerage account number:
---------------------------------
VASOGEN INC.
By:
------------------------------
Name:
Title:
Note to Parent: If this "Instruction for electronic delivery of unrestricted
shares (DWAC)" is filled out, then (i) the "Instruction for physical issuance of
restricted/unrestricted shares" below should be left blank and (ii) a copy of
this instruction should be provided by the Parent to the broker to request
delivery of the shares. The Parent shall provide a copy of the instruction to
the broker at the contact information contained in the DTC Brokerage Account
Information Form.
* * *
-2-
Instruction for physical issuance of restricted/unrestricted shares
The Parent hereby instructs CIBC Mellon Trust Company (the "Transfer Agent") to
issue the amount of Common Shares set forth above to the holder indicated below.
The Parent advises the Transfer Agent that such Common Shares are fully paid and
non-assessable. The Parent hereby instructs the Transfer Agent to issue such
Common Shares as indicated below:
|_| Such Common Shares are to be issued without any restrictive legends.
|_| Such Common Shares are to be issued with the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT; (B) TO THE COMPANY, (C) OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
1933 ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN ACCORDANCE WITH THE
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED
BY RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND
IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS
OR (2) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS PROVIDED THE
COMPANY, PRIOR TO SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES MAY BE SO
OFFERED, SOLD OR TRANSFERRED IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
-3-
|_| Such Common Shares are to be issued with the following restrictive
legend:
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER
OF THESE SECURITIES SHALL NOT TRADE THE SECURITIES IN CANADA BEFORE
[ ], 2006.
VASOGEN INC.
By:
------------------------------
Name:
Title:
* * * *
-4-
Conversion Notice
Reference is made to the Senior Convertible Note (the "Note") issued to the
undersigned by Vasogen Ireland Limited (the "Company"). In accordance with and
pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into Common Shares
of Vasogen Inc. (the "Parent") as of the date specified below.
The undersigned holder hereby represents and warrants to the Parent and the
Company that after giving effect to the conversion of the Note contemplated by
this Conversion Notice and Treasury Instruction, such holder will not be in
violation of the beneficial ownership limits specified in Section 3(d) of the
Note, as increased or decreased pursuant to terms contained therein.
The following box is to be checked by the undersigned holder if such holder is
an "accredited investor" as that term is defined in the National Instrument
45-106, Prospectus and Registration Exemptions: |_|
The following box is to be checked by the undersigned holder if such holder
agrees with following statement: |_|
The undersigned holder hereby represents and warrants to the Parent and
the Company that such holder is a Qualified Institutional Buyer (as such
term is defined in Rule 144A under the Securities Act of 1933, as amended
(the "1933 Act")), and covenants to the Parent and the Company that such
holder will offer or sell such Common Shares only pursuant to an effective
registration statement or pursuant to Rule 904 or Rule 144 under the 1933
Act and that such holder will not be an affiliate (as such term is defined
in Rule 144 under the 1933 Act) of the Parent or the Company at the time
of any such offer or sale of such Common Shares pursuant to Rule 904 under
the 1933 Act by such holder.
Note Number:
-------------------------------------------------------------
Date of Conversion:
------------------------------------------------------
Aggregate Conversion Amount to be converted:
-----------------------------
Please confirm the following information:
Conversion Price:
--------------------------------------------------------
Number of Common Shares to be issued:
------------------------------------
-5-
Please issue the Common Shares into which the Note is being converted in the
following name and, if physical certificates are to be delivered, to the
following address:
Issue to:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Facsimile Number:
--------------------------------------------------------
Authorization:
-----------------------------------------------------------
By:
----------------------------------------------------------------
Title:
----------------------------------------------------------
Dated:
-------------------------------------------------------------------------
Information for electronic book entry transfer:
DTC Broker/Participant Number:
-------------------------------------
Brokerage account number:
-------------------------------------
Broker Name:
-------------------------------------
Broker Address:
-------------------------------------
-------------------------------------
Broker Telephone Number:
-------------------------------------
Broker Facsimile Number:
-------------------------------------
Broker e-mail address:
-------------------------------------
* * *
Exhibit 6b
Senior Convertible Note - Amatis Ltd.
(exhibits and schedules attached to Kings Road Investments Ltd.
Senior Convertible Note omitted)
(see attached)
SENIOR CONVERTIBLE NOTE
THE COMPANY HAS NOT OFFERED OR SOLD, AND WILL NOT OFFER OR SELL, THIS NOTE IN
IRELAND IN CIRCUMSTANCES THAT WOULD CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF IRISH PROSPECTUS LAW (AS DEFINED IN THE INVESTMENT FUNDS, COMPANIES
AND MISCELLANEOUS PROVISIONS ACT, 2005) OR AN INVITATION TO THE PUBLIC (AS
REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO SUBSCRIBE FOR THIS NOTE
AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CONSTITUTING AN OFFER OF THIS
NOTE TO THE PUBLIC WITHIN THE MEANING OF IRISH PROSPECTUS LAW OR AN "INVITATION
TO THE PUBLIC" (AS REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO
SUBSCRIBE FOR THIS NOTE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN THE UNITED STATES OR TO
ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT) (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION THE HOLDER OF (A) THE
SECURITIES REPRESENTED HEREBY WILL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE
RESIDENTS OF CANADA BEFORE THE LATER OF: (I) FEBRUARY 8, 2006 AND (II) FOUR
MONTHS AND A DAY AFTER THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY OF CANADA; AND (B) THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF SHALL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA
BEFORE FEBRUARY 8, 2006.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.
VASOGEN IRELAND LIMITED
SENIOR CONVERTIBLE NOTE
Issuance Date: October 7, 2005 Principal: U.S. $8,000,000
Note Certificate Number A-2
FOR VALUE RECEIVED, Vasogen Ireland Limited, a company incorporated under
the laws of the Republic of Ireland (the "Company"), hereby promises to pay to
AMATIS LTD. or registered assigns ("Holder") the amount set out above as the
Principal (as reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise, the "Principal") when due, whether upon the Maturity
Date, on any Installment Date with respect to the Installment Amount due on such
Installment Date (each, as defined herein), acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Interest Principal Amount at the rate of 6.45%
per annum (the "Interest Rate"), from the date set out above as the Issuance
Date (the "Issuance Date") until the same becomes due and payable, whether upon
an Interest Date (as defined below), any Installment Date, the Maturity Date,
acceleration, conversion, redemption or otherwise (in each case, in accordance
with the terms hereof). This Senior Convertible Note (including all Senior
Convertible Notes issued in exchange, transfer or replacement hereof, this
"Note") is one of an issue of Senior Convertible Notes issued pursuant to the
Purchase Agreements on the Closing Date (collectively, the "Notes" and such
other Senior Convertible Notes, the "Other Notes"). Certain capitalized terms
used herein are defined in Section 32.
(1) PAYMENTS OF PRINCIPAL.
(a) On each Installment Date the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date in
accordance with Section 8. On the Maturity Date, the Holder shall surrender the
Note to the Company and the Company shall pay to the Holder, (i) an amount in
Common Shares, or, at the option of the Company, in cash, representing all
outstanding Principal and (ii) an amount in cash equal to the accrued and unpaid
Interest thereon; provided that Principal shall be payable in Common Shares on
the Maturity Date if, and only if, there has been no Equity Conditions Failure.
On or prior to the eighth (8th) Trading Day prior to the Maturity Date (the
"Maturity Election Notice Due Date"), the Company shall deliver a written notice
to the Holder (x) specifying whether the Principal shall be paid on the Maturity
Date in Common Shares or cash and (y) if the Principal is to be paid in Common
Shares, certifying that there has been no Equity Conditions Failure. Principal
to be paid on the Maturity Date and on the Maturity Settlement Date (as defined
below) in Common Shares shall be paid in a number of fully paid and
nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) Common Shares.
(b) If the Company shall pay the Principal on the Maturity Date in
Common Shares, then on the Maturity Date (i) (A) provided that Xxxxxxx's
transfer agent (the "Transfer Agent") is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, the Company shall
direct Vasogen to, and upon such direction
-2-
Vasogen shall or shall cause the Transfer Agent to, credit a number of Common
Shares equal to the quotient of the outstanding Principal due on such date
divided by the Initial Maturity Conversion Price (the "Pre-Maturity Conversion
Shares") to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system,
or (B) if the foregoing shall not apply, Vasogen shall issue and deliver, to the
address set forth in the register maintained by Vasogen for such purpose
pursuant to the Securities Purchase Agreement or to such address as specified by
the Holder in writing to Vasogen at least three (3) Trading Days prior to the
Maturity Date, a certificate, registered in the name of the Holder or its
designee, for the number of Pre-Maturity Conversion Shares to which the Holder
shall be entitled and (ii) the Company shall pay to the Holder, in cash by wire
transfer of immediately available funds, the amount of any accrued and unpaid
interest on such Principal. On the third (3rd) Trading Day immediately after the
end of the Maturity Conversion Measuring Period (the "Maturity Settlement
Date"), the Company shall direct Vasogen to, and upon such direction Vasogen
shall or shall cause the Transfer Agent to, deliver to the Holder's account with
DTC a number of additional Common Shares, if any, equal to the Maturity Balance
Conversion Shares. If an Event of Default or Equity Conditions Failure occurs
during the Maturity Conversion Measuring Period, then, at the Holder's option,
either (x) the Holder may require the Company to pay the Principal amount of the
Note outstanding on the Maturity Date (including any Principal amount
represented by Pre-Maturity Conversion Shares that shall be returned to the
Company and which Principal amount shall be reduced to the extent any such
Common Shares are not returned to the Company) in cash on the Maturity
Settlement Date and, in conjunction with receipt of such cash payment, shall
return any Pre-Maturity Conversion Shares delivered to the Holder which the
Holder has not otherwise sold, transferred or disposed of or (y) the Company
shall pay to the Holder in cash on the Maturity Settlement Date an amount equal
to the difference between (1) the Principal outstanding on the Maturity Date
minus (2) the product of (A) the Principal outstanding on the Maturity Date
multiplied by (B) the Conversion Share Ratio and, notwithstanding Section 14(a),
in the case of this clause (y), such amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Maturity Conversion
Measuring Period.
(c) No prepayment of Principal shall be permitted except as expressly
provided herein.
(2) INTEREST; INTEREST RATE. Interest on the applicable Interest Principal
Amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 360-day year comprised of twelve 30-day months and
shall be payable on each Installment Date and on the Maturity Date (each an
"Interest Date"). Interest shall be payable on each Interest Date in cash. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate. Upon the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to twelve percent
(12.0%) (the "Default Rate"). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the Interest as
calculated at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default. Interest on overdue interest shall accrue at the same
rate compounded quarterly.
-3-
(3) CONVERSION OF NOTES. This Note shall be convertible into common shares
of Vasogen Inc. ("Vasogen"), without par value (the "Common Shares"), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d)(i), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable Common Shares in accordance with
Section 3(c), at the Conversion Rate (as defined below). Vasogen shall not issue
any fraction of a Common Share upon any conversion. If the issuance would result
in the issuance of a fraction of a Common Share, Vasogen shall round such
fraction of a Common Share up to the nearest whole share.
(b) Conversion Rate. The number of Common Shares issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (such number
of shares, the "Conversion Rate").
(i) "Conversion Amount" means the portion of the Principal to be
converted, amortized, redeemed or otherwise with respect to which this
determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination a price equal to $3.00, subject to
adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into
Common Shares on any date, the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time and
transmit by e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement, on the third (3rd) Trading Day prior to
such date (a "Conversion Date"), a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to Vasogen and
with a copy to the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the Company as soon as practicable
on or following such date (or an indemnification undertaking with respect to
this Note in the case of its loss, theft or destruction). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, Vasogen
and the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3rd) Trading Day following the date of receipt of a Conversion Notice (the
"Share Delivery Date"), (1) (x) provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, credit such aggregate number of Common Shares to which
the Holder shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system or (y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, Vasogen shall issue
-4-
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of Common
Shares to which the Holder shall be entitled and (2) the Company shall pay to
the Holder in cash an amount equal to the accrued and unpaid Interest up to and
including the Conversion Date on the Conversion Amount. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than five (5) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the Common Shares issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such Common Shares on the Conversion Date. In the event of a
partial conversion of this Note pursuant hereto, the principal amount converted
shall be deducted from the Installment Amounts relating to the Installment Dates
as set forth in the Conversion Notice.
(ii) Failure to Timely Convert. If Vasogen shall fail to issue a
certificate to the Holder or credit the Holder's balance account with DTC for
the number of Common Shares to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the Share Delivery Date (a "Conversion
Failure"), then (A) the Company shall pay damages to the Holder for each day of
such Conversion Failure in an amount equal to 1.5% of the product of (I) the
number of Common Shares not issued to the Holder on or prior to the Share
Delivery Date and to which the Holder is entitled, and (II) the Weighted Average
Price of the Common Shares on the Share Delivery Date or (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, where the
Holder has chosen not to void its Conversion Notice, if on or prior to the Share
Delivery Date, Vasogen shall fail to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of Common
Shares to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Shares to deliver in
satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the Common Shares so purchased
(the "Buy-In Price"), at which point Vasogen's obligation to deliver such
certificate (and to issue such Common Shares) shall terminate, or (ii) promptly
have Vasogen honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Common Shares times (B) the Weighted Average Price on the
Conversion Date. In the event that (1) the Holder has chosen to void its
Conversion Notice and (2) the Holder, prior to voiding such Conversion Notice,
purchased (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three
-5-
(3) Trading Days after the Holder's request, pay cash to the Holder in an amount
equal to the excess (if any) of (x) the Buy-In Price over the (y) the aggregate
consideration received by the Holder in the sale of such Common Shares.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event that the Company
and Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and Vasogen can convert some, but not all, of such
portions of the Notes submitted for conversion, subject to Section 3(d), the
Company shall direct Vasogen to, and upon such direction Vasogen shall, convert
from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such
holder relative to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number of Common
Shares issuable to the Holder in connection with a conversion of this Note,
Vasogen shall issue to the Holder the number of Common Shares not in dispute and
resolve such dispute in accordance with Section 25.
(d) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates and joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (y) for
purposes of the Securities Act (Ontario), in excess of 9.99% (the "Maximum
Percentage") of the number of Common Shares outstanding immediately after giving
effect to such conversion; provided that the Company shall nevertheless be
entitled to make payments in Common Shares pursuant to Sections 8(c), 8(d), 9
and 10. For purposes of the foregoing sentence, the number of Common Shares
beneficially owned by the Holder and its affiliates and joint actors shall
include the number of Common Shares issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of Common Shares which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates or joint actors and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of Vasogen
and the Company (including, without limitation, any Other Notes or warrants),
which in each case are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. For purposes of calculating
beneficial ownership pursuant to this Section 3(d)(i), beneficial ownership
pursuant to the Exchange Act shall be calculated in
-6-
accordance with Section 13(d) of the Exchange Act, and beneficial ownership
pursuant to the Securities Act (Ontario) shall be calculated in accordance with
section 101 of the Securities Act (Ontario), in each case except as set forth in
the preceding sentence. For purposes of this Section 3(d)(i), in determining the
number of outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (x) Vasogen's most recent Form 40-F or
Form 6-K, as the case may be, (y) a more recent public announcement by Vasogen
or (z) any other notice by the Company, Vasogen or the Transfer Agent setting
forth the number of Common Shares outstanding. For any reason at any time, upon
the written or oral request of the Holder, Vasogen shall within two (2) Trading
Days confirm orally and in writing to the Holder the number of Common Shares
then outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the actual conversion or exercise of
securities of Vasogen and the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company and Vasogen, the Holder from time
to time may increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and Vasogen, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes;
provided that the Company shall nevertheless be entitled to make payments in
Common Shares pursuant to Sections 8(c), 8(d), 9 and 10 without regard to the
Maximum Percentage as adjusted.
(ii) Principal Market Regulation. Vasogen shall not be obligated to
issue any Common Shares upon conversion, amortization or redemption of this
Note, and the Holder of this Note shall not have the right to receive upon
conversion, amortization or redemption of this Note any Common Shares (and only
such Common Shares), if the issuance of such Common Shares would exceed the
aggregate number of Common Shares which Vasogen may issue upon conversion,
amortization or redemption, or exercise, as applicable, of the Notes and
Warrants without breaching Vasogen's obligations under the rules or regulations
of the Principal Market (the "Exchange Cap"), except that such limitation shall
not apply in the event that the Company or Vasogen (A) obtains the approval of
the Principal Market (in the case of the TSX) or Vasogen's shareholders as
required by the applicable rules of the Principal Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the Purchase
Agreements (the "Purchasers") shall be issued in the aggregate, upon conversion
or exercise, as applicable, of Notes or Warrants, Common Shares in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the principal amount of Notes issued to such Purchaser
pursuant to the applicable Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Purchase Agreements on the Closing Date (with
respect to each Purchaser, the "Exchange Cap Allocation"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Notes, the
transferee shall be allocated a pro rata portion of such Purchaser's Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap
-7-
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of Common Shares actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. For purposes of clarification, with respect
to any Exchange Cap relating to the TSX, no holder of Notes shall be issued in
the aggregate upon conversion (including pursuant to any Company Conversion,
Mandatory Conversion or LC Conversion) of the Notes or exercise of the Warrants
or upon payment of Principal on the Notes on the Maturity Date, any Common
Shares at a discount to the market price (as defined for purposes of the TSX) at
the time of issuance of such shares in excess of such holder's Exchange Cap
Allocation.
(e) Payment in Lieu of Conversion Above Exchange Cap Limitation. If at
any time while this Note is outstanding, the Holder delivers a Conversion
Notice, and as a result of the application of an Exchange Cap, Vasogen is unable
to issue any Common Shares upon such conversion at the applicable Conversion
Price, then the Company shall (i) direct Vasogen to, and upon such direction
Vasogen shall, deliver to the Holder on the Conversion Date a number of Common
Shares equal to the quotient of the Conversion Amount stated in such Conversion
Notice divided by the Adjusted Conversion Price (the "Adjusted Conversion
Shares") and (ii) pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (A) the number of Exchange Cap Limitation Shares in connection with
such conversion multiplied by (B) the excess (if any) of (1) such Adjusted
Conversion Price over (2) the Conversion Price (the "Conversion Make-Whole").
Notwithstanding the foregoing, in the event that the Company is prohibited,
pursuant to the rules and regulations of any applicable Principal Market, to
honor the Holder's Conversion Notice by both the delivery of the Adjusted
Conversion Shares and the payment of the Conversion Make-Whole in cash, then the
Company shall pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (x) the number of Exchange Cap Limitation Shares and (y) the Adjusted
Conversion Price (the "Exchange Cap Redemption Payment"). If the Company shall
fail to deliver to the Holder the Adjusted Conversion Shares and pay the
Conversion Make-Whole or to pay to the Holder the Exchange Cap Redemption
Payment, as applicable, on or prior to the date such delivery and/or payment is
due, the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice or for which the Holder has not received the Adjusted Conversion Shares
and the Conversion Make-Whole or the Exchange Cap Redemption Payment, as
applicable.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"Event of Default":
(i) the failure of (A) any Common Shares issued or issuable upon
conversion, as part of any Installment Amount or as part of any Accelerated
Amount to be freely tradable under Canadian law on the TSX (subject to any
restrictions on disposition by the holder of a control block) on or after
February 8, 2006, or, thereafter, the Common Shares of any holder of Notes shall
cease to be freely tradable under Canadian law on the TSX and such lapse
-8-
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period or (B) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the applicable Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order by the SEC) or is unavailable to any holder of the Notes for sale of all
of such holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of twenty (20)
consecutive days or for more than an aggregate of forty (40) days in any 365-day
period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the suspension from trading on all of the Eligible Markets on
which the Common Shares are listed or failure of the Common Shares to be listed
on at least one Eligible Market for a period of ten (10) consecutive Trading
Days or for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(iii) Vasogen's (A) failure to cure a Conversion Failure by delivery
of the required number of Common Shares within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at
any time, of its intention not to comply with a request for conversion of any
Notes into Common Shares that is tendered in accordance with the provisions of
the Notes;
(iv) at any time following the tenth (10th) consecutive Trading Day
that the number of Common Shares that are authorized for issuance to the Holder
is less than the number of Common Shares that the Holder would be entitled to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);
(v) the Company's failure (or Vasogen's failure if any such amounts
are due in Common Shares) to pay to the Holder any amount of Principal
(including, without limitation, the Company's failure to pay any redemption or
make-whole payments), Interest or other amounts when and as due under this Note
or any other Transaction Document (as defined in the Securities Purchase
Agreement), except, in the case of a failure to pay Interest or other amounts
due under the Transaction Documents (other than Principal) when and as due, in
which case only if such failure continues for a period of at least three (3)
Trading Days;
(vi) the occurrence of (A) any material default under any
Indebtedness of Vasogen or any of its Subsidiaries (as defined in Section 3(a)
of the Securities Purchase Agreement) in an aggregate principal amount of
$5,000,000 or greater or (B) any redemption of or acceleration prior to maturity
of Indebtedness of Vasogen or any of its Subsidiaries in an aggregate principal
amount of $5,000,000 or greater, in each case of (A) or (B) other than with
respect to any Other Notes;
-9-
(vii) Vasogen or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the
Companies Creditors Arrangement Act (Canada) or any similar Federal, foreign or
state law for the relief of debtors (collectively, "Bankruptcy Law"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator
or similar official (a "Custodian"), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to
pay its debts as they become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against Vasogen or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of Vasogen or any
of its Subsidiaries or (C) orders the liquidation of Vasogen or any of its
Subsidiaries;
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against Vasogen or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $5,000,000 amount set
forth above so long as Vasogen provides the Holder a copy of its policy with
such insurer or indemnity provider where such judgment is clearly covered by
insurance or an indemnity and Vasogen will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;
(x) other than as set forth in item (xi) below, the Company, Vasogen
or any Guarantor breaches in any material respect any representation, warranty,
covenant or other term or condition of any Transaction Document, except, (A) in
the case of a breach of a representation and warranty, such representation and
warranty need only have been true and correct as of the Closing Date, and (B) in
the case of breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) consecutive Trading Days following the
earlier of (A) the day on which the Company, Vasogen or such Guarantor becomes,
or should have become, aware of such breach and (B) the day on which the Company
or Vasogen receives written notice of such breach from the Holder or any holder
of Other Notes;
(xi) any breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note (including any failure to maintain the Net Cash
Balance as required by Section 16(e)), except, in the case of a breach or
failure to comply with Sections 16(b), (c) or (d), there shall be a one (1) time
opportunity to cure a single breach or failure under one of such sections within
three (3) Business Days after the date the Company knows or should have known of
such breach or failure provided that such cure period does not exceed, in the
aggregate, six (6) Business Days from the date of the occurrence of any such
breach or failure;
(xii) (A) any Guarantee at any time for any reason shall cease to be
in full force and effect or shall cease to be enforceable in respect of its
material terms or (B) any Guarantor shall assert that its Guarantee is invalid
or unenforceable; or
-10-
(xiii) any Event of Default (as defined in the Other Notes) occurs
with respect to any Other Notes.
(b) Redemption Right. Promptly after the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of
an Event of Default Notice and the Holder becoming aware of an Event of Default,
the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice
and (B) the Weighted Average Price of the Common Shares on the date immediately
preceding such Event of Default (the "Event of Default Redemption Price").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 14. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the Event of Default Redemption Notice.
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. Neither the Company nor Vasogen shall enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company and Vasogen, as applicable, under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the Interest Rates of the Notes held by such holder,
having similar conversion rights as the Notes (specifying, without limitation,
that such security is convertible into common shares of the Successor Entity)
and having similar ranking to the Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common shares are quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the "Company" and "Vasogen", as applicable, shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and Vasogen and shall assume all of the obligations of the Company and
Vasogen under this Note with the same effect as if such Successor Entity had
been named as the Company or Vasogen, as the case maybe, herein. Upon
consummation of the Fundamental Transaction, the Successor Entity (if other than
the Company) shall deliver to the Holder confirmation that there shall be issued
upon conversion or redemption
-11-
of this Note at any time after the consummation of the Fundamental Transaction,
in lieu of the Common Shares (or other securities, cash, assets or other
property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Note; provided, however, that in the event that, pursuant to the terms
of the Fundamental Transaction, the holders of Common Shares may elect the
consideration to be received in exchange for the Common Shares in the such
Fundamental Transaction, the Holder shall elect, within the same time periods as
provided to the holders of Common Shares, the kind or amount of such shares,
securities, cash, assets or any other property (including warrants or other
purchase or subscription rights) that the Holder will, following the
consummation of such transaction, be entitled to receive upon conversion or
redemption; provided, further, however, that no such election by the Holder
shall be construed to require the conversion or redemption of this Note in
connection with such Fundamental Transaction. If the Holder is required to make
any election of the kind described in the foregoing sentence, the Company or
Vasogen, as applicable, shall deliver to the Holder all documentation,
informational materials and election forms relating to such Fundamental
Transaction contemporaneously with the delivery of such documentation, materials
and forms to the holders of the Common Shares. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Note.
(b) Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period (the "Change of
Control Period") beginning after the Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control
Redemption Notice shall indicate (i) the Conversion Amount the Holder is
electing to redeem and (ii) whether the Holder is requiring the Company to pay
the Change of Control Redemption Price in cash or by delivery of Common Shares.
The portion of this Note subject to redemption pursuant to this Section 5 shall
be redeemed by the Company in cash at a price equal to the greater of (x) 115%
of the sum of (1) the Conversion Amount being redeemed and (2) the amount of any
accrued but unpaid Interest thereon through the date of such redemption payment
and (y) the sum of (A) the product of (1) the aggregate cash consideration and
the aggregate cash value of any non-cash consideration per Common Share to be
paid to the holders of the Common Shares upon consummation of the Change of
Control and (2) the quotient determined by dividing (I) the Conversion Amount
being redeemed by (II) the Conversion Price plus (B) the amount of any accrued
but unpaid Interest on the Conversion Amount being redeemed through the date of
such redemption payment (the "Change of Control Redemption Price"). In the event
the Holder has elected to receive the Change of Control Redemption Price in
Common Shares, Vasogen shall deliver, within three (3) Trading Days of receipt
of the Holder's Change of Control Redemption Notice, to the Holder's account
with DTC on the Change of Control Redemption Date (as defined in Section 14) a
-12-
number of Common Shares equal to the quotient of (aa) the applicable Change of
Control Redemption Price divided by (bb) the Change of Control Conversion Price,
rounded to the nearest whole Common Share; provided that if the Change of
Control Redemption Date would fall on a date that is after the consummation of
the applicable Change of Control, then Vasogen shall not deliver Common Shares
to the Holder but rather the Company shall pay the Change of Control Redemption
Price to the Holder in cash. Redemptions made in cash as required by this
Section 5 shall be made in accordance with the provisions of Section 14 and
shall have priority to payments to shareholders in connection with a Change of
Control. Notwithstanding anything to the contrary in this Section 5, until the
Change of Control Redemption Price (together with any interest thereon) is paid
in full, the Conversion Amount submitted for redemption under this Section 5(c)
may be converted, in whole or in part, by the Holder into Common Shares, or in
the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Common Shares pursuant to Section 3.
(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS. If at any time Vasogen
grants, issues or sells any Options, Convertible Securities or rights to
purchase shares, warrants, securities or other property pro rata to all record
holders of any class of Common Shares (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
and upon the Holder's election, the aggregate Purchase Rights, in lieu of any
adjustments to which the Holder is otherwise entitled under Section 7 below in
respect of each Purchase Right, which the Holder could have acquired if the
Holder had held the number of Common Shares acquirable upon complete conversion
of this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Subscription Date, Vasogen issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any Common
Shares (including the issuance or sale of Common Shares owned or held by or for
the account of Vasogen, but excluding Common Shares deemed to have been issued
or sold by Vasogen in connection with any Excluded Security) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price
in effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of Common Shares Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by Vasogen upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of Common Shares Deemed
-13-
Outstanding immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section 7(a), the following
shall be applicable:
(i) Issuance of Options. If Vasogen in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by Vasogen at the time of the
granting or sale of such Option for such price per share; provided, however,
that notwithstanding the foregoing, with respect to any Options that are
Variable Price Securities (as defined below), the Conversion Price hereunder
shall only be adjusted pursuant to this Section 7(a) at such time as Vasogen
issues Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that is less
than the Applicable Price and any such adjustment shall be based on such
Variable Price and not on the lowest price per share for which one Common Share
would be issuable under the terms of such Variable Price Securities. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by Vasogen with respect to any one Common Share
upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company or Vasogen
in any manner issues or sells any Convertible Securities and the lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by the
Company or Vasogen, as the case may be, at the time of the issuance or sale of
such Convertible Securities for such price per share; provided, however, that
notwithstanding the foregoing, with respect to any Convertible Securities that
are Variable Price Securities, the Conversion Price hereunder shall only be
adjusted pursuant to this Section 7(a) at such time as Vasogen issues Common
Shares to a holder of such Variable Price Securities and such Common Shares are
issued at a Variable Price (as defined below) that is less than the Applicable
Price and any such adjustment shall be based on such Variable Price and not on
the lowest price per share for which one Common Share would be issuable under
the terms of such Variable Price Securities. For the purposes of this Section
7(a)(ii), the "lowest price per share for which one Common Share is issuable
upon such conversion or exchange or exercise" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by Vasogen with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Shares upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other
-14-
provisions of this Section 7(a), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be re-adjusted (but
to no greater extent than originally adjusted) to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of Vasogen,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by Vasogen therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by Vasogen in connection therewith. If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Vasogen will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by Vasogen will be the Weighted Average Price of such securities on the
date of receipt. If any Common Shares, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Vasogen is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Shares,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 7(d), if Xxxxxxx takes a record
of the holders of Common Shares for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Shares, Options or in
Convertible Securities
-15-
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If Vasogen at any time on or after the Subscription Date
subdivides (by any share split, share dividend, recapitalization or otherwise)
one or more classes of its outstanding Common Shares into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If Vasogen at any time on or after the
Subscription Date combines (by combination, reverse share split or otherwise)
one or more classes of its outstanding Common Shares into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment made pursuant to this Section
7(b) shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then Xxxxxxx's Board
of Directors will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(d) Abandoned Dividends or Distributions. If Vasogen shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Price shall be required by reason of the taking of such record.
(e) Xxxxxx's Right of Alternative Conversion Price Following Issuance
of Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 7, if Vasogen in any manner issues or sells any Options or Convertible
Securities (any such securities, "Variable Price Securities") after the
Subscription Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), Vasogen or the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(k) of the Securities Purchase Agreement, from and after the date Vasogen
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by it by designating in the Conversion Notice delivered upon any conversion
of this Note that
-16-
solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder's election to
rely on a Variable Price for a particular conversion of this Note shall not
obligate the Holder to rely on a Variable Price for any future conversions of
this Note.
(8) COMPANY INSTALLMENT CONVERSION OR REDEMPTION.
(a) General. Subject to and in accordance with the terms of this
Section 8, on each applicable Installment Date, the Company shall pay to the
Holder of this Note the Installment Amount as of such Installment Date by the
combination of any of the following, (i) provided that there has been no Equity
Conditions Failure, requiring the conversion of all or any portion of the
applicable Installment Amount, in accordance with this Section 8 (a "Company
Conversion"), and/or (ii) redeeming for cash all or any portion of the
applicable Installment Amount in accordance with this Section 8 (a "Company
Redemption"); provided that all of the outstanding applicable Installment Amount
as of each such Installment Date must be converted or redeemed by the Company on
the applicable Installment Date, subject to the provisions of this Section 8.
Unless the Company Installment Notice (as defined below) indicates otherwise or
if there is an Equity Conditions Failure, the entire Installment Amount to be
paid on such Installment Date shall be paid through a Company Conversion. On or
prior to the date which is the eighth (8th) Trading Day prior to each
Installment Date (each, an "Installment Notice Due Date"), the Company shall
deliver written notice (each, a "Company Installment Notice"), to the Holder
which Company Installment Notice shall state (i) the portion, if any, of the
applicable Installment Amount to be converted pursuant to a Company Conversion
(the "Company Conversion Amount"), (ii) the portion, if any, of the applicable
Installment Amount which the Company elects to redeem pursuant to a Company
Redemption (the "Company Redemption Amount") and (iii) unless the Company has
elected to pay the applicable Installment Amount entirely through a Company
Redemption, the Company Installment Notice shall certify that the Equity
Conditions have been satisfied as of the date of the Company Installment Notice.
Each Company Installment Notice whether actually given or deemed given shall be
irrevocable. Except as expressly provided in this Section 8(a), the Company
shall redeem and convert the applicable Installment Amount of this Note pursuant
to this Section 8 and the corresponding Installment Amounts of the Other Notes
pursuant to the corresponding provisions of the Other Notes in the same ratio of
the Installment Amount being redeemed and converted hereunder. The Company
Redemption Amount (whether set forth in the Company Installment Notice or by
operation of this Section 8) shall be redeemed in accordance with Section 8(b)
and the Company Conversion Amount shall be converted in accordance with Section
8(c).
(b) Mechanics of Company Redemption. If the Company elects, or is
deemed to have elected, a Company Redemption in accordance with Section 8(a),
then the Company Redemption Amount, if any, which is to be paid to the Holder on
the applicable Installment Date shall be redeemed by the Company on such
Installment Date upon payment by the Company to the Holder on such Installment
Date, by wire transfer of immediately available funds, an amount in cash (the
"Company Installment Redemption Price") equal to 100% of the Company Redemption
Amount. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any
-17-
such designation, a "Conversion Notice" for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price. Conversions required by this Section
8(b) shall be made in accordance with the provisions of Section 3(c).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any
interest thereon) is paid in full, the Company Redemption Amount (together with
any interest thereon) may be converted, in whole or in part, by the Holder into
Common Shares pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable
Installment Date as set forth in the immediately preceding sentence, the Company
Redemption Amount so converted shall be deducted from the Installment Amounts
relating to the Installment Dates as set forth in the applicable Conversion
Notice.
(c) Mechanics of Company Conversion.
(i) If the Company pays any part of an Installment Amount pursuant
to a Company Conversion in accordance with Section 8(a), then on the third (3rd)
Trading Day immediately preceding the Installment Date the Company shall (i)
direct Vasogen to, and upon such direction Vasogen shall or shall cause the
Transfer Agent to, issue to the Holder, for delivery on or prior to the
Installment Date, to the Holder's account with DTC a number of Common Shares
equal to the quotient of (x) such Company Conversion Amount (minus accrued and
unpaid Interest included in such amount) divided by (y) the Initial Company
Conversion Price (the "Pre-Installment Conversion Shares"), rounded to the
nearest whole Common Share and (ii) pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any accrued and unpaid Interest
included in such Company Conversion Amount. On the third (3rd) Trading Day
immediately after the end of the Company Conversion Measuring Period (the
"Installment Settlement Date"), the Company shall direct Vasogen to, and upon
such direction Vasogen shall or shall cause the Transfer Agent to, deliver to
the Holder's account with DTC a number of additional Conversion Shares, if any,
equal to the Installment Balance Conversion Shares. If an Event of Default
occurs during any applicable Company Conversion Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (A) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Company Conversion Amount represented by Pre-Installment Conversion Shares that
shall be returned to the Company and which Redemption Price shall be reduced to
the extent any such Common Shares are not returned to the Company), shall return
any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date to Vasogen which the Holder has not otherwise sold,
transferred or disposed of or (B) the Conversion Amount used to calculate the
Event of Default Redemption Price shall be reduced by the product of (1) the
Company Conversion Amount applicable to such Installment Date multiplied by (2)
the Conversion Share Ratio and, notwithstanding Section 14(a), in the case of
this clause (B), the Event of Default Redemption Price shall be paid by the
Company to the Holder within five (5) Trading Days after the end of the Company
Conversion Measuring Period.
(ii) Subject to the provisions of the following sentence, if there
is an Equity Conditions Failure, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to satisfy the
payment of the relevant
-18-
Installment Amount in one of the following ways or a combination of both: (x)
the Company shall redeem all or any part designated by the Holder of the
unconverted Company Conversion Amount (such designated amount is referred to as
the "First Redemption Amount") on such Installment Date or Installment
Settlement Date, as applicable, by paying to the Holder on such Installment Date
or Installment Settlement Date, as applicable, by wire transfer of immediately
available funds, an amount in cash equal to 125% of such First Redemption
Amount, or (y) the Company Conversion shall be null and void with respect to all
or any part designated by the Holder of the unconverted Company Conversion
Amount (other than any amount redeemed under clause (x) of this Section
8(c)(ii)) and the Holder shall be entitled to all the rights of a holder of this
Note with respect to such amount of the Company Conversion Amount; for the
avoidance of doubt, Xxxxxxx's failure to issue Common Shares with respect to any
Company Conversion Amount due to an Equity Conditions Failure shall not be
deemed an Event of Default hereunder so long as the Company otherwise complies
with the Holder's written designation in respect of the options set forth in (x)
and (y) above with respect to such Company Conversion Amount. In the event of an
Equity Conditions Failure, at the Holder's option, either (A) the Holder shall,
upon receipt of a First Redemption Amount (which amount includes redemption of
any portion of a Company Conversion Amount represented by Pre-Installment
Conversion Shares that shall be returned to the Company and which First
Redemption Amount shall be reduced to the extent any such Common Shares are not
returned to the Company), return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date to Vasogen which the Holder
has not otherwise sold, transferred or disposed of or (B) any related First
Redemption Amount shall be reduced by the product of (I) the Company Conversion
Amount applicable to such Installment Date multiplied by (II) the Conversion
Share Ratio and, notwithstanding the foregoing sentence, in the case of this
clause (B), such First Redemption Amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Company Conversion
Measuring Period. If the Company fails to redeem any First Redemption Amount on
or before the applicable Installment Date or Installment Settlement Date, as
applicable, by payment of such amount on the applicable Installment Date or
Installment Settlement Date, as applicable, then the Holder shall have the
rights set forth in Section 14(a) as if the Company failed to pay the applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xi)). Notwithstanding anything to the contrary in this Section
8(c), but subject to 3(d), until Vasogen delivers Common Shares representing the
Company Conversion Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Shares pursuant to Section 3. In the event
the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the Installment Dates as set forth in the
applicable Conversion Notice.
(iii) If, in connection with any Company Conversion, Vasogen is
unable to issue at the applicable Unadjusted Company Conversion Price all the
Common Shares that, but for the application of the Exchange Cap, Vasogen would
have been required to issue, then (A) Vasogen shall deliver to the Holder Common
Shares in accordance with Section 8(c)(i) and (B) the Company shall pay to the
Holder in cash, within ten (10) Trading Days of the applicable Installment
Settlement Date, an amount equal to the product of (1) the number of Exchange
Cap Limitation Shares applicable to such Installment Settlement Date and (2) the
-19-
excess (if any) of (x) such Adjusted Company Conversion Price over (y) the
Conversion Price (the "Company Conversion Make-Whole"). Notwithstanding the
foregoing, in connection with such Company Conversion, if the Company is
prohibited, pursuant to the rules and regulations of any applicable Principal
Market, to effect a Company Conversion by both the delivery by Vasogen to the
Holder of Common Shares and the payment by the Company of the Company Conversion
Make-Whole in cash, then (1) the Company shall pay to the Holder, in cash, on
the Installment Settlement Date, an amount (the "Exchange Cap Installment
Payment") equal to the product of (A) the number of Exchange Cap Limitation
Shares applicable to such Installment Settlement Date multiplied by (B) such
Adjusted Company Conversion Price and upon such payment the Company's and
Xxxxxxx's obligations to such Holder with respect to such Company Conversion
shall be deemed to be fully satisfied, and (2) such Holder shall return to
Vasogen on or before such Installment Settlement Date any Common Shares issued
to such Holder by Vasogen in connection with such Company Conversion; provided
that in the event that the Holder cannot return any such Common Shares to
Vasogen, the Company shall pay to the Holder, in lieu of the foregoing, an
amount in cash equal to the difference between (x) the Exchange Cap Installment
Payment and (y) the product of (I) the number of Pre-Installment Conversion
Shares issued to the Holder multiplied by (II) the applicable Unadjusted Initial
Company Conversion Price.
(d) Accelerated Amounts. The Company may, at its option (the
"Accelerated Payment Option"), (x) in the event that the Weighted Average Price
of the Common Shares on the most recently completed Trading Day prior to date
the of delivery of the Company Installment Notice exceeds $1.00, increase the
amount of the Installment Amount to be paid on the applicable Installment Date
by up to $1,600,000 plus accrued and unpaid Interest on such amount or (y) at
any one time during each of 2005, 2006 or 2007, in the event that the Weighted
Average Price of the Common Shares on the most recently completed Trading Day
prior to the date of delivery of the Company Installment Notice exceeds $4.00 on
NASDAQ, increase the applicable Installment Amount to be paid on the applicable
Installment Date by an amount equal to up to 40% of the aggregate Principal
amount (excluding the Letter of Credit Amount) of this Note then outstanding
plus accrued and unpaid Interest on such amount (any such amount described in
clauses (x) or (y) which exceeds the applicable Installment Amount, an
"Accelerated Amount"). In order for the Company to exercise any Accelerated
Payment Option, (1) the applicable Accelerated Amount shall be added to the
Installment Amount to be paid to the Holder in any Company Redemption and/or
Company Conversion on the applicable Installment Date pursuant to this Section 8
and (2) Vasogen shall issue the appropriate number of Accelerated Payment
Options Warrants on the applicable Installment Date. If the Company exercises
any such Accelerated Payment Option, the applicable Company Installment Notice
delivered to the holders of the Notes pursuant to Section 8(a) shall also state
that (1) the Company is exercising the Accelerated Payment Option and describe
the basis on which the Company is making such exercise, (2) state the aggregate
Accelerated Amount that shall be paid to the holders of all Notes on the
Installment Date and (3) state the number of Accelerated Payment Option Warrants
Vasogen anticipates issuing to the Holder on the applicable Installment Date.
Each Accelerated Amount shall be deducted from the Installment Amounts to be
paid on the last scheduled Installment Date hereunder.
(e) Pro Rata Acceleration Requirement. If the Company elects to
exercise the Accelerated Payment Option pursuant to Section 8(d), then it must
simultaneously
-20-
take the same action (and in the same proportion of the Accelerated Amount) with
respect to the Other Notes.
(9) COMPANY'S RIGHT OF MANDATORY REDEMPTION/CONVERSION.
(a) Mandatory Redemption/Conversion. If at any time from and after the
first (1st) anniversary of the Issuance Date (the "Mandatory
Redemption/Conversion Eligibility Date"), (i) the Weighted Average Price of the
Common Shares exceeds 175% of the Conversion Price then in effect for each of
twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the Mandatory Redemption/Conversion Eligibility Date (the "Mandatory
Redemption/Conversion Condition") and (ii) the Equity Conditions are satisfied
or waived in writing by the Holder from and including the Mandatory
Redemption/Conversion Notice Date (as defined below) through and including the
Mandatory Redemption/Conversion Date (as defined below) or through and including
the Installment Settlement Date in the case of any Mandatory Conversion, the
Company shall have the right, provided the Mandatory Redemption/Conversion is
met on and as of the Mandatory Redemption/Conversion Notice Date (as defined
below), to (i) redeem all or any portion of the Conversion Amount then remaining
under this Note (a "Mandatory Redemption") and/or (ii) require the conversion of
all or any portion of the Conversion Amount then remaining under this Note (a
"Mandatory Conversion"). The portion of this Note subject to redemption pursuant
to this Section 9 shall be redeemed by the Company in cash, if it so elects, at
a price equal to the Conversion Amount being redeemed on the Mandatory
Redemption/Conversion Date plus any accrued and unpaid Interest thereon through
the Mandatory Redemption/Conversion Date (the "Mandatory Redemption Price"). The
Company may exercise its right to require a Mandatory Redemption and/or a
Mandatory Conversion under this Section 9(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the "Mandatory Redemption/Conversion Notice" and the date all
of the holders are delivered such notice by facsimile is referred to as the
"Mandatory Redemption/Conversion Notice Date") and each Mandatory
Redemption/Conversion Notice shall be irrevocable. The Mandatory
Redemption/Conversion Notice shall state (1) the aggregate Conversion Amount of
Notes (the "Mandatory Redemption/Conversion Amount") which the Company has
elected to be subject to Mandatory Redemption and/or Mandatory Conversion from
all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes), (2) the Holder's pro rata portion, if any, of
the Mandatory Redemption/Conversion Amount that the Company is requiring to be
converted pursuant to a Mandatory Conversion, (the "Mandatory Conversion
Amount"), (3) the Holder's pro rata portion, if any, of the Mandatory
Redemption/Conversion Amount which the Company elects to redeem pursuant to a
Mandatory Redemption (the "Mandatory Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the Mandatory Redemption/Conversion
Amount which shall be paid in cash to the holders of Notes on the Mandatory
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the Mandatory Redemption/Conversion Notice and (6) the date on
which the Mandatory Redemption and/or Mandatory Conversion shall occur (the
"Mandatory Redemption/Conversion Date") which date shall be (x) in connection
with any Mandatory Redemption not less than ten (10) Trading Days nor more than
thirty (30) Trading Days after the Mandatory Redemption/Conversion Notice Date
and (y) in connection with any Mandatory Conversion not less than thirty (30)
Trading Days after the Mandatory Redemption/Conversion Notice Date; provided,
however, that the Company shall not redeem and/or convert a Conversion
-21-
Amount under this Section in excess of the Holder's Pro Rata Amount of the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Shares
on NASDAQ and the TSX combined over the ten (10) consecutive Trading Day period
ending on the Trading Day immediately preceding the Mandatory
Redemption/Conversion Notice Date. The Company may not effect more than one
Mandatory Redemption and/or Mandatory Conversion during any consecutive thirty
(30) day period. All Conversion Amounts converted by the Holder after the
Mandatory Redemption/Conversion Notice Date shall reduce the Conversion Amount
of this Note required to be redeemed and/or converted on the Mandatory
Redemption/Conversion Date. Mandatory Conversions made pursuant to this Section
9 shall be made in accordance with Section 8(c) (including Section 8(c)(iii))
and references in Section 8(c) to (I) the Installment Amount shall be deemed to
refer to the Mandatory Redemption/Conversion Amount (plus accrued and unpaid
Interest thereon), (II) the Company Conversion shall be deemed to refer to the
Mandatory Conversion, (III) the Company Conversion Amount shall be deemed to
refer to the Mandatory Conversion Amount (plus accrued and unpaid Interest
thereon), (IV) the Installment Date shall be deemed to refer to the Mandatory
Redemption/Conversion Date, (V) the Initial Company Conversion Price shall be
deemed to refer to Initial Mandatory Conversion Price, (VI) the Company
Conversion Measuring Period shall be deemed to refer to the Mandatory Conversion
Measuring Period, (VII) the Company Conversion Price shall be deemed to refer to
Mandatory Conversion Price, (VIII) the Adjusted Company Conversion Price shall
be deemed to refer to the Adjusted Mandatory Conversion Price and (IX) the
Unadjusted Company Conversion Price shall be deemed to refer to the Unadjusted
Mandatory Conversion Price. Mandatory Redemptions made pursuant to this Section
9 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause a Mandatory Redemption and/or Mandatory Conversion pursuant to Section
9(a), then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Mandatory Redemption and/or Mandatory
Conversion pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require redemption and/or conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(i) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be redeemed and/or converted pursuant to Section 9(a), multiplied by
(ii) the fraction, the numerator of which is the sum of the aggregate initial
principal amount of the Notes purchased by such holder and the denominator of
which is the sum of the aggregate initial principal amount of the Notes
purchased by all holders (such fraction with respect to each holder is referred
to as its "Redemption/Conversion Allocation Percentage", and such amount with
respect to each holder is referred to as its "Pro Rata Redemption/Conversion
Amount"). In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder's Notes, the transferee shall be allocated
a pro rata portion of such holder's Redemption/Conversion Allocation Percentage
and Pro Rata Redemption/Conversion Amount.
(10) COMPANY'S RIGHT OF REDEMPTION/CONVERSION OF THE LETTER OF CREDIT
AMOUNT.
(a) Letter of Credit Amount Redemption. If at any time from and after
the Issuance Date (the "LC Conversion Eligibility Date"), (i) the Weighted
Average Price of
-22-
the Common Shares exceeds 150% of the Conversion Price then in effect for each
of twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the LC Conversion Eligibility Date (the "LC Redemption/Conversion
Condition") and (ii) the Equity Conditions are satisfied or waived in writing by
the Holder from and including the LC Redemption/Conversion Notice Date (as
defined below) through and including the LC Redemption/Conversion Date (as
defined below) or through and including the Installment Settlement Date in the
case of any LC Conversion, the Company shall have the right, provided the LC
Redemption/Conversion Condition is met on and as of the LC Redemption/Conversion
Notice Date (as defined below), to (i) redeem all or any portion of a principal
amount of this Note then outstanding that is not in excess of the Letter of
Credit Amount (the "Available Conversion Amount") (such redemption, an "LC
Redemption") and/or (ii) require the conversion of all or any portion of such
amount (an "LC Conversion"). The portion of this Note subject to redemption
pursuant to this Section 10 shall be redeemed by the Company in cash, if it so
elects, at a price equal to the Conversion Amount being redeemed plus any
accrued and unpaid Interest thereon through the LC Redemption/Conversion Date
(the "LC Redemption Price"). The Company may exercise its right to require an LC
Redemption and/or an LC Conversion under this Section 10(a) by delivering a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of Notes (the "LC Redemption/Conversion Notice" and the
date all of the holders are delivered such notice by facsimile is referred to as
the "LC Redemption/Conversion Notice Date") and each LC Redemption/Conversion
Notice shall be irrevocable. The LC Redemption/Conversion Notice shall state (1)
the aggregate Conversion Amount of Notes (the "LC Redemption/Conversion Amount")
which the Company has elected to be subject to an LC Redemption and/or an LC
Conversion from all of the holders of the Notes pursuant to this Section 9 (and
analogous provisions under the Other Notes), (2) the portion, if any, of the
Available Conversion Amount that the Company is requiring to be converted
pursuant to an LC Conversion, (the "LC Conversion Amount"), (3) the portion, if
any, of the Available Conversion Amount which the Company elects to redeem
pursuant to an LC Redemption (the "LC Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the LC Redemption/Conversion Amount
which shall be paid in cash to the holders of Notes on the LC
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the LC Redemption/Conversion Notice and (6) the date on which
the LC Redemption and/or LC Conversion shall occur (the "LC
Redemption/Conversion Date") which date shall be (x) in connection with any LC
Redemption not less than fifteen (15) Trading Days nor more than thirty (30)
Trading Days after the LC Redemption/Conversion Notice Date and (y) in
connection with any LC Conversion not less than thirty (30) Trading Days after
the LC Redemption/Conversion Notice Date; provided, however, that the Company
shall not redeem any aggregate Conversion Amount under this Section in excess of
the Holder's Pro Rata Amount of the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Shares on NASDAQ and the TSX combined over the
fifteen (15) consecutive Trading Day period ending on the Trading Day
immediately preceding the LC Redemption/Conversion Notice Date. The Company may
not effect more than one LC Redemption and/or LC Conversion during any
consecutive thirty (30) day period. All Conversion Amounts converted by the
Holder after the LC Redemption/Conversion Notice Date shall reduce the
Conversion Amount of this Note required to be redeemed and/or converted on the
LC Redemption/Conversion Date. LC Conversions made pursuant to this Section 10
shall be made in accordance with Section 8(c) (including Section 8(c)(iii)) and
references in Section 8(c)
-23-
to (I) the Installment Amount shall be deemed to refer to the LC
Redemption/Conversion Amount (plus accrued and unpaid Interest thereon), (II)
the Company Conversion shall be deemed to refer to the LC Conversion, (III) the
Company Conversion Amount shall be deemed to refer to the LC Conversion Amount
(plus accrued and unpaid Interest thereon), (IV) the Installment Date shall be
deemed to refer to the LC Redemption/Conversion Date, (V) the Initial Company
Conversion Price shall be deemed to refer to Initial Mandatory Conversion Price,
(VI) the Company Conversion Measuring Period shall be deemed to refer to the
Mandatory Conversion Measuring Period, (VII) the Company Conversion Price shall
be deemed to refer to Mandatory Conversion Price, (VIII) the Adjusted Company
Conversion Price shall be deemed to refer to the Adjusted Mandatory Conversion
Price and (IX) the Unadjusted Company Conversion Price shall be deemed to refer
to the Unadjusted Mandatory Conversion Price. LC Redemptions made pursuant to
this Section 10 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause an LC Redemption and/or LC Conversion pursuant to Section 10(a), then
it must simultaneously take the same action with respect to the Other Notes. If
the Company elects to cause a LC Redemption and/or LC Conversion pursuant to
Section 10(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the
Company shall require redemption and/or conversion of a Conversion Amount from
each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be redeemed
and/or converted pursuant to Section 10(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder and the denominator of which is the sum of the
aggregate initial principal amount of the Notes purchased by all holders (such
fraction with respect to each holder is referred to as its "LC Amount Allocation
Percentage", and such amount with respect to each holder is referred to as its
"Pro Rata LC Amount"). In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such xxxxxx'x XX Amount Allocation Percentage
and Pro Rata LC Amount.
(11) GUARANTY. Vasogen and Vasogen, Corp. shall guarantee the obligations
under this Note and the Other Notes to the extent and in the manner set forth in
the Guarantees (as defined in the Securities Purchase Agreement).
(12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Memorandum and Articles of Association or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(13) AUTHORIZED SHARES.
(a) Reservation. Vasogen shall have sufficient authorized and unissued
Common Shares for each of the Notes equal to the number of Common Shares
necessary to effect the conversion at the Conversion Rate with respect to the
Conversion Amount
-24-
of each such Note as of the Issuance Date. So long as any of the Notes are
outstanding, Vasogen shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Shares, solely for the
purpose of effecting the conversion of the Notes, the number of Common Shares as
shall from time to time be necessary to effect the conversion of all of the
Notes then outstanding; provided that at no time shall the number of Common
Shares so available be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the
"Required Amount").
(b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding Vasogen does not have a sufficient number of authorized
and unissued Common Shares to satisfy its obligation to have available for
issuance upon conversion of the Notes at least a number of Common Shares equal
to the Required Amount (an "Authorized Share Failure"), then Vasogen shall as
promptly as practicable take all action necessary to increase Vasogen's
authorized Common Shares to an amount sufficient to allow Vasogen to have
available the Required Amount for the Notes then outstanding.
(14) HOLDER'S REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Trading Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to be paid in cash to the Holder concurrently with the
consummation of such Change of Control if such notice is received at least five
(5) Trading Days prior to the consummation of such Change of Control and within
five (5) Trading Days after the Company's receipt of such notice otherwise (the
"Change of Control Redemption Date"). The Company shall deliver the Mandatory
Redemption Price to the Holder on the Mandatory Redemption/Conversion Date. The
Company shall deliver the LC Redemption Price to the Holder on the LC
Redemption/Conversion Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to, by providing written notice to the Company, require the
Company to promptly return to the Holder all or any portion of this Note
representing the Conversion Amount that was submitted for redemption and for
which the applicable Redemption Price has not been paid. Upon the Company's
receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to such Conversion Amount and (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount.
(b) Redemption by Other Holders. Upon the Company's receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(b) (each, an "Other
Redemption Notice"), the Company shall immediately, but no later than one (1)
Trading Day of its receipt thereof, forward to the Holder by facsimile a copy of
-25-
such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Trading Day period beginning on and
including the date which is three (3) Trading Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Trading Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Trading Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Trading Day period.
(15) VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as provided by law, the Canada Business Corporations Act
and as expressly provided in this Note.
(16) COVENANTS.
(a) Rank. All payments due under this Note (a) shall rank pari passu
with all Other Notes and (b) neither Vasogen nor any of its Subsidiaries shall
incur Indebtedness that is senior to the Notes or the Guarantees as applicable.
(b) Incurrence of Indebtedness. So long as this Note is outstanding,
Vasogen shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of Liens. So long as this Note is outstanding, Vasogen
shall not, and Vasogen shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by Vasogen or any of its
Subsidiaries (collectively, "Liens") other than Permitted Liens.
(d) Restricted Payments. Vasogen shall not, and Vasogen shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness, whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness if at the time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Net Cash Balance Test. If the ACCLAIM trial fails to meet its
primary endpoint, then, beginning on September 1, 2006 until the earlier of (x)
the Maturity Date or (y) such time as the Notes have been otherwise converted or
redeemed in full, Vasogen and the Company, on a consolidated basis, shall
maintain, at all times, a Net Cash Balance equal to or exceeding the applicable
Net Cash Balance Threshold (the "Net Cash Balance Test").
-26-
(i) On any date (or within four (4) Business Days thereafter) on
which the Net Cash Balance Test is not satisfied (a "Failure Date"), Vasogen
shall publicly disclose (on a Current Report on Form 6-K or otherwise and
through analogous legal disclosure means under Canadian securities laws) the
fact that Vasogen has failed to satisfy the Net Cash Balance Test. On the date
of any such disclosure, Vasogen shall also provide to the Holder a
certification, executed on behalf of Vasogen by the Chief Financial Officer of
Vasogen or his or her designate who shall also be an executive officer or the
controller, as to the amount of the Net Cash Balance as of the Failure Date and
disclose such amount in the Current Report on Form 6-K.
(ii) Vasogen shall announce its operating results (the "Operating
Results") for each Fiscal Quarter no later than the forty-fifth (45th) day after
the end of each Fiscal Quarter or, with respect to the last Fiscal Quarter, the
ninetieth (90th) day after such quarter (the "Announcement Date") and, in the
event Vasogen shall have satisfied the Net Cash Balance Test at all times during
such Fiscal Quarter, such announcement shall include a statement to the effect
that Vasogen satisfied the Net Cash Balance Test at all times throughout such
Fiscal Quarter; provided, however, that in the event Vasogen is delayed in
announcing its Operating Results for any Fiscal Quarter, on the Announcement
Date Vasogen shall, in lieu of the foregoing, (A) make a statement to the effect
that it has complied with all of its covenants under the Notes, including,
without limitation, the Net Cash Balance Test and (B) provide to the holders of
Notes a certification, in accordance with terms of the next sentence, certifying
the same. On the Announcement Date, Vasogen shall also provide to the holders of
Notes a certification, executed on behalf of Vasogen by the Chief Financial
Officer of Vasogen or his or her designate who shall also be an executive
officer or the controller, certifying that Vasogen satisfied the Net Cash
Balance Test at all times throughout such Fiscal Quarter.
