Exhibit 10.38
NOTE PURCHASE AGREEMENT
DATED AS OF FEBRUARY 3, 1998
BY AND BETWEEN
CYGNUS, INC.
AND
[NAME OF BUYER]
____________________
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
NOTE PURCHASE AGREEMENT
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
CYGNUS, INC.
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE; PURCHASE PRICE . . . . . . . . . . . . . . . . . 7
(a) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER . . . . . 8
(a) Note Purchase Agreement. . . . . . . . . . . . . . . . . . . . 8
(b) Accredited Investor. . . . . . . . . . . . . . . . . . . . . . 8
(c) Short Position . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Non-contravention. . . . . . . . . . . . . . . . . . . . . . . 8
(e) Documents and Information. . . . . . . . . . . . . . . . . . . 8
(f) Certain Circumstances of Offering. . . . . . . . . . . . . . . 8
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY . . . . 9
(a) Organization and Authority . . . . . . . . . . . . . . . . . . 9
(b) Qualifications . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Material Losses. . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Concerning the Shares and the Common Stock . . . . . . . . . . 10
(f) Corporate Authorization. . . . . . . . . . . . . . . . . . . . 10
(g) Description of Common Stock. . . . . . . . . . . . . . . . . . 11
(h) Non-contravention. . . . . . . . . . . . . . . . . . . . . . . 12
(i) Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 12
(k) Absence of Certain Proceedings . . . . . . . . . . . . . . . . 13
(l) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) Absence of Certain Changes . . . . . . . . . . . . . . . . . . 13
(n) Intellectual Property. . . . . . . . . . . . . . . . . . . . . 14
(o) Compliance with Law and Obligations. . . . . . . . . . . . . . 14
(p) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i.
(q) Registration Statement, Indenture, Etc.. . . . . . . . . . . . 15
(r) Investment Company . . . . . . . . . . . . . . . . . . . . . . 16
(s) Absence of Brokers, Finders, Etc.. . . . . . . . . . . . . . . 16
(t) Certain Issuances of Securities; Certain NASD Matters. . . . . 16
(u) Rights Agreement.. . . . . . . . . . . . . . . . . . . . . . . 16
5. CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Nasdaq Listing; Reporting Status . . . . . . . . . . . . . . . 17
(b) Indenture; Supplemental Indenture. . . . . . . . . . . . . . . 17
(c) State Securities Laws. . . . . . . . . . . . . . . . . . . . . 17
(d) Certain Future Financings and Related Actions. . . . . . . . . 17
(e) Limitation on Certain Actions. . . . . . . . . . . . . . . . . 18
(f) Concerning the Registration Statement. . . . . . . . . . . . . 18
(g) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Debt Obligation. . . . . . . . . . . . . . . . . . . . . . . . 20
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. . . . . . . . . . . 20
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. . . . . . . . . . 20
8. INDEMNIFICATION AND CONTRIBUTION. . . . . . . . . . . . . . . . . . 22
(a) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. PURCHASABLE SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Right to Purchase. . . . . . . . . . . . . . . . . . . . . . . 23
(b) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Adjustment for Dividends in Other Stock, Property, Etc.;
Reclassification, Etc. . . . . . . . . . . . . . . . . . . . . 24
(e) Exercise Upon Reorganization, Consolidation, Merger, Etc. . . 25
(f) Adjustment for Extraordinary Events . . . . . . . . . . . . . 25
(g) Notices of Record Date, Etc. . . . . . . . . . . . . . . . . . 26
(h) Reservation of Stock, Etc. . . . . . . . . . . . . . . . . . . 27
(i) No Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 27
(j) Certain Matters . . . . . . . . . . . . . . . . . . . . . . . 27
10. MISCELLANEOUS
(a) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Entire Agreement; Benefit. . . . . . . . . . . . . . . . . . . 28
(g) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Further Assurances . . . . . . . . . . . . . . . . . . . . . . 29
(j) Assignment of Certain Rights and Obligations . . . . . . . . . 29
(k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(l) Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(n) Press Release, Public Announcements, Etc.. . . . . . . . . . . 30
(o) Construction . . . . . . . . . . . . . . . . . . . . . . . . . 30
ii.
ANNEXES
Annex I Buyer Escrow Instructions
Annex II Form of Conversion Agent Agreement
Annex III Form of Prospectus Supplement
Annex IV Form of First Supplemental Indenture to be dated as of
February 3, 1998
Annex V Form of Opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, Counsel for the
Company, to Be Delivered to the Buyer on the Closing Date
Annex VI Form of Opinion of Patent Counsel for the Company, to Be Delivered
to the Buyer on the Closing Date
iii.
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of February 3, 1998 (this
"Agreement"), by and between CYGNUS, INC., a Delaware corporation (the
"Company"), with headquarters located at 000 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxx,
Xxxxxxxxxx 00000-0000, and [NAME OF BUYER] (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company and the Company
wishes to sell to the Buyer, upon the terms and subject to the conditions of
this Agreement, convertible promissory notes of the Company having the aggregate
principal amount set forth on the signature page of this Agreement, to be issued
by the Company pursuant to the Indenture (such capitalized term and all other
capitalized terms used herein having the respective meanings provided herein)
and the Supplemental Indenture and which will be convertible into shares of
Common Stock; and
WHEREAS, the Company has filed the Registration Statement relating to
debt and equity securities, which has been declared effective by the SEC, and is
offering a portion of such securities to the Buyer to be purchased pursuant to
this Agreement and the Prospectus;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) As used in this Agreement, the terms "Agreement," "Buyer" and
"Company" shall have the respective meanings assigned to such terms in the
introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Agreement.
(c) Capitalized terms defined herein by reference to another
agreement or instrument which, on the date of execution and delivery of this
Agreement, has not been executed and delivered by the parties thereto shall
nonetheless have the meanings set forth in the form of such other agreement or
instrument referred to in this Agreement until execution of such other agreement
or instrument and, following execution and delivery of such other agreement or
instrument, shall have the meanings set forth in such other agreement or
instrument as so executed and delivered.
(d) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in New York, New York, San Francisco, California or the
city in which the Corporate Trust Office is located are authorized or required
by law or executive order to remain closed.
"Buyer Escrow Agent" means the escrow agent identified in the Buyer
Escrow Instructions.
"Buyer Escrow Instructions" means the Buyer Escrow Instructions
attached hereto as ANNEX I.
"Claims" means any losses, claims, damages, liabilities or expenses
(joint or several), incurred by an Indemnified Person.
"Closing Date" means 12:00 noon, New York City time, on February 4,
1998 or such other mutually agreed to time.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company, together with the related Preferred Stock Purchase Rights (until
such time as such rights are no longer applicable or the Rights Agreement is
terminated) or similar rights of the Company applicable to the Common Stock
generally, or any shares of capital stock and the related rights into which such
class of stock or such rights shall be changed or reclassified after the Closing
Date.
