EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
BETWEEN
GENSIA SICOR INC.
AND
HEALTH CARE CAPITAL PARTNERS L.P.
Dated as of May 1, 1997
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TABLE OF CONTENTS
Page
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1. Issuance and Sale of Notes and Warrants................................. 1
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1.1. Issuance, Purchase and Sale of Notes and Warrants.................. 1
1.2. Closing............................................................ 1
1.3. Conditions to Closing.............................................. 2
1.4. Deliveries at Closing.............................................. 3
1.5. Definitions........................................................ 3
1.6. Transaction Fee.................................................... 3
2. Representations and Warranties of the Company........................... 4
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2.1. Organization and Qualification..................................... 4
2.2. Due Authorization.................................................. 4
2.3. Subsidiaries....................................................... 4
2.4. SEC Reports........................................................ 5
2.5. Financial Statements............................................... 5
2.6. Actions Pending; Compliance with Laws.............................. 6
2.7. Title to Properties; Insurance..................................... 7
2.8. Governmental Consents, etc......................................... 7
2.9. Holding Company Act and Investment Company Act..................... 7
2.10. Taxes............................................................. 8
2.11. Conflicting Agreements and Charter Provisions..................... 8
2.12. Capitalization.................................................... 8
2.13. Disclosure........................................................ 9
2.14. Status of Securities.............................................. 10
2.15. Registration Under Exchange Act................................... 10
2.16. ERISA............................................................. 10
2.17. Possession of Franchises, Licenses, etc........................... 10
2.18. Environmental Matters............................................. 11
2.19. Certain Agreements................................................ 11
2.20. Offering of Notes and Warrants.................................... 13
2.21. Use of Proceeds................................................... 13
2.22. Unlawful Use of Proceeds.......................................... 13
2.23. Product Warranties and Liabilities................................ 13
2.24. [Reserved]........................................................ 14
2.25. Intellectual Property Rights...................................... 14
2.26. Related Transactions.............................................. 15
2.27. No Brokerage or Finder's Fees..................................... 15
3. Representations and Warranties of the Purchaser......................... 15
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3.1. Organization and Qualification..................................... 15
3.2. Due Authorization................................................. 16
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3.3. Conflicting Agreements and Other Matters........................... 16
3.4. Acquisition for Investment......................................... 16
3.5. Brokers or Finders................................................. 16
3.6. Accredited Investor................................................ 17
3.7. HSR Notification................................................... 17
4. Registration, Exchange and Transfer of Notes............................ 17
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4.1. Authorized Denominations of Notes.................................. 17
4.2. The Note Register; Persons Deemed Owners........................... 17
4.3. Issuance of New Notes Upon Exchange or Transfer.................... 17
4.4. Lost, Stolen, Damaged and Destroyed Notes.......................... 18
5. Payment of Notes........................................................ 18
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5.1. Home Office Payment................................................ 18
5.2. Limitation on Interest............................................. 18
5.3. No Prepayment...................................................... 19
5.4. Interest........................................................... 19
6. Covenants of the Company................................................ 19
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6.1. Financial Covenants................................................ 19
6.2. Limitation on Convertible Securities............................... 20
6.3. Merger............................................................. 20
6.4. Dividends and Distributions........................................ 21
6.5. Compliance with Laws............................................... 21
6.6. Limitation on Agreements........................................... 22
6.7. Preservation of Franchises and Existence........................... 22
6.8. Insurance.......................................................... 22
6.9. Payment of Taxes and Other Charges................................. 23
6.10. [Reserved]........................................................ 23
6.11. [Reserved]........................................................ 23
6.12. Financial Statements and Other Reports............................ 23
6.13. Inspection of Property............................................ 24
6.14. Board Membership.................................................. 25
6.15. Lost, Stolen, Damaged and Destroyed Stock Certificates............ 25
6.16. [Reserved]........................................................ 26
6.17. HSR............................................................... 26
6.18. Certain Tax Matters............................................... 26
6.19. Certain Additional Payments Following Redemption
under Certain Circumstances....................................... 28
6.20. Notice of Breach.................................................. 29
6.21. Limitation on Transactions with Affiliates........................ 29
7. Covenants of the Purchaser.............................................. 29
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7.1. Nondisclosure of Confidential Information.......................... 29
8. Events of Default and Remedies.......................................... 31
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8.1. Events of Default.................................................. 31
8.2. Acceleration of Maturity........................................... 32
8.3. Other Remedies..................................................... 33
8.4. Conduct No Waiver; Collection Expenses............................. 34
8.5. Annulment of Acceleration.......................................... 34
8.6. Remedies Cumulative................................................ 34
8.7. Limitations........................................................ 35
9. Redemption.............................................................. 35
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9.1. Optional Redemption................................................ 35
9.2. Mandatory Redemption.............................................. 35
9.3. Change of Control.................................................. 35
9.4. Redemption Procedures.............................................. 36
10. Conversion............................................................... 36
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10.1. Holder's Option to Convert into Preferred Stock................... 36
10.2. Holder's Option to Convert into Common Stock...................... 36
10.3. Company's Option to Convert....................................... 37
10.4. Exercise of Conversion Privilege.................................. 37
10.5. Fractions of Shares; Interest..................................... 38
10.6. Reservation of Stock.............................................. 39
10.7. Adjustment of Conversion Ratio.................................... 39
10.8. Merger or Consolidation........................................... 43
10.9. Notice of Certain Corporate Actions............................... 43
10.10. Reports as to Adjustments........................................ 44
11. Subordination of Notes................................................... 44
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11.1. Subordination of Notes to Senior Indebtedness..................... 44
11.2. Proofs of Claim of Holders of Senior Indebtedness; Voting......... 47
11.3. Rights of Holders of Senior Indebtedness Unimpaired............... 47
11.4. Effects of Event of Default....................................... 48
11.5. Company's Obligations Unimpaired.................................. 48
11.6. Subrogation....................................................... 48
12. Interpretation........................................................... 48
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12.1. Definitions....................................................... 48
12.2. Accounting Principles............................................. 59
13. Miscellaneous............................................................ 59
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13.1. Payments.......................................................... 59
13.2. Severability...................................................... 59
13.3. Specific Enforcement.............................................. 60
13.4. Entire Agreement.................................................. 60
13.5. Counterparts...................................................... 60
13.6. Notices and Other Communications.................................. 60
13.7. Amendments........................................................ 61
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13.8. Cooperation....................................................... 61
13.9. Successors and Assigns............................................ 62
13.10. Expenses and Remedies............................................ 62
13.11. Survival of Representations and Warranties....................... 64
13.12. Transfer of Securities........................................... 64
13.13. Governing Law.................................................... 64
13.14. Term............................................................. 64
13.15. Publicity........................................................ 64
13.16. Signatures....................................................... 65
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SCHEDULES
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Schedule 2.3 Subsidiaries of the Company
Schedule 2.5(a) Financial Statements
Schedule 2.7 Insurance Policies
Schedule 2.12 Options and Warrants Outstanding
Schedule 2.16 ERISA
Schedule 2.19(a) Certain Agreements
Schedule 2.19(b) Related Agreements
Schedule 2.23 Product Warranty and Liability Matters
Schedule 2.25 Intellectual Property Rights Matters
Schedule 2.26 Related Transactions
EXHIBITS
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Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Opinion Matters of Pillsbury Madison & Sutro LLP
Exhibit D Form of Registration Rights Agreement
Exhibit E Certificate of Designation of Preferred Stock
Exhibit F Form of Amendment to Shareholder's Agreement
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THIS SECURITIES PURCHASE AGREEMENT, dated as of May 1, 1997 (this
"Agreement"), between Gensia Sicor Inc., a Delaware corporation (the "Company"),
and Health Care Capital Partners L.P., a Delaware limited partnership (the
"Purchaser").
WHEREAS, the Purchaser wishes to purchase from the Company, and the
Company wishes to sell to the Purchaser, 2.675% Subordinated Convertible Notes
due May 1, 2004 (the "Notes") in the aggregate principal amount set forth herein
and warrants (the "Warrants") to purchase shares of the Company's Common Stock,
par value $.01 (the "Common Stock"), upon the terms set forth herein;
WHEREAS, the Notes shall be convertible (under the circumstances
described herein) into the Company's Series A Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock") and the Common Stock; the Notes and
the Warrants are referred to collectively as the "Purchased Securities"; the
Notes, the Warrants and the Preferred Stock are referred to collectively as the
"Convertible Securities"; and the Convertible Securities and the Common Stock
are referred to collectively as the "Securities"; and
WHEREAS, the Purchaser and the Company desire to provide for such
purchase and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
1. Issuance and Sale of Notes and Warrants
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1.1. Issuance, Purchase and Sale of Notes and Warrants. Upon the terms
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set forth herein, the Company will sell to the Purchaser, and the Purchaser will
purchase from the Company, Notes in the aggregate principal amount of
$20,000,000 (the "Initial Principal Balance") and Notes and the Warrants
referred to collectively as the "Purchase Price"). Each Note shall be in the
form of Exhibit A hereto and the Warrants shall be in the form set forth in
Exhibit B hereto. The initial Conversion Price of the Notes shall be $3.78 per
share. The Warrants shall be initially exercisable at a price equal to $4.347
per share.
1.2. Closing. The closing of the transactions contemplated hereby
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(the "Closing") will take place at the offices of Fried, Frank, Harris, Xxxxxxx
& Xxxxxxxx, New York, New York, at 9:00 a.m. on May 16, 1997 or on such other
date as shall be mutually agreed by the Company and the Purchaser (the "Closing
Date").
1.3. Conditions to Closing. (a) The obligations of the Company and
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the Purchaser to consummate the transactions contemplated hereby at the Closing
are subject to the satisfaction of the following conditions: no temporary
restraining order, preliminary or permanent injunction or other order or decree
which prevents the consummation of the transactions contemplated hereby shall
have been issued and remain in effect, and no statutes, rule or regulation shall
have been enacted by any governmental authority (of the United States or
otherwise) which prevents the consummation of the transactions contemplated
hereby; provided, however, that the parties shall use their reasonable best
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efforts to cause any such decree, ruling, injunction or other order to be
vacated or lifted.
(b) The obligations of the Purchaser to consummate the
transactions contemplated hereby at the Closing is subject to the satisfaction
or waiver of the following conditions:
(i) the representations and warranties of the Company
set forth in Section 2 of this Agreement shall be true and correct in
all material respects as of the date when made and (unless made as of
a specified date) as of the Closing Date; and the Company shall have
performed in all material respects its covenants set forth in this
Agreement to be performed prior to the Closing Date and shall not have
taken any action which (if any shares of Preferred Stock or the Notes
were outstanding) would violate any provision of the Certificate of
Designation or this Agreement, as the case may be (and at the Closing
the Company shall deliver to the Purchaser an officer's certificate
certifying as to the Company's compliance with the conditions set
forth in this clause (i));
(ii) Pillsbury Madison & Sutro LLP, counsel to the
Company, shall have delivered to the Purchaser an opinion dated the
Closing Date with respect to the matters set forth in Exhibit C
hereto;
(iii) at the Closing, the Company shall have executed a
registration rights agreement in the form of Exhibit D hereto (the
"Registration Rights Agreement");
(iv) the Company and the Purchaser shall have entered
into a warrant agreement in the form of Exhibit B hereto (the "Warrant
Agreement");
(v) prior to the Closing, the Restated Certificate of
Incorporation of the Company, as amended, shall have been amended and
supplemented by the Certificate of Designation substantially in the
form of Exhibit E hereto setting forth the rights and preferences of
the Preferred Stock (the
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"Certificate of Designation"), and the Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law ("GCL") of the State of
Delaware (the Certificate of Incorporation, as amended, including such
Certificate of Designation, the "Certificate of Incorporation");
(vi) at or prior to the Closing, the Company and Rakepoll
Finance, N.V. ("Rakepoll Finance") shall have entered into an amendment to
the Shareholder's Agreement, dated November 12, 1996, as amended December
21, 1996 and February 28, 1997, between the Company and Rakepoll Finance
(the "Shareholder's Agreement") in the form attached as Exhibit G (the
"Rakepoll Finance Consent");
(vii) the Common Stock to be issued upon conversion of the Notes
or Preferred Stock, as the case may be, or upon exercise of the Warrant
shall have been approved for quotation on the Nasdaq Stock Market, subject
to official notice of issuance; and
(viii) the Purchaser shall have received funding from its limited
partners pursuant to its capital call sufficient to fund the transactions
contemplated hereby.
1.4. Deliveries at Closing. At the Closing, the Company shall
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deliver to the Purchaser, against payment in full of the Purchase Price,
(a) Notes in such denominations as the Purchaser has requested, dated the
Closing Date hereof and registered in the names requested by the Purchaser, in
an aggregate principal amount corresponding to the Initial Principal Balance and
(b) the Warrants.
The Closing of the purchase and sale of the Purchased Securities
shall be deemed to have taken place in the State of New York.
1.5. Definitions. Certain capitalized terms used in this Agreement
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are defined in Section 12 hereof.
1.6. Transaction Fee. The Company shall pay the general partner of
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the Purchaser on the date hereof a transaction fee of $500,000 by wire transfer
to an account specified by the Purchaser.
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2. Representations and Warranties of the Company
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The Company represents and warrants as of the date hereof as follows:
2.1. Organization and Qualification. Each of the Company and its
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Subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated and has the power to
own its respective property and to carry on its respective business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by it
makes such qualification necessary and where the failure so to qualify would
have a material adverse effect on the properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole (a "Material Adverse Effect").
2.2. Due Authorization. The execution and delivery of this
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Agreement, the Registration Rights Agreement and the Warrant Agreement and the
issuance and sale of the Purchased Securities by the Company and compliance by
the Company with all the provisions of this Agreement, the Registration Rights
Agreement, the Warrant Agreement, the Certificate of Designation and the
Convertible Securities (i) are within the corporate power and authority of the
Company; (ii) except for the Rakepoll Finance Consent, do not or will not
require the approval or consent of the stockholders of the Company; and (iii)
have been authorized by all requisite corporate proceedings on the part of the
Company. This Agreement, the Registration Rights Agreement and the Warrant
Agreement have been duly executed and delivered by the Company and constitute
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The Company has furnished to the
Purchaser true and correct copies of the Company's Certificate of Incorporation
and By-laws as in effect on the date of this Agreement. Prior to the Closing,
the Certificate of Designation will have been filed with the Secretary of State
of the State of Delaware in accordance with the GCL.
2.3. Subsidiaries. The Subsidiaries of the Company, together with
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their jurisdiction of incorporation, are as set forth on Schedule 2.3 hereto.
2.4. SEC Reports
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The Company has filed all registration statements, proxy statements,
reports and other documents required to be filed by it under the Securities Act
and the Exchange Act since January 1, 1994; and the Company has furnished the
Purchaser copies of its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 Form 10-K") and all proxy statement filings
(including the definitive proxy statement, dated January 15, 1997 (the "Proxy
Statement"), filed by the Company in connection with the stock exchange between
the Company and Rakepoll Finance), registration statements and reports under the
Securities Act and the Exchange Act filed by the Company after such date, each
as filed with the Commission (collectively, the "SEC Reports"). Each SEC Report
was in substantial compliance with the requirements of its respective report
form and did not on the date of filing 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 light of the circumstances
under which they were made, not misleading and as of the date hereof there is no
fact not disclosed in the SEC Reports which is peculiar to the Company and which
materially adversely affects the properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
2.5. Financial Statements. (a) Attached hereto as Schedule 2.5(a) are
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true and correct copies of: (i) the audited consolidated balance sheet and
statements of operations, stockholders' equity and cash flows of the Company for
the year ended December 31, 1996 (including the related notes thereto), together
with the unqualified report of Ernst & Young LLP ("E&Y") and (ii) the audited
consolidated balance sheet and statements of operations, stockholder's equity
and cash flow of Rakepoll Holding B.V. ("Rakepoll") and its subsidiaries for the
year ended December 31, 1996 (including the related notes thereto), together
with the unqualified report of KPMG Peat Marwick LLP thereon (such financial
statements of Rakepoll and those referred to in clause (i), the "1996 Financial
Statements").