(17) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if Vasogen shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Note, then, in each such case any Conversion Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Conversion Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the Common Shares on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by Xxxxxxx's Board of Directors) applicable to one
Common Share, and (ii) the denominator shall be the Weighted Average Price of
the Common Shares on the trading day immediately preceding such record date (but
such fraction shall not be greater than one); provided, however, that in no
event shall the Conversion Price be reduced pursuant to this Section 17 with
respect to any portion of a Distribution for which the Conversion Price is also
being reduced pursuant to any of the provisions of Section 7 hereof in respect
of the same portion of such Distribution.
(18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
-27-
affirmative vote of the Required Holders at a meeting duly called for such
purpose or the written consent of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. Any change or amendment so
approved shall be binding upon all existing and future holders of this Note and
any Other Notes; provided, however, that no such change, amendment, alteration
or amendment, as applied to any of the Notes held by any particular holder of
Notes, shall, without the written consent of that particular holder, (i) reduce
the Interest Rate, extend the time for payment of Interest or change the manner
or rate of accrual of Interest on the Notes, (ii) reduce the amount of
Principal, or extend the Maturity Date, of the Notes, (iii) make any change that
impairs or adversely affects the conversion rights of the Notes, (iv) impair the
right of any holder of Notes to receive payment of principal or Interest or
other payments due under the Notes, if any, on or after the due dates therefor;
or (v) modify any of the provisions of, or impair the right of any holder of
Notes under, this Section 18.
(19) TRANSFER. This Note and any Common Shares issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company on two (2) Trading Days' written notice, subject only
to the provisions of Section 2(f) of the Securities Purchase Agreement;
provided, that the Holder may not transfer any outstanding Principal and accrued
and unpaid Interest of this Note, in part, to the extent such Principal and
Interest is less than the lesser of (a) $2,000,000 and (b) the remaining
outstanding Principal and accrued and unpaid Interest of this Note; provided,
further, however, that any transferee of all or any portion of this Note agrees
to comply with all applicable securities laws; provided, also, that any
transferee of all or any portion of this Note that wishes to avail itself of the
benefits contemplated by Section 9(s) of the Securities Purchase Agreement
(including, for the avoidance of doubt, any subsequent transferee of any
transferee) shall make to Vasogen the representations and warranties made by the
Purchaser in, and give the Notice as contemplated pursuant to, Section 9(s) of
the Securities Purchase Agreement. Prior to the effectiveness of any such sale,
assignment or transfer pursuant to this Section 19, and only if such transferee
seeks to receive Common Shares through DTC's Deposit Withdrawal Agent Commission
system, such transferee shall have completed and delivered to the Company the
DTC brokerage account information with respect to such transferee in
substantially the form of Exhibit E as attached to the Securities Purchase
Agreement.
(20) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of
-28-
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 20(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 20(a) or Section 20(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest on the Principal of this Note, from the Issuance Date.
(21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to,
-29-
attorneys' fees and disbursements.
(23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
(24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(25) DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Weighted Average Price or the arithmetic calculation of the Conversion
Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Trading
Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Trading Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Trading Days submit via facsimile (a) the disputed
determination of the Weighted Average Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Rate or the Redemption Price
to the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Trading Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
(26) NOTICES; CURRENCY; TAXES; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven (7) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
-30-
(b) Currency. All principal, interest and other amounts owing under
this Note or any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in US dollars. All amounts denominated in other
currencies shall be converted in the US dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Note, the US dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date
of calculation shall be the final date of such period of time).
(c) Taxes.
(i) Any and all payments made by the Company hereunder, including
any amounts received on a conversion or redemption of the Note and any amounts
on account of interest or deemed interest, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 26(c)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to the Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 26(c) shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.
(d) Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via
-31-
overnight courier service to such Person at such address as previously provided
to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Buyer Schedule attached to the Purchase
Agreements); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Trading Day, the same shall instead be due on
the next succeeding day which is a Trading Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.
(27) CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
(28) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices otherwise
required pursuant to applicable law in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(29) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Note shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
-32-
XXXXXX IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(30) JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 30
referred to as the "Judgment Currency") an amount due in US dollars under this
Note, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 30(a)(ii) being hereinafter
referred to as the "Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Note.
(31) MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
(32) CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "Accelerated Payment Option Warrants" means warrants exercisable
for a number of Common Shares equal to 65% of the quotient of (x) the
Accelerated Amount being paid pursuant to Section 8 minus accrued and unpaid
Interest
-33-
included in such amount divided by (y) the Conversion Price on the applicable
Installment Date, rounded up to the nearest whole Common Share. Such warrants
shall be in substantially the form of the Warrant attached as Exhibit B to the
Securities Purchase Agreement, except that the expiration date of such warrants
shall be five (5) years from the issuance date thereof. The exercise price of
the Accelerated Payment Option Warrants shall be the same as the Conversion
Price then in effect; provided, however, that if on the applicable Installment
Date on which such warrants are issued the Weighted Average Price of the Common
Shares is greater than the Conversion Price that would become the exercise price
of the Accelerated Payment Option Warrants, (i) the Company shall pay to the
Purchasers, in Common Shares within three (3) Trading Days of the applicable
Installment Date or, at the option of the Company, in cash, the product of (A)
the difference between (1) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) Trading Days ending on the
Trading Day immediately prior to the applicable Installment Date (the "Exercise
Price Measuring Period") and (2) such Conversion Price and (B) the number of
Common Shares for which such Accelerated Payment Option Warrants are exercisable
(such product, the "Adjustment Amount") and (ii) the exercise price for such
Accelerated Payment Option Warrants will be adjusted to equal such arithmetic
average of the Weighted Average Price of the Common Shares during the Exercise
Price Measuring Period. In the event the Company shall pay the Adjustment Amount
in Common Shares, the number of Common Shares to be delivered shall be equal to
the quotient of the Adjustment Amount divided by the Company Conversion Price
for the applicable Installment Date, rounded up to the nearest whole Common
Share; provided, however that the Company shall not be entitled to pay the
Adjustment Amount in Common Shares if the Equity Conditions are not satisfied.
(b) "Adjusted Conversion Price" means, as of any date of determination,
the price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Conversion Date.
(c) "Approved Share Plan" means any employee benefit plan which has
been approved by the Board of Directors of Vasogen, pursuant to which Xxxxxxx's
securities may be issued to any employee, consultant, officer or director in
connection with services provided or to be provided to Vasogen or any Subsidiary
thereof.
(d) "Bloomberg" means Bloomberg Financial Markets.
(e) "Canadian Prospectus" shall have the meaning set forth in the
Registration Rights Agreement.
(f) "Change of Control" means any Fundamental Transaction other than
(A) any reorganization, recapitalization or reclassification of the Common
Shares in which holders of Vasogen's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger
-34-
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or Vasogen.
(g) "Change of Control Conversion Price" means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Shares during each of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the delivery of the Change of Control Redemption Notice (such period,
the "Change of Control Measuring Period"); provided, however, that if such
arithmetic average of the Weighted Average Price during the Change of Control
Measuring Period shall yield a price that is less than $1.00, then the Change of
Control Conversion Price shall be computed as 90% of the arithmetic average of
the Weighted Average Price of the Common Shares during the Change of Control
Measuring Period. Notwithstanding the foregoing, in the event that as a result
of the application of the Exchange Cap the Company is unable to issue Common
Shares on the applicable date using the Change of Control Conversion Price as
calculated pursuant to the foregoing sentence, then the Change of Control
Conversion Price shall be the price equal to the arithmetic average of the
Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
delivery of the Change of Control Redemption Notice (such price, the "Adjusted
Change of Control Conversion Price").
(h) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement, which date is the date the Company initially issued Notes
pursuant to the terms of the Securities Purchase Agreement.
(i) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of Vasogen or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.
(j) "Company Conversion Price" means, as of any date of determination,
that price which shall be the lower of (i) the applicable Conversion Price and
(ii) the price computed as 95% of the arithmetic average of the Weighted Average
Price of the Common Shares during each of the twelve (12) consecutive Trading
Days commencing on the Trading Day immediately after the applicable Installment
Date (such period, the "Company Conversion Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Company Conversion Measuring Period shall yield a price that is less than
$1.00, then the Company Conversion Price shall be computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Shares during the
Company Conversion Measuring Period. Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap the Company is unable to
issue Common Shares on an Installment Settlement Date using the Company
Conversion Price as calculated pursuant to the foregoing sentence (the
"Unadjusted Company Conversion Price"), then the Company Conversion Price shall
be the price equal to the arithmetic average of the Weighted Average Price of
the Common Shares during each of the five (5) consecutive Trading Days ending on
the
-35-
Trading Day immediately prior to the applicable Installment Settlement Date
(such price, the "Adjusted Company Conversion Price").
(k) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
(l) "Conversion Share Ratio" means, as to any applicable date of
determination, the quotient of (i) the number of Pre-Installment Conversion
Shares or Pre-Maturity Conversion Shares, as applicable, delivered in connection
with an Installment Date or the Maturity Date, as applicable divided by (ii) the
number of Post-Installment Conversion Shares or Post Maturity Conversion Shares,
as applicable, relating to such Installment Settlement Date or Maturity
Settlement Date, as the case may be.
(m) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(n) "Effectiveness Time" means January 20, 2006.
(o) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc. or the American Stock Exchange.
(p) "Equity Conditions" means that each of the following conditions is
satisfied: (i) either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and a Grace Period (as defined in the Registration
Rights Agreement) shall not be in progress or (y) all Common Shares issuable
upon conversion or redemption of the Notes and payment of Installment Amounts
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws and such
shares shall be freely tradable on both the NASDAQ and the TSX, other than any
restrictions on disposition by (I) a holder of a control block, where the Holder
has become such a holder or (II) an affiliate; (ii) the Common Shares are
designated for quotation or listed on both of the Principal Markets and shall
not have been suspended from trading on either of such exchanges or markets
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by Vasogen or the
Company) nor shall delisting or suspension by either of such exchanges or
markets have been threatened or pending either (A) in writing by such exchanges
or markets or (B) by falling below the minimum listing maintenance requirements
of such exchanges or markets; provided, however, that no threatened or pending
delisting or suspension that has been publicly announced and which shall not
occur within one (1) month of the applicable date of determination shall be
considered when determining whether the Company has satisfied the condition set
forth in this clause (ii); (iii) during the one (1) year period ending on and
including
-36-
the date immediately preceding the applicable date of determination (or such
lesser period of time since the Issuance Date), Vasogen shall have delivered
Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise
of the Warrants to the holders on a timely basis as set forth in Section
3(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections
1(c) of the Warrants, unless such failure to deliver shall have occurred only
once and shall have been remedied by Vasogen with three (3) Business Days; (iv)
any applicable Common Shares to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules and regulations of the Principal Markets; (v) on each day during the
period beginning three (3) months prior to the applicable date of determination
and ending on and including the applicable date of determination (the "Equity
Conditions Measuring Period"), the Company (or Vasogen if any such payment was
due in Common Shares) shall not have failed to timely make any payments within
five (5) Trading Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not
have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, rejected publicly
by the board of directors (or similar governing body) of Vasogen or the Company,
as applicable, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) neither Vasogen nor the Company shall have any knowledge of any
fact (other than facts relating exclusively to the Holder that would require
updating of the Selling Shareholders or Plan of Distribution section of the
Registration Statement) that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of all remaining Registrable Securities in accordance
with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion or redemption of the Notes or payment of Installment
Amounts not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws, other than any restrictions on
disposition by (I) a holder of a control block, where the Holder has become such
a holder or (II) an affiliate; (viii) Vasogen and the Company shall be in
material compliance with and shall not be in breach of any material provision or
covenant, and shall not have breached, as of the Closing Date, any
representation or warranty contained in any Transaction Document; and (ix) at
the applicable date of determination, Vasogen is not Insolvent (as defined in
the Securities Purchase Agreement).
(q) "Equity Conditions Failure" means that during any period commencing
with (i) the delivery of the Company Installment Notice through the applicable
Installment Date or Installment Settlement Date, as applicable, or (ii) the
delivery of the Maturity Election Notice through the Maturity Settlement Date,
the Equity Conditions have not been satisfied (or waived in writing by the
Holder).
(r) "Exchange Cap Limitation Shares" means (i) with respect to any
conversion required pursuant to a Conversion Notice, a number of Common Shares
equal to the quotient of the Conversion Amount set forth in such Conversion
Notice divided by the Conversion Price and (ii) with respect to any Company
Conversion, Mandatory Conversion or LC Conversion, a number of Common Shares
equal to the quotient of the Conversion Amount subject to conversion divided by
the applicable Unadjusted Company Conversion Price or the applicable Unadjusted
Mandatory Conversion Price.
-37-
(s) "Excluded Securities" means any Common Shares issued or issuable:
(i) in connection with any Approved Share Plan; (ii) upon conversion of the
Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering which generates gross proceeds to the
Company of at least $50,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with any strategic acquisition or strategic transaction, including a
licensing partnership, development or marketing agreement, whether through an
acquisition of shares or a merger of any business, assets or technologies, the
primary purpose of which is not to raise equity capital; and (v) upon conversion
of any Options or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date and have been disclosed in Schedule
3(r) to the Securities Purchase Agreement, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date.
(t) "FDA Approval" means the pre-market approval granted by the U.S.
Food and Drug Administration for the marketing of Celacade for use in treatment
of chronic heart failure.
(u) "Fiscal Quarter" means each of the fiscal quarters adopted by the
Company for financial reporting purposes that correspond to the Company's fiscal
year that ends on November 30, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(v) "Fundamental Transaction" means that the Company shall no longer be
a wholly-owned subsidiary of Vasogen or that the Company or Vasogen shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company or Vasogen, as applicable, is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
Vasogen or Vasogen and its Subsidiaries to another Person other than in
connection with a strategic transaction involving a licensing of intellectual
property and related assets of the Company or Vasogen or relating to a
partnership arrangement with respect to any such intellectual property and
related assets, in each case where such licensing or partnership arrangements
contain terms and conditions that are customary in Vasogen's industry for such
type of transactions and where the board of directors of Vasogen determines, in
good faith, that Vasogen shall retain a material financial participation in the
exploitation of such intellectual property and related assets, or (iii) be
subject to an offer from another Person or group of related Persons (as defined
in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or
(iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other
Person or group acquires more than the 50% of the outstanding Voting Shares (not
including any Voting Shares held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such share purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify the Common Shares.
-38-
(w) "GAAP" means Canadian generally accepted accounting principles,
consistently applied, as in effect on the Issuance Date.
(x) "Holder Pro Rata Amount" means a fraction (i) the numerator of
which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Purchase Agreements on the Closing Date.
(y) "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables and related accrued liabilities
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. References to Indebtedness of the Company or Vasogen shall
mean Indebtedness on a consolidated basis.
(z) "Initial Company Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the fourth (4th) Trading Day immediately
prior to the Installment Date (such period, the "Initial Company Measuring
Period"); provided, however, that if such arithmetic average of the Weighted
Average Price during the Initial Company Measuring Period shall yield a price
that is less than $1.00, then the Initial Company Conversion Price shall be
computed as 90% of the arithmetic average of the Weighted Average Price of the
Common Shares during the Initial Company Measuring Period (the "Unadjusted
Initial Company Conversion Price"). Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap, the Company is unable
to issue Common Shares on an Installment Date using the Initial Company
Conversion Price as calculated pursuant to the foregoing sentence to determine
the number of Common Shares to be issued to the Holder as payment of any Company
Conversion Amount on any Installment Date, then the Initial Company Conversion
Price shall be the price equal to the
-39-
arithmetic average of the Weighted Average Price of the Common Shares during
each of the five (5) consecutive Trading Days ending on the fourth (4th) Trading
Day immediately prior to the applicable Installment Date.
(aa) "Initial Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) consecutive Trading Days ending
on the third (3rd) Trading Day immediately prior to the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the
applicable Mandatory Redemption/Conversion Date or LC Redemption/Conversion Date
using the Initial Mandatory Conversion Price as calculated pursuant to the
foregoing sentence, then the Initial Mandatory Conversion Price shall be the
price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Mandatory Redemption/Conversion
Date or LC Redemption/Conversion Date.
(bb) "Initial Maturity Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately prior to the
Maturity Date (such period, the "Initial Maturity Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Initial Maturity Measuring Period shall yield a price that is less than
$1.00, then the Initial Maturity Conversion Price shall be computed as 90% of
the arithmetic average of the Weighted Average Price of the Common Shares during
the Initial Maturity Measuring Period. Notwithstanding the foregoing, in the
event that as a result of the application of the Exchange Cap the Company is
unable to issue Common Shares on the Maturity Date using the Initial Maturity
Conversion Price as calculated pursuant to the foregoing sentence, then the
Maturity Conversion Price shall be the price equal to the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
Maturity Date.
(cc) "Installment Amount" means, as to the initial Installment Date
(and, unless otherwise required herein, such amount shall be the Installment
Amount to be paid on each subsequent Installment Date), an amount equal to the
lesser of (i) (A) the quotient of (x) the aggregate outstanding Principal of
this Note divided by (y) the number of whole months from such Installment Date
through the Maturity Date and (ii) the Principal amount outstanding under the
Note, in each case, plus any accrued and unpaid interest on such amount, as any
such Installment Amount may be reduced pursuant to the terms of this Note,
whether upon conversion, redemption or otherwise; provided that, for any
scheduled Installment Date following the date on which the Maturity Date is
extended to October 7, 2010, the Installment Amount shall be recalculated
pursuant to the formula in clause (i) using such new Maturity Date and such
amount shall be the Installment Amount to be paid on such Installment Date and
on each subsequent Installment Date. For any Installment Date on which an
Accelerated Amount is
-40-
to be paid, such Accelerated Amount shall be added to, and considered part of,
the applicable Installment Amount.
(dd) "Installment Balance Conversion Shares" means, for any Installment
Date, a number of Common Shares equal to (i) the Post-Installment Conversion
Shares for such date minus (ii) the amount of any Pre-Installment Conversion
Shares delivered on such date; provided that in the event that the amount of
Pre-Installment Conversion Shares exceeds the Post-Installment Conversion Shares
for such date (such excess, the "Installment Conversion Shares Excess"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Installment Conversion Share Excess and (y) the Company Conversion Price and the
Installment Balance Conversion Shares shall equal zero (0).
(ee) "Installment Date" means, initially, the first (1st) day of the
calendar month following the month during which the Canadian Prospectus has
become effective and, thereafter, the first (1st) day of each calendar month
prior to the Maturity Date.
(ff) "Interest Principal Amount" means, for any date of determination,
the amount equal to (i) the outstanding Principal of this Note on such date
minus (ii) the Letter of Credit Amount on such date.
(gg) "Letter of Credit Amount" means the Holder's Pro Rata Amount of
the amount of the letter of credit (the "Letter of Credit") issued in favor of
the LC Agent (as defined in the Securities Purchase Agreement), which amount
shall initially be $10,000,000, which amount may be reduced pursuant to Section
4(q) of the Securities Purchase Agreement.
(hh) "Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the twelve (12) consecutive Trading Days
commencing on the Trading Day immediately after the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be
(such period, the "Mandatory Conversion Measuring Period"). Notwithstanding the
foregoing, in the event that as a result of the application of the Exchange Cap
the Company is unable to issue Common Shares on the applicable Installment
Settlement Date pursuant to Section 8(c) using the Mandatory Conversion Price as
calculated pursuant to the foregoing sentence (the "Unadjusted Mandatory
Conversion Price"), then the Mandatory Conversion Price shall be the price equal
to the arithmetic average of the Weighted Average Price of the Common Shares
during each of the five (5) consecutive Trading Days ending on the Trading Day
immediately prior to the applicable Installment Settlement Date (such price, the
"Adjusted Mandatory Conversion Price").
(ii) "Maturity Balance Conversion Shares" means a number of Common
Shares equal to (i) the Post-Maturity Conversion Shares for such date minus (ii)
the amount of any Pre-Maturity Conversion Shares delivered on such date;
provided that in the event that the amount of Pre-Maturity Conversion Shares
exceeds the Post-Maturity Conversion Shares for such date (such excess, the
"Maturity Conversion Shares Excess"), then the Maturity Balance Conversion
Shares shall equal zero (0).
-41-
(jj) "Maturity Conversion Price" means that price which shall be the
lower of (i) the applicable Conversion Price and (ii) the price computed as 95%
of the arithmetic average of the Weighted Average Price of the Common Shares
during each of the twelve (12) consecutive Trading Days beginning on the Trading
Day immediately following the Maturity Date (such period, the "Maturity
Conversion Measuring Period"); provided, however, that if such arithmetic
average of the Weighted Average Price during the Maturity Conversion Measuring
Period shall yield a price that is less than $1.00, then the Maturity Conversion
Price shall be computed as 90% of the arithmetic average of the Weighted Average
Price of the Common Shares during the Maturity Conversion Measuring Period.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the Maturity
Settlement Date using the Maturity Conversion Price as calculated pursuant to
the foregoing sentence, then the Maturity Conversion Price shall be the price
equal to the arithmetic average of the Weighted Average Price of the Common
Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately preceding the Maturity Settlement Date.
(kk) "Maturity Date" means October 7, 2007; provided that such date
shall be extended to October 7, 2010 in the event that the FDA Approval is
granted; provided, however, that the Maturity Date may be extended at the option
of the Holder (i) in the event that, and for so long as, an Event of Default
shall have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice is delivered prior to the
Maturity Date; provided, further, that such date shall be shortened by the
number of months equal to the quotient of (A) any Accelerated Amount (less the
amount of any accrued and unpaid interest included in such amount) paid on any
Installment Date hereunder divided by (B) the applicable Installment Amount paid
on the Installment Date related to such Accelerated Amount (less the amount of
any accrued and unpaid interest included in such amount and less any Accelerated
Amount that would otherwise be included therein) on the Installment Date related
to such Accelerated Amount, rounded down to the nearest whole number.
(ll) "NASDAQ" means whichever of the Nasdaq National Market or The
Nasdaq SmallCap Market on which the Common Shares are traded.
(mm) "Net Cash Balance" means, at any date, (i) an amount equal to the
aggregate amount of cash, cash equivalents (including cash collateralizing the
Letter of Credit and not including other restricted cash) and marketable
securities, consisting of corporate bonds, commercial paper and medium-term
notes, as shown or reflected in the notes to Vasogen's consolidated balance
sheet as at such date minus (ii) the unpaid principal balance of any
Indebtedness for borrowed money (excluding Indebtedness under the Notes).
(nn) "Net Cash Balance Threshold" means, for any date of determination,
an amount equal to 110% of the outstanding aggregate Principal amount of the
Notes on such date.
-42-
(oo) "Options" means any rights, warrants or options to subscribe for
or purchase Common Shares or Convertible Securities.
(pp) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security are quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(qq) "Permitted Indebtedness" means (i) Indebtedness incurred by the
Company, Vasogen or their Subsidiaries that is pari passu with, or is made
expressly subordinate in right of payment to the Indebtedness evidenced by this
Note (any such subordination to be reflected in a written agreement acceptable
to the Required Holders and approved by the Required Holders in writing) and
which Indebtedness does not provide at any time for the payment, prepayment,
repayment, redemption, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later, (ii) Indebtedness secured by Xxxxxxxxx Xxxxx, (iii)
Indebtedness to trade creditors incurred in the ordinary course of business,
(iv) intercompany Indebtedness amongst the Company, Vasogen and their respective
Subsidiaries which Indebtedness is subordinate in right of payment to the
Indebtedness evidenced by this Note and (v) Indebtedness the proceeds of which
are used to redeem, repay or otherwise retire the Notes, in whole or in part;
provided that in the event such Indebtedness is not used to redeem, repay or
retire the Notes in full, such Indebtedness shall rank junior to the Notes in
accordance with Section 16(a).
(rr) "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) Liens (A) upon or in any
equipment, inventory or other assets acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment, inventory or
other assets or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment,
inventory or other assets at the time of its acquisition, provided that the Lien
is confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, inventory or other assets.
(ss) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(tt) "Post-Installment Conversion Shares" means, for any Installment
Date, that number of Common Shares equal to the applicable Company Conversion
Amount for such Installment Date divided by the Company Conversion Price
(without taking
-43-
into account the delivery of any Pre-Installment Conversion Shares), rounded up
to the nearest whole Common Share.
(uu) "Post-Maturity Conversion Shares" means that number of Common
Shares equal to the outstanding Principal on the Maturity Date divided by the
Maturity Conversion Price (without taking into account the delivery of any
Pre-Maturity Conversion Shares), rounded up to the nearest whole Common Share.
(vv) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(ww) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Subscription Date, by and among the Company, Vasogen, Vasogen, Corp. and the
initial holders of the Other Notes.
(xx) "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, Change of Control Redemption Notices, any Company
Installment Notices (in the event a Company Redemption is elected in any such
notices), Mandatory Redemption/Conversion Notices (in the event a Mandatory
Redemption is elected in any such notices) and LC Redemption/Conversion Notices
(in the event an LC Redemption is elected in any such notice) and, each of the
foregoing, individually, a Redemption Notice.
(yy) "Redemption Premium" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.
(zz) "Redemption Prices" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, any Company Installment
Redemption Price (in the event a Company Redemption is elected with respect to
any Installment Date), Mandatory Redemption Price and LC Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(aaa) "Registration Rights Agreement" means that certain registration
rights agreement dated as of the Subscription Date by and among Vasogen and the
initial holders of the Notes relating to, among other things, the registration
of the resale of the Common Shares issuable upon conversion of the Notes and
exercise of the Warrants.
(bbb) "Required Holders" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.
(ccc) "SEC" means the United States Securities and Exchange Commission.
(ddd) "Securities Purchase Agreement" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company,
Vasogen, Vasogen, Corp. and the initial Holder of this Note pursuant to which
the Company issued this Note.
-44-
(eee) "Subscription Date" means October 7, 2005.
(fff) "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common shares or equivalent
equity security are quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person's Parent Entity.
(ggg) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(hhh) "Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment under the Note.
(iii) "TSX" means the Toronto Stock Exchange.
(jjj) "Trading Day" means any day on which the Common Shares is traded
on the Principal Markets, or, if the Principal Markets are not the principal
trading market for the Common Shares, then on the principal securities exchange
or securities market on which the Common Shares is then traded; provided that
"Trading Day" shall not include any day on which the Common Shares is scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Shares is suspended from trading during the final hour of trading on
any such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(kkk) "Voting Shares" of a Person means capital shares of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(lll) "Warrants" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
(mmm) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security on another Principal Market for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as such Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg, or, if the foregoing does not apply, the dollar volume-weighted
-45-
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such other time as such market publicly announces is the official close of
trading) as reported by Bloomberg, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
(33) VASOGEN'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of Vasogen to issue Common
Shares to the Holder's account with DTC so long as Vasogen has sent a copy of
such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), Vasogen shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
(34) DISCLOSURE. Upon receipt or delivery by the Company or Vasogen of any
notice in accordance with the terms of this Note, unless Vasogen has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to Vasogen or its Subsidiaries, Vasogen
shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 6-K or
otherwise and through analogous legal disclosure in accordance with Canadian
securities laws. In the event that Xxxxxxx believes that a notice contains
material, nonpublic information, relating to Vasogen or its Subsidiaries,
Vasogen shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to Vasogen or its Subsidiaries.
[Signature Page Follows]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the Issuance Date set out above.
SIGNED, SEALED AND DELIVERED BY
XXXXX XXXXXXX AS A DEED FOR AND
ON BEHALF OF VASOGEN IRELAND
LIMITED PURSUANT TO A POWER OF
ATTORNEY
----------------------------------------
Signature of Witness:
-------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
Occupation:
-----------------------------------
ACKNOWLEDGED AND AGREED:
VASOGEN INC.
By:
------------------------------------------
Name:
Title:
Address:
Exhibit 6c
Senior Convertible Note - Castlerigg Master Investments Ltd.
(exhibits and schedules attached to Kings Road Investments Ltd.
Senior Convertible Note omitted)
(see attached)
SENIOR CONVERTIBLE NOTE
THE COMPANY HAS NOT OFFERED OR SOLD, AND WILL NOT OFFER OR SELL, THIS NOTE IN
IRELAND IN CIRCUMSTANCES THAT WOULD CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF IRISH PROSPECTUS LAW (AS DEFINED IN THE INVESTMENT FUNDS, COMPANIES
AND MISCELLANEOUS PROVISIONS ACT, 2005) OR AN INVITATION TO THE PUBLIC (AS
REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO SUBSCRIBE FOR THIS NOTE
AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CONSTITUTING AN OFFER OF THIS
NOTE TO THE PUBLIC WITHIN THE MEANING OF IRISH PROSPECTUS LAW OR AN "INVITATION
TO THE PUBLIC" (AS REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO
SUBSCRIBE FOR THIS NOTE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN THE UNITED STATES OR TO
ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT) (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION THE HOLDER OF (A) THE
SECURITIES REPRESENTED HEREBY WILL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE
RESIDENTS OF CANADA BEFORE THE LATER OF: (I) FEBRUARY 8, 2006 AND (II) FOUR
MONTHS AND A DAY AFTER THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY OF CANADA; AND (B) THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF SHALL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA
BEFORE FEBRUARY 8, 2006.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.
VASOGEN IRELAND LIMITED
SENIOR CONVERTIBLE NOTE
Issuance Date: October 7, 2005 Principal: U.S. $8,000,000
Note Certificate Number A-3
FOR VALUE RECEIVED, Vasogen Ireland Limited, a company incorporated under
the laws of the Republic of Ireland (the "Company"), hereby promises to pay to
CASTLERIGG MASTER INVESTMENTS LTD. or registered assigns ("Holder") the amount
set out above as the Principal (as reduced pursuant to the terms hereof pursuant
to redemption, conversion or otherwise, the "Principal") when due, whether upon
the Maturity Date, on any Installment Date with respect to the Installment
Amount due on such Installment Date (each, as defined herein), acceleration,
redemption or otherwise (in each case in accordance with the terms hereof) and
to pay interest ("Interest") on any outstanding Interest Principal Amount at the
rate of 6.45% per annum (the "Interest Rate"), from the date set out above as
the Issuance Date (the "Issuance Date") until the same becomes due and payable,
whether upon an Interest Date (as defined below), any Installment Date, the
Maturity Date, acceleration, conversion, redemption or otherwise (in each case,
in accordance with the terms hereof). This Senior Convertible Note (including
all Senior Convertible Notes issued in exchange, transfer or replacement hereof,
this "Note") is one of an issue of Senior Convertible Notes issued pursuant to
the Purchase Agreements on the Closing Date (collectively, the "Notes" and such
other Senior Convertible Notes, the "Other Notes"). Certain capitalized terms
used herein are defined in Section 32.
(1) PAYMENTS OF PRINCIPAL.
(a) On each Installment Date the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date in
accordance with Section 8. On the Maturity Date, the Holder shall surrender the
Note to the Company and the Company shall pay to the Holder, (i) an amount in
Common Shares, or, at the option of the Company, in cash, representing all
outstanding Principal and (ii) an amount in cash equal to the accrued and unpaid
Interest thereon; provided that Principal shall be payable in Common Shares on
the Maturity Date if, and only if, there has been no Equity Conditions Failure.
On or prior to the eighth (8th) Trading Day prior to the Maturity Date (the
"Maturity Election Notice Due Date"), the Company shall deliver a written notice
to the Holder (x) specifying whether the Principal shall be paid on the Maturity
Date in Common Shares or cash and (y) if the Principal is to be paid in Common
Shares, certifying that there has been no Equity Conditions Failure. Principal
to be paid on the Maturity Date and on the Maturity Settlement Date (as defined
below) in Common Shares shall be paid in a number of fully paid and
nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) Common Shares.
(b) If the Company shall pay the Principal on the Maturity Date in
Common Shares, then on the Maturity Date (i) (A) provided that Xxxxxxx's
transfer agent (the "Transfer Agent") is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, the Company shall
direct Vasogen to, and upon such direction
-2-
Vasogen shall or shall cause the Transfer Agent to, credit a number of Common
Shares equal to the quotient of the outstanding Principal due on such date
divided by the Initial Maturity Conversion Price (the "Pre-Maturity Conversion
Shares") to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system,
or (B) if the foregoing shall not apply, Vasogen shall issue and deliver, to the
address set forth in the register maintained by Vasogen for such purpose
pursuant to the Securities Purchase Agreement or to such address as specified by
the Holder in writing to Vasogen at least three (3) Trading Days prior to the
Maturity Date, a certificate, registered in the name of the Holder or its
designee, for the number of Pre-Maturity Conversion Shares to which the Holder
shall be entitled and (ii) the Company shall pay to the Holder, in cash by wire
transfer of immediately available funds, the amount of any accrued and unpaid
interest on such Principal. On the third (3rd) Trading Day immediately after the
end of the Maturity Conversion Measuring Period (the "Maturity Settlement
Date"), the Company shall direct Vasogen to, and upon such direction Vasogen
shall or shall cause the Transfer Agent to, deliver to the Holder's account with
DTC a number of additional Common Shares, if any, equal to the Maturity Balance
Conversion Shares. If an Event of Default or Equity Conditions Failure occurs
during the Maturity Conversion Measuring Period, then, at the Holder's option,
either (x) the Holder may require the Company to pay the Principal amount of the
Note outstanding on the Maturity Date (including any Principal amount
represented by Pre-Maturity Conversion Shares that shall be returned to the
Company and which Principal amount shall be reduced to the extent any such
Common Shares are not returned to the Company) in cash on the Maturity
Settlement Date and, in conjunction with receipt of such cash payment, shall
return any Pre-Maturity Conversion Shares delivered to the Holder which the
Holder has not otherwise sold, transferred or disposed of or (y) the Company
shall pay to the Holder in cash on the Maturity Settlement Date an amount equal
to the difference between (1) the Principal outstanding on the Maturity Date
minus (2) the product of (A) the Principal outstanding on the Maturity Date
multiplied by (B) the Conversion Share Ratio and, notwithstanding Section 14(a),
in the case of this clause (y), such amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Maturity Conversion
Measuring Period.
(c) No prepayment of Principal shall be permitted except as expressly
provided herein.
(2) INTEREST; INTEREST RATE. Interest on the applicable Interest Principal
Amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 360-day year comprised of twelve 30-day months and
shall be payable on each Installment Date and on the Maturity Date (each an
"Interest Date"). Interest shall be payable on each Interest Date in cash. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate. Upon the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to twelve percent
(12.0%) (the "Default Rate"). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the Interest as
calculated at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default. Interest on overdue interest shall accrue at the same
rate compounded quarterly.
-3-
(3) CONVERSION OF NOTES. This Note shall be convertible into common shares
of Vasogen Inc. ("Vasogen"), without par value (the "Common Shares"), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d)(i), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable Common Shares in accordance with
Section 3(c), at the Conversion Rate (as defined below). Vasogen shall not issue
any fraction of a Common Share upon any conversion. If the issuance would result
in the issuance of a fraction of a Common Share, Vasogen shall round such
fraction of a Common Share up to the nearest whole share.
(b) Conversion Rate. The number of Common Shares issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (such number
of shares, the "Conversion Rate").
(i) "Conversion Amount" means the portion of the Principal to be
converted, amortized, redeemed or otherwise with respect to which this
determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination a price equal to $3.00, subject to
adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into
Common Shares on any date, the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time and
transmit by e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement, on the third (3rd) Trading Day prior to
such date (a "Conversion Date"), a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to Vasogen and
with a copy to the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the Company as soon as practicable
on or following such date (or an indemnification undertaking with respect to
this Note in the case of its loss, theft or destruction). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, Vasogen
and the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3rd) Trading Day following the date of receipt of a Conversion Notice (the
"Share Delivery Date"), (1) (x) provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, credit such aggregate number of Common Shares to which
the Holder shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system or (y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, Vasogen shall issue
-4-
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of Common
Shares to which the Holder shall be entitled and (2) the Company shall pay to
the Holder in cash an amount equal to the accrued and unpaid Interest up to and
including the Conversion Date on the Conversion Amount. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than five (5) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the Common Shares issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such Common Shares on the Conversion Date. In the event of a
partial conversion of this Note pursuant hereto, the principal amount converted
shall be deducted from the Installment Amounts relating to the Installment Dates
as set forth in the Conversion Notice.
(ii) Failure to Timely Convert. If Vasogen shall fail to issue a
certificate to the Holder or credit the Holder's balance account with DTC for
the number of Common Shares to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the Share Delivery Date (a "Conversion
Failure"), then (A) the Company shall pay damages to the Holder for each day of
such Conversion Failure in an amount equal to 1.5% of the product of (I) the
number of Common Shares not issued to the Holder on or prior to the Share
Delivery Date and to which the Holder is entitled, and (II) the Weighted Average
Price of the Common Shares on the Share Delivery Date or (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, where the
Holder has chosen not to void its Conversion Notice, if on or prior to the Share
Delivery Date, Vasogen shall fail to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of Common
Shares to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Shares to deliver in
satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the Common Shares so purchased
(the "Buy-In Price"), at which point Vasogen's obligation to deliver such
certificate (and to issue such Common Shares) shall terminate, or (ii) promptly
have Vasogen honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Common Shares times (B) the Weighted Average Price on the
Conversion Date. In the event that (1) the Holder has chosen to void its
Conversion Notice and (2) the Holder, prior to voiding such Conversion Notice,
purchased (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three
-5-
(3) Trading Days after the Holder's request, pay cash to the Holder in an amount
equal to the excess (if any) of (x) the Buy-In Price over the (y) the aggregate
consideration received by the Holder in the sale of such Common Shares.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event that the Company
and Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and Vasogen can convert some, but not all, of such
portions of the Notes submitted for conversion, subject to Section 3(d), the
Company shall direct Vasogen to, and upon such direction Vasogen shall, convert
from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such
holder relative to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number of Common
Shares issuable to the Holder in connection with a conversion of this Note,
Vasogen shall issue to the Holder the number of Common Shares not in dispute and
resolve such dispute in accordance with Section 25.
(d) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates and joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (y) for
purposes of the Securities Act (Ontario), in excess of 9.99% (the "Maximum
Percentage") of the number of Common Shares outstanding immediately after giving
effect to such conversion; provided that the Company shall nevertheless be
entitled to make payments in Common Shares pursuant to Sections 8(c), 8(d), 9
and 10. For purposes of the foregoing sentence, the number of Common Shares
beneficially owned by the Holder and its affiliates and joint actors shall
include the number of Common Shares issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of Common Shares which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates or joint actors and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of Vasogen
and the Company (including, without limitation, any Other Notes or warrants),
which in each case are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. For purposes of calculating
beneficial ownership pursuant to this Section 3(d)(i), beneficial ownership
pursuant to the Exchange Act shall be calculated in
-6-
accordance with Section
13(d) of the Exchange Act, and beneficial ownership pursuant to the Securities
Act (Ontario) shall be calculated in accordance with section 101 of the
Securities Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Section 3(d)(i), in determining the number of
outstanding Common Shares, the Holder may rely on the number of outstanding
Common Shares as reflected in (x) Vasogen's most recent Form 40-F or Form 6-K,
as the case may be, (y) a more recent public announcement by Vasogen or (z) any
other notice by the Company, Vasogen or the Transfer Agent setting forth the
number of Common Shares outstanding. For any reason at any time, upon the
written or oral request of the Holder, Vasogen shall within two (2) Trading Days
confirm orally and in writing to the Holder the number of Common Shares then
outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the actual conversion or exercise of
securities of Vasogen and the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company and Vasogen, the Holder from time
to time may increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and Vasogen, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes;
provided that the Company shall nevertheless be entitled to make payments in
Common Shares pursuant to Sections 8(c), 8(d), 9 and 10 without regard to the
Maximum Percentage as adjusted.
(ii) Principal Market Regulation. Vasogen shall not be obligated to
issue any Common Shares upon conversion, amortization or redemption of this
Note, and the Holder of this Note shall not have the right to receive upon
conversion, amortization or redemption of this Note any Common Shares (and only
such Common Shares), if the issuance of such Common Shares would exceed the
aggregate number of Common Shares which Vasogen may issue upon conversion,
amortization or redemption, or exercise, as applicable, of the Notes and
Warrants without breaching Vasogen's obligations under the rules or regulations
of the Principal Market (the "Exchange Cap"), except that such limitation shall
not apply in the event that the Company or Vasogen (A) obtains the approval of
the Principal Market (in the case of the TSX) or Vasogen's shareholders as
required by the applicable rules of the Principal Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the Purchase
Agreements (the "Purchasers") shall be issued in the aggregate, upon conversion
or exercise, as applicable, of Notes or Warrants, Common Shares in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the principal amount of Notes issued to such Purchaser
pursuant to the applicable Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Purchase Agreements on the Closing Date (with
respect to each Purchaser, the "Exchange Cap Allocation"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Notes, the
transferee shall be allocated a pro rata portion of such Purchaser's Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap
-7-
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of Common Shares actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. For purposes of clarification, with respect
to any Exchange Cap relating to the TSX, no holder of Notes shall be issued in
the aggregate upon conversion (including pursuant to any Company Conversion,
Mandatory Conversion or LC Conversion) of the Notes or exercise of the Warrants
or upon payment of Principal on the Notes on the Maturity Date, any Common
Shares at a discount to the market price (as defined for purposes of the TSX) at
the time of issuance of such shares in excess of such holder's Exchange Cap
Allocation.
(e) Payment in Lieu of Conversion Above Exchange Cap Limitation. If at
any time while this Note is outstanding, the Holder delivers a Conversion
Notice, and as a result of the application of an Exchange Cap, Vasogen is unable
to issue any Common Shares upon such conversion at the applicable Conversion
Price, then the Company shall (i) direct Vasogen to, and upon such direction
Vasogen shall, deliver to the Holder on the Conversion Date a number of Common
Shares equal to the quotient of the Conversion Amount stated in such Conversion
Notice divided by the Adjusted Conversion Price (the "Adjusted Conversion
Shares") and (ii) pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (A) the number of Exchange Cap Limitation Shares in connection with
such conversion multiplied by (B) the excess (if any) of (1) such Adjusted
Conversion Price over (2) the Conversion Price (the "Conversion Make-Whole").
Notwithstanding the foregoing, in the event that the Company is prohibited,
pursuant to the rules and regulations of any applicable Principal Market, to
honor the Holder's Conversion Notice by both the delivery of the Adjusted
Conversion Shares and the payment of the Conversion Make-Whole in cash, then the
Company shall pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (x) the number of Exchange Cap Limitation Shares and (y) the Adjusted
Conversion Price (the "Exchange Cap Redemption Payment"). If the Company shall
fail to deliver to the Holder the Adjusted Conversion Shares and pay the
Conversion Make-Whole or to pay to the Holder the Exchange Cap Redemption
Payment, as applicable, on or prior to the date such delivery and/or payment is
due, the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice or for which the Holder has not received the Adjusted Conversion Shares
and the Conversion Make-Whole or the Exchange Cap Redemption Payment, as
applicable.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"Event of Default":
(i) the failure of (A) any Common Shares issued or issuable upon
conversion, as part of any Installment Amount or as part of any Accelerated
Amount to be freely tradable under Canadian law on the TSX (subject to any
restrictions on disposition by the holder of a control block) on or after
February 8, 2006, or, thereafter, the Common Shares of any holder of Notes shall
cease to be freely tradable under Canadian law on the TSX and such lapse
-8-
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period or (B) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the applicable Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order by the SEC) or is unavailable to any holder of the Notes for sale of all
of such holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of twenty (20)
consecutive days or for more than an aggregate of forty (40) days in any 365-day
period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the suspension from trading on all of the Eligible Markets on
which the Common Shares are listed or failure of the Common Shares to be listed
on at least one Eligible Market for a period of ten (10) consecutive Trading
Days or for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(iii) Vasogen's (A) failure to cure a Conversion Failure by delivery
of the required number of Common Shares within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at
any time, of its intention not to comply with a request for conversion of any
Notes into Common Shares that is tendered in accordance with the provisions of
the Notes;
(iv) at any time following the tenth (10th) consecutive Trading Day
that the number of Common Shares that are authorized for issuance to the Holder
is less than the number of Common Shares that the Holder would be entitled to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);
(v) the Company's failure (or Vasogen's failure if any such amounts
are due in Common Shares) to pay to the Holder any amount of Principal
(including, without limitation, the Company's failure to pay any redemption or
make-whole payments), Interest or other amounts when and as due under this Note
or any other Transaction Document (as defined in the Securities Purchase
Agreement), except, in the case of a failure to pay Interest or other amounts
due under the Transaction Documents (other than Principal) when and as due, in
which case only if such failure continues for a period of at least three (3)
Trading Days;
(vi) the occurrence of (A) any material default under any
Indebtedness of Vasogen or any of its Subsidiaries (as defined in Section 3(a)
of the Securities Purchase Agreement) in an aggregate principal amount of
$5,000,000 or greater or (B) any redemption of or acceleration prior to maturity
of Indebtedness of Vasogen or any of its Subsidiaries in an aggregate principal
amount of $5,000,000 or greater, in each case of (A) or (B) other than with
respect to any Other Notes;
-9-
(vii) Vasogen or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the
Companies Creditors Arrangement Act (Canada) or any similar Federal, foreign or
state law for the relief of debtors (collectively, "Bankruptcy Law"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator
or similar official (a "Custodian"), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to
pay its debts as they become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against Vasogen or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of Vasogen or any
of its Subsidiaries or (C) orders the liquidation of Vasogen or any of its
Subsidiaries;
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against Vasogen or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $5,000,000 amount set
forth above so long as Vasogen provides the Holder a copy of its policy with
such insurer or indemnity provider where such judgment is clearly covered by
insurance or an indemnity and Vasogen will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;
(x) other than as set forth in item (xi) below, the Company, Vasogen
or any Guarantor breaches in any material respect any representation, warranty,
covenant or other term or condition of any Transaction Document, except, (A) in
the case of a breach of a representation and warranty, such representation and
warranty need only have been true and correct as of the Closing Date, and (B) in
the case of breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) consecutive Trading Days following the
earlier of (A) the day on which the Company, Vasogen or such Guarantor becomes,
or should have become, aware of such breach and (B) the day on which the Company
or Vasogen receives written notice of such breach from the Holder or any holder
of Other Notes;
(xi) any breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note (including any failure to maintain the Net Cash
Balance as required by Section 16(e)), except, in the case of a breach or
failure to comply with Sections 16(b), (c) or (d), there shall be a one (1) time
opportunity to cure a single breach or failure under one of such sections within
three (3) Business Days after the date the Company knows or should have known of
such breach or failure provided that such cure period does not exceed, in the
aggregate, six (6) Business Days from the date of the occurrence of any such
breach or failure;
(xii) (A) any Guarantee at any time for any reason shall cease to be
in full force and effect or shall cease to be enforceable in respect of its
material terms or (B) any Guarantor shall assert that its Guarantee is invalid
or unenforceable; or
-10-
(xiii) any Event of Default (as defined in the Other Notes) occurs
with respect to any Other Notes.
(b) Redemption Right. Promptly after the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of
an Event of Default Notice and the Holder becoming aware of an Event of Default,
the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice
and (B) the Weighted Average Price of the Common Shares on the date immediately
preceding such Event of Default (the "Event of Default Redemption Price").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 14. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the Event of Default Redemption Notice.
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. Neither the Company nor Vasogen shall enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company and Vasogen, as applicable, under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the Interest Rates of the Notes held by such holder,
having similar conversion rights as the Notes (specifying, without limitation,
that such security is convertible into common shares of the Successor Entity)
and having similar ranking to the Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common shares are quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the "Company" and "Vasogen", as applicable, shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and Vasogen and shall assume all of the obligations of the Company and
Vasogen under this Note with the same effect as if such Successor Entity had
been named as the Company or Vasogen, as the case maybe, herein. Upon
consummation of the Fundamental Transaction, the Successor Entity (if other than
the Company) shall deliver to the Holder confirmation that there shall be issued
upon conversion or redemption
-11-
of this Note at any time after the consummation of the Fundamental Transaction,
in lieu of the Common Shares (or other securities, cash, assets or other
property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Note; provided, however, that in the event that, pursuant to the terms
of the Fundamental Transaction, the holders of Common Shares may elect the
consideration to be received in exchange for the Common Shares in the such
Fundamental Transaction, the Holder shall elect, within the same time periods as
provided to the holders of Common Shares, the kind or amount of such shares,
securities, cash, assets or any other property (including warrants or other
purchase or subscription rights) that the Holder will, following the
consummation of such transaction, be entitled to receive upon conversion or
redemption; provided, further, however, that no such election by the Holder
shall be construed to require the conversion or redemption of this Note in
connection with such Fundamental Transaction. If the Holder is required to make
any election of the kind described in the foregoing sentence, the Company or
Vasogen, as applicable, shall deliver to the Holder all documentation,
informational materials and election forms relating to such Fundamental
Transaction contemporaneously with the delivery of such documentation, materials
and forms to the holders of the Common Shares. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Note.
(b) Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period (the "Change of
Control Period") beginning after the Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control
Redemption Notice shall indicate (i) the Conversion Amount the Holder is
electing to redeem and (ii) whether the Holder is requiring the Company to pay
the Change of Control Redemption Price in cash or by delivery of Common Shares.
The portion of this Note subject to redemption pursuant to this Section 5 shall
be redeemed by the Company in cash at a price equal to the greater of (x) 115%
of the sum of (1) the Conversion Amount being redeemed and (2) the amount of any
accrued but unpaid Interest thereon through the date of such redemption payment
and (y) the sum of (A) the product of (1) the aggregate cash consideration and
the aggregate cash value of any non-cash consideration per Common Share to be
paid to the holders of the Common Shares upon consummation of the Change of
Control and (2) the quotient determined by dividing (I) the Conversion Amount
being redeemed by (II) the Conversion Price plus (B) the amount of any accrued
but unpaid Interest on the Conversion Amount being redeemed through the date of
such redemption payment (the "Change of Control Redemption Price"). In the event
the Holder has elected to receive the Change of Control Redemption Price in
Common Shares, Vasogen shall deliver, within three (3) Trading Days of receipt
of the Holder's Change of Control Redemption Notice, to the Holder's account
with DTC on the Change of Control Redemption Date (as defined in Section 14) a
-12-
number of Common Shares equal to the quotient of (aa) the applicable Change of
Control Redemption Price divided by (bb) the Change of Control Conversion Price,
rounded to the nearest whole Common Share; provided that if the Change of
Control Redemption Date would fall on a date that is after the consummation of
the applicable Change of Control, then Vasogen shall not deliver Common Shares
to the Holder but rather the Company shall pay the Change of Control Redemption
Price to the Holder in cash. Redemptions made in cash as required by this
Section 5 shall be made in accordance with the provisions of Section 14 and
shall have priority to payments to shareholders in connection with a Change of
Control. Notwithstanding anything to the contrary in this Section 5, until the
Change of Control Redemption Price (together with any interest thereon) is paid
in full, the Conversion Amount submitted for redemption under this Section 5(c)
may be converted, in whole or in part, by the Holder into Common Shares, or in
the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Common Shares pursuant to Section 3.
(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS. If at any time Vasogen
grants, issues or sells any Options, Convertible Securities or rights to
purchase shares, warrants, securities or other property pro rata to all record
holders of any class of Common Shares (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
and upon the Holder's election, the aggregate Purchase Rights, in lieu of any
adjustments to which the Holder is otherwise entitled under Section 7 below in
respect of each Purchase Right, which the Holder could have acquired if the
Holder had held the number of Common Shares acquirable upon complete conversion
of this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Subscription Date, Vasogen issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any Common
Shares (including the issuance or sale of Common Shares owned or held by or for
the account of Vasogen, but excluding Common Shares deemed to have been issued
or sold by Vasogen in connection with any Excluded Security) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price
in effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of Common Shares Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by Vasogen upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of Common Shares Deemed
-13-
Outstanding immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section 7(a), the following
shall be applicable:
(i) Issuance of Options. If Vasogen in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by Vasogen at the time of the
granting or sale of such Option for such price per share; provided, however,
that notwithstanding the foregoing, with respect to any Options that are
Variable Price Securities (as defined below), the Conversion Price hereunder
shall only be adjusted pursuant to this Section 7(a) at such time as Vasogen
issues Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that is less
than the Applicable Price and any such adjustment shall be based on such
Variable Price and not on the lowest price per share for which one Common Share
would be issuable under the terms of such Variable Price Securities. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by Vasogen with respect to any one Common Share
upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company or Vasogen
in any manner issues or sells any Convertible Securities and the lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by the
Company or Vasogen, as the case may be, at the time of the issuance or sale of
such Convertible Securities for such price per share; provided, however, that
notwithstanding the foregoing, with respect to any Convertible Securities that
are Variable Price Securities, the Conversion Price hereunder shall only be
adjusted pursuant to this Section 7(a) at such time as Vasogen issues Common
Shares to a holder of such Variable Price Securities and such Common Shares are
issued at a Variable Price (as defined below) that is less than the Applicable
Price and any such adjustment shall be based on such Variable Price and not on
the lowest price per share for which one Common Share would be issuable under
the terms of such Variable Price Securities. For the purposes of this Section
7(a)(ii), the "lowest price per share for which one Common Share is issuable
upon such conversion or exchange or exercise" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by Vasogen with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Shares upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other
-14-
provisions of this Section 7(a), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be re-adjusted (but
to no greater extent than originally adjusted) to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of Vasogen,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by Vasogen therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by Vasogen in connection therewith. If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Vasogen will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by Vasogen will be the Weighted Average Price of such securities on the
date of receipt. If any Common Shares, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Vasogen is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Shares,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 7(d), if Xxxxxxx takes a record
of the holders of Common Shares for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Shares, Options or in
Convertible Securities
-15-
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If Vasogen at any time on or after the Subscription Date
subdivides (by any share split, share dividend, recapitalization or otherwise)
one or more classes of its outstanding Common Shares into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If Vasogen at any time on or after the
Subscription Date combines (by combination, reverse share split or otherwise)
one or more classes of its outstanding Common Shares into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment made pursuant to this Section
7(b) shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then Xxxxxxx's Board
of Directors will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(d) Abandoned Dividends or Distributions. If Vasogen shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Price shall be required by reason of the taking of such record.
(e) Xxxxxx's Right of Alternative Conversion Price Following Issuance
of Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 7, if Vasogen in any manner issues or sells any Options or Convertible
Securities (any such securities, "Variable Price Securities") after the
Subscription Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), Vasogen or the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(k) of the Securities Purchase Agreement, from and after the date Vasogen
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by it by designating in the Conversion Notice delivered upon any conversion
of this Note that
-16-
solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder's election to
rely on a Variable Price for a particular conversion of this Note shall not
obligate the Holder to rely on a Variable Price for any future conversions of
this Note.
(8) COMPANY INSTALLMENT CONVERSION OR REDEMPTION.
(a) General. Subject to and in accordance with the terms of this
Section 8, on each applicable Installment Date, the Company shall pay to the
Holder of this Note the Installment Amount as of such Installment Date by the
combination of any of the following, (i) provided that there has been no Equity
Conditions Failure, requiring the conversion of all or any portion of the
applicable Installment Amount, in accordance with this Section 8 (a "Company
Conversion"), and/or (ii) redeeming for cash all or any portion of the
applicable Installment Amount in accordance with this Section 8 (a "Company
Redemption"); provided that all of the outstanding applicable Installment Amount
as of each such Installment Date must be converted or redeemed by the Company on
the applicable Installment Date, subject to the provisions of this Section 8.
Unless the Company Installment Notice (as defined below) indicates otherwise or
if there is an Equity Conditions Failure, the entire Installment Amount to be
paid on such Installment Date shall be paid through a Company Conversion. On or
prior to the date which is the eighth (8th) Trading Day prior to each
Installment Date (each, an "Installment Notice Due Date"), the Company shall
deliver written notice (each, a "Company Installment Notice"), to the Holder
which Company Installment Notice shall state (i) the portion, if any, of the
applicable Installment Amount to be converted pursuant to a Company Conversion
(the "Company Conversion Amount"), (ii) the portion, if any, of the applicable
Installment Amount which the Company elects to redeem pursuant to a Company
Redemption (the "Company Redemption Amount") and (iii) unless the Company has
elected to pay the applicable Installment Amount entirely through a Company
Redemption, the Company Installment Notice shall certify that the Equity
Conditions have been satisfied as of the date of the Company Installment Notice.
Each Company Installment Notice whether actually given or deemed given shall be
irrevocable. Except as expressly provided in this Section 8(a), the Company
shall redeem and convert the applicable Installment Amount of this Note pursuant
to this Section 8 and the corresponding Installment Amounts of the Other Notes
pursuant to the corresponding provisions of the Other Notes in the same ratio of
the Installment Amount being redeemed and converted hereunder. The Company
Redemption Amount (whether set forth in the Company Installment Notice or by
operation of this Section 8) shall be redeemed in accordance with Section 8(b)
and the Company Conversion Amount shall be converted in accordance with Section
8(c).
(b) Mechanics of Company Redemption. If the Company elects, or is
deemed to have elected, a Company Redemption in accordance with Section 8(a),
then the Company Redemption Amount, if any, which is to be paid to the Holder on
the applicable Installment Date shall be redeemed by the Company on such
Installment Date upon payment by the Company to the Holder on such Installment
Date, by wire transfer of immediately available funds, an amount in cash (the
"Company Installment Redemption Price") equal to 100% of the Company Redemption
Amount. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any
-17-
such designation, a "Conversion Notice" for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price. Conversions required by this Section
8(b) shall be made in accordance with the provisions of Section 3(c).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any
interest thereon) is paid in full, the Company Redemption Amount (together with
any interest thereon) may be converted, in whole or in part, by the Holder into
Common Shares pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable
Installment Date as set forth in the immediately preceding sentence, the Company
Redemption Amount so converted shall be deducted from the Installment Amounts
relating to the Installment Dates as set forth in the applicable Conversion
Notice.
