Exhibit 4.2
January 28, 1998
NaPro BioTherapeutics, Inc.
Unit A
0000 Xxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Vice President and Chief Financial Officer
Gentlemen:
Reference is made to (i) the Subscription Agreement (the "Subscription
Agreement") dated as of December 8, 1997 by and between NaPro BioTherapeutics,
Inc., a Delaware corporation (the "Company" or the "Corporation"), and Advantage
Fund II, Ltd. (the "Holder"); (ii) the Certificate of Designations of Series C
Senior Convertible Preferred Stock (the "Certificate"); and (iii) warrants to
purchase 175,000 shares of common stock of the Company, issued to the Holder
(the "Warrants"). Capitalized terms used herein and not defined shall have the
meanings assigned to them in the Subscription Agreement and the Certificate.
The Holder and the Company agree as follows:
(a) (1) The Company agrees to hold an annual meeting of stockholders
(the "Annual Meeting") no later than June 1, 1998. Prior to the Annual Meeting,
the Board of Directors of the Company shall recommend to the stockholders that
they (i) approve an amendment to the Company's Certificate of Incorporation
which shall increase the authorized Common Stock to 30,000,000 shares and (ii)
effect the Stockholder Approval. The Board of Directors of the Company will
solicit proxies to vote the outstanding shares of Common Stock in favor of the
actions specified in clauses (i) and (ii) of the immediately preceding sentence
and the Company shall otherwise use its best efforts to obtain approval of such
actions by the holders of the outstanding Common Stock. If the stockholders take
the action specified in clause (i) and fail to take the actions specified in
clause (ii) of the first sentence of this paragraph (a), the Company shall use
its best efforts to obtain a waiver by Nasdaq of the Stockholder Approval. The
Company may cease taking further steps to fulfill the requirements of this
paragraph (a) if at any time prior to performance in full of the Company's
obligations under this paragraph (a)(1) no shares of Series C Preferred Stock
are outstanding or the Company shall have redeemed all outstanding shares of
Series C Preferred Stock pursuant to Section 9(a) of the Certificate by payment
in full of the Redemption Price
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thereof after giving a Redemption Notice therefor in accordance with Section
9(a) of the Certificate.
(2) If the stockholders fail to take the actions specified in
clauses (i) and (ii) of the first sentence of paragraph (a)(1), so long as the
Company is in compliance in all material respects with its obligations to the
Holder, then on June 1, 1998, this Agreement shall terminate and the terms of
the Series C Preferred Stock and Warrants shall be those in effect on the date
hereof without giving effect to the amendments contained herein, except that the
terms of the proviso in the definition of "Conversion Price", as amended hereby,
and Section (k) hereof shall remain in effect.
(b) So long as the Company is in compliance in all material respects
with its obligations to the holders of the shares of Series C Preferred Stock,
including, without limitation, the obligations of the Company under the
Transaction Documents and this Agreement, during the period beginning on the
date hereof and ending December 31, 1998, the Holder hereby waives its rights to
require the Company to redeem any shares of Series C Preferred Stock due to a
Maximum Share Amount Inconvertibility, including any rights to receive notice.
(c) The Company hereby agrees that, at any time after the date hereof,
the Holder may exchange shares of Series C Preferred Stock for shares of Common
Stock in lieu of converting such shares in accordance with the Certificate and
the Holder hereby agrees that it will not convert any shares in accordance with
the Certificate so long as the Company is in compliance in all material respects
with its obligations to the holders of the shares of Series C Preferred Stock,
including, without limitation, the obligations of the Company under the
Transaction Documents and this Agreement. The terms and conditions pursuant to
which shares of Series C Preferred Stock may be exchanged for shares of Common
Stock shall in all respects be identical to the terms pursuant to which such
shares may be converted under the Certificate and the provisions of Section 10
of the Certificate are hereby incorporated herein by this reference as if set
forth in full herein, except as set forth below:
(1) each reference in the Certificate to "conversion" or
"convert" or other forms of such words (including in the definitions contained
therein) shall be deemed to be a reference to "exchange" or the appropriate form
of such word.
(2) Section 10 of the Certificate shall be deemed to have a new Section
10(c), which shall read as follows:
"(c) Limitation on Conversion Under Certain Circumstances.