"Conversion Agent Agreement" means the Conversion Agent Agreement to
be entered into by and among the Company, the Transfer Agent and the Trustee for
the benefit of the holders of the Notes and the Other Notes in the form attached
hereto as ANNEX II.
"Conversion Notice" means a Notice of Conversion of 4% Senior
Subordinated Convertible Notes due 2005 substantially in the form to be set
forth in Section 2.04 of the
2.
Supplemental Indenture.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Notes.
"Corporate Trust Office" shall have the meaning to be provided in the
Indenture.
"Direct Common Stock Offering" means the proposed sale by the Company
for cash of 905,740 shares of Common Stock registered pursuant to the
Registration Statement, which sale shall be made directly to the purchasers of
such shares.
"Event of Default" shall have the meaning to be provided in the
Supplemental Indenture.
"Indemnified Person" means the Buyer, the directors, if any, of the
Buyer, the officers and other agents, if any, of the Buyer, the investment
advisors to the Buyer and each person, if any, who controls the Buyer within the
meaning of the 1933 Act or the 1934 Act.
"Indenture" means the Indenture, to be dated as of February 4, 1998,
by and between the Company and the Trustee in the form filed as Exhibit 4.2 to
the Registration Statement.
"Interest Shares" means the shares of Common Stock issuable in payment
of interest on the Notes.
"Majority Holders" means at any time the Persons who are holders of
Notes and Other Notes which, based on the original principal amount thereof,
represent a majority of the original aggregate principal amount of the Notes,
and the Other Notes, whether or not outstanding at such time.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"1996 10-K" means the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as amended by Amendment No. 1 thereto on
Form 10-K/A.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1939 Act" means the Trust Indenture Act of 1939, as amended.
3.
"1939 Act Rules and Regulations" means the rules and regulations of
the SEC under the 1939 Act.
"Notes" means the 4% Senior Convertible Notes due 2005 of the Company
to be issued pursuant to the Indenture and the Supplemental Indenture in the
form provided for in Section 2.02 of the Supplemental Indenture.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of the date hereof, by and between the Company and the
respective buyers named therein pursuant to which the Other Notes are being
issued.
"Other Notes" shall mean the 4% Senior Subordinated Convertible Notes
due 2005 issuable pursuant to the Other Note Purchase Agreement.
"Permitted Transferee" means any Person who is (A) an Affiliate of the
Buyer, (B) the holder of any Other Note (provided that such holder is an
authorized holder thereof pursuant to this Agreement or the Other Note Purchase
Agreements), (C) an Affiliate of the holder of any Other Note (provided that
such holder is an authorized holder thereof pursuant to this Agreement or the
Other Note Purchase Agreements), and (D) any Person who has the same principal
investment adviser as, or whose principal investment adviser is an Affiliate of
the principal investment adviser to, the Buyer or any Person identified in the
preceding clauses (A) through (C), and in any such case to whom Notes are being
transferred which have a principal amount equal to at least 20% of the principal
amount of the Notes outstanding on the date of such transfer, but in no event
less than $1,500,000 (or equal to such lesser principal amount of the Notes held
by the Buyer at the time of such transfer).
"Person" shall have the meaning to be provided in the Indenture.
"Preferred Stock Purchase Rights" shall have the meaning to be
provided in the Supplemental Indenture.
"Prospectus" means the Prospectus, dated November 12, 1997, forming
part of the Registration Statement, as supplemented by the Prospectus
Supplement, including any documents and reports incorporated therein by
reference.
"Prospectus Supplement" means the Prospectus Supplement in the form
attached hereto as ANNEX III, to be filed with the SEC as provided in
Section 5(f).
"Purchasable Shares" means the shares of Common Stock which may be
purchased
4.
by the Buyer pursuant to Section 9.
"Purchase Price" means the purchase price for the Notes set forth on
the signature page of this Agreement.
"Registration Statement" means the Registration Statement on Form S-3
of the Company under the 1933 Act (Registration No. 333-39275), including any
documents or reports incorporated therein by reference.
"Repurchase Event" shall have the meaning to be provided in the
Supplemental Indenture.
"Rights Agreement" shall have the meaning to be provided in the
Supplemental Indenture.
"Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a delayed or continuous basis.
"Rule 144" means Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit a holder of
any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"Rules and Regulations" means the rules and regulations of the SEC
under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement was
declared effective by the SEC.
"SEC Reports" means the 1996 10-K, the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997, and the Company's definitive Proxy Statement for its 1997 Annual Meeting
of Stockholders, in each case as filed with the SEC.
"Securities" means, collectively, the Note and the Conversion Shares.
"Shares" means the Conversion Shares and the Interest Shares.
"Stockholder Approval" shall have the meaning to be provided in the
Supplemental
5.
Indenture.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Supplemental Indenture" means the First Supplemental Indenture, to be
dated as of February 4, 1998, by and between the Company and the Trustee in the
form attached hereto as ANNEX IV.
"Transaction Documents" means, collectively, this Agreement, the
Indenture, the Supplemental Indenture, the Notes, the Conversion Agent Agreement
and the other agreements, instruments and documents contemplated hereby and
thereby.
"Transfer Agent" means Xxxxx Xxxxxx Shareholder Services L.L.C. or any
successor thereof serving as transfer agent and registrar for the Common Stock.
"Trustee" means State Street Bank and Trust Company of California,
N.A., as Trustee.
"Violations" means
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC on or prior to
the Closing Date) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by the Company of any
representation, warranty, covenant, agreement or other term of any of the
Transaction Documents.
6.
2. PURCHASE AND SALE; PURCHASE PRICE
(a) PURCHASE. The Buyer hereby agrees to purchase, and the Company
hereby agrees to sell to the Buyer, on the Closing Date, the Notes in the
aggregate principal amount set forth on the signature page of this Agreement and
having the terms and conditions to be set forth in the Indenture and the
Supplemental Indenture.
(b) FORM OF PAYMENT. On or before the Closing Date, the Buyer shall
deposit an amount equal to the Purchase Price in escrow by delivering funds in
United States Dollars in the amount of the Purchase Price to the Buyer Escrow
Agent against delivery by the Company of the Notes, duly executed on behalf of
the Company, to the Buyer on or prior to the Closing Date. Delivery of the
Purchase Price to the Buyer Escrow Agent shall be made by wire transfer of funds
to:
Bank of America
ABA: 000000000
Account #: 0000000000
Account Name: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Identifier: 020422.0010
Such funds shall at all times remain the property of the Buyer, subject to the
terms of the Buyer Escrow Instructions, until required to be released to the
Company in accordance with the Buyer Escrow Instructions. By signing this
Agreement, the Buyer agrees to all of the terms and conditions of, and becomes a
party to, the Buyer Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full. Neither the
Company nor any creditor or stockholder of the Company or any person claiming
rights by, through or on behalf of the Company shall have any claim, lien,
equity, encumbrance or other right to or in respect of the funds or any other
property held pursuant to the Buyer Escrow Instructions prior to satisfaction of
the conditions to the release thereof to the Company in accordance with the
terms of this Agreement and the Buyer Escrow Instructions.