(c) Mechanics of Company Conversion.
(i) If the Company pays any part of an Installment Amount pursuant
to a Company Conversion in accordance with Section 8(a), then on the third (3rd)
Trading Day immediately preceding the Installment Date the Company shall (i)
direct Vasogen to, and upon such direction Vasogen shall or shall cause the
Transfer Agent to, issue to the Holder, for delivery on or prior to the
Installment Date, to the Holder's account with DTC a number of Common Shares
equal to the quotient of (x) such Company Conversion Amount (minus accrued and
unpaid Interest included in such amount) divided by (y) the Initial Company
Conversion Price (the "Pre-Installment Conversion Shares"), rounded to the
nearest whole Common Share and (ii) pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any accrued and unpaid Interest
included in such Company Conversion Amount. On the third (3rd) Trading Day
immediately after the end of the Company Conversion Measuring Period (the
"Installment Settlement Date"), the Company shall direct Vasogen to, and upon
such direction Vasogen shall or shall cause the Transfer Agent to, deliver to
the Holder's account with DTC a number of additional Conversion Shares, if any,
equal to the Installment Balance Conversion Shares. If an Event of Default
occurs during any applicable Company Conversion Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (A) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Company Conversion Amount represented by Pre-Installment Conversion Shares that
shall be returned to the Company and which Redemption Price shall be reduced to
the extent any such Common Shares are not returned to the Company), shall return
any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date to Vasogen which the Holder has not otherwise sold,
transferred or disposed of or (B) the Conversion Amount used to calculate the
Event of Default Redemption Price shall be reduced by the product of (1) the
Company Conversion Amount applicable to such Installment Date multiplied by (2)
the Conversion Share Ratio and, notwithstanding Section 14(a), in the case of
this clause (B), the Event of Default Redemption Price shall be paid by the
Company to the Holder within five (5) Trading Days after the end of the Company
Conversion Measuring Period.
(ii) Subject to the provisions of the following sentence, if there
is an Equity Conditions Failure, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to satisfy the
payment of the relevant
-18-
Installment Amount in one of the following ways or a combination of both: (x)
the Company shall redeem all or any part designated by the Holder of the
unconverted Company Conversion Amount (such designated amount is referred to as
the "First Redemption Amount") on such Installment Date or Installment
Settlement Date, as applicable, by paying to the Holder on such Installment Date
or Installment Settlement Date, as applicable, by wire transfer of immediately
available funds, an amount in cash equal to 125% of such First Redemption
Amount, or (y) the Company Conversion shall be null and void with respect to all
or any part designated by the Holder of the unconverted Company Conversion
Amount (other than any amount redeemed under clause (x) of this Section
8(c)(ii)) and the Holder shall be entitled to all the rights of a holder of this
Note with respect to such amount of the Company Conversion Amount; for the
avoidance of doubt, Xxxxxxx's failure to issue Common Shares with respect to any
Company Conversion Amount due to an Equity Conditions Failure shall not be
deemed an Event of Default hereunder so long as the Company otherwise complies
with the Holder's written designation in respect of the options set forth in (x)
and (y) above with respect to such Company Conversion Amount. In the event of an
Equity Conditions Failure, at the Holder's option, either (A) the Holder shall,
upon receipt of a First Redemption Amount (which amount includes redemption of
any portion of a Company Conversion Amount represented by Pre-Installment
Conversion Shares that shall be returned to the Company and which First
Redemption Amount shall be reduced to the extent any such Common Shares are not
returned to the Company), return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date to Vasogen which the Holder
has not otherwise sold, transferred or disposed of or (B) any related First
Redemption Amount shall be reduced by the product of (I) the Company Conversion
Amount applicable to such Installment Date multiplied by (II) the Conversion
Share Ratio and, notwithstanding the foregoing sentence, in the case of this
clause (B), such First Redemption Amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Company Conversion
Measuring Period. If the Company fails to redeem any First Redemption Amount on
or before the applicable Installment Date or Installment Settlement Date, as
applicable, by payment of such amount on the applicable Installment Date or
Installment Settlement Date, as applicable, then the Holder shall have the
rights set forth in Section 14(a) as if the Company failed to pay the applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xi)). Notwithstanding anything to the contrary in this Section
8(c), but subject to 3(d), until Vasogen delivers Common Shares representing the
Company Conversion Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Shares pursuant to Section 3. In the event
the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the Installment Dates as set forth in the
applicable Conversion Notice.
(iii) If, in connection with any Company Conversion, Vasogen is
unable to issue at the applicable Unadjusted Company Conversion Price all the
Common Shares that, but for the application of the Exchange Cap, Vasogen would
have been required to issue, then (A) Vasogen shall deliver to the Holder Common
Shares in accordance with Section 8(c)(i) and (B) the Company shall pay to the
Holder in cash, within ten (10) Trading Days of the applicable Installment
Settlement Date, an amount equal to the product of (1) the number of Exchange
Cap Limitation Shares applicable to such Installment Settlement Date and (2) the
-19-
excess (if any) of (x) such Adjusted Company Conversion Price over (y) the
Conversion Price (the "Company Conversion Make-Whole"). Notwithstanding the
foregoing, in connection with such Company Conversion, if the Company is
prohibited, pursuant to the rules and regulations of any applicable Principal
Market, to effect a Company Conversion by both the delivery by Vasogen to the
Holder of Common Shares and the payment by the Company of the Company Conversion
Make-Whole in cash, then (1) the Company shall pay to the Holder, in cash, on
the Installment Settlement Date, an amount (the "Exchange Cap Installment
Payment") equal to the product of (A) the number of Exchange Cap Limitation
Shares applicable to such Installment Settlement Date multiplied by (B) such
Adjusted Company Conversion Price and upon such payment the Company's and
Xxxxxxx's obligations to such Holder with respect to such Company Conversion
shall be deemed to be fully satisfied, and (2) such Holder shall return to
Vasogen on or before such Installment Settlement Date any Common Shares issued
to such Holder by Vasogen in connection with such Company Conversion; provided
that in the event that the Holder cannot return any such Common Shares to
Vasogen, the Company shall pay to the Holder, in lieu of the foregoing, an
amount in cash equal to the difference between (x) the Exchange Cap Installment
Payment and (y) the product of (I) the number of Pre-Installment Conversion
Shares issued to the Holder multiplied by (II) the applicable Unadjusted Initial
Company Conversion Price.
(d) Accelerated Amounts. The Company may, at its option (the
"Accelerated Payment Option"), (x) in the event that the Weighted Average Price
of the Common Shares on the most recently completed Trading Day prior to date
the of delivery of the Company Installment Notice exceeds $1.00, increase the
amount of the Installment Amount to be paid on the applicable Installment Date
by up to $1,600,000 plus accrued and unpaid Interest on such amount or (y) at
any one time during each of 2005, 2006 or 2007, in the event that the Weighted
Average Price of the Common Shares on the most recently completed Trading Day
prior to the date of delivery of the Company Installment Notice exceeds $4.00 on
NASDAQ, increase the applicable Installment Amount to be paid on the applicable
Installment Date by an amount equal to up to 40% of the aggregate Principal
amount (excluding the Letter of Credit Amount) of this Note then outstanding
plus accrued and unpaid Interest on such amount (any such amount described in
clauses (x) or (y) which exceeds the applicable Installment Amount, an
"Accelerated Amount"). In order for the Company to exercise any Accelerated
Payment Option, (1) the applicable Accelerated Amount shall be added to the
Installment Amount to be paid to the Holder in any Company Redemption and/or
Company Conversion on the applicable Installment Date pursuant to this Section 8
and (2) Vasogen shall issue the appropriate number of Accelerated Payment
Options Warrants on the applicable Installment Date. If the Company exercises
any such Accelerated Payment Option, the applicable Company Installment Notice
delivered to the holders of the Notes pursuant to Section 8(a) shall also state
that (1) the Company is exercising the Accelerated Payment Option and describe
the basis on which the Company is making such exercise, (2) state the aggregate
Accelerated Amount that shall be paid to the holders of all Notes on the
Installment Date and (3) state the number of Accelerated Payment Option Warrants
Vasogen anticipates issuing to the Holder on the applicable Installment Date.
Each Accelerated Amount shall be deducted from the Installment Amounts to be
paid on the last scheduled Installment Date hereunder.
(e) Pro Rata Acceleration Requirement. If the Company elects to
exercise the Accelerated Payment Option pursuant to Section 8(d), then it must
simultaneously
-20-
take the same action (and in the same proportion of the Accelerated Amount) with
respect to the Other Notes.
(9) COMPANY'S RIGHT OF MANDATORY REDEMPTION/CONVERSION.
(a) Mandatory Redemption/Conversion. If at any time from and after the
first (1st) anniversary of the Issuance Date (the "Mandatory
Redemption/Conversion Eligibility Date"), (i) the Weighted Average Price of the
Common Shares exceeds 175% of the Conversion Price then in effect for each of
twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the Mandatory Redemption/Conversion Eligibility Date (the "Mandatory
Redemption/Conversion Condition") and (ii) the Equity Conditions are satisfied
or waived in writing by the Holder from and including the Mandatory
Redemption/Conversion Notice Date (as defined below) through and including the
Mandatory Redemption/Conversion Date (as defined below) or through and including
the Installment Settlement Date in the case of any Mandatory Conversion, the
Company shall have the right, provided the Mandatory Redemption/Conversion is
met on and as of the Mandatory Redemption/Conversion Notice Date (as defined
below), to (i) redeem all or any portion of the Conversion Amount then remaining
under this Note (a "Mandatory Redemption") and/or (ii) require the conversion of
all or any portion of the Conversion Amount then remaining under this Note (a
"Mandatory Conversion"). The portion of this Note subject to redemption pursuant
to this Section 9 shall be redeemed by the Company in cash, if it so elects, at
a price equal to the Conversion Amount being redeemed on the Mandatory
Redemption/Conversion Date plus any accrued and unpaid Interest thereon through
the Mandatory Redemption/Conversion Date (the "Mandatory Redemption Price"). The
Company may exercise its right to require a Mandatory Redemption and/or a
Mandatory Conversion under this Section 9(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the "Mandatory Redemption/Conversion Notice" and the date all
of the holders are delivered such notice by facsimile is referred to as the
"Mandatory Redemption/Conversion Notice Date") and each Mandatory
Redemption/Conversion Notice shall be irrevocable. The Mandatory
Redemption/Conversion Notice shall state (1) the aggregate Conversion Amount of
Notes (the "Mandatory Redemption/Conversion Amount") which the Company has
elected to be subject to Mandatory Redemption and/or Mandatory Conversion from
all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes), (2) the Holder's pro rata portion, if any, of
the Mandatory Redemption/Conversion Amount that the Company is requiring to be
converted pursuant to a Mandatory Conversion, (the "Mandatory Conversion
Amount"), (3) the Holder's pro rata portion, if any, of the Mandatory
Redemption/Conversion Amount which the Company elects to redeem pursuant to a
Mandatory Redemption (the "Mandatory Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the Mandatory Redemption/Conversion
Amount which shall be paid in cash to the holders of Notes on the Mandatory
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the Mandatory Redemption/Conversion Notice and (6) the date on
which the Mandatory Redemption and/or Mandatory Conversion shall occur (the
"Mandatory Redemption/Conversion Date") which date shall be (x) in connection
with any Mandatory Redemption not less than ten (10) Trading Days nor more than
thirty (30) Trading Days after the Mandatory Redemption/Conversion Notice Date
and (y) in connection with any Mandatory Conversion not less than thirty (30)
Trading Days after the Mandatory Redemption/Conversion Notice Date; provided,
however, that the Company shall not redeem and/or convert a Conversion
-21-
Amount under this Section in excess of the Holder's Pro Rata Amount of the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Shares
on NASDAQ and the TSX combined over the ten (10) consecutive Trading Day period
ending on the Trading Day immediately preceding the Mandatory
Redemption/Conversion Notice Date. The Company may not effect more than one
Mandatory Redemption and/or Mandatory Conversion during any consecutive thirty
(30) day period. All Conversion Amounts converted by the Holder after the
Mandatory Redemption/Conversion Notice Date shall reduce the Conversion Amount
of this Note required to be redeemed and/or converted on the Mandatory
Redemption/Conversion Date. Mandatory Conversions made pursuant to this Section
9 shall be made in accordance with Section 8(c) (including Section 8(c)(iii))
and references in Section 8(c) to (I) the Installment Amount shall be deemed to
refer to the Mandatory Redemption/Conversion Amount (plus accrued and unpaid
Interest thereon), (II) the Company Conversion shall be deemed to refer to the
Mandatory Conversion, (III) the Company Conversion Amount shall be deemed to
refer to the Mandatory Conversion Amount (plus accrued and unpaid Interest
thereon), (IV) the Installment Date shall be deemed to refer to the Mandatory
Redemption/Conversion Date, (V) the Initial Company Conversion Price shall be
deemed to refer to Initial Mandatory Conversion Price, (VI) the Company
Conversion Measuring Period shall be deemed to refer to the Mandatory Conversion
Measuring Period, (VII) the Company Conversion Price shall be deemed to refer to
Mandatory Conversion Price, (VIII) the Adjusted Company Conversion Price shall
be deemed to refer to the Adjusted Mandatory Conversion Price and (IX) the
Unadjusted Company Conversion Price shall be deemed to refer to the Unadjusted
Mandatory Conversion Price. Mandatory Redemptions made pursuant to this Section
9 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause a Mandatory Redemption and/or Mandatory Conversion pursuant to Section
9(a), then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Mandatory Redemption and/or Mandatory
Conversion pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require redemption and/or conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(i) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be redeemed and/or converted pursuant to Section 9(a), multiplied by
(ii) the fraction, the numerator of which is the sum of the aggregate initial
principal amount of the Notes purchased by such holder and the denominator of
which is the sum of the aggregate initial principal amount of the Notes
purchased by all holders (such fraction with respect to each holder is referred
to as its "Redemption/Conversion Allocation Percentage", and such amount with
respect to each holder is referred to as its "Pro Rata Redemption/Conversion
Amount"). In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder's Notes, the transferee shall be allocated
a pro rata portion of such holder's Redemption/Conversion Allocation Percentage
and Pro Rata Redemption/Conversion Amount.
(10) COMPANY'S RIGHT OF REDEMPTION/CONVERSION OF THE LETTER OF CREDIT
AMOUNT.
(a) Letter of Credit Amount Redemption. If at any time from and after
the Issuance Date (the "LC Conversion Eligibility Date"), (i) the Weighted
Average Price of
-22-
the Common Shares exceeds 150% of the Conversion Price then in effect for each
of twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the LC Conversion Eligibility Date (the "LC Redemption/Conversion
Condition") and (ii) the Equity Conditions are satisfied or waived in writing by
the Holder from and including the LC Redemption/Conversion Notice Date (as
defined below) through and including the LC Redemption/Conversion Date (as
defined below) or through and including the Installment Settlement Date in the
case of any LC Conversion, the Company shall have the right, provided the LC
Redemption/Conversion Condition is met on and as of the LC Redemption/Conversion
Notice Date (as defined below), to (i) redeem all or any portion of a principal
amount of this Note then outstanding that is not in excess of the Letter of
Credit Amount (the "Available Conversion Amount") (such redemption, an "LC
Redemption") and/or (ii) require the conversion of all or any portion of such
amount (an "LC Conversion"). The portion of this Note subject to redemption
pursuant to this Section 10 shall be redeemed by the Company in cash, if it so
elects, at a price equal to the Conversion Amount being redeemed plus any
accrued and unpaid Interest thereon through the LC Redemption/Conversion Date
(the "LC Redemption Price"). The Company may exercise its right to require an LC
Redemption and/or an LC Conversion under this Section 10(a) by delivering a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of Notes (the "LC Redemption/Conversion Notice" and the
date all of the holders are delivered such notice by facsimile is referred to as
the "LC Redemption/Conversion Notice Date") and each LC Redemption/Conversion
Notice shall be irrevocable. The LC Redemption/Conversion Notice shall state (1)
the aggregate Conversion Amount of Notes (the "LC Redemption/Conversion Amount")
which the Company has elected to be subject to an LC Redemption and/or an LC
Conversion from all of the holders of the Notes pursuant to this Section 9 (and
analogous provisions under the Other Notes), (2) the portion, if any, of the
Available Conversion Amount that the Company is requiring to be converted
pursuant to an LC Conversion, (the "LC Conversion Amount"), (3) the portion, if
any, of the Available Conversion Amount which the Company elects to redeem
pursuant to an LC Redemption (the "LC Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the LC Redemption/Conversion Amount
which shall be paid in cash to the holders of Notes on the LC
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the LC Redemption/Conversion Notice and (6) the date on which
the LC Redemption and/or LC Conversion shall occur (the "LC
Redemption/Conversion Date") which date shall be (x) in connection with any LC
Redemption not less than fifteen (15) Trading Days nor more than thirty (30)
Trading Days after the LC Redemption/Conversion Notice Date and (y) in
connection with any LC Conversion not less than thirty (30) Trading Days after
the LC Redemption/Conversion Notice Date; provided, however, that the Company
shall not redeem any aggregate Conversion Amount under this Section in excess of
the Holder's Pro Rata Amount of the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Shares on NASDAQ and the TSX combined over the
fifteen (15) consecutive Trading Day period ending on the Trading Day
immediately preceding the LC Redemption/Conversion Notice Date. The Company may
not effect more than one LC Redemption and/or LC Conversion during any
consecutive thirty (30) day period. All Conversion Amounts converted by the
Holder after the LC Redemption/Conversion Notice Date shall reduce the
Conversion Amount of this Note required to be redeemed and/or converted on the
LC Redemption/Conversion Date. LC Conversions made pursuant to this Section 10
shall be made in accordance with Section 8(c) (including Section 8(c)(iii)) and
references in Section 8(c)
-23-
to (I) the Installment Amount shall be deemed to refer to the LC
Redemption/Conversion Amount (plus accrued and unpaid Interest thereon), (II)
the Company Conversion shall be deemed to refer to the LC Conversion, (III) the
Company Conversion Amount shall be deemed to refer to the LC Conversion Amount
(plus accrued and unpaid Interest thereon), (IV) the Installment Date shall be
deemed to refer to the LC Redemption/Conversion Date, (V) the Initial Company
Conversion Price shall be deemed to refer to Initial Mandatory Conversion Price,
(VI) the Company Conversion Measuring Period shall be deemed to refer to the
Mandatory Conversion Measuring Period, (VII) the Company Conversion Price shall
be deemed to refer to Mandatory Conversion Price, (VIII) the Adjusted Company
Conversion Price shall be deemed to refer to the Adjusted Mandatory Conversion
Price and (IX) the Unadjusted Company Conversion Price shall be deemed to refer
to the Unadjusted Mandatory Conversion Price. LC Redemptions made pursuant to
this Section 10 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause an LC Redemption and/or LC Conversion pursuant to Section 10(a), then
it must simultaneously take the same action with respect to the Other Notes. If
the Company elects to cause a LC Redemption and/or LC Conversion pursuant to
Section 10(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the
Company shall require redemption and/or conversion of a Conversion Amount from
each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be redeemed
and/or converted pursuant to Section 10(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder and the denominator of which is the sum of the
aggregate initial principal amount of the Notes purchased by all holders (such
fraction with respect to each holder is referred to as its "LC Amount Allocation
Percentage", and such amount with respect to each holder is referred to as its
"Pro Rata LC Amount"). In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such xxxxxx'x XX Amount Allocation Percentage
and Pro Rata LC Amount.
(11) GUARANTY. Vasogen and Vasogen, Corp. shall guarantee the obligations
under this Note and the Other Notes to the extent and in the manner set forth in
the Guarantees (as defined in the Securities Purchase Agreement).
(12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Memorandum and Articles of Association or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(13) AUTHORIZED SHARES.
(a) Reservation. Vasogen shall have sufficient authorized and unissued
Common Shares for each of the Notes equal to the number of Common Shares
necessary to effect the conversion at the Conversion Rate with respect to the
Conversion Amount
-24-
of each such Note as of the Issuance Date. So long as any of the Notes are
outstanding, Vasogen shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Shares, solely for the
purpose of effecting the conversion of the Notes, the number of Common Shares as
shall from time to time be necessary to effect the conversion of all of the
Notes then outstanding; provided that at no time shall the number of Common
Shares so available be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the
"Required Amount").
(b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding Vasogen does not have a sufficient number of authorized
and unissued Common Shares to satisfy its obligation to have available for
issuance upon conversion of the Notes at least a number of Common Shares equal
to the Required Amount (an "Authorized Share Failure"), then Vasogen shall as
promptly as practicable take all action necessary to increase Vasogen's
authorized Common Shares to an amount sufficient to allow Vasogen to have
available the Required Amount for the Notes then outstanding.
(14) HOLDER'S REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Trading Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to be paid in cash to the Holder concurrently with the
consummation of such Change of Control if such notice is received at least five
(5) Trading Days prior to the consummation of such Change of Control and within
five (5) Trading Days after the Company's receipt of such notice otherwise (the
"Change of Control Redemption Date"). The Company shall deliver the Mandatory
Redemption Price to the Holder on the Mandatory Redemption/Conversion Date. The
Company shall deliver the LC Redemption Price to the Holder on the LC
Redemption/Conversion Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to, by providing written notice to the Company, require the
Company to promptly return to the Holder all or any portion of this Note
representing the Conversion Amount that was submitted for redemption and for
which the applicable Redemption Price has not been paid. Upon the Company's
receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to such Conversion Amount and (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount.
(b) Redemption by Other Holders. Upon the Company's receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(b) (each, an "Other
Redemption Notice"), the Company shall immediately, but no later than one (1)
Trading Day of its receipt thereof, forward to the Holder by facsimile a copy of
-25-
such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Trading Day period beginning on and
including the date which is three (3) Trading Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Trading Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Trading Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Trading Day period.
(15) VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as provided by law, the Canada Business Corporations Act
and as expressly provided in this Note.
(16) COVENANTS.
(a) Rank. All payments due under this Note (a) shall rank pari passu
with all Other Notes and (b) neither Vasogen nor any of its Subsidiaries shall
incur Indebtedness that is senior to the Notes or the Guarantees as applicable.
(b) Incurrence of Indebtedness. So long as this Note is outstanding,
Vasogen shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of Liens. So long as this Note is outstanding, Vasogen
shall not, and Vasogen shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by Vasogen or any of its
Subsidiaries (collectively, "Liens") other than Permitted Liens.
(d) Restricted Payments. Vasogen shall not, and Vasogen shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness, whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness if at the time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Net Cash Balance Test. If the ACCLAIM trial fails to meet its
primary endpoint, then, beginning on September 1, 2006 until the earlier of (x)
the Maturity Date or (y) such time as the Notes have been otherwise converted or
redeemed in full, Vasogen and the Company, on a consolidated basis, shall
maintain, at all times, a Net Cash Balance equal to or exceeding the applicable
Net Cash Balance Threshold (the "Net Cash Balance Test").
-26-
(i) On any date (or within four (4) Business Days thereafter) on
which the Net Cash Balance Test is not satisfied (a "Failure Date"), Vasogen
shall publicly disclose (on a Current Report on Form 6-K or otherwise and
through analogous legal disclosure means under Canadian securities laws) the
fact that Vasogen has failed to satisfy the Net Cash Balance Test. On the date
of any such disclosure, Vasogen shall also provide to the Holder a
certification, executed on behalf of Vasogen by the Chief Financial Officer of
Vasogen or his or her designate who shall also be an executive officer or the
controller, as to the amount of the Net Cash Balance as of the Failure Date and
disclose such amount in the Current Report on Form 6-K.
(ii) Vasogen shall announce its operating results (the "Operating
Results") for each Fiscal Quarter no later than the forty-fifth (45th) day after
the end of each Fiscal Quarter or, with respect to the last Fiscal Quarter, the
ninetieth (90th) day after such quarter (the "Announcement Date") and, in the
event Vasogen shall have satisfied the Net Cash Balance Test at all times during
such Fiscal Quarter, such announcement shall include a statement to the effect
that Vasogen satisfied the Net Cash Balance Test at all times throughout such
Fiscal Quarter; provided, however, that in the event Vasogen is delayed in
announcing its Operating Results for any Fiscal Quarter, on the Announcement
Date Vasogen shall, in lieu of the foregoing, (A) make a statement to the effect
that it has complied with all of its covenants under the Notes, including,
without limitation, the Net Cash Balance Test and (B) provide to the holders of
Notes a certification, in accordance with terms of the next sentence, certifying
the same. On the Announcement Date, Vasogen shall also provide to the holders of
Notes a certification, executed on behalf of Vasogen by the Chief Financial
Officer of Vasogen or his or her designate who shall also be an executive
officer or the controller, certifying that Vasogen satisfied the Net Cash
Balance Test at all times throughout such Fiscal Quarter.
(17) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if Vasogen shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Note, then, in each such case any Conversion Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Conversion Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the Common Shares on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by Xxxxxxx's Board of Directors) applicable to one
Common Share, and (ii) the denominator shall be the Weighted Average Price of
the Common Shares on the trading day immediately preceding such record date (but
such fraction shall not be greater than one); provided, however, that in no
event shall the Conversion Price be reduced pursuant to this Section 17 with
respect to any portion of a Distribution for which the Conversion Price is also
being reduced pursuant to any of the provisions of Section 7 hereof in respect
of the same portion of such Distribution.
(18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
-27-
affirmative vote of the Required Holders at a meeting duly called for such
purpose or the written consent of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. Any change or amendment so
approved shall be binding upon all existing and future holders of this Note and
any Other Notes; provided, however, that no such change, amendment, alteration
or amendment, as applied to any of the Notes held by any particular holder of
Notes, shall, without the written consent of that particular holder, (i) reduce
the Interest Rate, extend the time for payment of Interest or change the manner
or rate of accrual of Interest on the Notes, (ii) reduce the amount of
Principal, or extend the Maturity Date, of the Notes, (iii) make any change that
impairs or adversely affects the conversion rights of the Notes, (iv) impair the
right of any holder of Notes to receive payment of principal or Interest or
other payments due under the Notes, if any, on or after the due dates therefor;
or (v) modify any of the provisions of, or impair the right of any holder of
Notes under, this Section 18.
(19) TRANSFER. This Note and any Common Shares issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company on two (2) Trading Days' written notice, subject only
to the provisions of Section 2(f) of the Securities Purchase Agreement;
provided, that the Holder may not transfer any outstanding Principal and accrued
and unpaid Interest of this Note, in part, to the extent such Principal and
Interest is less than the lesser of (a) $2,000,000 and (b) the remaining
outstanding Principal and accrued and unpaid Interest of this Note; provided,
further, however, that any transferee of all or any portion of this Note agrees
to comply with all applicable securities laws; provided, also, that any
transferee of all or any portion of this Note that wishes to avail itself of the
benefits contemplated by Section 9(s) of the Securities Purchase Agreement
(including, for the avoidance of doubt, any subsequent transferee of any
transferee) shall make to Vasogen the representations and warranties made by the
Purchaser in, and give the Notice as contemplated pursuant to, Section 9(s) of
the Securities Purchase Agreement. Prior to the effectiveness of any such sale,
assignment or transfer pursuant to this Section 19, and only if such transferee
seeks to receive Common Shares through DTC's Deposit Withdrawal Agent Commission
system, such transferee shall have completed and delivered to the Company the
DTC brokerage account information with respect to such transferee in
substantially the form of Exhibit E as attached to the Securities Purchase
Agreement.
(20) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of
-28-
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 20(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 20(a) or Section 20(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest on the Principal of this Note, from the Issuance Date.
(21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to,
-29-
attorneys' fees and disbursements.
(23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
(24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(25) DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Weighted Average Price or the arithmetic calculation of the Conversion
Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Trading
Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Trading Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Trading Days submit via facsimile (a) the disputed
determination of the Weighted Average Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Rate or the Redemption Price
to the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Trading Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
(26) NOTICES; CURRENCY; TAXES; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven (7) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
-30-
(b) Currency. All principal, interest and other amounts owing under
this Note or any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in US dollars. All amounts denominated in other
currencies shall be converted in the US dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Note, the US dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date
of calculation shall be the final date of such period of time).
(c) Taxes.
(i) Any and all payments made by the Company hereunder, including
any amounts received on a conversion or redemption of the Note and any amounts
on account of interest or deemed interest, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 26(c)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to the Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 26(c) shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.
(d) Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via
-31-
overnight courier service to such Person at such address as previously provided
to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Buyer Schedule attached to the Purchase
Agreements); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Trading Day, the same shall instead be due on
the next succeeding day which is a Trading Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.
(27) CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
(28) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices otherwise
required pursuant to applicable law in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(29) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Note shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
-32-
XXXXXX IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(30) JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 30
referred to as the "Judgment Currency") an amount due in US dollars under this
Note, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 30(a)(ii) being hereinafter
referred to as the "Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Note.
(31) MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
(32) CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "Accelerated Payment Option Warrants" means warrants exercisable
for a number of Common Shares equal to 65% of the quotient of (x) the
Accelerated Amount being paid pursuant to Section 8 minus accrued and unpaid
Interest
-33-
included in such amount divided by (y) the Conversion Price on the applicable
Installment Date, rounded up to the nearest whole Common Share. Such warrants
shall be in substantially the form of the Warrant attached as Exhibit B to the
Securities Purchase Agreement, except that the expiration date of such warrants
shall be five (5) years from the issuance date thereof. The exercise price of
the Accelerated Payment Option Warrants shall be the same as the Conversion
Price then in effect; provided, however, that if on the applicable Installment
Date on which such warrants are issued the Weighted Average Price of the Common
Shares is greater than the Conversion Price that would become the exercise price
of the Accelerated Payment Option Warrants, (i) the Company shall pay to the
Purchasers, in Common Shares within three (3) Trading Days of the applicable
Installment Date or, at the option of the Company, in cash, the product of (A)
the difference between (1) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) Trading Days ending on the
Trading Day immediately prior to the applicable Installment Date (the "Exercise
Price Measuring Period") and (2) such Conversion Price and (B) the number of
Common Shares for which such Accelerated Payment Option Warrants are exercisable
(such product, the "Adjustment Amount") and (ii) the exercise price for such
Accelerated Payment Option Warrants will be adjusted to equal such arithmetic
average of the Weighted Average Price of the Common Shares during the Exercise
Price Measuring Period. In the event the Company shall pay the Adjustment Amount
in Common Shares, the number of Common Shares to be delivered shall be equal to
the quotient of the Adjustment Amount divided by the Company Conversion Price
for the applicable Installment Date, rounded up to the nearest whole Common
Share; provided, however that the Company shall not be entitled to pay the
Adjustment Amount in Common Shares if the Equity Conditions are not satisfied.
(b) "Adjusted Conversion Price" means, as of any date of determination,
the price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Conversion Date.
(c) "Approved Share Plan" means any employee benefit plan which has
been approved by the Board of Directors of Vasogen, pursuant to which Xxxxxxx's
securities may be issued to any employee, consultant, officer or director in
connection with services provided or to be provided to Vasogen or any Subsidiary
thereof.
(d) "Bloomberg" means Bloomberg Financial Markets.
(e) "Canadian Prospectus" shall have the meaning set forth in the
Registration Rights Agreement.
(f) "Change of Control" means any Fundamental Transaction other than
(A) any reorganization, recapitalization or reclassification of the Common
Shares in which holders of Vasogen's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger
-34-
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or Vasogen.
(g) "Change of Control Conversion Price" means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Shares during each of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the delivery of the Change of Control Redemption Notice (such period,
the "Change of Control Measuring Period"); provided, however, that if such
arithmetic average of the Weighted Average Price during the Change of Control
Measuring Period shall yield a price that is less than $1.00, then the Change of
Control Conversion Price shall be computed as 90% of the arithmetic average of
the Weighted Average Price of the Common Shares during the Change of Control
Measuring Period. Notwithstanding the foregoing, in the event that as a result
of the application of the Exchange Cap the Company is unable to issue Common
Shares on the applicable date using the Change of Control Conversion Price as
calculated pursuant to the foregoing sentence, then the Change of Control
Conversion Price shall be the price equal to the arithmetic average of the
Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
delivery of the Change of Control Redemption Notice (such price, the "Adjusted
Change of Control Conversion Price").
(h) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement, which date is the date the Company initially issued Notes
pursuant to the terms of the Securities Purchase Agreement.
(i) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of Vasogen or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.
(j) "Company Conversion Price" means, as of any date of determination,
that price which shall be the lower of (i) the applicable Conversion Price and
(ii) the price computed as 95% of the arithmetic average of the Weighted Average
Price of the Common Shares during each of the twelve (12) consecutive Trading
Days commencing on the Trading Day immediately after the applicable Installment
Date (such period, the "Company Conversion Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Company Conversion Measuring Period shall yield a price that is less than
$1.00, then the Company Conversion Price shall be computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Shares during the
Company Conversion Measuring Period. Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap the Company is unable to
issue Common Shares on an Installment Settlement Date using the Company
Conversion Price as calculated pursuant to the foregoing sentence (the
"Unadjusted Company Conversion Price"), then the Company Conversion Price shall
be the price equal to the arithmetic average of the Weighted Average Price of
the Common Shares during each of the five (5) consecutive Trading Days ending on
the
-35-
Trading Day immediately prior to the applicable Installment Settlement Date
(such price, the "Adjusted Company Conversion Price").
(k) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
(l) "Conversion Share Ratio" means, as to any applicable date of
determination, the quotient of (i) the number of Pre-Installment Conversion
Shares or Pre-Maturity Conversion Shares, as applicable, delivered in connection
with an Installment Date or the Maturity Date, as applicable divided by (ii) the
number of Post-Installment Conversion Shares or Post Maturity Conversion Shares,
as applicable, relating to such Installment Settlement Date or Maturity
Settlement Date, as the case may be.
(m) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(n) "Effectiveness Time" means January 20, 2006.
(o) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc. or the American Stock Exchange.
(p) "Equity Conditions" means that each of the following conditions is
satisfied: (i) either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and a Grace Period (as defined in the Registration
Rights Agreement) shall not be in progress or (y) all Common Shares issuable
upon conversion or redemption of the Notes and payment of Installment Amounts
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws and such
shares shall be freely tradable on both the NASDAQ and the TSX, other than any
restrictions on disposition by (I) a holder of a control block, where the Holder
has become such a holder or (II) an affiliate; (ii) the Common Shares are
designated for quotation or listed on both of the Principal Markets and shall
not have been suspended from trading on either of such exchanges or markets
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by Vasogen or the
Company) nor shall delisting or suspension by either of such exchanges or
markets have been threatened or pending either (A) in writing by such exchanges
or markets or (B) by falling below the minimum listing maintenance requirements
of such exchanges or markets; provided, however, that no threatened or pending
delisting or suspension that has been publicly announced and which shall not
occur within one (1) month of the applicable date of determination shall be
considered when determining whether the Company has satisfied the condition set
forth in this clause (ii); (iii) during the one (1) year period ending on and
including
-36-
the date immediately preceding the applicable date of determination (or such
lesser period of time since the Issuance Date), Vasogen shall have delivered
Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise
of the Warrants to the holders on a timely basis as set forth in Section
3(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections
1(c) of the Warrants, unless such failure to deliver shall have occurred only
once and shall have been remedied by Vasogen with three (3) Business Days; (iv)
any applicable Common Shares to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules and regulations of the Principal Markets; (v) on each day during the
period beginning three (3) months prior to the applicable date of determination
and ending on and including the applicable date of determination (the "Equity
Conditions Measuring Period"), the Company (or Vasogen if any such payment was
due in Common Shares) shall not have failed to timely make any payments within
five (5) Trading Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not
have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, rejected publicly
by the board of directors (or similar governing body) of Vasogen or the Company,
as applicable, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) neither Vasogen nor the Company shall have any knowledge of any
fact (other than facts relating exclusively to the Holder that would require
updating of the Selling Shareholders or Plan of Distribution section of the
Registration Statement) that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of all remaining Registrable Securities in accordance
with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion or redemption of the Notes or payment of Installment
Amounts not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws, other than any restrictions on
disposition by (I) a holder of a control block, where the Holder has become such
a holder or (II) an affiliate; (viii) Vasogen and the Company shall be in
material compliance with and shall not be in breach of any material provision or
covenant, and shall not have breached, as of the Closing Date, any
representation or warranty contained in any Transaction Document; and (ix) at
the applicable date of determination, Vasogen is not Insolvent (as defined in
the Securities Purchase Agreement).
(q) "Equity Conditions Failure" means that during any period commencing
with (i) the delivery of the Company Installment Notice through the applicable
Installment Date or Installment Settlement Date, as applicable, or (ii) the
delivery of the Maturity Election Notice through the Maturity Settlement Date,
the Equity Conditions have not been satisfied (or waived in writing by the
Holder).
(r) "Exchange Cap Limitation Shares" means (i) with respect to any
conversion required pursuant to a Conversion Notice, a number of Common Shares
equal to the quotient of the Conversion Amount set forth in such Conversion
Notice divided by the Conversion Price and (ii) with respect to any Company
Conversion, Mandatory Conversion or LC Conversion, a number of Common Shares
equal to the quotient of the Conversion Amount subject to conversion divided by
the applicable Unadjusted Company Conversion Price or the applicable Unadjusted
Mandatory Conversion Price.
-37-
(s) "Excluded Securities" means any Common Shares issued or issuable:
(i) in connection with any Approved Share Plan; (ii) upon conversion of the
Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering which generates gross proceeds to the
Company of at least $50,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with any strategic acquisition or strategic transaction, including a
licensing partnership, development or marketing agreement, whether through an
acquisition of shares or a merger of any business, assets or technologies, the
primary purpose of which is not to raise equity capital; and (v) upon conversion
of any Options or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date and have been disclosed in Schedule
3(r) to the Securities Purchase Agreement, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date.
(t) "FDA Approval" means the pre-market approval granted by the U.S.
Food and Drug Administration for the marketing of Celacade for use in treatment
of chronic heart failure.
(u) "Fiscal Quarter" means each of the fiscal quarters adopted by the
Company for financial reporting purposes that correspond to the Company's fiscal
year that ends on November 30, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(v) "Fundamental Transaction" means that the Company shall no longer be
a wholly-owned subsidiary of Vasogen or that the Company or Vasogen shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company or Vasogen, as applicable, is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
Vasogen or Vasogen and its Subsidiaries to another Person other than in
connection with a strategic transaction involving a licensing of intellectual
property and related assets of the Company or Vasogen or relating to a
partnership arrangement with respect to any such intellectual property and
related assets, in each case where such licensing or partnership arrangements
contain terms and conditions that are customary in Vasogen's industry for such
type of transactions and where the board of directors of Vasogen determines, in
good faith, that Vasogen shall retain a material financial participation in the
exploitation of such intellectual property and related assets, or (iii) be
subject to an offer from another Person or group of related Persons (as defined
in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or
(iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other
Person or group acquires more than the 50% of the outstanding Voting Shares (not
including any Voting Shares held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such share purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify the Common Shares.
-38-
(w) "GAAP" means Canadian generally accepted accounting principles,
consistently applied, as in effect on the Issuance Date.
(x) "Holder Pro Rata Amount" means a fraction (i) the numerator of
which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Purchase Agreements on the Closing Date.
(y) "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables and related accrued liabilities
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. References to Indebtedness of the Company or Vasogen shall
mean Indebtedness on a consolidated basis.
(z) "Initial Company Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the fourth (4th) Trading Day immediately
prior to the Installment Date (such period, the "Initial Company Measuring
Period"); provided, however, that if such arithmetic average of the Weighted
Average Price during the Initial Company Measuring Period shall yield a price
that is less than $1.00, then the Initial Company Conversion Price shall be
computed as 90% of the arithmetic average of the Weighted Average Price of the
Common Shares during the Initial Company Measuring Period (the "Unadjusted
Initial Company Conversion Price"). Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap, the Company is unable
to issue Common Shares on an Installment Date using the Initial Company
Conversion Price as calculated pursuant to the foregoing sentence to determine
the number of Common Shares to be issued to the Holder as payment of any Company
Conversion Amount on any Installment Date, then the Initial Company Conversion
Price shall be the price equal to the
-39-
arithmetic average of the Weighted Average Price of the Common Shares during
each of the five (5) consecutive Trading Days ending on the fourth (4th) Trading
Day immediately prior to the applicable Installment Date.
(aa) "Initial Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) consecutive Trading Days ending
on the third (3rd) Trading Day immediately prior to the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the
applicable Mandatory Redemption/Conversion Date or LC Redemption/Conversion Date
using the Initial Mandatory Conversion Price as calculated pursuant to the
foregoing sentence, then the Initial Mandatory Conversion Price shall be the
price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Mandatory Redemption/Conversion
Date or LC Redemption/Conversion Date.
(bb) "Initial Maturity Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately prior to the
Maturity Date (such period, the "Initial Maturity Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Initial Maturity Measuring Period shall yield a price that is less than
$1.00, then the Initial Maturity Conversion Price shall be computed as 90% of
the arithmetic average of the Weighted Average Price of the Common Shares during
the Initial Maturity Measuring Period. Notwithstanding the foregoing, in the
event that as a result of the application of the Exchange Cap the Company is
unable to issue Common Shares on the Maturity Date using the Initial Maturity
Conversion Price as calculated pursuant to the foregoing sentence, then the
Maturity Conversion Price shall be the price equal to the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
Maturity Date.
(cc) "Installment Amount" means, as to the initial Installment Date
(and, unless otherwise required herein, such amount shall be the Installment
Amount to be paid on each subsequent Installment Date), an amount equal to the
lesser of (i) (A) the quotient of (x) the aggregate outstanding Principal of
this Note divided by (y) the number of whole months from such Installment Date
through the Maturity Date and (ii) the Principal amount outstanding under the
Note, in each case, plus any accrued and unpaid interest on such amount, as any
such Installment Amount may be reduced pursuant to the terms of this Note,
whether upon conversion, redemption or otherwise; provided that, for any
scheduled Installment Date following the date on which the Maturity Date is
extended to October 7, 2010, the Installment Amount shall be recalculated
pursuant to the formula in clause (i) using such new Maturity Date and such
amount shall be the Installment Amount to be paid on such Installment Date and
on each subsequent Installment Date. For any Installment Date on which an
Accelerated Amount is
-40-
to be paid, such Accelerated Amount shall be added to, and
considered part of, the applicable Installment Amount.
(dd) "Installment Balance Conversion Shares" means, for any Installment
Date, a number of Common Shares equal to (i) the Post-Installment Conversion
Shares for such date minus (ii) the amount of any Pre-Installment Conversion
Shares delivered on such date; provided that in the event that the amount of
Pre-Installment Conversion Shares exceeds the Post-Installment Conversion Shares
for such date (such excess, the "Installment Conversion Shares Excess"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Installment Conversion Share Excess and (y) the Company Conversion Price and the
Installment Balance Conversion Shares shall equal zero (0).
(ee) "Installment Date" means, initially, the first (1st) day of the
calendar month following the month during which the Canadian Prospectus has
become effective and, thereafter, the first (1st) day of each calendar month
prior to the Maturity Date.
(ff) "Interest Principal Amount" means, for any date of determination,
the amount equal to (i) the outstanding Principal of this Note on such date
minus (ii) the Letter of Credit Amount on such date.
(gg) "Letter of Credit Amount" means the Holder's Pro Rata Amount of
the amount of the letter of credit (the "Letter of Credit") issued in favor of
the LC Agent (as defined in the Securities Purchase Agreement), which amount
shall initially be $10,000,000, which amount may be reduced pursuant to Section
4(q) of the Securities Purchase Agreement.
(hh) "Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the twelve (12) consecutive Trading Days
commencing on the Trading Day immediately after the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be
(such period, the "Mandatory Conversion Measuring Period"). Notwithstanding the
foregoing, in the event that as a result of the application of the Exchange Cap
the Company is unable to issue Common Shares on the applicable Installment
Settlement Date pursuant to Section 8(c) using the Mandatory Conversion Price as
calculated pursuant to the foregoing sentence (the "Unadjusted Mandatory
Conversion Price"), then the Mandatory Conversion Price shall be the price equal
to the arithmetic average of the Weighted Average Price of the Common Shares
during each of the five (5) consecutive Trading Days ending on the Trading Day
immediately prior to the applicable Installment Settlement Date (such price, the
"Adjusted Mandatory Conversion Price").
(ii) "Maturity Balance Conversion Shares" means a number of Common
Shares equal to (i) the Post-Maturity Conversion Shares for such date minus (ii)
the amount of any Pre-Maturity Conversion Shares delivered on such date;
provided that in the event that the amount of Pre-Maturity Conversion Shares
exceeds the Post-Maturity Conversion Shares for such date (such excess, the
"Maturity Conversion Shares Excess"), then the Maturity Balance Conversion
Shares shall equal zero (0).
-41-
(jj) "Maturity Conversion Price" means that price which shall be the
lower of (i) the applicable Conversion Price and (ii) the price computed as 95%
of the arithmetic average of the Weighted Average Price of the Common Shares
during each of the twelve (12) consecutive Trading Days beginning on the Trading
Day immediately following the Maturity Date (such period, the "Maturity
Conversion Measuring Period"); provided, however, that if such arithmetic
average of the Weighted Average Price during the Maturity Conversion Measuring
Period shall yield a price that is less than $1.00, then the Maturity Conversion
Price shall be computed as 90% of the arithmetic average of the Weighted Average
Price of the Common Shares during the Maturity Conversion Measuring Period.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the Maturity
Settlement Date using the Maturity Conversion Price as calculated pursuant to
the foregoing sentence, then the Maturity Conversion Price shall be the price
equal to the arithmetic average of the Weighted Average Price of the Common
Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately preceding the Maturity Settlement Date.
(kk) "Maturity Date" means October 7, 2007; provided that such date
shall be extended to October 7, 2010 in the event that the FDA Approval is
granted; provided, however, that the Maturity Date may be extended at the option
of the Holder (i) in the event that, and for so long as, an Event of Default
shall have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice is delivered prior to the
Maturity Date; provided, further, that such date shall be shortened by the
number of months equal to the quotient of (A) any Accelerated Amount (less the
amount of any accrued and unpaid interest included in such amount) paid on any
Installment Date hereunder divided by (B) the applicable Installment Amount paid
on the Installment Date related to such Accelerated Amount (less the amount of
any accrued and unpaid interest included in such amount and less any Accelerated
Amount that would otherwise be included therein) on the Installment Date related
to such Accelerated Amount, rounded down to the nearest whole number.
(ll) "NASDAQ" means whichever of the Nasdaq National Market or The
Nasdaq SmallCap Market on which the Common Shares are traded.
(mm) "Net Cash Balance" means, at any date, (i) an amount equal to the
aggregate amount of cash, cash equivalents (including cash collateralizing the
Letter of Credit and not including other restricted cash) and marketable
securities, consisting of corporate bonds, commercial paper and medium-term
notes, as shown or reflected in the notes to Vasogen's consolidated balance
sheet as at such date minus (ii) the unpaid principal balance of any
Indebtedness for borrowed money (excluding Indebtedness under the Notes).
(nn) "Net Cash Balance Threshold" means, for any date of determination,
an amount equal to 110% of the outstanding aggregate Principal amount of the
Notes on such date.
-42-
(oo) "Options" means any rights, warrants or options to subscribe for
or purchase Common Shares or Convertible Securities.
(pp) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security are quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(qq) "Permitted Indebtedness" means (i) Indebtedness incurred by the
Company, Vasogen or their Subsidiaries that is pari passu with, or is made
expressly subordinate in right of payment to the Indebtedness evidenced by this
Note (any such subordination to be reflected in a written agreement acceptable
to the Required Holders and approved by the Required Holders in writing) and
which Indebtedness does not provide at any time for the payment, prepayment,
repayment, redemption, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later, (ii) Indebtedness secured by Xxxxxxxxx Xxxxx, (iii)
Indebtedness to trade creditors incurred in the ordinary course of business,
(iv) intercompany Indebtedness amongst the Company, Vasogen and their respective
Subsidiaries which Indebtedness is subordinate in right of payment to the
Indebtedness evidenced by this Note and (v) Indebtedness the proceeds of which
are used to redeem, repay or otherwise retire the Notes, in whole or in part;
provided that in the event such Indebtedness is not used to redeem, repay or
retire the Notes in full, such Indebtedness shall rank junior to the Notes in
accordance with Section 16(a).
(rr) "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) Liens (A) upon or in any
equipment, inventory or other assets acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment, inventory or
other assets or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment,
inventory or other assets at the time of its acquisition, provided that the Lien
is confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, inventory or other assets.
(ss) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(tt) "Post-Installment Conversion Shares" means, for any Installment
Date, that number of Common Shares equal to the applicable Company Conversion
Amount for such Installment Date divided by the Company Conversion Price
(without taking
-43-
into account the delivery of any Pre-Installment Conversion Shares), rounded up
to the nearest whole Common Share.
(uu) "Post-Maturity Conversion Shares" means that number of Common
Shares equal to the outstanding Principal on the Maturity Date divided by the
Maturity Conversion Price (without taking into account the delivery of any
Pre-Maturity Conversion Shares), rounded up to the nearest whole Common Share.
(vv) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(ww) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Subscription Date, by and among the Company, Vasogen, Vasogen, Corp. and the
initial holders of the Other Notes.
(xx) "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, Change of Control Redemption Notices, any Company
Installment Notices (in the event a Company Redemption is elected in any such
notices), Mandatory Redemption/Conversion Notices (in the event a Mandatory
Redemption is elected in any such notices) and LC Redemption/Conversion Notices
(in the event an LC Redemption is elected in any such notice) and, each of the
foregoing, individually, a Redemption Notice.
(yy) "Redemption Premium" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.
(zz) "Redemption Prices" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, any Company Installment
Redemption Price (in the event a Company Redemption is elected with respect to
any Installment Date), Mandatory Redemption Price and LC Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(aaa) "Registration Rights Agreement" means that certain registration
rights agreement dated as of the Subscription Date by and among Vasogen and the
initial holders of the Notes relating to, among other things, the registration
of the resale of the Common Shares issuable upon conversion of the Notes and
exercise of the Warrants.
(bbb) "Required Holders" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.
(ccc) "SEC" means the United States Securities and Exchange Commission.
(ddd) "Securities Purchase Agreement" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company,
Vasogen, Vasogen, Corp. and the initial Holder of this Note pursuant to which
the Company issued this Note.
-44-
(eee) "Subscription Date" means October 7, 2005.
(fff) "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common shares or equivalent
equity security are quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person's Parent Entity.
(ggg) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(hhh) "Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment under the Note.
(iii) "TSX" means the Toronto Stock Exchange.
(jjj) "Trading Day" means any day on which the Common Shares is traded
on the Principal Markets, or, if the Principal Markets are not the principal
trading market for the Common Shares, then on the principal securities exchange
or securities market on which the Common Shares is then traded; provided that
"Trading Day" shall not include any day on which the Common Shares is scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Shares is suspended from trading during the final hour of trading on
any such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(kkk) "Voting Shares" of a Person means capital shares of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(lll) "Warrants" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
(mmm) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security on another Principal Market for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as such Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg, or, if the foregoing does not apply, the dollar volume-weighted
-45-
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such other time as such market publicly announces is the official close of
trading) as reported by Bloomberg, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
(33) VASOGEN'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of Vasogen to issue Common
Shares to the Holder's account with DTC so long as Vasogen has sent a copy of
such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), Vasogen shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
(34) DISCLOSURE. Upon receipt or delivery by the Company or Vasogen of any
notice in accordance with the terms of this Note, unless Vasogen has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to Vasogen or its Subsidiaries, Vasogen
shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 6-K or
otherwise and through analogous legal disclosure in accordance with Canadian
securities laws. In the event that Xxxxxxx believes that a notice contains
material, nonpublic information, relating to Vasogen or its Subsidiaries,
Vasogen shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to Vasogen or its Subsidiaries.
[Signature Page Follows]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the Issuance Date set out above.
SIGNED, SEALED AND DELIVERED BY
XXXXX XXXXXXX AS A DEED FOR AND
ON BEHALF OF VASOGEN IRELAND
LIMITED PURSUANT TO A POWER OF
ATTORNEY
----------------------------------------
Signature of Witness:
-------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
Occupation:
-----------------------------------
ACKNOWLEDGED AND AGREED:
VASOGEN INC.
By:
------------------------------------------
Name:
Title:
Address:
Exhibit 6d
Senior Convertible Note - Capital Ventures International
(exhibits and schedules attached to Kings Road Investments Ltd.
Senior Convertible Note omitted)
(see attached)
SENIOR CONVERTIBLE NOTE
THE COMPANY HAS NOT OFFERED OR SOLD, AND WILL NOT OFFER OR SELL, THIS NOTE IN
IRELAND IN CIRCUMSTANCES THAT WOULD CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF IRISH PROSPECTUS LAW (AS DEFINED IN THE INVESTMENT FUNDS, COMPANIES
AND MISCELLANEOUS PROVISIONS ACT, 2005) OR AN INVITATION TO THE PUBLIC (AS
REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO SUBSCRIBE FOR THIS NOTE
AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CONSTITUTING AN OFFER OF THIS
NOTE TO THE PUBLIC WITHIN THE MEANING OF IRISH PROSPECTUS LAW OR AN "INVITATION
TO THE PUBLIC" (AS REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO
SUBSCRIBE FOR THIS NOTE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN THE UNITED STATES OR TO
ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT) (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION THE HOLDER OF (A) THE
SECURITIES REPRESENTED HEREBY WILL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE
RESIDENTS OF CANADA BEFORE THE LATER OF: (I) FEBRUARY 8, 2006 AND (II) FOUR
MONTHS AND A DAY AFTER THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY OF CANADA; AND (B) THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF SHALL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA
BEFORE FEBRUARY 8, 2006.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.
VASOGEN IRELAND LIMITED
SENIOR CONVERTIBLE NOTE
Issuance Date: October 7, 2005 Principal: U.S. $4,500,000
Note Certificate Number A-4
FOR VALUE RECEIVED, Vasogen Ireland Limited, a company incorporated under
the laws of the Republic of Ireland (the "Company"), hereby promises to pay to
CAPITAL VENTURES INTERNATIONAL or registered assigns ("Holder") the amount set
out above as the Principal (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the "Principal") when due, whether upon the
Maturity Date, on any Installment Date with respect to the Installment Amount
due on such Installment Date (each, as defined herein), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest ("Interest") on any outstanding Interest Principal Amount at the rate
of 6.45% per annum (the "Interest Rate"), from the date set out above as the
Issuance Date (the "Issuance Date") until the same becomes due and payable,
whether upon an Interest Date (as defined below), any Installment Date, the
Maturity Date, acceleration, conversion, redemption or otherwise (in each case,
in accordance with the terms hereof). This Senior Convertible Note (including
all Senior Convertible Notes issued in exchange, transfer or replacement hereof,
this "Note") is one of an issue of Senior Convertible Notes issued pursuant to
the Purchase Agreements on the Closing Date (collectively, the "Notes" and such
other Senior Convertible Notes, the "Other Notes"). Certain capitalized terms
used herein are defined in Section 32.
(1) PAYMENTS OF PRINCIPAL.
(a) On each Installment Date the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date in
accordance with Section 8. On the Maturity Date, the Holder shall surrender the
Note to the Company and the Company shall pay to the Holder, (i) an amount in
Common Shares, or, at the option of the Company, in cash, representing all
outstanding Principal and (ii) an amount in cash equal to the accrued and unpaid
Interest thereon; provided that Principal shall be payable in Common Shares on
the Maturity Date if, and only if, there has been no Equity Conditions Failure.
On or prior to the eighth (8th) Trading Day prior to the Maturity Date (the
"Maturity Election Notice Due Date"), the Company shall deliver a written notice
to the Holder (x) specifying whether the Principal shall be paid on the Maturity
Date in Common Shares or cash and (y) if the Principal is to be paid in Common
Shares, certifying that there has been no Equity Conditions Failure. Principal
to be paid on the Maturity Date and on the Maturity Settlement Date (as defined
below) in Common Shares shall be paid in a number of fully paid and
nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) Common Shares.
(b) If the Company shall pay the Principal on the Maturity Date in
Common Shares, then on the Maturity Date (i) (A) provided that Xxxxxxx's
transfer agent (the "Transfer Agent") is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, the Company shall
direct Vasogen to, and upon such direction
-2-
Vasogen shall or shall cause the Transfer Agent to, credit a number of Common
Shares equal to the quotient of the outstanding Principal due on such date
divided by the Initial Maturity Conversion Price (the "Pre-Maturity Conversion
Shares") to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system,
or (B) if the foregoing shall not apply, Vasogen shall issue and deliver, to the
address set forth in the register maintained by Vasogen for such purpose
pursuant to the Securities Purchase Agreement or to such address as specified by
the Holder in writing to Vasogen at least three (3) Trading Days prior to the
Maturity Date, a certificate, registered in the name of the Holder or its
designee, for the number of Pre-Maturity Conversion Shares to which the Holder
shall be entitled and (ii) the Company shall pay to the Holder, in cash by wire
transfer of immediately available funds, the amount of any accrued and unpaid
interest on such Principal. On the third (3rd) Trading Day immediately after the
end of the Maturity Conversion Measuring Period (the "Maturity Settlement
Date"), the Company shall direct Vasogen to, and upon such direction Vasogen
shall or shall cause the Transfer Agent to, deliver to the Holder's account with
DTC a number of additional Common Shares, if any, equal to the Maturity Balance
Conversion Shares. If an Event of Default or Equity Conditions Failure occurs
during the Maturity Conversion Measuring Period, then, at the Holder's option,
either (x) the Holder may require the Company to pay the Principal amount of the
Note outstanding on the Maturity Date (including any Principal amount
represented by Pre-Maturity Conversion Shares that shall be returned to the
Company and which Principal amount shall be reduced to the extent any such
Common Shares are not returned to the Company) in cash on the Maturity
Settlement Date and, in conjunction with receipt of such cash payment, shall
return any Pre-Maturity Conversion Shares delivered to the Holder which the
Holder has not otherwise sold, transferred or disposed of or (y) the Company
shall pay to the Holder in cash on the Maturity Settlement Date an amount equal
to the difference between (1) the Principal outstanding on the Maturity Date
minus (2) the product of (A) the Principal outstanding on the Maturity Date
multiplied by (B) the Conversion Share Ratio and, notwithstanding Section 14(a),
in the case of this clause (y), such amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Maturity Conversion
Measuring Period.