(i) Notwithstanding any other provision
herein (A) a holder of Series C Preferred Stock shall
have no right to convert any shares of Series C
Preferred Stock (and accrued and unpaid dividends
thereon) if such conversion would result in the
aggregate number of shares of Common Stock issued
hereunder during the period
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beginning on the Issuance Date and ending on December
31, 1998 (whether through conversion or in payment of
dividends or otherwise) exceeding 2,300,000, and (B)
during the period beginning on January 1, 1998 and
ending on December 31, 1998, a holder of shares of
Series C Preferred Stock shall not be entitled to
convert shares of Series C Preferred Stock at a
Conversion Price that is less than $4.00 if such
conversion would result in the aggregate number of
shares of Common Stock issued hereunder (whether
through conversion or in payment of dividends or
otherwise) at a Conversion Price (or Computed Price,
in the case of shares issued as dividends) of less
than $4.00 during the calendar month of the proposed
conversion for which the determination under this
clause (B) is being made exceeding 150,000 shares of
Common Stock. The Conversion Price set forth in this
Section 10(c)(1) shall be subject to adjustment on
the same basis set forth in the parenthetical phrase
in clause (1) of the definition of the term
Conversion Price (as in effect prior to this
Agreement) for any such events which occur on or
after the effective date of this Agreement.
(ii) Notwithstanding any other provision
herein, until the Stockholder Approval is obtained, a
holder of Series C Preferred Stock shall have no
right to convert any shares of Series C Preferred
Stock (and accrued and unpaid dividends thereon) if
such conversion would result in the aggregate number
of shares of Common Stock issued hereunder (whether
through conversion or in payment of dividends or
otherwise) exceeding 1,250,000.
(iii) The provisions contained in this
Section 10(c) shall be of no further force and effect
if (i) the Company is acquired by another person by
means of any merger, consolidation, sale or all or
substantially all assets of the Company, share
exchange or other business combination (each, a
"Transaction"), (ii) the Company enters into any
Transaction where the shareholders of the Company
immediately prior to such Transaction do not
collectively own at least 51% of the outstanding
voting securities of the surviving corporation of
such Transaction immediately following such
Transaction, (iii) the Company enters into any
agreement for any such Transaction, (iv) a Tender
Offer is consummated for at least 51% of the
outstanding shares of Common Stock or (v) the Company
fails to comply in any material respect with its
obligations to any holder of shares of Series C
Preferred Stock, including, without limitation, its
obligations arising under or in connection with this
Certificate of Designations, the Subscription
Agreement, the Transfer Instruction, the Warrants (as
defined in the Subscription Agreement) and of the
letter
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agreement, dated as of January 6, 1998, by and between the Company and
Advantage Fund II, Ltd."
(3) The definition of Conversion Price in Section 1(b) of the
Certificate of Designations shall be deemed to read as follows:
"Conversion Price" for any Conversion Date means 95%
of the lowest Two-Day Average Trading Price during
the Measurement Period for the applicable Conversion
Date; provided, however, that (i) on any date on or
after March 1, 1998 but prior to June 1, 1998, the
Conversion Price shall not be greater than 110% of
the arithmetic average of the Trading Prices of the
Common Stock for the period of 30 consecutive Trading
Days ending one Trading Days prior to March 1, 1998
(the "March Cap") and (ii) on any date on or after
June 1, 1998, the Conversion Price shall not be
greater than the lesser of (A) 110% of the arithmetic
average of the Trading Price of the Common Stock for
the period of thirty (30) consecutive Trading Days
ending one Trading Day prior to June 1, 1998 and (B)
the March Cap (subject, in the case of the amount
determined in accordance with this proviso, to
equitable adjustments from time to time on terms
reasonably acceptable to the Corporation and the
Majority Holders for (1) stock splits, (2) stock
dividends, (3) combinations, (4) capital
reorganizations (5) issuance to all holders of Common
Stock rights or warrants to purchase shares of Common
Stock, (6) the distribution by the Corporation to all
holders of Common Stock of evidences of indebtedness
of the Corporation or cash (other than regular
quarterly cash dividends), (7) Tender Offers by the
Corporation or any Subsidiary for, or other
repurchases of shares of, Common Stock in one or more
transactions which, individually or in the aggregate,
result in the purchase of more than ten percent of
the Common Stock outstanding and (8) similar events
relating to the Common Stock, in each such case which
occur, or with respect to which "ex-" trading of the
Common Stock begins, on or after March 1, 1998 and on
or before the applicable Conversion Date, in each
case on a basis consistent with the adjustments set
forth in the definition of Trading Price); and
provided further, however, that if an Adjustment
Event occurs, then the Conversion Price in effect on
any date after such Adjustment Event occurs (and
whether or not such Adjustment Event continues) shall
be adjusted to each date on which the Conversion
Price is being determined as follows: (x) in the case
of the Conversion Price provided in the main clause
of this definition, the percentage used in computing
such Conversion Price shall be reduced at the rate of
2.5 percentage points for each 30 days that such
Adjustment Event continues (pro rated for any period
of less than 30
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days) and (y) in the case of the Conversion Price
provided in the first proviso to this definition, the
Conversion Price determined in accordance therewith
shall be reduced at the rate of 2.5% of such
Conversion Price (computed on the basis of the amount
such Conversion Price would otherwise be without
regard to any adjustment therein pursuant to this
clause (y)) for each 30 days on or after March 1,
1998 that such Adjustment Event continues (pro rated
for any period of less than 30 days).