(c) CLOSING. The issuance and sale of the Notes shall occur on the
Closing Date at the Law Offices of Xxxxx X Xxxxx, Penthouse Suite, 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx. At the closing on the Closing Date (1) the Buyer
will pay the Purchase Price to the Company by release of an amount equal thereto
under the Buyer Escrow Instructions and (2) the Company will deliver the Notes
to the Buyer or its designee.
7.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) NOTE PURCHASE AGREEMENT. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the Buyer
in connection herewith and to consummate the transactions contemplated hereby
and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by
the Company, is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of Regulation D.
(c) SHORT POSITION. The Buyer and, to the best of Buyer's knowledge,
the Buyer's Affiliates do not as of the date of this Agreement and will not as
of the Closing Date, directly or indirectly, maintain a short position in the
Common Stock resulting from a "short sale" (as that term is defined in Rule 3b-3
under the 1934 Act as in effect on the date of this Agreement) or own any puts,
calls, options or other derivative securities in respect of the Common Stock.
(d) NON-CONTRAVENTION. The execution and delivery of this Agreement
and the purchase of the Notes by the Buyer pursuant hereto will not violate or
contravene any law, rule or regulation applicable to the Buyer, or any
applicable decree, judgment or order of any court, United States federal or
state regulatory body, administrative agency or other governmental body having
jurisdiction over the Buyer, except to the extent that such violation or
contravention would not have a material adverse effect on the ability of the
Buyer to perform its obligations under this Agreement.
(e) DOCUMENTS AND INFORMATION. The Buyer has received the
Registration Statement and the Prospectus, including the SEC Reports
incorporated by reference therein (but excluding certain exhibits thereto), and
has had an opportunity to review and to ask questions of the Company regarding
the Registration Statement and the Prospectus.
(f) CERTAIN CIRCUMSTANCES OF OFFERING. The Buyer first received an
offer to acquire the Notes either in connection with the preliminary prospectus
supplement, dated
8.
November 25, 1997, prepared by the Company, or directly from the Company, and
the Buyer has negotiated the purchase of the Notes solely and directly with the
Company and the buyers of the Other Notes.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as described in the
Prospectus and as currently conducted, and (ii) in the case of the Company, to
execute, deliver and perform its obligations under this Agreement, the Notes and
the other agreements executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby.
The Company has no Subsidiaries other than the Subsidiaries listed in Exhibit 21
to the 1996 10-K; none of such Subsidiaries is material to the Company. Except
for the stock of the Subsidiaries and as disclosed in the Registration
Statement, the Company does not own, directly or indirectly, any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, limited liability company, joint
venture, association or other entity (other than a minority interest in a
non-affiliated Company, which interest is not material to the Company).
(b) QUALIFICATIONS. The Company and each Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries taken as a whole.
(c) CAPITALIZATION. The capitalization of the Company as of
September 30, 1997 was as set forth in the Prospectus; the authorized Common
Stock consists of 30,000,000 shares, of which 19,273,817 shares were outstanding
on January 26, 1998; no shares of preferred stock of the Company are
outstanding; and on the Closing Date there will be no material increase in the
number of shares of Common Stock outstanding (except for not more than 10,000
shares issued upon the exercise of options and warrants outstanding on the date
hereof and except for any sale of shares of Common Stock which may be made
pursuant to the Direct Common Stock Offering) and no increase in the number of
shares of preferred stock outstanding. The Company does not have outstanding
any securities convertible into, exchangeable for, or otherwise entitling the
holder to acquire, shares of Common Stock other than options granted under the
stock option and similar plans which have been adopted by the Company and the
$6,000,000 convertible promissory note
9.
issued to Sanofi S.A. which is referenced in the Prospectus; and there will
be no antidilution or similar adjustment to such stock options which arises
by reason of issuance of the Notes and the Other Notes or the conversion
thereof in accordance with their terms or the issuance of the Purchasable
Shares pursuant hereto. The outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is subject to
personal liability solely by reason of being such a holder. None of the
outstanding shares of Common Stock or options to purchase shares of Common
Stock has been issued in violation of the preemptive rights of any
securityholder of the Company. No holder of any of the Company's securities
has any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement.
(d) MATERIAL LOSSES. Except as disclosed in the Prospectus, since
December 31, 1996, the Company has not sustained any loss or interference with
its business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, which loss or interference would
be material to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries
taken as a whole.
(e) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares and the
Purchasable Shares have been duly authorized and the Conversion Shares, when
issued upon conversion of the Notes, and the Interest Shares, when issued in
payment of interest on the Notes, and the Purchasable Shares, when issued
pursuant to this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. The holders of outstanding shares of capital stock
of the Company are not entitled to preemptive or other rights to subscribe for
the Shares or to purchase or otherwise acquire the Notes. The Company has duly
reserved 3,854,763 shares of Common Stock for issuance upon conversion of the
Notes and the Other Notes, and such shares shall remain so reserved, and the
Company shall from time to time reserve such additional shares of Common Stock
as shall be required to be reserved pursuant to the Notes and the Supplemental
Indenture, as long as the Notes are outstanding. The Common Stock is listed for
trading on Nasdaq and (1) the Company and the Common Stock, to the Company's
knowledge, meet the criteria for continued listing and trading on Nasdaq; (2)
the Company has not been notified since December 31, 1995 by the NASD of any
failure or potential failure to meet the criteria for continued listing and
trading on Nasdaq (other than in connection with the Company's settlement with
Sanofi, S.A., which matter the Company believes has been resolved to the
satisfaction of Nasdaq) and (3) no suspension of trading in the Common Stock is
in effect. The Company knows of no reason why the Shares will not be eligible
for listing on Nasdaq.
(f) CORPORATE AUTHORIZATION. The Transaction Documents have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by
10.
the Company and, assuming due execution and delivery by the Buyer, this
Agreement is, and the Indenture and the Supplemental Indenture will be, when
duly executed and delivered by the Company and the Trustee, and the
Conversion Agent Agreement will be, when executed and delivered by the
Company, the Trustee and the Conversion Agent, valid and binding obligations
of the Company enforceable in accordance with their respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally
and general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law; and the Notes have been duly
and validly authorized and, when authenticated by the Trustee and issued,
delivered and sold in accordance with this Agreement, the Indenture and the
Supplemental Indenture, will have been duly and validly executed,
authenticated, issued and delivered and will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or
at law) and entitled to the benefits provided by the Indenture and the
Supplemental Indenture.