(c) No prepayment of Principal shall be permitted except as expressly
provided herein.
(2) INTEREST; INTEREST RATE. Interest on the applicable Interest Principal
Amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 360-day year comprised of twelve 30-day months and
shall be payable on each Installment Date and on the Maturity Date (each an
"Interest Date"). Interest shall be payable on each Interest Date in cash. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate. Upon the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to twelve percent
(12.0%) (the "Default Rate"). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the Interest as
calculated at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default. Interest on overdue interest shall accrue at the same
rate compounded quarterly.
-3-
(3) CONVERSION OF NOTES. This Note shall be convertible into common shares
of Vasogen Inc. ("Vasogen"), without par value (the "Common Shares"), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d)(i), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable Common Shares in accordance with
Section 3(c), at the Conversion Rate (as defined below). Vasogen shall not issue
any fraction of a Common Share upon any conversion. If the issuance would result
in the issuance of a fraction of a Common Share, Vasogen shall round such
fraction of a Common Share up to the nearest whole share.
(b) Conversion Rate. The number of Common Shares issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (such number
of shares, the "Conversion Rate").
(i) "Conversion Amount" means the portion of the Principal to be
converted, amortized, redeemed or otherwise with respect to which this
determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination a price equal to $3.00, subject to
adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into
Common Shares on any date, the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time and
transmit by e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement, on the third (3rd) Trading Day prior to
such date (a "Conversion Date"), a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to Vasogen and
with a copy to the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the Company as soon as practicable
on or following such date (or an indemnification undertaking with respect to
this Note in the case of its loss, theft or destruction). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, Vasogen
and the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3rd) Trading Day following the date of receipt of a Conversion Notice (the
"Share Delivery Date"), (1) (x) provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, credit such aggregate number of Common Shares to which
the Holder shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system or (y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, Vasogen shall issue
-4-
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of Common
Shares to which the Holder shall be entitled and (2) the Company shall pay to
the Holder in cash an amount equal to the accrued and unpaid Interest up to and
including the Conversion Date on the Conversion Amount. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than five (5) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the Common Shares issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such Common Shares on the Conversion Date. In the event of a
partial conversion of this Note pursuant hereto, the principal amount converted
shall be deducted from the Installment Amounts relating to the Installment Dates
as set forth in the Conversion Notice.
(ii) Failure to Timely Convert. If Vasogen shall fail to issue a
certificate to the Holder or credit the Holder's balance account with DTC for
the number of Common Shares to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the Share Delivery Date (a "Conversion
Failure"), then (A) the Company shall pay damages to the Holder for each day of
such Conversion Failure in an amount equal to 1.5% of the product of (I) the
number of Common Shares not issued to the Holder on or prior to the Share
Delivery Date and to which the Holder is entitled, and (II) the Weighted Average
Price of the Common Shares on the Share Delivery Date or (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, where the
Holder has chosen not to void its Conversion Notice, if on or prior to the Share
Delivery Date, Vasogen shall fail to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of Common
Shares to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Shares to deliver in
satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the Common Shares so purchased
(the "Buy-In Price"), at which point Vasogen's obligation to deliver such
certificate (and to issue such Common Shares) shall terminate, or (ii) promptly
have Vasogen honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Common Shares times (B) the Weighted Average Price on the
Conversion Date. In the event that (1) the Holder has chosen to void its
Conversion Notice and (2) the Holder, prior to voiding such Conversion Notice,
purchased (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three
-5-
(3) Trading Days after the Holder's request, pay cash to the Holder in an amount
equal to the excess (if any) of (x) the Buy-In Price over the (y) the aggregate
consideration received by the Holder in the sale of such Common Shares.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event that the Company
and Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and Vasogen can convert some, but not all, of such
portions of the Notes submitted for conversion, subject to Section 3(d), the
Company shall direct Vasogen to, and upon such direction Vasogen shall, convert
from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such
holder relative to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number of Common
Shares issuable to the Holder in connection with a conversion of this Note,
Vasogen shall issue to the Holder the number of Common Shares not in dispute and
resolve such dispute in accordance with Section 25.
(d) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates and joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (y) for
purposes of the Securities Act (Ontario), in excess of 9.99% (the "Maximum
Percentage") of the number of Common Shares outstanding immediately after giving
effect to such conversion; provided that the Company shall nevertheless be
entitled to make payments in Common Shares pursuant to Sections 8(c), 8(d), 9
and 10. For purposes of the foregoing sentence, the number of Common Shares
beneficially owned by the Holder and its affiliates and joint actors shall
include the number of Common Shares issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of Common Shares which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates or joint actors and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of Vasogen
and the Company (including, without limitation, any Other Notes or warrants),
which in each case are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. For purposes of calculating
beneficial ownership pursuant to this Section 3(d)(i), beneficial ownership
pursuant to the Exchange Act shall be calculated in
-6-
accordance with Section 13(d) of the Exchange Act, and beneficial ownership
pursuant to the Securities Act (Ontario) shall be calculated in accordance with
section 101 of the Securities Act (Ontario), in each case except as set forth in
the preceding sentence. For purposes of this Section 3(d)(i), in determining the
number of outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (x) Vasogen's most recent Form 40-F or
Form 6-K, as the case may be, (y) a more recent public announcement by Vasogen
or (z) any other notice by the Company, Vasogen or the Transfer Agent setting
forth the number of Common Shares outstanding. For any reason at any time, upon
the written or oral request of the Holder, Vasogen shall within two (2) Trading
Days confirm orally and in writing to the Holder the number of Common Shares
then outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the actual conversion or exercise of
securities of Vasogen and the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company and Vasogen, the Holder from time
to time may increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and Vasogen, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes;
provided that the Company shall nevertheless be entitled to make payments in
Common Shares pursuant to Sections 8(c), 8(d), 9 and 10 without regard to the
Maximum Percentage as adjusted.
(ii) Principal Market Regulation. Vasogen shall not be obligated to
issue any Common Shares upon conversion, amortization or redemption of this
Note, and the Holder of this Note shall not have the right to receive upon
conversion, amortization or redemption of this Note any Common Shares (and only
such Common Shares), if the issuance of such Common Shares would exceed the
aggregate number of Common Shares which Vasogen may issue upon conversion,
amortization or redemption, or exercise, as applicable, of the Notes and
Warrants without breaching Vasogen's obligations under the rules or regulations
of the Principal Market (the "Exchange Cap"), except that such limitation shall
not apply in the event that the Company or Vasogen (A) obtains the approval of
the Principal Market (in the case of the TSX) or Vasogen's shareholders as
required by the applicable rules of the Principal Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the Purchase
Agreements (the "Purchasers") shall be issued in the aggregate, upon conversion
or exercise, as applicable, of Notes or Warrants, Common Shares in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the principal amount of Notes issued to such Purchaser
pursuant to the applicable Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Purchase Agreements on the Closing Date (with
respect to each Purchaser, the "Exchange Cap Allocation"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Notes, the
transferee shall be allocated a pro rata portion of such Purchaser's Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap
-7-
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of Common Shares actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. For purposes of clarification, with respect
to any Exchange Cap relating to the TSX, no holder of Notes shall be issued in
the aggregate upon conversion (including pursuant to any Company Conversion,
Mandatory Conversion or LC Conversion) of the Notes or exercise of the Warrants
or upon payment of Principal on the Notes on the Maturity Date, any Common
Shares at a discount to the market price (as defined for purposes of the TSX) at
the time of issuance of such shares in excess of such holder's Exchange Cap
Allocation.
(e) Payment in Lieu of Conversion Above Exchange Cap Limitation. If at
any time while this Note is outstanding, the Holder delivers a Conversion
Notice, and as a result of the application of an Exchange Cap, Vasogen is unable
to issue any Common Shares upon such conversion at the applicable Conversion
Price, then the Company shall (i) direct Vasogen to, and upon such direction
Vasogen shall, deliver to the Holder on the Conversion Date a number of Common
Shares equal to the quotient of the Conversion Amount stated in such Conversion
Notice divided by the Adjusted Conversion Price (the "Adjusted Conversion
Shares") and (ii) pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (A) the number of Exchange Cap Limitation Shares in connection with
such conversion multiplied by (B) the excess (if any) of (1) such Adjusted
Conversion Price over (2) the Conversion Price (the "Conversion Make-Whole").
Notwithstanding the foregoing, in the event that the Company is prohibited,
pursuant to the rules and regulations of any applicable Principal Market, to
honor the Holder's Conversion Notice by both the delivery of the Adjusted
Conversion Shares and the payment of the Conversion Make-Whole in cash, then the
Company shall pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (x) the number of Exchange Cap Limitation Shares and (y) the Adjusted
Conversion Price (the "Exchange Cap Redemption Payment"). If the Company shall
fail to deliver to the Holder the Adjusted Conversion Shares and pay the
Conversion Make-Whole or to pay to the Holder the Exchange Cap Redemption
Payment, as applicable, on or prior to the date such delivery and/or payment is
due, the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice or for which the Holder has not received the Adjusted Conversion Shares
and the Conversion Make-Whole or the Exchange Cap Redemption Payment, as
applicable.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"Event of Default":
(i) the failure of (A) any Common Shares issued or issuable upon
conversion, as part of any Installment Amount or as part of any Accelerated
Amount to be freely tradable under Canadian law on the TSX (subject to any
restrictions on disposition by the holder of a control block) on or after
February 8, 2006, or, thereafter, the Common Shares of any holder of Notes shall
cease to be freely tradable under Canadian law on the TSX and such lapse
-8-
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period or (B) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the applicable Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order by the SEC) or is unavailable to any holder of the Notes for sale of all
of such holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of twenty (20)
consecutive days or for more than an aggregate of forty (40) days in any 365-day
period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the suspension from trading on all of the Eligible Markets on
which the Common Shares are listed or failure of the Common Shares to be listed
on at least one Eligible Market for a period of ten (10) consecutive Trading
Days or for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(iii) Vasogen's (A) failure to cure a Conversion Failure by delivery
of the required number of Common Shares within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at
any time, of its intention not to comply with a request for conversion of any
Notes into Common Shares that is tendered in accordance with the provisions of
the Notes;
(iv) at any time following the tenth (10th) consecutive Trading Day
that the number of Common Shares that are authorized for issuance to the Holder
is less than the number of Common Shares that the Holder would be entitled to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);
(v) the Company's failure (or Vasogen's failure if any such amounts
are due in Common Shares) to pay to the Holder any amount of Principal
(including, without limitation, the Company's failure to pay any redemption or
make-whole payments), Interest or other amounts when and as due under this Note
or any other Transaction Document (as defined in the Securities Purchase
Agreement), except, in the case of a failure to pay Interest or other amounts
due under the Transaction Documents (other than Principal) when and as due, in
which case only if such failure continues for a period of at least three (3)
Trading Days;
(vi) the occurrence of (A) any material default under any
Indebtedness of Vasogen or any of its Subsidiaries (as defined in Section 3(a)
of the Securities Purchase Agreement) in an aggregate principal amount of
$5,000,000 or greater or (B) any redemption of or acceleration prior to maturity
of Indebtedness of Vasogen or any of its Subsidiaries in an aggregate principal
amount of $5,000,000 or greater, in each case of (A) or (B) other than with
respect to any Other Notes;
-9-
(vii) Vasogen or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the
Companies Creditors Arrangement Act (Canada) or any similar Federal, foreign or
state law for the relief of debtors (collectively, "Bankruptcy Law"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator
or similar official (a "Custodian"), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to
pay its debts as they become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against Vasogen or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of Vasogen or any
of its Subsidiaries or (C) orders the liquidation of Vasogen or any of its
Subsidiaries;
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against Vasogen or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $5,000,000 amount set
forth above so long as Vasogen provides the Holder a copy of its policy with
such insurer or indemnity provider where such judgment is clearly covered by
insurance or an indemnity and Vasogen will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;
(x) other than as set forth in item (xi) below, the Company, Vasogen
or any Guarantor breaches in any material respect any representation, warranty,
covenant or other term or condition of any Transaction Document, except, (A) in
the case of a breach of a representation and warranty, such representation and
warranty need only have been true and correct as of the Closing Date, and (B) in
the case of breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) consecutive Trading Days following the
earlier of (A) the day on which the Company, Vasogen or such Guarantor becomes,
or should have become, aware of such breach and (B) the day on which the Company
or Vasogen receives written notice of such breach from the Holder or any holder
of Other Notes;
(xi) any breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note (including any failure to maintain the Net Cash
Balance as required by Section 16(e)), except, in the case of a breach or
failure to comply with Sections 16(b), (c) or (d), there shall be a one (1) time
opportunity to cure a single breach or failure under one of such sections within
three (3) Business Days after the date the Company knows or should have known of
such breach or failure provided that such cure period does not exceed, in the
aggregate, six (6) Business Days from the date of the occurrence of any such
breach or failure;
(xii) (A) any Guarantee at any time for any reason shall cease to be
in full force and effect or shall cease to be enforceable in respect of its
material terms or (B) any Guarantor shall assert that its Guarantee is invalid
or unenforceable; or
-10-
(xiii) any Event of Default (as defined in the Other Notes) occurs
with respect to any Other Notes.
(b) Redemption Right. Promptly after the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of
an Event of Default Notice and the Holder becoming aware of an Event of Default,
the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice
and (B) the Weighted Average Price of the Common Shares on the date immediately
preceding such Event of Default (the "Event of Default Redemption Price").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 14. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the Event of Default Redemption Notice.
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. Neither the Company nor Vasogen shall enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company and Vasogen, as applicable, under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the Interest Rates of the Notes held by such holder,
having similar conversion rights as the Notes (specifying, without limitation,
that such security is convertible into common shares of the Successor Entity)
and having similar ranking to the Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common shares are quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the "Company" and "Vasogen", as applicable, shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and Vasogen and shall assume all of the obligations of the Company and
Vasogen under this Note with the same effect as if such Successor Entity had
been named as the Company or Vasogen, as the case maybe, herein. Upon
consummation of the Fundamental Transaction, the Successor Entity (if other than
the Company) shall deliver to the Holder confirmation that there shall be issued
upon conversion or redemption
-11-
of this Note at any time after the consummation of the Fundamental Transaction,
in lieu of the Common Shares (or other securities, cash, assets or other
property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Note; provided, however, that in the event that, pursuant to the terms
of the Fundamental Transaction, the holders of Common Shares may elect the
consideration to be received in exchange for the Common Shares in the such
Fundamental Transaction, the Holder shall elect, within the same time periods as
provided to the holders of Common Shares, the kind or amount of such shares,
securities, cash, assets or any other property (including warrants or other
purchase or subscription rights) that the Holder will, following the
consummation of such transaction, be entitled to receive upon conversion or
redemption; provided, further, however, that no such election by the Holder
shall be construed to require the conversion or redemption of this Note in
connection with such Fundamental Transaction. If the Holder is required to make
any election of the kind described in the foregoing sentence, the Company or
Vasogen, as applicable, shall deliver to the Holder all documentation,
informational materials and election forms relating to such Fundamental
Transaction contemporaneously with the delivery of such documentation, materials
and forms to the holders of the Common Shares. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Note.
(b) Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period (the "Change of
Control Period") beginning after the Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control
Redemption Notice shall indicate (i) the Conversion Amount the Holder is
electing to redeem and (ii) whether the Holder is requiring the Company to pay
the Change of Control Redemption Price in cash or by delivery of Common Shares.
The portion of this Note subject to redemption pursuant to this Section 5 shall
be redeemed by the Company in cash at a price equal to the greater of (x) 115%
of the sum of (1) the Conversion Amount being redeemed and (2) the amount of any
accrued but unpaid Interest thereon through the date of such redemption payment
and (y) the sum of (A) the product of (1) the aggregate cash consideration and
the aggregate cash value of any non-cash consideration per Common Share to be
paid to the holders of the Common Shares upon consummation of the Change of
Control and (2) the quotient determined by dividing (I) the Conversion Amount
being redeemed by (II) the Conversion Price plus (B) the amount of any accrued
but unpaid Interest on the Conversion Amount being redeemed through the date of
such redemption payment (the "Change of Control Redemption Price"). In the event
the Holder has elected to receive the Change of Control Redemption Price in
Common Shares, Vasogen shall deliver, within three (3) Trading Days of receipt
of the Holder's Change of Control Redemption Notice, to the Holder's account
with DTC on the Change of Control Redemption Date (as defined in Section 14) a
-12-
number of Common Shares equal to the quotient of (aa) the applicable Change of
Control Redemption Price divided by (bb) the Change of Control Conversion Price,
rounded to the nearest whole Common Share; provided that if the Change of
Control Redemption Date would fall on a date that is after the consummation of
the applicable Change of Control, then Vasogen shall not deliver Common Shares
to the Holder but rather the Company shall pay the Change of Control Redemption
Price to the Holder in cash. Redemptions made in cash as required by this
Section 5 shall be made in accordance with the provisions of Section 14 and
shall have priority to payments to shareholders in connection with a Change of
Control. Notwithstanding anything to the contrary in this Section 5, until the
Change of Control Redemption Price (together with any interest thereon) is paid
in full, the Conversion Amount submitted for redemption under this Section 5(c)
may be converted, in whole or in part, by the Holder into Common Shares, or in
the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Common Shares pursuant to Section 3.
(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS. If at any time Vasogen
grants, issues or sells any Options, Convertible Securities or rights to
purchase shares, warrants, securities or other property pro rata to all record
holders of any class of Common Shares (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
and upon the Holder's election, the aggregate Purchase Rights, in lieu of any
adjustments to which the Holder is otherwise entitled under Section 7 below in
respect of each Purchase Right, which the Holder could have acquired if the
Holder had held the number of Common Shares acquirable upon complete conversion
of this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Subscription Date, Vasogen issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any Common
Shares (including the issuance or sale of Common Shares owned or held by or for
the account of Vasogen, but excluding Common Shares deemed to have been issued
or sold by Vasogen in connection with any Excluded Security) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price
in effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of Common Shares Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by Vasogen upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of Common Shares Deemed
-13-
Outstanding immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section 7(a), the following
shall be applicable:
(i) Issuance of Options. If Vasogen in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by Vasogen at the time of the
granting or sale of such Option for such price per share; provided, however,
that notwithstanding the foregoing, with respect to any Options that are
Variable Price Securities (as defined below), the Conversion Price hereunder
shall only be adjusted pursuant to this Section 7(a) at such time as Vasogen
issues Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that is less
than the Applicable Price and any such adjustment shall be based on such
Variable Price and not on the lowest price per share for which one Common Share
would be issuable under the terms of such Variable Price Securities. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by Vasogen with respect to any one Common Share
upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company or Vasogen
in any manner issues or sells any Convertible Securities and the lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by the
Company or Vasogen, as the case may be, at the time of the issuance or sale of
such Convertible Securities for such price per share; provided, however, that
notwithstanding the foregoing, with respect to any Convertible Securities that
are Variable Price Securities, the Conversion Price hereunder shall only be
adjusted pursuant to this Section 7(a) at such time as Vasogen issues Common
Shares to a holder of such Variable Price Securities and such Common Shares are
issued at a Variable Price (as defined below) that is less than the Applicable
Price and any such adjustment shall be based on such Variable Price and not on
the lowest price per share for which one Common Share would be issuable under
the terms of such Variable Price Securities. For the purposes of this Section
7(a)(ii), the "lowest price per share for which one Common Share is issuable
upon such conversion or exchange or exercise" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by Vasogen with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Shares upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other
-14-
provisions of this Section 7(a), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be re-adjusted (but
to no greater extent than originally adjusted) to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of Vasogen,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by Vasogen therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by Vasogen in connection therewith. If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Vasogen will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by Vasogen will be the Weighted Average Price of such securities on the
date of receipt. If any Common Shares, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Vasogen is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Shares,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 7(d), if Xxxxxxx takes a record
of the holders of Common Shares for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Shares, Options or in
Convertible Securities
-15-
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If Vasogen at any time on or after the Subscription Date
subdivides (by any share split, share dividend, recapitalization or otherwise)
one or more classes of its outstanding Common Shares into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If Vasogen at any time on or after the
Subscription Date combines (by combination, reverse share split or otherwise)
one or more classes of its outstanding Common Shares into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment made pursuant to this Section
7(b) shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then Xxxxxxx's Board
of Directors will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(d) Abandoned Dividends or Distributions. If Vasogen shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Price shall be required by reason of the taking of such record.
(e) Xxxxxx's Right of Alternative Conversion Price Following Issuance
of Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 7, if Vasogen in any manner issues or sells any Options or Convertible
Securities (any such securities, "Variable Price Securities") after the
Subscription Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), Vasogen or the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(k) of the Securities Purchase Agreement, from and after the date Vasogen
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by it by designating in the Conversion Notice delivered upon any conversion
of this Note that
-16-
solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder's election to
rely on a Variable Price for a particular conversion of this Note shall not
obligate the Holder to rely on a Variable Price for any future conversions of
this Note.
(8) COMPANY INSTALLMENT CONVERSION OR REDEMPTION.
(a) General. Subject to and in accordance with the terms of this
Section 8, on each applicable Installment Date, the Company shall pay to the
Holder of this Note the Installment Amount as of such Installment Date by the
combination of any of the following, (i) provided that there has been no Equity
Conditions Failure, requiring the conversion of all or any portion of the
applicable Installment Amount, in accordance with this Section 8 (a "Company
Conversion"), and/or (ii) redeeming for cash all or any portion of the
applicable Installment Amount in accordance with this Section 8 (a "Company
Redemption"); provided that all of the outstanding applicable Installment Amount
as of each such Installment Date must be converted or redeemed by the Company on
the applicable Installment Date, subject to the provisions of this Section 8.
Unless the Company Installment Notice (as defined below) indicates otherwise or
if there is an Equity Conditions Failure, the entire Installment Amount to be
paid on such Installment Date shall be paid through a Company Conversion. On or
prior to the date which is the eighth (8th) Trading Day prior to each
Installment Date (each, an "Installment Notice Due Date"), the Company shall
deliver written notice (each, a "Company Installment Notice"), to the Holder
which Company Installment Notice shall state (i) the portion, if any, of the
applicable Installment Amount to be converted pursuant to a Company Conversion
(the "Company Conversion Amount"), (ii) the portion, if any, of the applicable
Installment Amount which the Company elects to redeem pursuant to a Company
Redemption (the "Company Redemption Amount") and (iii) unless the Company has
elected to pay the applicable Installment Amount entirely through a Company
Redemption, the Company Installment Notice shall certify that the Equity
Conditions have been satisfied as of the date of the Company Installment Notice.
Each Company Installment Notice whether actually given or deemed given shall be
irrevocable. Except as expressly provided in this Section 8(a), the Company
shall redeem and convert the applicable Installment Amount of this Note pursuant
to this Section 8 and the corresponding Installment Amounts of the Other Notes
pursuant to the corresponding provisions of the Other Notes in the same ratio of
the Installment Amount being redeemed and converted hereunder. The Company
Redemption Amount (whether set forth in the Company Installment Notice or by
operation of this Section 8) shall be redeemed in accordance with Section 8(b)
and the Company Conversion Amount shall be converted in accordance with Section
8(c).
(b) Mechanics of Company Redemption. If the Company elects, or is
deemed to have elected, a Company Redemption in accordance with Section 8(a),
then the Company Redemption Amount, if any, which is to be paid to the Holder on
the applicable Installment Date shall be redeemed by the Company on such
Installment Date upon payment by the Company to the Holder on such Installment
Date, by wire transfer of immediately available funds, an amount in cash (the
"Company Installment Redemption Price") equal to 100% of the Company Redemption
Amount. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any
-17-
such designation, a "Conversion Notice" for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price. Conversions required by this Section
8(b) shall be made in accordance with the provisions of Section 3(c).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any
interest thereon) is paid in full, the Company Redemption Amount (together with
any interest thereon) may be converted, in whole or in part, by the Holder into
Common Shares pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable
Installment Date as set forth in the immediately preceding sentence, the Company
Redemption Amount so converted shall be deducted from the Installment Amounts
relating to the Installment Dates as set forth in the applicable Conversion
Notice.
(c) Mechanics of Company Conversion.
(i) If the Company pays any part of an Installment Amount pursuant
to a Company Conversion in accordance with Section 8(a), then on the third (3rd)
Trading Day immediately preceding the Installment Date the Company shall (i)
direct Vasogen to, and upon such direction Vasogen shall or shall cause the
Transfer Agent to, issue to the Holder, for delivery on or prior to the
Installment Date, to the Holder's account with DTC a number of Common Shares
equal to the quotient of (x) such Company Conversion Amount (minus accrued and
unpaid Interest included in such amount) divided by (y) the Initial Company
Conversion Price (the "Pre-Installment Conversion Shares"), rounded to the
nearest whole Common Share and (ii) pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any accrued and unpaid Interest
included in such Company Conversion Amount. On the third (3rd) Trading Day
immediately after the end of the Company Conversion Measuring Period (the
"Installment Settlement Date"), the Company shall direct Vasogen to, and upon
such direction Vasogen shall or shall cause the Transfer Agent to, deliver to
the Holder's account with DTC a number of additional Conversion Shares, if any,
equal to the Installment Balance Conversion Shares. If an Event of Default
occurs during any applicable Company Conversion Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (A) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Company Conversion Amount represented by Pre-Installment Conversion Shares that
shall be returned to the Company and which Redemption Price shall be reduced to
the extent any such Common Shares are not returned to the Company), shall return
any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date to Vasogen which the Holder has not otherwise sold,
transferred or disposed of or (B) the Conversion Amount used to calculate the
Event of Default Redemption Price shall be reduced by the product of (1) the
Company Conversion Amount applicable to such Installment Date multiplied by (2)
the Conversion Share Ratio and, notwithstanding Section 14(a), in the case of
this clause (B), the Event of Default Redemption Price shall be paid by the
Company to the Holder within five (5) Trading Days after the end of the Company
Conversion Measuring Period.
(ii) Subject to the provisions of the following sentence, if there
is an Equity Conditions Failure, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to satisfy the
payment of the relevant
-18-
Installment Amount in one of the following ways or a combination of both: (x)
the Company shall redeem all or any part designated by the Holder of the
unconverted Company Conversion Amount (such designated amount is referred to as
the "First Redemption Amount") on such Installment Date or Installment
Settlement Date, as applicable, by paying to the Holder on such Installment Date
or Installment Settlement Date, as applicable, by wire transfer of immediately
available funds, an amount in cash equal to 125% of such First Redemption
Amount, or (y) the Company Conversion shall be null and void with respect to all
or any part designated by the Holder of the unconverted Company Conversion
Amount (other than any amount redeemed under clause (x) of this Section
8(c)(ii)) and the Holder shall be entitled to all the rights of a holder of this
Note with respect to such amount of the Company Conversion Amount; for the
avoidance of doubt, Xxxxxxx's failure to issue Common Shares with respect to any
Company Conversion Amount due to an Equity Conditions Failure shall not be
deemed an Event of Default hereunder so long as the Company otherwise complies
with the Holder's written designation in respect of the options set forth in (x)
and (y) above with respect to such Company Conversion Amount. In the event of an
Equity Conditions Failure, at the Holder's option, either (A) the Holder shall,
upon receipt of a First Redemption Amount (which amount includes redemption of
any portion of a Company Conversion Amount represented by Pre-Installment
Conversion Shares that shall be returned to the Company and which First
Redemption Amount shall be reduced to the extent any such Common Shares are not
returned to the Company), return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date to Vasogen which the Holder
has not otherwise sold, transferred or disposed of or (B) any related First
Redemption Amount shall be reduced by the product of (I) the Company Conversion
Amount applicable to such Installment Date multiplied by (II) the Conversion
Share Ratio and, notwithstanding the foregoing sentence, in the case of this
clause (B), such First Redemption Amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Company Conversion
Measuring Period. If the Company fails to redeem any First Redemption Amount on
or before the applicable Installment Date or Installment Settlement Date, as
applicable, by payment of such amount on the applicable Installment Date or
Installment Settlement Date, as applicable, then the Holder shall have the
rights set forth in Section 14(a) as if the Company failed to pay the applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xi)). Notwithstanding anything to the contrary in this Section
8(c), but subject to 3(d), until Vasogen delivers Common Shares representing the
Company Conversion Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Shares pursuant to Section 3. In the event
the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the Installment Dates as set forth in the
applicable Conversion Notice.
(iii) If, in connection with any Company Conversion, Vasogen is
unable to issue at the applicable Unadjusted Company Conversion Price all the
Common Shares that, but for the application of the Exchange Cap, Vasogen would
have been required to issue, then (A) Vasogen shall deliver to the Holder Common
Shares in accordance with Section 8(c)(i) and (B) the Company shall pay to the
Holder in cash, within ten (10) Trading Days of the applicable Installment
Settlement Date, an amount equal to the product of (1) the number of Exchange
Cap Limitation Shares applicable to such Installment Settlement Date and (2) the
-19-
excess (if any) of (x) such Adjusted Company Conversion Price over (y) the
Conversion Price (the "Company Conversion Make-Whole"). Notwithstanding the
foregoing, in connection with such Company Conversion, if the Company is
prohibited, pursuant to the rules and regulations of any applicable Principal
Market, to effect a Company Conversion by both the delivery by Vasogen to the
Holder of Common Shares and the payment by the Company of the Company Conversion
Make-Whole in cash, then (1) the Company shall pay to the Holder, in cash, on
the Installment Settlement Date, an amount (the "Exchange Cap Installment
Payment") equal to the product of (A) the number of Exchange Cap Limitation
Shares applicable to such Installment Settlement Date multiplied by (B) such
Adjusted Company Conversion Price and upon such payment the Company's and
Xxxxxxx's obligations to such Holder with respect to such Company Conversion
shall be deemed to be fully satisfied, and (2) such Holder shall return to
Vasogen on or before such Installment Settlement Date any Common Shares issued
to such Holder by Vasogen in connection with such Company Conversion; provided
that in the event that the Holder cannot return any such Common Shares to
Vasogen, the Company shall pay to the Holder, in lieu of the foregoing, an
amount in cash equal to the difference between (x) the Exchange Cap Installment
Payment and (y) the product of (I) the number of Pre-Installment Conversion
Shares issued to the Holder multiplied by (II) the applicable Unadjusted Initial
Company Conversion Price.
(d) Accelerated Amounts. The Company may, at its option (the
"Accelerated Payment Option"), (x) in the event that the Weighted Average Price
of the Common Shares on the most recently completed Trading Day prior to date
the of delivery of the Company Installment Notice exceeds $1.00, increase the
amount of the Installment Amount to be paid on the applicable Installment Date
by up to $900,000 plus accrued and unpaid Interest on such amount or (y) at any
one time during each of 2005, 2006 or 2007, in the event that the Weighted
Average Price of the Common Shares on the most recently completed Trading Day
prior to the date of delivery of the Company Installment Notice exceeds $4.00 on
NASDAQ, increase the applicable Installment Amount to be paid on the applicable
Installment Date by an amount equal to up to 40% of the aggregate Principal
amount (excluding the Letter of Credit Amount) of this Note then outstanding
plus accrued and unpaid Interest on such amount (any such amount described in
clauses (x) or (y) which exceeds the applicable Installment Amount, an
"Accelerated Amount"). In order for the Company to exercise any Accelerated
Payment Option, (1) the applicable Accelerated Amount shall be added to the
Installment Amount to be paid to the Holder in any Company Redemption and/or
Company Conversion on the applicable Installment Date pursuant to this Section 8
and (2) Vasogen shall issue the appropriate number of Accelerated Payment
Options Warrants on the applicable Installment Date. If the Company exercises
any such Accelerated Payment Option, the applicable Company Installment Notice
delivered to the holders of the Notes pursuant to Section 8(a) shall also state
that (1) the Company is exercising the Accelerated Payment Option and describe
the basis on which the Company is making such exercise, (2) state the aggregate
Accelerated Amount that shall be paid to the holders of all Notes on the
Installment Date and (3) state the number of Accelerated Payment Option Warrants
Vasogen anticipates issuing to the Holder on the applicable Installment Date.
Each Accelerated Amount shall be deducted from the Installment Amounts to be
paid on the last scheduled Installment Date hereunder.
(e) Pro Rata Acceleration Requirement. If the Company elects to
exercise the Accelerated Payment Option pursuant to Section 8(d), then it must
simultaneously
-20-
take the same action (and in the same proportion of the Accelerated Amount) with
respect to the Other Notes.
(9) COMPANY'S RIGHT OF MANDATORY REDEMPTION/CONVERSION.
(a) Mandatory Redemption/Conversion. If at any time from and after the
first (1st) anniversary of the Issuance Date (the "Mandatory
Redemption/Conversion Eligibility Date"), (i) the Weighted Average Price of the
Common Shares exceeds 175% of the Conversion Price then in effect for each of
twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the Mandatory Redemption/Conversion Eligibility Date (the "Mandatory
Redemption/Conversion Condition") and (ii) the Equity Conditions are satisfied
or waived in writing by the Holder from and including the Mandatory
Redemption/Conversion Notice Date (as defined below) through and including the
Mandatory Redemption/Conversion Date (as defined below) or through and including
the Installment Settlement Date in the case of any Mandatory Conversion, the
Company shall have the right, provided the Mandatory Redemption/Conversion is
met on and as of the Mandatory Redemption/Conversion Notice Date (as defined
below), to (i) redeem all or any portion of the Conversion Amount then remaining
under this Note (a "Mandatory Redemption") and/or (ii) require the conversion of
all or any portion of the Conversion Amount then remaining under this Note (a
"Mandatory Conversion"). The portion of this Note subject to redemption pursuant
to this Section 9 shall be redeemed by the Company in cash, if it so elects, at
a price equal to the Conversion Amount being redeemed on the Mandatory
Redemption/Conversion Date plus any accrued and unpaid Interest thereon through
the Mandatory Redemption/Conversion Date (the "Mandatory Redemption Price"). The
Company may exercise its right to require a Mandatory Redemption and/or a
Mandatory Conversion under this Section 9(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the "Mandatory Redemption/Conversion Notice" and the date all
of the holders are delivered such notice by facsimile is referred to as the
"Mandatory Redemption/Conversion Notice Date") and each Mandatory
Redemption/Conversion Notice shall be irrevocable. The Mandatory
Redemption/Conversion Notice shall state (1) the aggregate Conversion Amount of
Notes (the "Mandatory Redemption/Conversion Amount") which the Company has
elected to be subject to Mandatory Redemption and/or Mandatory Conversion from
all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes), (2) the Holder's pro rata portion, if any, of
the Mandatory Redemption/Conversion Amount that the Company is requiring to be
converted pursuant to a Mandatory Conversion, (the "Mandatory Conversion
Amount"), (3) the Holder's pro rata portion, if any, of the Mandatory
Redemption/Conversion Amount which the Company elects to redeem pursuant to a
Mandatory Redemption (the "Mandatory Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the Mandatory Redemption/Conversion
Amount which shall be paid in cash to the holders of Notes on the Mandatory
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the Mandatory Redemption/Conversion Notice and (6) the date on
which the Mandatory Redemption and/or Mandatory Conversion shall occur (the
"Mandatory Redemption/Conversion Date") which date shall be (x) in connection
with any Mandatory Redemption not less than ten (10) Trading Days nor more than
thirty (30) Trading Days after the Mandatory Redemption/Conversion Notice Date
and (y) in connection with any Mandatory Conversion not less than thirty (30)
Trading Days after the Mandatory Redemption/Conversion Notice Date; provided,
however, that the Company shall not redeem and/or convert a Conversion
-21-
Amount under this Section in excess of the Holder's Pro Rata Amount of the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Shares
on NASDAQ and the TSX combined over the ten (10) consecutive Trading Day period
ending on the Trading Day immediately preceding the Mandatory
Redemption/Conversion Notice Date. The Company may not effect more than one
Mandatory Redemption and/or Mandatory Conversion during any consecutive thirty
(30) day period. All Conversion Amounts converted by the Holder after the
Mandatory Redemption/Conversion Notice Date shall reduce the Conversion Amount
of this Note required to be redeemed and/or converted on the Mandatory
Redemption/Conversion Date. Mandatory Conversions made pursuant to this Section
9 shall be made in accordance with Section 8(c) (including Section 8(c)(iii))
and references in Section 8(c) to (I) the Installment Amount shall be deemed to
refer to the Mandatory Redemption/Conversion Amount (plus accrued and unpaid
Interest thereon), (II) the Company Conversion shall be deemed to refer to the
Mandatory Conversion, (III) the Company Conversion Amount shall be deemed to
refer to the Mandatory Conversion Amount (plus accrued and unpaid Interest
thereon), (IV) the Installment Date shall be deemed to refer to the Mandatory
Redemption/Conversion Date, (V) the Initial Company Conversion Price shall be
deemed to refer to Initial Mandatory Conversion Price, (VI) the Company
Conversion Measuring Period shall be deemed to refer to the Mandatory Conversion
Measuring Period, (VII) the Company Conversion Price shall be deemed to refer to
Mandatory Conversion Price, (VIII) the Adjusted Company Conversion Price shall
be deemed to refer to the Adjusted Mandatory Conversion Price and (IX) the
Unadjusted Company Conversion Price shall be deemed to refer to the Unadjusted
Mandatory Conversion Price. Mandatory Redemptions made pursuant to this Section
9 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause a Mandatory Redemption and/or Mandatory Conversion pursuant to Section
9(a), then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Mandatory Redemption and/or Mandatory
Conversion pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require redemption and/or conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(i) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be redeemed and/or converted pursuant to Section 9(a), multiplied by
(ii) the fraction, the numerator of which is the sum of the aggregate initial
principal amount of the Notes purchased by such holder and the denominator of
which is the sum of the aggregate initial principal amount of the Notes
purchased by all holders (such fraction with respect to each holder is referred
to as its "Redemption/Conversion Allocation Percentage", and such amount with
respect to each holder is referred to as its "Pro Rata Redemption/Conversion
Amount"). In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder's Notes, the transferee shall be allocated
a pro rata portion of such holder's Redemption/Conversion Allocation Percentage
and Pro Rata Redemption/Conversion Amount.
(10) COMPANY'S RIGHT OF REDEMPTION/CONVERSION OF THE LETTER OF CREDIT
AMOUNT.
(a) Letter of Credit Amount Redemption. If at any time from and after
the Issuance Date (the "LC Conversion Eligibility Date"), (i) the Weighted
Average Price of
-22-
the Common Shares exceeds 150% of the Conversion Price then in effect for each
of twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the LC Conversion Eligibility Date (the "LC Redemption/Conversion
Condition") and (ii) the Equity Conditions are satisfied or waived in writing by
the Holder from and including the LC Redemption/Conversion Notice Date (as
defined below) through and including the LC Redemption/Conversion Date (as
defined below) or through and including the Installment Settlement Date in the
case of any LC Conversion, the Company shall have the right, provided the LC
Redemption/Conversion Condition is met on and as of the LC Redemption/Conversion
Notice Date (as defined below), to (i) redeem all or any portion of a principal
amount of this Note then outstanding that is not in excess of the Letter of
Credit Amount (the "Available Conversion Amount") (such redemption, an "LC
Redemption") and/or (ii) require the conversion of all or any portion of such
amount (an "LC Conversion"). The portion of this Note subject to redemption
pursuant to this Section 10 shall be redeemed by the Company in cash, if it so
elects, at a price equal to the Conversion Amount being redeemed plus any
accrued and unpaid Interest thereon through the LC Redemption/Conversion Date
(the "LC Redemption Price"). The Company may exercise its right to require an LC
Redemption and/or an LC Conversion under this Section 10(a) by delivering a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of Notes (the "LC Redemption/Conversion Notice" and the
date all of the holders are delivered such notice by facsimile is referred to as
the "LC Redemption/Conversion Notice Date") and each LC Redemption/Conversion
Notice shall be irrevocable. The LC Redemption/Conversion Notice shall state (1)
the aggregate Conversion Amount of Notes (the "LC Redemption/Conversion Amount")
which the Company has elected to be subject to an LC Redemption and/or an LC
Conversion from all of the holders of the Notes pursuant to this Section 9 (and
analogous provisions under the Other Notes), (2) the portion, if any, of the
Available Conversion Amount that the Company is requiring to be converted
pursuant to an LC Conversion, (the "LC Conversion Amount"), (3) the portion, if
any, of the Available Conversion Amount which the Company elects to redeem
pursuant to an LC Redemption (the "LC Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the LC Redemption/Conversion Amount
which shall be paid in cash to the holders of Notes on the LC
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the LC Redemption/Conversion Notice and (6) the date on which
the LC Redemption and/or LC Conversion shall occur (the "LC
Redemption/Conversion Date") which date shall be (x) in connection with any LC
Redemption not less than fifteen (15) Trading Days nor more than thirty (30)
Trading Days after the LC Redemption/Conversion Notice Date and (y) in
connection with any LC Conversion not less than thirty (30) Trading Days after
the LC Redemption/Conversion Notice Date; provided, however, that the Company
shall not redeem any aggregate Conversion Amount under this Section in excess of
the Holder's Pro Rata Amount of the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Shares on NASDAQ and the TSX combined over the
fifteen (15) consecutive Trading Day period ending on the Trading Day
immediately preceding the LC Redemption/Conversion Notice Date. The Company may
not effect more than one LC Redemption and/or LC Conversion during any
consecutive thirty (30) day period. All Conversion Amounts converted by the
Holder after the LC Redemption/Conversion Notice Date shall reduce the
Conversion Amount of this Note required to be redeemed and/or converted on the
LC Redemption/Conversion Date. LC Conversions made pursuant to this Section 10
shall be made in accordance with Section 8(c) (including Section 8(c)(iii)) and
references in Section 8(c)
-23-
to (I) the Installment Amount shall be deemed to refer to the LC
Redemption/Conversion Amount (plus accrued and unpaid Interest thereon), (II)
the Company Conversion shall be deemed to refer to the LC Conversion, (III) the
Company Conversion Amount shall be deemed to refer to the LC Conversion Amount
(plus accrued and unpaid Interest thereon), (IV) the Installment Date shall be
deemed to refer to the LC Redemption/Conversion Date, (V) the Initial Company
Conversion Price shall be deemed to refer to Initial Mandatory Conversion Price,
(VI) the Company Conversion Measuring Period shall be deemed to refer to the
Mandatory Conversion Measuring Period, (VII) the Company Conversion Price shall
be deemed to refer to Mandatory Conversion Price, (VIII) the Adjusted Company
Conversion Price shall be deemed to refer to the Adjusted Mandatory Conversion
Price and (IX) the Unadjusted Company Conversion Price shall be deemed to refer
to the Unadjusted Mandatory Conversion Price. LC Redemptions made pursuant to
this Section 10 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause an LC Redemption and/or LC Conversion pursuant to Section 10(a), then
it must simultaneously take the same action with respect to the Other Notes. If
the Company elects to cause a LC Redemption and/or LC Conversion pursuant to
Section 10(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the
Company shall require redemption and/or conversion of a Conversion Amount from
each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be redeemed
and/or converted pursuant to Section 10(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder and the denominator of which is the sum of the
aggregate initial principal amount of the Notes purchased by all holders (such
fraction with respect to each holder is referred to as its "LC Amount Allocation
Percentage", and such amount with respect to each holder is referred to as its
"Pro Rata LC Amount"). In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such xxxxxx'x XX Amount Allocation Percentage
and Pro Rata LC Amount.
(11) GUARANTY. Vasogen and Vasogen, Corp. shall guarantee the obligations
under this Note and the Other Notes to the extent and in the manner set forth in
the Guarantees (as defined in the Securities Purchase Agreement).
(12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Memorandum and Articles of Association or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(13) AUTHORIZED SHARES.
(a) Reservation. Vasogen shall have sufficient authorized and unissued
Common Shares for each of the Notes equal to the number of Common Shares
necessary to effect the conversion at the Conversion Rate with respect to the
Conversion Amount
-24-
of each such Note as of the Issuance Date. So long as any of the Notes are
outstanding, Vasogen shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Shares, solely for the
purpose of effecting the conversion of the Notes, the number of Common Shares as
shall from time to time be necessary to effect the conversion of all of the
Notes then outstanding; provided that at no time shall the number of Common
Shares so available be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the
"Required Amount").
(b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding Vasogen does not have a sufficient number of authorized
and unissued Common Shares to satisfy its obligation to have available for
issuance upon conversion of the Notes at least a number of Common Shares equal
to the Required Amount (an "Authorized Share Failure"), then Vasogen shall as
promptly as practicable take all action necessary to increase Vasogen's
authorized Common Shares to an amount sufficient to allow Vasogen to have
available the Required Amount for the Notes then outstanding.
(14) HOLDER'S REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Trading Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to be paid in cash to the Holder concurrently with the
consummation of such Change of Control if such notice is received at least five
(5) Trading Days prior to the consummation of such Change of Control and within
five (5) Trading Days after the Company's receipt of such notice otherwise (the
"Change of Control Redemption Date"). The Company shall deliver the Mandatory
Redemption Price to the Holder on the Mandatory Redemption/Conversion Date. The
Company shall deliver the LC Redemption Price to the Holder on the LC
Redemption/Conversion Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to, by providing written notice to the Company, require the
Company to promptly return to the Holder all or any portion of this Note
representing the Conversion Amount that was submitted for redemption and for
which the applicable Redemption Price has not been paid. Upon the Company's
receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to such Conversion Amount and (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount.
(b) Redemption by Other Holders. Upon the Company's receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(b) (each, an "Other
Redemption Notice"), the Company shall immediately, but no later than one (1)
Trading Day of its receipt thereof, forward to the Holder by facsimile a copy of
-25-
such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Trading Day period beginning on and
including the date which is three (3) Trading Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Trading Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Trading Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Trading Day period.
(15) VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as provided by law, the Canada Business Corporations Act
and as expressly provided in this Note.
(16) COVENANTS.
(a) Rank. All payments due under this Note (a) shall rank pari passu
with all Other Notes and (b) neither Vasogen nor any of its Subsidiaries shall
incur Indebtedness that is senior to the Notes or the Guarantees as applicable.
(b) Incurrence of Indebtedness. So long as this Note is outstanding,
Vasogen shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of Liens. So long as this Note is outstanding, Vasogen
shall not, and Vasogen shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by Vasogen or any of its
Subsidiaries (collectively, "Liens") other than Permitted Liens.
(d) Restricted Payments. Vasogen shall not, and Vasogen shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness, whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness if at the time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Net Cash Balance Test. If the ACCLAIM trial fails to meet its
primary endpoint, then, beginning on September 1, 2006 until the earlier of (x)
the Maturity Date or (y) such time as the Notes have been otherwise converted or
redeemed in full, Vasogen and the Company, on a consolidated basis, shall
maintain, at all times, a Net Cash Balance equal to or exceeding the applicable
Net Cash Balance Threshold (the "Net Cash Balance Test").
-26-
(i) On any date (or within four (4) Business Days thereafter) on
which the Net Cash Balance Test is not satisfied (a "Failure Date"), Vasogen
shall publicly disclose (on a Current Report on Form 6-K or otherwise and
through analogous legal disclosure means under Canadian securities laws) the
fact that Vasogen has failed to satisfy the Net Cash Balance Test. On the date
of any such disclosure, Vasogen shall also provide to the Holder a
certification, executed on behalf of Vasogen by the Chief Financial Officer of
Vasogen or his or her designate who shall also be an executive officer or the
controller, as to the amount of the Net Cash Balance as of the Failure Date and
disclose such amount in the Current Report on Form 6-K.
(ii) Vasogen shall announce its operating results (the "Operating
Results") for each Fiscal Quarter no later than the forty-fifth (45th) day after
the end of each Fiscal Quarter or, with respect to the last Fiscal Quarter, the
ninetieth (90th) day after such quarter (the "Announcement Date") and, in the
event Vasogen shall have satisfied the Net Cash Balance Test at all times during
such Fiscal Quarter, such announcement shall include a statement to the effect
that Vasogen satisfied the Net Cash Balance Test at all times throughout such
Fiscal Quarter; provided, however, that in the event Vasogen is delayed in
announcing its Operating Results for any Fiscal Quarter, on the Announcement
Date Vasogen shall, in lieu of the foregoing, (A) make a statement to the effect
that it has complied with all of its covenants under the Notes, including,
without limitation, the Net Cash Balance Test and (B) provide to the holders of
Notes a certification, in accordance with terms of the next sentence, certifying
the same. On the Announcement Date, Vasogen shall also provide to the holders of
Notes a certification, executed on behalf of Vasogen by the Chief Financial
Officer of Vasogen or his or her designate who shall also be an executive
officer or the controller, certifying that Vasogen satisfied the Net Cash
Balance Test at all times throughout such Fiscal Quarter.
(17) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if Vasogen shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Note, then, in each such case any Conversion Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Conversion Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the Common Shares on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by Xxxxxxx's Board of Directors) applicable to one
Common Share, and (ii) the denominator shall be the Weighted Average Price of
the Common Shares on the trading day immediately preceding such record date (but
such fraction shall not be greater than one); provided, however, that in no
event shall the Conversion Price be reduced pursuant to this Section 17 with
respect to any portion of a Distribution for which the Conversion Price is also
being reduced pursuant to any of the provisions of Section 7 hereof in respect
of the same portion of such Distribution.
(18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
-27-
affirmative vote of the Required Holders at a meeting duly called for such
purpose or the written consent of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. Any change or amendment so
approved shall be binding upon all existing and future holders of this Note and
any Other Notes; provided, however, that no such change, amendment, alteration
or amendment, as applied to any of the Notes held by any particular holder of
Notes, shall, without the written consent of that particular holder, (i) reduce
the Interest Rate, extend the time for payment of Interest or change the manner
or rate of accrual of Interest on the Notes, (ii) reduce the amount of
Principal, or extend the Maturity Date, of the Notes, (iii) make any change that
impairs or adversely affects the conversion rights of the Notes, (iv) impair the
right of any holder of Notes to receive payment of principal or Interest or
other payments due under the Notes, if any, on or after the due dates therefor;
or (v) modify any of the provisions of, or impair the right of any holder of
Notes under, this Section 18.
(19) TRANSFER. This Note and any Common Shares issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company on two (2) Trading Days' written notice, subject only
to the provisions of Section 2(f) of the Securities Purchase Agreement;
provided, that the Holder may not transfer any outstanding Principal and accrued
and unpaid Interest of this Note, in part, to the extent such Principal and
Interest is less than the lesser of (a) $2,000,000 and (b) the remaining
outstanding Principal and accrued and unpaid Interest of this Note; provided,
further, however, that any transferee of all or any portion of this Note agrees
to comply with all applicable securities laws; provided, also, that any
transferee of all or any portion of this Note that wishes to avail itself of the
benefits contemplated by Section 9(s) of the Securities Purchase Agreement
(including, for the avoidance of doubt, any subsequent transferee of any
transferee) shall make to Vasogen the representations and warranties made by the
Purchaser in, and give the Notice as contemplated pursuant to, Section 9(s) of
the Securities Purchase Agreement. Prior to the effectiveness of any such sale,
assignment or transfer pursuant to this Section 19, and only if such transferee
seeks to receive Common Shares through DTC's Deposit Withdrawal Agent Commission
system, such transferee shall have completed and delivered to the Company the
DTC brokerage account information with respect to such transferee in
substantially the form of Exhibit E as attached to the Securities Purchase
Agreement.
(20) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of
-28-
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 20(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 20(a) or Section 20(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest on the Principal of this Note, from the Issuance Date.
(21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to,
-29-
attorneys' fees and disbursements.
(23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
(24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(25) DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Weighted Average Price or the arithmetic calculation of the Conversion
Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Trading
Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Trading Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Trading Days submit via facsimile (a) the disputed
determination of the Weighted Average Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Rate or the Redemption Price
to the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Trading Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
(26) NOTICES; CURRENCY; TAXES; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven (7) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
-30-
(b) Currency. All principal, interest and other amounts owing under
this Note or any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in US dollars. All amounts denominated in other
currencies shall be converted in the US dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Note, the US dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date
of calculation shall be the final date of such period of time).
(c) Taxes.
(i) Any and all payments made by the Company hereunder, including
any amounts received on a conversion or redemption of the Note and any amounts
on account of interest or deemed interest, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 26(c)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to the Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 26(c) shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.
(d) Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via
-31-
overnight courier service to such Person at such address as previously provided
to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Buyer Schedule attached to the Purchase
Agreements); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Trading Day, the same shall instead be due on
the next succeeding day which is a Trading Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.
(27) CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
(28) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices otherwise
required pursuant to applicable law in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(29) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Note shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
-32-
XXXXXX IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(30) JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 30
referred to as the "Judgment Currency") an amount due in US dollars under this
Note, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 30(a)(ii) being hereinafter
referred to as the "Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Note.
(31) MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
(32) CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "Accelerated Payment Option Warrants" means warrants exercisable
for a number of Common Shares equal to 65% of the quotient of (x) the
Accelerated Amount being paid pursuant to Section 8 minus accrued and unpaid
Interest
-33-
included in such amount divided by (y) the Conversion Price on the applicable
Installment Date, rounded up to the nearest whole Common Share. Such warrants
shall be in substantially the form of the Warrant attached as Exhibit B to the
Securities Purchase Agreement, except that the expiration date of such warrants
shall be five (5) years from the issuance date thereof. The exercise price of
the Accelerated Payment Option Warrants shall be the same as the Conversion
Price then in effect; provided, however, that if on the applicable Installment
Date on which such warrants are issued the Weighted Average Price of the Common
Shares is greater than the Conversion Price that would become the exercise price
of the Accelerated Payment Option Warrants, (i) the Company shall pay to the
Purchasers, in Common Shares within three (3) Trading Days of the applicable
Installment Date or, at the option of the Company, in cash, the product of (A)
the difference between (1) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) Trading Days ending on the
Trading Day immediately prior to the applicable Installment Date (the "Exercise
Price Measuring Period") and (2) such Conversion Price and (B) the number of
Common Shares for which such Accelerated Payment Option Warrants are exercisable
(such product, the "Adjustment Amount") and (ii) the exercise price for such
Accelerated Payment Option Warrants will be adjusted to equal such arithmetic
average of the Weighted Average Price of the Common Shares during the Exercise
Price Measuring Period. In the event the Company shall pay the Adjustment Amount
in Common Shares, the number of Common Shares to be delivered shall be equal to
the quotient of the Adjustment Amount divided by the Company Conversion Price
for the applicable Installment Date, rounded up to the nearest whole Common
Share; provided, however that the Company shall not be entitled to pay the
Adjustment Amount in Common Shares if the Equity Conditions are not satisfied.
(b) "Adjusted Conversion Price" means, as of any date of determination,
the price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Conversion Date.
(c) "Approved Share Plan" means any employee benefit plan which has
been approved by the Board of Directors of Vasogen, pursuant to which Xxxxxxx's
securities may be issued to any employee, consultant, officer or director in
connection with services provided or to be provided to Vasogen or any Subsidiary
thereof.
(d) "Bloomberg" means Bloomberg Financial Markets.
(e) "Canadian Prospectus" shall have the meaning set forth in the
Registration Rights Agreement.
(f) "Change of Control" means any Fundamental Transaction other than
(A) any reorganization, recapitalization or reclassification of the Common
Shares in which holders of Vasogen's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger
-34-
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or Vasogen.
(g) "Change of Control Conversion Price" means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Shares during each of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the delivery of the Change of Control Redemption Notice (such period,
the "Change of Control Measuring Period"); provided, however, that if such
arithmetic average of the Weighted Average Price during the Change of Control
Measuring Period shall yield a price that is less than $1.00, then the Change of
Control Conversion Price shall be computed as 90% of the arithmetic average of
the Weighted Average Price of the Common Shares during the Change of Control
Measuring Period. Notwithstanding the foregoing, in the event that as a result
of the application of the Exchange Cap the Company is unable to issue Common
Shares on the applicable date using the Change of Control Conversion Price as
calculated pursuant to the foregoing sentence, then the Change of Control
Conversion Price shall be the price equal to the arithmetic average of the
Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
delivery of the Change of Control Redemption Notice (such price, the "Adjusted
Change of Control Conversion Price").
(h) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement, which date is the date the Company initially issued Notes
pursuant to the terms of the Securities Purchase Agreement.
(i) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of Vasogen or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.
(j) "Company Conversion Price" means, as of any date of determination,
that price which shall be the lower of (i) the applicable Conversion Price and
(ii) the price computed as 95% of the arithmetic average of the Weighted Average
Price of the Common Shares during each of the twelve (12) consecutive Trading
Days commencing on the Trading Day immediately after the applicable Installment
Date (such period, the "Company Conversion Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Company Conversion Measuring Period shall yield a price that is less than
$1.00, then the Company Conversion Price shall be computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Shares during the
Company Conversion Measuring Period. Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap the Company is unable to
issue Common Shares on an Installment Settlement Date using the Company
Conversion Price as calculated pursuant to the foregoing sentence (the
"Unadjusted Company Conversion Price"), then the Company Conversion Price shall
be the price equal to the arithmetic average of the Weighted Average Price of
the Common Shares during each of the five (5) consecutive Trading Days ending on
the
-35-
Trading Day immediately prior to the applicable Installment Settlement Date
(such price, the "Adjusted Company Conversion Price").
(k) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
(l) "Conversion Share Ratio" means, as to any applicable date of
determination, the quotient of (i) the number of Pre-Installment Conversion
Shares or Pre-Maturity Conversion Shares, as applicable, delivered in connection
with an Installment Date or the Maturity Date, as applicable divided by (ii) the
number of Post-Installment Conversion Shares or Post Maturity Conversion Shares,
as applicable, relating to such Installment Settlement Date or Maturity
Settlement Date, as the case may be.
(m) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(n) "Effectiveness Time" means January 20, 2006.
(o) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc. or the American Stock Exchange.