(d) The parties agree that they shall have the rights and obligations
set forth below as if Section 7 of the Certificate had been amended to add a new
Section 7(a)(8), which shall read as follows:
"(8) If at any time following the Stockholder
Approval, the Company or the holder of shares of Series C
Preferred Stock becomes aware of any facts that would cause
any outstanding shares of Series C Preferred Stock to be
inconvertible, other than a Maximum Share Amount
Inconvertibility or a Registration Restriction
Inconvertibility, such person shall promptly give written
notice of such facts to the other person. Within 10 Business
Days after receipt of such notice by the receiving person, if
the parties agree that such inconvertibility exists, such
holder shall have the right by a Redemption Election given to
the Corporation to direct the Corporation to redeem the
portion of such holder's outstanding shares of Series C
Preferred Stock (which, if applicable, shall be all of such
holder's outstanding shares of Series C Preferred Stock) as
shall not, on the Business Day prior to the date of such
redemption, be convertible into shares of Common Stock by
reason other than a Maximum Share Amount Inconvertibility or
Registration Restriction Inconvertibility, at a price per
share equal to the Share Limitation Redemption Price. Such
Share Limitation Redemption Price shall be payable by the
Company in four equal monthly installments and the shares of
Series C Preferred Stock held by such holder shall be redeemed
in four equal installments as such payments are made. If at
any time subsequent to a determination pursuant to this
Section 7(a)(8) of the number of inconvertible shares of
Series C Preferred Stock any such inconvertibility shall occur
with respect to additional shares of Series C Preferred Stock
held by such holders, the provisions of this Section 7(a)(8)
shall be applicable successively to each instance of such
inconvertibility."
(e) The parties agree that they will not enforce their rights contained
in Section 9(a)(2) of the Certificate and will instead have the rights and
obligations set forth below as if Section 9(a)(2) of the Certificate had been
amended to read as follows:
(2) The Company shall not be entitled to give a
Redemption Notice or to redeem any shares of Series C
Preferred Stock with respect to which a holder has given a
Conversion Notice. Notwithstanding the giving of a Redemption
Notice, each holder of shares of Series C Preferred Stock
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shall be entitled to convert in accordance with Section 10
such shares of Series C Preferred Stock held by such holder
which are otherwise to be redeemed in accordance with such
Redemption Notice and would convert into shares of Common
Stock sufficient to cover open and short positions in the
Common Stock held by such holder on the date of the Redemption
Notice by giving a Conversion Notice at any time prior to the
later of (1) the date that is one Business Day prior to the
Redemption Date and (2) the date on which the Corporation pays
the Redemption Price of such shares to such holder; provided,
however, that if the Company defaults in payment of the
Redemption Price, such holder shall thereafter be entitled to
convert all of such holder's shares of Series C Preferred
Stock.
(f) The definitions of "Redemption Date" and "Redemption Price" in
Section 1(b) of the Certificate shall be deemed to read as follows:
"Redemption Date" means, as applicable, a 1998 Redemption Date
or a Subsequent Redemption Date.
"Redemption Price" means, as applicable, the 1998 Redemption
Price or the Subsequent Redemption Price. The 1998 Redemption
Price shall be payable on any 1998 Redemption Date and the
Subsequent Redemption Price shall be payable on any Subsequent
Redemption Date.
(g) The following definitions shall be deemed to be added to Section 1(b)
of the Certificate in the appropriate alphabetical order:
"1998 Redemption Date" means each date on or prior to December
31, 1998 on which the Corporation is required to redeem shares
of Series C Preferred Stock by reason of the exercise of its
option to do so in accordance with Section 9(a).
"1998 Redemption Price" means an amount in cash equal to the
sum of (a) the product obtained by multiplying (i) the sum of
(A) $1,000 plus (B( an amount equal to the accrued but unpaid
dividends on the share of Series C Preferred Stock to be
redeemed to the date of payment of the Redemption Price times
(ii) 130% plus (b) an amount equal to accrued and unpaid
Arrearage Interest on dividends in arrears on such share of
Series C Preferred Stock (determined in accordance with
Section 5(a)) to the Redemption Date.