(g) DESCRIPTION OF COMMON STOCK. The description of the Common Stock
in the Registration Statement and the Prospectus is, and at the Closing Date
will be, complete and accurate in all material respects.
11.
(h) NON-CONTRAVENTION. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of
the issuance of the Securities and the other transactions contemplated by the
Transaction Documents do not and will not, with or without the giving of
notice or the passage of time, or both, (i) result in any violation of any
term of the certificate of incorporation or by-laws of the Company, (ii)
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, or result in the modification
of, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties or assets are
bound or affected which conflict, breach, default, modification, lien,
security interest, charge or encumbrance would have a material adverse effect
on the business, properties, operations, condition (financial or other) or
results of operations of the Company and the Subsidiaries, taken as a whole,
or the transactions contemplated by the Transaction Documents or the
authority or ability of the Company to perform its obligations under the
Transaction Documents, (iii) violate or contravene any applicable law, rule
or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any
Subsidiary or any of their respective properties or assets which violation or
contravention would have a material adverse effect on the business,
properties, operations, condition (financial or other) or results of
operations of the Company and Subsidiaries, taken as a whole, or the
transactions contemplated by the Transaction Documents or the authority or
ability of the Company to perform its obligations under the Transaction
Documents, or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise
necessary for the Company or any Subsidiary to own or lease and operate any
of its material properties and to conduct its business or to make use thereof.
(i) APPROVALS. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company
is required to be obtained or made by the Company in connection with the
execution, delivery and performance of the Transaction Documents and the
issuance and sale of the Securities as contemplated by this Agreement and the
terms of the Notes, other than (1) such as have been obtained or made under
the 1933 Act and the Rules and Regulations and the 1939 Act and the 1939 Act
Rules and Regulations, (2) listing of the Shares on Nasdaq, (3) as may be
required under applicable state securities or "blue sky" laws, and (4) the
filing of the Prospectus Supplement with the SEC.
(j) CONDUCT OF BUSINESS. Except as set forth in the Prospectus,
since December 31, 1996, neither the Company nor any Subsidiary has (i)
incurred any material obligation or liability (absolute or contingent) other
than in the ordinary course of business; (ii) canceled, without payment in
full, any material notes, loans or other obligations receivable or other
12.
debts or claims held by it other than in the ordinary course of business;
(iii) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected
to lien any of its material properties, tangible or intangible, or rights
under any material contract, permit, license, franchise or other agreement;
(iv) conducted its business in a manner materially different from its
business as conducted on such date; (v) declared, made or paid or set aside
for payment any cash or non-cash distribution on any shares of its capital
stock; or (vi) consummated, or entered into any agreement with respect to,
any transaction or event which would constitute a Repurchase Event.
(k) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
Prospectus, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body presently pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary wherein an unfavorable decision, ruling or finding could have a
material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and
the Subsidiaries taken as a whole or the transactions contemplated by the
Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, the Transaction Documents; and to the best of the
Company's knowledge there is not pending or contemplated, and there has been
no, investigation by the SEC involving the Company or any director or officer
of the Company.
(l) LIABILITIES. Except as and to the extent disclosed, reflected
or reserved against in the financial statements of the Company and the notes
thereto included in the Prospectus or as otherwise described in the
Prospectus, subsequent to December 31, 1996, neither the Company nor any
Subsidiary has incurred any liability, debt or obligation of any nature
whatsoever which individually or in the aggregate are material to the Company
and the Subsidiaries taken as a whole, other than those incurred in the
ordinary course of their respective businesses.
(m) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there
has been no material adverse change and no material adverse development in
the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company and the Subsidiaries taken as a
whole, except as disclosed in the Prospectus.
13.
(n) INTELLECTUAL PROPERTY. Except as disclosed in the Prospectus,
to the knowledge of the Company after reasonable investigation conducted in
the normal course of business, the Company and the Subsidiaries own, or are
licensed or otherwise have the right to use, the material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, services marks and trade
names (collectively, "patent and proprietary rights") presently employed by
them or which are necessary in connection with the conduct of the business
now operated by them or proposed to be conducted by them, and neither the
Company nor any Subsidiary has received any written notice or otherwise has
actual knowledge of any infringement of or conflict with asserted rights of
others or any other claims with respect to any patent or proprietary rights,
or of any basis for rendering any patent and proprietary rights invalid or
inadequate to protect the interest of the Company or any of its Subsidiaries.
(o) COMPLIANCE WITH LAW AND OBLIGATIONS. Except as disclosed in
the Prospectus, neither the Company nor any Subsidiary is in violation of any
statute, law, rule, regulation, ordinance, decision or order of any
governmental agency or body or any court, domestic or foreign, including,
without limitation, those relating to the use, operation, handling,
transportation, disposal or release of hazardous or toxic substances or
wastes or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances or wastes, except where such
violations would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the
Subsidiaries taken as a whole; and the Company is not aware of any pending
investigation which would reasonably be expected to lead to such a claim
against the Company or any Subsidiary. The Company and each of the
Subsidiaries has performed in all material respects its obligations required
to be performed by it, and is not in default in any material respect, under
any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement, lease, contract or other
agreement or instrument to which it is a party or by which its property is
bound or affected. To the best knowledge of the Company and each of its
Subsidiaries, no other party under any material contract or other agreement
to which it is a party is in default in any respect thereunder.
14.
(p) INSURANCE. The Company and each Subsidiary maintains
insurance against loss or damage by fire or other casualty and such other
insurance, including but not limited to, product liability insurance, in such
amounts and covering such risks as is to the Company's knowledge usually
maintained by companies of comparable size engaged in the same or a similar
business and in the same geographic region as the Company and the
Subsidiaries, subject to customary deductibles.
(q) REGISTRATION STATEMENT, INDENTURE, ETC. (1) The Registration
Statement has been declared effective under the 1933 Act and no stop order or
other proceeding relating to the Registration Statement is pending or
threatened. The Indenture has been qualified under the 1939 Act.
(2) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein), at the time it was
first filed with the SEC, on the SEC Effective Date, on the date of execution
and delivery of this Agreement by the parties hereto and on the Closing Date
(and each such amendment and supplement at the time of its filing with the
SEC and on the Closing Date) did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
(3) The Prospectus as of its date, on the date of execution and
delivery of this Agreement by the parties hereto, and on the Closing Date did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading.
(4) On the SEC Effective Date, the date the Prospectus was first
filed with the SEC pursuant to Rule 424(b), on the date of execution and
delivery of this Agreement by the parties hereto and on the Closing Date and
when any amendment or supplement to the Prospectus is filed with the SEC on
or prior to the Closing Date, the Registration Statement and the Prospectus
(as amended or as supplemented if the Company shall have filed with the SEC
any amendment or supplement thereto), did and will comply with the applicable
provisions of the 1933 Act, the Rules and Regulations, the 1934 Act and the
rules and regulations thereunder, the 1939 Act and the 1939 Act Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the 1933 Act, the Rules and Regulations, the 1934 Act and the
rules and regulations thereunder.