(p) "Equity Conditions" means that each of the following conditions is
satisfied: (i) either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and a Grace Period (as defined in the Registration
Rights Agreement) shall not be in progress or (y) all Common Shares issuable
upon conversion or redemption of the Notes and payment of Installment Amounts
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws and such
shares shall be freely tradable on both the NASDAQ and the TSX, other than any
restrictions on disposition by (I) a holder of a control block, where the Holder
has become such a holder or (II) an affiliate; (ii) the Common Shares are
designated for quotation or listed on both of the Principal Markets and shall
not have been suspended from trading on either of such exchanges or markets
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by Vasogen or the
Company) nor shall delisting or suspension by either of such exchanges or
markets have been threatened or pending either (A) in writing by such exchanges
or markets or (B) by falling below the minimum listing maintenance requirements
of such exchanges or markets; provided, however, that no threatened or pending
delisting or suspension that has been publicly announced and which shall not
occur within one (1) month of the applicable date of determination shall be
considered when determining whether the Company has satisfied the condition set
forth in this clause (ii); (iii) during the one (1) year period ending on and
including
-36-
the date immediately preceding the applicable date of determination (or such
lesser period of time since the Issuance Date), Vasogen shall have delivered
Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise
of the Warrants to the holders on a timely basis as set forth in Section
3(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections
1(c) of the Warrants, unless such failure to deliver shall have occurred only
once and shall have been remedied by Vasogen with three (3) Business Days; (iv)
any applicable Common Shares to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules and regulations of the Principal Markets; (v) on each day during the
period beginning three (3) months prior to the applicable date of determination
and ending on and including the applicable date of determination (the "Equity
Conditions Measuring Period"), the Company (or Vasogen if any such payment was
due in Common Shares) shall not have failed to timely make any payments within
five (5) Trading Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not
have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, rejected publicly
by the board of directors (or similar governing body) of Vasogen or the Company,
as applicable, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) neither Vasogen nor the Company shall have any knowledge of any
fact (other than facts relating exclusively to the Holder that would require
updating of the Selling Shareholders or Plan of Distribution section of the
Registration Statement) that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of all remaining Registrable Securities in accordance
with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion or redemption of the Notes or payment of Installment
Amounts not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws, other than any restrictions on
disposition by (I) a holder of a control block, where the Holder has become such
a holder or (II) an affiliate; (viii) Vasogen and the Company shall be in
material compliance with and shall not be in breach of any material provision or
covenant, and shall not have breached, as of the Closing Date, any
representation or warranty contained in any Transaction Document; and (ix) at
the applicable date of determination, Vasogen is not Insolvent (as defined in
the Securities Purchase Agreement).
(q) "Equity Conditions Failure" means that during any period commencing
with (i) the delivery of the Company Installment Notice through the applicable
Installment Date or Installment Settlement Date, as applicable, or (ii) the
delivery of the Maturity Election Notice through the Maturity Settlement Date,
the Equity Conditions have not been satisfied (or waived in writing by the
Holder).
(r) "Exchange Cap Limitation Shares" means (i) with respect to any
conversion required pursuant to a Conversion Notice, a number of Common Shares
equal to the quotient of the Conversion Amount set forth in such Conversion
Notice divided by the Conversion Price and (ii) with respect to any Company
Conversion, Mandatory Conversion or LC Conversion, a number of Common Shares
equal to the quotient of the Conversion Amount subject to conversion divided by
the applicable Unadjusted Company Conversion Price or the applicable Unadjusted
Mandatory Conversion Price.
-37-
(s) "Excluded Securities" means any Common Shares issued or issuable:
(i) in connection with any Approved Share Plan; (ii) upon conversion of the
Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering which generates gross proceeds to the
Company of at least $50,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with any strategic acquisition or strategic transaction, including a
licensing partnership, development or marketing agreement, whether through an
acquisition of shares or a merger of any business, assets or technologies, the
primary purpose of which is not to raise equity capital; and (v) upon conversion
of any Options or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date and have been disclosed in Schedule
3(r) to the Securities Purchase Agreement, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date.
(t) "FDA Approval" means the pre-market approval granted by the U.S.
Food and Drug Administration for the marketing of Celacade for use in treatment
of chronic heart failure.
(u) "Fiscal Quarter" means each of the fiscal quarters adopted by the
Company for financial reporting purposes that correspond to the Company's fiscal
year that ends on November 30, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(v) "Fundamental Transaction" means that the Company shall no longer be
a wholly-owned subsidiary of Vasogen or that the Company or Vasogen shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company or Vasogen, as applicable, is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
Vasogen or Vasogen and its Subsidiaries to another Person other than in
connection with a strategic transaction involving a licensing of intellectual
property and related assets of the Company or Vasogen or relating to a
partnership arrangement with respect to any such intellectual property and
related assets, in each case where such licensing or partnership arrangements
contain terms and conditions that are customary in Vasogen's industry for such
type of transactions and where the board of directors of Vasogen determines, in
good faith, that Vasogen shall retain a material financial participation in the
exploitation of such intellectual property and related assets, or (iii) be
subject to an offer from another Person or group of related Persons (as defined
in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or
(iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other
Person or group acquires more than the 50% of the outstanding Voting Shares (not
including any Voting Shares held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such share purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify the Common Shares.
-38-
(w) "GAAP" means Canadian generally accepted accounting principles,
consistently applied, as in effect on the Issuance Date.
(x) "Holder Pro Rata Amount" means a fraction (i) the numerator of
which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Purchase Agreements on the Closing Date.
(y) "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables and related accrued liabilities
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. References to Indebtedness of the Company or Vasogen shall
mean Indebtedness on a consolidated basis.
(z) "Initial Company Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the fourth (4th) Trading Day immediately
prior to the Installment Date (such period, the "Initial Company Measuring
Period"); provided, however, that if such arithmetic average of the Weighted
Average Price during the Initial Company Measuring Period shall yield a price
that is less than $1.00, then the Initial Company Conversion Price shall be
computed as 90% of the arithmetic average of the Weighted Average Price of the
Common Shares during the Initial Company Measuring Period (the "Unadjusted
Initial Company Conversion Price"). Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap, the Company is unable
to issue Common Shares on an Installment Date using the Initial Company
Conversion Price as calculated pursuant to the foregoing sentence to determine
the number of Common Shares to be issued to the Holder as payment of any Company
Conversion Amount on any Installment Date, then the Initial Company Conversion
Price shall be the price equal to the
-39-
arithmetic average of the Weighted Average Price of the Common Shares during
each of the five (5) consecutive Trading Days ending on the fourth (4th) Trading
Day immediately prior to the applicable Installment Date.
(aa) "Initial Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) consecutive Trading Days ending
on the third (3rd) Trading Day immediately prior to the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the
applicable Mandatory Redemption/Conversion Date or LC Redemption/Conversion Date
using the Initial Mandatory Conversion Price as calculated pursuant to the
foregoing sentence, then the Initial Mandatory Conversion Price shall be the
price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Mandatory Redemption/Conversion
Date or LC Redemption/Conversion Date.
(bb) "Initial Maturity Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately prior to the
Maturity Date (such period, the "Initial Maturity Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Initial Maturity Measuring Period shall yield a price that is less than
$1.00, then the Initial Maturity Conversion Price shall be computed as 90% of
the arithmetic average of the Weighted Average Price of the Common Shares during
the Initial Maturity Measuring Period. Notwithstanding the foregoing, in the
event that as a result of the application of the Exchange Cap the Company is
unable to issue Common Shares on the Maturity Date using the Initial Maturity
Conversion Price as calculated pursuant to the foregoing sentence, then the
Maturity Conversion Price shall be the price equal to the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
Maturity Date.
(cc) "Installment Amount" means, as to the initial Installment Date
(and, unless otherwise required herein, such amount shall be the Installment
Amount to be paid on each subsequent Installment Date), an amount equal to the
lesser of (i) (A) the quotient of (x) the aggregate outstanding Principal of
this Note divided by (y) the number of whole months from such Installment Date
through the Maturity Date and (ii) the Principal amount outstanding under the
Note, in each case, plus any accrued and unpaid interest on such amount, as any
such Installment Amount may be reduced pursuant to the terms of this Note,
whether upon conversion, redemption or otherwise; provided that, for any
scheduled Installment Date following the date on which the Maturity Date is
extended to October 7, 2010, the Installment Amount shall be recalculated
pursuant to the formula in clause (i) using such new Maturity Date and such
amount shall be the Installment Amount to be paid on such Installment Date and
on each subsequent Installment Date. For any Installment Date on which an
Accelerated Amount is
-40-
to be paid, such Accelerated Amount shall be added to, and considered part of,
the applicable Installment Amount.
(dd) "Installment Balance Conversion Shares" means, for any Installment
Date, a number of Common Shares equal to (i) the Post-Installment Conversion
Shares for such date minus (ii) the amount of any Pre-Installment Conversion
Shares delivered on such date; provided that in the event that the amount of
Pre-Installment Conversion Shares exceeds the Post-Installment Conversion Shares
for such date (such excess, the "Installment Conversion Shares Excess"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Installment Conversion Share Excess and (y) the Company Conversion Price and the
Installment Balance Conversion Shares shall equal zero (0).
(ee) "Installment Date" means, initially, the first (1st) day of the
calendar month following the month during which the Canadian Prospectus has
become effective and, thereafter, the first (1st) day of each calendar month
prior to the Maturity Date.
(ff) "Interest Principal Amount" means, for any date of determination,
the amount equal to (i) the outstanding Principal of this Note on such date
minus (ii) the Letter of Credit Amount on such date.
(gg) "Letter of Credit Amount" means the Holder's Pro Rata Amount of
the amount of the letter of credit (the "Letter of Credit") issued in favor of
the LC Agent (as defined in the Securities Purchase Agreement), which amount
shall initially be $10,000,000, which amount may be reduced pursuant to Section
4(q) of the Securities Purchase Agreement.
(hh) "Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the twelve (12) consecutive Trading Days
commencing on the Trading Day immediately after the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be
(such period, the "Mandatory Conversion Measuring Period"). Notwithstanding the
foregoing, in the event that as a result of the application of the Exchange Cap
the Company is unable to issue Common Shares on the applicable Installment
Settlement Date pursuant to Section 8(c) using the Mandatory Conversion Price as
calculated pursuant to the foregoing sentence (the "Unadjusted Mandatory
Conversion Price"), then the Mandatory Conversion Price shall be the price equal
to the arithmetic average of the Weighted Average Price of the Common Shares
during each of the five (5) consecutive Trading Days ending on the Trading Day
immediately prior to the applicable Installment Settlement Date (such price, the
"Adjusted Mandatory Conversion Price").
(ii) "Maturity Balance Conversion Shares" means a number of Common
Shares equal to (i) the Post-Maturity Conversion Shares for such date minus (ii)
the amount of any Pre-Maturity Conversion Shares delivered on such date;
provided that in the event that the amount of Pre-Maturity Conversion Shares
exceeds the Post-Maturity Conversion Shares for such date (such excess, the
"Maturity Conversion Shares Excess"), then the Maturity Balance Conversion
Shares shall equal zero (0).
-41-
(jj) "Maturity Conversion Price" means that price which shall be the
lower of (i) the applicable Conversion Price and (ii) the price computed as 95%
of the arithmetic average of the Weighted Average Price of the Common Shares
during each of the twelve (12) consecutive Trading Days beginning on the Trading
Day immediately following the Maturity Date (such period, the "Maturity
Conversion Measuring Period"); provided, however, that if such arithmetic
average of the Weighted Average Price during the Maturity Conversion Measuring
Period shall yield a price that is less than $1.00, then the Maturity Conversion
Price shall be computed as 90% of the arithmetic average of the Weighted Average
Price of the Common Shares during the Maturity Conversion Measuring Period.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the Maturity
Settlement Date using the Maturity Conversion Price as calculated pursuant to
the foregoing sentence, then the Maturity Conversion Price shall be the price
equal to the arithmetic average of the Weighted Average Price of the Common
Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately preceding the Maturity Settlement Date.
(kk) "Maturity Date" means October 7, 2007; provided that such date
shall be extended to October 7, 2010 in the event that the FDA Approval is
granted; provided, however, that the Maturity Date may be extended at the option
of the Holder (i) in the event that, and for so long as, an Event of Default
shall have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice is delivered prior to the
Maturity Date; provided, further, that such date shall be shortened by the
number of months equal to the quotient of (A) any Accelerated Amount (less the
amount of any accrued and unpaid interest included in such amount) paid on any
Installment Date hereunder divided by (B) the applicable Installment Amount paid
on the Installment Date related to such Accelerated Amount (less the amount of
any accrued and unpaid interest included in such amount and less any Accelerated
Amount that would otherwise be included therein) on the Installment Date related
to such Accelerated Amount, rounded down to the nearest whole number.
(ll) "NASDAQ" means whichever of the Nasdaq National Market or The
Nasdaq SmallCap Market on which the Common Shares are traded.
(mm) "Net Cash Balance" means, at any date, (i) an amount equal to the
aggregate amount of cash, cash equivalents (including cash collateralizing the
Letter of Credit and not including other restricted cash) and marketable
securities, consisting of corporate bonds, commercial paper and medium-term
notes, as shown or reflected in the notes to Vasogen's consolidated balance
sheet as at such date minus (ii) the unpaid principal balance of any
Indebtedness for borrowed money (excluding Indebtedness under the Notes).
(nn) "Net Cash Balance Threshold" means, for any date of determination,
an amount equal to 110% of the outstanding aggregate Principal amount of the
Notes on such date.
-42-
(oo) "Options" means any rights, warrants or options to subscribe for
or purchase Common Shares or Convertible Securities.
(pp) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security are quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(qq) "Permitted Indebtedness" means (i) Indebtedness incurred by the
Company, Vasogen or their Subsidiaries that is pari passu with, or is made
expressly subordinate in right of payment to the Indebtedness evidenced by this
Note (any such subordination to be reflected in a written agreement acceptable
to the Required Holders and approved by the Required Holders in writing) and
which Indebtedness does not provide at any time for the payment, prepayment,
repayment, redemption, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later, (ii) Indebtedness secured by Xxxxxxxxx Xxxxx, (iii)
Indebtedness to trade creditors incurred in the ordinary course of business,
(iv) intercompany Indebtedness amongst the Company, Vasogen and their respective
Subsidiaries which Indebtedness is subordinate in right of payment to the
Indebtedness evidenced by this Note and (v) Indebtedness the proceeds of which
are used to redeem, repay or otherwise retire the Notes, in whole or in part;
provided that in the event such Indebtedness is not used to redeem, repay or
retire the Notes in full, such Indebtedness shall rank junior to the Notes in
accordance with Section 16(a).
(rr) "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) Liens (A) upon or in any
equipment, inventory or other assets acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment, inventory or
other assets or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment,
inventory or other assets at the time of its acquisition, provided that the Lien
is confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, inventory or other assets.
(ss) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(tt) "Post-Installment Conversion Shares" means, for any Installment
Date, that number of Common Shares equal to the applicable Company Conversion
Amount for such Installment Date divided by the Company Conversion Price
(without taking
-43-
into account the delivery of any Pre-Installment Conversion Shares), rounded up
to the nearest whole Common Share.
(uu) "Post-Maturity Conversion Shares" means that number of Common
Shares equal to the outstanding Principal on the Maturity Date divided by the
Maturity Conversion Price (without taking into account the delivery of any
Pre-Maturity Conversion Shares), rounded up to the nearest whole Common Share.
(vv) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(ww) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Subscription Date, by and among the Company, Vasogen, Vasogen, Corp. and the
initial holders of the Other Notes.
(xx) "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, Change of Control Redemption Notices, any Company
Installment Notices (in the event a Company Redemption is elected in any such
notices), Mandatory Redemption/Conversion Notices (in the event a Mandatory
Redemption is elected in any such notices) and LC Redemption/Conversion Notices
(in the event an LC Redemption is elected in any such notice) and, each of the
foregoing, individually, a Redemption Notice.
(yy) "Redemption Premium" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.
(zz) "Redemption Prices" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, any Company Installment
Redemption Price (in the event a Company Redemption is elected with respect to
any Installment Date), Mandatory Redemption Price and LC Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(aaa) "Registration Rights Agreement" means that certain registration
rights agreement dated as of the Subscription Date by and among Vasogen and the
initial holders of the Notes relating to, among other things, the registration
of the resale of the Common Shares issuable upon conversion of the Notes and
exercise of the Warrants.
(bbb) "Required Holders" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.
(ccc) "SEC" means the United States Securities and Exchange Commission.
(ddd) "Securities Purchase Agreement" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company,
Vasogen, Vasogen, Corp. and the initial Holder of this Note pursuant to which
the Company issued this Note.
-44-
(eee) "Subscription Date" means October 7, 2005.
(fff) "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common shares or equivalent
equity security are quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person's Parent Entity.
(ggg) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(hhh) "Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment under the Note.
(iii) "TSX" means the Toronto Stock Exchange.
(jjj) "Trading Day" means any day on which the Common Shares is traded
on the Principal Markets, or, if the Principal Markets are not the principal
trading market for the Common Shares, then on the principal securities exchange
or securities market on which the Common Shares is then traded; provided that
"Trading Day" shall not include any day on which the Common Shares is scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Shares is suspended from trading during the final hour of trading on
any such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(kkk) "Voting Shares" of a Person means capital shares of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(lll) "Warrants" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
(mmm) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security on another Principal Market for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as such Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg, or, if the foregoing does not apply, the dollar volume-weighted
-45-
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such other time as such market publicly announces is the official close of
trading) as reported by Bloomberg, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
(33) VASOGEN'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of Vasogen to issue Common
Shares to the Holder's account with DTC so long as Vasogen has sent a copy of
such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), Vasogen shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
(34) DISCLOSURE. Upon receipt or delivery by the Company or Vasogen of any
notice in accordance with the terms of this Note, unless Vasogen has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to Vasogen or its Subsidiaries, Vasogen
shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 6-K or
otherwise and through analogous legal disclosure in accordance with Canadian
securities laws. In the event that Xxxxxxx believes that a notice contains
material, nonpublic information, relating to Vasogen or its Subsidiaries,
Vasogen shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to Vasogen or its Subsidiaries.
[Signature Page Follows]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Issuance Date set out above.
SIGNED, SEALED AND DELIVERED BY
XXXXX XXXXXXX AS A DEED FOR AND
ON BEHALF OF VASOGEN IRELAND
LIMITED PURSUANT TO A POWER OF
ATTORNEY
----------------------------------------
Signature of Witness:
-------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
Occupation:
-----------------------------------
ACKNOWLEDGED AND AGREED:
VASOGEN INC.
By:
------------------------------------------
Name:
Title:
Address:
Exhibit 6e
Senior Convertible Note - Smithfield Fiduciary LLC
(exhibits and schedules attached to Kings Road Investments Ltd.
Senior Convertible Note omitted)
(see attached)
SENIOR CONVERTIBLE NOTE
THE COMPANY HAS NOT OFFERED OR SOLD, AND WILL NOT OFFER OR SELL, THIS NOTE IN
IRELAND IN CIRCUMSTANCES THAT WOULD CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF IRISH PROSPECTUS LAW (AS DEFINED IN THE INVESTMENT FUNDS, COMPANIES
AND MISCELLANEOUS PROVISIONS ACT, 2005) OR AN INVITATION TO THE PUBLIC (AS
REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO SUBSCRIBE FOR THIS NOTE
AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CONSTITUTING AN OFFER OF THIS
NOTE TO THE PUBLIC WITHIN THE MEANING OF IRISH PROSPECTUS LAW OR AN "INVITATION
TO THE PUBLIC" (AS REFERRED TO IN SECTION 33 OF THE COMPANIES ACT, 1963) TO
SUBSCRIBE FOR THIS NOTE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN THE UNITED STATES OR TO
ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT) (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION THE HOLDER OF (A) THE
SECURITIES REPRESENTED HEREBY WILL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE
RESIDENTS OF CANADA BEFORE THE LATER OF: (I) FEBRUARY 8, 2006 AND (II) FOUR
MONTHS AND A DAY AFTER THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY OF CANADA; AND (B) THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF SHALL NOT TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA
BEFORE FEBRUARY 8, 2006.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.
VASOGEN IRELAND LIMITED
SENIOR CONVERTIBLE NOTE
Issuance Date: October 7, 2005 Principal: U.S. $3,000,000
Note Certificate Number A-5
FOR VALUE RECEIVED, Vasogen Ireland Limited, a company incorporated under
the laws of the Republic of Ireland (the "Company"), hereby promises to pay to
SMITHFIELD FIDUCIARY LLC or registered assigns ("Holder") the amount set out
above as the Principal (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the "Principal") when due, whether upon the
Maturity Date, on any Installment Date with respect to the Installment Amount
due on such Installment Date (each, as defined herein), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest ("Interest") on any outstanding Interest Principal Amount at the rate
of 6.45% per annum (the "Interest Rate"), from the date set out above as the
Issuance Date (the "Issuance Date") until the same becomes due and payable,
whether upon an Interest Date (as defined below), any Installment Date, the
Maturity Date, acceleration, conversion, redemption or otherwise (in each case,
in accordance with the terms hereof). This Senior Convertible Note (including
all Senior Convertible Notes issued in exchange, transfer or replacement hereof,
this "Note") is one of an issue of Senior Convertible Notes issued pursuant to
the Purchase Agreements on the Closing Date (collectively, the "Notes" and such
other Senior Convertible Notes, the "Other Notes"). Certain capitalized terms
used herein are defined in Section 32.
(1) PAYMENTS OF PRINCIPAL.
(a) On each Installment Date the Company shall pay to the Holder an
amount equal to the Installment Amount due on such Installment Date in
accordance with Section 8. On the Maturity Date, the Holder shall surrender the
Note to the Company and the Company shall pay to the Holder, (i) an amount in
Common Shares, or, at the option of the Company, in cash, representing all
outstanding Principal and (ii) an amount in cash equal to the accrued and unpaid
Interest thereon; provided that Principal shall be payable in Common Shares on
the Maturity Date if, and only if, there has been no Equity Conditions Failure.
On or prior to the eighth (8th) Trading Day prior to the Maturity Date (the
"Maturity Election Notice Due Date"), the Company shall deliver a written notice
to the Holder (x) specifying whether the Principal shall be paid on the Maturity
Date in Common Shares or cash and (y) if the Principal is to be paid in Common
Shares, certifying that there has been no Equity Conditions Failure. Principal
to be paid on the Maturity Date and on the Maturity Settlement Date (as defined
below) in Common Shares shall be paid in a number of fully paid and
nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) Common Shares.
(b) If the Company shall pay the Principal on the Maturity Date in
Common Shares, then on the Maturity Date (i) (A) provided that Xxxxxxx's
transfer agent (the "Transfer Agent") is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, the Company shall
direct Vasogen to, and upon such direction
-2-
Vasogen shall or shall cause the Transfer Agent to, credit a number of Common
Shares equal to the quotient of the outstanding Principal due on such date
divided by the Initial Maturity Conversion Price (the "Pre-Maturity Conversion
Shares") to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system,
or (B) if the foregoing shall not apply, Vasogen shall issue and deliver, to the
address set forth in the register maintained by Vasogen for such purpose
pursuant to the Securities Purchase Agreement or to such address as specified by
the Holder in writing to Vasogen at least three (3) Trading Days prior to the
Maturity Date, a certificate, registered in the name of the Holder or its
designee, for the number of Pre-Maturity Conversion Shares to which the Holder
shall be entitled and (ii) the Company shall pay to the Holder, in cash by wire
transfer of immediately available funds, the amount of any accrued and unpaid
interest on such Principal. On the third (3rd) Trading Day immediately after the
end of the Maturity Conversion Measuring Period (the "Maturity Settlement
Date"), the Company shall direct Vasogen to, and upon such direction Vasogen
shall or shall cause the Transfer Agent to, deliver to the Holder's account with
DTC a number of additional Common Shares, if any, equal to the Maturity Balance
Conversion Shares. If an Event of Default or Equity Conditions Failure occurs
during the Maturity Conversion Measuring Period, then, at the Holder's option,
either (x) the Holder may require the Company to pay the Principal amount of the
Note outstanding on the Maturity Date (including any Principal amount
represented by Pre-Maturity Conversion Shares that shall be returned to the
Company and which Principal amount shall be reduced to the extent any such
Common Shares are not returned to the Company) in cash on the Maturity
Settlement Date and, in conjunction with receipt of such cash payment, shall
return any Pre-Maturity Conversion Shares delivered to the Holder which the
Holder has not otherwise sold, transferred or disposed of or (y) the Company
shall pay to the Holder in cash on the Maturity Settlement Date an amount equal
to the difference between (1) the Principal outstanding on the Maturity Date
minus (2) the product of (A) the Principal outstanding on the Maturity Date
multiplied by (B) the Conversion Share Ratio and, notwithstanding Section 14(a),
in the case of this clause (y), such amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Maturity Conversion
Measuring Period.
(c) No prepayment of Principal shall be permitted except as expressly
provided herein.
(2) INTEREST; INTEREST RATE. Interest on the applicable Interest Principal
Amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 360-day year comprised of twelve 30-day months and
shall be payable on each Installment Date and on the Maturity Date (each an
"Interest Date"). Interest shall be payable on each Interest Date in cash. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate. Upon the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to twelve percent
(12.0%) (the "Default Rate"). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the Interest as
calculated at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default. Interest on overdue interest shall accrue at the same
rate compounded quarterly.
-3-
(3) CONVERSION OF NOTES. This Note shall be convertible into common shares
of Vasogen Inc. ("Vasogen"), without par value (the "Common Shares"), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d)(i), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable Common Shares in accordance with
Section 3(c), at the Conversion Rate (as defined below). Vasogen shall not issue
any fraction of a Common Share upon any conversion. If the issuance would result
in the issuance of a fraction of a Common Share, Vasogen shall round such
fraction of a Common Share up to the nearest whole share.
(b) Conversion Rate. The number of Common Shares issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (such number
of shares, the "Conversion Rate").
(i) "Conversion Amount" means the portion of the Principal to be
converted, amortized, redeemed or otherwise with respect to which this
determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination a price equal to $3.00, subject to
adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into
Common Shares on any date, the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time and
transmit by e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement, on the third (3rd) Trading Day prior to
such date (a "Conversion Date"), a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to Vasogen and
with a copy to the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the Company as soon as practicable
on or following such date (or an indemnification undertaking with respect to
this Note in the case of its loss, theft or destruction). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, Vasogen
and the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3rd) Trading Day following the date of receipt of a Conversion Notice (the
"Share Delivery Date"), (1) (x) provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, credit such aggregate number of Common Shares to which
the Holder shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system or (y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, Vasogen shall issue
-4-
and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of Common
Shares to which the Holder shall be entitled and (2) the Company shall pay to
the Holder in cash an amount equal to the accrued and unpaid Interest up to and
including the Conversion Date on the Conversion Amount. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than five (5) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the Common Shares issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such Common Shares on the Conversion Date. In the event of a
partial conversion of this Note pursuant hereto, the principal amount converted
shall be deducted from the Installment Amounts relating to the Installment Dates
as set forth in the Conversion Notice.
(ii) Failure to Timely Convert. If Vasogen shall fail to issue a
certificate to the Holder or credit the Holder's balance account with DTC for
the number of Common Shares to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the Share Delivery Date (a "Conversion
Failure"), then (A) the Company shall pay damages to the Holder for each day of
such Conversion Failure in an amount equal to 1.5% of the product of (I) the
number of Common Shares not issued to the Holder on or prior to the Share
Delivery Date and to which the Holder is entitled, and (II) the Weighted Average
Price of the Common Shares on the Share Delivery Date or (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any portion of this Note that
has not been converted pursuant to such Conversion Notice; provided that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, where the
Holder has chosen not to void its Conversion Notice, if on or prior to the Share
Delivery Date, Vasogen shall fail to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of Common
Shares to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Shares to deliver in
satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the Common Shares so purchased
(the "Buy-In Price"), at which point Vasogen's obligation to deliver such
certificate (and to issue such Common Shares) shall terminate, or (ii) promptly
have Vasogen honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Common Shares times (B) the Weighted Average Price on the
Conversion Date. In the event that (1) the Holder has chosen to void its
Conversion Notice and (2) the Holder, prior to voiding such Conversion Notice,
purchased (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
conversion that the Holder anticipated receiving from the Company, then the
Company shall, within three
-5-
(3) Trading Days after the Holder's request, pay cash to the Holder in an amount
equal to the excess (if any) of (x) the Buy-In Price over the (y) the aggregate
consideration received by the Holder in the sale of such Common Shares.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event that the Company
and Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and Vasogen can convert some, but not all, of such
portions of the Notes submitted for conversion, subject to Section 3(d), the
Company shall direct Vasogen to, and upon such direction Vasogen shall, convert
from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such
holder relative to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number of Common
Shares issuable to the Holder in connection with a conversion of this Note,
Vasogen shall issue to the Holder the number of Common Shares not in dispute and
resolve such dispute in accordance with Section 25.
(d) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates and joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (y) for
purposes of the Securities Act (Ontario), in excess of 9.99% (the "Maximum
Percentage") of the number of Common Shares outstanding immediately after giving
effect to such conversion; provided that the Company shall nevertheless be
entitled to make payments in Common Shares pursuant to Sections 8(c), 8(d), 9
and 10. For purposes of the foregoing sentence, the number of Common Shares
beneficially owned by the Holder and its affiliates and joint actors shall
include the number of Common Shares issuable upon conversion of this Note with
respect to which the determination of such sentence is being made, but shall
exclude the number of Common Shares which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates or joint actors and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of Vasogen
and the Company (including, without limitation, any Other Notes or warrants),
which in each case are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. For purposes of calculating
beneficial ownership pursuant to this Section 3(d)(i), beneficial ownership
pursuant to the Exchange Act shall be calculated in
-6-
accordance with Section 13(d) of the Exchange Act, and beneficial ownership
pursuant to the Securities Act (Ontario) shall be calculated in accordance with
section 101 of the Securities Act (Ontario), in each case except as set forth in
the preceding sentence. For purposes of this Section 3(d)(i), in determining the
number of outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (x) Vasogen's most recent Form 40-F or
Form 6-K, as the case may be, (y) a more recent public announcement by Vasogen
or (z) any other notice by the Company, Vasogen or the Transfer Agent setting
forth the number of Common Shares outstanding. For any reason at any time, upon
the written or oral request of the Holder, Vasogen shall within two (2) Trading
Days confirm orally and in writing to the Holder the number of Common Shares
then outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the actual conversion or exercise of
securities of Vasogen and the Company, including this Note, by the Holder or its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company and Vasogen, the Holder from time
to time may increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company and Vasogen, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes;
provided that the Company shall nevertheless be entitled to make payments in
Common Shares pursuant to Sections 8(c), 8(d), 9 and 10 without regard to the
Maximum Percentage as adjusted.
(ii) Principal Market Regulation. Vasogen shall not be obligated to
issue any Common Shares upon conversion, amortization or redemption of this
Note, and the Holder of this Note shall not have the right to receive upon
conversion, amortization or redemption of this Note any Common Shares (and only
such Common Shares), if the issuance of such Common Shares would exceed the
aggregate number of Common Shares which Vasogen may issue upon conversion,
amortization or redemption, or exercise, as applicable, of the Notes and
Warrants without breaching Vasogen's obligations under the rules or regulations
of the Principal Market (the "Exchange Cap"), except that such limitation shall
not apply in the event that the Company or Vasogen (A) obtains the approval of
the Principal Market (in the case of the TSX) or Vasogen's shareholders as
required by the applicable rules of the Principal Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the Purchase
Agreements (the "Purchasers") shall be issued in the aggregate, upon conversion
or exercise, as applicable, of Notes or Warrants, Common Shares in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the principal amount of Notes issued to such Purchaser
pursuant to the applicable Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Purchase Agreements on the Closing Date (with
respect to each Purchaser, the "Exchange Cap Allocation"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Notes, the
transferee shall be allocated a pro rata portion of such Purchaser's Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of
such holder's Notes into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap
-7-
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of Common Shares actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. For purposes of clarification, with respect
to any Exchange Cap relating to the TSX, no holder of Notes shall be issued in
the aggregate upon conversion (including pursuant to any Company Conversion,
Mandatory Conversion or LC Conversion) of the Notes or exercise of the Warrants
or upon payment of Principal on the Notes on the Maturity Date, any Common
Shares at a discount to the market price (as defined for purposes of the TSX) at
the time of issuance of such shares in excess of such holder's Exchange Cap
Allocation.
(e) Payment in Lieu of Conversion Above Exchange Cap Limitation. If at
any time while this Note is outstanding, the Holder delivers a Conversion
Notice, and as a result of the application of an Exchange Cap, Vasogen is unable
to issue any Common Shares upon such conversion at the applicable Conversion
Price, then the Company shall (i) direct Vasogen to, and upon such direction
Vasogen shall, deliver to the Holder on the Conversion Date a number of Common
Shares equal to the quotient of the Conversion Amount stated in such Conversion
Notice divided by the Adjusted Conversion Price (the "Adjusted Conversion
Shares") and (ii) pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (A) the number of Exchange Cap Limitation Shares in connection with
such conversion multiplied by (B) the excess (if any) of (1) such Adjusted
Conversion Price over (2) the Conversion Price (the "Conversion Make-Whole").
Notwithstanding the foregoing, in the event that the Company is prohibited,
pursuant to the rules and regulations of any applicable Principal Market, to
honor the Holder's Conversion Notice by both the delivery of the Adjusted
Conversion Shares and the payment of the Conversion Make-Whole in cash, then the
Company shall pay to the Holder, in cash, on or prior to the tenth (10th)
Trading Day following delivery of such Conversion Notice, an amount equal to the
product of (x) the number of Exchange Cap Limitation Shares and (y) the Adjusted
Conversion Price (the "Exchange Cap Redemption Payment"). If the Company shall
fail to deliver to the Holder the Adjusted Conversion Shares and pay the
Conversion Make-Whole or to pay to the Holder the Exchange Cap Redemption
Payment, as applicable, on or prior to the date such delivery and/or payment is
due, the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice or for which the Holder has not received the Adjusted Conversion Shares
and the Conversion Make-Whole or the Exchange Cap Redemption Payment, as
applicable.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"Event of Default":
(i) the failure of (A) any Common Shares issued or issuable upon
conversion, as part of any Installment Amount or as part of any Accelerated
Amount to be freely tradable under Canadian law on the TSX (subject to any
restrictions on disposition by the holder of a control block) on or after
February 8, 2006, or, thereafter, the Common Shares of any holder of Notes shall
cease to be freely tradable under Canadian law on the TSX and such lapse
-8-
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period or (B) the applicable
Registration Statement required to be filed pursuant to the Registration Rights
Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the applicable Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order by the SEC) or is unavailable to any holder of the Notes for sale of all
of such holder's Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of twenty (20)
consecutive days or for more than an aggregate of forty (40) days in any 365-day
period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the suspension from trading on all of the Eligible Markets on
which the Common Shares are listed or failure of the Common Shares to be listed
on at least one Eligible Market for a period of ten (10) consecutive Trading
Days or for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(iii) Vasogen's (A) failure to cure a Conversion Failure by delivery
of the required number of Common Shares within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at
any time, of its intention not to comply with a request for conversion of any
Notes into Common Shares that is tendered in accordance with the provisions of
the Notes;
(iv) at any time following the tenth (10th) consecutive Trading Day
that the number of Common Shares that are authorized for issuance to the Holder
is less than the number of Common Shares that the Holder would be entitled to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);
(v) the Company's failure (or Vasogen's failure if any such amounts
are due in Common Shares) to pay to the Holder any amount of Principal
(including, without limitation, the Company's failure to pay any redemption or
make-whole payments), Interest or other amounts when and as due under this Note
or any other Transaction Document (as defined in the Securities Purchase
Agreement), except, in the case of a failure to pay Interest or other amounts
due under the Transaction Documents (other than Principal) when and as due, in
which case only if such failure continues for a period of at least three (3)
Trading Days;
(vi) the occurrence of (A) any material default under any
Indebtedness of Vasogen or any of its Subsidiaries (as defined in Section 3(a)
of the Securities Purchase Agreement) in an aggregate principal amount of
$5,000,000 or greater or (B) any redemption of or acceleration prior to maturity
of Indebtedness of Vasogen or any of its Subsidiaries in an aggregate principal
amount of $5,000,000 or greater, in each case of (A) or (B) other than with
respect to any Other Notes;
-9-
(vii) Vasogen or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the
Companies Creditors Arrangement Act (Canada) or any similar Federal, foreign or
state law for the relief of debtors (collectively, "Bankruptcy Law"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator
or similar official (a "Custodian"), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to
pay its debts as they become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against Vasogen or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of Vasogen or any
of its Subsidiaries or (C) orders the liquidation of Vasogen or any of its
Subsidiaries;
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against Vasogen or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $5,000,000 amount set
forth above so long as Vasogen provides the Holder a copy of its policy with
such insurer or indemnity provider where such judgment is clearly covered by
insurance or an indemnity and Vasogen will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;
(x) other than as set forth in item (xi) below, the Company, Vasogen
or any Guarantor breaches in any material respect any representation, warranty,
covenant or other term or condition of any Transaction Document, except, (A) in
the case of a breach of a representation and warranty, such representation and
warranty need only have been true and correct as of the Closing Date, and (B) in
the case of breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) consecutive Trading Days following the
earlier of (A) the day on which the Company, Vasogen or such Guarantor becomes,
or should have become, aware of such breach and (B) the day on which the Company
or Vasogen receives written notice of such breach from the Holder or any holder
of Other Notes;
(xi) any breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note (including any failure to maintain the Net Cash
Balance as required by Section 16(e)), except, in the case of a breach or
failure to comply with Sections 16(b), (c) or (d), there shall be a one (1) time
opportunity to cure a single breach or failure under one of such sections within
three (3) Business Days after the date the Company knows or should have known of
such breach or failure provided that such cure period does not exceed, in the
aggregate, six (6) Business Days from the date of the occurrence of any such
breach or failure;
(xii) (A) any Guarantee at any time for any reason shall cease to be
in full force and effect or shall cease to be enforceable in respect of its
material terms or (B) any Guarantor shall assert that its Guarantee is invalid
or unenforceable; or
-10-
(xiii) any Event of Default (as defined in the Other Notes) occurs
with respect to any Other Notes.
(b) Redemption Right. Promptly after the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of
an Event of Default Notice and the Holder becoming aware of an Event of Default,
the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice
and (B) the Weighted Average Price of the Common Shares on the date immediately
preceding such Event of Default (the "Event of Default Redemption Price").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 14. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the Event of Default Redemption Notice.
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. Neither the Company nor Vasogen shall enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company and Vasogen, as applicable, under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 5(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the Interest Rates of the Notes held by such holder,
having similar conversion rights as the Notes (specifying, without limitation,
that such security is convertible into common shares of the Successor Entity)
and having similar ranking to the Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common shares are quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the "Company" and "Vasogen", as applicable, shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and Vasogen and shall assume all of the obligations of the Company and
Vasogen under this Note with the same effect as if such Successor Entity had
been named as the Company or Vasogen, as the case maybe, herein. Upon
consummation of the Fundamental Transaction, the Successor Entity (if other than
the Company) shall deliver to the Holder confirmation that there shall be issued
upon conversion or redemption
-11-
of this Note at any time after the consummation of the Fundamental Transaction,
in lieu of the Common Shares (or other securities, cash, assets or other
property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Note; provided, however, that in the event that, pursuant to the terms
of the Fundamental Transaction, the holders of Common Shares may elect the
consideration to be received in exchange for the Common Shares in the such
Fundamental Transaction, the Holder shall elect, within the same time periods as
provided to the holders of Common Shares, the kind or amount of such shares,
securities, cash, assets or any other property (including warrants or other
purchase or subscription rights) that the Holder will, following the
consummation of such transaction, be entitled to receive upon conversion or
redemption; provided, further, however, that no such election by the Holder
shall be construed to require the conversion or redemption of this Note in
connection with such Fundamental Transaction. If the Holder is required to make
any election of the kind described in the foregoing sentence, the Company or
Vasogen, as applicable, shall deliver to the Holder all documentation,
informational materials and election forms relating to such Fundamental
Transaction contemporaneously with the delivery of such documentation, materials
and forms to the holders of the Common Shares. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Note.
(b) Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period (the "Change of
Control Period") beginning after the Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control
Redemption Notice shall indicate (i) the Conversion Amount the Holder is
electing to redeem and (ii) whether the Holder is requiring the Company to pay
the Change of Control Redemption Price in cash or by delivery of Common Shares.
The portion of this Note subject to redemption pursuant to this Section 5 shall
be redeemed by the Company in cash at a price equal to the greater of (x) 115%
of the sum of (1) the Conversion Amount being redeemed and (2) the amount of any
accrued but unpaid Interest thereon through the date of such redemption payment
and (y) the sum of (A) the product of (1) the aggregate cash consideration and
the aggregate cash value of any non-cash consideration per Common Share to be
paid to the holders of the Common Shares upon consummation of the Change of
Control and (2) the quotient determined by dividing (I) the Conversion Amount
being redeemed by (II) the Conversion Price plus (B) the amount of any accrued
but unpaid Interest on the Conversion Amount being redeemed through the date of
such redemption payment (the "Change of Control Redemption Price"). In the event
the Holder has elected to receive the Change of Control Redemption Price in
Common Shares, Vasogen shall deliver, within three (3) Trading Days of receipt
of the Holder's Change of Control Redemption Notice, to the Holder's account
with DTC on the Change of Control Redemption Date (as defined in Section 14) a
-12-
number of Common Shares equal to the quotient of (aa) the applicable Change of
Control Redemption Price divided by (bb) the Change of Control Conversion Price,
rounded to the nearest whole Common Share; provided that if the Change of
Control Redemption Date would fall on a date that is after the consummation of
the applicable Change of Control, then Vasogen shall not deliver Common Shares
to the Holder but rather the Company shall pay the Change of Control Redemption
Price to the Holder in cash. Redemptions made in cash as required by this
Section 5 shall be made in accordance with the provisions of Section 14 and
shall have priority to payments to shareholders in connection with a Change of
Control. Notwithstanding anything to the contrary in this Section 5, until the
Change of Control Redemption Price (together with any interest thereon) is paid
in full, the Conversion Amount submitted for redemption under this Section 5(c)
may be converted, in whole or in part, by the Holder into Common Shares, or in
the event the Conversion Date is after the consummation of the Change of
Control, shares or equity interests of the Successor Entity substantially
equivalent to the Common Shares pursuant to Section 3.
(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS. If at any time Vasogen
grants, issues or sells any Options, Convertible Securities or rights to
purchase shares, warrants, securities or other property pro rata to all record
holders of any class of Common Shares (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
and upon the Holder's election, the aggregate Purchase Rights, in lieu of any
adjustments to which the Holder is otherwise entitled under Section 7 below in
respect of each Purchase Right, which the Holder could have acquired if the
Holder had held the number of Common Shares acquirable upon complete conversion
of this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Subscription Date, Vasogen issues or sells, or in
accordance with this Section 7(a) is deemed to have issued or sold, any Common
Shares (including the issuance or sale of Common Shares owned or held by or for
the account of Vasogen, but excluding Common Shares deemed to have been issued
or sold by Vasogen in connection with any Excluded Security) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price
in effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of Common Shares Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by Vasogen upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of Common Shares Deemed
-13-
Outstanding immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section 7(a), the following
shall be applicable:
(i) Issuance of Options. If Vasogen in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by Vasogen at the time of the
granting or sale of such Option for such price per share; provided, however,
that notwithstanding the foregoing, with respect to any Options that are
Variable Price Securities (as defined below), the Conversion Price hereunder
shall only be adjusted pursuant to this Section 7(a) at such time as Vasogen
issues Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that is less
than the Applicable Price and any such adjustment shall be based on such
Variable Price and not on the lowest price per share for which one Common Share
would be issuable under the terms of such Variable Price Securities. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by Vasogen with respect to any one Common Share
upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company or Vasogen
in any manner issues or sells any Convertible Securities and the lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by the
Company or Vasogen, as the case may be, at the time of the issuance or sale of
such Convertible Securities for such price per share; provided, however, that
notwithstanding the foregoing, with respect to any Convertible Securities that
are Variable Price Securities, the Conversion Price hereunder shall only be
adjusted pursuant to this Section 7(a) at such time as Vasogen issues Common
Shares to a holder of such Variable Price Securities and such Common Shares are
issued at a Variable Price (as defined below) that is less than the Applicable
Price and any such adjustment shall be based on such Variable Price and not on
the lowest price per share for which one Common Share would be issuable under
the terms of such Variable Price Securities. For the purposes of this Section
7(a)(ii), the "lowest price per share for which one Common Share is issuable
upon such conversion or exchange or exercise" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by Vasogen with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Shares upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other
-14-
provisions of this Section 7(a), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be re-adjusted (but
to no greater extent than originally adjusted) to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of Vasogen,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by Vasogen therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by Vasogen in connection therewith. If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Vasogen will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by Vasogen will be the Weighted Average Price of such securities on the
date of receipt. If any Common Shares, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Vasogen is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Shares,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 7(d), if Xxxxxxx takes a record
of the holders of Common Shares for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Shares, Options or in
Convertible Securities
-15-
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If Vasogen at any time on or after the Subscription Date
subdivides (by any share split, share dividend, recapitalization or otherwise)
one or more classes of its outstanding Common Shares into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. If Vasogen at any time on or after the
Subscription Date combines (by combination, reverse share split or otherwise)
one or more classes of its outstanding Common Shares into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment made pursuant to this Section
7(b) shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then Xxxxxxx's Board
of Directors will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(d) Abandoned Dividends or Distributions. If Vasogen shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the
Conversion Price shall be required by reason of the taking of such record.
(e) Xxxxxx's Right of Alternative Conversion Price Following Issuance
of Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 7, if Vasogen in any manner issues or sells any Options or Convertible
Securities (any such securities, "Variable Price Securities") after the
Subscription Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), Vasogen or the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(k) of the Securities Purchase Agreement, from and after the date Vasogen
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of this
Note by it by designating in the Conversion Notice delivered upon any conversion
of this Note that
-16-
solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder's election to
rely on a Variable Price for a particular conversion of this Note shall not
obligate the Holder to rely on a Variable Price for any future conversions of
this Note.
(8) COMPANY INSTALLMENT CONVERSION OR REDEMPTION.
(a) General. Subject to and in accordance with the terms of this
Section 8, on each applicable Installment Date, the Company shall pay to the
Holder of this Note the Installment Amount as of such Installment Date by the
combination of any of the following, (i) provided that there has been no Equity
Conditions Failure, requiring the conversion of all or any portion of the
applicable Installment Amount, in accordance with this Section 8 (a "Company
Conversion"), and/or (ii) redeeming for cash all or any portion of the
applicable Installment Amount in accordance with this Section 8 (a "Company
Redemption"); provided that all of the outstanding applicable Installment Amount
as of each such Installment Date must be converted or redeemed by the Company on
the applicable Installment Date, subject to the provisions of this Section 8.
Unless the Company Installment Notice (as defined below) indicates otherwise or
if there is an Equity Conditions Failure, the entire Installment Amount to be
paid on such Installment Date shall be paid through a Company Conversion. On or
prior to the date which is the eighth (8th) Trading Day prior to each
Installment Date (each, an "Installment Notice Due Date"), the Company shall
deliver written notice (each, a "Company Installment Notice"), to the Holder
which Company Installment Notice shall state (i) the portion, if any, of the
applicable Installment Amount to be converted pursuant to a Company Conversion
(the "Company Conversion Amount"), (ii) the portion, if any, of the applicable
Installment Amount which the Company elects to redeem pursuant to a Company
Redemption (the "Company Redemption Amount") and (iii) unless the Company has
elected to pay the applicable Installment Amount entirely through a Company
Redemption, the Company Installment Notice shall certify that the Equity
Conditions have been satisfied as of the date of the Company Installment Notice.
Each Company Installment Notice whether actually given or deemed given shall be
irrevocable. Except as expressly provided in this Section 8(a), the Company
shall redeem and convert the applicable Installment Amount of this Note pursuant
to this Section 8 and the corresponding Installment Amounts of the Other Notes
pursuant to the corresponding provisions of the Other Notes in the same ratio of
the Installment Amount being redeemed and converted hereunder. The Company
Redemption Amount (whether set forth in the Company Installment Notice or by
operation of this Section 8) shall be redeemed in accordance with Section 8(b)
and the Company Conversion Amount shall be converted in accordance with Section
8(c).
(b) Mechanics of Company Redemption. If the Company elects, or is
deemed to have elected, a Company Redemption in accordance with Section 8(a),
then the Company Redemption Amount, if any, which is to be paid to the Holder on
the applicable Installment Date shall be redeemed by the Company on such
Installment Date upon payment by the Company to the Holder on such Installment
Date, by wire transfer of immediately available funds, an amount in cash (the
"Company Installment Redemption Price") equal to 100% of the Company Redemption
Amount. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any
-17-
such designation, a "Conversion Notice" for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price. Conversions required by this Section
8(b) shall be made in accordance with the provisions of Section 3(c).
Notwithstanding anything to the contrary in this Section 8(b), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any
interest thereon) is paid in full, the Company Redemption Amount (together with
any interest thereon) may be converted, in whole or in part, by the Holder into
Common Shares pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable
Installment Date as set forth in the immediately preceding sentence, the Company
Redemption Amount so converted shall be deducted from the Installment Amounts
relating to the Installment Dates as set forth in the applicable Conversion
Notice.
(c) Mechanics of Company Conversion.
(i) If the Company pays any part of an Installment Amount pursuant
to a Company Conversion in accordance with Section 8(a), then on the third (3rd)
Trading Day immediately preceding the Installment Date the Company shall (i)
direct Vasogen to, and upon such direction Vasogen shall or shall cause the
Transfer Agent to, issue to the Holder, for delivery on or prior to the
Installment Date, to the Holder's account with DTC a number of Common Shares
equal to the quotient of (x) such Company Conversion Amount (minus accrued and
unpaid Interest included in such amount) divided by (y) the Initial Company
Conversion Price (the "Pre-Installment Conversion Shares"), rounded to the
nearest whole Common Share and (ii) pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any accrued and unpaid Interest
included in such Company Conversion Amount. On the third (3rd) Trading Day
immediately after the end of the Company Conversion Measuring Period (the
"Installment Settlement Date"), the Company shall direct Vasogen to, and upon
such direction Vasogen shall or shall cause the Transfer Agent to, deliver to
the Holder's account with DTC a number of additional Conversion Shares, if any,
equal to the Installment Balance Conversion Shares. If an Event of Default
occurs during any applicable Company Conversion Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (A) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Company Conversion Amount represented by Pre-Installment Conversion Shares that
shall be returned to the Company and which Redemption Price shall be reduced to
the extent any such Common Shares are not returned to the Company), shall return
any Pre-Installment Conversion Shares delivered in connection with the
applicable Installment Date to Vasogen which the Holder has not otherwise sold,
transferred or disposed of or (B) the Conversion Amount used to calculate the
Event of Default Redemption Price shall be reduced by the product of (1) the
Company Conversion Amount applicable to such Installment Date multiplied by (2)
the Conversion Share Ratio and, notwithstanding Section 14(a), in the case of
this clause (B), the Event of Default Redemption Price shall be paid by the
Company to the Holder within five (5) Trading Days after the end of the Company
Conversion Measuring Period.
(ii) Subject to the provisions of the following sentence, if there
is an Equity Conditions Failure, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to satisfy the
payment of the relevant
-18-
Installment Amount in one of the following ways or a combination of both: (x)
the Company shall redeem all or any part designated by the Holder of the
unconverted Company Conversion Amount (such designated amount is referred to as
the "First Redemption Amount") on such Installment Date or Installment
Settlement Date, as applicable, by paying to the Holder on such Installment Date
or Installment Settlement Date, as applicable, by wire transfer of immediately
available funds, an amount in cash equal to 125% of such First Redemption
Amount, or (y) the Company Conversion shall be null and void with respect to all
or any part designated by the Holder of the unconverted Company Conversion
Amount (other than any amount redeemed under clause (x) of this Section
8(c)(ii)) and the Holder shall be entitled to all the rights of a holder of this
Note with respect to such amount of the Company Conversion Amount; for the
avoidance of doubt, Xxxxxxx's failure to issue Common Shares with respect to any
Company Conversion Amount due to an Equity Conditions Failure shall not be
deemed an Event of Default hereunder so long as the Company otherwise complies
with the Holder's written designation in respect of the options set forth in (x)
and (y) above with respect to such Company Conversion Amount. In the event of an
Equity Conditions Failure, at the Holder's option, either (A) the Holder shall,
upon receipt of a First Redemption Amount (which amount includes redemption of
any portion of a Company Conversion Amount represented by Pre-Installment
Conversion Shares that shall be returned to the Company and which First
Redemption Amount shall be reduced to the extent any such Common Shares are not
returned to the Company), return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date to Vasogen which the Holder
has not otherwise sold, transferred or disposed of or (B) any related First
Redemption Amount shall be reduced by the product of (I) the Company Conversion
Amount applicable to such Installment Date multiplied by (II) the Conversion
Share Ratio and, notwithstanding the foregoing sentence, in the case of this
clause (B), such First Redemption Amount shall be paid by the Company to the
Holder within five (5) Trading Days after the end of the Company Conversion
Measuring Period. If the Company fails to redeem any First Redemption Amount on
or before the applicable Installment Date or Installment Settlement Date, as
applicable, by payment of such amount on the applicable Installment Date or
Installment Settlement Date, as applicable, then the Holder shall have the
rights set forth in Section 14(a) as if the Company failed to pay the applicable
Company Redemption Price and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in
Section 4(a)(xi)). Notwithstanding anything to the contrary in this Section
8(c), but subject to 3(d), until Vasogen delivers Common Shares representing the
Company Conversion Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Shares pursuant to Section 3. In the event
the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the Installment Dates as set forth in the
applicable Conversion Notice.
(iii) If, in connection with any Company Conversion, Vasogen is
unable to issue at the applicable Unadjusted Company Conversion Price all the
Common Shares that, but for the application of the Exchange Cap, Vasogen would
have been required to issue, then (A) Vasogen shall deliver to the Holder Common
Shares in accordance with Section 8(c)(i) and (B) the Company shall pay to the
Holder in cash, within ten (10) Trading Days of the applicable Installment
Settlement Date, an amount equal to the product of (1) the number of Exchange
Cap Limitation Shares applicable to such Installment Settlement Date and (2) the
-19-
excess (if any) of (x) such Adjusted Company Conversion Price over (y) the
Conversion Price (the "Company Conversion Make-Whole"). Notwithstanding the
foregoing, in connection with such Company Conversion, if the Company is
prohibited, pursuant to the rules and regulations of any applicable Principal
Market, to effect a Company Conversion by both the delivery by Vasogen to the
Holder of Common Shares and the payment by the Company of the Company Conversion
Make-Whole in cash, then (1) the Company shall pay to the Holder, in cash, on
the Installment Settlement Date, an amount (the "Exchange Cap Installment
Payment") equal to the product of (A) the number of Exchange Cap Limitation
Shares applicable to such Installment Settlement Date multiplied by (B) such
Adjusted Company Conversion Price and upon such payment the Company's and
Xxxxxxx's obligations to such Holder with respect to such Company Conversion
shall be deemed to be fully satisfied, and (2) such Holder shall return to
Vasogen on or before such Installment Settlement Date any Common Shares issued
to such Holder by Vasogen in connection with such Company Conversion; provided
that in the event that the Holder cannot return any such Common Shares to
Vasogen, the Company shall pay to the Holder, in lieu of the foregoing, an
amount in cash equal to the difference between (x) the Exchange Cap Installment
Payment and (y) the product of (I) the number of Pre-Installment Conversion
Shares issued to the Holder multiplied by (II) the applicable Unadjusted Initial
Company Conversion Price.
(d) Accelerated Amounts. The Company may, at its option (the
"Accelerated Payment Option"), (x) in the event that the Weighted Average Price
of the Common Shares on the most recently completed Trading Day prior to date
the of delivery of the Company Installment Notice exceeds $1.00, increase the
amount of the Installment Amount to be paid on the applicable Installment Date
by up to $600,000 plus accrued and unpaid Interest on such amount or (y) at any
one time during each of 2005, 2006 or 2007, in the event that the Weighted
Average Price of the Common Shares on the most recently completed Trading Day
prior to the date of delivery of the Company Installment Notice exceeds $4.00 on
NASDAQ, increase the applicable Installment Amount to be paid on the applicable
Installment Date by an amount equal to up to 40% of the aggregate Principal
amount (excluding the Letter of Credit Amount) of this Note then outstanding
plus accrued and unpaid Interest on such amount (any such amount described in
clauses (x) or (y) which exceeds the applicable Installment Amount, an
"Accelerated Amount"). In order for the Company to exercise any Accelerated
Payment Option, (1) the applicable Accelerated Amount shall be added to the
Installment Amount to be paid to the Holder in any Company Redemption and/or
Company Conversion on the applicable Installment Date pursuant to this Section 8
and (2) Vasogen shall issue the appropriate number of Accelerated Payment
Options Warrants on the applicable Installment Date. If the Company exercises
any such Accelerated Payment Option, the applicable Company Installment Notice
delivered to the holders of the Notes pursuant to Section 8(a) shall also state
that (1) the Company is exercising the Accelerated Payment Option and describe
the basis on which the Company is making such exercise, (2) state the aggregate
Accelerated Amount that shall be paid to the holders of all Notes on the
Installment Date and (3) state the number of Accelerated Payment Option Warrants
Vasogen anticipates issuing to the Holder on the applicable Installment Date.
Each Accelerated Amount shall be deducted from the Installment Amounts to be
paid on the last scheduled Installment Date hereunder.
(e) Pro Rata Acceleration Requirement. If the Company elects to
exercise the Accelerated Payment Option pursuant to Section 8(d), then it must
simultaneously
-20-
take the same action (and in the same proportion of the Accelerated Amount) with
respect to the Other Notes.
(9) COMPANY'S RIGHT OF MANDATORY REDEMPTION/CONVERSION.