"Subsequent Redemption Date" means each date beginning on
January 1, 1999 on which the Corporation is required to redeem
shares of Series C Preferred Stock by reason of the exercise
of its option to do so in accordance with Section 9(a).
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"Subsequent Redemption Price" means an amount in cash equal to
the sum of (a) the product obtained by multiplying (i) the sum
of (A) $1,000 plus (B) an amount equal to the accrued but
unpaid dividends on the share of Series C Preferred Stock to
be redeemed to the date of payment of the Redemption Price
times (ii) 110% plus (b) an amount equal to accrued and unpaid
Arrearage Interest on dividends in arrears on such share of
Series C Preferred Stock (determined in accordance with
Section 5(a)) to the Redemption Price.
(h) On and after the date hereof, so long as paragraph (c) hereof
remains in effect, the Company shall treat any request for conversion of Series
C Preferred Stock submitted by a holder in accordance with the terms and
conditions of the Certificate as a request or exchange in accordance with the
terms and conditions hereof.
(i) Within 10 Business Days after the date hereof, the Company will (1)
execute and deliver the Transfer Agent Instructions in a form to be agreed and
thereby irrevocably instruct American Stock Transfer & Trust Company, as
Transfer Agent and Registrar (the "Transfer Agent"), to issue certificates for
the Common Stock from time to time upon exchange of the Series C Preferred
Shares in such amounts as specified from time to time to the Transfer Agent in
the Conversion Notices surrendered in connection with such exchanges and (2)
appoint the Transfer Agent the exchange agent for the Series C Preferred Stock.
The certificates for the Common Shares shall be registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each exchange of Series C Preferred Shares. The Company warrants
that no instruction other than such instructions referred to in this Section (i)
will be given by the Company to the Transfer Agent and that the Common Stock
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement. Nothing in this Section (i)
shall limit in any way the Holders' obligations and agreement to comply with the
registration requirements of all applicable securities laws upon any resale of
Common Stock by the Holder. If the Holder provides the Company with an opinion
of counsel reasonably satisfactory in form, scope and substance to the Company
that registration of a resale by the Holder of any of the Common Stock by the
Holder of any of the Common Stock is not required under the 1933 Act, the
Company shall permit the transfer of such Common Stock and promptly instruct the
Company's transfer agent to issue upon transfer no later than three days after
receipt of such opinion one or more share certificates in such name and in such
denominations as specified by the Holder.
(j) Any notice of exchange of shares of Series C Preferred Stock by a
Holder pursuant hereto shall be in the form of the Conversion Notice included in
the Certificate.
(k) The definition of "Purchase Price" in the Warrants is amended by
deleting "$10.00" and replacing it with "$2.50."
(l) (1) Within five Business Days of the date hereof, the Company shall
(i) file a Current Report on Form 8-K describing the terms of this Amendment
Agreement (the "8-K") and (ii) make a good faith determination within five days
after execution of this
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Agreement of whether, pursuant to Section 8 of the Subscription Agreement, the
Company is required to file an additional Registration Statement or to amend the
existing Registration Statement and notify the Holder in writing of such
determination. Notwithstanding Section 8(a) of the Subscription Agreement, if
the Company so determines that such a filing is required, the Company shall file
such Registration Statement within 15 days after the date hereof or such
amendment within five Business Days after the date hereof.
(2) This Agreement constitutes a notice pursuant to Section
8(b)(5) of the Subscription Agreement and accordingly the Holder agrees that it
will not sell any securities pursuant to the Prospectus until the Company gives
the Holder notice that it may thereafter do so. The Company hereby confirms that
it will use its best efforts to make the Prospectus available within five
Business Days after the date hereof.
(3) During the period beginning on the date hereof and ending
on the earliest to occur of (i) effectiveness of an amendment to the existing
Registration Statement or (ii) a good faith determination by the Company that no
such amendment is required and the filing of the 8-K, or (iii) the date which is
30 days after the date of this Agreement, the Holder (A) waives its rights under
Section 11 of the Certificate to require the Company to redeem any shares of
Preferred Stock by reason of clause (5) of the definition of Optional Redemption
Event and (B) agrees that no Adjustment Event shall be deemed to have occurred
with respect to the Registration Statement.
(4) Notwithstanding Section 8(a) of the Subscription
Agreement, if the Company is required, pursuant to Section 8 of the Subscription
Agreement, to file an additional Registration Statement to register shares of
Common Stock issuable upon conversion of the Series C Preferred Stock following
the Stockholder Approval, it will do so within 15 days after obtaining the
Stockholder Approval. Notwithstanding any inconsistent provision in Section 8 of
the Subscription Agreement, the Company will use its best efforts to have such
Registration Statement declared effective as soon as possible but in no event
later than 75 days after obtaining the Stockholder Approval. Such Registration
Statement and the related prospectus shall otherwise be deemed to be included in
the terms ARegistration Statement@ and AProspectus.@ During the period beginning
on the date on which the Stockholder Approval is effected and ending on the
earlier to occur of (i) effectiveness of such additional Registration Statement
or (ii) the date that is 75 days after the date on which the Stockholder
Approval is effected, the Holder agrees that no Adjustment Event shall be deemed
to have occurred with respect to the Registration Statement.
(m) Prior to transferring any shares of Preferred Stock, the Holder
shall provide the transferee with a copy of this Agreement and such transferee
shall agree in writing to be bound by the terms hereof. The Company agrees to be
bound by the terms of this Agreement for the benefit of each such transferee.
(n) The Holder represents and warrants that it has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this
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Agreement and the Transaction Documents and to consummate the transactions
contemplated hereby and thereby; and this Agreement has been duly authorized,
executed and delivered on behalf of the Holder and, assuming due execution and
delivery by the Company, is a valid and binding agreement of the Holder
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium 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.
(o) The Company represents and warrants to the Holder that:
(1) The Company has duly reserved 1,250,000 shares of Common
Stock as the Conversion Shares and 175,000 shares of Common Stock as the Warrant
Shares, and such shares shall remain so reserved (subject to reduction from time
to time for shares of Common Stock issued upon conversion of Preferred Shares
and exercise of the Warrant), 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 Certificate of Designations, as long as the Preferred Shares are
convertible, and pursuant to the Warrants, so long as the Warrants are
exercisable. The Common Stock is listed for trading on Nasdaq and (1) the
Company and the Common Stock meet the criteria for continued listing and trading
on Nasdaq; (2) the Company has not been notified since January 1, 1995 by the
NASD of any failure or potential failure to meet the criteria for continued
listing and trading on Nasdaq and (3) no suspension of trading in the Common
Stock is in effect. The Company knows of no reason that the Common Shares will
not be eligible for listing on Nasdaq.
(2) This Agreement has been duly authorized, executed and
delivered on behalf of the Company and this Agreement is, assuming due execution
by the Holder, is a valid and binding obligation of the Company enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
general principles of equity, regardless of whether endorsement is considered in
a proceeding in equity or at law.
(3) The execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated by do not and will
not, with or without the giving of notice or the lapse of time, or both, (i)
result in any violation of any term of the certificate of incorporation or
by-laws of the Company or any Subsidiary, (ii) conflict with or result in a
breach by the Company or any Subsidiary 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 or any Subsidiary 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, (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
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body, administrative agency or other governmental body having jurisdiction over
the Company or any Subsidiary or any of their respective properties or assets 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 their respective properties
and to conduct any of their respective businesses or the ability of the Company
or any Subsidiary to make use thereof.
(4) No authorization, approval or consent of 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
by the Company or any Subsidiary for (1) the execution, delivery and performance
by the Company of this Agreement, (2) the issuance and sale of shares of Common
Shares upon conversion of, or in payment of dividends on, the Preferred Shares
and upon exercise of the Warrants as contemplated by the Certificate and the
Warrants, (3) the issuance of Redemption Price Notes pursuant to the Certificate
and (4) the performance by the Company of its other obligations under the
Transaction Documents, other than (1) listing of the additional Common Shares on
Nasdaq, (2) registration of the resale of the Common Shares under the 1993 Act
as contemplated by Section 8, (3) as may be required under applicable state
securities or "blue sky" laws.
(5) Once the Stockholder Approval has been obtained and a
certificate of amendment to the Company's certificate of incorporation has been
filed to increase the number of authorized shares of Common Stock, the
additional shares of Common Stock issuable upon conversion or exchange of the
shares of Series C Preferred Stock will be duly authorized and, upon issuance
upon conversion or exchange of the shares of Series C Preferred Stock, will be
validly issued and fully paid and non-assessable.
(p) The parties hereto agree that the condition set forth on the signature
page hereto has been satisfied.
* * * * *
This Amendment Agreement is conditioned upon the amendment of the terms
of at least 80% of the outstanding principal amount of the Company's 5% Senior
Convertible Notes due June 4, 2000, substantially on the terms set forth on
Exhibit A to the Agreement in Principle, dated as of January 6, 1998 by and
among the Company and holders named therein.
ADVANTAGE FUND II, LTD.
By: /s/
Acknowledged and agreed:
NAPRO BIOTHERAPEUTICS, INC.
By: /s/ Xxxxxx X. Link, Jr.
Date:1/28/98
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