(b) The 1996 Financial Statements and the financial
statements included in the SEC Reports (including any related schedules and/or
notes) have been prepared in accordance with generally accepted accounting
principles consistently followed (except as indicated in the notes thereto)
throughout the periods involved and fairly present the consolidated financial
condition, results of operations and changes in stockholders' equity of the
Company and its Subsidiaries or Rakepoll and its Subsidiaries, as the case may
be, as of the dates thereof and for the periods ended on such dates (in each
case subject, as to interim statements, to changes resulting from year-end
adjustments, none of which will be material in amount or effect), and the
Company has no material liabilities or obligations, contingent or otherwise, not
reserved against or otherwise disclosed in the1996 Financial Statements, other
than any such liabilities which are not material and were incurred in the
ordinary course of business since December 31,
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1996. The pro forma financial statements of the Company and its Subsidiaries
giving effect to the acquisition of Rakepoll and its Subsidiaries and the
related notes thereto included in the Proxy Statement present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein, including the valuation adjustments, are appropriate to give
effect to the transactions and circumstances referred to therein. Since December
31, 1996, the Company and its Subsidiaries have operated their respective
businesses only in the ordinary course and there has been no material adverse
change in the properties, business, results of operation, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries taken as a whole,
other than changes disclosed or referred to in the SEC Reports or the 1996
Financial Statements, and provided that an adverse decision by the Food and Drug
Administration in respect of the Company's New Drug Application for the GenESA
System shall not be deemed to be a material adverse change for purposes of this
Agreement.
2.6. Actions Pending; Compliance with Laws.
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There is no action, suit, investigation or proceeding pending or, to
the knowledge of the Company, threatened by any public official or governmental
authority, against the Company or any of its Subsidiaries or any of their
respective properties or assets by or before any court, arbitrator or
governmental body, department, commission, board, bureau, agency or
instrumentality (collectively, "Litigation"), which questions the validity or
enforceability of, or seeks to enjoin or invalidate this Agreement, the
Registration Rights Agreement, the Warrant Agreement, the Certificate of
Designation or the Convertible Securities or any action taken or to be taken
pursuant hereto or thereto, or, except as set forth in the SEC Reports or the
1996 Financial Statements, which is reasonably likely to result in any Material
Adverse Effect, and neither the Company nor any of its Subsidiaries is in
default in any material respect with respect to any judgment, order, writ,
injunction, decree or award. To the knowledge of the Company, the Company and
each Subsidiary is in material compliance with, and at all times since December
31, 1992 has been in material compliance with, all applicable federal, state,
local and foreign laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
governmental authority (collectively, "Applicable Laws") relating to the Company
or any Subsidiary or their respective business or properties, including, without
limitation, social security laws, workers' protection laws, laws regarding the
provision of insurance, third party administration and primary health care
services, good manufacturing practices of the Food and Drug Administration (the
"FDA"), the Prescription Drug Marketing Act, the Federal Controlled Substances
Act of 1970, the Food, Drug and Cosmetic Act, any federal or state Pharmacy
Practice Acts, Controlled Substance Acts, Dangerous Drugs Acts and Food, Drug
and Cosmetic Acts, the
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Occupational Safety and Health Act and the regulations promulgated thereunder
("OSHA"), the Foreign Corrupt Practices Act (the "FCPA") and all rules of
professional conduct applicable to the Company or any Subsidiary by which any of
its properties are bound or subject, except where the failure to be in
compliance therewith could not reasonably be expected to have a Material Adverse
Effect.
2.7. Title to Properties; Insurance. The Company and its
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Subsidiaries have good and valid title to, or, in the case of property leased by
any of them as lessee, a valid and subsisting leasehold interest in, their
respective properties and assets, free of all liens and encumbrances other than
those referred to in the 1996 Financial Statements, except in each case for such
defects in title and such other liens and encumbrances which are disclosed in
the SEC Reports or the 1996 Financial Statements or which do not in the
aggregate materially detract from the value to the Company of the properties and
assets of the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries maintain insurance in such amounts, including self-insurance,
retainage and deductible arrangements, and of such a character as is reasonable
for companies engaged in the same or similar business, including directors' and
officers' liability and product liability insurance. Schedule 2.7 sets forth a
complete and correct list of all such policies, including the amount of all
policy limits and deductibles.
2.8. Governmental Consents, etc. The Company is not required to
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obtain any consent, approval or authorization of, or to make any declaration or
filing with, any governmental authority as a condition to or in connection with
the valid execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrant Agreement and the valid offer,
issue, sale or delivery of the Securities, or the performance by the Company of
its obligations in respect thereof, except for the filing with the Secretary of
State of the State of Delaware of the Certificate of Designation which will have
been made prior to the Closing Date, any filings required to effect any
registration pursuant to the Registration Rights Agreement, and any filings
required pursuant to state and federal securities laws which will be timely made
after the Closing hereunder.
2.9. Holding Company Act and Investment Company Act. Neither the
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Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
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2.10. Taxes. The representations set forth in Sections 2.6 and 3.7
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of the Stock Exchange Agreement, including items disclosed in the applicable
sections of the Gensia Disclosure Schedules and the Rakepoll Disclosure Schedule
thereto, are true.
2.11. Conflicting Agreements and Charter Provisions. None of (i) the
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execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrant Agreement and the issuance of the Securities, (ii) the fulfillment
of and compliance with the terms and provisions hereof and thereof and of the
Securities, (iii) the payment of dividends, if any, on shares of Preferred Stock
and the redemption of the Notes and Preferred Stock as contemplated by the
Governing Instruments out of funds legally available therefor, and (iv) the
conversion or exercise, as the case may be, of the Convertible Securities as
contemplated by the Governing Instruments will conflict with or result in a
breach of the terms, conditions or provisions of, or give rise to a right of
termination under, or constitute a default under, or result in any violation of,
the Certificate of Incorporation or By-laws of the Company or any mortgage,
agreement, instrument, order, judgment, decree, statute, law, rule or
regulations to which the Company or any of its Subsidiaries or any of their
respective property is subject. Neither the Company nor any of its Subsidiaries
is in default under any outstanding indenture or other debt instrument or with
respect to the payment of principal of or interest on any outstanding obligation
for borrowed money, is in default under any of their respective contracts or
agreements, or under any instrument by which the Company or any of its
Subsidiaries is bound, in each case which default materially and adversely
affects the properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
2.12. Capitalization. As of April 15, 1997, the authorized capital
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stock of the Company consists solely of (a) 125,000,000 shares of the Common
Stock of which (i) 74,338,932 shares are issued and outstanding and
(ii) 11,656,248 shares were reserved for issuance upon the exercise of options
or warrants granted or issuable by the Company or pursuant to the Company's
Employee Stock Purchase Plan or pursuant to conversion of outstanding
convertible securities of the Company; and (b) 5,000,000 shares of preferred
stock, $.01 per share, of which (i) 1,840,000 shares have been designated as
$3.75 Convertible Exchangeable Preferred Stock of which 1,600,000 shares were
issued and outstanding or reserved for issuance, and (ii) 125,000 shares have
been designated as Series I Participating Preferred Stock, none of which were
issued or outstanding, all of which were reserved for issuance under the Gensia
Preferred Stock Purchase Rights. All of the outstanding shares of Common Stock
have been validly issued and are fully paid and nonassessable. No class of
capital stock of the Company is entitled to preemptive or similar rights. Except
for the securities referred to in the first sentence of this Section 2.12 and
the options and warrants listed on Schedule 2.12 hereto, there are no
outstanding subscriptions, options, warrants, puts, calls, scrip, rights to
subscribe to, calls or
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commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any class of capital stock of the Company, or
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of its capital stock or options,
warrants or rights to purchase or acquire any shares of its capital stock. Since
April 15, 1997, the Company has not, and between the date hereof and the Closing
Date the Company will not, issue any additional shares of capital stock, other
than pursuant to the exercise of outstanding stock options or warrants or
pursuant to the Company's Employee Stock Purchase Plan or pursuant to the
conversion of the Company's outstanding convertible securities or as
contemplated by Schedule 2.12. Except as disclosed in the SEC Reports or the
1996 Financial Statements, all dividends on all series of preferred stock have
been paid in full. Except as set forth in Schedule 2.12, the Company has not
agreed to register any securities under the Securities Act or under any state
securities law or granted registration rights to any person or entity. Except
for the Shareholder's Agreement, there are no voting trusts, stockholders
agreements, proxies or other similar agreements or understandings in effect to
which the Company is a party or of which it has knowledge with respect to the
voting or transfer of any of the shares of Common Stock other than a letter
agreement with the State of Wisconsin Investment Board obligating the Company to
obtain stockholder approval for any proposed repricing of stock options. To the
extent that any rights, options or warrants to acquire any securities of the
Company are outstanding, none of (i) the issuance and sale of the Purchased
Securities pursuant to this Agreement, (ii) the conversion of the Notes into
Preferred Stock or (iii) the issuance of the Common Stock upon conversion of the
Notes or the Preferred Stock or upon exercise of the Warrants will result in an
adjustment of the exercise price or number of shares issuable upon the exercise
in respect of any such rights, options or warrants.
2.13. Disclosure. Neither this Agreement nor any certificate,
----------
instrument or written statement furnished or made to the Purchaser by or on
behalf of the Company in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein misleading. There is
no fact which the Company has not disclosed to the Purchaser or its counsel in
writing and of which the Company is aware which materially and adversely affects
or which could reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement.
2.14. Status of Securities. The Securities have been duly authorized
--------------------
by all necessary corporate action on the part of the Company (no consent or
approval of stockholders being required by law, the Certificate of Incorporation
or the By-laws of the Company or otherwise), and the Preferred Stock or Common
Stock, as the case may be, issuable upon conversion of the Notes and the
Preferred Stock and the exercise of the
-9-
Warrants, as the case may be, will be validly issued and outstanding, fully paid
and nonassessable, and the issuance of such Preferred Stock or Common Stock is
not and will not be subject to preemptive rights of any other stockholder of the
Company. Such shares of Preferred Stock and such shares of Common Stock have
been validly reserved for issuance.
2.15. Registration Under Exchange Act. The Company has not
-------------------------------
registered the Notes, the Warrants or the Preferred Stock as a class pursuant to
Section 12 of the Exchange Act. Neither the Notes, the Warrants nor the
Preferred Stock will be registered as such class and such registration is not
required except as otherwise required by the provisions of the Registration
Rights Agreement.
2.16. ERISA. Except as set forth in Schedule 2.16, the
-----
representations and warranties contained in Section 2.14(a)-(j) (substituting,
however, "Gensia Plans" for "Employee Plans" in Section 2.14(j) each time it
appears therein) and Section 3.14(a)-(g) of the Stock Exchange Agreement, which
incorporate the respective applicable sections of the Gensia Disclosure Schedule
and the Rakepoll Disclosure Schedule, are true and correct in all material
respects as if made as of the date hereof and will be true and correct as of the
Closing Date. Rakepoll and its Subsidiaries have complied in all material
respects with all laws applicable to their Employee Benefit Plans and their
employees. Except as set forth in Schedule 2.16, Schedule 2.14(h) of the Gensia
Disclosure Schedule and Schedule 3.14(h) of the Rakepoll Disclosure Schedule set
forth all material compensatory arrangements between the Company, Rakepoll or
any Subsidiary of the Company or Rakepoll and any of its or their employees,
officers or directors.
2.17. Possession of Franchises, Licenses, etc. The Company and its
----------------------------------------
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from governmental or political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that are necessary
in any material respect to the Company and its Subsidiaries taken as a whole for
the ownership, maintenance and operation of their respective properties and
assets, and neither the Company nor any of its Subsidiaries is in violation of
any thereof in any material respect.
2.18. Environmental Matters. Except as listed in Section 2.22 to the
---------------------
Gensia Disclosure Schedule or Section 3.22 to the Rakepoll Disclosure Schedule:
(a) There are, with respect to the Company and each
Subsidiary, or any predecessor of the foregoing, no past or present material
violations of Environmental Law, nor any actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any liability pursuant to any
10
Environmental Law and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any Litigation
pending or threatened in connection with any of the foregoing.
(b) No Hazardous Materials are present on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries and no Hazardous Materials were present on or about any real
property previously owned, leased or used by the Company or any its Subsidiaries
during the period the property was owned, leased or used by the Company or any
of its Subsidiaries, except in the normal course of the Company's or any such
Subsidiary's business.
(c) No Hazardous Materials have been released on or about, or
where they may pose a threat of migration to, any real property currently owned,
leased or used by the Company or any of its Subsidiaries and no Hazardous
Materials were released on or about any real property previously owned, leased
or used by the Company or any of its Subsidiaries during the period the property
was owned, leased or used by the Company or any of its Subsidiaries, except as
may be required in the normal course of business and in material compliance with
applicable Environmental Law.
(d) No asbestos-containing materials or PCBs are present on or
about any property currently owned, leased or used by the Company or any of its
Subsidiaries.
(e) There are not now, nor have there ever been, any
underground storage tanks or similar facilities of any kind on or under any real
property currently or previously owned, leased or used by the Company or any of
its Subsidiaries.
2.19. Certain Agreements. (a) Except as set forth in Schedule 2.15
------------------
to the Gensia Disclosure Schedule, Schedule 3.15 to the Rakepoll Disclosure
Schedule or Schedule 2.19(a) hereto, neither the Company nor any Subsidiary is a
party to any written or oral contract, agreement, guarantee, lease or executory
commitment (each a "Contract") falling within any of the following categories:
(a) Contracts valued at over $250,000 obligating any party to pay or receive
money, goods or services, (b) joint venture, partnership and similar agreements,
(c) Contracts which are service contracts or equipment leases involving payments
by the Company or any Subsidiary of more than $100,000 per year, (d) Contracts
containing covenants purporting to limit the freedom of the Company or any
Subsidiary to compete in any line of business in any geographic area or to hire
any individual or group of individuals, (e) Contracts which contain minimum
purchase conditions or requirements or other terms that restrict or limit the
purchasing relationships of the Company or any Subsidiary, (f) Contracts
relating to any outstanding commitment for capital expenditures in excess of
$250,000, (g) Contracts relating to the
11
lease or sublease of or sale or purchase of real or personal property involving
any annual expense or price in excess of $100,000 and not cancelable by the
Company or any Subsidiary (without premium or penalty) within one month, (h)
Contracts with any labor organization, (i) indentures, mortgages, promissory
notes, loan agreements, guarantees of amounts in excess of $100,000, letters of
credit or other agreements or instruments of the Company or any Subsidiary or
commitments for the borrowing or the lending of amounts in excess of $100,000 or
by the Company or any Subsidiary or providing for the creation of any charge,
security interest, encumbrance or lien upon any of the assets of the Company or
any Subsidiary, (j) Contracts involving annual revenues or expenditures to the
business of the Company or any Subsidiary, in excess of 5.0% of the Company's
annual revenues and (k) Contracts with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof. All
such contracts are valid and binding obligations of the Company and each
Subsidiary, as the case may be, and, to the knowledge of the Company and each
Subsidiary, are the valid and binding obligation of each other party thereto
except such Contracts which if not so valid and binding would not, individually
or in the aggregate, have a Material Adverse Effect. Neither the Company or any
Subsidiary nor, to the knowledge of the Company or any Subsidiary, any other
party thereto is in violation of or in default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under, any such Contract except such
violations or defaults under such Contracts which, individually or in the
aggregate, would not have a Material Adverse Effect.
(b) Except for Non-Disclosable Contracts, Schedule 2.19 (b) lists
all Contracts to which the Company or any Subsidiary is a party with or for the
benefit of any officer, director or Affiliate of the Company or any Subsidiary
or Associate thereof, and the Company has provided to the Purchaser true and
correct copies of each such Contract as currently in effect.