(a) Mandatory Redemption/Conversion. If at any time from and after the
first (1st) anniversary of the Issuance Date (the "Mandatory
Redemption/Conversion Eligibility Date"), (i) the Weighted Average Price of the
Common Shares exceeds 175% of the Conversion Price then in effect for each of
twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the Mandatory Redemption/Conversion Eligibility Date (the "Mandatory
Redemption/Conversion Condition") and (ii) the Equity Conditions are satisfied
or waived in writing by the Holder from and including the Mandatory
Redemption/Conversion Notice Date (as defined below) through and including the
Mandatory Redemption/Conversion Date (as defined below) or through and including
the Installment Settlement Date in the case of any Mandatory Conversion, the
Company shall have the right, provided the Mandatory Redemption/Conversion is
met on and as of the Mandatory Redemption/Conversion Notice Date (as defined
below), to (i) redeem all or any portion of the Conversion Amount then remaining
under this Note (a "Mandatory Redemption") and/or (ii) require the conversion of
all or any portion of the Conversion Amount then remaining under this Note (a
"Mandatory Conversion"). The portion of this Note subject to redemption pursuant
to this Section 9 shall be redeemed by the Company in cash, if it so elects, at
a price equal to the Conversion Amount being redeemed on the Mandatory
Redemption/Conversion Date plus any accrued and unpaid Interest thereon through
the Mandatory Redemption/Conversion Date (the "Mandatory Redemption Price"). The
Company may exercise its right to require a Mandatory Redemption and/or a
Mandatory Conversion under this Section 9(a) by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the "Mandatory Redemption/Conversion Notice" and the date all
of the holders are delivered such notice by facsimile is referred to as the
"Mandatory Redemption/Conversion Notice Date") and each Mandatory
Redemption/Conversion Notice shall be irrevocable. The Mandatory
Redemption/Conversion Notice shall state (1) the aggregate Conversion Amount of
Notes (the "Mandatory Redemption/Conversion Amount") which the Company has
elected to be subject to Mandatory Redemption and/or Mandatory Conversion from
all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes), (2) the Holder's pro rata portion, if any, of
the Mandatory Redemption/Conversion Amount that the Company is requiring to be
converted pursuant to a Mandatory Conversion, (the "Mandatory Conversion
Amount"), (3) the Holder's pro rata portion, if any, of the Mandatory
Redemption/Conversion Amount which the Company elects to redeem pursuant to a
Mandatory Redemption (the "Mandatory Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the Mandatory Redemption/Conversion
Amount which shall be paid in cash to the holders of Notes on the Mandatory
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the Mandatory Redemption/Conversion Notice and (6) the date on
which the Mandatory Redemption and/or Mandatory Conversion shall occur (the
"Mandatory Redemption/Conversion Date") which date shall be (x) in connection
with any Mandatory Redemption not less than ten (10) Trading Days nor more than
thirty (30) Trading Days after the Mandatory Redemption/Conversion Notice Date
and (y) in connection with any Mandatory Conversion not less than thirty (30)
Trading Days after the Mandatory Redemption/Conversion Notice Date; provided,
however, that the Company shall not redeem and/or convert a Conversion
-21-
Amount under this Section in excess of the Holder's Pro Rata Amount of the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Shares
on NASDAQ and the TSX combined over the ten (10) consecutive Trading Day period
ending on the Trading Day immediately preceding the Mandatory
Redemption/Conversion Notice Date. The Company may not effect more than one
Mandatory Redemption and/or Mandatory Conversion during any consecutive thirty
(30) day period. All Conversion Amounts converted by the Holder after the
Mandatory Redemption/Conversion Notice Date shall reduce the Conversion Amount
of this Note required to be redeemed and/or converted on the Mandatory
Redemption/Conversion Date. Mandatory Conversions made pursuant to this Section
9 shall be made in accordance with Section 8(c) (including Section 8(c)(iii))
and references in Section 8(c) to (I) the Installment Amount shall be deemed to
refer to the Mandatory Redemption/Conversion Amount (plus accrued and unpaid
Interest thereon), (II) the Company Conversion shall be deemed to refer to the
Mandatory Conversion, (III) the Company Conversion Amount shall be deemed to
refer to the Mandatory Conversion Amount (plus accrued and unpaid Interest
thereon), (IV) the Installment Date shall be deemed to refer to the Mandatory
Redemption/Conversion Date, (V) the Initial Company Conversion Price shall be
deemed to refer to Initial Mandatory Conversion Price, (VI) the Company
Conversion Measuring Period shall be deemed to refer to the Mandatory Conversion
Measuring Period, (VII) the Company Conversion Price shall be deemed to refer to
Mandatory Conversion Price, (VIII) the Adjusted Company Conversion Price shall
be deemed to refer to the Adjusted Mandatory Conversion Price and (IX) the
Unadjusted Company Conversion Price shall be deemed to refer to the Unadjusted
Mandatory Conversion Price. Mandatory Redemptions made pursuant to this Section
9 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause a Mandatory Redemption and/or Mandatory Conversion pursuant to Section
9(a), then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Mandatory Redemption and/or Mandatory
Conversion pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require redemption and/or conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(i) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be redeemed and/or converted pursuant to Section 9(a), multiplied by
(ii) the fraction, the numerator of which is the sum of the aggregate initial
principal amount of the Notes purchased by such holder and the denominator of
which is the sum of the aggregate initial principal amount of the Notes
purchased by all holders (such fraction with respect to each holder is referred
to as its "Redemption/Conversion Allocation Percentage", and such amount with
respect to each holder is referred to as its "Pro Rata Redemption/Conversion
Amount"). In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder's Notes, the transferee shall be allocated
a pro rata portion of such holder's Redemption/Conversion Allocation Percentage
and Pro Rata Redemption/Conversion Amount.
(10) COMPANY'S RIGHT OF REDEMPTION/CONVERSION OF THE LETTER OF CREDIT
AMOUNT.
(a) Letter of Credit Amount Redemption. If at any time from and after
the Issuance Date (the "LC Conversion Eligibility Date"), (i) the Weighted
Average Price of
-22-
the Common Shares exceeds 150% of the Conversion Price then in effect for each
of twenty (20) Trading Days out of any thirty (30) consecutive Trading Days
following the LC Conversion Eligibility Date (the "LC Redemption/Conversion
Condition") and (ii) the Equity Conditions are satisfied or waived in writing by
the Holder from and including the LC Redemption/Conversion Notice Date (as
defined below) through and including the LC Redemption/Conversion Date (as
defined below) or through and including the Installment Settlement Date in the
case of any LC Conversion, the Company shall have the right, provided the LC
Redemption/Conversion Condition is met on and as of the LC Redemption/Conversion
Notice Date (as defined below), to (i) redeem all or any portion of a principal
amount of this Note then outstanding that is not in excess of the Letter of
Credit Amount (the "Available Conversion Amount") (such redemption, an "LC
Redemption") and/or (ii) require the conversion of all or any portion of such
amount (an "LC Conversion"). The portion of this Note subject to redemption
pursuant to this Section 10 shall be redeemed by the Company in cash, if it so
elects, at a price equal to the Conversion Amount being redeemed plus any
accrued and unpaid Interest thereon through the LC Redemption/Conversion Date
(the "LC Redemption Price"). The Company may exercise its right to require an LC
Redemption and/or an LC Conversion under this Section 10(a) by delivering a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of Notes (the "LC Redemption/Conversion Notice" and the
date all of the holders are delivered such notice by facsimile is referred to as
the "LC Redemption/Conversion Notice Date") and each LC Redemption/Conversion
Notice shall be irrevocable. The LC Redemption/Conversion Notice shall state (1)
the aggregate Conversion Amount of Notes (the "LC Redemption/Conversion Amount")
which the Company has elected to be subject to an LC Redemption and/or an LC
Conversion from all of the holders of the Notes pursuant to this Section 9 (and
analogous provisions under the Other Notes), (2) the portion, if any, of the
Available Conversion Amount that the Company is requiring to be converted
pursuant to an LC Conversion, (the "LC Conversion Amount"), (3) the portion, if
any, of the Available Conversion Amount which the Company elects to redeem
pursuant to an LC Redemption (the "LC Redemption Amount"), (4) the aggregate
amount of accrued and unpaid Interest on the LC Redemption/Conversion Amount
which shall be paid in cash to the holders of Notes on the LC
Redemption/Conversion Date, (5) that the Equity Conditions have been satisfied
as of the date of the LC Redemption/Conversion Notice and (6) the date on which
the LC Redemption and/or LC Conversion shall occur (the "LC
Redemption/Conversion Date") which date shall be (x) in connection with any LC
Redemption not less than fifteen (15) Trading Days nor more than thirty (30)
Trading Days after the LC Redemption/Conversion Notice Date and (y) in
connection with any LC Conversion not less than thirty (30) Trading Days after
the LC Redemption/Conversion Notice Date; provided, however, that the Company
shall not redeem any aggregate Conversion Amount under this Section in excess of
the Holder's Pro Rata Amount of the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Shares on NASDAQ and the TSX combined over the
fifteen (15) consecutive Trading Day period ending on the Trading Day
immediately preceding the LC Redemption/Conversion Notice Date. The Company may
not effect more than one LC Redemption and/or LC Conversion during any
consecutive thirty (30) day period. All Conversion Amounts converted by the
Holder after the LC Redemption/Conversion Notice Date shall reduce the
Conversion Amount of this Note required to be redeemed and/or converted on the
LC Redemption/Conversion Date. LC Conversions made pursuant to this Section 10
shall be made in accordance with Section 8(c) (including Section 8(c)(iii)) and
references in Section 8(c)
-23-
to (I) the Installment Amount shall be deemed to refer to the LC
Redemption/Conversion Amount (plus accrued and unpaid Interest thereon), (II)
the Company Conversion shall be deemed to refer to the LC Conversion, (III) the
Company Conversion Amount shall be deemed to refer to the LC Conversion Amount
(plus accrued and unpaid Interest thereon), (IV) the Installment Date shall be
deemed to refer to the LC Redemption/Conversion Date, (V) the Initial Company
Conversion Price shall be deemed to refer to Initial Mandatory Conversion Price,
(VI) the Company Conversion Measuring Period shall be deemed to refer to the
Mandatory Conversion Measuring Period, (VII) the Company Conversion Price shall
be deemed to refer to Mandatory Conversion Price, (VIII) the Adjusted Company
Conversion Price shall be deemed to refer to the Adjusted Mandatory Conversion
Price and (IX) the Unadjusted Company Conversion Price shall be deemed to refer
to the Unadjusted Mandatory Conversion Price. LC Redemptions made pursuant to
this Section 10 shall be made in accordance with Section 14.
(b) Pro Rata Redemption/Conversion Requirement. If the Company elects
to cause an LC Redemption and/or LC Conversion pursuant to Section 10(a), then
it must simultaneously take the same action with respect to the Other Notes. If
the Company elects to cause a LC Redemption and/or LC Conversion pursuant to
Section 10(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the
Company shall require redemption and/or conversion of a Conversion Amount from
each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be redeemed
and/or converted pursuant to Section 10(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder and the denominator of which is the sum of the
aggregate initial principal amount of the Notes purchased by all holders (such
fraction with respect to each holder is referred to as its "LC Amount Allocation
Percentage", and such amount with respect to each holder is referred to as its
"Pro Rata LC Amount"). In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such xxxxxx'x XX Amount Allocation Percentage
and Pro Rata LC Amount.
(11) GUARANTY. Vasogen and Vasogen, Corp. shall guarantee the obligations
under this Note and the Other Notes to the extent and in the manner set forth in
the Guarantees (as defined in the Securities Purchase Agreement).
(12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Memorandum and Articles of Association or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(13) AUTHORIZED SHARES.
(a) Reservation. Vasogen shall have sufficient authorized and unissued
Common Shares for each of the Notes equal to the number of Common Shares
necessary to effect the conversion at the Conversion Rate with respect to the
Conversion Amount
-24-
of each such Note as of the Issuance Date. So long as any of the Notes are
outstanding, Vasogen shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Shares, solely for the
purpose of effecting the conversion of the Notes, the number of Common Shares as
shall from time to time be necessary to effect the conversion of all of the
Notes then outstanding; provided that at no time shall the number of Common
Shares so available be less than the number of shares required to be reserved by
the previous sentence (without regard to any limitations on conversions) (the
"Required Amount").
(b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding Vasogen does not have a sufficient number of authorized
and unissued Common Shares to satisfy its obligation to have available for
issuance upon conversion of the Notes at least a number of Common Shares equal
to the Required Amount (an "Authorized Share Failure"), then Vasogen shall as
promptly as practicable take all action necessary to increase Vasogen's
authorized Common Shares to an amount sufficient to allow Vasogen to have
available the Required Amount for the Notes then outstanding.
(14) HOLDER'S REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Trading Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to be paid in cash to the Holder concurrently with the
consummation of such Change of Control if such notice is received at least five
(5) Trading Days prior to the consummation of such Change of Control and within
five (5) Trading Days after the Company's receipt of such notice otherwise (the
"Change of Control Redemption Date"). The Company shall deliver the Mandatory
Redemption Price to the Holder on the Mandatory Redemption/Conversion Date. The
Company shall deliver the LC Redemption Price to the Holder on the LC
Redemption/Conversion Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to, by providing written notice to the Company, require the
Company to promptly return to the Holder all or any portion of this Note
representing the Conversion Amount that was submitted for redemption and for
which the applicable Redemption Price has not been paid. Upon the Company's
receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to such Conversion Amount and (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount.
(b) Redemption by Other Holders. Upon the Company's receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b) or Section 5(b) (each, an "Other
Redemption Notice"), the Company shall immediately, but no later than one (1)
Trading Day of its receipt thereof, forward to the Holder by facsimile a copy of
-25-
such notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Trading Day period beginning on and
including the date which is three (3) Trading Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Trading Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Trading Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Trading Day period.
(15) VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as provided by law, the Canada Business Corporations Act
and as expressly provided in this Note.
(16) COVENANTS.
(a) Rank. All payments due under this Note (a) shall rank pari passu
with all Other Notes and (b) neither Vasogen nor any of its Subsidiaries shall
incur Indebtedness that is senior to the Notes or the Guarantees as applicable.
(b) Incurrence of Indebtedness. So long as this Note is outstanding,
Vasogen shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of Liens. So long as this Note is outstanding, Vasogen
shall not, and Vasogen shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by Vasogen or any of its
Subsidiaries (collectively, "Liens") other than Permitted Liens.
(d) Restricted Payments. Vasogen shall not, and Vasogen shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Permitted Indebtedness, whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness if at the time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Net Cash Balance Test. If the ACCLAIM trial fails to meet its
primary endpoint, then, beginning on September 1, 2006 until the earlier of (x)
the Maturity Date or (y) such time as the Notes have been otherwise converted or
redeemed in full, Vasogen and the Company, on a consolidated basis, shall
maintain, at all times, a Net Cash Balance equal to or exceeding the applicable
Net Cash Balance Threshold (the "Net Cash Balance Test").
-26-
(i) On any date (or within four (4) Business Days thereafter) on
which the Net Cash Balance Test is not satisfied (a "Failure Date"), Vasogen
shall publicly disclose (on a Current Report on Form 6-K or otherwise and
through analogous legal disclosure means under Canadian securities laws) the
fact that Vasogen has failed to satisfy the Net Cash Balance Test. On the date
of any such disclosure, Vasogen shall also provide to the Holder a
certification, executed on behalf of Vasogen by the Chief Financial Officer of
Vasogen or his or her designate who shall also be an executive officer or the
controller, as to the amount of the Net Cash Balance as of the Failure Date and
disclose such amount in the Current Report on Form 6-K.
(ii) Vasogen shall announce its operating results (the "Operating
Results") for each Fiscal Quarter no later than the forty-fifth (45th) day after
the end of each Fiscal Quarter or, with respect to the last Fiscal Quarter, the
ninetieth (90th) day after such quarter (the "Announcement Date") and, in the
event Vasogen shall have satisfied the Net Cash Balance Test at all times during
such Fiscal Quarter, such announcement shall include a statement to the effect
that Vasogen satisfied the Net Cash Balance Test at all times throughout such
Fiscal Quarter; provided, however, that in the event Vasogen is delayed in
announcing its Operating Results for any Fiscal Quarter, on the Announcement
Date Vasogen shall, in lieu of the foregoing, (A) make a statement to the effect
that it has complied with all of its covenants under the Notes, including,
without limitation, the Net Cash Balance Test and (B) provide to the holders of
Notes a certification, in accordance with terms of the next sentence, certifying
the same. On the Announcement Date, Vasogen shall also provide to the holders of
Notes a certification, executed on behalf of Vasogen by the Chief Financial
Officer of Vasogen or his or her designate who shall also be an executive
officer or the controller, certifying that Vasogen satisfied the Net Cash
Balance Test at all times throughout such Fiscal Quarter.
(17) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if Vasogen shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Note, then, in each such case any Conversion Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Conversion Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the Common Shares on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by Xxxxxxx's Board of Directors) applicable to one
Common Share, and (ii) the denominator shall be the Weighted Average Price of
the Common Shares on the trading day immediately preceding such record date (but
such fraction shall not be greater than one); provided, however, that in no
event shall the Conversion Price be reduced pursuant to this Section 17 with
respect to any portion of a Distribution for which the Conversion Price is also
being reduced pursuant to any of the provisions of Section 7 hereof in respect
of the same portion of such Distribution.
(18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
-27-
affirmative vote of the Required Holders at a meeting duly called for such
purpose or the written consent of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. Any change or amendment so
approved shall be binding upon all existing and future holders of this Note and
any Other Notes; provided, however, that no such change, amendment, alteration
or amendment, as applied to any of the Notes held by any particular holder of
Notes, shall, without the written consent of that particular holder, (i) reduce
the Interest Rate, extend the time for payment of Interest or change the manner
or rate of accrual of Interest on the Notes, (ii) reduce the amount of
Principal, or extend the Maturity Date, of the Notes, (iii) make any change that
impairs or adversely affects the conversion rights of the Notes, (iv) impair the
right of any holder of Notes to receive payment of principal or Interest or
other payments due under the Notes, if any, on or after the due dates therefor;
or (v) modify any of the provisions of, or impair the right of any holder of
Notes under, this Section 18.
(19) TRANSFER. This Note and any Common Shares issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company on two (2) Trading Days' written notice, subject only
to the provisions of Section 2(f) of the Securities Purchase Agreement;
provided, that the Holder may not transfer any outstanding Principal and accrued
and unpaid Interest of this Note, in part, to the extent such Principal and
Interest is less than the lesser of (a) $2,000,000 and (b) the remaining
outstanding Principal and accrued and unpaid Interest of this Note; provided,
further, however, that any transferee of all or any portion of this Note agrees
to comply with all applicable securities laws; provided, also, that any
transferee of all or any portion of this Note that wishes to avail itself of the
benefits contemplated by Section 9(s) of the Securities Purchase Agreement
(including, for the avoidance of doubt, any subsequent transferee of any
transferee) shall make to Vasogen the representations and warranties made by the
Purchaser in, and give the Notice as contemplated pursuant to, Section 9(s) of
the Securities Purchase Agreement. Prior to the effectiveness of any such sale,
assignment or transfer pursuant to this Section 19, and only if such transferee
seeks to receive Common Shares through DTC's Deposit Withdrawal Agent Commission
system, such transferee shall have completed and delivered to the Company the
DTC brokerage account information with respect to such transferee in
substantially the form of Exhibit E as attached to the Securities Purchase
Agreement.
(20) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of
-28-
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 20(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 20(a) or Section 20(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest on the Principal of this Note, from the Issuance Date.
(21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to,
-29-
attorneys' fees and disbursements.
(23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
(24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(25) DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Weighted Average Price or the arithmetic calculation of the Conversion
Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Trading
Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
Notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Trading Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two (2) Trading Days submit via facsimile (a) the disputed
determination of the Weighted Average Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Rate or the Redemption Price
to the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Trading Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
(26) NOTICES; CURRENCY; TAXES; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven (7) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
-30-
(b) Currency. All principal, interest and other amounts owing under
this Note or any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in US dollars. All amounts denominated in other
currencies shall be converted in the US dollar equivalent amount in accordance
with the Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Note, the US dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation (it being understood and agreed that where
an amount is calculated with reference to, or over, a period of time, the date
of calculation shall be the final date of such period of time).
(c) Taxes.
(i) Any and all payments made by the Company hereunder, including
any amounts received on a conversion or redemption of the Note and any amounts
on account of interest or deemed interest, must be made by it without any Tax
Deduction, unless a Tax Deduction is required by law. If the Company is aware
that it must make a Tax Deduction (or that there is a change in the rate or the
basis of a Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 26(c)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Note ("Other Taxes"). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to the Holder any official receipt or form, if any, provided by or required by
the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 26(c) shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.
(d) Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via
-31-
overnight courier service to such Person at such address as previously provided
to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Buyer Schedule attached to the Purchase
Agreements); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Trading Day, the same shall instead be due on
the next succeeding day which is a Trading Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.
(27) CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
(28) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices otherwise
required pursuant to applicable law in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(29) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Note shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
-32-
XXXXXX IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(30) JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 30
referred to as the "Judgment Currency") an amount due in US dollars under this
Note, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 30(a)(ii) being hereinafter
referred to as the "Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Note.
(31) MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
(32) CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "Accelerated Payment Option Warrants" means warrants exercisable
for a number of Common Shares equal to 65% of the quotient of (x) the
Accelerated Amount being paid pursuant to Section 8 minus accrued and unpaid
Interest
-33-
included in such amount divided by (y) the Conversion Price on the applicable
Installment Date, rounded up to the nearest whole Common Share. Such warrants
shall be in substantially the form of the Warrant attached as Exhibit B to the
Securities Purchase Agreement, except that the expiration date of such warrants
shall be five (5) years from the issuance date thereof. The exercise price of
the Accelerated Payment Option Warrants shall be the same as the Conversion
Price then in effect; provided, however, that if on the applicable Installment
Date on which such warrants are issued the Weighted Average Price of the Common
Shares is greater than the Conversion Price that would become the exercise price
of the Accelerated Payment Option Warrants, (i) the Company shall pay to the
Purchasers, in Common Shares within three (3) Trading Days of the applicable
Installment Date or, at the option of the Company, in cash, the product of (A)
the difference between (1) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) Trading Days ending on the
Trading Day immediately prior to the applicable Installment Date (the "Exercise
Price Measuring Period") and (2) such Conversion Price and (B) the number of
Common Shares for which such Accelerated Payment Option Warrants are exercisable
(such product, the "Adjustment Amount") and (ii) the exercise price for such
Accelerated Payment Option Warrants will be adjusted to equal such arithmetic
average of the Weighted Average Price of the Common Shares during the Exercise
Price Measuring Period. In the event the Company shall pay the Adjustment Amount
in Common Shares, the number of Common Shares to be delivered shall be equal to
the quotient of the Adjustment Amount divided by the Company Conversion Price
for the applicable Installment Date, rounded up to the nearest whole Common
Share; provided, however that the Company shall not be entitled to pay the
Adjustment Amount in Common Shares if the Equity Conditions are not satisfied.
(b) "Adjusted Conversion Price" means, as of any date of determination,
the price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Conversion Date.
(c) "Approved Share Plan" means any employee benefit plan which has
been approved by the Board of Directors of Vasogen, pursuant to which Xxxxxxx's
securities may be issued to any employee, consultant, officer or director in
connection with services provided or to be provided to Vasogen or any Subsidiary
thereof.
(d) "Bloomberg" means Bloomberg Financial Markets.
(e) "Canadian Prospectus" shall have the meaning set forth in the
Registration Rights Agreement.
(f) "Change of Control" means any Fundamental Transaction other than
(A) any reorganization, recapitalization or reclassification of the Common
Shares in which holders of Vasogen's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger
-34-
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or Vasogen.
(g) "Change of Control Conversion Price" means, as of any date of
determination, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Shares during each of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the delivery of the Change of Control Redemption Notice (such period,
the "Change of Control Measuring Period"); provided, however, that if such
arithmetic average of the Weighted Average Price during the Change of Control
Measuring Period shall yield a price that is less than $1.00, then the Change of
Control Conversion Price shall be computed as 90% of the arithmetic average of
the Weighted Average Price of the Common Shares during the Change of Control
Measuring Period. Notwithstanding the foregoing, in the event that as a result
of the application of the Exchange Cap the Company is unable to issue Common
Shares on the applicable date using the Change of Control Conversion Price as
calculated pursuant to the foregoing sentence, then the Change of Control
Conversion Price shall be the price equal to the arithmetic average of the
Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
delivery of the Change of Control Redemption Notice (such price, the "Adjusted
Change of Control Conversion Price").
(h) "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement, which date is the date the Company initially issued Notes
pursuant to the terms of the Securities Purchase Agreement.
(i) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of Vasogen or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.
(j) "Company Conversion Price" means, as of any date of determination,
that price which shall be the lower of (i) the applicable Conversion Price and
(ii) the price computed as 95% of the arithmetic average of the Weighted Average
Price of the Common Shares during each of the twelve (12) consecutive Trading
Days commencing on the Trading Day immediately after the applicable Installment
Date (such period, the "Company Conversion Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Company Conversion Measuring Period shall yield a price that is less than
$1.00, then the Company Conversion Price shall be computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Shares during the
Company Conversion Measuring Period. Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap the Company is unable to
issue Common Shares on an Installment Settlement Date using the Company
Conversion Price as calculated pursuant to the foregoing sentence (the
"Unadjusted Company Conversion Price"), then the Company Conversion Price shall
be the price equal to the arithmetic average of the Weighted Average Price of
the Common Shares during each of the five (5) consecutive Trading Days ending on
the
-35-
Trading Day immediately prior to the applicable Installment Settlement Date
(such price, the "Adjusted Company Conversion Price").
(k) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
(l) "Conversion Share Ratio" means, as to any applicable date of
determination, the quotient of (i) the number of Pre-Installment Conversion
Shares or Pre-Maturity Conversion Shares, as applicable, delivered in connection
with an Installment Date or the Maturity Date, as applicable divided by (ii) the
number of Post-Installment Conversion Shares or Post Maturity Conversion Shares,
as applicable, relating to such Installment Settlement Date or Maturity
Settlement Date, as the case may be.
(m) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(n) "Effectiveness Time" means January 20, 2006.
(o) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc. or the American Stock Exchange.
(p) "Equity Conditions" means that each of the following conditions is
satisfied: (i) either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and a Grace Period (as defined in the Registration
Rights Agreement) shall not be in progress or (y) all Common Shares issuable
upon conversion or redemption of the Notes and payment of Installment Amounts
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws and such
shares shall be freely tradable on both the NASDAQ and the TSX, other than any
restrictions on disposition by (I) a holder of a control block, where the Holder
has become such a holder or (II) an affiliate; (ii) the Common Shares are
designated for quotation or listed on both of the Principal Markets and shall
not have been suspended from trading on either of such exchanges or markets
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by Vasogen or the
Company) nor shall delisting or suspension by either of such exchanges or
markets have been threatened or pending either (A) in writing by such exchanges
or markets or (B) by falling below the minimum listing maintenance requirements
of such exchanges or markets; provided, however, that no threatened or pending
delisting or suspension that has been publicly announced and which shall not
occur within one (1) month of the applicable date of determination shall be
considered when determining whether the Company has satisfied the condition set
forth in this clause (ii); (iii) during the one (1) year period ending on and
including
-36-
the date immediately preceding the applicable date of determination (or such
lesser period of time since the Issuance Date), Vasogen shall have delivered
Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise
of the Warrants to the holders on a timely basis as set forth in Section
3(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections
1(c) of the Warrants, unless such failure to deliver shall have occurred only
once and shall have been remedied by Vasogen with three (3) Business Days; (iv)
any applicable Common Shares to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules and regulations of the Principal Markets; (v) on each day during the
period beginning three (3) months prior to the applicable date of determination
and ending on and including the applicable date of determination (the "Equity
Conditions Measuring Period"), the Company (or Vasogen if any such payment was
due in Common Shares) shall not have failed to timely make any payments within
five (5) Trading Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not
have occurred either (A) the public announcement of a pending, proposed or
intended Fundamental Transaction which has not been abandoned, rejected publicly
by the board of directors (or similar governing body) of Vasogen or the Company,
as applicable, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) neither Vasogen nor the Company shall have any knowledge of any
fact (other than facts relating exclusively to the Holder that would require
updating of the Selling Shareholders or Plan of Distribution section of the
Registration Statement) that would cause (x) the Registration Statements
required pursuant to the Registration Rights Agreement not to be effective and
available for the resale of all remaining Registrable Securities in accordance
with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion or redemption of the Notes or payment of Installment
Amounts not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws, other than any restrictions on
disposition by (I) a holder of a control block, where the Holder has become such
a holder or (II) an affiliate; (viii) Vasogen and the Company shall be in
material compliance with and shall not be in breach of any material provision or
covenant, and shall not have breached, as of the Closing Date, any
representation or warranty contained in any Transaction Document; and (ix) at
the applicable date of determination, Vasogen is not Insolvent (as defined in
the Securities Purchase Agreement).
(q) "Equity Conditions Failure" means that during any period commencing
with (i) the delivery of the Company Installment Notice through the applicable
Installment Date or Installment Settlement Date, as applicable, or (ii) the
delivery of the Maturity Election Notice through the Maturity Settlement Date,
the Equity Conditions have not been satisfied (or waived in writing by the
Holder).
(r) "Exchange Cap Limitation Shares" means (i) with respect to any
conversion required pursuant to a Conversion Notice, a number of Common Shares
equal to the quotient of the Conversion Amount set forth in such Conversion
Notice divided by the Conversion Price and (ii) with respect to any Company
Conversion, Mandatory Conversion or LC Conversion, a number of Common Shares
equal to the quotient of the Conversion Amount subject to conversion divided by
the applicable Unadjusted Company Conversion Price or the applicable Unadjusted
Mandatory Conversion Price.
-37-
(s) "Excluded Securities" means any Common Shares issued or issuable:
(i) in connection with any Approved Share Plan; (ii) upon conversion of the
Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering which generates gross proceeds to the
Company of at least $50,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with any strategic acquisition or strategic transaction, including a
licensing partnership, development or marketing agreement, whether through an
acquisition of shares or a merger of any business, assets or technologies, the
primary purpose of which is not to raise equity capital; and (v) upon conversion
of any Options or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date and have been disclosed in Schedule
3(r) to the Securities Purchase Agreement, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date.
(t) "FDA Approval" means the pre-market approval granted by the U.S.
Food and Drug Administration for the marketing of Celacade for use in treatment
of chronic heart failure.
(u) "Fiscal Quarter" means each of the fiscal quarters adopted by the
Company for financial reporting purposes that correspond to the Company's fiscal
year that ends on November 30, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(v) "Fundamental Transaction" means that the Company shall no longer be
a wholly-owned subsidiary of Vasogen or that the Company or Vasogen shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company or Vasogen, as applicable, is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
Vasogen or Vasogen and its Subsidiaries to another Person other than in
connection with a strategic transaction involving a licensing of intellectual
property and related assets of the Company or Vasogen or relating to a
partnership arrangement with respect to any such intellectual property and
related assets, in each case where such licensing or partnership arrangements
contain terms and conditions that are customary in Vasogen's industry for such
type of transactions and where the board of directors of Vasogen determines, in
good faith, that Vasogen shall retain a material financial participation in the
exploitation of such intellectual property and related assets, or (iii) be
subject to an offer from another Person or group of related Persons (as defined
in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or
(iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of related Persons (as
defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other
Person or group acquires more than the 50% of the outstanding Voting Shares (not
including any Voting Shares held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such share purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify the Common Shares.
-38-
(w) "GAAP" means Canadian generally accepted accounting principles,
consistently applied, as in effect on the Issuance Date.
(x) "Holder Pro Rata Amount" means a fraction (i) the numerator of
which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Purchase Agreements on the Closing Date.
(y) "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables and related accrued liabilities
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above. References to Indebtedness of the Company or Vasogen shall
mean Indebtedness on a consolidated basis.
(z) "Initial Company Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the fourth (4th) Trading Day immediately
prior to the Installment Date (such period, the "Initial Company Measuring
Period"); provided, however, that if such arithmetic average of the Weighted
Average Price during the Initial Company Measuring Period shall yield a price
that is less than $1.00, then the Initial Company Conversion Price shall be
computed as 90% of the arithmetic average of the Weighted Average Price of the
Common Shares during the Initial Company Measuring Period (the "Unadjusted
Initial Company Conversion Price"). Notwithstanding the foregoing, in the event
that as a result of the application of the Exchange Cap, the Company is unable
to issue Common Shares on an Installment Date using the Initial Company
Conversion Price as calculated pursuant to the foregoing sentence to determine
the number of Common Shares to be issued to the Holder as payment of any Company
Conversion Amount on any Installment Date, then the Initial Company Conversion
Price shall be the price equal to the
-39-
arithmetic average of the Weighted Average Price of the Common Shares during
each of the five (5) consecutive Trading Days ending on the fourth (4th) Trading
Day immediately prior to the applicable Installment Date.
(aa) "Initial Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the five (5) consecutive Trading Days ending
on the third (3rd) Trading Day immediately prior to the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the
applicable Mandatory Redemption/Conversion Date or LC Redemption/Conversion Date
using the Initial Mandatory Conversion Price as calculated pursuant to the
foregoing sentence, then the Initial Mandatory Conversion Price shall be the
price equal to the arithmetic average of the Weighted Average Price of the
Common Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately prior to the applicable Mandatory Redemption/Conversion
Date or LC Redemption/Conversion Date.
(bb) "Initial Maturity Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the price computed as 95% of the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately prior to the
Maturity Date (such period, the "Initial Maturity Measuring Period"); provided,
however, that if such arithmetic average of the Weighted Average Price during
the Initial Maturity Measuring Period shall yield a price that is less than
$1.00, then the Initial Maturity Conversion Price shall be computed as 90% of
the arithmetic average of the Weighted Average Price of the Common Shares during
the Initial Maturity Measuring Period. Notwithstanding the foregoing, in the
event that as a result of the application of the Exchange Cap the Company is
unable to issue Common Shares on the Maturity Date using the Initial Maturity
Conversion Price as calculated pursuant to the foregoing sentence, then the
Maturity Conversion Price shall be the price equal to the arithmetic average of
the Weighted Average Price of the Common Shares during each of the five (5)
consecutive Trading Days ending on the Trading Day immediately preceding the
Maturity Date.
(cc) "Installment Amount" means, as to the initial Installment Date
(and, unless otherwise required herein, such amount shall be the Installment
Amount to be paid on each subsequent Installment Date), an amount equal to the
lesser of (i) (A) the quotient of (x) the aggregate outstanding Principal of
this Note divided by (y) the number of whole months from such Installment Date
through the Maturity Date and (ii) the Principal amount outstanding under the
Note, in each case, plus any accrued and unpaid interest on such amount, as any
such Installment Amount may be reduced pursuant to the terms of this Note,
whether upon conversion, redemption or otherwise; provided that, for any
scheduled Installment Date following the date on which the Maturity Date is
extended to October 7, 2010, the Installment Amount shall be recalculated
pursuant to the formula in clause (i) using such new Maturity Date and such
amount shall be the Installment Amount to be paid on such Installment Date and
on each subsequent Installment Date. For any Installment Date on which an
Accelerated Amount is
-40-
to be paid, such Accelerated Amount shall be added to, and considered part of,
the applicable Installment Amount.
(dd) "Installment Balance Conversion Shares" means, for any Installment
Date, a number of Common Shares equal to (i) the Post-Installment Conversion
Shares for such date minus (ii) the amount of any Pre-Installment Conversion
Shares delivered on such date; provided that in the event that the amount of
Pre-Installment Conversion Shares exceeds the Post-Installment Conversion Shares
for such date (such excess, the "Installment Conversion Shares Excess"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Installment Conversion Share Excess and (y) the Company Conversion Price and the
Installment Balance Conversion Shares shall equal zero (0).
(ee) "Installment Date" means, initially, the first (1st) day of the
calendar month following the month during which the Canadian Prospectus has
become effective and, thereafter, the first (1st) day of each calendar month
prior to the Maturity Date.
(ff) "Interest Principal Amount" means, for any date of determination,
the amount equal to (i) the outstanding Principal of this Note on such date
minus (ii) the Letter of Credit Amount on such date.
(gg) "Letter of Credit Amount" means the Holder's Pro Rata Amount of
the amount of the letter of credit (the "Letter of Credit") issued in favor of
the LC Agent (as defined in the Securities Purchase Agreement), which amount
shall initially be $10,000,000, which amount may be reduced pursuant to Section
4(q) of the Securities Purchase Agreement.
(hh) "Mandatory Conversion Price" means, as of any date of
determination, that price which shall be the lower of (i) the applicable
Conversion Price and (ii) the arithmetic average of the Weighted Average Price
of the Common Shares during each of the twelve (12) consecutive Trading Days
commencing on the Trading Day immediately after the applicable Mandatory
Redemption/Conversion Date or LC Redemption/Conversion Date, as the case may be
(such period, the "Mandatory Conversion Measuring Period"). Notwithstanding the
foregoing, in the event that as a result of the application of the Exchange Cap
the Company is unable to issue Common Shares on the applicable Installment
Settlement Date pursuant to Section 8(c) using the Mandatory Conversion Price as
calculated pursuant to the foregoing sentence (the "Unadjusted Mandatory
Conversion Price"), then the Mandatory Conversion Price shall be the price equal
to the arithmetic average of the Weighted Average Price of the Common Shares
during each of the five (5) consecutive Trading Days ending on the Trading Day
immediately prior to the applicable Installment Settlement Date (such price, the
"Adjusted Mandatory Conversion Price").
(ii) "Maturity Balance Conversion Shares" means a number of Common
Shares equal to (i) the Post-Maturity Conversion Shares for such date minus (ii)
the amount of any Pre-Maturity Conversion Shares delivered on such date;
provided that in the event that the amount of Pre-Maturity Conversion Shares
exceeds the Post-Maturity Conversion Shares for such date (such excess, the
"Maturity Conversion Shares Excess"), then the Maturity Balance Conversion
Shares shall equal zero (0).
-41-
(jj) "Maturity Conversion Price" means that price which shall be the
lower of (i) the applicable Conversion Price and (ii) the price computed as 95%
of the arithmetic average of the Weighted Average Price of the Common Shares
during each of the twelve (12) consecutive Trading Days beginning on the Trading
Day immediately following the Maturity Date (such period, the "Maturity
Conversion Measuring Period"); provided, however, that if such arithmetic
average of the Weighted Average Price during the Maturity Conversion Measuring
Period shall yield a price that is less than $1.00, then the Maturity Conversion
Price shall be computed as 90% of the arithmetic average of the Weighted Average
Price of the Common Shares during the Maturity Conversion Measuring Period.
Notwithstanding the foregoing, in the event that as a result of the application
of the Exchange Cap the Company is unable to issue Common Shares on the Maturity
Settlement Date using the Maturity Conversion Price as calculated pursuant to
the foregoing sentence, then the Maturity Conversion Price shall be the price
equal to the arithmetic average of the Weighted Average Price of the Common
Shares during each of the five (5) consecutive Trading Days ending on the
Trading Day immediately preceding the Maturity Settlement Date.
(kk) "Maturity Date" means October 7, 2007; provided that such date
shall be extended to October 7, 2010 in the event that the FDA Approval is
granted; provided, however, that the Maturity Date may be extended at the option
of the Holder (i) in the event that, and for so long as, an Event of Default
shall have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice is delivered prior to the
Maturity Date; provided, further, that such date shall be shortened by the
number of months equal to the quotient of (A) any Accelerated Amount (less the
amount of any accrued and unpaid interest included in such amount) paid on any
Installment Date hereunder divided by (B) the applicable Installment Amount paid
on the Installment Date related to such Accelerated Amount (less the amount of
any accrued and unpaid interest included in such amount and less any Accelerated
Amount that would otherwise be included therein) on the Installment Date related
to such Accelerated Amount, rounded down to the nearest whole number.
(ll) "NASDAQ" means whichever of the Nasdaq National Market or The
Nasdaq SmallCap Market on which the Common Shares are traded.
(mm) "Net Cash Balance" means, at any date, (i) an amount equal to the
aggregate amount of cash, cash equivalents (including cash collateralizing the
Letter of Credit and not including other restricted cash) and marketable
securities, consisting of corporate bonds, commercial paper and medium-term
notes, as shown or reflected in the notes to Vasogen's consolidated balance
sheet as at such date minus (ii) the unpaid principal balance of any
Indebtedness for borrowed money (excluding Indebtedness under the Notes).
(nn) "Net Cash Balance Threshold" means, for any date of determination,
an amount equal to 110% of the outstanding aggregate Principal amount of the
Notes on such date.
-42-
(oo) "Options" means any rights, warrants or options to subscribe for
or purchase Common Shares or Convertible Securities.
(pp) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security are quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(qq) "Permitted Indebtedness" means (i) Indebtedness incurred by the
Company, Vasogen or their Subsidiaries that is pari passu with, or is made
expressly subordinate in right of payment to the Indebtedness evidenced by this
Note (any such subordination to be reflected in a written agreement acceptable
to the Required Holders and approved by the Required Holders in writing) and
which Indebtedness does not provide at any time for the payment, prepayment,
repayment, redemption, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later, (ii) Indebtedness secured by Xxxxxxxxx Xxxxx, (iii)
Indebtedness to trade creditors incurred in the ordinary course of business,
(iv) intercompany Indebtedness amongst the Company, Vasogen and their respective
Subsidiaries which Indebtedness is subordinate in right of payment to the
Indebtedness evidenced by this Note and (v) Indebtedness the proceeds of which
are used to redeem, repay or otherwise retire the Notes, in whole or in part;
provided that in the event such Indebtedness is not used to redeem, repay or
retire the Notes in full, such Indebtedness shall rank junior to the Notes in
accordance with Section 16(a).
(rr) "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) Liens (A) upon or in any
equipment, inventory or other assets acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment, inventory or
other assets or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment,
inventory or other assets at the time of its acquisition, provided that the Lien
is confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, inventory or other assets.
(ss) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(tt) "Post-Installment Conversion Shares" means, for any Installment
Date, that number of Common Shares equal to the applicable Company Conversion
Amount for such Installment Date divided by the Company Conversion Price
(without taking
-43-
into account the delivery of any Pre-Installment Conversion Shares), rounded up
to the nearest whole Common Share.
(uu) "Post-Maturity Conversion Shares" means that number of Common
Shares equal to the outstanding Principal on the Maturity Date divided by the
Maturity Conversion Price (without taking into account the delivery of any
Pre-Maturity Conversion Shares), rounded up to the nearest whole Common Share.
(vv) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(ww) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Subscription Date, by and among the Company, Vasogen, Vasogen, Corp. and the
initial holders of the Other Notes.
(xx) "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, Change of Control Redemption Notices, any Company
Installment Notices (in the event a Company Redemption is elected in any such
notices), Mandatory Redemption/Conversion Notices (in the event a Mandatory
Redemption is elected in any such notices) and LC Redemption/Conversion Notices
(in the event an LC Redemption is elected in any such notice) and, each of the
foregoing, individually, a Redemption Notice.
(yy) "Redemption Premium" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.
(zz) "Redemption Prices" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, any Company Installment
Redemption Price (in the event a Company Redemption is elected with respect to
any Installment Date), Mandatory Redemption Price and LC Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(aaa) "Registration Rights Agreement" means that certain registration
rights agreement dated as of the Subscription Date by and among Vasogen and the
initial holders of the Notes relating to, among other things, the registration
of the resale of the Common Shares issuable upon conversion of the Notes and
exercise of the Warrants.
(bbb) "Required Holders" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.
(ccc) "SEC" means the United States Securities and Exchange Commission.
(ddd) "Securities Purchase Agreement" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company,
Vasogen, Vasogen, Corp. and the initial Holder of this Note pursuant to which
the Company issued this Note.
-44-
(eee) "Subscription Date" means October 7, 2005.
(fff) "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common shares or equivalent
equity security are quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person's Parent Entity.
(ggg) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(hhh) "Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment under the Note.
(iii) "TSX" means the Toronto Stock Exchange.
(jjj) "Trading Day" means any day on which the Common Shares is traded
on the Principal Markets, or, if the Principal Markets are not the principal
trading market for the Common Shares, then on the principal securities exchange
or securities market on which the Common Shares is then traded; provided that
"Trading Day" shall not include any day on which the Common Shares is scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Shares is suspended from trading during the final hour of trading on
any such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(kkk) "Voting Shares" of a Person means capital shares of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(lll) "Warrants" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
(mmm) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-weighted
-45-
average price of such security on another Principal Market for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such Principal Market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York Time (or such other time as such Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such other time as such market publicly announces is the official close of
trading) as reported by Bloomberg, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
(33) VASOGEN'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of Vasogen to issue Common
Shares to the Holder's account with DTC so long as Vasogen has sent a copy of
such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), Vasogen shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
(34) DISCLOSURE. Upon receipt or delivery by the Company or Vasogen of any
notice in accordance with the terms of this Note, unless Vasogen has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to Vasogen or its Subsidiaries, Vasogen
shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 6-K or
otherwise and through analogous legal disclosure in accordance with Canadian
securities laws. In the event that Xxxxxxx believes that a notice contains
material, nonpublic information, relating to Vasogen or its Subsidiaries,
Vasogen shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to Vasogen or its Subsidiaries.
[Signature Page Follows]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Issuance Date set out above.
SIGNED, SEALED AND DELIVERED BY
XXXXX XXXXXXX AS A DEED FOR AND
ON BEHALF OF VASOGEN IRELAND
LIMITED PURSUANT TO A POWER OF
ATTORNEY
----------------------------------------
Signature of Witness:
-------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
Occupation:
-----------------------------------
ACKNOWLEDGED AND AGREED:
VASOGEN INC.
By:
------------------------------------------
Name:
Title:
Address:
Exhibit 7a
Amendments to Senior Convertible Notes - Kings Road Investments Ltd.
(see attached)
VASOGEN INC.
VASOGEN IRELAND LIMITED
c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
KINGS ROAD INVESTMENTS LTD.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X.X. Xxxxxxxxx and Xxxxxxx X. Xxxxx
Dear Sirs:
We refer to the Senior Convertible Note, dated as of October 7, 2005 (the
"Note"), issued by Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland (the "Company"), and acknowledged and agreed to
by Vasogen Inc., a Canadian corporation (the "Parent"), in favor of Kings Road
Investments Ltd., a Cayman Islands company (the "Holder"), in the original
principal amount of U.S. Sixteen Million Five Hundred Thousand Dollars
(US$16,500,000). Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Note.
The Company, the Parent and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company, the Parent and the
---------
holders of the Other Notes of letters in identical form and substance to this
Letter, the Note is hereby amended by adding the following subsections (f) and
(g) at the end of Section 3 thereof:
"(f) Payment in Lieu of Conversion Above Number of Common Shares Available
---------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Note is outstanding, the Holder delivers a Conversion Notice and, on the
date of receipt of such Conversion Notice by Vasogen (the "Conversion
Notice Date"), following the application of, when applicable, Section 3(e)
hereof, the number of Common Shares that Vasogen would otherwise be
required to issue pursuant to the foregoing provisions of this Section 3
to satisfy such conversion in full (the "Required Conversion Shares")
exceeds the number of Common Shares that are available for resale under
the Registration Statement (as defined in the
2
Registration Rights Agreement) (such excess, the "Unregistered Shares" and
the difference between the Required Conversion Shares minus the
Unregistered Shares, the "Available Shares"), then (A) the Company shall
direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, issue to the Holder the Available Shares by the
third (3rd) Trading Day following receipt of the applicable Conversion
Notice and (B) the Company shall pay to the Holder, in lieu of Vasogen
issuing Unregistered Shares and in addition to any Conversion Make-Whole
amount required to be paid pursuant to Section 3(e), within twelve (12)
Trading Days following the Conversion Notice Date in cash an amount equal
to the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Conversion Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Conversion Notice and ending on, and including, the third (3rd)
Trading Day following receipt of such Conversion Notice or (2) in the
event the Holder has received an Unavailability Notice prior to delivery
of such Conversion Notice, 105% of the Weighted Average Price of the
Common Shares on the applicable Conversion Date (the "Unregistered Shares
Redemption Payment"); provided, however, that if at any time the
arithmetic average of the Weighted Average Price of the Common Shares
calculated for the applicable period or day in accordance with clause (1)
or (2) is less than $1.00, then for purposes of clause (y) such arithmetic
average shall be multiplied by 110% instead of 105% to determine the
Unregistered Shares Redemption Payment. In the event that the Company and
Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Available Shares can cover some, but not
all, of such portions of the Notes submitted for conversion, Vasogen shall
allocate the Available Shares amongst the converting holders in accordance
with Section 3(c)(iv). Provided that Vasogen delivers the Common Shares
and makes the Unregistered Shares Redemption Payment in the time periods
set forth in clauses (A) and (B) of the foregoing sentence, the
obligations of the Company and Vasogen with respect to such Conversion
Notice shall be deemed to be fully satisfied and the Holder shall have no
right to pursue any remedies set forth in Section 3(c)(ii) hereof with
respect to such Conversion Notice.
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company or Vasogen shall deliver to the Holder a written
---------
notice (an "Unavailability Notice") that there
3
are no additional Common Shares available for resale under the
Registration Statement (the "Unavailability Date") at the earlier of (i)
no more than one (1) Trading Day after such Unavailability Date or (ii) no
more than one (1) Trading Day after the delivery of any Conversion Notice
by a Holder requiring a conversion of a number of Required Conversion
Shares in excess of the amount of any Available Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Note. Except as expressly provided herein, all of
------------------------
the terms and conditions of the Note are ratified and shall remain unchanged and
continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
SIGNED BY XXXX XXXX AS A DEED
FOR AND ON BEHALF OF VASOGEN
IRELAND LIMITED PURSUANT TO A
POWER OF ATTORNEY
--------------------------------
Pursuant to a Power of Attorney
VASOGEN INC.
By: ----------------------------
Name:
Title:
Accepted and agreed to as of
the date first written above by:
KINGS ROAD INVESTMENTS LTD.
By:
------------------------------
Name:
Title:
Exhibit 7b
Amendments to Senior Convertible Notes - Amatis Ltd.
(see attached)
VASOGEN INC.
VASOGEN IRELAND LIMITED
c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
AMATIS LTD.
c/o Amaranth Advisors LLC
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Dear Sirs:
We refer to the Senior Convertible Note, dated as of October 7, 2005 (the
"Note"), issued by Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland (the "Company"), and acknowledged and agreed to
by Vasogen Inc., a Canadian corporation (the "Parent"), in favor of Amatis Ltd.,
a Cayman Islands company (the "Holder"), in the original principal amount of
U.S. Eight Million Dollars (US$8,000,000). Capitalized terms used but not
defined in this letter agreement ("Letter") have the respective meanings set
forth in the Note.
The Company, the Parent and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company, the Parent and the
---------
holders of the Other Notes of letters in identical form and substance to this
Letter, the Note is hereby amended by adding the following subsections (f) and
(g) at the end of Section 3 thereof:
"(f) Payment in Lieu of Conversion Above Number of Common Shares Available
---------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Note is outstanding, the Holder delivers a Conversion Notice and, on the
date of receipt of such Conversion Notice by Vasogen (the "Conversion
Notice Date"), following the application of, when applicable, Section 3(e)
hereof, the number of Common Shares that Vasogen would otherwise be
required to issue pursuant to the foregoing provisions of this Section 3
to satisfy such conversion in full (the "Required Conversion Shares")
exceeds the number of Common Shares that are available for resale under
the Registration Statement (as defined in the Registration Rights
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required Conversion Shares minus the Unregistered
2
Shares, the "Available Shares"), then (A) the Company shall direct Vasogen
to, and upon such direction Vasogen shall or shall cause the Transfer
Agent to, issue to the Holder the Available Shares by the third (3rd)
Trading Day following receipt of the applicable Conversion Notice and (B)
the Company shall pay to the Holder, in lieu of Vasogen issuing
Unregistered Shares and in addition to any Conversion Make-Whole amount
required to be paid pursuant to Section 3(e), within twelve (12) Trading
Days following the Conversion Notice Date in cash an amount equal to the
product of (x) the Unregistered Shares multiplied by (y) (1) in the event
the Holder has not received an Unavailability Notice (as defined below)
prior to the delivery of its Conversion Notice, 105% of the arithmetic
average of the Weighted Average Price of the Common Shares during the
period beginning on, and including, the day the Holder delivers its
Conversion Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Conversion Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Conversion Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable Conversion Date (the "Unregistered Shares Redemption
Payment"); provided, however, that if at any time the arithmetic average
of the Weighted Average Price of the Common Shares calculated for the
applicable period or day in accordance with clause (1) or (2) is less than
$1.00, then for purposes of clause (y) such arithmetic average shall be
multiplied by 110% instead of 105% to determine the Unregistered Shares
Redemption Payment. In the event that the Company and Vasogen receive a
Conversion Notice from more than one holder of Notes for the same
Conversion Date and the Available Shares can cover some, but not all, of
such portions of the Notes submitted for conversion, Vasogen shall
allocate the Available Shares amongst the converting holders in accordance
with Section 3(c)(iv). Provided that Vasogen delivers the Common Shares
and makes the Unregistered Shares Redemption Payment in the time periods
set forth in clauses (A) and (B) of the foregoing sentence, the
obligations of the Company and Vasogen with respect to such Conversion
Notice shall be deemed to be fully satisfied and the Holder shall have no
right to pursue any remedies set forth in Section 3(c)(ii) hereof with
respect to such Conversion Notice.
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company or Vasogen shall deliver to the Holder a written
---------
notice (an "Unavailability Notice") that there are no additional Common
Shares available for resale under the
3
Registration Statement (the "Unavailability Date") at the earlier of (i)
no more than one (1) Trading Day after such Unavailability Date or (ii) no
more than one (1) Trading Day after the delivery of any Conversion Notice
by a Holder requiring a conversion of a number of Required Conversion
Shares in excess of the amount of any Available Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Note. Except as expressly provided herein, all of
------------------------
the terms and conditions of the Note are ratified and shall remain unchanged and
continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
SIGNED BY XXXX XXXX AS A DEED
FOR AND ON BEHALF OF VASOGEN
IRELAND LIMITED PURSUANT TO A
POWER OF ATTORNEY
--------------------------------
Pursuant to a Power of Attorney
VASOGEN INC.
By:
----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
AMATIS LTD.
By:
--------------------------------
Name:
Title:
Exhibit 7c
Amendments to Senior Convertible Notes - Castlerigg Master Investments Ltd.
(see attached)
VASOGEN INC.
VASOGEN IRELAND LIMITED
c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CASTLERIGG MASTER INVESTMENTS LTD.
c/o Sandell Asset Management Corp.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Cem Hacioglu
Dear Sirs:
We refer to the Senior Convertible Note, dated as of October 7, 2005 (the
"Note"), issued by Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland (the "Company"), and acknowledged and agreed to
by Vasogen Inc., a Canadian corporation (the "Parent"), in favor of Castlerigg
Master Investments Ltd., a Curacao, Netherland Antilles company (the "Holder"),
in the original principal amount of U.S. Eight Million Dollars (US$8,000,000).
Capitalized terms used but not defined in this letter agreement ("Letter") have
the respective meanings set forth in the Note.
The Company, the Parent and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company, the Parent and the
---------
holders of the Other Notes of letters in identical form and substance to this
Letter, the Note is hereby amended by adding the following subsections (f) and
(g) at the end of Section 3 thereof:
"(f) Payment in Lieu of Conversion Above Number of Common Shares Available
---------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Note is outstanding, the Holder delivers a Conversion Notice and, on the
date of receipt of such Conversion Notice by Vasogen (the "Conversion
Notice Date"), following the application of, when applicable, Section 3(e)
hereof, the number of Common Shares that Vasogen would otherwise be
required to issue pursuant to the foregoing provisions of this Section 3
to satisfy such conversion in full (the "Required Conversion Shares")
exceeds the number of Common Shares that are available for resale under
the Registration Statement (as defined in the
2
Registration Rights Agreement) (such excess, the "Unregistered Shares" and
the difference between the Required Conversion Shares minus the
Unregistered Shares, the "Available Shares"), then (A) the Company shall
direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, issue to the Holder the Available Shares by the
third (3rd) Trading Day following receipt of the applicable Conversion
Notice and (B) the Company shall pay to the Holder, in lieu of Vasogen
issuing Unregistered Shares and in addition to any Conversion Make-Whole
amount required to be paid pursuant to Section 3(e), within twelve (12)
Trading Days following the Conversion Notice Date in cash an amount equal
to the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Conversion Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Conversion Notice and ending on, and including, the third (3rd)
Trading Day following receipt of such Conversion Notice or (2) in the
event the Holder has received an Unavailability Notice prior to delivery
of such Conversion Notice, 105% of the Weighted Average Price of the
Common Shares on the applicable Conversion Date (the "Unregistered Shares
Redemption Payment"); provided, however, that if at any time the
arithmetic average of the Weighted Average Price of the Common Shares
calculated for the applicable period or day in accordance with clause (1)
or (2) is less than $1.00, then for purposes of clause (y) such arithmetic
average shall be multiplied by 110% instead of 105% to determine the
Unregistered Shares Redemption Payment. In the event that the Company and
Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Available Shares can cover some, but not
all, of such portions of the Notes submitted for conversion, Vasogen shall
allocate the Available Shares amongst the converting holders in accordance
with Section 3(c)(iv). Provided that Vasogen delivers the Common Shares
and makes the Unregistered Shares Redemption Payment in the time periods
set forth in clauses (A) and (B) of the foregoing sentence, the
obligations of the Company and Vasogen with respect to such Conversion
Notice shall be deemed to be fully satisfied and the Holder shall have no
right to pursue any remedies set forth in Section 3(c)(ii) hereof with
respect to such Conversion Notice.