(5) On the date of execution and delivery of this Agreement by the
parties hereto and on the Closing Date, the Indenture and the Supplemental
Indenture complied and will comply with all applicable provisions of the 1939
Act and the 1939 Act Rules and Regulations.
15.
(6) The Company meets the requirements for use of Form S-3 for
registration of the offer and sale of the Notes and Shares to the Buyer in
accordance with Rule 415 of the Rules and Regulations. Copies of the
Registration Statement and all amendments thereto and the Prospectus
Supplement, a copy of which Prospectus Supplement is attached hereto as ANNEX
III, have been delivered to the Buyer.
(r) INVESTMENT COMPANY. The Company is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(s) ABSENCE OF BROKERS, FINDERS, ETC. The Company has engaged Xxxx &
Attschal Capital LLC exclusively to provide financial transaction advice to the
Company relating to the Notes and the Company will be responsible for the fees
of Xxxx & Attschal. The Company has not engaged any underwriter, placement
agent, broker, finder or similar person in connection with the transactions
contemplated by this Agreement.
(t) CERTAIN ISSUANCES OF SECURITIES; CERTAIN NASD MATTERS. The
Company has not issued any shares of Common Stock or shares of any series of
preferred stock or other securities convertible into, exchangeable for, or
otherwise entitling the holder to acquire, shares of Common Stock which are
subject to Section 4460(i)(1)(D) of the rules of the NASD since January 20,
1997. Based upon the letter, dated February 2, 1998, from the NASD to the
Company, a copy of which has been provided to the Buyer, the issuance of the
Notes and the issuance of the Conversion Shares upon conversion of the Notes or
the Interest Shares in payment of interest on the Notes are not subject to a
requirement of Nasdaq for Stockholder Approval under Rule 4460(i) of Nasdaq, and
the Company will not be limited by Rule 4460(i) of Nasdaq with respect to the
number of Conversion Shares issuable upon conversion of the Notes or Interest
Shares issued in payment of interest on the Notes in order to remain in
compliance with the listing standards of Nasdaq (it being understood that no
representation is made herein with regard to the Purchasable Shares).
(u) RIGHTS AGREEMENT. Assuming that the Buyer does not hold any
shares of Common Stock other than as acquired upon conversion of the Notes, and
subject to compliance with the limitation on the number of shares of Common
Stock that may be held by the Buyer as contained therein, the execution and
delivery of this Agreement by the Company, the issuance of the Notes as
contemplated by this Agreement, the issuance of the Conversion Shares upon
conversion of the Notes and the other transactions contemplated by the
Transaction Documents will not result in the Buyer becoming an Acquiring Person,
as defined in the Rights Agreement; and the holders of the Notes will be
entitled with respect to the Shares and the Buyer shall be entitled with respect
to the Purchasable Shares, to the benefits available to the holders of Common
Stock under the Rights Agreement.
5. CERTAIN COVENANTS
16.
(a) NASDAQ LISTING; REPORTING STATUS. On or before the Closing Date,
the Company will file with Nasdaq an application or other document required by
Nasdaq for the listing of the Shares with Nasdaq and shall provide evidence of
such filing to the Buyer. So long as the Buyer beneficially owns any portion of
the Notes or any Shares, the Company will use its best efforts to maintain the
listing of the Common Stock on Nasdaq or another national securities exchange.
During the period of three years following the Closing Date, the Company shall
timely file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination. So long as the
Buyer owns the Notes or any Conversion Shares, the Company shall (1) use its
commercially reasonable best effort to furnish to the Buyer copies of all
Current Reports on Form 8-K filed by the Company with the SEC within three
business days after each such filing and (2) furnish to the Buyer copies of all
other reports and other information filed by the Company with the SEC pursuant
to Sections 13, 14(a), 14(c) and 15(d) of the 1934 Act promptly, but in no event
later than five days, after the same are filed with the SEC, other than in the
case of this clause (2) any such report or other information which is publicly
available through the SEC's XXXXX system on or prior to such fifth day.
(b) INDENTURE; SUPPLEMENTAL INDENTURE. The Company agrees to execute
and deliver to the Trustee (1) the Indenture in the form filed as Exhibit 4.2 to
the Registration Statement and (2) the Supplemental Indenture in the form
attached hereto as ANNEX IV, in each such case on or before the Closing Date.
(c) STATE SECURITIES LAWS. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Notes for sale to the Buyer pursuant to this Agreement and
the Shares for sale upon conversion of the Notes and for payment of interest on
the Notes under such of the securities laws of the States of Illinois and New
York as shall be applicable thereto. In connection with the foregoing
obligations of the Company in this Section 5(c), the Company shall not be
required (1) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(c), (2) to subject
itself to general taxation in any such jurisdiction, (3) to file a general
consent to service of process in any such jurisdiction, (4) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(5) to make any change in its charter or by-laws which the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders. The Company shall furnish the Buyer with copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities laws on or before the Closing Date.
(d) CERTAIN FUTURE FINANCINGS AND RELATED ACTIONS. (1) The Company
shall not make any assertion or claim contrary to the interpretation of the NASD
with respect to the
17.
inapplicability of the Stockholder Approval requirement under NASD Rule
4460(i) to the Notes and the Shares set forth in the letter, dated February
2, 1998, from the NASD to the Company.
(2) During the period from the date of this Agreement to the date
which is one year after the Closing Date, the Company shall not, without the
prior written consent of the Majority Holders, offer, sell, contract to sell or
issue (or engage any person to assist the Company in taking any such action) any
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire, any Common Stock at a price which fluctuates with the market price
of the Common Stock other than pursuant to this Agreement and the Other Note
Purchase Agreements.
(e) LIMITATION ON CERTAIN ACTIONS. From the date of execution and
delivery of this Agreement by the parties hereto to the date of issuance of the
Note, the Company (1) shall comply with Article Ten of the Indenture and Article
Five of the Supplemental Indenture as if the Notes were outstanding, (2) shall
not take any action which, if the Notes were outstanding, (A) would constitute
an Event of Default or, with the giving of notice or the passage of time or
both, would constitute an Event of Default or (B) would constitute a Repurchase
Event or, with the giving of notice or the passage of time or both, would
constitute a Repurchase Event.
(f) CONCERNING THE REGISTRATION STATEMENT.
(1) The Company will file the Prospectus Supplement, in the form
attached hereto as ANNEX III, with the SEC on or before the Closing Date. The
Company will not, on or prior to the Closing Date, file any amendment or
supplement to the Registration Statement or the Prospectus, unless a copy
thereof shall first have been submitted to the Buyer within a reasonable period
of time prior to the filing thereof and the Buyer shall not have objected
thereto in good faith.