2.20. Offering of Notes and Warrants. Neither the Company nor any
------------------------------
Person acting on its behalf has offered the Notes or the Warrants or any similar
securities of the Company for sale to, solicited any offers to buy the Notes or
the Warrants or any similar securities of the Company from or otherwise
approached or negotiated with respect to the Company with any Person other than
the Purchaser and other "Accredited Investors" (as defined in Rule 501(a) under
the Securities Act). Neither the Company nor any Person acting on its behalf has
taken or will take any action (including, without limitation, any offering of
any securities of the Company under circumstances which would require the
integration of such offering with the offering of the Notes and Warrants under
the Securities Act and the rules and regulations of the Commission thereunder)
which could reasonably be expected to subject the offering, issuance or sale of
the Notes and Warrants to the registration requirements of Section 5 of the
Securities Act.
-12-
2.21. Use of Proceeds. The proceeds of the sale of the Purchased
---------------
Securities will be used by the Company for general corporate purposes.
2.22. Unlawful Use of Proceeds. (a) The Company does not own,
------------------------
directly or indirectly, any "margin security", as defined in Regulation G issued
by the Board of Governors of the Federal Reserve System (12 CFR Part 207); and
the Company will not use any proceeds from the sale of the Purchased Securities
to purchase or carry any "Security", as defined in Section 3(a)(10) of the
Exchange Act, or for any other purpose which would result in any transaction
contemplated by this Agreement constituting a "purpose credit" within the
meaning of said Regulation G, or which would involve a violation of Section 7 of
the Exchange Act or Regulation T, U or X of said Board of Governors (12 CFR
Parts 220, 221 and 224, respectively).
(b) The Company does not intend to apply and will not apply
any part of the proceeds of the sale of the Purchased Securities in any manner
which is unlawful or which would involve a violation of Executive Orders 12775
and 12779 (56 Fed. Reg. 50645 and 55976) Prohibiting Certain Transactions with
respect to Haiti or any of the following regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended): the Foreign
Assets Control Regulations, the Transactions Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Iraqi Transactions Regulations, the Nicaraguan
Trade Control Regulations, the South African Transactions Regulations and the
Libyan Sanctions Regulations.
2.23. Product Warranties and Liabilities. Except as set forth in the
SEC Reports or as otherwise set forth in Schedule 2.23 or in Section 2.21 to the
Gensia Disclosure Schedule or Section 3.21 to the Rakepoll Disclosure Schedule,
the Company and each Subsidiary have no forms of warranties or guarantees of its
products and services that are in effect or proposed to be used by it. Schedule
2.23 sets forth a description, which is true and correct in all material
respects, of each pending or, to the knowledge of the Company, threatened
material action under any warranty or guaranty of the Company or any Subsidiary
which is not accurately described in all material respects in the SEC Reports.
Except for amounts covered by specific reserves in the 1996 Financial
Statements, the Company and each Subsidiary have not incurred, nor does the
Company or any Subsidiary know or have any reason to believe there is any basis
for alleging, any material liability, damage, loss, cost or expense as a result
of any material defect or other deficiency (whether of design, materials,
workmanship, labeling instructions or otherwise) ("Product Liability") with
respect to any product sold or services rendered by or on behalf of the Company
or any Subsidiary (including any lessee thereof), whether such Product Liability
is incurred by reason of any express or implied
-13-
warranty (including, without limitation, any warranty of merchantability or
fitness), any doctrine of common law (tort, contract or other), any statutory
provision or otherwise and irrespective of whether such Product Liability is
covered by insurance.
2.24. [Reserved].
--------
2.25. Intellectual Property Rights. To the Company's knowledge,
----------------------------
except as described in the SEC Reports or as set forth in Schedule 2.25 or in
the Gensia Disclosure Schedule or the Rakepoll Disclosure Schedule:
(a) The Company or a Subsidiary owns or has a license to use
all patents and patent applications, trademark registrations and applications
and copyright registrations and applications, and all other material intangible
property and technology ("Intellectual Property") which are used by the Company
or any Subsidiary free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair such ownership or use of such
Intellectual Property or materially detract from the value thereof. With respect
to such Intellectual Property licensed by the Company or any Subsidiary, such
licenses are in full force and effect, the Company or such Subsidiary is in
compliance with the terms and provisions thereof, and no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
violation thereof which could have a Material Adverse Effect, and the Company or
such Subsidiary holds a valid license to use such Intellectual Property, free of
any liens, claims or encumbrances except those liens, claims or encumbrances
which do not and will not, individually or in the aggregate, have a Material
Adverse Effect.
(b) The Company and the Subsidiaries have the right and
authority to use such Intellectual Property in connection with the conduct of
the business of the Company and the Subsidiaries in the manner and to the extent
such business is presently conducted, and neither the Company nor any Subsidiary
has been notified of any claim that such use conflicts with, infringes upon or
violates any rights of any other person or entity, except to the extent that
such conflict, infringement or violation does not and will not, individually or
in the aggregate, have a Material Adverse Effect.
2.26. Related Transactions. Except as disclosed in the SEC Reports
--------------------
or on Schedule 2.26, no current stockholder, director, officer or employee of
the Company, or any "Affiliate" or "associate" (as such term is defined in Rule
12b-2 under the Exchange Act) of any of the foregoing persons or the Company or
any Subsidiary is presently, or during the past three years has been, directly
or indirectly, a party to any agreement, transaction or series of similar
transactions with the Company or any Subsidiary which are or will be required to
be disclosed under the provisions of the 1934 Act, other than in
-14-
connection with any such person's duties as a director, officer or employee of
the Company.
2.27. No Brokerage or Finder's Fees. Except for the Company's
-----------------------------
potential obligations to C S First Boston Corporation under an engagement letter
dated May 1, 1995, neither the Company, any Subsidiary of the Company, nor any
stockholder, director, officer or employee of the Company or any Subsidiary has
incurred or will incur any brokerage, finder's or similar fee in connection with
the transactions contemplated by this Agreement.
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
represents and warrants as to it itself as of the date hereof as follows:
3.1. Organization and Qualification. The Purchaser is a limited
------------------------------
partnership duly organized and existing in good standing under the laws of the
jurisdiction of its formation and has the power to own its respective property
and to carry on its respective business as now being conducted. The Purchaser is
duly qualified to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by it
makes such qualification necessary, except where the failure to so qualify would
not prevent consummation of the transactions contemplated hereby or have a
material adverse effect on the Purchaser's ability to perform its obligations
hereunder.
3.2. Due Authorization. The Purchaser has all right, power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary action on behalf of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and constitutes a valid and binding agreement of the Purchaser enforceable in
accordance with its terms, except that (i)such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii)the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3. Conflicting Agreements and Other Matters. Neither the
----------------------------------------
execution and delivery of this Agreement nor the performance by the Purchaser of
its obligations hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, or require any consent,
approval or other action by or any notice to or filing with any court or
administrative or governmental body pursuant to, the organizational documents or
agreements of the Purchaser or any mortgage, agreement,
-15-
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Purchaser or any of its respective properties are subject, except for
filings after the Closing under Section13(d) of the Exchange Act.
3.4. Acquisition for Investment. The Purchaser is acquiring the
--------------------------
Purchased Securities being purchased by it for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof, and the Purchaser has no present intention or plan to
effect any distribution thereof. The Purchaser acknowledges that the Securities,
including the Securities issuable upon conversion or exercise, as the case may
be, of the Convertible Securities, have not been registered under the Securities
Act of 1933, as amended, and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from such registration and in
accordance with this Agreement. At the date hereof the Purchaser does not
beneficially own, directly or, to the knowledge of the Purchaser, indirectly (or
have any option or right to acquire), any securities of the Company other than
the Securities being purchased by it hereunder.
3.5. Brokers or Finders. No agent, broker, investment banker or
------------------
other firm or Person, including any of the foregoing that is an Affiliate of the
Purchaser, is or will be entitled to any broker's fee or any other commission or
similar fee from the Purchaser in connection with any of the transactions
contemplated by this Agreement that the Company will be responsible for pursuant
to Section13.10.
3.6. Accredited Investor. The Purchaser is an "accredited
-------------------
investor" within the meaning of Rule501 promulgated under the Securities Act.
3.7. HSR Notification. The Purchaser will cause to be filed its
----------------
notification ("HSR Notification") of the transaction contemplated by this
Agreement pursuant to the HSR Act at the same time as the Company files its HSR
Notification pursuant to Section 6.17.
4. Registration, Exchange and Transfer of Notes
--------------------------------------------
4.1. Authorized Denominations of Notes. The Notes are issuable
---------------------------------
only as fully registered Notes in denominations of at least $100,000.
4.2. The Note Register; Persons Deemed Owners. The Company shall
----------------------------------------
maintain, at its office designated for notices in accordance with Section 13.6,
a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company may deem and treat the
-16-
person in whose name a Note is so registered as the holder and owner thereof for
all purposes and shall not be affected by any notice to the contrary, until due
presentment of such Note for registration of transfer as provided in this
Article 4.
4.3. Issuance of New Notes Upon Exchange or Transfer. Upon
-----------------------------------------------
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section13.6, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest, if any, has been paid on the Note so
surrendered (or, if no interest has been paid, the date of such surrendered
Note), but in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as shall be
designated in writing by such holder. Every Note surrendered for registration of
transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may also condition the issuance of any new
Note or Notes in connection with a transfer by any person on the payment of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
4.4. Lost, Stolen, Damaged and Destroyed Notes. Upon receipt by
-----------------------------------------
the Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of the Purchaser or any Affiliate of the Purchaser or the general
partner of the Purchaser, notice from the Purchaser or such Affiliate of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
--------
is a nominee for, the Purchaser, an Affiliate of the Purchaser or the general
partner of the Purchaser or another holder of a Note with a minimum net worth of
at least $5,000,000, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
-17-
5. Payment of Notes
----------------
5.1. Home Office Payment. The Company will pay to the Purchaser or
-------------------
any transferee thereof all sums becoming due on the Notes (including all sums
which become due on the Notes at the maturity thereof) at the address specified
in Section 13.6 or at the address specified by such transferee, by wire transfer
of immediately available funds, or at such other address or by such other method
as the Purchaser or transferee shall have designated by notice to the Company,
without presentment for notation of payment and without surrender. Before
selling or otherwise transferring any Note, the Purchaser or transferee will
make a notation thereon of the aggregate amount of all payments of principal, if
any, therefore made, and of the date to which interest has been paid.
5.2. Limitation on Interest. No provision of this Agreement or of
----------------------
any Note shall require the payment or permit the collection of interest, if
payable, in excess of the maximum rate which is permitted by law. If any such
excess interest is provided for herein or in any Note, or shall be adjudicated
to be so provided for, then the Company shall not be obligated to pay such
interest in excess of the maximum rate permitted by law, and the right to demand
payment of any such excess interest is hereby waived, any other provisions in
this Agreement or in any Note to the contrary notwithstanding.
5.3. No Prepayment. Except for redemptions in accordance with
-------------
Section9.4 or upon conversion pursuant to Section 10, neither the Company nor
any Subsidiary will prepay or otherwise acquire any Note unless it offers to
prepay or acquire Notes pro rata from each holder thereof.
5.4. Interest. Interest, if payable, on the principal amount of
--------
the Notes shall be due and payable as provided in the Notes.
6. Covenants of the Company
------------------------
A. The Company covenants that so long as the Purchaser (and/or its
Affiliates and Affiliates of the general partner of the Purchaser) collectively
hold not less than $10,000,000 in aggregate Liquidation Value or Stated Value of
Notes or Preferred Stock:
6.1. Financial Covenants. (a) The Company will not permit its
-------------------
Consolidated Tangible Net Worth to be less than the following amounts on the
last day of any fiscal quarter: (i) on or before December 31, 1997, $60 million;
(ii) from January 1, 1998 to and including December 31, 1998, $70 million and
(iii) from January 1, 1999 and thereafter, $75 million (it being understood
that, for the purposes of this paragraph(a), the
-18-
Notes and any other Subordinated Indebtedness of the Company shall be treated as
equity).
(b) The Company will not incur, create, assume or permit to
exist any Indebtedness, or permit any Subsidiary to incur, create, assume or
permit to exist any Indebtedness, if such Indebtedness (excluding the Notes)
would result in a ratio of Consolidated Total Indebtedness (excluding the Notes)
to Consolidated Tangible Net Worth (which for this purpose shall include the
principal amount of any Notes then outstanding) of more than 1.0 to 1.0.
(c) The Company will not exchange its $3.75 Convertible
Exchangeable Preferred Stock for its 7 1/2% Convertible Subordinated Debentures
due 2003.
(d) This Section 6.1 shall terminate and cease to be of
further force and effect from and after a Change of Control described in clause
(c)(iv) of the definition of Change of Control, provided that (i)no Default or
--------
Event of Default shall have occurred and be continuing, (ii)the Person with or
into which the Company is merged or consolidated is directly or through wholly
owned subsidiaries an operating business or is part of a consolidated group (not
including the Company) that operates a business, (iii)no Indebtedness is
incurred by the Company (or any of its Subsidiaries) in anticipation of such
merger or consolidation and (iv) the Company shall have paid in cash the Change
of Control Price, plus in each case accrued and unpaid interest or dividends, as
the case may be, to the date of payment, to each holder of Notes or Preferred
Stock who elects to have the Company redeem such holder's Notes or Preferred
Stock as a result of such Change of Control.
6.2. Limitation on Convertible Securities. (a) For so long as
------------------------------------
$10,000,000 in aggregate principal amount of Notes are outstanding, (i)the
Company will not issue any convertible debt securities ranking senior to the
Notes and (ii)the Company will not issue any other convertible debt securities
or any convertible equity securities ranking senior to the Preferred Stock with
respect to dividends or as to distribution of assets upon liquidation,
dissolution or winding up unless either (A)such convertible debt or equity
securities provide by their terms that they shall automatically convert into
equity securities of the Company ranking on a parity with or junior to the
Preferred Stock with respect to dividends or as to distribution of assets upon
liquidation, dissolution or winding up upon conversion of the Notes pursuant to
Section10.3 or (B)the Company irrevocably waives its right to convert the Notes
into Preferred Stock under Section10.3.
-19-
(b) For so long as any Preferred Stock is outstanding, the
Company will not issue (i)any convertible debt securities or (ii)any convertible
equity securities ranking senior to the Preferred Stock with respect to
dividends or as to distribution of assets upon liquidation, dissolution or
winding up; provided, however, that this paragraph (b) shall not restrict the
issuance of convertible debt securities if, on the issue date, (a) no Default or
Event of Default shall have occurred and be continuing and (b) the Current
Market Price of the Common Stock has exceeded the Conversion Price multiple by
200% for the preceding 60 consecutive Trading Days.
(c) For purposes of this Section 6.2, the issuance of units
comprising debt (including financial leases) or preferred stock and warrants
(other than Excepted Warrant Issues) shall be deemed to be an issuance of
convertible securities.
6.3. Merger. The Company will not merge with or into or
------
consolidate with any other Person or sell or convey all or substantially all of
its assets or property to any other Person unless the Company is the continuing
or surviving entity or the Person (if other than the Company) formed by such
merger or consolidation or into which the Company is merged or to which the
assets of the Company are sold or conveyed (the "Surviving Entity") shall
expressly assume the then outstanding principal amount of the Notes or Stated
Value of the Preferred Stock.
6.4. Dividends and Distributions. The Company will not, and will
---------------------------
not permit any Subsidiary to, declare or pay any dividend on, or make any other
distribution in respect of, or redeem, purchase or otherwise acquire any shares
of Common Stock or any other shares of capital stock of the Company ranking
junior to or on a parity with the Preferred Stock; provided, however, that
-------- -------
nothing in this Section 6.4 shall prevent the Company from (i)redeeming, at a
redemption price of $.01 per Right, the Rights issued pursuant to the Rights
Agreement, (ii)declaring or paying accrued and accumulated dividends on the
Company's outstanding $3.75 Convertible Exchangeable Preferred Stock, (iii)
declaring or paying a dividend in the stock of Metabasis Therapeutics, Inc.
("Metabasis") or Gensia Automedics, Inc. ("Automedics") in accordance with the
proposals disclosed by the Company to the Purchaser or (iv) declaring or paying
a dividend in the stock of any other Subsidiary, provided that (a) no Default or
--------
Event of Default shall have occurred and be continuing or result from the
payment of such dividend and (b) if such dividend will constitute a Change of
Control, the Company shall have paid in cash the Change of Control Price, plus
in each case accrued and unpaid interest or dividends, as the case may be, to
the date of payment, to each holder of Notes or Preferred Stock who elects to
have the Company redeem such holder's Notes or Preferred Stock as a result of
such dividend. This Section 6.4 in no way limits intercompany dividends between
the Company and any Subsidiary or between Subsidiaries with respect to dividends
or as to distributions of assets upon liquidation, dissolution or winding up.
-20-
6.5. Compliance with Laws. The Company will, and will cause each
--------------------
Subsidiary to, comply with all Applicable Laws with respect to the conduct of
its business and the ownership of its properties, including without limitation,
social security laws, workers' protection laws, environmental laws, human health
and equal employment opportunity laws, laws regarding the provision of
insurance, third party administration and primary health care services, good
manufacturing practices of the FDA, the Prescription Drug Marketing Act, the
Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act, any
federal or state Pharmacy Practice Acts, Controlled Substance Acts, Dangerous
Drugs Acts and Food, Drug and Cosmetic Acts, OSHA, the FCPA and all rules of
professional conduct applicable to the Company or any Subsidiary by which any of
its properties are bound or subject, provided that the Company shall not be
--------
deemed to be in violation of this Section 6.5 as a result of any failure to
comply with any provisions of such statutes, rules, regulations, and orders, the
noncompliance with which would not result in fines, penalties, injunctive relief
or other civil liabilities which, in the aggregate, would materially and
adversely affect the properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company and the Subsidiaries taken as
a whole.
6.6. Limitation on Agreements. The Company will not, and will not
------------------------
permit any Subsidiary to, enter into any agreement, or any amendment,
modification, extension or supplement to any existing agreement, which
contractually prohibits the Company from paying interest, if any, payable on the
Notes or dividends on the Preferred Stock or redeeming the Notes or the
Preferred Stock.
6.7. Preservation of Franchises and Existence. Except as otherwise
----------------------------------------
permitted by the Agreement, the Company will (i) maintain its corporate
existence, rights and franchises in full force and effect, and (ii) cause the
Subsidiaries to maintain their respective corporate existences, rights and
franchises in full force and effect, provided that nothing in this Section6.7
shall prevent the Company or any Subsidiary from discontinuing its operations in
any particular state or at any particular location or locations within the
state, or prevent the corporate existence, rights and franchises of any
Subsidiary from being terminated if, in the opinion of the Board of Directors of
the Company, the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries taken as a whole or
implementing the Company's plans with respect to Metabasis or Automedics.
6.8. Insurance. (a) The Company will, and will cause each of the
---------
Subsidiaries to maintain, with insurers believed by the Company to be
responsible, such insurance, in such amounts and of such types as are
customarily carried under similar circumstances by companies engaged in the same
or a similar business or having similar properties similarly situated.
-21-
circumstances by companies engaged in the same or a similar business or having
similar properties similarly situated.
(b) The Company shall (i) provide, maintain and perform in the
same manner as prior to the date hereof the Company's existing indemnification
provisions with respect to present and future directors and officers of the
Company for all losses, claims, damages, expenses or liabilities arising out of
actions or omissions or alleged actions or omissions occurring after the Closing
Date to the extent permitted or required under applicable law and the Company's
Restated Certificate of Incorporation and By-Laws in effect at the date hereof
(to the extent consistent with applicable law); and (ii) maintain directors and
officers liability coverage, with limits, terms and conditions no less
advantageous than in effect on the date hereof. Such coverage will be maintained
with the current insurance carriers or insurance carriers of financial strength
equal to or greater than the financial strength of the current insurance
carriers. Evidence of such coverage will be provided to the individual officers
and directors upon request. Any new directors or officers of the Company will be
added to such policies.
6.9. Payment of Taxes and Other Charges. The Company will pay or
----------------------------------
discharge, and will cause each of the Subsidiaries to pay or discharge, before
the same shall become delinquent, (i) all taxes, assessments and other
governmental charges or levies imposed upon it or any of its properties or
income (including, without limitation, such as may arise under Section 4062,
4063, or 4064 of ERISA or any similar provision of law), and (ii) all claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like persons which, in the case of either clause (i) or clause (ii), if unpaid,
might result in the creation of a material lien upon any of its properties,
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
6.10. [Reserved].
----------
6.11. [Reserved].
----------
6.12. Financial Statements and Other Reports.
--------------------------------------
(i) The Company will, as soon as practicable and in any event
within 45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its Subsidiaries for the
period from the beginning of the then current fiscal year to the end of such
quarterly period, and consolidated balance
-22-
sheets of the Company and its Subsidiaries as of the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, all in reasonable
detail and certified by an authorized financial officer of the Company, subject
to changes resulting from year-end adjustments; provided, however, that delivery
-------- -------
pursuant to clause (iii) below of a copy of the Quarterly Report on Form 10-Q of
the Company for such quarterly period filed with the Commission shall be deemed
to satisfy the requirements of this clause (i);
(ii) it will, as soon as practicable and in any event within 90
days after the end of each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its Subsidiaries for such
year, and consolidated balance sheets of the Company and its Subsidiaries as of
the end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
national standing selected by the Company; provided, however, that delivery
-------- -------
pursuant to clause (iii) below of a copy of the Annual Report on Form 10-K of
the Company for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this clause (ii);
(iii) it will, promptly upon transmission thereof, furnish to
the Purchaser copies of all such financial statements, proxy statements, notices
and reports as it shall send to its stockholders and copies of all such
registration statements (without exhibits), other than registration statements
relating to employee benefit or dividend reinvestment plans, and all such
regular and periodic reports as it shall file with the Commission; and
(iv) it will promptly furnish to the Purchaser (a) copies of
(i) any compliance certificates furnished to lenders in respect of Indebtedness
of the Company and its Subsidiaries and (ii) any notices of default from lenders
in respect of any such Indebtedness and (b) notice of (i) the commencement of
any Litigation which, if determined adversely to the Company, would have a
Material Adverse Effect, (ii) the issuance by any governmental authority of any
injunction, order, restraint or other decision which has resulted in, or which
is likely, in the reasonable judgment of the Company or any such Subsidiary, to
have a Material Adverse Effect or (iii) any development in the business or
affairs of the Company or any of the Subsidiaries which has resulted in, or
which is likely, in the reasonable judgment of the Company or any such
Subsidiary, to result in a Material Adverse Effect.
-23-
Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to the Purchaser a certificate of the Chief
Financial Officer, Treasurer or other financial officer of the Company regarding
compliance by the Company with the covenants set forth in Sections 6.1 and 6.4.
6.13. Inspection of Property.
----------------------
The Company will permit representatives of the Purchaser to visit and
inspect, at such Purchaser's expense, any of the properties of the Company and
its Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the principal officers of the Company, all at such
reasonable times, upon reasonable notice and as often as the Purchaser may
reasonably request; provided, however, that the foregoing shall be subject to
-------- -------
compliance with reasonable safety, operating and production requirements and
shall not require the Company or any of its Subsidiaries to permit any
inspection which in the reasonable judgment of the Company would result in the
violation of any statute or regulation with respect to confidentiality or
security. The Purchaser agrees that the information received pursuant to this
Section 6.13 or Section 6.12(iv) is subject to Section 7.1 hereof.
6.14. Board Membership.
----------------
On the Closing Date, the Board of Directors of the Company will take
all necessary action to elect one person reasonably acceptable to the Board of
Directors nominated by the Purchaser to the Board of Directors as a Class II
director. At each subsequent annual meeting for the election of directors of
Class II the Purchaser will be entitled to propose (and the Company will
nominate and recommend) one person reasonably acceptable to the Board of
Directors as a member of the Company's Board of Directors. In the event of any
vacancy arising by reason of the resignation, death, removal or inability to
serve as the Purchaser's nominee, the Purchaser shall be entitled to designate a
successor to fill such vacancy until the next annual meeting for the election of
Class II directors. So long as Purchaser and its Affiliates and Affiliates of
the general partner of Purchaser own at least $10,000,000 in aggregate principal
amount of Notes or aggregate Stated Value of Preferred Stock, such member of the
Board of Directors shall be a member of the Company's executive committee, if
any, or any committee performing substantially similar functions and shall, if
requested by the Purchaser, be considered for membership on other committees of
the Board of Directors. The Company agrees that if such nominee is not elected,
(i) the Purchaser will be entitled to have observational rights at all meetings
of the Board of Directors and the Purchaser shall have the same access to
information concerning the business and operations of the Company and its
Subsidiaries and at the same time as directors of the Company, subject to the
provisions of Section 7.1, and shall be entitled to participate in discussions
and consult with the Board of Directors,
-24-
without voting, and (ii) the Company will nominate and recommend one person
proposed by the Purchaser at each subsequent annual meeting (without regard to
the Class of directors subject to election at such meeting) until a nominee
proposed by the Purchaser has been elected to the Board of Directors. If at any
time Purchaser and its Affiliates and Affiliates of the general partner of
Purchaser do not own at least $10,000,000 in aggregate principal amount of Notes
or aggregate Stated Value of Preferred Stock then any director appointed by
Purchaser shall immediately resign from the Board of Directors.
B. The Company covenants that, so long as the Purchaser
(and/or its Affiliates) owns any of the Securities:
6.15. Lost, Stolen, Damaged and Destroyed Stock Certificates.
------------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
certificate for shares of Preferred Stock (which evidence shall be, in the case
of the Purchaser or any Affiliate of the Purchaser or the general partner of the
Purchaser, notice from the Purchaser or such Affiliate of such ownership and
such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it provided that if the holder of such shares of
--------
Preferred Stock is, or is a nominee for, the Purchaser, an Affiliate of the
Purchaser or the general partner of the Purchaser or another holder of the
shares of Preferred Stock with a minimum net worth of at least $5,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
certificate, dated and paying dividends from the date to which dividends shall
have been paid on such lost, stolen, destroyed or mutilated certificate or dated
the date of such lost, stolen, destroyed or mutilated certificate if no dividend
shall have been paid thereon.
6.16. [Reserved].
----------
6.17. HSR.
---
If deemed necessary by Purchaser, the Company shall file its HSR Notification
not later than July 31, 1998. Notwithstanding the foregoing, the Company shall
not deliver any notice of redemption pursuant to Article 9 or any notice of
conversion pursuant to Article 10 unless (a) the Company shall have filed its
HSR Notification, (b) the applicable waiting period shall have expired or been
terminated and (c) the date fixed for redemption in accordance with Section 9.4
or conversion in accordance with Article 10 shall be a date
-25-
upon which the Purchaser shall not be prohibited from owning Voting Securities
under the HSR Act; provided, that if the condition set forth in clause (c) shall
not be satisfied and either the Company desires to have the ability to issue a
notice of conversion or a notice of redemption or the Purchaser desires to have
the ability to convert some or all of the Notes into Preferred Stock or Common
Stock, each of the Company and the Purchaser, upon notice from the party
desiring to exercise such right to the other party, shall as promptly as
possible file its HSR Notification.
6.18. Certain Tax Matters.
-------------------
(a) In the event (i) of a Final Determination (as defined below) that the
Purchaser is required to include in income for any taxable year amounts ("OID")
determined pursuant to the principles of Sections 1271-75 of the Code and the
regulations thereunder, including by application of Section 305(c) of the Code,
or any successor provisions thereto (collectively, the "OID Rules") with respect
to the Notes, the Warrants or the Preferred Stock (an "OID Inclusion") or
(ii) the OID Rules or any similar or corresponding state or local law is amended
to require an OID Inclusion for any taxable year, the Company shall pay to such
Purchaser with respect to each such OID Inclusion no later than the Payment Due
Time (as defined below), an additional payment (the "Gross-Up Payment") such
that the net amount of such Gross-Up Payment (plus the amount of any interest
paid with respect to the Notes) retained by such Purchaser after payment by such
Purchaser of any federal, state and local income tax actually imposed upon such
Gross-Up Payment (plus the amount of any interest paid with respect to the
Notes) shall equal the sum of (A) the amount of the OID Inclusion for such
taxable year (plus the amount of any interest paid with respect to the Notes)
multiplied by the maximum combined federal, state and local income tax rate for
an individual resident in New York City, after giving due allowance for the
deductibility of state and local income taxes (the "Applicable Tax Rate"),
(B) interest on the amount specified in subclause (A) at the rates in effect
from time to time for individual taxpayers resident in New York City with
respect to income tax deficiencies for all periods from the date with respect to
which the deficiency arose until the payment of the amount specified in
subclause (A), and (C) penalties, if any, actually payable by any direct or
indirect partner or member of the Purchaser with respect to the OID Inclusion to
the Internal Revenue Service or any other applicable taxing authority by reason
of such events.
(b) A "Final Determination" with respect to a federal tax
liability shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree or other order
has become final, or (ii) a closing agreement entered into under Section 7121
(or any successor to such Section) of the Code or any other settlement agreement
entered into a connection with an administrative or judicial proceeding and
consented to by the Purchaser or any member of its consolidated group. The
"Payment Due Time" shall mean 5:00 p.m. Eastern time, of
-26-
the day two banking days before the date on which expires the period allowed by
applicable law for timely payment of the tax liability imposed on the related
OID Inclusion pursuant to an applicable Final Determination.
(c) In the event that the Purchaser is notified formally or
informally of any audit, examination or proceeding by the Internal Revenue
Service or other taxing authority with respect to the includability in income of
OID with respect to the Notes, Warrants or Preferred Stock, the Purchaser will
promptly notify the Company of such audit, examination or proceeding; provided,
--------
however, that the Purchaser's failure to give such notice or to keep the Company
-------
fully informed concerning a Contest (as defined below) shall not affect the
Company's obligation to make Gross-Up Payments in accordance with this Section
6.18. Subject to the requirement that the Purchaser shall proceed in good faith
and shall pursue the issue diligently, the Purchaser shall have exclusive
control and responsibility to conduct any audit, examination, proceeding or
litigation (a "Contest") with respect to such treatment. The Purchaser shall
bear all costs and expenses in connection with such Contest.
(d) The Company expressly acknowledges that Affiliates of the
Purchaser who acquire Notes, Warrants or Preferred Stock as permitted by this
Agreement shall be entitled to the benefits of this Section 6.18. No other
subsequent holder shall be entitled to the benefits of this Section 6.18.
6.19. Certain Additional Payments Following Redemption
------------------------------------------------
under Certain Circumstances.
---------------------------
In the event that, within six months after the date of redemption of
the Notes pursuant to Article 9 or redemption of the Preferred Stock pursuant to
the Certificate of Designation, there shall be (i) a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Company immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation, (ii) an acquisition by any Person or "group" (as that term is
defined in Section 13(d) (3) of the Exchange Act) of more than 50% of the
capital stock, assets or property of the Company (determined by the net book
value of such assets or property as of the most recently prepared balance sheet
of the Company), (iii) a plan of liquidation approved by the Board of Directors,
or (iv) a public announcement of any of the transactions specified in (i)
through (iii) above and such transaction is consummated within six months after
the date of such public announcement, then the Company shall promptly pay to the
record holders of the Notes or the Preferred Stock on the date of such
redemption, an amount in respect of each share into which the Notes or the
Preferred
-27-
Stock was convertible as of the date of redemption equal to the excess, if any,
of (x) (in the case of a transaction described in clause (i) or (iii)) the Fair
Market Value of the consideration per share of Common Stock received or
receivable in such transaction by the Company or the holders of the Company's
capital stock or (y) (in the case of a transaction described in clause (ii)) the
Current Market Price for the five Trading Days immediately preceding the date of
consummation of the transaction over the redemption price or if higher than (x)
or (y), the consideration per share of Common Stock received by Rakepoll
Finance, any executive officer of the Company or any of their respective
Affiliates or Associates (calculated based upon the number of shares of Common
Stock into which, directly or indirectly, the Notes or Preferred Stock would
have been convertible had they been so converted on the date of redemption) of
the Notes or shares of Preferred Stock paid to such holders in accordance with
the terms of this Agreement or the Certificate of Designation, as the case may
be.
6.20. Notice of Breach.
----------------
As promptly as practicable, and in any event not later than (i) ten
Business Days after such breach in the case of a breach of Section 6.01(a) on
the last day of one of the first three fiscal quarters, (ii) fifteen Business
Days after such breach in the case of a breach of Section 6.01(a) on the last
day of a fiscal year and (iii) ten Business Days after executive officers of the
Company become aware of any other breach by the Company of any provision of this
Agreement, including, without limitation, any other provision of this Article 6,
the Company shall provide the Purchasers with written notice specifying the
nature of such breach and any actions proposed to be taken by the Company to
cure such breach.
6.21. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly enter into any transaction or series of related
transactions (including, without limitation , the sale, purchase, exchange or
lease of assets, property or services) with or for the benefit of any Affiliate
of the Company (other than the Company or a wholly-owned Subsidiary) unless such
transaction or series of related transactions is entered into in good faith and
(a) such transaction or series of related transactions is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
that would be available in a comparable transaction in arm's-length dealings
with an unrelated third party and (b) with respect to any transaction or series
of related transactions involving aggregate value in excess of $100,000, such
transaction or series of related transactions has been approved by a majority of
the Disinterested Directors of the Company, or in the event there is only one
Disinterested Director, by such Disinterested Director; provided, however, that
-------- -------
this provision shall not apply to any transaction with (i) an officer or
director of the Company entered into in the ordinary course of business
(including compensation and employee benefit arrangements with any officer,
director or
-28-
employee of the Company, including under any stock option or stock incentive
plans); or (ii) pursuant to the terms of any agreement or arrangement in
existence on the date of this Agreement listed on Schedule 2.19(b); or (iii)
pursuant to any Non-Disclosable Contract. The Company shall not amend or waive
its rights under, and shall not permit any Subsidiary to amend or waive its
rights under, any of the terms of the agreements referred to in clause (ii) of
the foregoing proviso without the prior written consent of a majority of the
Disinterested Directors of the Company.
7. Covenants of the Purchaser
--------------------------
7.1. Nondisclosure of Confidential Information.
-----------------------------------------
(a) Without the prior written consent of the Company, any
information relating to the Company provided to the Purchaser in connection with
this Agreement, or to the persons nominated by the Purchaser to be elected to
the Board of Directors, which is either confidential, proprietary, or otherwise
not generally available to the public (but excluding information the Purchaser
has obtained independently from third-party sources without the Purchaser's
knowledge that the source has violated any fiduciary or other duty not to
disclose such information) (the "Confidential Information") will be kept
confidential by the Purchaser and its directors, officers, employees, and
representatives (collectively, "Representatives"), using the same standard of
care in safeguarding the Confidential Information as the Purchaser employs in
protecting its own proprietary information which such Purchaser desires not to
disseminate or publish, and will not be disclosed to any Person, except for
Representatives of the Purchaser who need to know such Confidential Information.
It is understood (i) that such Representatives shall be informed by the
Purchaser of the confidential nature of the Confidential Information, (ii) that
such Representatives shall be bound by the provisions of this Section 7.1 as a
condition of receiving the Confidential Information and (iii) that, in any
event, the Purchaser shall be responsible for any breach of this Agreement by
any of their Representatives.
(b) Without the prior consent of the Company, other than as
required by applicable law, the Purchaser will not, and will direct their
Representatives not to, disclose to any Person either the fact that the
Confidential Information has been made available to the Purchaser or that the
Purchaser has inspected any portion of the Confidential Information.
(c) If the Purchaser or its Representatives are requested or
required (by oral question, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any Confidential Information, such Purchaser will, as soon as practicable,
notify the Company of such request or requirement so that the Company may seek
an appropriate protective order. If, in the absence of a protective order, such
Purchaser or its Representatives are, in the opinion of such
-29-
Purchaser's counsel, compelled to disclose the Confidential Information or else
stand liable for contempt or suffer other censure or significant penalty, such
Purchaser may disclose only such of the Confidential Information to the party
compelling disclosure as is required by law. The Purchaser shall not be liable
for the disclosure of Confidential Information pursuant to the preceding
sentence. The Purchaser will, at the Company's expense, cooperate with the
Company's reasonable efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
8. Events of Default and Remedies
------------------------------
8.1. Events of Default
-----------------
Each of the following shall constitute an Event of Default with
respect to the Notes under this Agreement:
(a) Nonpayment of Principal of the Notes. If the Company fails
------------------------------------
to pay the principal of or interest on or any other sum, if any, due on any
Note, when and as the same becomes due and payable, whether at the maturity
thereof, on a dated fixed for a redemption, or otherwise and fails to cure
such failure within five days; or
(b) Cross-Default. If (i) the Company or any Subsidiary (x)
-------------
fails to make any payment in respect of any Indebtedness, having an
aggregate principal amount (including undrawn committed or available
amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than $3,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such
failure; or (y) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness, and such failure
continues after the applicable grace or notice period, if any, specified in
the relevant document on the date of such failure if the effect of such
failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to
be demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in and provided for in any such Swap Contract
that is in the form of an ISDA Master Agreement) or equivalent termination
event (as provided in any other Swap Contract) resulting from (1) any event
of default under such Swap Contract as to which the Company or any
Subsidiary is the
-30-
Defaulting Party (as defined in such Swap Contract) or (2) any Termination
Event (as so defined in such Swap Contract) as to which the Company or any
Subsidiary is an Affected Party (as so defined in such Swap Contract), and,
in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $3,000,000; or
(c) Voluntary Bankruptcy and Insolvency Proceedings. If the
-----------------------------------------------
Company or any Subsidiary shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to the Federal
Bankruptcy Code of 1978, as amended, or under any similar present or future
federal law or the law of any other jurisdiction or shall be adjudicated a
bankrupt or become insolvent, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or such Subsidiary
or for all or any substantial part of its respective property, or the
Company or any Subsidiary shall make an assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take any corporate action, as the
case may be, in furtherance of any of the foregoing; or
(d) Adjudication of Bankruptcy. If a petition or answer shall
--------------------------
be filed proposing the adjudication of the Company or any Subsidiary as a
bankrupt or its reorganization or arrangement, or any composition,
readjustment, liquidation, dissolution or similar relief with respect to it
pursuant to the Federal Bankruptcy Code of 1978, as amended, or under any
similar present or future federal law or the law of any other jurisdiction
applicable to the Company or such Subsidiary, and the Company or any
Subsidiary shall consent to or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within 90 days after
the filing thereof; or
(e) Receivership or Sequestration. If a decree or order is
-----------------------------
rendered by a court having jurisdiction (i) for the appointment of a
receiver or custodian or liquidator or trustee or sequestrator or assignee
(or similar official) in bankruptcy or insolvency of the Company or any
Subsidiary or of all or a substantial part of its property, or for the
winding-up or liquidation of its affairs, and such decree or order shall
have remained in force undischarged and unstayed for a period of 90 days,
or (ii) for the sequestration or attachment of any property of the Company
or any Subsidiary without its return to the possession of the Company or
such Subsidiary or its release from such sequestration or attachment within
90 days thereafter; or
-31-
(f) Covenant Defaults. If the Company shall have breached in
-----------------
any material respect any of the covenants set forth herein and such breach
shall continue for 90 days following (i) the date notice is required to be
given under Section 6.20(i) or (ii) with respect to breaches under 6.01(a)
and (ii) otherwise from the date of the breach.
8.2. Acceleration of Maturity.
------------------------
If any Event of Default shall have occurred and be continuing, the
holders of 66 2/3% of the outstanding principal amount of Notes may, by notice
to the Company, declare the entire outstanding principal balance of the Notes,
and all accrued and unpaid interest, if any, thereon, to be due and payable
immediately, and upon any such declaration the entire outstanding principal
balance of the Notes, and said accrued and unpaid interest, if any, shall become
and be immediately due and payable, without presentment, demand, protest or
other notice whatsoever, all of which are hereby expressly waived, anything in
the Notes or in this Agreement to the contrary notwithstanding; provided that if
--------
an Event of Default under clause (c), (d), or (e) of Section 8.1 with respect to
the Company shall have occurred, the outstanding principal amount of all of the
Notes, and all accrued and unpaid interest, if any, thereon, shall immediately
become due and payable, without any declaration and without presentment, demand,
protest or other notice whatsoever, all of which are hereby expressly waived,
anything in the Notes or this Agreement to the contrary notwithstanding; and
provided, further, that if an Event of Default under clause (a) of Section 8.1
-------- -------
shall have occurred and be continuing with respect to any Note, the Purchaser or
Affiliate of the Purchaser (but not any transferee thereof other than an
Affiliate of such Purchaser) holding one or more Notes in an aggregate
outstanding principal amount of at least $1,000,000 may, by notice to the
Company, declare the entire outstanding principal of such Notes and all accrued
and unpaid interest, if any, thereon, to be due and payable immediately, and
upon any such declaration the entire outstanding principal of such Notes and
said accrued and unpaid interest, if any, shall become and be immediately due
and payable, without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in such Notes or in this
Agreement to the contrary notwithstanding.
8.3. Other Remedies.
--------------
If any Event of Default shall have occurred and be continuing, from and
including the date of such Event of Default to but not including the date such
Event of Default is cured or waived, any holder may enforce its rights by suit
in equity, by action at law, or by any other appropriate proceedings, whether
for the specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Agreement or the Notes or in aid of the exercise of
any power granted in this Agreement or the Notes, and any holder may enforce the
payment of any Note held by such holder and any of its other
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legal or equitable rights. From the date that a Default or Event of Default
shall have occurred and during the continuance of any Default or Event of
Default, the Company shall pay interest on the outstanding principal of, and
premium, if any, on the Notes and (to the extent legally enforceable) on any
overdue installment of interest, if any, at the rate of 11.75% per annum until
such overdue amount is paid or until such Default or Event of Default is cured
or waived.
8.4. Conduct No Waiver; Collection Expenses.
--------------------------------------
No course of dealing on the part of any holder, nor any delay or failure on
the part of any holder to exercise any of its rights, shall operate as a waiver
of such right or otherwise prejudice such holder's rights, powers and remedies.
If the Company fails to pay, when due, the principal or the premium, if any, or
the interest, if any, on any Note, the Company will pay to each holder, to the
extent permitted by law, on demand, all costs and expenses incurred by such
holder in the collection of any amount due in respect of any Note hereunder,
including reasonable legal fees incurred by such holder in enforcing its rights
hereunder.
8.5. Annulment of Acceleration.
-------------------------
If a declaration is made in accordance with Section 8.2, then and in
every such case, the holders of at least 66 2/3% of the outstanding principal
amount of the Notes may, by an instrument delivered to the Company, annul such
declaration and the consequences thereof, provided that at the time such
--------
declaration is annulled:
(a) no judgment or decree has been entered for the payment of
any monies due on the Notes or pursuant to this Agreement;
(b) all arrears of interest on the Notes and all other sums
payable on the Notes and pursuant to this Agreement (except any principal
of or interest or premium on the Notes which has become due and payable by
reason of such declaration) shall have been duly paid; and
(c) every other Event of Default shall have been duly waived or
otherwise made good or cured;
provided, however, that only the Purchaser or Affiliate of the Purchaser (but
-------- -------
not any transferee thereof other than an Affiliate of such Purchaser) of the
Note or Notes making the declaration permitted by the last proviso of Section
8.2 may annul such declaration; and provided, further, that no such annulment
-------- -------
shall extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
8.6. Remedies Cumulative.
-------------------
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No right or remedy conferred upon or reserved to the holders of Notes
under this Agreement is intended to be exclusive of any other right or remedy,
and every right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now and hereafter existing under applicable
law. Every right and remedy given by this Agreement or by applicable law to the
holders of Notes may be exercised from time to time and as often as may be
deemed expedient by the holders.
8.7. Limitations.
-----------
Notwithstanding the foregoing provisions of this Article 8, the
exercise of remedies by the holders of the Notes is subject to the provisions of
Article 11 hereof.
9. Redemption
----------
9.1. Optional Redemption.
-------------------
The Company shall have the right, at its sole option and election
made in accordance with Section 9.4, to redeem the Notes and the Preferred
Stock, on or after 18 months following the Closing Date, in whole but not in
part, if the Current Market Price per share of the Common Stock shall exceed the
Conversion Price multiplied by 350% for at least 90 consecutive Trading Days,
subject to the final paragraph of this Section 9.1, at a redemption price equal
to the Liquidation Value (the "Redemption Price"), plus an amount equal to all
accrued and unpaid interest, if any, to the date of redemption, in cash.
In the event that at any time a Change of Control has occurred
prior to a redemption pursuant to this Section 9.1, the Redemption Price of each
Note until the expiration of the 90-day period referred to in Section 9.4(b)
shall equal the Change of Control Price (as defined in Section 9.3 below).
9.2. Mandatory Redemption.
--------------------
On May 1, 2004, the Company shall redeem all outstanding Notes, by
paying therefor the Liquidation Value, in cash, plus all accrued and unpaid
interest to the date of redemption.
9.3. Change of Control.
-----------------
In the event that there occurs a Change of Control, any record holder of
Notes, in accordance with the procedures set forth in Section 9.4(b), may
require the Company to redeem any or all of the Notes held by such holder for,
at such holder's option, an amount equal to (i) the greater of (A) 100% of the
Liquidation Value of the Notes and (B)(I) 135% of the Liquidation Value of the
Notes if such Change of Control occurs on or before the first anniversary of the
Closing Date and (II) 150% of the Liquidation Value of such Notes if the Change
of Control occurs thereafter, less, in the case of each of clause (B)(I) and
----
(B)(II), the Warrant Value attributable to the Notes held by such holder
-34-
or (ii) the form and amount of consideration that such holder would have
received had such holder converted such Notes into Common Stock and had such
holder received the higher of (A) the same consideration per share of Common
Stock received or receivable on a per share basis by Rakepoll Finance, any
executive officer of the Company or any of their respective Affiliates or
Associates (the "Affiliated Holders") and (B) the same consideration per share
of Common Stock received or receivable by the non-Affiliated Holders in
connection with such Change of Control (the "Change of Control Price"), plus, in
the case of each of clause (i) and clause (ii) all accrued and unpaid interest,
if any, on the Notes being redeemed to the date of redemption, in cash. For
purposes of this Section 9.3, the Warrant Value attributable to a Note shall be
equal to the Warrant Value on the date of the Change of Control multiplied by a
fraction the numerator of which shall be the Liquidation Value of the Note and
the denominator of which shall be $20,000,000.
9.4. Redemption Procedures.
---------------------
(a) Notice of any redemption of Notes pursuant to Section 9.1 or 9.2 shall be
mailed at least 30 but not more than 60 days prior to the date fixed for
redemption to each holder of Notes to be redeemed, at such holder's address as
it appears in the Note Register. In order to facilitate the redemption of
Notes, the Board of Directors may fix a record date for the determination of
Notes to be redeemed.
(b) Promptly following a Change of Control (but in no event
more than five Business Days thereafter), the Company shall mail to each holder
of Notes, at such holder's address as it appears on the transfer books of the
Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Notes held by it. The
Company shall thereafter during a period of 90 days from the date of such notice
(or the date the Company was required to give such notice) redeem any Notes, in
whole or in part, at the option of the holder, upon at least five days' written
notice to the Company by such holder specifying (i) the principal amount of
Notes to be redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to
Section 9.1, 9.2 or 9.3 which is specified in a notice given pursuant to this
Section 9.4, the Company shall wire transfer to such holder the Redemption Price
or Change of Control Price, as the case may be, for the principal amount of
notes so redeemed, together with an amount equal to all accrued and unpaid
interest, if any, thereon to the date of redemption.
10. Conversion
----------
10.1. Holder's Option to Convert into Preferred Stock.
-----------------------------------------------
The Notes shall be converted, in whole but not in part, at the
direction of the holders of not less than 66-2/3% of all outstanding Notes at
any time after the Closing
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into shares of Preferred Stock, at a conversion ratio of one share of Preferred
Stock for each $100 of outstanding principal amount of Notes (the "Preferred
Ratio").
10.2. Holder's Option to Convert into Common Stock.
--------------------------------------------
(a) Subject to the provisions for adjustment hereinafter set forth,
any Note or any portion of the outstanding principal amount of such Note shall
be convertible at the option of the holder at any time after the Closing into
shares of Common Stock at a conversion ratio for each $100 of outstanding
principal amount of Notes equal to the Conversion Ratio.
(b) Following notice of redemption by the Company pursuant to
Section 9.1, subject to the provisions for adjustment hereinafter set forth, any
Note or any portion of the outstanding principal amount of such Note shall be
convertible at the option of the holder into shares of Common Stock at a
conversion ratio for each $100 of outstanding principal amount of Notes equal to
the Conversion Ratio in effect on the date of such notice of redemption.
10.3. Company's Option to Convert.
---------------------------
Provided that (a) no Default or Event of Default shall have occurred
and be continuing and (b) (i) the Current Market Price of the Common Stock has,
since the Closing, exceeded the Conversion Price multiplied by 200% for at least
60 consecutive Trading Days, or (ii) the Company shall have filed reports with
the Commission on Forms 10-Q or 10-K reporting positive Consolidated Net Income
(after payment of all accrued and accumulated preferred stock dividends
currently due, including any and all preferred stock dividend arrearages, which
amounts shall have been paid prior to exercise of such option to convert) for
two consecutive fiscal quarters ending on or after March 31, 1997, the Notes
shall be convertible at the option of the Company, in whole but not in part, at
any time into shares of Preferred Stock, at the Preferred Ratio.
10.4. Exercise of Conversion Privilege.
--------------------------------
(a) Any conversion by the holders of Notes into Common Stock shall
be in an aggregate outstanding principal amount equal to at least $100,000,
unless the amount so converted shall be such holder's entire outstanding
principal amount of Notes. Conversion of the Notes may be effected by any holder
thereof upon the surrender to the Company at the office of the Company
designated for notices in accordance with Section 13.6 or at the office of any
agent or agents of the Company, as may be designated by the Board of Directors
(the "Transfer Agent"), of the Notes to be converted, accompanied by a written
notice stating that such holder elects to convert all or a specified portion of
the outstanding principal amount of such Notes in accordance with the provisions
of this Article 10 and specifying the name or names in which such holder wishes
the certificate or certificates for shares of Preferred Stock or Common Stock,
as
-36-
the case may be, to be issued; provided that, in the case of the conversion
-------- ----
of the Notes into Preferred Stock in accordance with Section 10.3, the Company
shall provide each holder written notice stating that such holder's Notes have
been converted pursuant to Section 10.3, and each holder shall thereupon
promptly surrender to the Transfer Agent the Notes so converted specifying the
name or names in which such holder wishes the certificates for shares of
Preferred Stock to be issued. In case any holder's notice shall specify a name
or names other than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance of shares of Preferred
Stock or Common Stock in such name or names. Other than such taxes, the Company
will pay any and all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of shares of Preferred
Stock or Common Stock on conversion of Notes pursuant hereto. As promptly as
practicable, and in any event within five Business Days after the surrender of
such Notes and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of the
Company that such taxes have been paid), the Company shall deliver or cause to
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of Preferred Stock or Common Stock, as the
case may be, to which the holder of the Notes being converted shall be entitled
and (ii) if less than the entire outstanding principal amount of any Note
surrendered is being converted, a new Note in the principal amount which remains
outstanding upon such partial conversion. Such conversion shall be deemed to
have been made at the close of business on the date of giving such notice so
that the rights of the holder thereof as to the Note or Notes (or portion
thereof) being converted shall cease except for the right to receive shares of
Preferred Stock or Common Stock, as the case may be, in accordance herewith, and
the person entitled to receive the shares of Preferred Stock or Common Stock
shall be treated for all purposes as having become the record holder of such
shares of Preferred Stock or Common Stock at such time, so long as such holder's
Notes are delivered to the Company within two Business Days after the date of
the giving of notice. In any other case of conversion at the holder's option,
the date of delivery of the Notes shall be deemed to be the date of conversion.
(b) In case any Notes are to be redeemed pursuant to
Section 9.1, such right of conversion shall cease and terminate as to the Notes
to be redeemed at the close of business on the Business Day preceding the date
fixed for redemption unless the Company shall default in the payment of the
Redemption Price or the Change of Control Price, as the case may be.
(c) The Conversion Ratio shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
10.5. Fractions of Shares; Interest.
-----------------------------
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In connection with the conversion of any Note into Common Stock, no
fractions of shares shall be issued, but in lieu thereof the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Current Market Price per share of
Common Stock on the Trading Day on which such Note is deemed to have been
converted. If more than one Note shall be surrendered for conversion by the
same holder at the same time, the number of full shares of Common Stock issuable
on conversion thereof shall be computed on the basis of the aggregate
outstanding principal amount of Notes so surrendered. Promptly upon conversion,
the Company shall pay to holders of Notes so converted an amount equal to any
accrued and unpaid interest on the Notes surrendered for conversion to the date
of such conversion, together with cash in lieu of any fractional share of Common
Stock.
10.6. Reservation of Stock.
--------------------
(a) The Company shall at all times reserve and keep available for
issuance upon the conversion of the Notes and exercise of the Warrants, free
from any preemptive rights, such number of its authorized but unissued shares of
Preferred Stock and Common Stock as will from time to time be sufficient to
permit the conversion of the entire outstanding principal amount of the Notes
into Preferred Stock or Common Stock and permit the exercise of all of the
Warrants, and shall take all action required to increase the authorized number
of shares of Preferred Stock or Common Stock, if necessary, to permit the
conversion of the entire outstanding principal amount of the Notes and permit
the exercise of all of the Warrants.
(b) If the Company shall issue shares of Common Stock upon
conversion of the Notes as contemplated by this Article 10, or upon exercise of
the Warrants, the Company shall issue together with each such share of Common
Stock one Right (or other securities in lieu thereof), or any rights issued to
holders of Common Stock in addition thereto or in replacement therefor, whether
or not such rights shall be exercisable at such time, but only if such rights
are issued and outstanding and held by other holders of Common Stock at such
time and have not expired.
10.7. Adjustment of Conversion Ratio.
------------------------------
The Conversion Ratio will be subject to adjustment from time to time
as follows:
(a) In case the Company shall at any time or from time to time
after May 1, 1997 (A) pay a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of Common Stock into
a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any
-38-
shares of capital stock of the Company, then, and in each such case, the
Conversion Ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any Note
thereafter surrendered for conversion into Common Stock shall be entitled to
receive, for each $100 of outstanding principal amount of Notes, the number of
shares of Common Stock or other securities of the Company which such holder
would have owned or have been entitled to receive after the happening of any of
the events described above, had such Notes been surrendered for conversion
immediately prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause (a) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(a) in connection with any transaction to which Section 10.8 applies.
(b) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for shares
of Common Stock) after May 1, 1997 at a price per share (or having a conversion
price per share) less than the Conversion Price as of the date of issuance of
such shares (or, in the case of convertible or exchangeable securities, less
than the Conversion Price as of the date of issuance of the rights, warrants or
other securities in respect of which shares of Common Stock were issued), then,
and in each such case, the Conversion Ratio and the Conversion Price shall be
adjusted so that the holder of each Note shall be entitled to receive, for each
$100 of outstanding principal amount of Notes, upon the conversion thereof into
Common Stock, the number of shares of Common Stock determined by multiplying
(A) the Conversion Ratio in effect on the day immediately prior to such date by
(B) a fraction, the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding on such date and (2) the number of additional
shares of Common Stock issued (or into which the convertible securities may
convert), and the denominator of which shall be the sum of (x) the number of
shares of Common Stock outstanding on such date and (y) the number of shares of
Common Stock purchasable at the then applicable Conversion Price per share with
the aggregate consideration receivable by the Company for the total number of
shares of Common Stock so issued (or into which the rights, warrants or other
convertible securities may convert). An adjustment made pursuant to this
Section 10.7(b) shall be made on the next Business Day following the date on
which any such issuance is made and shall be effective retroactively to the
close of business on the date of such issuance. For purposes of this
Section 10.7(b), the aggregate consideration receivable by the Company in
connection with the issuance of shares of Common Stock or of rights, warrants or
other securities convertible into shares of Common Stock shall be deemed to be
equal to the sum of the aggregate offering price
-39-
(before deduction of underwriting discounts or commissions and expenses payable
to third parties) of all such Common Stock, rights, warrants and convertible
securities plus the minimum aggregate amount, if any, payable upon exercise or
conversion of any such rights, warrants and convertible securities into shares
of Common Stock. If Common Stock is sold as a unit with other securities or
rights of value, the aggregate consideration received for such Common Stock
shall be deemed to be net of the Fair Market Value of such other securities and
rights of value. If Common Stock is issued in consideration of the release of a
claim brought by a shareholder against the Company, whether before or after the
Closing Date, on the basis of events or circumstances occurring prior to the
Closing Date ("Pre-Closing Shareholder Claims"), the consideration for such
Common Stock shall be deemed to be $0. The issuance or reissuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to
(i) a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the conversion ratio pursuant to Section 10.7(a), (ii) shares
issued as Stock Milestone Payments or Combination Milestone Payments pursuant to
Section 5.06 of the Development and Marketing Agreement dated June 13, 1991 with
Gensia Clinical Partners as in effect on the date hereof or pursuant to any
acquisition of BIOFA A.B. on terms approved by the full Board of Directors or
(iii) any restricted stock or stock option plan or program of the Company
involving the grant of options or rights at below the applicable Conversion
Price (but the Company will in no event issue options or rights exercisable at
less than 85% of Current Market Price at the date of grant) so long as the
granting of such options or rights has been approved by the full Board of
Directors or a committee of the Board of Directors on which the director
designated by the Purchaser is a member, or (iv) any option, warrant, right, or
convertible security outstanding as of the date hereof (other than the Rights or
similar securities) shall not be deemed to constitute an issuance of Common
Stock or convertible securities by the Company to which this Section 10.7(b)
applies. Upon the expiration unexercised of any options, warrants or rights to
convert any convertible securities for which an adjustment has been made
pursuant to this Section 10.7(b), the adjustments shall forthwith be reversed to
effect such rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or convertible
securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued. Nothing herein shall limit the right of any
holder to an anti-dilution adjustment in the event that there shall occur a
"flip-in" or "flip-over" event under the Rights Agreement or any similar plan or
agreement of the Company. No adjustment shall be made pursuant to this
Section 10.7(b)in connection with any transaction to which Section 10.8 applies.
(c) In case the Company shall at any time or from time to time
after May 1, 1997 declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or
-40-
warrants to subscribe for securities of the Company or any of its Subsidiaries
by way of dividend, including any distribution of shares or assets of Metabasis
or Automedics and any payment or granting of anything of value in consideration
of the release of a Pre-Closing Shareholder Claim, on its Common Stock, other
than dividends or distributions of shares of Common Stock which are referred to
in Section 10.7(a) or issuances of Common Stock which are referred to in Section
10.7(b), then, and in each such case, the Conversion Ratio and the Conversion
Price shall be adjusted so that the holder of each Note shall be entitled to
receive, upon the conversion thereof, for each $100 of outstanding principal
amount of Notes, the number of shares of Common Stock determined by multiplying
(1) the applicable Conversion Ratio on the day immediately prior to the record
date fixed for the determination of stockholders entitled to receive such
dividend or distribution by (2) a fraction, the numerator of which shall be the
Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such Current
Market Price of the Common Stock less the Fair Market Value per share of Common
Stock (as determined in good faith by the Board of Directors and supported by an
opinion from an investment banking firm of recognized national standing
acceptable to holders of a majority of the Notes) of such dividend or
distribution. No adjustment shall be made pursuant to this Section 10.7(c) in
connection with any transaction to which Section 10.8 applies.
(d) For purposes of this Section 10.7, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
(e) The term "dividend," as used in this Section 10.7, shall
mean a dividend or other distribution upon stock of the Company as well as any
consideration granted to a shareholder for the release of a claim against the
Company.
(f) Anything in this Section 10.7 to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at least
one one-hundredth of one share of Common Stock, and when the cumulative net
effect of more than one adjustment so determined shall be to change the
Conversion Ratio by at least one one-hundredth of one share of Common Stock,
such change in Conversion Ratio shall thereupon be given effect.
(g) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
(which may be the firm of independent public accountants regularly employed by
the Company) shall be presumptively correct for any computation made under this
Section 10.7.
-41-
(h) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
Section 10.7 or in the Conversion Ratio or Conversion Price then in effect shall
be required by reason of the taking of such record.
(i) In the case of any event which requires an adjustment to
the Conversion Ratio pursuant to this Section 10.7, the Conversion Price shall
also be appropriately adjusted to reflect such event.
(j) If any event occurs as to which the provisions of this
Section 10.7 are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of the Notes in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Notes.
10.8. Merger or Consolidation.
-----------------------
In the case of any consolidation or merger of the Company with or into
another corporation, or in case of any sale or conveyance to another corporation
of all or substantially all of the assets or property of the Company (each of
the foregoing being referred to as a "Transaction") occurring in each case at
any time, each Note then outstanding shall thereafter be convertible into, in
lieu of the Common Stock issuable upon such conversion prior to consummation of
such Transaction, the kind and amount of shares of stock and other securities
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which the
principal balance of such Note was convertible immediately prior to such
Transaction. In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Article 10 shall be deemed to apply, so far as appropriate and nearly as
may be, to such other securities or property.
10.9. Notice of Certain Corporate Actions.
-----------------------------------
In case at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock or consolidation or merger of the Company with
-42-
or into another corporation, or any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of said cases the Company shall give at
least 20 days' prior written notice (the time of mailing of such notice shall be
deemed to be the time of giving thereof) to the registered holders of the Notes
at the addresses of each as shown in the Note Register of the date on which (i)
a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take place, as
the case may be, provided that in the case of any Transaction to which
Section 10.7 applies the Company shall give at least 30 days' prior written
notice as aforesaid. Such notice shall also specify the date as of which the
holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or conveyance or
participate in such dissolution, liquidation or winding up, as the case may be.
Failure to give such notice shall not invalidate any action so taken.
10.10. Reports as to Adjustments.
-------------------------
Upon any adjustment of the Conversion Ratio then in effect and any
increase or decrease in the number of shares of Common Stock issuable upon the
operation of the conversion provisions set forth in this Article 10, then, and
in each such case, the Company shall promptly deliver to the Transfer Agent of
the Notes and Common Stock, a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by this Section 10, and shall set forth in reasonable detail the method of
calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Notes may be given
in advance and included as part of the notice required under the provisions of
Section 10.9.
11. Subordination of Notes
----------------------
11.1. Subordination of Notes to Senior Indebtedness.
---------------------------------------------
The Indebtedness evidenced by the Notes and all renewals and
extensions thereof, all obligations of the Company under this Agreement, the
Certificate of Designation, and all other instruments and agreements arising out
of or relating to any or all of the foregoing and all renewals and extensions
thereof (collectively called the "Junior Indebtedness") shall at all times be
wholly subordinate and junior in right of
-43-
payment to any and all Senior Indebtedness of the Company (including any claims
by the holders of such Senior Indebtedness for interest accruing after any
assignment for the benefit of creditors by the Company or the institution by or
against the Company of any proceedings under the Bankruptcy Code or any law for
the relief of or relating to debtors, or any other claim by such holders for any
such interest which would have accrued in the absence of such assignment or the
institution of such proceedings) in the manner and with the force and effect
hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up
of the Company, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Company or its property, all sums owing on all
Senior Indebtedness of the Company (including cash collateral and amounts
not yet due and payable) shall first be paid in full before any payment is
made upon the Junior Indebtedness; and in any such event any payment or
distribution of any kind or character, whether in cash, property, or
securities which shall be made upon or in respect of the Junior
Indebtedness shall be paid over to the holders of the Senior Indebtedness
of the Company, pro rata, for application in payment thereof unless and
until such Senior Indebtedness shall have been paid or satisfied in full.
In case of any assignment for the benefit of creditors by the Company or in
case any proceedings under the Bankruptcy Code or any other law for the
relief of or relating to debtors are instituted by or against the Company,
or in case of the appointment of any receiver for the Company's business or
assets, or in case of any dissolution or winding up of the affairs of the
Company, the Company and any assignee, trustee in bankruptcy, receiver,
debtor in possession or other person or persons in charge are hereby
directed to pay to the holders of the Senior Indebtedness of the Company
the full amount of such holders' claims against the Company (including
interest to the date of payment) before making any payments to the holders
of Junior Indebtedness, and insofar as may be necessary for that purpose,
the Purchaser hereby assign and transfer to the holders of Senior
Indebtedness of the Company all rights to any payments, dividends or other
distributions.
(b) In the event that all or any part of the Junior
Indebtedness is declared or becomes due and payable because of the
occurrence of any Event of Default or otherwise than at the option of the
Company (other than pursuant to its terms at its final maturity), under
circumstances when the foregoing clause (a) shall not be applicable, the
holders of the Junior Indebtedness shall be entitled to payments only after
there shall first have been paid in full all Senior Indebtedness of the
Company or payment shall have been provided therefor in a manner
satisfactory to the holders of such Senior Indebtedness.
-44-
(c) Upon the occurrence of an event which is, or with the lapse of
time or notice or both would be, an event which gives any holder of any
Senior Indebtedness of the Company the right to demand payment, cash
collateral, accelerate the maturity, or terminate any commitment to further
extend credit, no payment shall be made on any Junior Indebtedness if
either:
(i) notice of such default in writing or by telegram has been
given to the Company by any holder of any Senior Indebtedness of the
Company, provided that judicial proceedings shall be commenced with
respect to such default (x) within 180 days thereafter if such default
consists of the nonpayment of principal, interest, or any other sum
due on such Senior Indebtedness, or (y) within 180 days after the
earlier of (i) the giving of such notice or (ii) the date on which
such holder is entitled to institute judicial proceedings, or
(ii) judicial proceedings shall be pending in respect of such
default.
The holder of any portion of Senior Indebtedness of the Company shall not be
entitled to give notice pursuant to this clause (c) more than once with respect
to any default which was specified in such notice and which has continued
without interruption since the date such notice was given, nor shall such holder
be entitled to give a separate notice with respect to any default not so
specified which (to the knowledge of the holder giving notice) was existing on
the date such notice was given pursuant to this clause (c) and which has
continued without interruption from the date such notice was given. Upon
receipt of any notice from any holder of any Senior Indebtedness pursuant to
this clause (c), the Company shall forthwith send a copy thereof to each holder
of Junior Indebtedness and each holder of its Senior Indebtedness at the time
outstanding.
(d) All payments, cash, or noncash distributions made to the holders
of Junior Indebtedness which should have been made to the holders of Senior
Indebtedness of the Company shall be received and held by the former in trust
for the benefit of the latter, and the holders of Junior Indebtedness shall
forthwith remit such payments, cash, or noncash distributions to the holders of
the Senior Indebtedness of the Company, pro rata, in the form in which it was
received, together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same to the holders of the Senior
Indebtedness of the Company.
(e) Each holder of Senior Indebtedness of the Company is hereby
authorized by the Purchaser to:
-45-
(i) renew, compromise, extend, accelerate or otherwise change
the time of payment, or any other terms, of any Senior Indebtedness of
the Company held by such holder;
(ii) increase or decrease the rate of interest payable thereon
or any part thereof;
(iii) exchange, enforce, waive or release any security therefor;
(iv) apply such security and direct the order or manner of sale
thereof in such manner as such holder may at its discretion determine;
and/or
(v) release the Company or any guarantor of any Senior
Indebtedness of the Company from liability.
If any such action is taken, the Company shall promptly notify the Purchaser and
any holder of Junior Indebtedness. Notwithstanding anything set forth in this
Section 11.1, nothing set forth herein shall restrict holders of the Notes and
Preferred Stock from exercising their rights of conversion hereunder.
11.2. Proofs of Claim of Holders of Senior Indebtness; Voting
-------------------------------------------------------
The Purchaser undertakes and agrees for the benefit of each holder of
Senior Indebtedness of the Company to execute, verify, deliver and file any
proofs of claim relating to the Junior Indebtedness which any holder of such
Senior Indebtedness may at any time require in order to prove and realize upon
any rights or claims pertaining to the Junior Indebtedness and to effectuate the
full benefit of the subordination contained herein. Upon failure of the
Purchaser to file the required proof or proofs of claim prior to 30 days before
the expiration of the time to file claims in such proceeding, each holder of
Senior Indebtedness of the Company is hereby irrevocably appointed by the
Purchaser to be such Purchaser's agent to file the appropriate claim or claims
and if such holder of Senior Indebtedness elects at its sole discretion to file
such claim or claims (i) to accept or reject any plan of reorganization or
arrangement on behalf of the Purchaser, and (ii) to otherwise vote the
Purchaser's claim in respect of the Junior Indebtedness in any manner deemed
appropriate for the benefit and protection of the holders of the Senior
Indebtedness of the Company.
11.3. Rights of Holders of Senior Indebtedness Unimpaired.
---------------------------------------------------
No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired
-46-
by any failure to act on the part of the Company or the holders of Senior
Indebtedness, or by any noncompliance by the Company with any of the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
that any such holder of Senior Indebtedness may have or be otherwise charged
with.
11.4. Effects of Event of Default.
---------------------------
The Company agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that a Note is declared due and payable before
its maturity because of the occurrence of an Event of Default, (i) the Company
will give prompt notice in writing of such happening to the holders of Senior
Indebtedness and (ii) all Senior Indebtedness shall forthwith become immediately
due and payable upon demand, regardless of the expressed maturity thereof.
11.5. Company's Obligations Unimpaired.
--------------------------------
The provisions of this Article 11 are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on the one
hand, and the Purchaser on the other hand, and nothing herein shall impair, as
between the Company and the Purchaser, the obligation of the Company which is
unconditional and absolute, to pay the principal, premium, if any, and interest,
if payable, on the Notes in accordance with this Agreement and the terms of the
Notes, nor shall anything herein prevent the Purchaser from exercising all
remedies otherwise permitted by applicable law or under this Agreement or the
Notes upon the occurrence of an Event of Default, subject to the rights of the
holders of Senior Indebtedness as herein provided for.
11.6. Subrogation.
-----------
Subject to the payment in full of Senior Indebtedness, holders of the
Notes shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities made on the
Senior Indebtedness until the Senior Indebtedness shall be paid in full; and,
for the purposes of such subrogation, payments or distributions to the holders
of Senior Indebtedness of any cash, property or securities to which any holder
of Notes would be entitled except for the provisions of this Agreement shall, as
between the Company and its creditors other than the holders of Senior
Indebtedness and holders of the Notes, be deemed to be a payment by the Company
to or on account of the Notes, it being understood that the provisions of this
Agreement are and are intended solely for the purpose of defining the relative
rights of the holders of the Notes on the one hand, and the holders of Senior
Indebtedness, on the other hand. The purpose of this Section 11.6 is to grant
to holders of the Notes the same rights against the Company with respect to the
aggregate amount of such payments or distributions as the holders of Senior
Indebtedness would have against the Company if such aggregate amount were
considered overdue Senior Indebtedness.
-47-
12. Interpretation
--------------
12.1. Definitions.
-----------
"Adjustment Period" shall mean the period of five consecutive Trading
-----------------
Days preceding the date as of which the Fair Market Value of a security is to be
determined.
"Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
"Applicable Tax Rate" shall have the meaning set forth in
-------------------
Section 6.18(a).
"Beneficially Own" or "Beneficial Owners" with respect to any
---------------- -----------------
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the Company.
------------------
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Capitalized Lease" shall mean, with respect to any person, any lease
-----------------
or any other agreement for the use of property which, in accordance with
generally accepted accounting principals, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include,
----------------------------
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such person in respect of a Capitalized Lease of such person.
"Change of Control" shall mean:
-----------------
(a) A "person" or "Group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act becoming, in the transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise more than 60% of the total voting power of all outstanding Voting
Securities of the Company (including any Voting Securities that are not then
outstanding of which such person or Group is deemed the Beneficial Owner);
-48-
(b) liquidation of the Company;
(c) a reorganization, merger or consolidation, in each case,
with respect to which (i) all or substantially all the individuals and entities
who were the respective Beneficial Owners of the voting securities of the
Company immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation Beneficially Own,
directly or indirectly, more than 50.1% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation, or (ii) the shares of the surviving corporation held by such
holders are not, and immediately upon issuance will not be, listed on a national
securities exchange or quoted on the Nasdaq Stock Market, or (iii) the shares of
the Surviving Corporation held by such holders are or will be subject to any
right of repurchase by the issuer thereof or any third-party or are otherwise
subject to any encumbrance as a result of such transaction, or (iv) immediately
after the consummation of such reorganization, merger or consolidation, the
surviving corporation would be in violation of any covenant set forth in Section
6.1 hereof;
(d) the sale or other disposition of assets or property of the
Company in one transaction or series of related transactions having a book value
greater than 50% of the book value of the Company's total assets immediately
preceding such transaction;
(e) a "Fundamental Change" within the meaning of paragraph (c)
of Section C8 of Article IV of the Company's Restated Certificate of
Incorporation;
(f) the Company shall propose, declare or pay a dividend or
other distribution in stock of any Subsidiary other than Metabasis or Automedics
and the Fair Market Value of such stock plus the Fair Market Value of all other
stock of Subsidiaries (other than Metabasis or Automedics) distributed since the
date of this Agreement to shareholders of the Company (such Fair Market Value in
the case of prior distributions to be determined as of their respective dates of
distribution) exceeds 10% of the Company's consolidated total assets as of the
end of the most recently ended fiscal quarter; or
(g) the Company merges with or into or consolidates with any
other Person and the Surviving Entity is organized under the laws of a
jurisdiction other than the United States or any State thereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
-49-
"Commission" shall mean the Securities and Exchange Commission.
----------
"Consolidated" or "consolidated", when used with reference to any
------------ ------------
financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more persons of
the amounts signified by such term for all such persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such person or attributable to shares of preferred stock of any
such person not owned by any other such person.
"Consolidated Net Income (Loss)" of any Person shall mean, for any
------------------------------
period, the Consolidated net income (or loss) of such Person and its
Subsidiaries for such period on a Consolidated basis as determined in accordance
with generally accepted accounting principles, adjusted, to the extent included
in calculating such net income (or loss), by excluding, without duplication, (i)
all extraordinary gains (less all fees and expenses relating thereto), (ii) the
portion of net income (or loss) of such Person and its Subsidiaries on a
Consolidated basis allocable to minority interests in unconsolidated Persons to
the extent that cash dividends or distributions have not actually been received
by such Person or one of its Consolidated Subsidiaries, (iii) net income (or
loss) of any Person combined with such Person or any of its Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the termination
of any employee pension benefit plan, (v) net gains (or losses) (less all fees
and expenses relating thereto) in respect of dispositions of assets other than
in the ordinary course of business, (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (vii) any restoration to income of any
contingency reserve, except to the extent provision for such reserve was made
out of income accrued at any time following the date of this Agreement, or
(viii) any gain arising from the acquisition of any securities, or the
extinguishment, under generally accepted accounting principles, of any
Indebtedness of such Person.
"Consolidated Tangible Net Worth" shall mean the consolidated
-------------------------------
stockholders' equity of the Company and its Subsidiaries, less the amount of
assets constituting good will, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that in the event
-------- -------
of any distribution or issuance of the capital stock of Metabasis, the
consolidated tangible net worth of Metabasis at the time of such distribution or
issuance shall subsequently be added to (or
-50-
subtracted from in the case of a deficit) any calculation of the Consolidated
Tangible Net Worth of the Company for purposes of Article 6.
"Consolidated Total Indebtedness" shall mean consolidated Indebtedness
-------------------------------
of the Company and its Subsidiaries, determined in accordance with generally
accepted accounting principles consistently applied.
"Contingent Warrant" shall have the meaning given such term in the
------------------
Warrant.
"Conversion Price" shall mean $3.78, subject to adjustment as provided
----------------
in Article 10.
"Conversion Ratio" shall mean the ratio obtained by dividing each $100
----------------
of outstanding principal amount of Notes by the Conversion Price, subject to
adjustment as provided in Article 10.
"Current Market Price", when used with reference to shares of Common
--------------------
Stock or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. The closing price for each day shall be the last
quoted bid price in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the closing bid price as
furnished by a professional market maker making a market in the Common Stock or
such other securities selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the closing bid price, regular way, as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Common Stock or such other securities are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock or such other securities
are listed or admitted to trading. If the Common Stock or such other securities
are not publicly held or so listed or publicly traded, "Current Market Price"
shall mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the Company
based on an opinion of an independent investment banking firm acceptable to
holders of a majority
-51-
of the Notes, which opinion may be based on such assumptions as such firm shall
deem to be necessary and appropriate.
"Current Warrant Price" shall have the meaning given such term in the
---------------------
Warrant.
"Default" shall mean any event which, with or without the passage of
-------
time, would be an Event of Default.
"Disinterested Director" shall mean, with respect to any transaction
----------------------
or series of related transactions, a member of the Board of Directors who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of related transactions.
"Employee Benefit Plan" shall mean each plan, program, policy, payroll
---------------------
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and whether or not legally
binding, including, without limitation, each "employee benefit plan," within the
meaning of Section 3(3) of ERISA and each "multiemployer plan" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA, pursuant to which the Company,
any Subsidiary or any ERISA Affiliate has or may have any liability, contingent
or otherwise.
"Environmental Laws" shall mean, at any date, all provisions of
------------------
federal, state, local or foreign law (including applicable principles of common
and civil law), statutes, ordinances, rules, regulations, published standards
and directives that have the force and effect of Laws, permits, licenses,
judgments, writs, injunctions, decrees and orders enacted, promulgated or issued
by any Public Authority, and all indemnity agreements and other contractual
obligations, as in effect at such date, relating to (i) the protection of the
environment, including the air, surface and subsurface soils, surface waters,
groundwaters and natural resources, and (ii) occupational health and safety and
exposure of persons to Hazardous Materials. Environmental Laws shall include
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S)9601 et seq., and any other Laws imposing or creating liability
------
with respect to Hazardous Materials.
"Environmental Liability" shall mean any liabilities, obligations,
-----------------------
costs, losses, payments or damages, including compensatory and punitive damages,
incurred (i) to contain, remove, clean up, assess, xxxxx or otherwise remedy any
actual or alleged release or threatened release of Hazardous Materials, any
actual or alleged contamination
-52-
(by Hazardous Materials) of air, surface or subsurface soil, groundwater or
surface water, or any personal injury or damage to natural resources or property
resulting from any such release or contamination, pursuant to the requirements
of any Environmental Law or in response to any claim by any Public Authority or
other Third Party under any Environmental Law; (ii) to modify facilities or
processes or take any other remedial action in response to any claim by any
Public Authority of non-compliance with any Environmental Law; (iii) as a result
of the imposition of any civil or criminal fine or penalty by any Public
Authority for the violation or alleged violation of any Environmental Law; or
(iv) as a result of any action, suit, proceeding or claim by any Third Party
under any Environmental Law. The term "Environmental Liability" shall include:
(i) reasonable fees of counsel and consultants (but not any corporate allocation
for management time or for the use of similar in-house services or facilities)
and (ii) the costs and expenses of any investigation undertaken to ascertain the
existence or extent of any potential or actual Environmental Liability.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is a member
---------------
of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company or its Subsidiaries within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated
with the Company or its Subsidiaries under Section 414(o) of the Code, or is
under "common control" with the Company or its Subsidiaries, within the meaning
of Section 4001(a)(14) of ERISA.
"Event of Default" shall mean each of the happenings or circumstances
----------------
enumerated in Section 8.1.
"Excepted Warrant Issues" shall mean (i) an issue of units comprising
-----------------------
debt or preferred stock and warrants exercisable for Common Stock of the Company
in which, on the issue date, the product of (a) the number of shares of Common
Stock of the Company issuable upon exercise of the warrants multiplied by
(b) the Current Market Price of the Common Stock of the Company does not exceed
25% of the cash consideration paid for such units and (ii) the grant of warrants
exercisable for Common Stock of the Company to the lessor of equipment to the
Company under a financing lease which finances the acquisition of such equipment
by the Company (or which refinances such a lease) and which is principally
secured by a first priority security interest in such equipment.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any successor federal statute, and the rules and regulations of the
-53-
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of any such
successor federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares of securities for each day of the Adjustment Period. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company or a
committee thereof, or, if no such investment banking or appraisal firm is in the
good faith judgment of the Board of Directors or such committee available to
make such determination, as determined in good faith by the Board of Directors
of the Company or such committee.
"Fee Letter" shall mean the letter dated March 17, 1997, from the
----------
Purchaser to the Company.
"Gensia Disclosure Schedule" shall mean the disclosure schedule dated
--------------------------
February 28, 1997 delivered by the Company to Rakepoll Finance pursuant to the
Stock Exchange Agreement.
"Governing Instruments" shall mean, collectively, this Agreement, the
---------------------
Notes, the Warrant Agreement and the Certificate of Designation.
"Guarantee" by any Person shall mean all obligations (other than
---------
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of any Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this
-54-
Agreement, a Guarantee in respect of any Indebtedness for borrowed money shall
be deemed to be Indebtedness equal to the principal amount of the Indebtedness
for borrowed money which has been guaranteed, and a Guarantee in respect of any
other obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Material" shall mean any substance regulated by any
------------------
Environmental Law or which may now or in the future form the basis for any
Environmental Liability.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
-------
of 1976, as amended, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any person, (i) all
------------
obligations of such person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such person
under conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice),
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Liquidation Value" shall mean the outstanding principal amount of any
-----------------
Note.
"Multiemployer Plan" shall mean each Employee Benefit Plan which is a
------------------
"multiemployer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"Non-Disclosable Contracts" shall mean Contracts to which the Company
-------------------------
or any Subsidiary is a party with or for the benefit of any officer, director or
Affiliate of the Company or any Subsidiary or Associate thereof meeting none of
the disclosure requirements nor any of the exhibit filing requirements for an
annual, quarterly or periodic report on Form 10-K, 10-Q or 8-K of the Company
covering reporting periods
-55-
that include any of the date of this Agreement, the Closing Date, the date such
Contract is entered into or the date or dates of the Company's performance under
such Contract.
"OSHA" shall have the meaning set forth in Section 2.6.
----
"Outstanding" or "outstanding" shall mean when used with reference to
----------- -----------
the Notes at a particular time, all Notes therefore issued as provided in this
Agreement, except (i) Notes therefore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect to
which replacement Notes have been issued, (ii) Notes therefore paid in full, and
(iii) Notes therefore canceled by the Company except that, for the purpose of
determining whether holders of the requisite principal amount of Notes have made
or concurred in any waiver, consent, approval, notice or other communication
under this Agreement, Notes registered in the name of, or owned beneficially by,
the Company or any Subsidiary of any thereof, shall not be deemed to be
outstanding.
"Person" shall mean any individual, firm, corporation, partnership or
------
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Pension Plan" shall mean each Employee Benefit Plan (other than a
------------
Multiemployer Plan) which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA and which is subject to Title IV of ERISA.
"Preferred Ratio" shall have the meaning set forth in Section 10.1.
---------------
"Public Authority" shall mean any supranational, national, regional,
----------------
state or local government court, governmental agency, authority, board, bureau,
instrumentality or regulatory body.
"Rakepoll Disclosure Schedule" shall mean the disclosure schedule
----------------------------
dated February 28, 1997 delivered by Rakepoll Finance to the Company pursuant to
the Stock Exchange Agreement.
"Rights" shall mean the rights to purchase Preferred Stock issued
------
pursuant to the Rights Agreement.
"Rights Agreement" shall mean the Gensia Stockholders Rights
----------------
Agreement, dated March 16, 1992, as amended, between the Company and ChaseMellon
Shareholder Services, L.L., as successor in interest to First Interstate Bank.
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"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall mean and include, as of any date as of
-------------------
which the amount thereof is to be determined, the principal of and premium, if
any, and interest due on (a) any Indebtedness, whether outstanding on the date
of this Agreement or thereafter created, incurred or assumed, except for any
such Indebtedness that by the terms of the instrument or instruments by which
such Indebtedness was created or incurred expressly provides that it (i) is
subordinated in right of payment to the Notes or (ii) ranks pari passu in right
of payment with the Notes and (b) any amendments, renewals, extensions,
modifications and refundings of any such Indebtedness.
"Stated Value" with respect to a share of Preferred Stock shall mean
------------
$100.00 per share.
"Stock Exchange Agreement" shall mean the Stock Exchange Agreement,
------------------------
dated November 12, 1996, as amended, between the Company and Rakepoll Finance.
"Subordinated Indebtedness" shall mean all Indebtedness which is not
-------------------------
Senior Indebtedness.
"Subsidiary" of any Person shall mean any corporation or other entity
----------
of which a majority of the voting power or the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Swap Contract" shall mean any agreement whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or xxxx option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap, cross-
currency rate swap, swaption, currency option or any other similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" shall mean, in respect of any one or more
----------------------
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in subclause (a) the amount(s) determined as
the xxxx-to-market value(s) for such Swap
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Contracts, as determined by the Company based upon one or more mid-market or
other readily available quotations provided by any recognized dealer in such
Swap Contracts.
"Third Party" shall mean a person who or which is neither the Company
-----------
or its Subsidiaries nor the Purchaser.
"Trading Day" shall mean a Business Day or, if the Common Stock is
-----------
listed or admitted to trading on any national securities exchange, a day on
which such exchange is open for the transaction of business.
"Voting Securities" shall mean at any time shares of any class of
-----------------
capital stock of the Company which are then entitled to vote generally in the
election of directors.
"Warrant Value" shall mean at any time an amount (not less than $0)
-------------
equal to the product of (i) the number of shares of Common Stock previously
issued upon exercise of the Contingent Warrants multiplied by (ii) an amount
equal to the difference between (A) the weighted average of the Current Market
Prices of such shares of Common Stock on the respective exercise dates of such
previously exercised Contingent Warrants less (B) the weighted average of the
----
Current Warrant Prices of such previously exercised Contingent Warrants on their
respective dates of exercise.
12.2. Accounting Principles.
---------------------
The character or amount of any asset, liability, capital account or
reserve and of any item of income or expense required to be determined pursuant
to this Agreement, and any consolidation or other accounting computation
required to be made pursuant to this Agreement, and the construction of any
definition in this Agreement containing a financial term, shall be determined or
made, as the case may be, in accordance with United States generally accepted
accounting principles, to the extent applicable, unless such principles are
inconsistent with the express requirements of this Agreement.
13. Miscellaneous
-------------
13.1. Payments.
--------
The Company agrees that, so long as the Purchaser shall hold any
Convertible Securities, it will make all cash payments thereon in immediately
available funds in such manner as the Purchaser may reasonably request in
writing.
13.2. Severability.
------------
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If any term, provision, covenant or restriction of this Agreement or
any exhibit hereto is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement and such exhibits shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
13.3. Specific Enforcement.
--------------------
The Purchaser, on the one hand, and the Company, on the other,
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction to prevent breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be entitled at law or
equity.
13.4. Entire Agreement.
----------------
This Agreement (including the documents set forth in the exhibits
hereto) and the Fee Letter between the parties contains the entire understanding
of the parties with respect to the transactions contemplated hereby.
13.5. Counterparts.
------------
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more of the counterparts have been signed by each party and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
13.6. Notices and Other Communications.
--------------------------------
All notices, consents, requests, instructions, approvals, financial
statements, proxy statements, reports and other communications provided for
herein shall be rapidly given, if in writing and delivered personally, by
telecopy or sent by registered mail, postage prepaid, if to:
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THE COMPANY:
Gensia Sicor Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention:
With a copy to:
Pillsbury Madison & Sutro LLP
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
THE PURCHASER:
Health Care Capital Partners L.P.
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
With a copy to:
Xxxx Xxxxxxxxxxx, Esq.
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
13.7. Amendments.
----------
This Agreement may be amended as to the Purchaser and its successors
and assigns, and the Company may take any action herein prohibited, or omit to
perform any act required to be performed by it, if the Company shall obtain the
written consent of the Purchaser and/or such successors and assigns who are the
registered holders of not less than 66 2/3% of the outstanding principal amount
of the Notes or Stated Value of the Preferred Stock then held by the Purchaser
and its successors or assigns. This Agreement may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change,
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modification or discharge is sought or by parties with the right to consent to
such waiver, change, modification or discharge on behalf of such party.
13.8. Cooperation.
-----------
The Purchaser and the Company agree to take, or cause to be taken, all
such further or other actions as shall reasonably be necessary to make effective
and consummate the transactions contemplated by this Agreement.
13.9. Successors and Assigns.
----------------------
All covenants and agreements contained herein shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns,
it being understood however that the covenants set forth in Sections 6.12(iii)
and (iv), 6.14 and 13.10 shall not inure to the benefit of any assignee of the
Purchaser other than Affiliates of the Purchaser. Neither this Agreement nor
any rights hereunder may be transferred prior to the Closing Date without the
consent of the other party, except that the Purchaser may assign any of its
rights and obligations hereunder to any fund for which Xxxxxx Xxxxxxx Xxxxxxxx &
Co. LLC is the general partner.
13.10. Expenses and Remedies.
---------------------
(a) Subject to paragraph (d), the Company agrees to pay the
Purchaser for all of its out-of-pocket expenses, including reasonable
outside legal, accounting and consulting fees of the Purchaser, incurred in
connection with this Agreement and the consummation of all transactions
contemplated hereby, and all costs and expenses relating to any future
amendment or supplement to this Agreement or any of the Securities (or any
proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect thereto (or any proposal
for such waiver or consent) whether or not consummated, and all costs and
expenses of the Purchaser relating to the enforcement of this Agreement,
the Registration Rights Agreement, the Warrant Agreement or any of the
Securities. The Company shall be entitled to credit the underwriting
deposit previously paid by it to the Purchaser pursuant to the Fee Letter
against such expense reimbursement obligation.
(b) The Company further agrees to indemnify and save
harmless the Purchaser and its officers, directors, partners, employees,
trustees and agents, each person who controls the Purchaser within the
meaning of the Securities Act or the Exchange Act, from and against any and
all costs, expenses, damages or other liabilities resulting from any breach
of this Agreement by the Company (including the breach of any covenant or
representation or warranty made by the Company) or any legal,
administrative or other proceedings arising out of the transactions
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contemplated hereby (other than such costs, expenses, damages or other
liabilities resulting, directly or indirectly, (i) from the breach by such
Purchaser of any of its agreements contained herein or (ii) from the gross
negligence or willful misconduct of such Purchaser or any of its officers,
directors, partners, employees or agents, or any person who controls such
Purchaser within the meaning of the Securities Act or the Exchange Act;
provided, however, that, if and to the extent that such indemnification is
-------- -------
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of such indemnified liability
which shall be permissible under applicable laws.
(c) The indemnified party under this Section 13.10 will,
promptly after the receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
from the Company on account of an indemnity agreement contained in this
Section 13.10, notify the Company in writing of the commencement thereof.
The omission of any indemnified party so to notify the Company of any such
action shall not relieve the Company from any liability which it may have
to such indemnified party except to the extent the Company shall have been
materially prejudiced by the omission of such indemnified party so to
notify the Company, pursuant to this Section 13.10. In case any such action
shall be brought against any indemnified party and it shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the Company to such indemnified party of its
election so to assume the defense thereof, the Company will not be liable
to such indemnified party under this Section 13.10 for any legal or other
expense subsequently incurred by such indemnified party in connection with
the defense thereof nor for any settlement thereof entered into without the
consent of the Company; provided, however, that (i) if the Company shall
-------- -------
elect not to assume the defense of such claim or action or (ii) if the
indemnified party reasonably determines (x) that there may be a conflict
between the positions of the Company and of the indemnified party in
defending such claim or action or (y) that there may be legal defenses
available to such indemnified party different from or in addition to those
available to the Company, then separate counsel for the indemnified party
shall be entitled to participate in and conduct the defense, in the case of
(i) and (ii)(x), or such different defenses, in the case of (ii)(y), and
the Company shall be liable for any reasonable legal or other expenses
incurred by the indemnified party in connection with the defense.
(d) If the Closing shall fail to occur solely as a result of the
failure of the Purchaser to receive funding from its limited partners
pursuant to the Purchaser's capital call following the satisfaction of all
other conditions to
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Purchaser's obligations hereunder, (i) the Company shall be entitled to a
refund of (A) the underwriting deposit paid pursuant to the Fee Letter, and
(B) the transaction fee paid pursuant to Section 1.6, and (ii) Purchaser
shall pay the Company for all of its out-of-pocket expenses, including
reasonable outside legal and accounting fees. Further, the Company shall
not be required to pay the costs, expenses and fees referred to in
paragraph (a) of this Section 13.10.
13.11. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties contained herein or made in writing
by any party in connection herewith shall survive the execution and delivery of
this Agreement and the issuance and delivery of the Securities, regardless of
any investigation made by or on behalf of any party.
13.12. Transfer of Securities.
----------------------
The Purchaser understands and agrees that the Securities have not been
registered under the Securities Act or the securities laws of any state and that
they may be sold or otherwise disposed of only in one or more transactions
registered under the Securities Act and, where applicable, such laws or
transactions as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws are available. The Purchaser
acknowledges that, except as provided in the Registration Rights Agreement, the
Purchaser has no right to require the Company to register the Securities. The
Purchaser understands and agrees that each Note or certificate representing the
Securities shall bear the following legend:
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS NOTE HAS]
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
13.13. Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
13.14. Term.
----
Unless an Event of Default shall have occurred and be continuing, this
Agreement shall terminate on May 1, 2004, except that Sections 6.18 and 13.10
shall survive the termination of this Agreement.
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13.15. Publicity.
---------
Each of the parties hereto agrees that it will make no statement
regarding the transactions contemplated hereby unless such statement has been
approved by both of the parties hereto. Notwithstanding the foregoing, each of
the parties hereto may, in documents required to be filed by it with the
Commission or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised is legally necessary
upon advice of its counsel.
13.16. Signatures.
----------
This Agreement shall be effective upon delivery of original signature
pages or facsimile copies thereof executed by each of the parties hereto.
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IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.
GENSIA SICOR INC.
By: /s/Xxxx Xxxxxxx
-----------------
HEALTH CARE CAPITAL PARTNERS L.P.
By: XXXXXX XXXXXXX XXXXXXXX
& CO. LLC., its General Partner
By: /s/Xxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
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