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company or Vasogen shall deliver to the Holder a written
---------
notice (an "Unavailability Notice") that there
3
are no additional Common Shares available for resale under the
Registration Statement (the "Unavailability Date") at the earlier of (i)
no more than one (1) Trading Day after such Unavailability Date or (ii) no
more than one (1) Trading Day after the delivery of any Conversion Notice
by a Holder requiring a conversion of a number of Required Conversion
Shares in excess of the amount of any Available Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Note. Except as expressly provided herein, all of
------------------------
the terms and conditions of the Note are ratified and shall remain unchanged and
continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
SIGNED BY XXXX XXXX AS A DEED
FOR AND ON BEHALF OF VASOGEN
IRELAND LIMITED PURSUANT TO A
POWER OF ATTORNEY
--------------------------------
Pursuant to a Power of Attorney
VASOGEN INC.
By:
----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CASTLERIGG MASTER INVESTMENTS LTD.
By:
--------------------------------
Name:
Title:
Exhibit 7d
Amendments to Senior Convertible Notes - Capital Ventures International
(see attached)
VASOGEN INC.
VASOGEN IRELAND LIMITED
c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CAPITAL VENTURES INTERNATIONAL
c/o Heights Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Dear Sirs:
We refer to the Senior Convertible Note, dated as of October 7, 2005 (the
"Note"), issued by Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland (the "Company"), and acknowledged and agreed to
by Vasogen Inc., a Canadian corporation (the "Parent"), in favor of Capital
Ventures International, a Cayman Islands company (the "Holder"), in the original
principal amount of U.S. Four Million Five Hundred Thousand Dollars
(US$4,500,000). Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Note.
The Company, the Parent and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company, the Parent and the
---------
holders of the Other Notes of letters in identical form and substance to this
Letter, the Note is hereby amended by adding the following subsections (f) and
(g) at the end of Section 3 thereof:
"(f) Payment in Lieu of Conversion Above Number of Common Shares Available
---------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Note is outstanding, the Holder delivers a Conversion Notice and, on the
date of receipt of such Conversion Notice by Vasogen (the "Conversion
Notice Date"), following the application of, when applicable, Section 3(e)
hereof, the number of Common Shares that Vasogen would otherwise be
required to issue pursuant to the foregoing provisions of this Section 3
to satisfy such conversion in full (the "Required Conversion Shares")
exceeds the number of Common Shares that are available for resale under
the Registration Statement (as defined in the
2
Registration Rights Agreement) (such excess, the "Unregistered Shares" and
the difference between the Required Conversion Shares minus the
Unregistered Shares, the "Available Shares"), then (A) the Company shall
direct Vasogen to, and upon such direction Vasogen shall or shall cause
the Transfer Agent to, issue to the Holder the Available Shares by the
third (3rd) Trading Day following receipt of the applicable Conversion
Notice and (B) the Company shall pay to the Holder, in lieu of Vasogen
issuing Unregistered Shares and in addition to any Conversion Make-Whole
amount required to be paid pursuant to Section 3(e), within twelve (12)
Trading Days following the Conversion Notice Date in cash an amount equal
to the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Conversion Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Conversion Notice and ending on, and including, the third (3rd)
Trading Day following receipt of such Conversion Notice or (2) in the
event the Holder has received an Unavailability Notice prior to delivery
of such Conversion Notice, 105% of the Weighted Average Price of the
Common Shares on the applicable Conversion Date (the "Unregistered Shares
Redemption Payment"); provided, however, that if at any time the
arithmetic average of the Weighted Average Price of the Common Shares
calculated for the applicable period or day in accordance with clause (1)
or (2) is less than $1.00, then for purposes of clause (y) such arithmetic
average shall be multiplied by 110% instead of 105% to determine the
Unregistered Shares Redemption Payment. In the event that the Company and
Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Available Shares can cover some, but not
all, of such portions of the Notes submitted for conversion, Vasogen shall
allocate the Available Shares amongst the converting holders in accordance
with Section 3(c)(iv). Provided that Vasogen delivers the Common Shares
and makes the Unregistered Shares Redemption Payment in the time periods
set forth in clauses (A) and (B) of the foregoing sentence, the
obligations of the Company and Vasogen with respect to such Conversion
Notice shall be deemed to be fully satisfied and the Holder shall have no
right to pursue any remedies set forth in Section 3(c)(ii) hereof with
respect to such Conversion Notice.
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company or Vasogen shall deliver to the Holder a written
---------
notice (an "Unavailability Notice") that there
are no additional Common Shares available for resale under the
Registration Statement (the "Unavailability Date") at the earlier of (i)
no more than one (1) Trading Day after such Unavailability Date or (ii) no
more than one (1) Trading Day after the delivery of any Conversion Notice
by a Holder requiring a conversion of a number of Required Conversion
Shares in excess of the amount of any Available Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Note. Except as expressly provided herein, all of
------------------------
the terms and conditions of the Note are ratified and shall remain unchanged and
continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
SIGNED BY XXXX XXXX AS A DEED
FOR AND ON BEHALF OF VASOGEN
IRELAND LIMITED PURSUANT TO A
POWER OF ATTORNEY
--------------------------------
Pursuant to a Power of Attorney
VASOGEN INC.
By:
----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CAPITAL VENTURES INTERNATIONAL
By:
--------------------------------
Name:
Title:
Exhibit 7e
Amendments to Senior Convertible Notes - Smithfield Fiduciary LLC
(see attached)
VASOGEN INC.
VASOGEN IRELAND LIMITED
c/o Vasogen Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
SMITHFIELD FIDUCIARY LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx and Xxxx X. Xxxxx
Dear Sirs:
We refer to the Senior Convertible Note, dated as of October 7, 2005 (the
"Note"), issued by Vasogen Ireland Limited, a company incorporated under the
laws of the Republic of Ireland (the "Company"), and acknowledged and agreed to
by Vasogen Inc., a Canadian corporation (the "Parent"), in favor of Smithfield
Fiduciary LLC, a Cayman Islands company (the "Holder"), in the original
principal amount of U.S. Three Million Dollars (US$3,000,000). Capitalized terms
used but not defined in this letter agreement ("Letter") have the respective
meanings set forth in the Note.
The Company, the Parent and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company, the Parent and the
---------
holders of the Other Notes of letters in identical form and substance to this
Letter, the Note is hereby amended by adding the following subsections (f) and
(g) at the end of Section 3 thereof:
"(f) Payment in Lieu of Conversion Above Number of Common Shares Available
---------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Note is outstanding, the Holder delivers a Conversion Notice and, on the
date of receipt of such Conversion Notice by Vasogen (the "Conversion
Notice Date"), following the application of, when applicable, Section 3(e)
hereof, the number of Common Shares that Vasogen would otherwise be
required to issue pursuant to the foregoing provisions of this Section 3
to satisfy such conversion in full (the "Required Conversion Shares")
exceeds the number of Common Shares that are available for resale under
the Registration Statement (as defined in the Registration Rights
Agreement) (such excess, the "Unregistered
2
Shares" and the difference between the Required Conversion Shares minus
the Unregistered Shares, the "Available Shares"), then (A) the Company
shall direct Vasogen to, and upon such direction Vasogen shall or shall
cause the Transfer Agent to, issue to the Holder the Available Shares by
the third (3rd) Trading Day following receipt of the applicable Conversion
Notice and (B) the Company shall pay to the Holder, in lieu of Vasogen
issuing Unregistered Shares and in addition to any Conversion Make-Whole
amount required to be paid pursuant to Section 3(e), within twelve (12)
Trading Days following the Conversion Notice Date in cash an amount equal
to the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Conversion Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Conversion Notice and ending on, and including, the third (3rd)
Trading Day following receipt of such Conversion Notice or (2) in the
event the Holder has received an Unavailability Notice prior to delivery
of such Conversion Notice, 105% of the Weighted Average Price of the
Common Shares on the applicable Conversion Date (the "Unregistered Shares
Redemption Payment"); provided, however, that if at any time the
arithmetic average of the Weighted Average Price of the Common Shares
calculated for the applicable period or day in accordance with clause (1)
or (2) is less than $1.00, then for purposes of clause (y) such arithmetic
average shall be multiplied by 110% instead of 105% to determine the
Unregistered Shares Redemption Payment. In the event that the Company and
Vasogen receive a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Available Shares can cover some, but not
all, of such portions of the Notes submitted for conversion, Vasogen shall
allocate the Available Shares amongst the converting holders in accordance
with Section 3(c)(iv). Provided that Vasogen delivers the Common Shares
and makes the Unregistered Shares Redemption Payment in the time periods
set forth in clauses (A) and (B) of the foregoing sentence, the
obligations of the Company and Vasogen with respect to such Conversion
Notice shall be deemed to be fully satisfied and the Holder shall have no
right to pursue any remedies set forth in Section 3(c)(ii) hereof with
respect to such Conversion Notice.
(g) Notice of Unavailability of Common Shares Under the Registration
-----------------------------------------------------------------
Statement. The Company or Vasogen shall deliver to the Holder a written
---------
notice (an "Unavailability Notice") that there are no additional Common
Shares available for resale under the
3
Registration Statement (the "Unavailability Date") at the earlier of (i)
no more than one (1) Trading Day after such Unavailability Date or (ii) no
more than one (1) Trading Day after the delivery of any Conversion Notice
by a Holder requiring a conversion of a number of Required Conversion
Shares in excess of the amount of any Available Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Note. Except as expressly provided herein, all of
------------------------
the terms and conditions of the Note are ratified and shall remain unchanged and
continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
SIGNED BY XXXX XXXX AS A DEED
FOR AND ON BEHALF OF VASOGEN
IRELAND LIMITED PURSUANT TO A
POWER OF ATTORNEY
--------------------------------
Pursuant to a Power of Attorney
VASOGEN INC.
By:
----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
SMITHFIELD FIDUCIARY LLC
By:
--------------------------------
Name:
Title:
Exhibit 8a
Warrants - Kings Road Investments Ltd.
(see attached)
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED, OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN
THE UNITED STATES OR TO ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT)
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL NOT
TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA BEFORE FEBRUARY 8,
2006.
VASOGEN INC.
WARRANT TO PURCHASE COMMON SHARES
Warrant No.: A-1
Number of Common Shares: 1,375,000
Date of Issuance: October 7, 2005 ("Issuance Date")
Vasogen Inc., a Canadian corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, UBS SECURITIES LLC F/B/O KINGS ROAD INVESTMENTS LTD.,
the registered holder hereof or its permitted assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Shares (including any Warrants to Purchase Common
Shares issued in exchange, transfer or replacement hereof, the "Warrant"), at
any time or times on or after the Issuance Date, but not after 5:00 p.m., New
York Time, on the Expiration Date (as defined below), One Million Three Hundred
Seventy Five Thousand (1,375,000) fully paid and nonassessable Common Shares (as
defined below) (the "Warrant Shares"). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth in Section
19. This Warrant is the Warrant to Purchase Common Shares (the "SPA Warrants")
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of October
7, 2005 (the "Subscription Date"), by and among the Company, VIL, Vasogen, Corp.
and the investor (the "Buyer") referred to therein (the "Securities Purchase
Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(e) and
the conditions set forth in the Exercise Notice (as defined below)), this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
in whole or in part, by (i) delivery of a written notice, substantially in the
form attached hereto as Exhibit I (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and transmission of such Exercise Notice by
e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement and (ii) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first (1st) Trading Day (as defined in the SPA Securities) following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of Common Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the foregoing shall not apply,
issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in
the name of the Holder or its designee, for the number of Common Shares to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five (5) Trading
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Common Shares are to be issued upon the exercise of
this Warrant, but rather the number of Common Shares to be issued shall be
rounded up to the nearest whole number. The Warrant Shares shall bear the
legends referred to in Sections 2(g) of the Securities Purchase Agreement, to
the extent required thereby.
-2-
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $3.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the Company
shall fail for any reason or for no reason to issue to the Holder on the Share
Delivery Date, a certificate for the Common Shares to which the Holder is
entitled or to credit the Holder's balance account with DTC for such number of
Common Shares to which the Holder is entitled upon the Holder's exercise of this
Warrant, if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Common Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Shares so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Weighted Average
Price on the date of exercise.
(d) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 16.
(e) Limitation on Exercises.
(i) Beneficial Ownership. The Company shall not effect the exercise
of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates and
joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(y) for purposes of the Securities Act (Ontario), in excess of 9.99%
(the "Maximum Percentage") of the number of Common Shares
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of Common
Shares beneficially owned by such Person and its affiliates and
joint actors shall include the number of Common Shares issuable upon
exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude Common Shares which
would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its
affiliates or joint actors and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates or
joint actors (including, without limitation, any convertible notes
or convertible preferred shares or warrants), which in each case is
subject to a limitation on
-3-
conversion or exercise analogous to the limitation contained herein.
For purposes of calculating beneficial ownership pursuant to this
paragraph, beneficial ownership pursuant to the Exchange Act shall
be calculated in accordance with Section 13(d) of the Exchange Act,
and beneficial ownership pursuant to the Securities Act (Ontario)
shall be calculated in accordance with section 101 of the Securities
Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (1) the Company's most
recent Form 40-F, Current Report on Form 6-K or other public filing
with the Securities and Exchange Commission or the Canadian
Securities Administration, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Trading Days
of receipt of a written request from the Holder confirm in writing
to the Holder the number of Common Shares then outstanding. In any
case, the number of outstanding Common Shares shall be determined
after giving effect to the actual conversion or exercise of
securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By
written notice to the Company, the Holder from time to time may
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Securities.
(ii) Principal Market Regulation. The Company shall not be obligated
to issue any Common Shares upon exercise of this Warrant if the
issuance of such Common Shares would exceed that number of Common
Shares which the Company may issue upon exercise of this Warrant
(including, as applicable, any Common Shares issued upon conversion,
amortization or redemption of the SPA Securities) without breaching
the Company's obligations under the rules or regulations of the
Principal Market (the "Exchange Cap"), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of the Principal Market (in the case of the TSX) or its
shareholders as required by the applicable rules of the Principal
Market for issuances of Common Shares in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval
or
-4-
written opinion is obtained, no Buyer shall be issued, upon exercise
or conversion, as applicable, of any SPA Warrants or SPA Securities,
Common Shares in an amount greater than the product of the Exchange
Cap multiplied by a fraction, the numerator of which is the total
number of Warrant Shares issuable to the Buyer pursuant to the
Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Warrant Shares
issuable to the Buyers pursuant to the Purchase Agreements on the
Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of the Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
SPA Warrants on a pro rata basis in proportion to the Common Shares
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares
for which an Exercise Notice has been received as a result of the
operation of this Section 1(e)(ii), the Company shall, in
satisfaction of its obligation to issue such Warrant Shares, at its
option either (X) pay to the Holder on the Share Delivery Date cash
at a price per Warrant Share equal to the difference between the
Weighted Average Price of the Common Shares and the Exercise Price
as of the date of the attempted exercise (such cash amount in the
aggregate for all such Warrant Shares, the "In-The-Money Value"), or
(Y) issue to the Holder on the Share Delivery Date an amount of
Common Shares equal to the quotient of (1) the In-The-Money Value
divided by (2) the arithmetic average of the Weighted Average Price
of the Common Shares during the five (5) Trading Day period
immediately preceding the date of attempted exercise, rounded to the
nearest whole Common Share.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Common Shares. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any Common Shares (including the issuance or sale of Common
Shares owned or held by or for the account of the Company, but excluding Common
Shares deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA
-5-
Securities) for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of Common Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
Common Shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or
sells any Options and the lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Options that are Variable Price Securities (as
defined below), the Exercise Price hereunder shall only be adjusted
pursuant to this Section 7(a) at such time as the Company issues
Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that
is less than the Applicable Price and any such adjustment shall be
based on such Variable Price and not on the lowest price per share
for which one Common Share would be issuable under the terms of such
Variable Price Securities. For purposes of this Section 2(a)(i), the
"lowest price per share for which one Common Share is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such
Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Shares upon
conversion, exercise or exchange of such Convertible Securities.
-6-
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one Common Share is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Convertible Securities that are Variable Price
Securities (as defined below), the Exercise Price hereunder shall
only be adjusted pursuant to this Section 7(a) at such time as the
Company issues Common Shares to a holder of such Variable Price
Securities and such Common Shares are issued at a Variable Price (as
defined below) that is less than the Applicable Price and any such
adjustment shall be based on such Variable Price and not on the
lowest price per share for which one Common Share would be issuable
under the terms of such Variable Price Securities. For the purposes
of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange"
shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
Common Share upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Shares increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such
time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the
Common Shares deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such
increase
-7-
or decrease. No adjustment pursuant to this Section 2(a) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any Common Shares, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the
Company in connection therewith. If any Common Shares, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Weighted Average
Price of such security on the date of receipt. If any Common Shares,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 2(e), if the Company takes a
record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
Common Shares, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
-8-
(b) Adjustment upon Subdivision or Combination of Common Shares. If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased. If the Company
at any time on or after the Subscription Date combines (by combination, reverse
share split or otherwise) one or more classes of its outstanding Common Shares
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Xxxxxx's Right of Alternative Exercise Price Following Issuance of
Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 2, if the Company in any manner issues or sells any Options or
Convertible Securities (any such securities, "Variable Price Securities") after
the Closing Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(i.e. stock splits, stock combinations, stock dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(k) of the Securities Purchase Agreement, from and after the
date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price by
designating in the Exercise Notice delivered upon exercise of any Warrants that
solely for purposes of such exercise the Holder is relying on the Variable Price
rather than the Exercise Price then in effect. The Holder's election to rely on
a Variable Price for a particular exercise of Warrants shall not obligate the
Holder to rely on a Variable Price for any future exercise of Warrants.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
(e) Abandoned Dividends or Distributions. If the Company shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the Exercise
Price shall be required by reason of the taking of such record.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if the Company shall declare
or make any
-9-
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution shall be reduced, effective as of
the close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Weighted Average Price of the Common Shares on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one Common Share,
and (ii) the denominator shall be the Weighted Average Price of the Common
Shares on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Common Shares obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Shares entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of Common Shares (or common shares)
("Other Common Shares") of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Shares
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Shares that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b); provided, however, that in no event shall the Exercise Price be reduced
pursuant to this Section 3 with respect to any portion of a Distribution for
which the Exercise Price is also being reduced pursuant to any of the provisions
of Section 2 hereof in respect of the same portion of such Distribution.
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Shares (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, and upon the Holder's
election, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder is otherwise entitled under Section 2 herein in respect of each Purchase
Right, which the Holder could have acquired if the Holder had held the number of
Common Shares acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale
-10-
of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the Common Shares reflected by
the terms of such Fundamental Transaction, having similar exercise rights as the
Warrants (specifying, without limitation, that such security is exercisable into
common shares of the Successor Entity) and exercisable for a corresponding
number of shares of capital shares equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
shares are quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity (if other than the Company) shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the Common Shares (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant; provided, however, that in the
event that, pursuant to the terms of the Fundamental Transaction, the holders of
Common Shares may elect the consideration to be received in exchange for the
Common Shares in the such Fundamental Transaction, the Holder shall elect,
within the same time periods as provided to the holders of Common Shares, the
kind or amount of such shares, securities, cash, assets or any other property
(including warrants or other purchase or subscription rights) that the Holder
will, following the consummation of such transaction, be entitled to receive
upon exercise; provided, further, however, that no such election by the Holder
shall be construed to require the exercise of this Warrant in connection with
such Fundamental Transaction. If the Holder is required to make any election of
the kind described in the foregoing sentence, the Company shall deliver to the
Holder all documentation, informational materials and election forms relating to
such Fundamental Transaction contemporaneously with the delivery of such
documentation, materials and forms to the holders of the Common Shares.
Provision made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section 4(b)
above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and (ii)
shall, so long as any of the SPA Warrants are outstanding, take all reasonable
action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the
SPA Warrants, the requisite number of Common Shares as shall from time to time
be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of shares,
reclassification of shares, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)),
-12-
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of Common Shares underlying the other new
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an issuance date,
as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein
-13-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be
governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, enforcement, and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Warrant. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations to
the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-14-
11. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 11
referred to as the "Judgment Currency") an amount due in US dollars under this
Warrant, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion
being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this
Section 11(a)(ii) being hereinafter referred to as the
"Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Warrant.
12. CURRENCY. All amounts owing under this Warrant or any Transaction
Document that, in accordance with their terms, are paid in cash shall be paid in
US dollars. All amounts denominated in other currencies shall be converted in
the US dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation (for the purpose of Section 2 hereof, the date of calculation
shall equal the date of such event resulting in the adjustment of the Exercise
Price thereunder). "Exchange Rate" means, in relation to any amount of currency
to be converted into US dollars pursuant to this Warrant, the US dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with
reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).
13. TAXES.
(a) (i) Any and all payments made by the Company hereunder, including
any amounts received on an exercise of the Warrant and any amounts on account of
interest or deemed interest, must be made by it without any Tax Deduction,
unless a Tax Deduction is required by law. If the Company is aware that it must
make a Tax Deduction (or
-15-
that there is a change in the rate or the basis of a Tax Deduction), it must
notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 13(a)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Warrant ("Other Taxes"). As
soon as practicable after making a payment of Other Taxes, the Company must
deliver to the Holder any official receipt or form, if any, provided by or
required by the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 13(a) shall
survive the termination of this Warrant and the exercise of the Warrant and all
other amounts payable hereunder.
14. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
15. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
16. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Trading Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Trading Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Trading Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and
-16-
reasonably and timely approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
18. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company on two (2) Trading Days' written
notice, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement and subject to applicable securities laws; provided, that the
Holder may not transfer any unexercised portion of this Warrant, in part, to the
extent such portion of the Warrant is less than the lesser of (a) a portion
exercisable for less than 100,000 Warrant Shares and (b) the unexercised portion
of this Warrant; provided further, that any transferee of all or any portion of
this Warrant agrees to comply with all applicable securities laws; provided,
also, that any transferee of all or any portion of this Warrant that wishes to
avail itself of the benefits contemplated by Section 9(s) of the Securities
Purchase Agreement (including, for the avoidance of doubt, any subsequent
transferee of any transferee) shall make to the Company the representations and
warranties made by the Holder in, and give the Notice as contemplated pursuant
to, Section 9(s) of the Securities Purchase Agreement. Prior to the
effectiveness of any such sale, transfer or assignment pursuant to this Section
18, and only if such transferee seeks to receive Common Shares through DTC's
Deposit Withdrawal Agent Commission system, such transferee shall have completed
and delivered to the Company the DTC brokerage account information with respect
to such transferee in substantially the form of Exhibit E as attached to the
Securities Purchase Agreement.
19. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Common Shares" means (i) the Company's Common Shares, no par value
per share, and (ii) any share capital into which such Common Shares shall have
been changed or any share capital resulting from a reclassification of such
Common Shares.
-17-
(c) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of the Company or issuable upon conversion and exercise, as
applicable, of the SPA Securities and the Warrants.
(d) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(e) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(f) "Expiration Date" means the date sixty (60) months after the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Markets (a "Holiday"), the
next date that is not a Holiday.
(g) "Fundamental Transaction" means that the Company shall or Vasogen
Ireland Limited ("VIL") shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
or VIL, as applicable, is the surviving corporation) another Person, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or the Company and its Subsidiaries
to another Person other than in connection with a strategic transaction
involving a licensing of intellectual property and related assets of the Company
or VIL or relating to a partnership arrangement with respect to any such
intellectual property and related assets, in each case where such licensing or
partnership arrangements contain terms and conditions that are customary in the
Company's industry for such type of transactions, where the board of directors
of the Company determines, in good faith, that the Company shall retain a
material financial participation in the exploitation of such intellectual
property and related assets, or (iii) be subject to an offer from another Person
or group of related Persons (as defined in Sections 13(d) and 14(d) of the
Exchange Act) other than the Holder to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding Voting
Shares (not including any Voting Shares held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of related Persons (as defined in Sections 13(d) and
14(d) of the Exchange Act) whereby such other Person or group acquires more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such share purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Shares.
(h) "Options" means any rights, warrants or options to subscribe for or
purchase Common Shares or Convertible Securities.
(i) "Other Warrants" means the other Warrants to Purchase Common Shares
issued pursuant to the other Purchase Agreements.
-18-
(j) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(m) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Issuance Date, by and among the Company, VIL, Vasogen, Corp. and the initial
holders of the Other Warrants.
(n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Common Shares underlying the SPA Warrants
then outstanding.
(o) "SPA Securities" means the Notes issued pursuant to the Securities
Purchase Agreement.
(p) "Successor Entity" means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common shares or equivalent equity security are quoted or
listed for trading on an Eligible Market, Successor Entity shall mean such
Person's Parent Entity.
(q) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(r) "Tax Deduction" means a deduction or withholding for or on account
of Tax from a payment under the Warrant.
(s) "Voting Shares" of a Person means capital shares of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(t) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-
-19-
weighted average price of such security on another Principal Market for such
security during the period beginning at 9:30:01 a.m., New York Time (or such
other time as such Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 16. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
20. COMPANY'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of the Company to issue Common
Shares to the Holder's account with DTC so long as the Company has sent a copy
of such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), the Company shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
EXHIBIT I
VASOGEN INC.
TREASURY INSTRUCTIONS
* * *
Instruction for electronic delivery of unrestricted shares (DWAC)
Vasogen Inc. (the "Company") hereby instructs Mellon Investor Services LLC (the
"Co-Transfer Agent") to issue the amount of Common Shares of the Company,
without par value (the "Common Shares") to the holder set forth below. Such
Common Shares are to be issued without any restrictive legends. The Company
advises the Co-Transfer Agent that such Common Shares are fully paid and
non-assessable. The Company hereby instructs the Co-Transfer Agent to issue such
Common Shares from the Common Shares reserved for the exercise of Warrants
(Reserve #19) as follows:
Warrant Number (Broker's reference number):
---------------------------------
Number of Common Shares to be issued:
---------------------------------
DTC Broker/Participant Number:
---------------------------------
Brokerage account number:
---------------------------------
VASOGEN INC.
By:
------------------------------
Name:
Title:
Note to Company: If this "Instruction for electronic delivery of unrestricted
shares (DWAC)" is filled out, then (i) the "Instruction for physical issuance of
restricted/unrestricted shares" below should be left blank and (ii) a copy of
this instruction should be provided by the Company to the broker to request
delivery of the shares. The Company shall provide a copy of the instruction to
the broker at the contact information contained in the DTC Brokerage Account
Information Form.
* * *
-2-
Instruction for physical issuance of restricted/unrestricted shares
The Company hereby instructs CIBC Mellon Trust Company (the "Transfer Agent") to
issue the amount of Common Shares set forth above to the holder indicated below.
The Company advises the Transfer Agent that such Common Shares are fully paid
and non-assessable. The Company hereby instructs the Transfer Agent to issue
such Common Shares as indicated below:
|_| Such Common Shares are to be issued without any restrictive legends.
|_| Such Common Shares are to be issued with the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT; (B) TO THE COMPANY, (C) OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
1933 ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR
(D) WITHIN THE UNITED STATES (1) IN ACCORDANCE WITH THE
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED
BY RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND
IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS
OR (2) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS PROVIDED THE
COMPANY, PRIOR TO SUCH OFFER, SALE OR TRANSFER, WITH
REASONABLE ASSURANCE THAT SUCH SECURITIES MAY BE SO
OFFERED, SOLD OR TRANSFERRED IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
-3-
|_| Such Common Shares are to be issued with the following restrictive
legend:
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER
OF THESE SECURITIES SHALL NOT TRADE THE SECURITIES IN CANADA BEFORE
[ ], 2006.
VASOGEN INC.
By:
------------------------------
Name:
Title:
* * * *
-4-
Exercise Notice
The undersigned holder hereby exercises the right to purchase _________________
of the Common Shares ("Warrant Shares") of Vasogen Inc., a Canadian corporation
(the "Company"), evidenced by the attached Warrant Number ___________ to
purchase Common Shares (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
The following box is to be checked by the undersigned holder if such holder is
an "accredited investor" as that term is defined in the National Instrument
45-106, Prospectus and Registration Exemptions: |_|
The following box is to be checked by the undersigned holder if such
holder agrees with following statement: |_|
The undersigned holder hereby represents and warrants to the
Company that such holder is a Qualified Institutional Buyer
(as such term is defined in Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act")), and covenants to the
Company that such holder will offer or sell such Common Shares
only pursuant to an effective registration statement or
pursuant to Rule 904 or Rule 144 under the 1933 Act and that
such holder will not be an affiliate (as such term is defined
in Rule 144 under the 1933 Act) of the Company at the time of
any such offer or sale of such Common Shares pursuant to Rule
904 under the 1933 Act by such holder.
1. Payment of Exercise Price. The holder shall pay the Aggregate Exercise
Price in the sum of $___________________ to the Company in accordance with the
terms of the Warrant.
-5-
2. Delivery of Warrant Shares.
The Warrant Shares shall be issued in the following name and, if physical
certificates are to be delivered, to the following address:
Issue to:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Facsimile Number:
--------------------------------------------------------
Authorization:
-----------------------------------------------------------
By:
----------------------------------------------------------------
Title:
----------------------------------------------------------
Dated:
-------------------------------------------------------------------------
Information for electronic book entry transfer:
DTC Broker/Participant Number:
-------------------------------------
Brokerage account number:
-------------------------------------
Broker Name:
-------------------------------------
Broker Address:
-------------------------------------
-------------------------------------
Broker Telephone Number:
-------------------------------------
Broker Facsimile Number:
-------------------------------------
Broker e-mail address:
-------------------------------------
Brokerage account number:
-------------------------------------
-6-
3. The undersigned holder hereby represents and warrants to the Company
that after giving effect to the exercise of the Warrant contemplated by this
Exercise Notice, such holder will not be in violation of the beneficial
ownership limits specified in Section 1(f) of the Warrant, as increased or
decreased pursuant to terms contained therein.
Date: _______________ __, ______
--------------------------------
Name of Registered Holder
By:
---------------------------
Name:
Title:
* * *
Exhibit 8b
Warrants - Amatis Ltd.
(exhibits and schedules attached to Kings Road Investments Ltd.
Warrant omitted)
(see attached)
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED, OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN
THE UNITED STATES OR TO ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT)
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL NOT
TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA BEFORE FEBRUARY 8,
2006.
VASOGEN INC.
WARRANT TO PURCHASE COMMON SHARES
Warrant No.: A-3
Number of Common Shares: 666,667
Date of Issuance: October 7, 2005 ("Issuance Date")
Vasogen Inc., a Canadian corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, AMATIS LTD., the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as defined below)
then in effect, upon surrender of this Warrant to Purchase Common Shares
(including any Warrants to Purchase Common Shares issued in exchange, transfer
or replacement hereof, the "Warrant"), at any time or times on or after the
Issuance Date, but not after 5:00 p.m., New York Time, on the Expiration Date
(as defined below), Six Hundred Sixty Six Thousand Six Hundred Sixty Seven
(666,667) fully paid and nonassessable Common Shares (as defined below) (the
"Warrant Shares"). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 19. This Warrant is the
Warrant to Purchase Common Shares (the "SPA Warrants") issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of October 7,
2005 (the "Subscription Date"),
by and among the Company, VIL, Vasogen, Corp. and the investor (the "Buyer")
referred to therein (the "Securities Purchase Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(e) and
the conditions set forth in the Exercise Notice (as defined below)), this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
in whole or in part, by (i) delivery of a written notice, substantially in the
form attached hereto as Exhibit I (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and transmission of such Exercise Notice by
e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement and (ii) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first (1st) Trading Day (as defined in the SPA Securities) following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of Common Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the foregoing shall not apply,
issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in
the name of the Holder or its designee, for the number of Common Shares to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five (5) Trading
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Common Shares are to be issued upon the exercise of
this Warrant, but rather the number of Common Shares to be issued shall be
rounded up to the nearest whole number. The Warrant Shares shall bear the
legends referred to in Sections 2(g) of the Securities Purchase Agreement, to
the extent required thereby.
-2-
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $3.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the Company
shall fail for any reason or for no reason to issue to the Holder on the Share
Delivery Date, a certificate for the Common Shares to which the Holder is
entitled or to credit the Holder's balance account with DTC for such number of
Common Shares to which the Holder is entitled upon the Holder's exercise of this
Warrant, if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Common Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Shares so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Weighted Average
Price on the date of exercise.
(d) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 16.
(e) Limitation on Exercises.
(i) Beneficial Ownership. The Company shall not effect the exercise
of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates and
joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(y) for purposes of the Securities Act (Ontario), in excess of 9.99%
(the "Maximum Percentage") of the number of Common Shares
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of Common
Shares beneficially owned by such Person and its affiliates and
joint actors shall include the number of Common Shares issuable upon
exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude Common Shares which
would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its
affiliates or joint actors and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates or
joint actors (including, without limitation, any convertible notes
or convertible preferred shares or warrants), which in each case is
subject to a limitation on
-3-
conversion or exercise analogous to the limitation contained herein.
For purposes of calculating beneficial ownership pursuant to this
paragraph, beneficial ownership pursuant to the Exchange Act shall
be calculated in accordance with Section 13(d) of the Exchange Act,
and beneficial ownership pursuant to the Securities Act (Ontario)
shall be calculated in accordance with section 101 of the Securities
Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (1) the Company's most
recent Form 40-F, Current Report on Form 6-K or other public filing
with the Securities and Exchange Commission or the Canadian
Securities Administration, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Trading Days
of receipt of a written request from the Holder confirm in writing
to the Holder the number of Common Shares then outstanding. In any
case, the number of outstanding Common Shares shall be determined
after giving effect to the actual conversion or exercise of
securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By
written notice to the Company, the Holder from time to time may
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Securities.
(ii) Principal Market Regulation. The Company shall not be obligated
to issue any Common Shares upon exercise of this Warrant if the
issuance of such Common Shares would exceed that number of Common
Shares which the Company may issue upon exercise of this Warrant
(including, as applicable, any Common Shares issued upon conversion,
amortization or redemption of the SPA Securities) without breaching
the Company's obligations under the rules or regulations of the
Principal Market (the "Exchange Cap"), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of the Principal Market (in the case of the TSX) or its
shareholders as required by the applicable rules of the Principal
Market for issuances of Common Shares in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval
or
-4-
written opinion is obtained, no Buyer shall be issued, upon exercise
or conversion, as applicable, of any SPA Warrants or SPA Securities,
Common Shares in an amount greater than the product of the Exchange
Cap multiplied by a fraction, the numerator of which is the total
number of Warrant Shares issuable to the Buyer pursuant to the
Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Warrant Shares
issuable to the Buyers pursuant to the Purchase Agreements on the
Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of the Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
SPA Warrants on a pro rata basis in proportion to the Common Shares
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares
for which an Exercise Notice has been received as a result of the
operation of this Section 1(e)(ii), the Company shall, in
satisfaction of its obligation to issue such Warrant Shares, at its
option either (X) pay to the Holder on the Share Delivery Date cash
at a price per Warrant Share equal to the difference between the
Weighted Average Price of the Common Shares and the Exercise Price
as of the date of the attempted exercise (such cash amount in the
aggregate for all such Warrant Shares, the "In-The-Money Value"), or
(Y) issue to the Holder on the Share Delivery Date an amount of
Common Shares equal to the quotient of (1) the In-The-Money Value
divided by (2) the arithmetic average of the Weighted Average Price
of the Common Shares during the five (5) Trading Day period
immediately preceding the date of attempted exercise, rounded to the
nearest whole Common Share.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Common Shares. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any Common Shares (including the issuance or sale of Common
Shares owned or held by or for the account of the Company, but excluding Common
Shares deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA
-5-
Securities) for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of Common Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
Common Shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or
sells any Options and the lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Options that are Variable Price Securities (as
defined below), the Exercise Price hereunder shall only be adjusted
pursuant to this Section 7(a) at such time as the Company issues
Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that
is less than the Applicable Price and any such adjustment shall be
based on such Variable Price and not on the lowest price per share
for which one Common Share would be issuable under the terms of such
Variable Price Securities. For purposes of this Section 2(a)(i), the
"lowest price per share for which one Common Share is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such
Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Shares upon
conversion, exercise or exchange of such Convertible Securities.
-6-
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one Common Share is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Convertible Securities that are Variable Price
Securities (as defined below), the Exercise Price hereunder shall
only be adjusted pursuant to this Section 7(a) at such time as the
Company issues Common Shares to a holder of such Variable Price
Securities and such Common Shares are issued at a Variable Price (as
defined below) that is less than the Applicable Price and any such
adjustment shall be based on such Variable Price and not on the
lowest price per share for which one Common Share would be issuable
under the terms of such Variable Price Securities. For the purposes
of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange"
shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
Common Share upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Shares increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such
time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the
Common Shares deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such
increase
-7-
or decrease. No adjustment pursuant to this Section 2(a) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any Common Shares, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the
Company in connection therewith. If any Common Shares, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Weighted Average
Price of such security on the date of receipt. If any Common Shares,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 2(e), if the Company takes a
record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
Common Shares, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
-8-
(b) Adjustment upon Subdivision or Combination of Common Shares. If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased. If the Company
at any time on or after the Subscription Date combines (by combination, reverse
share split or otherwise) one or more classes of its outstanding Common Shares
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Xxxxxx's Right of Alternative Exercise Price Following Issuance of
Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 2, if the Company in any manner issues or sells any Options or
Convertible Securities (any such securities, "Variable Price Securities") after
the Closing Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(i.e. stock splits, stock combinations, stock dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(k) of the Securities Purchase Agreement, from and after the
date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price by
designating in the Exercise Notice delivered upon exercise of any Warrants that
solely for purposes of such exercise the Holder is relying on the Variable Price
rather than the Exercise Price then in effect. The Holder's election to rely on
a Variable Price for a particular exercise of Warrants shall not obligate the
Holder to rely on a Variable Price for any future exercise of Warrants.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
(e) Abandoned Dividends or Distributions. If the Company shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the Exercise
Price shall be required by reason of the taking of such record.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if the Company shall declare
or make any
-9-
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution shall be reduced, effective as of
the close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Weighted Average Price of the Common Shares on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one Common Share,
and (ii) the denominator shall be the Weighted Average Price of the Common
Shares on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Common Shares obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Shares entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of Common Shares (or common shares)
("Other Common Shares") of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Shares
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Shares that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b); provided, however, that in no event shall the Exercise Price be reduced
pursuant to this Section 3 with respect to any portion of a Distribution for
which the Exercise Price is also being reduced pursuant to any of the provisions
of Section 2 hereof in respect of the same portion of such Distribution.
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Shares (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, and upon the Holder's
election, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder is otherwise entitled under Section 2 herein in respect of each Purchase
Right, which the Holder could have acquired if the Holder had held the number of
Common Shares acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale
-10-
of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the Common Shares reflected by
the terms of such Fundamental Transaction, having similar exercise rights as the
Warrants (specifying, without limitation, that such security is exercisable into
common shares of the Successor Entity) and exercisable for a corresponding
number of shares of capital shares equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
shares are quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity (if other than the Company) shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the Common Shares (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant; provided, however, that in the
event that, pursuant to the terms of the Fundamental Transaction, the holders of
Common Shares may elect the consideration to be received in exchange for the
Common Shares in the such Fundamental Transaction, the Holder shall elect,
within the same time periods as provided to the holders of Common Shares, the
kind or amount of such shares, securities, cash, assets or any other property
(including warrants or other purchase or subscription rights) that the Holder
will, following the consummation of such transaction, be entitled to receive
upon exercise; provided, further, however, that no such election by the Holder
shall be construed to require the exercise of this Warrant in connection with
such Fundamental Transaction. If the Holder is required to make any election of
the kind described in the foregoing sentence, the Company shall deliver to the
Holder all documentation, informational materials and election forms relating to
such Fundamental Transaction contemporaneously with the delivery of such
documentation, materials and forms to the holders of the Common Shares.
Provision made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section 4(b)
above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and (ii)
shall, so long as any of the SPA Warrants are outstanding, take all reasonable
action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the
SPA Warrants, the requisite number of Common Shares as shall from time to time
be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of shares,
reclassification of shares, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)),
-12-
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of Common Shares underlying the other new
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an issuance date,
as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein
-13-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be
governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, enforcement, and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Warrant. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations to
the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-14-
11. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 11
referred to as the "Judgment Currency") an amount due in US dollars under this
Warrant, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion
being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this
Section 11(a)(ii) being hereinafter referred to as the
"Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Warrant.
12. CURRENCY. All amounts owing under this Warrant or any Transaction
Document that, in accordance with their terms, are paid in cash shall be paid in
US dollars. All amounts denominated in other currencies shall be converted in
the US dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation (for the purpose of Section 2 hereof, the date of calculation
shall equal the date of such event resulting in the adjustment of the Exercise
Price thereunder). "Exchange Rate" means, in relation to any amount of currency
to be converted into US dollars pursuant to this Warrant, the US dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with
reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).
13. TAXES.
(a) (i) Any and all payments made by the Company hereunder, including
any amounts received on an exercise of the Warrant and any amounts on account of
interest or deemed interest, must be made by it without any Tax Deduction,
unless a Tax Deduction is required by law. If the Company is aware that it must
make a Tax Deduction (or
-15-
that there is a change in the rate or the basis of a Tax Deduction), it must
notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 13(a)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Warrant ("Other Taxes"). As
soon as practicable after making a payment of Other Taxes, the Company must
deliver to the Holder any official receipt or form, if any, provided by or
required by the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 13(a) shall
survive the termination of this Warrant and the exercise of the Warrant and all
other amounts payable hereunder.
14. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
15. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
16. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Trading Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Trading Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Trading Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and
-16-
reasonably and timely approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
18. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company on two (2) Trading Days' written
notice, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement and subject to applicable securities laws; provided, that the
Holder may not transfer any unexercised portion of this Warrant, in part, to the
extent such portion of the Warrant is less than the lesser of (a) a portion
exercisable for less than 100,000 Warrant Shares and (b) the unexercised portion
of this Warrant; provided further, that any transferee of all or any portion of
this Warrant agrees to comply with all applicable securities laws; provided,
also, that any transferee of all or any portion of this Warrant that wishes to
avail itself of the benefits contemplated by Section 9(s) of the Securities
Purchase Agreement (including, for the avoidance of doubt, any subsequent
transferee of any transferee) shall make to the Company the representations and
warranties made by the Holder in, and give the Notice as contemplated pursuant
to, Section 9(s) of the Securities Purchase Agreement. Prior to the
effectiveness of any such sale, transfer or assignment pursuant to this Section
18, and only if such transferee seeks to receive Common Shares through DTC's
Deposit Withdrawal Agent Commission system, such transferee shall have completed
and delivered to the Company the DTC brokerage account information with respect
to such transferee in substantially the form of Exhibit E as attached to the
Securities Purchase Agreement.
19. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Common Shares" means (i) the Company's Common Shares, no par value
per share, and (ii) any share capital into which such Common Shares shall have
been changed or any share capital resulting from a reclassification of such
Common Shares.
-17-
(c) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of the Company or issuable upon conversion and exercise, as
applicable, of the SPA Securities and the Warrants.
(d) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(e) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(f) "Expiration Date" means the date sixty (60) months after the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Markets (a "Holiday"), the
next date that is not a Holiday.
(g) "Fundamental Transaction" means that the Company shall or Vasogen
Ireland Limited ("VIL") shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
or VIL, as applicable, is the surviving corporation) another Person, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or the Company and its Subsidiaries
to another Person other than in connection with a strategic transaction
involving a licensing of intellectual property and related assets of the Company
or VIL or relating to a partnership arrangement with respect to any such
intellectual property and related assets, in each case where such licensing or
partnership arrangements contain terms and conditions that are customary in the
Company's industry for such type of transactions, where the board of directors
of the Company determines, in good faith, that the Company shall retain a
material financial participation in the exploitation of such intellectual
property and related assets, or (iii) be subject to an offer from another Person
or group of related Persons (as defined in Sections 13(d) and 14(d) of the
Exchange Act) other than the Holder to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding Voting
Shares (not including any Voting Shares held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of related Persons (as defined in Sections 13(d) and
14(d) of the Exchange Act) whereby such other Person or group acquires more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such share purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Shares.
(h) "Options" means any rights, warrants or options to subscribe for or
purchase Common Shares or Convertible Securities.
(i) "Other Warrants" means the other Warrants to Purchase Common Shares
issued pursuant to the other Purchase Agreements.
-18-
(j) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(m) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Issuance Date, by and among the Company, VIL, Vasogen, Corp. and the initial
holders of the Other Warrants.
(n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Common Shares underlying the SPA Warrants
then outstanding.
(o) "SPA Securities" means the Notes issued pursuant to the Securities
Purchase Agreement.
(p) "Successor Entity" means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common shares or equivalent equity security are quoted or
listed for trading on an Eligible Market, Successor Entity shall mean such
Person's Parent Entity.
(q) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(r) "Tax Deduction" means a deduction or withholding for or on account
of Tax from a payment under the Warrant.
(s) "Voting Shares" of a Person means capital shares of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(t) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-
-19-
weighted average price of such security on another Principal Market for such
security during the period beginning at 9:30:01 a.m., New York Time (or such
other time as such Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 16. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
20. COMPANY'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of the Company to issue Common
Shares to the Holder's account with DTC so long as the Company has sent a copy
of such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), the Company shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Exhibit 8c
Warrants - Castlerigg Master Investments Ltd.
(exhibits and schedules attached to Kings Road Investments Ltd.
Warrant omitted)
(see attached)
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED, OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN
THE UNITED STATES OR TO ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT)
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL NOT
TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA BEFORE FEBRUARY 8,
2006.
VASOGEN INC.
WARRANT TO PURCHASE COMMON SHARES
Warrant No.: A-4
Number of Common Shares: 666,667
Date of Issuance: October 7, 2005 ("Issuance Date")
Vasogen Inc., a Canadian corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, CASTLERIGG MASTER INVESTMENTS LTD., the registered
holder hereof or its permitted assigns (the "Holder"), is entitled, subject to
the terms set forth below, to purchase from the Company, at the Exercise Price
(as defined below) then in effect, upon surrender of this Warrant to Purchase
Common Shares (including any Warrants to Purchase Common Shares issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or times
on or after the Issuance Date, but not after 5:00 p.m., New York Time, on the
Expiration Date (as defined below), Six Hundred Sixty Six Thousand Six Hundred
Sixty Seven (666,667) fully paid and nonassessable Common Shares (as defined
below) (the "Warrant Shares"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section 19. This
Warrant is the Warrant to Purchase Common Shares (the "SPA Warrants") issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of
October
7, 2005 (the "Subscription Date"), by and among the Company, VIL, Vasogen, Corp.
and the investor (the "Buyer") referred to therein (the "Securities Purchase
Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(e) and
the conditions set forth in the Exercise Notice (as defined below)), this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
in whole or in part, by (i) delivery of a written notice, substantially in the
form attached hereto as Exhibit I (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and transmission of such Exercise Notice by
e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement and (ii) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first (1st) Trading Day (as defined in the SPA Securities) following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of Common Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the foregoing shall not apply,
issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in
the name of the Holder or its designee, for the number of Common Shares to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five (5) Trading
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Common Shares are to be issued upon the exercise of
this Warrant, but rather the number of Common Shares to be issued shall be
rounded up to the nearest whole number. The Warrant Shares shall bear the
legends referred to in Sections 2(g) of the Securities Purchase Agreement, to
the extent required thereby.
-2-
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $3.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the Company
shall fail for any reason or for no reason to issue to the Holder on the Share
Delivery Date, a certificate for the Common Shares to which the Holder is
entitled or to credit the Holder's balance account with DTC for such number of
Common Shares to which the Holder is entitled upon the Holder's exercise of this
Warrant, if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Common Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Shares so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Weighted Average
Price on the date of exercise.
(d) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 16.
(e) Limitation on Exercises.
(i) Beneficial Ownership. The Company shall not effect the exercise
of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates and
joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(y) for purposes of the Securities Act (Ontario), in excess of 9.99%
(the "Maximum Percentage") of the number of Common Shares
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of Common
Shares beneficially owned by such Person and its affiliates and
joint actors shall include the number of Common Shares issuable upon
exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude Common Shares which
would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its
affiliates or joint actors and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates or
joint actors (including, without limitation, any convertible notes
or convertible preferred shares or warrants), which in each case is
subject to a limitation on
-3-
conversion or exercise analogous to the limitation contained herein.
For purposes of calculating beneficial ownership pursuant to this
paragraph, beneficial ownership pursuant to the Exchange Act shall
be calculated in accordance with Section 13(d) of the Exchange Act,
and beneficial ownership pursuant to the Securities Act (Ontario)
shall be calculated in accordance with section 101 of the Securities
Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (1) the Company's most
recent Form 40-F, Current Report on Form 6-K or other public filing
with the Securities and Exchange Commission or the Canadian
Securities Administration, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Trading Days
of receipt of a written request from the Holder confirm in writing
to the Holder the number of Common Shares then outstanding. In any
case, the number of outstanding Common Shares shall be determined
after giving effect to the actual conversion or exercise of
securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By
written notice to the Company, the Holder from time to time may
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Securities.
(ii) Principal Market Regulation. The Company shall not be obligated
to issue any Common Shares upon exercise of this Warrant if the
issuance of such Common Shares would exceed that number of Common
Shares which the Company may issue upon exercise of this Warrant
(including, as applicable, any Common Shares issued upon conversion,
amortization or redemption of the SPA Securities) without breaching
the Company's obligations under the rules or regulations of the
Principal Market (the "Exchange Cap"), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of the Principal Market (in the case of the TSX) or its
shareholders as required by the applicable rules of the Principal
Market for issuances of Common Shares in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval
or
-4-
written opinion is obtained, no Buyer shall be issued, upon exercise
or conversion, as applicable, of any SPA Warrants or SPA Securities,
Common Shares in an amount greater than the product of the Exchange
Cap multiplied by a fraction, the numerator of which is the total
number of Warrant Shares issuable to the Buyer pursuant to the
Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Warrant Shares
issuable to the Buyers pursuant to the Purchase Agreements on the
Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of the Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
SPA Warrants on a pro rata basis in proportion to the Common Shares
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares
for which an Exercise Notice has been received as a result of the
operation of this Section 1(e)(ii), the Company shall, in
satisfaction of its obligation to issue such Warrant Shares, at its
option either (X) pay to the Holder on the Share Delivery Date cash
at a price per Warrant Share equal to the difference between the
Weighted Average Price of the Common Shares and the Exercise Price
as of the date of the attempted exercise (such cash amount in the
aggregate for all such Warrant Shares, the "In-The-Money Value"), or
(Y) issue to the Holder on the Share Delivery Date an amount of
Common Shares equal to the quotient of (1) the In-The-Money Value
divided by (2) the arithmetic average of the Weighted Average Price
of the Common Shares during the five (5) Trading Day period
immediately preceding the date of attempted exercise, rounded to the
nearest whole Common Share.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Common Shares. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any Common Shares (including the issuance or sale of Common
Shares owned or held by or for the account of the Company, but excluding Common
Shares deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA
-5-
Securities) for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of Common Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
Common Shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or
sells any Options and the lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Options that are Variable Price Securities (as
defined below), the Exercise Price hereunder shall only be adjusted
pursuant to this Section 7(a) at such time as the Company issues
Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that
is less than the Applicable Price and any such adjustment shall be
based on such Variable Price and not on the lowest price per share
for which one Common Share would be issuable under the terms of such
Variable Price Securities. For purposes of this Section 2(a)(i), the
"lowest price per share for which one Common Share is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such
Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Shares upon
conversion, exercise or exchange of such Convertible Securities.
-6-
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one Common Share is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Convertible Securities that are Variable Price
Securities (as defined below), the Exercise Price hereunder shall
only be adjusted pursuant to this Section 7(a) at such time as the
Company issues Common Shares to a holder of such Variable Price
Securities and such Common Shares are issued at a Variable Price (as
defined below) that is less than the Applicable Price and any such
adjustment shall be based on such Variable Price and not on the
lowest price per share for which one Common Share would be issuable
under the terms of such Variable Price Securities. For the purposes
of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange"
shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
Common Share upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Shares increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such
time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the
Common Shares deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such
increase
-7-
or decrease. No adjustment pursuant to this Section 2(a) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any Common Shares, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the
Company in connection therewith. If any Common Shares, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Weighted Average
Price of such security on the date of receipt. If any Common Shares,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 2(e), if the Company takes a
record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
Common Shares, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
-8-
(b) Adjustment upon Subdivision or Combination of Common Shares. If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased. If the Company
at any time on or after the Subscription Date combines (by combination, reverse
share split or otherwise) one or more classes of its outstanding Common Shares
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Xxxxxx's Right of Alternative Exercise Price Following Issuance of
Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 2, if the Company in any manner issues or sells any Options or
Convertible Securities (any such securities, "Variable Price Securities") after
the Closing Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(i.e. stock splits, stock combinations, stock dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(k) of the Securities Purchase Agreement, from and after the
date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price by
designating in the Exercise Notice delivered upon exercise of any Warrants that
solely for purposes of such exercise the Holder is relying on the Variable Price
rather than the Exercise Price then in effect. The Holder's election to rely on
a Variable Price for a particular exercise of Warrants shall not obligate the
Holder to rely on a Variable Price for any future exercise of Warrants.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
(e) Abandoned Dividends or Distributions. If the Company shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the Exercise
Price shall be required by reason of the taking of such record.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if the Company shall declare
or make any
-9-
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution shall be reduced, effective as of
the close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Weighted Average Price of the Common Shares on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one Common Share,
and (ii) the denominator shall be the Weighted Average Price of the Common
Shares on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Common Shares obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Shares entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of Common Shares (or common shares)
("Other Common Shares") of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Shares
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Shares that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b); provided, however, that in no event shall the Exercise Price be reduced
pursuant to this Section 3 with respect to any portion of a Distribution for
which the Exercise Price is also being reduced pursuant to any of the provisions
of Section 2 hereof in respect of the same portion of such Distribution.
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Shares (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, and upon the Holder's
election, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder is otherwise entitled under Section 2 herein in respect of each Purchase
Right, which the Holder could have acquired if the Holder had held the number of
Common Shares acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale
-10-
of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the Common Shares reflected by
the terms of such Fundamental Transaction, having similar exercise rights as the
Warrants (specifying, without limitation, that such security is exercisable into
common shares of the Successor Entity) and exercisable for a corresponding
number of shares of capital shares equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
shares are quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity (if other than the Company) shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the Common Shares (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant; provided, however, that in the
event that, pursuant to the terms of the Fundamental Transaction, the holders of
Common Shares may elect the consideration to be received in exchange for the
Common Shares in the such Fundamental Transaction, the Holder shall elect,
within the same time periods as provided to the holders of Common Shares, the
kind or amount of such shares, securities, cash, assets or any other property
(including warrants or other purchase or subscription rights) that the Holder
will, following the consummation of such transaction, be entitled to receive
upon exercise; provided, further, however, that no such election by the Holder
shall be construed to require the exercise of this Warrant in connection with
such Fundamental Transaction. If the Holder is required to make any election of
the kind described in the foregoing sentence, the Company shall deliver to the
Holder all documentation, informational materials and election forms relating to
such Fundamental Transaction contemporaneously with the delivery of such
documentation, materials and forms to the holders of the Common Shares.
Provision made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section 4(b)
above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and (ii)
shall, so long as any of the SPA Warrants are outstanding, take all reasonable
action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the
SPA Warrants, the requisite number of Common Shares as shall from time to time
be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of shares,
reclassification of shares, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)),
-12-
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of Common Shares underlying the other new
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an issuance date,
as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein
-13-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be
governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, enforcement, and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Warrant. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations to
the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-14-
11. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 11
referred to as the "Judgment Currency") an amount due in US dollars under this
Warrant, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion
being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this
Section 11(a)(ii) being hereinafter referred to as the
"Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Warrant.
12. CURRENCY. All amounts owing under this Warrant or any Transaction
Document that, in accordance with their terms, are paid in cash shall be paid in
US dollars. All amounts denominated in other currencies shall be converted in
the US dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation (for the purpose of Section 2 hereof, the date of calculation
shall equal the date of such event resulting in the adjustment of the Exercise
Price thereunder). "Exchange Rate" means, in relation to any amount of currency
to be converted into US dollars pursuant to this Warrant, the US dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with
reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).
13. TAXES.
(a) (i) Any and all payments made by the Company hereunder, including
any amounts received on an exercise of the Warrant and any amounts on account of
interest or deemed interest, must be made by it without any Tax Deduction,
unless a Tax Deduction is required by law. If the Company is aware that it must
make a Tax Deduction (or
-15-
that there is a change in the rate or the basis of a Tax Deduction), it must
notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 13(a)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Warrant ("Other Taxes"). As
soon as practicable after making a payment of Other Taxes, the Company must
deliver to the Holder any official receipt or form, if any, provided by or
required by the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 13(a) shall
survive the termination of this Warrant and the exercise of the Warrant and all
other amounts payable hereunder.
14. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
15. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
16. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Trading Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Trading Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Trading Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and
-16-
reasonably and timely approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
18. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company on two (2) Trading Days' written
notice, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement and subject to applicable securities laws; provided, that the
Holder may not transfer any unexercised portion of this Warrant, in part, to the
extent such portion of the Warrant is less than the lesser of (a) a portion
exercisable for less than 100,000 Warrant Shares and (b) the unexercised portion
of this Warrant; provided further, that any transferee of all or any portion of
this Warrant agrees to comply with all applicable securities laws; provided,
also, that any transferee of all or any portion of this Warrant that wishes to
avail itself of the benefits contemplated by Section 9(s) of the Securities
Purchase Agreement (including, for the avoidance of doubt, any subsequent
transferee of any transferee) shall make to the Company the representations and
warranties made by the Holder in, and give the Notice as contemplated pursuant
to, Section 9(s) of the Securities Purchase Agreement. Prior to the
effectiveness of any such sale, transfer or assignment pursuant to this Section
18, and only if such transferee seeks to receive Common Shares through DTC's
Deposit Withdrawal Agent Commission system, such transferee shall have completed
and delivered to the Company the DTC brokerage account information with respect
to such transferee in substantially the form of Exhibit E as attached to the
Securities Purchase Agreement.
19. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Common Shares" means (i) the Company's Common Shares, no par value
per share, and (ii) any share capital into which such Common Shares shall have
been changed or any share capital resulting from a reclassification of such
Common Shares.
-17-
(c) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of the Company or issuable upon conversion and exercise, as
applicable, of the SPA Securities and the Warrants.