18.
(2) The Company will notify the Buyer promptly, and will confirm such
advice in writing (A) of any request by the SEC on or prior to the Closing Date
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, (B) of the issuance by the SEC on or prior to the
Closing Date of any stop order suspending the effectiveness of the Registration
Statement or the initiation on or prior to the Closing Date of any proceedings
for that purpose or the threat thereof, (C) of the happening of any event prior
to the Closing Date that in the judgment of the Company makes any statement made
in the Registration Statement or the Prospectus untrue or that requires the
making of any changes in the Registration Statement or the Prospectus in order
to make the statements therein, in light of the circumstances in which they are
made, not misleading and (D) of receipt by the Company or any representative or
attorney of the Company on or prior to the Closing Date of any other
communication from the SEC relating to the Company, the Registration Statement,
any preliminary prospectus or the Prospectus. If at any time on or prior to the
Closing Date the SEC shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. The Company will
use its best efforts to comply with the provisions of and make all requisite
filings with the SEC pursuant to Rule 430A and to notify the Buyer promptly of
all such filings.
(3) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement which are required to be
complied with on or prior to the Closing Date.
(4) The Company shall not file any document under the 1934 Act before
the termination of the offering of the Notes to the Buyer if such document would
be deemed to be incorporated by reference into the Prospectus which is not
approved by the Buyer after reasonable notice thereof.
(5) The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earning statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a 12-month period beginning
not later than the first day of the Company's fiscal quarter next following the
SEC Effective Date and the first day of the Company's final quarter next
following the date the Prospectus Supplement is filed with the SEC.
(6) The Company shall use its commercially reasonable best efforts to
maintain the effectiveness of the Registration Statement or a successor
registration statement under the 1933 Act at all times that the Buyer shall have
the right to purchase any Purchasable Shares pursuant to Section 9.
(g) BEST EFFORTS. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Note set forth in
19.
Section 6 or 7, as the case may be, of this Agreement on or before the
Closing Date.
(h) DEBT OBLIGATION. So long as any portion of the Notes is
outstanding, the Company shall cause its books, records and financial
statements to reflect the Note as a debt of the Company in its unpaid
principal amount and, whenever appropriate, as a valid senior subordinated
debt obligation of the Company for money borrowed.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The Buyer understands that the Company's obligation to sell the
Notes to the Buyer pursuant to this Agreement is conditioned upon the
following (any or all of which may be waived by the Company in its sole
discretion):
(a) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(b) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct on the date of this Agreement
and shall be true and correct on the Closing Date as if given on and as of
the Closing Date (except for any representation given as of a specific date,
which representation shall be true and correct as of such date), and on or
before the Closing Date the Buyer shall have performed all covenants and
agreements of the Buyer required to be performed by the Buyer on or before
the Closing Date;
(c) The Registration Statement shall continue to be effective and
no stop order or similar proceeding relating to the Registration Statement
shall be pending or threatened; and
(d) No event which, if the Notes were outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage
of time or both, would constitute an Event of Default shall have occurred and
be continuing or (2) would constitute a Repurchase Event or, with the giving
of notice or the lapse of time, or both, would constitute a Repurchase Event
shall have occurred and be continuing.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE
The Company understands that the Buyer's obligation to purchase the
Notes is conditioned upon the following (any or all of which may be waived by
the Buyer in its sole discretion):
(a) On or before the Closing Date, the Trustee shall have executed
and delivered to the Company the Indenture in the form filed as Exhibit 4.2
to the Registration Statement and the Supplemental Indenture in the form
attached hereto as ANNEX IV;
20.
(b) On or before the Closing Date, the Transfer Agent and the
Trustee shall have executed and delivered to the Company the Conversion Agent
Agreement in the form attached hereto as ANNEX II;
(c) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(d) The representations and warranties of the Company contained in
this Agreement shall have been true and correct on the date of this Agreement
and, except for the approvals referred to in clauses (1) through (4) of
Section 4(i), which shall have been obtained on or before the Closing Date,
shall be true and correct on the Closing Date as if given on and as of the
Closing Date (except for any representation given as of a specific date,
which representation shall be true and correct as of such date), and on or
before the Closing Date the Company shall have performed all covenants and
agreements of the Company contained herein required to be performed by the
Company on or before the Closing Date;
(e) The Registration Statement shall remain effective; no
stop-order or similar proceeding relating to the Registration Statement shall
be pending or threatened; the Company shall have filed the Prospectus
Supplement with the SEC; and, on or after the date of execution and delivery
of this Agreement but on or before the Closing Date, the Company shall not
have made or filed with the SEC any amendment or supplement to the
Registration Statement or the Prospectus other than the Prospectus Supplement;
(f) No event which, if the Notes were outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage
of time, or both, would constitute an Event of Default shall have occurred
and be continuing or (2) would constitute a Repurchase Event or, with the
giving of notice or the passage of time, or both, would constitute a
Repurchase Event shall have occurred and be continuing;
(g) The Company shall have delivered to the Buyer its certificate,
dated the Closing Date, duly executed by its President and Chief Executive
Officer to the effect set forth in subparagraphs (c), (d), (e) and (f) of
this Section 7;
(h) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date,
(2) all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby
and (3) such other matters as reasonably requested by the Buyer;
(i) The receipt by the Buyer on the Closing Date of an opinion of
Xxxxxxx,
21.
Phleger & Xxxxxxxx LLP, counsel for the Company, dated the Closing Date,
addressed to the Buyer, in form, scope and substance reasonably satisfactory
to the Buyer, substantially in the form of ANNEX V attached hereto, and an
opinion of patent counsel for the Company, dated the Closing Date, addressed
to the Buyer, in form, scope and substance reasonably satisfactory to the
Buyer, substantially in the form of ANNEX VI attached hereto;
(j) On the Closing Date, (i) trading in securities on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not
have been suspended or materially limited and (ii) a general moratorium on
commercial banking activities in the State of California or the State of New
York shall not have been declared by either federal or state authorities; and
(k) On or before the Closing Date, the Company shall have obtained
and delivered copies to the Buyer of written confirmation, in form and
substance reasonably satisfactory to the Buyer, from Silicon Valley Bank and
each lender or lessor under the Company's lease lines.
8. INDEMNIFICATION AND CONTRIBUTION
(a) INDEMNIFICATION. (1) To the extent not prohibited by
applicable law, the Company will indemnify and hold harmless each Indemnified
Person against any Claims to which any of them may become subject under the
1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any Violation and relate to or result from any liability
or alleged liability of any Indemnified Person to any third party. Subject
to the restrictions set forth in Section 8(a)(2), the Company shall reimburse
each Indemnified Person, promptly as such expenses are incurred and are due
and payable, for any reasonable legal fees or other expenses incurred by them
in connection with defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(a)(1) shall not apply to: (I) amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, or (II) any Claim to the extent such Claim relates to or results
from any liability or alleged liability of such Indemnified Person to the
Buyer, any holder of the Other Notes or any of their respective Affiliates or
any Permitted Transferee thereof based upon a Violation. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of any Indemnified Person and shall survive the transfer of the
Securities by the Buyer.
22.
(2) Promptly after receipt by an Indemnified Person under this
Section 8(a) of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 8(a),
deliver to the indemnifying party a notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with
counsel reasonably satisfactory to the Indemnified Person; PROVIDED, HOWEVER,
that an Indemnified Person shall have the right to retain its own counsel
with the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person and any other party represented by such
counsel in such proceeding; PROVIDED, FURTHER, HOWEVER, that, to the extent
practicable, any such additional counsel shall only be retained with respect
to the specific claims involving differing interests. The failure to deliver
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 8(a),
except to the extent that the indemnifying party is prejudiced in its ability
to defend such action.
(b) OTHER RIGHTS. The indemnification provided in this Section
shall be in addition to any other rights or remedies available at law or in
equity.
9. PURCHASABLE SHARES
(a) RIGHT TO PURCHASE. The Buyer shall have the right (up to 30
days) to purchase from the Company at any time or from time to time prior to
expiration as provided in this Section 9, the number of shares of Purchasable
Shares shown on the signature page of this Agreement at the price per share
shown on the signature page of this Agreement, subject to adjustment as
provided in Sections 9(d), 9(e) and 9(f). The Buyer is not giving any
consideration for the rights under this Section 9.
(b) PURCHASE.
(1) In order to purchase any Purchasable Shares, the Buyer shall
give a notice to the Company which sets forth the number of Purchasable
Shares to be purchased by the Buyer and the aggregate purchase price therefor.
(2) The closing of each purchase of Purchasable Shares pursuant hereto
shall occur on the date which is ten Business Days after the Buyer shall have
given the notice specified in Section 9(b)(1) or such other date as mutually
agreed by the Company and the Buyer, subject to the right of the Company by
notice to the Buyer to delay such closing for a reasonable period of time
23.
(up to 30 days) based on the Registration Statement not being available for
sales of Purchasable Shares (each, a "Purchasable Share Closing Date").
(3) Prior to each Purchasable Share Closing Date, the Company shall
prepare and file with the SEC, and deliver to the Buyer, such supplement, if
any, to the Prospectus as the Company determines is required to sell the
Purchasable Shares to the Buyer on such Purchasable Share Closing Date.
(4) The right to purchase the Purchasable Shares as provided for in
this Section 9 shall expire upon the earlier to occur of (A) February 3,
2001; or (B) expiration thereof in accordance with the proviso in Section
9(e).
(c) CLOSING. On each Purchasable Share Closing Date, the Company
shall issue and deliver to the Buyer the number of Purchasable Shares
issuable pursuant hereto on such Purchasable Share Closing Date and the Buyer
shall make payment in same day funds to the Company of an amount equal to the
aggregate purchase price of such Purchasable Shares.
(d) ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the
holders of Common Stock shall have received, or (on or after the record date
fixed for the determination of stockholders eligible to receive) shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(2) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(3) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section
9(f)), then and in each such case the Buyer, upon the purchase of Purchasable
Shares as provided in this Section 9, shall be entitled to receive the amount
of stock and other securities and property (including cash in the cases
referred to in subdivisions (2) and (3) of this Section 9(d)) which the Buyer
would hold on the date of such exercise if on the date thereof the Buyer had
been the holder of record of the number of shares of Common Stock included in
the Purchasable Shares and had thereafter, during the period from the date
thereof to and including the date of such exercise, retained such shares and
all such other or additional stock and other securities and property
(including cash in the case referred to in
24.
subdivisions (2) and (3) of this Section 9(d)) receivable by the Buyer as
aforesaid during such period, giving effect to all adjustments called for
during such period by Section 9(e).
(e) EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case at any time or from time to time, the Company shall (1) effect a
reorganization, (2) consolidate with or merge into any other Person, (3)
effect an exchange of outstanding shares of the Company for securities of any
other Person or (4) transfer all or substantially all of its properties or
assets to any other Person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition of such
reorganization, consolidation, merger, share exchange, sale or conveyance,
the Company shall cause effective provisions to be made so that the Buyer
shall have the right thereafter, upon purchase of Purchasable Shares (in lieu
of the shares of Common Stock of the Company purchasable and receivable upon
exercise of the rights represented hereby immediately prior to such
transaction) to purchase the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation, merger, share exchange, sale or conveyance by a holder of the
number of shares of Common Stock that might have been received upon purchase
of Purchasable Shares immediately prior to such reorganization,
consolidation, merger, share exchange, sale or conveyance; PROVIDED, HOWEVER,
that in the event (a) the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of Common Stock of the Company
purchasable and receivable upon the exercise by the Buyer of the right to
purchase hereunder immediately prior to such transaction is in excess of the
purchase price per share hereunder in effect at the time of such
reorganization, consolidation, merger, share exchange, sale or conveyance
(after giving effect to any adjustment in such purchase price required to be
made under this Section 9), and (b) the securities, if any, to be received in
such reorganization, consolidation, merger, share exchange, sale or
conveyance are publicly traded or the consideration to be so received in
cash, then if the Company gives the Buyer at least 20 Business Days (or such
lesser period as the Company gives notice of such transaction to the holders
of the outstanding shares of Common Stock) prior notice of such
reorganization, merger, share exchange, sale or conveyance the Buyer's rights
under this Section 9 shall expire unless exercised prior to such
reorganization, consolidation, merger, share exchange, sale or conveyance.
Any such provision shall include provisions for adjustments in respect of
such shares of stock and other securities and property that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The provisions of this Section 9(e) shall apply to
successive reorganizations, consolidations, mergers, share exchanges, sales
and conveyances.
(f) ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, in each such event, the purchase price per Purchasable Share
shall, simultaneously with the happening of such event, be adjusted by
multiplying the purchase price in effect immediately
25.
prior to such event by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the purchase price per Purchasable Share then in effect. The
purchase price per Purchasable Share, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events
described herein in this Section 9(f). The Buyer shall thereafter, on the
exercise of its rights hereunder, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of
Common Stock which would be issuable on such exercise immediately prior to
such issuance by a fraction of which (i) the numerator is the purchase price
per Purchasable Share in effect immediately prior to such issuance and (ii)
the denominator is the purchase price per Purchasable Share in effect on the
date of such exercise.
(g) NOTICES OF RECORD DATE, ETC. In the event of
(1) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(2) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all of the assets of the Company to or consolidation
or merger of the Company with or into any other Person, or
(3) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to
the Buyer, at least ten days prior to such record date, a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation
or merger (to which the Company is a party and for which approval of any
stockholders of the Company is required, other than a consolidation or merger
in which the Company is the continuing corporation and that does not result
in any reclassification or change of the Common Stock outstanding),
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable on
26.
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up, and (iii) the
amount and character of any stock or other securities, or rights or options
with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the Persons or class of Persons to whom such
proposed issue or grant is to be offered or made. Such notice shall also
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or a
favorable vote of stockholders if either is required.
(h) RESERVATION OF STOCK, ETC. The Company will at all times
reserve and keep available out of its authorized but unissued shares of
capital stock, solely for issuance and delivery under this Section 9, a
sufficient number of shares of Common Stock to effect the purchase in full by
the Buyer of the Purchasable Shares and the exercise, conversion or exchange
of any security of the Company exercisable for, convertible into,
exchangeable for or otherwise entitling the holder to acquire shares of
Common Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect such exercise, conversion
or exchange, the Company shall take such action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number as
shall be sufficient for such purposes.
(i) NO TRANSFER. The rights of the Buyer under this Section 9 may
not be transferred without the consent of the Company, except by operation of
law.
(j) CERTAIN MATTERS. The Buyer acknowledges that the right to
purchase the Purchasable Shares hereunder is not a "security" for purposes of
the 1933 Act or the 1934 Act and that no "sale" of a security is being made
by reason of the provisions of this Section 9.
10. MISCELLANEOUS
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) HEADINGS. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(c) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(d) NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be in writing and shall be sent by mail,
personal delivery, by telephone line
27.
facsimile transmission or courier and shall be effective five days after
being placed in the mail, if mailed, or upon receipt, if delivered
personally, by telephone line facsimile transmission or by courier, in each
case addressed to a party at such party's address (or telephone line
facsimile transmission number) shown in the introductory paragraph or on the
signature page of this Agreement or such other address (or telephone line
facsimile transmission number) as a party shall have provided by notice to
the other party in accordance with this provision. In the case of any notice
to the Company, such notice should be addressed to the Company at its address
shown in the introductory paragraph of this Agreement, Attention: Senior Vice
President, Finance (telephone line facsimile number (000) 000-0000), and a
copy shall also be given to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, Two
Embarcadero Place, 0000 Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000,
Attention: Xxxxxx Xxxxxxxxxx, Esq. (telephone line facsimile transmission
number (000) 000-0000), and in the case of any notice to the Buyer, a copy
shall be given to: _______________________________________________________
Attention: _____________ (telephone line facsimile transmission number (___)
___-____).
(e) COUNTERPARTS. This Agreement may be executed in counterparts
and by the parties hereto on separate counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and
the same agreement. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(f) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the
Annexes, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein
or therein or in the Indenture. This Agreement, including the Annexes,
supersedes all prior agreements and understandings between the parties hereto
with respect to the subject matter hereof. This Agreement and the terms and
provisions hereof are for the sole benefit of only the Company, the Buyer and
their respective successors and permitted assigns.
(g) WAIVER. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, delay by a party in exercising such right
or remedy, or course of dealing between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or exercise of any other right or power.
(h) AMENDMENT. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and
for the purpose for which given. No course of dealing between the parties
hereto shall operate
28.
as an amendment of this Agreement.
(i) FURTHER ASSURANCES. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(j) ASSIGNMENT OF CERTAIN RIGHTS AND OBLIGATIONS. Unless the
Buyer shall have obtained the prior written consent of the Company, the
rights and obligations of the Buyer pursuant to Section 5 and Section 8 of
this Agreement may only be assigned to a Permitted Transferee and shall be
automatically assigned by the Buyer to any Permitted Transferee of all or any
portion of the Notes only if: (a) the Buyer agrees in writing with such
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company contemporary with such assignment, and (b) the
Company is, contemporaneously with such transfer or assignment, furnished
with notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such rights and obligations are
being transferred or assigned. Upon any such transfer, the Company shall be
obligated to such Permitted Transferee to perform all of its covenants under
Section 5 and Section 8 as if such Permitted Transferee were the Buyer.
(k) EXPENSES. Whether or not the closing occurs, all expenses
incurred in connection with registrations, filings or qualifications pursuant
to this Agreement shall be paid by the Company, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company,
fees of the Trustee and counsel for the Trustee and fees of the Conversion
Agent but excluding (a) fees and expenses of investment bankers retained by
the Buyer, (b) brokerage commissions incurred by the Buyer and (c) fees and
disbursements of counsel for the Buyer. Except as provided in this Section
10(k), each of the Company and the Buyer shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
(l) TERMINATION. (1) The Buyer shall have the right to terminate
this Agreement by giving notice to the Company at any time at or prior to the
Closing Date if the closing shall not have occurred on a Closing Date on or
before February 4, 1998, other than solely by reason of a breach of this
Agreement by the Buyer. Any such termination shall be effective upon the
giving of notice thereof by the Buyer. Upon such termination, the Buyer
shall have no further obligation to the Company hereunder and the Company
shall remain liable for any breach of this Agreement or the other documents
contemplated hereby which occurred on or prior to the date of such
termination.
(2) The Company shall have the right to terminate this Agreement by
giving notice to the Buyer at any time prior to the Closing Date if the closing
shall not have occurred on a Closing Date on or before February 4, 1998, other
than solely by reason of a breach of this Agreement by the Company. Upon such
termination, neither the Company nor the Buyer shall
29.
have any further obligation one to the other hereunder.
(m) SURVIVAL. The respective representations, warranties,
covenants and agreements of the Company and the Buyer contained in this
Agreement and the documents delivered in connection with this Agreement shall
survive the execution and delivery of this Agreement and the Closing
hereunder and delivery of and payment for the Notes, and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of the Buyer or any Person controlling or acting on behalf of
the Buyer or by the Company or any Person controlling or acting on behalf of
the Company.
(n) PRESS RELEASE, PUBLIC ANNOUNCEMENTS, ETC. The Company has
provided to the Buyer, and the Buyer has approved, a form of press release
proposed to be issued by the Company regarding this Agreement and the
transactions contemplated hereby. The Company and the Buyer shall have the
right to approve before issuance any other press releases or any other public
statements with respect to the transactions contemplated hereby; PROVIDED,
HOWEVER, that the Company shall be entitled, without the prior approval of
the Buyer, to make any press release or other public disclosure with respect
to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall
be provided with a copy thereof).
(o) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
30.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
the date set forth above.
Principal Amount: $
Purchase Price: $
Purchasable Shares: $
Purchase Price: $
CYGNUS, INC.
By:
___________________________________
Name:
Title:
Date:
___________________________________
31.
[NAME]
By:
___________________________________
Name:
Title:
Date:
___________________________________
Address:
Facsimile No.:
32.