(d) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(e) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(f) "Expiration Date" means the date sixty (60) months after the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Markets (a "Holiday"), the
next date that is not a Holiday.
(g) "Fundamental Transaction" means that the Company shall or Vasogen
Ireland Limited ("VIL") shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
or VIL, as applicable, is the surviving corporation) another Person, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or the Company and its Subsidiaries
to another Person other than in connection with a strategic transaction
involving a licensing of intellectual property and related assets of the Company
or VIL or relating to a partnership arrangement with respect to any such
intellectual property and related assets, in each case where such licensing or
partnership arrangements contain terms and conditions that are customary in the
Company's industry for such type of transactions, where the board of directors
of the Company determines, in good faith, that the Company shall retain a
material financial participation in the exploitation of such intellectual
property and related assets, or (iii) be subject to an offer from another Person
or group of related Persons (as defined in Sections 13(d) and 14(d) of the
Exchange Act) other than the Holder to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding Voting
Shares (not including any Voting Shares held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of related Persons (as defined in Sections 13(d) and
14(d) of the Exchange Act) whereby such other Person or group acquires more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such share purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Shares.
(h) "Options" means any rights, warrants or options to subscribe for or
purchase Common Shares or Convertible Securities.
(i) "Other Warrants" means the other Warrants to Purchase Common Shares
issued pursuant to the other Purchase Agreements.
-18-
(j) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(m) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Issuance Date, by and among the Company, VIL, Vasogen, Corp. and the initial
holders of the Other Warrants.
(n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Common Shares underlying the SPA Warrants
then outstanding.
(o) "SPA Securities" means the Notes issued pursuant to the Securities
Purchase Agreement.
(p) "Successor Entity" means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common shares or equivalent equity security are quoted or
listed for trading on an Eligible Market, Successor Entity shall mean such
Person's Parent Entity.
(q) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(r) "Tax Deduction" means a deduction or withholding for or on account
of Tax from a payment under the Warrant.
(s) "Voting Shares" of a Person means capital shares of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(t) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-
-19-
weighted average price of such security on another Principal Market for such
security during the period beginning at 9:30:01 a.m., New York Time (or such
other time as such Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 16. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
20. COMPANY'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of the Company to issue Common
Shares to the Holder's account with DTC so long as the Company has sent a copy
of such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), the Company shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Exhibit 8d
Warrants - Capital Ventures International
(exhibits and schedules attached to Kings Road Investments Ltd.
Warrant omitted)
(see attached)
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED, OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN
THE UNITED STATES OR TO ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT)
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL NOT
TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA BEFORE FEBRUARY 8,
2006.
VASOGEN INC.
WARRANT TO PURCHASE COMMON SHARES
Warrant No.: A-2
Number of Common Shares: 375,000
Date of Issuance: October 7, 2005 ("Issuance Date")
Vasogen Inc., a Canadian corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, CAPITAL VENTURES INTERNATIONAL, the registered holder
hereof or its permitted assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common
Shares (including any Warrants to Purchase Common Shares issued in exchange,
transfer or replacement hereof, the "Warrant"), at any time or times on or after
the Issuance Date, but not after 5:00 p.m., New York Time, on the Expiration
Date (as defined below), Three Hundred Seventy Five Thousand (375,000) fully
paid and nonassessable Common Shares (as defined below) (the "Warrant Shares").
Except as otherwise defined herein, capitalized terms in this Warrant shall have
the meanings set forth in Section 19. This Warrant is the Warrant to Purchase
Common Shares (the "SPA Warrants") issued pursuant to Section 1 of that certain
Securities Purchase Agreement, dated as of October 7, 2005 (the "Subscription
Date"), by and among the Company, VIL, Vasogen, Corp. and the investor (the
"Buyer") referred to therein (the "Securities Purchase Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(e) and
the conditions set forth in the Exercise Notice (as defined below)), this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
in whole or in part, by (i) delivery of a written notice, substantially in the
form attached hereto as Exhibit I (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and transmission of such Exercise Notice by
e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement and (ii) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first (1st) Trading Day (as defined in the SPA Securities) following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of Common Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the foregoing shall not apply,
issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in
the name of the Holder or its designee, for the number of Common Shares to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five (5) Trading
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Common Shares are to be issued upon the exercise of
this Warrant, but rather the number of Common Shares to be issued shall be
rounded up to the nearest whole number. The Warrant Shares shall bear the
legends referred to in Sections 2(g) of the Securities Purchase Agreement, to
the extent required thereby.
-2-
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $3.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the Company
shall fail for any reason or for no reason to issue to the Holder on the Share
Delivery Date, a certificate for the Common Shares to which the Holder is
entitled or to credit the Holder's balance account with DTC for such number of
Common Shares to which the Holder is entitled upon the Holder's exercise of this
Warrant, if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Common Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Shares so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Weighted Average
Price on the date of exercise.
(d) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 16.
(e) Limitation on Exercises.
(i) Beneficial Ownership. The Company shall not effect the exercise
of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates and
joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(y) for purposes of the Securities Act (Ontario), in excess of 9.99%
(the "Maximum Percentage") of the number of Common Shares
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of Common
Shares beneficially owned by such Person and its affiliates and
joint actors shall include the number of Common Shares issuable upon
exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude Common Shares which
would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its
affiliates or joint actors and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates or
joint actors (including, without limitation, any convertible notes
or convertible preferred shares or warrants), which in each case is
subject to a limitation on
-3-
conversion or exercise analogous to the limitation contained herein.
For purposes of calculating beneficial ownership pursuant to this
paragraph, beneficial ownership pursuant to the Exchange Act shall
be calculated in accordance with Section 13(d) of the Exchange Act,
and beneficial ownership pursuant to the Securities Act (Ontario)
shall be calculated in accordance with section 101 of the Securities
Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (1) the Company's most
recent Form 40-F, Current Report on Form 6-K or other public filing
with the Securities and Exchange Commission or the Canadian
Securities Administration, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Trading Days
of receipt of a written request from the Holder confirm in writing
to the Holder the number of Common Shares then outstanding. In any
case, the number of outstanding Common Shares shall be determined
after giving effect to the actual conversion or exercise of
securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By
written notice to the Company, the Holder from time to time may
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Securities.
(ii) Principal Market Regulation. The Company shall not be obligated
to issue any Common Shares upon exercise of this Warrant if the
issuance of such Common Shares would exceed that number of Common
Shares which the Company may issue upon exercise of this Warrant
(including, as applicable, any Common Shares issued upon conversion,
amortization or redemption of the SPA Securities) without breaching
the Company's obligations under the rules or regulations of the
Principal Market (the "Exchange Cap"), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of the Principal Market (in the case of the TSX) or its
shareholders as required by the applicable rules of the Principal
Market for issuances of Common Shares in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval
or
-4-
written opinion is obtained, no Buyer shall be issued, upon exercise
or conversion, as applicable, of any SPA Warrants or SPA Securities,
Common Shares in an amount greater than the product of the Exchange
Cap multiplied by a fraction, the numerator of which is the total
number of Warrant Shares issuable to the Buyer pursuant to the
Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Warrant Shares
issuable to the Buyers pursuant to the Purchase Agreements on the
Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of the Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
SPA Warrants on a pro rata basis in proportion to the Common Shares
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares
for which an Exercise Notice has been received as a result of the
operation of this Section 1(e)(ii), the Company shall, in
satisfaction of its obligation to issue such Warrant Shares, at its
option either (X) pay to the Holder on the Share Delivery Date cash
at a price per Warrant Share equal to the difference between the
Weighted Average Price of the Common Shares and the Exercise Price
as of the date of the attempted exercise (such cash amount in the
aggregate for all such Warrant Shares, the "In-The-Money Value"), or
(Y) issue to the Holder on the Share Delivery Date an amount of
Common Shares equal to the quotient of (1) the In-The-Money Value
divided by (2) the arithmetic average of the Weighted Average Price
of the Common Shares during the five (5) Trading Day period
immediately preceding the date of attempted exercise, rounded to the
nearest whole Common Share.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Common Shares. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any Common Shares (including the issuance or sale of Common
Shares owned or held by or for the account of the Company, but excluding Common
Shares deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA
-5-
Securities) for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of Common Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
Common Shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or
sells any Options and the lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Options that are Variable Price Securities (as
defined below), the Exercise Price hereunder shall only be adjusted
pursuant to this Section 7(a) at such time as the Company issues
Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that
is less than the Applicable Price and any such adjustment shall be
based on such Variable Price and not on the lowest price per share
for which one Common Share would be issuable under the terms of such
Variable Price Securities. For purposes of this Section 2(a)(i), the
"lowest price per share for which one Common Share is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such
Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Shares upon
conversion, exercise or exchange of such Convertible Securities.
-6-
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one Common Share is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Convertible Securities that are Variable Price
Securities (as defined below), the Exercise Price hereunder shall
only be adjusted pursuant to this Section 7(a) at such time as the
Company issues Common Shares to a holder of such Variable Price
Securities and such Common Shares are issued at a Variable Price (as
defined below) that is less than the Applicable Price and any such
adjustment shall be based on such Variable Price and not on the
lowest price per share for which one Common Share would be issuable
under the terms of such Variable Price Securities. For the purposes
of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange"
shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
Common Share upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Shares increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such
time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the
Common Shares deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such
increase
-7-
or decrease. No adjustment pursuant to this Section 2(a) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any Common Shares, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the
Company in connection therewith. If any Common Shares, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Weighted Average
Price of such security on the date of receipt. If any Common Shares,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 2(e), if the Company takes a
record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
Common Shares, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
-8-
(b) Adjustment upon Subdivision or Combination of Common Shares. If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased. If the Company
at any time on or after the Subscription Date combines (by combination, reverse
share split or otherwise) one or more classes of its outstanding Common Shares
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Xxxxxx's Right of Alternative Exercise Price Following Issuance of
Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 2, if the Company in any manner issues or sells any Options or
Convertible Securities (any such securities, "Variable Price Securities") after
the Closing Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(i.e. stock splits, stock combinations, stock dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(k) of the Securities Purchase Agreement, from and after the
date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price by
designating in the Exercise Notice delivered upon exercise of any Warrants that
solely for purposes of such exercise the Holder is relying on the Variable Price
rather than the Exercise Price then in effect. The Holder's election to rely on
a Variable Price for a particular exercise of Warrants shall not obligate the
Holder to rely on a Variable Price for any future exercise of Warrants.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
(e) Abandoned Dividends or Distributions. If the Company shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the Exercise
Price shall be required by reason of the taking of such record.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if the Company shall declare
or make any
-9-
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution shall be reduced, effective as of
the close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Weighted Average Price of the Common Shares on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one Common Share,
and (ii) the denominator shall be the Weighted Average Price of the Common
Shares on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Common Shares obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Shares entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of Common Shares (or common shares)
("Other Common Shares") of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Shares
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Shares that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b); provided, however, that in no event shall the Exercise Price be reduced
pursuant to this Section 3 with respect to any portion of a Distribution for
which the Exercise Price is also being reduced pursuant to any of the provisions
of Section 2 hereof in respect of the same portion of such Distribution.
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Shares (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, and upon the Holder's
election, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder is otherwise entitled under Section 2 herein in respect of each Purchase
Right, which the Holder could have acquired if the Holder had held the number of
Common Shares acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of
-10-
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the Common Shares reflected by
the terms of such Fundamental Transaction, having similar exercise rights as the
Warrants (specifying, without limitation, that such security is exercisable into
common shares of the Successor Entity) and exercisable for a corresponding
number of shares of capital shares equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
shares are quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity (if other than the Company) shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the Common Shares (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant; provided, however, that in the
event that, pursuant to the terms of the Fundamental Transaction, the holders of
Common Shares may elect the consideration to be received in exchange for the
Common Shares in the such Fundamental Transaction, the Holder shall elect,
within the same time periods as provided to the holders of Common Shares, the
kind or amount of such shares, securities, cash, assets or any other property
(including warrants or other purchase or subscription rights) that the Holder
will, following the consummation of such transaction, be entitled to receive
upon exercise; provided, further, however, that no such election by the Holder
shall be construed to require the exercise of this Warrant in connection with
such Fundamental Transaction. If the Holder is required to make any election of
the kind described in the foregoing sentence, the Company shall deliver to the
Holder all documentation, informational materials and election forms relating to
such Fundamental Transaction contemporaneously with the delivery of such
documentation, materials and forms to the holders of the Common Shares.
Provision made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section 4(b)
above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and (ii)
shall, so long as any of the SPA Warrants are outstanding, take all reasonable
action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the
SPA Warrants, the requisite number of Common Shares as shall from time to time
be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of shares,
reclassification of shares, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)),
-12-
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of Common Shares underlying the other new
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an issuance date,
as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein
-13-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be
governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, enforcement, and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Warrant. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations to
the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-14-
11. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 11
referred to as the "Judgment Currency") an amount due in US dollars under this
Warrant, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion
being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this
Section 11(a)(ii) being hereinafter referred to as the
"Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Warrant.
12. CURRENCY. All amounts owing under this Warrant or any Transaction
Document that, in accordance with their terms, are paid in cash shall be paid in
US dollars. All amounts denominated in other currencies shall be converted in
the US dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation (for the purpose of Section 2 hereof, the date of calculation
shall equal the date of such event resulting in the adjustment of the Exercise
Price thereunder). "Exchange Rate" means, in relation to any amount of currency
to be converted into US dollars pursuant to this Warrant, the US dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with
reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).
13. TAXES.
(a) (i) Any and all payments made by the Company hereunder, including
any amounts received on an exercise of the Warrant and any amounts on account of
interest or deemed interest, must be made by it without any Tax Deduction,
unless a Tax Deduction is required by law. If the Company is aware that it must
make a Tax Deduction (or
-15-
that there is a change in the rate or the basis of a Tax Deduction), it must
notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 13(a)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Warrant ("Other Taxes"). As
soon as practicable after making a payment of Other Taxes, the Company must
deliver to the Holder any official receipt or form, if any, provided by or
required by the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 13(a) shall
survive the termination of this Warrant and the exercise of the Warrant and all
other amounts payable hereunder.
14. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
15. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
16. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Trading Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Trading Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Trading Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and
-16-
reasonably and timely approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
18. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company on two (2) Trading Days' written
notice, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement and subject to applicable securities laws; provided, that the
Holder may not transfer any unexercised portion of this Warrant, in part, to the
extent such portion of the Warrant is less than the lesser of (a) a portion
exercisable for less than 100,000 Warrant Shares and (b) the unexercised portion
of this Warrant; provided further, that any transferee of all or any portion of
this Warrant agrees to comply with all applicable securities laws; provided,
also, that any transferee of all or any portion of this Warrant that wishes to
avail itself of the benefits contemplated by Section 9(s) of the Securities
Purchase Agreement (including, for the avoidance of doubt, any subsequent
transferee of any transferee) shall make to the Company the representations and
warranties made by the Holder in, and give the Notice as contemplated pursuant
to, Section 9(s) of the Securities Purchase Agreement. Prior to the
effectiveness of any such sale, transfer or assignment pursuant to this Section
18, and only if such transferee seeks to receive Common Shares through DTC's
Deposit Withdrawal Agent Commission system, such transferee shall have completed
and delivered to the Company the DTC brokerage account information with respect
to such transferee in substantially the form of Exhibit E as attached to the
Securities Purchase Agreement.
19. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Common Shares" means (i) the Company's Common Shares, no par value
per share, and (ii) any share capital into which such Common Shares shall have
been changed or any share capital resulting from a reclassification of such
Common Shares.
-17-
(c) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of the Company or issuable upon conversion and exercise, as
applicable, of the SPA Securities and the Warrants.
(d) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(e) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(f) "Expiration Date" means the date sixty (60) months after the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Markets (a "Holiday"), the
next date that is not a Holiday.
(g) "Fundamental Transaction" means that the Company shall or Vasogen
Ireland Limited ("VIL") shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
or VIL, as applicable, is the surviving corporation) another Person, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or the Company and its Subsidiaries
to another Person other than in connection with a strategic transaction
involving a licensing of intellectual property and related assets of the Company
or VIL or relating to a partnership arrangement with respect to any such
intellectual property and related assets, in each case where such licensing or
partnership arrangements contain terms and conditions that are customary in the
Company's industry for such type of transactions, where the board of directors
of the Company determines, in good faith, that the Company shall retain a
material financial participation in the exploitation of such intellectual
property and related assets, or (iii) be subject to an offer from another Person
or group of related Persons (as defined in Sections 13(d) and 14(d) of the
Exchange Act) other than the Holder to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding Voting
Shares (not including any Voting Shares held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of related Persons (as defined in Sections 13(d) and
14(d) of the Exchange Act) whereby such other Person or group acquires more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such share purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Shares.
(h) "Options" means any rights, warrants or options to subscribe for or
purchase Common Shares or Convertible Securities.
(i) "Other Warrants" means the other Warrants to Purchase Common Shares
issued pursuant to the other Purchase Agreements.
-18-
(j) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(m) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Issuance Date, by and among the Company, VIL, Vasogen, Corp. and the initial
holders of the Other Warrants.
(n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Common Shares underlying the SPA Warrants
then outstanding.
(o) "SPA Securities" means the Notes issued pursuant to the Securities
Purchase Agreement.
(p) "Successor Entity" means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common shares or equivalent equity security are quoted or
listed for trading on an Eligible Market, Successor Entity shall mean such
Person's Parent Entity.
(q) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(r) "Tax Deduction" means a deduction or withholding for or on account
of Tax from a payment under the Warrant.
(s) "Voting Shares" of a Person means capital shares of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(t) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-
-19-
weighted average price of such security on another Principal Market for such
security during the period beginning at 9:30:01 a.m., New York Time (or such
other time as such Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 16. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
20. COMPANY'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of the Company to issue Common
Shares to the Holder's account with DTC so long as the Company has sent a copy
of such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), the Company shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Exhibit 8e
Warrants - Smithfield Fiduciary LLC
(exhibits and schedules attached to Kings Road Investments Ltd.
Warrant omitted)
(see attached)
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED, OR
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED WITHIN
THE UNITED STATES OR TO ANY U.S. PERSON (AS DEFINED IN RULE 902 OF THE 1933 ACT)
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT OR ANOTHER AVAILABLE EXEMPTION. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL NOT
TRADE SUCH SECURITIES IN CANADA OR TO THE RESIDENTS OF CANADA BEFORE FEBRUARY 8,
2006.
VASOGEN INC.
WARRANT TO PURCHASE COMMON SHARES
Warrant No.: A-5
Number of Common Shares: 250,000
Date of Issuance: October 7, 2005 ("Issuance Date")
Vasogen Inc., a Canadian corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, SMITHFIELD FIDUCIARY LLC, the registered holder hereof
or its permitted assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company, at the Exercise Price (as defined
below) then in effect, upon surrender of this Warrant to Purchase Common Shares
(including any Warrants to Purchase Common Shares issued in exchange, transfer
or replacement hereof, the "Warrant"), at any time or times on or after the
Issuance Date, but not after 5:00 p.m., New York Time, on the Expiration Date
(as defined below), Two Hundred Fifty Thousand (250,000) fully paid and
nonassessable Common Shares (as defined below) (the "Warrant Shares"). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 19. This Warrant is the Warrant to Purchase Common
Shares (the "SPA Warrants") issued pursuant to Section 1 of that certain
Securities Purchase Agreement, dated as of October 7, 2005 (the "Subscription
Date"), by and
among the Company, VIL, Vasogen, Corp. and the investor (the "Buyer") referred
to therein (the "Securities Purchase Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(e) and
the conditions set forth in the Exercise Notice (as defined below)), this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
in whole or in part, by (i) delivery of a written notice, substantially in the
form attached hereto as Exhibit I (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and transmission of such Exercise Notice by
e-mail to each of the Chief Financial Officer, the Controller and
Vice-President, Corporate & Legal Affairs of Vasogen, at the addresses indicated
in the Securities Purchase Agreement and (ii) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first (1st) Trading Day (as defined in the SPA Securities) following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of Common Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the foregoing shall not apply,
issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company's share register in
the name of the Holder or its designee, for the number of Common Shares to which
the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five (5) Trading
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Common Shares are to be issued upon the exercise of
this Warrant, but rather the number of Common Shares to be issued shall be
rounded up to the nearest whole number. The Warrant Shares shall bear the
legends referred to in Sections 2(g) of the Securities Purchase Agreement, to
the extent required thereby.
-2-
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $3.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the Company
shall fail for any reason or for no reason to issue to the Holder on the Share
Delivery Date, a certificate for the Common Shares to which the Holder is
entitled or to credit the Holder's balance account with DTC for such number of
Common Shares to which the Holder is entitled upon the Holder's exercise of this
Warrant, if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Common Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Shares so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Weighted Average
Price on the date of exercise.
(d) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 16.
(e) Limitation on Exercises.
(i) Beneficial Ownership. The Company shall not effect the exercise
of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates and
joint actors) would beneficially own, (x) for purposes of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(y) for purposes of the Securities Act (Ontario), in excess of 9.99%
(the "Maximum Percentage") of the number of Common Shares
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of Common
Shares beneficially owned by such Person and its affiliates and
joint actors shall include the number of Common Shares issuable upon
exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude Common Shares which
would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its
affiliates or joint actors and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Person and its affiliates or
joint actors (including, without limitation, any convertible notes
or convertible preferred shares or warrants), which in each case is
subject to a limitation on
-3-
conversion or exercise analogous to the limitation contained herein.
For purposes of calculating beneficial ownership pursuant to this
paragraph, beneficial ownership pursuant to the Exchange Act shall
be calculated in accordance with Section 13(d) of the Exchange Act,
and beneficial ownership pursuant to the Securities Act (Ontario)
shall be calculated in accordance with section 101 of the Securities
Act (Ontario), in each case except as set forth in the preceding
sentence. For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of
outstanding Common Shares as reflected in (1) the Company's most
recent Form 40-F, Current Report on Form 6-K or other public filing
with the Securities and Exchange Commission or the Canadian
Securities Administration, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Trading Days
of receipt of a written request from the Holder confirm in writing
to the Holder the number of Common Shares then outstanding. In any
case, the number of outstanding Common Shares shall be determined
after giving effect to the actual conversion or exercise of
securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By
written notice to the Company, the Holder from time to time may
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of SPA Securities.
(ii) Principal Market Regulation. The Company shall not be obligated
to issue any Common Shares upon exercise of this Warrant if the
issuance of such Common Shares would exceed that number of Common
Shares which the Company may issue upon exercise of this Warrant
(including, as applicable, any Common Shares issued upon conversion,
amortization or redemption of the SPA Securities) without breaching
the Company's obligations under the rules or regulations of the
Principal Market (the "Exchange Cap"), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of the Principal Market (in the case of the TSX) or its
shareholders as required by the applicable rules of the Principal
Market for issuances of Common Shares in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such approval
or
-4-
written opinion is obtained, no Buyer shall be issued, upon exercise
or conversion, as applicable, of any SPA Warrants or SPA Securities,
Common Shares in an amount greater than the product of the Exchange
Cap multiplied by a fraction, the numerator of which is the total
number of Warrant Shares issuable to the Buyer pursuant to the
Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Warrant Shares
issuable to the Buyers pursuant to the Purchase Agreements on the
Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise
transfer any of the Buyer's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of Common Shares which, in the aggregate, is
less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
SPA Warrants on a pro rata basis in proportion to the Common Shares
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares
for which an Exercise Notice has been received as a result of the
operation of this Section 1(e)(ii), the Company shall, in
satisfaction of its obligation to issue such Warrant Shares, at its
option either (X) pay to the Holder on the Share Delivery Date cash
at a price per Warrant Share equal to the difference between the
Weighted Average Price of the Common Shares and the Exercise Price
as of the date of the attempted exercise (such cash amount in the
aggregate for all such Warrant Shares, the "In-The-Money Value"), or
(Y) issue to the Holder on the Share Delivery Date an amount of
Common Shares equal to the quotient of (1) the In-The-Money Value
divided by (2) the arithmetic average of the Weighted Average Price
of the Common Shares during the five (5) Trading Day period
immediately preceding the date of attempted exercise, rounded to the
nearest whole Common Share.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Common Shares. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any Common Shares (including the issuance or sale of Common
Shares owned or held by or for the account of the Company, but excluding Common
Shares deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA
-5-
Securities) for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the product
of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance
and (B) the quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Exercise Price in effect immediately prior to such
Dilutive Issuance and the number of Common Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
Common Shares determined by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or
sells any Options and the lowest price per share for which one
Common Share is issuable upon the exercise of any such Option or
upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such Common Share shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Options that are Variable Price Securities (as
defined below), the Exercise Price hereunder shall only be adjusted
pursuant to this Section 7(a) at such time as the Company issues
Common Shares to a holder of such Variable Price Securities and such
Common Shares are issued at a Variable Price (as defined below) that
is less than the Applicable Price and any such adjustment shall be
based on such Variable Price and not on the lowest price per share
for which one Common Share would be issuable under the terms of such
Variable Price Securities. For purposes of this Section 2(a)(i), the
"lowest price per share for which one Common Share is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such
Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Shares upon
conversion, exercise or exchange of such Convertible Securities.
-6-
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one Common Share is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per
share; provided, however, that notwithstanding the foregoing, with
respect to any Convertible Securities that are Variable Price
Securities (as defined below), the Exercise Price hereunder shall
only be adjusted pursuant to this Section 7(a) at such time as the
Company issues Common Shares to a holder of such Variable Price
Securities and such Common Shares are issued at a Variable Price (as
defined below) that is less than the Applicable Price and any such
adjustment shall be based on such Variable Price and not on the
lowest price per share for which one Common Share would be issuable
under the terms of such Variable Price Securities. For the purposes
of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange"
shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
Common Share upon the issuance or sale of the Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common
Shares upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Shares increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such
time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the
Common Shares deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such
increase
-7-
or decrease. No adjustment pursuant to this Section 2(a) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any Common Shares, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the
Company in connection therewith. If any Common Shares, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Weighted Average
Price of such security on the date of receipt. If any Common Shares,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v) Record Date. Subject to Section 2(e), if the Company takes a
record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
Common Shares, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
-8-
(b) Adjustment upon Subdivision or Combination of Common Shares. If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of its
outstanding Common Shares into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased. If the Company
at any time on or after the Subscription Date combines (by combination, reverse
share split or otherwise) one or more classes of its outstanding Common Shares
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective retroactively in the case of any such subdivision or
combination, to the close of business on the day upon which such corporate
action becomes effective.
(c) Xxxxxx's Right of Alternative Exercise Price Following Issuance of
Convertible Securities. Subject to Section 4(k) of the Securities Purchase
Agreement, in addition to and not in limitation of the other provisions of this
Section 2, if the Company in any manner issues or sells any Options or
Convertible Securities (any such securities, "Variable Price Securities") after
the Closing Date that are convertible into or exchangeable or exercisable for
Common Shares at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but
exclusive of such formulations reflecting customary anti-dilution provisions
(i.e. stock splits, stock combinations, stock dividends and similar
transactions) (each of the formulations for such variable price being herein
referred to as, the "Variable Price"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(k) of the Securities Purchase Agreement, from and after the
date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price by
designating in the Exercise Notice delivered upon exercise of any Warrants that
solely for purposes of such exercise the Holder is relying on the Variable Price
rather than the Exercise Price then in effect. The Holder's election to rely on
a Variable Price for a particular exercise of Warrants shall not obligate the
Holder to rely on a Variable Price for any future exercise of Warrants.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
(e) Abandoned Dividends or Distributions. If the Company shall take a
record of the holders of shares of its Common Shares for the purpose of
entitling them to receive a dividend or other distribution, and shall thereafter
and before the distribution to shareholders thereof legally abandon its plan to
pay or deliver such dividend or distribution, then no adjustment in the Exercise
Price shall be required by reason of the taking of such record.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of
Section 4(j) of the Securities Purchase Agreement, if the Company shall declare
or make any
-9-
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, shares or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution shall be reduced, effective as of
the close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Weighted Average Price of the Common Shares on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one Common Share,
and (ii) the denominator shall be the Weighted Average Price of the Common
Shares on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Common Shares obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Shares entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of Common Shares (or common shares)
("Other Common Shares") of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Shares
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Shares that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b); provided, however, that in no event shall the Exercise Price be reduced
pursuant to this Section 3 with respect to any portion of a Distribution for
which the Exercise Price is also being reduced pursuant to any of the provisions
of Section 2 hereof in respect of the same portion of such Distribution.
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section
2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Shares (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, and upon the Holder's
election, the aggregate Purchase Rights, in lieu of any adjustments to which the
Holder is otherwise entitled under Section 2 herein in respect of each Purchase
Right, which the Holder could have acquired if the Holder had held the number of
Common Shares acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of
-10-
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the Common Shares reflected by
the terms of such Fundamental Transaction, having similar exercise rights as the
Warrants (specifying, without limitation, that such security is exercisable into
common shares of the Successor Entity) and exercisable for a corresponding
number of shares of capital shares equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
shares are quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity (if other than the Company) shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the Common Shares (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant; provided, however, that in the
event that, pursuant to the terms of the Fundamental Transaction, the holders of
Common Shares may elect the consideration to be received in exchange for the
Common Shares in the such Fundamental Transaction, the Holder shall elect,
within the same time periods as provided to the holders of Common Shares, the
kind or amount of such shares, securities, cash, assets or any other property
(including warrants or other purchase or subscription rights) that the Holder
will, following the consummation of such transaction, be entitled to receive
upon exercise; provided, further, however, that no such election by the Holder
shall be construed to require the exercise of this Warrant in connection with
such Fundamental Transaction. If the Holder is required to make any election of
the kind described in the foregoing sentence, the Company shall deliver to the
Holder all documentation, informational materials and election forms relating to
such Fundamental Transaction contemporaneously with the delivery of such
documentation, materials and forms to the holders of the Common Shares.
Provision made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section 4(b)
above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and (ii)
shall, so long as any of the SPA Warrants are outstanding, take all reasonable
action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the
SPA Warrants, the requisite number of Common Shares as shall from time to time
be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of shares,
reclassification of shares, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)),
-12-
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of Common Shares underlying the other new
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an issuance date,
as indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least seven days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Shares, (B) with respect to any pro
rata subscription offer to holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein
-13-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be
governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, enforcement, and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. The Company has appointed CT Corporation System, with offices at 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for service of process in
New York. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Warrant. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations to
the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-14-
11. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 11
referred to as the "Judgment Currency") an amount due in US dollars under this
Warrant, the conversion shall be made at the Exchange Rate prevailing on the
business day immediately preceding:
(i) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion
being made on such date: or
(ii) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this
Section 11(a)(ii) being hereinafter referred to as the
"Judgment Conversion Date").
(b) If in the case of any proceeding in the court of any jurisdiction
referred to in Section 11(a)(ii) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Warrant.
12. CURRENCY. All amounts owing under this Warrant or any Transaction
Document that, in accordance with their terms, are paid in cash shall be paid in
US dollars. All amounts denominated in other currencies shall be converted in
the US dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation (for the purpose of Section 2 hereof, the date of calculation
shall equal the date of such event resulting in the adjustment of the Exercise
Price thereunder). "Exchange Rate" means, in relation to any amount of currency
to be converted into US dollars pursuant to this Warrant, the US dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with
reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).
13. TAXES.
(a) (i) Any and all payments made by the Company hereunder, including
any amounts received on an exercise of the Warrant and any amounts on account of
interest or deemed interest, must be made by it without any Tax Deduction,
unless a Tax Deduction is required by law. If the Company is aware that it must
make a Tax Deduction (or
-15-
that there is a change in the rate or the basis of a
Tax Deduction), it must notify the Holder promptly.
(ii) If a Tax Deduction is required by law to be made by the
Company, subject to Section 13(a)(i) above, the amount of the payment due from
the Company will be increased to an amount which (after making the Tax
Deduction) leaves an amount equal to the payment which would have been due if no
Tax Deduction had been required. If the Company is required to make a Tax
Deduction, it must make the minimum Tax Deduction allowed by law and must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
(iii) As soon as practicable after making a Tax Deduction or a
payment required in connection with a Tax Deduction, the Company must deliver to
the Holder any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iv) In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, this Warrant ("Other Taxes"). As
soon as practicable after making a payment of Other Taxes, the Company must
deliver to the Holder any official receipt or form, if any, provided by or
required by the taxing authority to whom the Tax Deduction was paid.
(v) The obligations of the Company under this Section 13(a) shall
survive the termination of this Warrant and the exercise of the Warrant and all
other amounts payable hereunder.
14. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
15. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
16. DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Trading Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Trading Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Trading Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and
-16-
reasonably and timely approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
18. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company on two (2) Trading Days' written
notice, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement and subject to applicable securities laws; provided, that the
Holder may not transfer any unexercised portion of this Warrant, in part, to the
extent such portion of the Warrant is less than the lesser of (a) a portion
exercisable for less than 100,000 Warrant Shares and (b) the unexercised portion
of this Warrant; provided further, that any transferee of all or any portion of
this Warrant agrees to comply with all applicable securities laws; provided,
also, that any transferee of all or any portion of this Warrant that wishes to
avail itself of the benefits contemplated by Section 9(s) of the Securities
Purchase Agreement (including, for the avoidance of doubt, any subsequent
transferee of any transferee) shall make to the Company the representations and
warranties made by the Holder in, and give the Notice as contemplated pursuant
to, Section 9(s) of the Securities Purchase Agreement. Prior to the
effectiveness of any such sale, transfer or assignment pursuant to this Section
18, and only if such transferee seeks to receive Common Shares through DTC's
Deposit Withdrawal Agent Commission system, such transferee shall have completed
and delivered to the Company the DTC brokerage account information with respect
to such transferee in substantially the form of Exhibit E as attached to the
Securities Purchase Agreement.
19. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Common Shares" means (i) the Company's Common Shares, no par value
per share, and (ii) any share capital into which such Common Shares shall have
been changed or any share capital resulting from a reclassification of such
Common Shares.
-17-
(c) "Common Shares Deemed Outstanding" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Shares owned or held by or
for the account of the Company or issuable upon conversion and exercise, as
applicable, of the SPA Securities and the Warrants.
(d) "Convertible Securities" means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Shares.
(e) "Eligible Market" means the Principal Markets, The New York Stock
Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(f) "Expiration Date" means the date sixty (60) months after the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Markets (a "Holiday"), the
next date that is not a Holiday.
(g) "Fundamental Transaction" means that the Company shall or Vasogen
Ireland Limited ("VIL") shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
or VIL, as applicable, is the surviving corporation) another Person, or (ii)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or the Company and its Subsidiaries
to another Person other than in connection with a strategic transaction
involving a licensing of intellectual property and related assets of the Company
or VIL or relating to a partnership arrangement with respect to any such
intellectual property and related assets, in each case where such licensing or
partnership arrangements contain terms and conditions that are customary in the
Company's industry for such type of transactions, where the board of directors
of the Company determines, in good faith, that the Company shall retain a
material financial participation in the exploitation of such intellectual
property and related assets, or (iii) be subject to an offer from another Person
or group of related Persons (as defined in Sections 13(d) and 14(d) of the
Exchange Act) other than the Holder to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding Voting
Shares (not including any Voting Shares held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of related Persons (as defined in Sections 13(d) and
14(d) of the Exchange Act) whereby such other Person or group acquires more than
the 50% of the outstanding Voting Shares (not including any Voting Shares held
by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such share purchase
agreement or other business combination), or (v) reorganize, recapitalize or
reclassify its Common Shares.
(h) "Options" means any rights, warrants or options to subscribe for or
purchase Common Shares or Convertible Securities.
(i) "Other Warrants" means the other Warrants to Purchase Common Shares
issued pursuant to the other Purchase Agreements.
-18-
(j) "Parent Entity" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common shares or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "Principal Markets" means (i) either the Nasdaq National Market or
The Nasdaq SmallCap Market and (ii) TSX, and each, individually, a "Principal
Market".
(m) "Purchase Agreements" means, collectively, the Securities Purchase
Agreement and those certain other securities purchase agreements, dated as of
the Issuance Date, by and among the Company, VIL, Vasogen, Corp. and the initial
holders of the Other Warrants.
(n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Common Shares underlying the SPA Warrants
then outstanding.
(o) "SPA Securities" means the Notes issued pursuant to the Securities
Purchase Agreement.
(p) "Successor Entity" means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common shares or equivalent equity security are quoted or
listed for trading on an Eligible Market, Successor Entity shall mean such
Person's Parent Entity.
(q) "Tax" means any tax, levy, impost, duty or other charge or
withholding of a similar nature (including any related penalty or interest).
(r) "Tax Deduction" means a deduction or withholding for or on account
of Tax from a payment under the Warrant.
(s) "Voting Shares" of a Person means capital shares of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital shares of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
(t) "Weighted Average Price" means, for any security as of any date,
the dollar volume-weighted average price for such security on NASDAQ during the
period beginning at 9:30:01 a.m., New York Time (or such other time as NASDAQ
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as NASDAQ publicly announces is the official
close of trading) as reported by Bloomberg through its "Volume at Price"
functions, or, if the foregoing does not apply, the dollar volume-
-19-
weighted average price of such security on another Principal Market for such
security during the period beginning at 9:30:01 a.m., New York Time (or such
other time as such Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 16. All such determinations shall be appropriately adjusted
for any share dividend, share split, share combination or other similar
transaction during the applicable calculation period.
20. COMPANY'S OBLIGATION TO ISSUE SHARES. Notwithstanding anything to the
contrary herein, with respect to any obligation of the Company to issue Common
Shares to the Holder's account with DTC so long as the Company has sent a copy
of such Treasury Instructions to the Holder's broker at the email address and/or
facsimile number set forth in such Holder's DTC Brokerage Account Information
Form (the form of which is attached as Exhibit E to the Securities Purchase
Agreement), the Company shall not be responsible for any delivery failure if the
sole cause of such delivery failure is the failure of the Holder or its broker
to retrieve the Common Shares from DTC into its brokerage account.
[Signature Page Follows]
-20-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Exhibit 9a
Amendments to Warrants - Kings Road Investments Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
KINGS ROAD INVESTMENTS LTD.
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X.X. Xxxxxxxxx and Xxxxxxx X. Xxxxx
Dear Sirs:
We refer to the Warrant to Purchase Common Shares, dated as of October 7,
2005 (the "Warrant"), issued by Vasogen Inc., a Canadian corporation (the
"Company"), in favor of Kings Road Investments Ltd., a Cayman Islands company
(the "Holder"). Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Warrant.
The Company and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company and the holders of
---------
the Other Warrants of letters in identical form and substance to this Letter,
the Warrant is hereby amended by adding the following subsections (f) and (g) at
the end of Section 1 thereof:
"(f) Payment in Lieu of Exercise Above Number of Common Shares Available
-------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Warrant is outstanding, the Holder delivers an Exercise Notice and, on the
date of receipt of such Exercise Notice by the Company (the "Exercise
Notice Date"), following the application of, when applicable, Section
1(e)(ii) hereof, the number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 to satisfy such exercise in
full (the "Required Exercise Shares") exceeds the number of Common Shares
that are available for resale under the registration statement (the
"Registration Statement") required to be filed by the Company pursuant to
the Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required
2
Exercise Shares minus the Unregistered Shares, the "Available Shares"),
then (A) the Company shall or shall cause the Transfer Agent to, issue to
the Holder the Available Shares by the third (3rd) Trading Day following
receipt of the applicable Exercise Notice and (B) the Company shall pay to
the Holder, in lieu of issuing Unregistered Shares, within twelve (12)
Trading Days following the Exercise Notice Date in cash an amount equal to
the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Exercise Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Exercise Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Exercise Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Exercise Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable date of delivery of such Exercise Notice (the
"Unregistered Shares Redemption Payment"); provided, however, that if at
any time the arithmetic average of the Weighted Average Price of the
Common Shares calculated for the applicable period or day in accordance
with clause (1) or (2) is less than $1.00, then for purposes of clause (y)
such arithmetic average shall be multiplied by 110% instead of 105% to
determine the Unregistered Shares Redemption Payment. In the event that
the Company receives an Exercise Notice from more than one holder of
Warrants on the same date and the Available Shares can cover some, but not
all, of the aggregate number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 and equivalent provisions in
the applicable Other Warrants to satisfy such Exercise Notices in full,
the Company shall allocate the Available Shares amongst such exercising
holders by issuing to each such holder a pro rata amount of Common Shares
based on the number of Warrant Shares (as defined in the Exercise Notice)
set forth in such holder's Exercise Notice relative to the aggregate
number of Warrant Shares (as defined in the Exercise Notices) set forth in
all the Exercise Notices submitted on the same date. Provided that the
Company delivers the Common Shares and makes the Unregistered Shares
Redemption Payment in the time periods set forth in clauses (A) and (B) of
the foregoing sentence, the obligations of the Company with respect to
such Exercise Notice shall be deemed to be fully satisfied and the Holder
shall have no right to pursue any remedies set forth in Section 1(c)
hereof with respect to such Exercise Notice.
3
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company shall deliver to the Holder a written notice (an
---------
"Unavailability Notice") that there are no additional Common Shares
available for resale under the Registration Statement (the "Unavailability
Date") at the earlier of (i) no more than one (1) Trading Day after such
Unavailability Date or (ii) no more than one (1) Trading Day after the
delivery of any Exercise Notice by a Holder requiring exercise of a number
of Required Exercise Shares in excess of the amount of any Available
Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Warrant. Except as expressly provided herein, all
---------------------------
of the terms and conditions of the Warrant are ratified and shall remain
unchanged and continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
KINGS ROAD INVESTMENTS LTD.
By:
-----------------------------
Name:
Title:
Exhibit 9b
Amendments to Warrants - Amatis Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
AMATIS LTD.
c/o Amaranth Advisors LLC
Xxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Dear Sirs:
We refer to the Warrant to Purchase Common Shares, dated as of October 7,
2005 (the "Warrant"), issued by Vasogen Inc., a Canadian corporation (the
"Company"), in favor of Amatis Ltd., a Cayman Islands company (the "Holder").
Capitalized terms used but not defined in this letter agreement ("Letter") have
the respective meanings set forth in the Warrant.
The Company and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company and the holders of
---------
the Other Warrants of letters in identical form and substance to this Letter,
the Warrant is hereby amended by adding the following subsections (f) and (g) at
the end of Section 1 thereof:
"(f) Payment in Lieu of Exercise Above Number of Common Shares Available
-------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Warrant is outstanding, the Holder delivers an Exercise Notice and, on the
date of receipt of such Exercise Notice by the Company (the "Exercise
Notice Date"), following the application of, when applicable, Section
1(e)(ii) hereof, the number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 to satisfy such exercise in
full (the "Required Exercise Shares") exceeds the number of Common Shares
that are available for resale under the registration statement (the
"Registration Statement") required to be filed by the Company pursuant to
the Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required
2
Exercise Shares minus the Unregistered Shares, the "Available Shares"),
then (A) the Company shall or shall cause the Transfer Agent to, issue to
the Holder the Available Shares by the third (3rd) Trading Day following
receipt of the applicable Exercise Notice and (B) the Company shall pay to
the Holder, in lieu of issuing Unregistered Shares, within twelve (12)
Trading Days following the Exercise Notice Date in cash an amount equal to
the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Exercise Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Exercise Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Exercise Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Exercise Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable date of delivery of such Exercise Notice (the
"Unregistered Shares Redemption Payment"); provided, however, that if at
any time the arithmetic average of the Weighted Average Price of the
Common Shares calculated for the applicable period or day in accordance
with clause (1) or (2) is less than $1.00, then for purposes of clause (y)
such arithmetic average shall be multiplied by 110% instead of 105% to
determine the Unregistered Shares Redemption Payment. In the event that
the Company receives an Exercise Notice from more than one holder of
Warrants on the same date and the Available Shares can cover some, but not
all, of the aggregate number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 and equivalent provisions in
the applicable Other Warrants to satisfy such Exercise Notices in full,
the Company shall allocate the Available Shares amongst such exercising
holders by issuing to each such holder a pro rata amount of Common Shares
based on the number of Warrant Shares (as defined in the Exercise Notice)
set forth in such holder's Exercise Notice relative to the aggregate
number of Warrant Shares (as defined in the Exercise Notices) set forth in
all the Exercise Notices submitted on the same date. Provided that the
Company delivers the Common Shares and makes the Unregistered Shares
Redemption Payment in the time periods set forth in clauses (A) and (B) of
the foregoing sentence, the obligations of the Company with respect to
such Exercise Notice shall be deemed to be fully satisfied and the Holder
shall have no right to pursue any remedies set forth in Section 1(c)
hereof with respect to such Exercise Notice.
3
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company shall deliver to the Holder a written notice (an
---------
"Unavailability Notice") that there are no additional Common Shares
available for resale under the Registration Statement (the "Unavailability
Date") at the earlier of (i) no more than one (1) Trading Day after such
Unavailability Date or (ii) no more than one (1) Trading Day after the
delivery of any Exercise Notice by a Holder requiring exercise of a number
of Required Exercise Shares in excess of the amount of any Available
Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Warrant. Except as expressly provided herein, all
---------------------------
of the terms and conditions of the Warrant are ratified and shall remain
unchanged and continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
AMATIS LTD.
By:
-----------------------------
Name:
Title:
Exhibit 9c
Amendments to Warrants - Castlerigg Master Investments Ltd.
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CASTLERIGG MASTER INVESTMENTS LTD.
c/o Sandell Asset Management Corp.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Cem Hacioglu
Dear Sirs:
We refer to the Warrant to Purchase Common Shares, dated as of October 7,
2005 (the "Warrant"), issued by Vasogen Inc., a Canadian corporation (the
"Company"), in favor of Castlerigg Master Investments Ltd., a Curacao,
Netherland Antilles company (the "Holder"). Capitalized terms used but not
defined in this letter agreement ("Letter") have the respective meanings set
forth in the Warrant.
The Company and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company and the holders of
---------
the Other Warrants of letters in identical form and substance to this Letter,
the Warrant is hereby amended by adding the following subsections (f) and (g) at
the end of Section 1 thereof:
"(f) Payment in Lieu of Exercise Above Number of Common Shares Available
-------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Warrant is outstanding, the Holder delivers an Exercise Notice and, on the
date of receipt of such Exercise Notice by the Company (the "Exercise
Notice Date"), following the application of, when applicable, Section
1(e)(ii) hereof, the number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 to satisfy such exercise in
full (the "Required Exercise Shares") exceeds the number of Common Shares
that are available for resale under the registration statement (the
"Registration Statement") required to be filed by the Company pursuant to
the Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required
2
Exercise Shares minus the Unregistered Shares, the "Available Shares"),
then (A) the Company shall or shall cause the Transfer Agent to, issue to
the Holder the Available Shares by the third (3rd) Trading Day following
receipt of the applicable Exercise Notice and (B) the Company shall pay to
the Holder, in lieu of issuing Unregistered Shares, within twelve (12)
Trading Days following the Exercise Notice Date in cash an amount equal to
the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Exercise Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Exercise Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Exercise Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Exercise Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable date of delivery of such Exercise Notice (the
"Unregistered Shares Redemption Payment"); provided, however, that if at
any time the arithmetic average of the Weighted Average Price of the
Common Shares calculated for the applicable period or day in accordance
with clause (1) or (2) is less than $1.00, then for purposes of clause (y)
such arithmetic average shall be multiplied by 110% instead of 105% to
determine the Unregistered Shares Redemption Payment. In the event that
the Company receives an Exercise Notice from more than one holder of
Warrants on the same date and the Available Shares can cover some, but not
all, of the aggregate number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 and equivalent provisions in
the applicable Other Warrants to satisfy such Exercise Notices in full,
the Company shall allocate the Available Shares amongst such exercising
holders by issuing to each such holder a pro rata amount of Common Shares
based on the number of Warrant Shares (as defined in the Exercise Notice)
set forth in such holder's Exercise Notice relative to the aggregate
number of Warrant Shares (as defined in the Exercise Notices) set forth in
all the Exercise Notices submitted on the same date. Provided that the
Company delivers the Common Shares and makes the Unregistered Shares
Redemption Payment in the time periods set forth in clauses (A) and (B) of
the foregoing sentence, the obligations of the Company with respect to
such Exercise Notice shall be deemed to be fully satisfied and the Holder
shall have no right to pursue any remedies set forth in Section 1(c)
hereof with respect to such Exercise Notice.
3
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company shall deliver to the Holder a written notice (an
---------
"Unavailability Notice") that there are no additional Common Shares
available for resale under the Registration Statement (the "Unavailability
Date") at the earlier of (i) no more than one (1) Trading Day after such
Unavailability Date or (ii) no more than one (1) Trading Day after the
delivery of any Exercise Notice by a Holder requiring exercise of a number
of Required Exercise Shares in excess of the amount of any Available
Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Warrant. Except as expressly provided herein, all
---------------------------
of the terms and conditions of the Warrant are ratified and shall remain
unchanged and continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CASTLERIGG MASTER INVESTMENTS LTD.
By:
-----------------------------
Name:
Title:
Exhibit 9d
Amendments to Warrants - Capital Ventures International
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
CAPITAL VENTURES INTERNATIONAL
c/o Heights Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Dear Sirs:
We refer to the Warrant to Purchase Common Shares, dated as of October 7,
2005 (the "Warrant"), issued by Vasogen Inc., a Canadian corporation (the
"Company"), in favor of Capital Ventures International, a Cayman Islands company
(the "Holder"). Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Warrant.
The Company and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company and the holders of
---------
the Other Warrants of letters in identical form and substance to this Letter,
the Warrant is hereby amended by adding the following subsections (f) and (g) at
the end of Section 1 thereof:
"(f) Payment in Lieu of Exercise Above Number of Common Shares Available
-------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Warrant is outstanding, the Holder delivers an Exercise Notice and, on the
date of receipt of such Exercise Notice by the Company (the "Exercise
Notice Date"), following the application of, when applicable, Section
1(e)(ii) hereof, the number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 to satisfy such exercise in
full (the "Required Exercise Shares") exceeds the number of Common Shares
that are available for resale under the registration statement (the
"Registration Statement") required to be filed by the Company pursuant to
the Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required
2
Exercise Shares minus the Unregistered Shares, the "Available Shares"),
then (A) the Company shall or shall cause the Transfer Agent to, issue to
the Holder the Available Shares by the third (3rd) Trading Day following
receipt of the applicable Exercise Notice and (B) the Company shall pay to
the Holder, in lieu of issuing Unregistered Shares, within twelve (12)
Trading Days following the Exercise Notice Date in cash an amount equal to
the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Exercise Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Exercise Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Exercise Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Exercise Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable date of delivery of such Exercise Notice (the
"Unregistered Shares Redemption Payment"); provided, however, that if at
any time the arithmetic average of the Weighted Average Price of the
Common Shares calculated for the applicable period or day in accordance
with clause (1) or (2) is less than $1.00, then for purposes of clause (y)
such arithmetic average shall be multiplied by 110% instead of 105% to
determine the Unregistered Shares Redemption Payment. In the event that
the Company receives an Exercise Notice from more than one holder of
Warrants on the same date and the Available Shares can cover some, but not
all, of the aggregate number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 and equivalent provisions in
the applicable Other Warrants to satisfy such Exercise Notices in full,
the Company shall allocate the Available Shares amongst such exercising
holders by issuing to each such holder a pro rata amount of Common Shares
based on the number of Warrant Shares (as defined in the Exercise Notice)
set forth in such holder's Exercise Notice relative to the aggregate
number of Warrant Shares (as defined in the Exercise Notices) set forth in
all the Exercise Notices submitted on the same date. Provided that the
Company delivers the Common Shares and makes the Unregistered Shares
Redemption Payment in the time periods set forth in clauses (A) and (B) of
the foregoing sentence, the obligations of the Company with respect to
such Exercise Notice shall be deemed to be fully satisfied and the Holder
shall have no right to pursue any remedies set forth in Section 1(c)
hereof with respect to such Exercise Notice.
3
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company shall deliver to the Holder a written notice (an
---------
"Unavailability Notice") that there are no additional Common Shares
available for resale under the Registration Statement (the "Unavailability
Date") at the earlier of (i) no more than one (1) Trading Day after such
Unavailability Date or (ii) no more than one (1) Trading Day after the
delivery of any Exercise Notice by a Holder requiring exercise of a number
of Required Exercise Shares in excess of the amount of any Available
Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Warrant. Except as expressly provided herein, all
---------------------------
of the terms and conditions of the Warrant are ratified and shall remain
unchanged and continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
CAPITAL VENTURES INTERNATIONAL
By:
-----------------------------
Name:
Title:
Exhibit 9e
Amendments to Warrants - Smithfield Fiduciary LLC
(see attached)
VASOGEN INC.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
November 3, 2005
SMITHFIELD FIDUCIARY LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx and Xxxx X. Xxxxx
Dear Sirs:
We refer to the Warrant to Purchase Common Shares, dated as of October 7,
2005 (the "Warrant"), issued by Vasogen Inc., a Canadian corporation (the
"Company"), in favor of Smithfield Fiduciary LLC, a Cayman Islands company (the
"Holder"). Capitalized terms used but not defined in this letter agreement
("Letter") have the respective meanings set forth in the Warrant.
The Company and the Holder hereby agree as follows:
1. Amendment. Subject to the execution by the Company and the holders of
---------
the Other Warrants of letters in identical form and substance to this Letter,
the Warrant is hereby amended by adding the following subsections (f) and (g) at
the end of Section 1 thereof:
"(f) Payment in Lieu of Exercise Above Number of Common Shares Available
-------------------------------------------------------------------
for Resale under the Registration Statement. If at any time while this
-------------------------------------------
Warrant is outstanding, the Holder delivers an Exercise Notice and, on the
date of receipt of such Exercise Notice by the Company (the "Exercise
Notice Date"), following the application of, when applicable, Section
1(e)(ii) hereof, the number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 to satisfy such exercise in
full (the "Required Exercise Shares") exceeds the number of Common Shares
that are available for resale under the registration statement (the
"Registration Statement") required to be filed by the Company pursuant to
the Registration Rights Agreement (as defined in the Securities Purchase
Agreement) (such excess, the "Unregistered Shares" and the difference
between the Required
2
Exercise Shares minus the Unregistered Shares, the "Available Shares"),
then (A) the Company shall or shall cause the Transfer Agent to, issue to
the Holder the Available Shares by the third (3rd) Trading Day following
receipt of the applicable Exercise Notice and (B) the Company shall pay to
the Holder, in lieu of issuing Unregistered Shares, within twelve (12)
Trading Days following the Exercise Notice Date in cash an amount equal to
the product of (x) the Unregistered Shares multiplied by (y) (1) in the
event the Holder has not received an Unavailability Notice (as defined
below) prior to the delivery of its Exercise Notice, 105% of the
arithmetic average of the Weighted Average Price of the Common Shares
during the period beginning on, and including, the day the Holder delivers
its Exercise Notice and ending on, and including, the third (3rd) Trading
Day following receipt of such Exercise Notice or (2) in the event the
Holder has received an Unavailability Notice prior to delivery of such
Exercise Notice, 105% of the Weighted Average Price of the Common Shares
on the applicable date of delivery of such Exercise Notice (the
"Unregistered Shares Redemption Payment"); provided, however, that if at
any time the arithmetic average of the Weighted Average Price of the
Common Shares calculated for the applicable period or day in accordance
with clause (1) or (2) is less than $1.00, then for purposes of clause (y)
such arithmetic average shall be multiplied by 110% instead of 105% to
determine the Unregistered Shares Redemption Payment. In the event that
the Company receives an Exercise Notice from more than one holder of
Warrants on the same date and the Available Shares can cover some, but not
all, of the aggregate number of Common Shares that the Company would
otherwise be required to issue (or, in cases where the final sentence of
Section 1(e)(ii) applies, that the Company chooses to issue) pursuant to
the foregoing provisions of this Section 1 and equivalent provisions in
the applicable Other Warrants to satisfy such Exercise Notices in full,
the Company shall allocate the Available Shares amongst such exercising
holders by issuing to each such holder a pro rata amount of Common Shares
based on the number of Warrant Shares (as defined in the Exercise Notice)
set forth in such holder's Exercise Notice relative to the aggregate
number of Warrant Shares (as defined in the Exercise Notices) set forth in
all the Exercise Notices submitted on the same date. Provided that the
Company delivers the Common Shares and makes the Unregistered Shares
Redemption Payment in the time periods set forth in clauses (A) and (B) of
the foregoing sentence, the obligations of the Company with respect to
such Exercise Notice shall be deemed to be fully satisfied and the Holder
shall have no right to pursue any remedies set forth in Section 1(c)
hereof with respect to such Exercise Notice.
3
(g) Notice of Unavailability of Common Shares Under the Registration
----------------------------------------------------------------
Statement. The Company shall deliver to the Holder a written notice (an
---------
"Unavailability Notice") that there are no additional Common Shares
available for resale under the Registration Statement (the "Unavailability
Date") at the earlier of (i) no more than one (1) Trading Day after such
Unavailability Date or (ii) no more than one (1) Trading Day after the
delivery of any Exercise Notice by a Holder requiring exercise of a number
of Required Exercise Shares in excess of the amount of any Available
Shares."
2. Expenses. The Company shall pay an amount to the Holder or its
--------
designee(s) to cover legal expenses reasonably incurred by the Holder in
relation to the review, preparation and execution of this Letter.
3. Ratification of the Warrant. Except as expressly provided herein, all
---------------------------
of the terms and conditions of the Warrant are ratified and shall remain
unchanged and continue in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Letter.
5. Governing Law. This Letter shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
6. Execution in Counterparts. This Letter may be executed in several
-------------------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same Letter. Signature pages exchanged by facsimile
or other electronic means shall be fully binding.
7. Headings. The headings in this Letter are for convenience of reference
--------
only, and shall not be deemed to alter or affect the meaning or interpretation
of any provisions hereof.
[Remainder of this page intentionally left blank]
Please confirm your understanding and agreement of the foregoing by
signing below and returning an executed counterpart of this Letter to the
undersigned.
Very truly yours,
VASOGEN INC.
By:
-----------------------------
Name:
Title:
Accepted and agreed to as of the date first written above by:
SMITHFIELD FIDUCIARY LLC
By:
-----------------------------
Name:
Title:
