Exhibit 4.5
PREFERRED STOCK INVESTMENT AGREEMENT
AGREEMENT dated as of August 29, 1996 between Xxxxxxx Pharmaceutical
Corporation, a New Jersey corporation (the "Company") and the investor whose
name is set forth at the foot of this Agreement (the "Investor").
The parties hereto agree as follows:
ARTICLE I.
Purchase and Sale of Preferred Stock
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Section 1. Purchase and Sale of Preferred Stock. Upon the
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following terms and conditions, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, [_________] shares
of the Company's 5% Convertible Preferred Stock (the "Shares" or the "5%
Preferred") having the rights, designations and preferences set forth in
Schedule I hereto.
Section 2. Purchase Price. The purchase price for the Shares
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(the "Purchase Price") shall be $25 per share.
Section 3. The Closing.
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(a) The closing of the purchase and sale of the Shares (the "Closing"),
shall take place at the offices of the Company, at 10:00 a.m., local
time on the later of the following: (i) the date on which the last to be
fulfilled or waived of the conditions set forth in Article IV hereof and
applicable to the Closing shall be fulfilled or waived in accordance
herewith, or (ii) such other time and place and/or on such other date as
the Investor and the Company may agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."
(b) On the Closing Date, the Company shall deliver to the Investor
certificates representing the Shares registered in the name of the
Investor or
deposit such Shares into accounts designated by the Investor, and the
Investor shall deliver to the Company the Purchase Price for all the
Shares by cashier's check or wire transfer in immediately available
funds to such account as shall be designated in writing by the Company.
In addition, each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
Section 4. Covenant to Register.
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(a) For purposes of this Section, the following definitions shall apply:
(i) The terms "register," "registered," and "registration" refer to a
registration under the Securities Act of 1933, as amended (the "Act"),
effected by preparing and filing a registration statement or similar
document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement, document or amendment
thereto.
(ii) The term "Registrable Securities" means the stock issuable upon
conversion of the Shares, or upon conversion of any 5% Preferred or
other stock issued in payment of dividends on the Shares, or otherwise
issuable pursuant to this Agreement or the provisions of Schedule I
hereto (excluding, however, the 5% Preferred as such), and any
securities of the Company or securities of any successor corporation
issued as, or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of,
the Shares.
(iii) The term "holder of Registrable Securities" means the Investor and
any permitted assignee of registration rights pursuant to Section
1.4(h).
(b) The Company shall, as expeditiously as possible following the Closing, file
a registration statement on Form S-3, or if Form S-3 is not then available,
another appropriate form, covering all the Registrable Securities, and
shall use its best
efforts to cause such registration statement to become effective by the
90th calendar day after the Closing Date (the "Initial Registration"). In
the event such registration is not so declared effective or does not
include all Registrable Securities, a holder of Registrable Securities
shall have the right to require by notice in writing that the Company
register all or any part of the Registrable Securities held by such holder
(a "Demand Registration") and the Company shall thereupon effect such
registration in accordance herewith (which may include adding such shares
to an existing shelf registration). The parties agree that if the holder
of Registrable Securities demands registration of less than all of the
Registrable Securities, the Company, at its option, may nevertheless file a
registration statement covering all of the Registrable Securities. If such
registration statement is declared effective with respect to all
Registrable Securities and the Company is in compliance with its
obligations under Subsections (d)(i) through (v) of this Section 1.4, the
demand registration rights granted pursuant to this Subsection (b) (i)
shall cease. If such registration statement is not declared effective with
respect to all Registrable Securities or if the Company is not in
compliance with said obligations the demand registration rights described
herein shall remain in effect. The Company shall provide holders of
Registrable Securities reasonable opportunity (at least 5 business days) to
review any such registration statement or amendment or supplement thereto
prior to the filing thereof.
(i) The Company shall not be obligated to effect a Demand
Registration under Subsection (b)(i) above (a) if all of the Registrable
Securities held by the holder of Registrable Securities which are
demanded to be covered by the Demand Registration are, at the time of
such demand, included in an effective registration statement and the
Company is in compliance with its obligations under Subsection (d) (i)
through (v) of this Section 1.4, (b) if all of the Registrable
Securities may be sold under Rule 144(k) of the Act and the Company's
transfer agent has accepted an instruction from the Company to such
effect, or (c) at any time after three years from the date of the
Closing.
(ii) The Company may suspend the effectiveness of any such
registration effected pursuant to this Subsection (b) in the event, and
for such period of time as, such a suspension is required by the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Company will use its best efforts to cause such suspension to terminate
at the earliest possible date.
(iii) (A) If the registration statement covering all Registrable
Securities is not effective by the 90th calendar day after the Closing
Date, then the Company shall pay the Investor in cash an amount equal to
3% of the total Purchase Price of Shares and any Registrable Securities
then held by the Investor for each 30 day period thereafter until such
registration statement is effective (pro-rata as to a period of less
than 30 days). (B) If following such effectiveness, during the calendar
year following the Closing Date, either the effectiveness of the
Registration Statement is suspended or a current prospectus meeting the
requirements of Section 10 of the Act is not available for delivery by
the Investor (either, a "suspension"), an amount equal to 3% of the
total Purchase Price of Shares and any Registrable Securities then held
by Investor shall be paid to the Investor in cash, or at the Company's
option, in additional shares of 5% Convertible Preferred Stock, for each
30 days of such suspension (pro-rata as to a period of less than 30
days). (C) If during the second calendar year following the Closing
Date, there is a suspension for a period or periods aggregating more
than 30 days, an amount equal to 3% of the total Purchase Price of
Shares and any Registrable Securities then held by Investor shall be
paid to the Investor in cash, or at the Company's option, in additional
shares of 5% Convertible Preferred Stock, for each 30 days of such
suspension in excess of the initial 30 days (pro-rata as to a period of
less than 30 days). (D) Any amount payable pursuant to the foregoing
provisions of this subsection (iv) shall
be paid on or before the fifth day following the end of the calendar
month in which such payment obligation arose. For purposes of this
subsection (iv), any shares of 5% Convertible Preferred Stock to be
issued in satisfaction of the Company's obligation shall be valued at
the Liquidation Preference (as defined in Schedule I hereto) of a Share
issued on the Closing Date. The "Purchase Price" of Registrable
Securities shall be (1) if derived from conversion or substitution of
Shares, the Purchase Price of such Shares, and (2) if received in
satisfaction of a Company obligation, the dollar amount of such
obligation. (E) This subsection is in addition to the provisions of
Section 7.2(a) hereof.
(c) If the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the
Investor) any of its stock or other securities under the Act in connection
with a public offering of such securities (other than a registration on
Form X-0, Xxxx X-0 or other limited purpose form) and all Registrable
Securities have not theretofore been included in a registration statement
under Subsection (b) of this Section 1.4 which remains effective, the
Company shall, at such time, promptly give all holders of Registrable
Securities written notice of such registration. Upon the written request
of any holder of Registrable Securities given within twenty (20) days after
receipt of such notice by the holder of Registrable Securities, the Company
shall use its best efforts to cause to be registered under the Act all
Registrable Securities that such holder of Registrable Securities requests
to be registered. However, the Company shall have no obligation under this
Subsection (c) if (i) the Registrable Securities may be sold without
registration under Rule 144(k) and the Company's transfer agent has
accepted an instruction from the Company to such effect, or (ii) the
Registration Statement is filed more than three years after the date of
closing, or (iii) to the extent that, with respect to any underwritten
offering initiated by the Company later than twelve months following the
Closing or initiated at the demand of Yamanouchi Pharmaceutical Co., Ltd.
or the purchasers of Common Stock (or their assignees) pursuant to the
Stock Purchase Agreements dated as of July 17, 1996 between the Company and
certain entities advised by Dimensional Fund Advisors, Inc., the managing
underwriter of such offering reasonably notifies such holder(s) in writing
of its determination that the Registrable Securities or a portion thereof
shall be excluded therefrom.
(d) Whenever required under this Section 1.4 to effect the registration
of any Registrable Securities, including, without limitation, the Initial
Registration, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration to become effective as provided in Section 1.4(b)(i), and
keep such registration statement effective for so long as any holder of
Registrable Securities desires to dispose of the securities covered by
such registration statement; provided, however, that in no event shall
the Company be required to keep the Registration Statement effective for
a period greater than three years from the date of the Closing.
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities
covered by such registration statement and notify the holders of the
filing and effectiveness of such Registration Statement and any
amendments or supplements.
(iii) Furnish to each holder of Registrable Securities such numbers of
copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the Act, copies of the registration
statement, any amendment or supplement to any thereof and any documents
incorporated by reference therein and such other documents as such
holder of Registrable Securities may reasonably require in order to
facilitate
the disposition of Registrable Securities owned by such holder of
Registrable Securities.
(iv) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the
holder of Registrable Securities, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any
such states or jurisdictions.
(v) Notify each holder of Registrable Securities immediately of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and use its best
efforts to promptly update and/or correct such prospectus.
(vi) Furnish, at the request of any holder of Registrable Securities,
(1) an opinion of counsel of the Company, dated the effective date of
the registration statement, in form and substance reasonably
satisfactory to the holder and its counsel and covering, without
limitation, such matters as the due authorization and issuance of the
securities being registered and certain matters pertaining to disclosure
under and compliance with securities laws by the Company in connection
with the registration thereof and (2) a "comfort" letter or letters of
the Company's independent public accountants in form and substance
reasonably satisfactory to the holder and its counsel.
(vii) Use its best efforts to list the Registrable Securities covered by
such registration statement with any national market or securities
exchange on which such securities are then listed;
(viii) Make available for inspection by the holder of Registrable
Securities, upon request, all SEC Documents (as defined below) filed
subsequent to the Closing and require the Company's officers, directors
and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
(ix) Furnish to each holder of Registrable Securities prompt notice of
the commencement of any stop-order proceedings under the Act, together
with copies of all relevant documents in connection therewith, and use
its best efforts to obtain withdrawal of any such stop order as soon as
possible.
(e) Upon request of the Company, each holder of Registrable Securities
will furnish to the Company in connection with any registration under this
Section such information regarding itself, the Registrable Securities and
other securities of the Company held by it, and the intended method of
disposition of such securities as shall be reasonably required to effect
the registration of the Registrable Securities held by such holder of
Registrable Securities. The intended method of disposition (Plan of
Distribution) of such securities as so provided by Investor shall be
included without alteration in the Registration Statement covering the
Registrable Securities and shall not be changed without written consent of
the Investor.
(f) The Company shall indemnify, defend and hold harmless each holder of
Registrable Securities which are included in a registration statement
pursuant to the provisions of Subsections (b) or (c) and each of its
officers, directors, employees, agents, partners or controlling persons
(within the meaning of the Act) (each, an "indemnified party") from and
against, and shall reimburse such indemnified party with respect to, any
and all claims, suits, demands, causes of action, losses, damages,
liabilities, costs or expenses ("Liabilities") to which such indemnified
party may become subject under the Act or otherwise, arising from or
relating to (A) any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or (B)
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or omission so made in strict conformity with information
furnished by such indemnified party in writing specifically for use in the
registration statement.
(i) In the event of any registration under the Act of Registrable
Securities pursuant to Subsections (b) or (c), each holder of such
Registrable Securities hereby severally agrees to indemnify, defend and
hold harmless the Company, and its officers, directors, employees, agents,
partners, or controlling persons (within the meaning of the Act) (each, an
"indemnified party") from and against, and shall reimburse such indemnified
party with respect to, any and all Liabilities to which such indemnified
party may become subject under the Act or otherwise, arising from or
relating to (A) any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or (B) the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, that
such holders will be liable in any such case to the extent, and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in such registration statement, prospectus or amendment or supplement
thereto in reliance upon and in conformity with written information
furnished by such holder specifically for use in the preparation thereof.
(ii) Promptly after receipt by any indemnified party of notice of the
commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against another party (the
"indemnifying party") hereunder, notify such party in writing thereof, but
the omission so to notify such party shall not relieve such party from any
Liability which it may have to the indemnified party other than under this
section and shall only relieve it from any Liability which it may have to
the indemnified party under this section if and to the extent an
indemnifying party is materially prejudiced by such omission. In case any
such action shall be brought against any indemnified party and such
indemnified party shall notify an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to
the extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to the indemnified party of its election
so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to the indemnified party under this section for any
legal expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation and
of liaison with counsel so selected, provided, however, that if the
defendants in any such action include both parties and the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available
to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate
counsel and to assume such legal defenses and otherwise to participate in
the defense of such action, with the reasonable expenses and fees of one
such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(g) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to Subsections (b) or (c), all fees, costs
and expenses of and incidental to such registration,
inclusion and public offering shall be borne by the Company; provided,
however, that any securityholders participating in such registration shall
bear their pro-rata share of the underwriting discounts and commissions, if
any, incurred by them in connection with such registration.
(i) The fees, costs and expenses of registration to be borne by the
Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state
securities or Blue Sky laws of any jurisdiction or jurisdictions in which
securities to be offered are to be registered and qualified. Subject to
appropriate agreements as to confidentiality, the Company shall make
available to the holders of Registrable Securities and their counsel its
documents and personnel for due diligence purposes, and will pay the
reasonable fees and expenses of one counsel designated by a majority in
interest of the holders of Registrable Securities included in the
Registration Statement, if such a firm is so designated. Except as
otherwise provided herein, fees and disbursements of counsel and
accountants for the selling securityholders shall be borne by the
respective selling securityholders.
(h) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 1.4 may be assigned by
Investor to a transferee or assignee of the entire holding of the Investor
or of 20% or more but not less than 10,000 of the Shares or the Registrable
Securities derived from such Shares. Within a reasonable time after such
transfer the Investor shall notify the Company of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned. Such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act. Any
transferee asserting registration rights hereunder shall be bound by the
applicable provisions of this Agreement.
(i) Subject to the rights of (a) Yamanouchi Pharmaceutical Corporation,
Ltd. and its designees under the Stock Purchase Agreement dated January 22,
1992, which are hereby confirmed, (b) the holders of Common Stock sold by
the Company pursuant to the Stock Purchase Agreements dated on or about
July 17, 1996, (c) the holders of the Warrants and shares issuable to the
Placement Agents under this offering and the offering of shares issued
pursuant to the Stock Purchase Agreements dated on or about July 17, 1996,
and (d) the Agreement dated August 9, 1996 with Xxxxxx X. Xxxxxxxx, from
and after the date of this Agreement, the Company shall not agree to allow
the holders of any securities of the Company to include any of their
securities in any registration statement filed by the Company pursuant to
Subsection (b) unless such inclusion will not reduce the amount of the
Registrable Securities included therein; and none of said existing
agreements will reduce the amount of Registrable Securities which the
holders may include in the Initial Registration or a non-underwritten
Demand Registration.
5. Company Standoff. Except in a business combination, or under existing
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employee stock incentive or purchase plans, the Company shall not effect any
public sale or distribution of any securities similar to the Registrable
Securities or any securities exercisable for or convertible or exchangeable into
the Registrable Securities during the 14 days prior to, and during the 90 days
immediately following the effective date of any registration statement filed
pursuant to Section 1.4(b); provided, however, that the Company may effect such
public sale or distribution during the 90 days immediately following the
effective date of such registration statement if such sale or distribution of
securities is at a price equal to or greater than 120% of the Conversion Cap (as
defined in Section 4(c)(ii) of Schedule I hereto).
ARTICLE II.
Representations and Warranties
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Section 1. Representations and Warranties of the Company. The
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Company hereby makes the following representations and
warranties to the Investor:
(a) Organization and Qualification. The Company is a corporation
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duly incorporated and existing in good standing under the laws of
the State of New Jersey and has the requisite corporate power to own
its properties and to carry on its business as now being conducted.
The Company does not have any subsidiaries except as listed in
Exhibit A hereto. The Company and each such subsidiary, if any, is
duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would
not have a Material Adverse Effect. "Material Adverse Effect" means
any adverse effect on the business, operations, properties,
prospects, or financial condition of the entity with respect to
which such term is used and which is material to such entity and
other entities controlled by such entity taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
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corporate power and authority to enter into and perform this
Agreement and to issue the Shares in accordance with the terms
hereof, (ii) the execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board
of Directors or stockholders is required except for any stockholder
approval required by the terms of the Company's listing agreement
with NASDAQ or the rules of such organization, (iii) this Agreement
has been duly executed and delivered by the Company, (iv) this
Agreement constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application, and (v) prior to the Closing Date a Certificate of
Amendment to the Company's charter which authorizes the 5% Preferred
Stock as provided in Schedule I will have been filed with the New
Jersey Secretary of State and will be in full force and effect,
enforceable against the Company in accordance with its terms.
(c) Capitalization. The authorized capital stock of the Company
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consists of 50,000,000 shares of Common Stock and 10,000,000 shares of
Class B Preferred Stock; there are 19,187,648 shares of Common Stock and no
shares of Preferred Stock issued and outstanding; and, upon issuance of the
Shares in accordance with the terms hereof and pursuant to similar
agreements of like tenor, there will be 19,187,648 shares of Common Stock
and approximately 4,200,000 shares of Class B Preferred Stock of the series
denominated "5% Preferred Stock" issued and outstanding. All of the
outstanding shares of the Company's Common Stock have been validly issued
and are fully paid and nonassessable. Except as set forth in Exhibit A
hereto and as described in the SEC Documents, no shares of Common Stock are
entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company, or
contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of capital stock
of the Company or options, warrants, scrip, rights to subscribe to, or
commitments to purchase or acquire, any shares, or securities or rights
convertible into shares, of capital stock of the Company. The Company has
furnished or made available to the Investor true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Charter"), and the Company's By-Laws, as in effect on the date hereof (the
"By-Laws").
(d) Issuance of Shares. The issuance of the Shares has been duly
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authorized and, when paid for and issued in accordance with the terms
hereof, the Shares shall be validly issued, fully paid and non-assessable
and entitled to the rights and preferences set forth in Schedule I hereto.
The Common Stock issuable upon conversion of the Shares will be duly
authorized and reserved for issuance and, upon conversion in accordance
with the Certificate of Amendment to be filed by the Company to establish
the rights and preferences of the Shares, will be validly issued, fully
paid and non-assessable and the holders shall be entitled to all rights and
preferences accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Company's Charter or By-Laws or (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or assets of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect); provided that, for purposes of such representation as to
Federal, state, local or foreign law, rule or regulation, no representation is
made herein with respect to any of the same applicable solely to the Investor
and not to the Company. The business of the Company is not being conducted in
violation of any law, ordinance or regulations of any governmental entity,
except for violations which either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing (other than the filing of
the Certificate of Amendment with the New Jersey Secretary of State) or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Shares in accordance with the terms hereof (other than any SEC, NASD or
state securities filings which may be required to be made by the Company
subsequent to the Closing, and any registration statement which may be filed
pursuant hereto); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
(f) SEC Documents, Financial Statements. The Common Stock of the
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Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the Company has filed on a timely
basis all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC since July 1, 1993 pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
since July 1, 1993 (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC Documents"). The Company
has delivered or made available to the Investor true and complete copies of the
SEC Documents. The Company has not provided to the Investor any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Act or the Exchange Act as the case may be and the rules
and regulations of the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject,
in the case of unaudited statements, to normal year-end audit adjustments).
(g) No Material Adverse Change. Since the date through which the
--------------------------
most recent quarterly report of the Company on Form 10-Q has been prepared
and filed with the SEC, a copy of which is included in the SEC Documents,
no Material Adverse Effect has occurred or exists with respect to the
Company or its subsidiaries.
(h) No Undisclosed Liabilities. The Company and its subsidiaries
--------------------------
have no material liabilities or obligations not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since the date of the
most recently filed SEC Documents which, individually or in the aggregate,
do not or would not have a Material Adverse Effect on the Company or its
subsidiaries.
(i) No Undisclosed Events or Circumstances. No event or circumstance
--------------------------------------
has occurred or exists with respect to the Company or its subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
(j) No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, or, to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in connection with the
offer or sale of the Shares.
(k) No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would require
registration of the Shares under the Act.
Section 2. Representations and Warranties of the Investor. The
----------------------------------------------
Investor hereby makes the following representations and warranties to the
Company:
(a) Authorization, Enforcement. (i) Such Investor has the
--------------------------
requisite power and authority to enter into and perform this
Agreement and to purchase the Shares being sold hereunder, (ii) the
execution and delivery of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate or partnership action,
and (iii) this Agreement constitutes a valid and binding obligation
of the Investor enforceable against the Investor in accordance with
its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of
general application.
(b) No Conflicts. The execution, delivery and performance of
------------
this Agreement and the consummation by the Investor of the
transactions contemplated hereby do not and will not (i) result in a
violation of the Investor's charter documents or By-Laws or (ii)
conflict with any agreement, indenture or instrument to which
Investor is a party, or (iii) result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court
or governmental agency applicable to Investor. The Investor is not
required to obtain any consent or authorization of any governmental
agency in order for it to perform its obligations under this
Agreement. The data to be provided by the Investor in connection
with registering the Registrable Securities under the Act will be
true and correct in all material respects when so provided.
(c) Investment Representation. The Investor is purchasing the
-------------------------
Shares for its own account for investment and not with a view to
distribution otherwise than in compliance with the Act. Investor has
no present arrangement (whether or not legally binding) to sell the
Shares to or through any person or entity; provided, however, that
by making the representations herein, the Investor does not agree to
hold the Shares for any minimum or other specific term and reserves
the right to dispose of the Shares at any time in accordance with
Federal and state securities laws applicable to such disposition.
(d) Accredited Investor. The Investor is an accredited investor as
-------------------
defined in Rule 501 promulgated under the Act.
(e) Rule 144. The Investor understands that there is no public
--------
trading market for the Shares, that none is expected to develop,
and that the Shares must be held indefinitely unless such Shares or
securities into which the Shares are converted are registered under
the Act or an exemption from registration is available. The
Investor has been advised or is aware of the provisions of Rule 144
promulgated under the Act.
ARTICLE III.
Covenants
---------
Section 1. Securities Compliance.
---------------------
(a) The Company shall notify the SEC and NASD, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and Common Stock issuable upon conversion thereof to
the Investor or subsequent holder.
(b) The Investor understands that the Shares are being offered and sold
in reliance on a transactional exemption from the registration requirements
of Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in
order to determine the applicability of such exemptions and the suitability
of such Investor to acquire the Shares.
Section 2. Registration and Listing. Until at least three (3)
------------------------
years after all Shares have been converted into Common Stock, the
Company will cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects
with its reporting and filing obligations under said act, will comply
with all requirements related to any registration
statement filed pursuant to this Agreement and will not take any action
or file any document (whether or not permitted by the Act or the
Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said Acts, except as permitted herein. Until at least
three (3) years after all Shares have been converted into Common Stock
the Company will take all action within its power to continue the
listing or trading of its Common Stock on the NASDAQ National Market and
will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the NASD and NASDAQ. The
covenants set forth in this Section 3.2 shall not be deemed to prohibit
a merger, sale of all assets or other corporate reorganization if the
entity surviving or succeeding to the Company is bound by this Agreement
with respect to its securities issued in exchange for or in replacement
of the Shares or Common Stock or the consideration received for or in
replacement of the Shares or Common Stock is cash.
Section 3. Stockholder Approval. Following the Closing, the
--------------------
Company will use its best efforts to promptly notice and hold a
stockholders meeting not later than three months after the Closing Date
to obtain any necessary stockholder approvals required by the Company
(including those required by all applicable agreements between the
Company and the NASD) to allow for issuance of Common Stock upon
conversion of the Shares.
Section 4. Sale Restrictions. Following conversion of the Shares
-----------------
into Common Stock of the Company, Investor will not on any trading day
offer or sell publicly on NASDAQ or on the principal exchange on which
the Common Stock is traded, on a net basis more than the following
number of such shares of Common Stock: the greatest of (i) 20% of the
average daily trading volume for the Common Stock for the five
consecutive trading days immediately preceding such date as reported by
NASDAQ or by such principal exchange, (ii) 20,000 shares, and (iii) 10%
of the trading volume for the Common Stock on such day.
Section 5. Notice of Conversion Cap. No later than 97 days after
------------------------
the Closing Date, the Company will deliver notice to the Investor
specifying the amount of the Conversion Cap (as defined in Section
4(c)(ii) of Schedule I hereto) and the calculation thereof.
Section 6. Limitation on Conversion Rights. Investor shall not
-------------------------------
be entitled to convert any Share into Common Stock of the Company if
following conversion of such Share the Investor and its affiliates
(within the meaning of the Exchange Act) shall be the beneficial owners
(as defined in Rule 13d-3 under the Exchange Act) of more than the
percentage of the Common Stock of the Company set forth after the name
of the Investor in the signature page hereof.
Section 7. BHC Restrictions. If the Investor is subject to the
----------------
Bank Holding Company Act of 1956, as amended, and the rules and
regulations thereunder (the "BHC Act"), such Investor (a) may decline
receipt of additional shares of 5% Convertible Preferred Stock pursuant
to Section 1.4(b)(iv) and the Company shall make such payment in cash,
or (b) shall not be entitled to convert any Share into Common Stock of
the Company unless such conversion is effected in certain specified
transactions (as particularly set forth in the Company's Certificate of
Incorporation), if, following either such proposed distribution or such
conversion of such Share, the Investor and its affiliates (as defined in
the BHC Act) shall hold or beneficially own (as defined in the BHC Act)
more than 4.9% of the Common Stock of the Company.
Section 8. Limitations. The provisions of the foregoing Sections
-----------
3.6 and 3.7 shall not limit or affect the right of the Company to force
conversion pursuant to the provisions of Section 3(a) of Schedule I
hereto, nor the automatic conversion provided for in Section 3(d)
thereof. The Company shall have no obligation to monitor compliance with
said Sections or the holdings of any stockholder, and shall have no
liability for the failure of any Investor to comply with said Sections.
Section 9. Redemption Fund. The Company covenants and agrees
---------------
that pursuant to Section 4(l) of Schedule I hereto it will pay, in cash,
to the holders of the 5% Preferred Stock on a pro-rata basis by way of
redemption of approximately 2,700,000 of such shares at the Special
Redemption Price and on the Redemption Date defined in said Section
4(l), the sum of $75,000,000 plus earnings accumulated thereon (if any)
if the shareholders of the Company have not, within the time specified
in said Section 4(l), approved the issuance to the holders of the 5%
Preferred Stock of the full number of shares of common stock of the
Company to which they are entitled upon conversion of the 5% Preferred
Stock. On the Closing Date the Company shall deposit as a trust fund
(the "Redemption Fund") with a financial institution (the "Redemption
Agent") acceptable to Xxxxxxxx & Xxxxxx Capital Corp. (the "Placement
Agent") the sum of $75,000,000, constituting an amount equal to or
greater than 71% of the total Purchase Price paid by the Investor
hereunder together with an equal percentage of the Purchase Price paid
by other Investors similarly situated. Prior to the Closing the Company
shall deliver written instructions to the Redemption Agent, joined in by
the Placement Agent, and the Redemption Agent shall acknowledge receipt
of such instructions and agree to be bound thereby, providing in
substance that on the date which is specified in said Section 4(l), all
funds contained in the Redemption Fund (including earnings on the
initial deposit, if any) are to be disbursed to holders of 5% Preferred
Stock of the Company in redemption thereof at the Special Redemption
Price referred to above against delivery of certificates representing
such shares.
The Company agrees to give written notice of such redemption as
specified in said Section 4(l) to all record holders of 5% Preferred Stock, but
failure to give such notice shall not delay or cancel such redemption, and such
notice may be given by any holder of the 5% Preferred Stock or by the Placement
Agent. The Redemption Date shall not be later than the date which is specified
in said Section 4(l). The Company agrees to provide to the Redemption Agent, at
least 10 days prior to the Redemption Date, a list of the holders of 5%
Preferred Stock whose shares are to be redeemed, which list shall set forth the
complete name and address of the holder, the number of shares of 5% Preferred
Stock
to be redeemed and the dollar amount to be paid to such holder. The Company's
failure to provide such a list shall not delay or cancel the redemption; if the
Company fails timely to provide such a list to the Redemption Agent, the
Placement Agent may provide such a list based on the best information available
to the Placement Agent.
As partial security for the performance by the Company of its
obligations under this Section and under Section 4(l) of Schedule I hereto, the
Redemption Fund shall be held subject to a Security Agreement executed by the
Company in favor of all of the Investors. The instructions to the Redemption
Agent, and the Security Agreement, shall provide that the redemption of the 5%
Preferred Stock may be annulled and the funds in the Redemption Account paid
over to the Company if each of the following conditions is satisfied: (i) the
Investors, the Placement Agent, and the Redemption Agent shall each have
received a certificate executed by the chief executive officer and the chief
legal officer of the Company certifying that the shareholders of the Company
have approved the issuance to the holders of the 5% Preferred Stock, upon
conversion of such shares, of the full number of shares of Common Stock of the
Company issuable upon such conversion pursuant to the terms of the 5% Preferred
Stock, and further certifying that such issuance of Common Stock upon conversion
will not violate and will not be voidable under any rule or regulation of the
National Association of Securities Dealers, (ii) the Placement Agent shall have
received evidence reasonably satisfactory to the Placement Agent as to the
correctness of the statements contained in such certificate of the Company's
officers, and (iii) the Redemption Agent shall have received written
confirmation from the Placement Agent to the effect that the Redemption Agent
may rely on such certificate of the officers of the Company and may annul the
Redemption proceedings and pay over all funds in the Redemption Account
(including earnings on the initial deposit, if any) to the Company.
The Company and the Investor each agrees that the Placement Agent
shall have no liability for any action or inaction, decision, or instruction
given or made in good faith pursuant to the provisions of this Section 3.9, and
the Company agrees to indemnify the Placement Agent against any loss or expense
(including attorneys' fees) incurred in connection with any assertion of such
liability by any person.
ARTICLE IV.
Conditions
----------
Section 1. Conditions Precedent to the Obligation of the Company to Sell
-------------------------------------------------------------
the Shares. The
----------------
obligation hereunder of the Company to issue and/or sell the Shares to
the Investor is subject to the satisfaction, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Investor's Representations and Warranties. The
---------------------------------------------------------
representations and warranties of the Investor shall be true and correct in
all material respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Investor. The Investor shall have performed all
---------------------------
agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
(d) Legal action. No legal action, suit or proceeding shall be pending or
------------
threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
Section 2. Conditions Precedent to the Obligation of the Investor
------------------------------------------------------
to Purchase the Shares. The obligation hereunder of the
----------------------
Investor to acquire and pay for the Shares is subject to
the satisfaction, at or before the Closing, of each of
the conditions set forth below. These conditions are for
the Investor's sole benefit and may be waived by the
Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
--------------------------------------------------------
representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Company. The Company shall have performed all
--------------------------
agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing.
(c) NASDAQ. From the date hereof to the Closing Date, trading in the Company's
------
Common Stock shall not have been suspended by the SEC or the NASDAQ
National Market (except for any suspension of trading of limited duration
agreed to between the Company and the NASDAQ National Market solely to
permit dissemination of material information regarding the Company), and
trading in securities generally as reported by NASDAQ shall not have been
suspended or limited or minimum prices shall not have been established on
securities whose trades are reported by NASDAQ.
(d) No Injunction. No statute, rule, regulation, executive order, decree,
-------------
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
(e) Opinion of Counsel, Etc. At the Closing the Investor shall have received
-----------------------
an opinion of counsel to the Company (covering, without limitation, the
matters set forth in Section 2.1(a) through (e)), in form and substance
reasonably satisfactory to the Investor and its counsel, and such other
certificates and documents as the Investor or its counsel shall reasonably
require incident to the Closing.
(f) Undertaking of Stockholders. At or prior to the Closing, the Investor
---------------------------
shall have received a copy of a letter executed by Yamanouchi
Pharmaceutical Co., Ltd. to the effect that such corporation, as a common
stockholder of the Company, is prepared to vote its shares in the Company
in favor of the preferred stock offering contemplated by this Agreement.
In addition, the Investor shall have received a letter executed by Xx.
Xxxxxx X. Xxxxxxxx and a majority of the directors of the Company to the
effect that each of them will use his best efforts to cause a meeting of
the stockholders of the Company to be held as soon as practicable for the
purpose of approving the issuance to the Investor of the full number of
shares of Common Stock to which the Investor may be
entitled upon conversion, including, without limitation, authorization of
an increase in the number of authorized shares of Common Stock to enable
conversion to Common Stock of all of the 5% Preferred, and will use his
best efforts to cause such stockholder approval to be given, and will vote
all of his shares of the Company in favor of such approval.
ARTICLE V.
Legend on Stock
---------------
Each certificate representing the Shares and, if appropriate,
securities issued upon conversion thereof, shall be stamped or otherwise
imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
The Company agrees to reissue certificates representing the Shares or,
if applicable, the securities issued upon conversion thereof without the legend
set forth above at such time as (i) the holder thereof is permitted to dispose
of such Shares (or securities issued upon conversion thereof) pursuant to Rule
144(k) under the Act, (ii) the securities are sold to a purchaser or purchasers
who (in the opinion of counsel to such purchasers, in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the Act, or (iii) such
securities are registered under the Act.
ARTICLE VI.
Termination
-----------
Section 1. Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated at any time prior to the Closing by the
mutual written consent of the Company and the Investor.
Section 2. Other Termination. This Agreement may be terminated
-----------------
by action of the Board of Directors or other governing
body of the Investor or the Company at any time if the
Closing shall not
have been consummated by the fifth business day following the date of
this Agreement, provided that the party seeking to terminate the
Agreement is not in breach of the Agreement.
Section 3. Automatic Termination. This Agreement shall
---------------------
automatically terminate without any further action of either party
hereto if the Closing shall not have occurred by the tenth business day
following the date of this Agreement, provided, however, that any such
termination shall not terminate the liability of any party which is then
in breach of the Agreement.
ARTICLE VII.
Miscellaneous
-------------
Section 1. Fees and Expenses. Except as otherwise set forth in
-----------------
Section 1.4 hereof, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement,
provided that the Company shall pay, at the Closing, to the Investor's
law firm all legal costs related to this transaction, and (unless the
gross proceeds to the Company from the sale of 5% Convertible Preferred
Stock exceed $40,000,000) all such costs incurred by the Placement
Agent, in accordance with and up to the maximums stated in the final
letter agreement dated August 15, 1996 between the Company and the
Placement Agent. The Company shall compensate and indemnify the
Placement Agent as set forth in said letter agreement. The Company shall
pay all stamp and other taxes and duties levied in connection with the
issuance of the Shares pursuant hereto. As set forth in said letter
agreement, as amended, the Placement Agent's compensation includes a
cash payment in an amount equal to 5% of the Purchase Price of Shares
sold by the Company, and the issuance of a warrant to purchase that
number of Shares equal to 10% of the number of Shares sold at a purchase
price equal to $25 per share.
Section 2. Specific Enforcement, Consent
-----------------------------
to Jurisdiction.
---------------
(a) The Company and the Investor acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which
either of them may be entitled by law or equity.
(b) Each of the Company and the Investor (i) hereby irrevocably submits
to the jurisdiction of the United States District Court and other courts of
the United States sitting in New York for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each
of the Company and the Investor consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this paragraph shall affect or limit any
right to serve process in any other manner permitted by law.
Section 3. Entire Agreement: Amendment. This Agreement contains
---------------------------
the entire understanding of the parties with respect to the matters
covered hereby and, except as specifically set forth herein, neither the
Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is
sought.
Section 4. Notices. Any notice or other communication required
-------
or permitted to be given hereunder
shall be in writing and shall be effective (a) upon hand delivery or
delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall
be:
to the Company: Xxxxxxx Pharmaceutical Corporation
Meridian Center II
0 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
with copies to: Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxxx
to the Investor: At the address set forth at the foot of this Agreement,
with copies to Investor's counsel as set forth at the
foot of this Agreement or as specified in writing by
Investor
with copies to: Xxxxxx X. Xxxxxxxx
Xxxxxxxx & Laffer Capital Corp.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other party
hereto.
Section 5. Waivers. No waiver by either party of any default
-------
with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right
accruing to it thereafter.
Section 6. Headings. The headings herein are for convenience
--------
only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the
provisions hereof.
Section 7. Successors and Assigns. Except as otherwise provided
----------------------
herein, this Agreement shall be binding upon and inure
to the benefit of the parties and their successors and
assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. The
assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party
under this Agreement.
Section 8. No Third Party Beneficiaries. This Agreement is
----------------------------
intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9. Governing Law. This Agreement shall be governed by
-------------
and construed and enforced in accordance with the
internal laws of the present state of incorporation of
the Company without regard to such state's principles of
conflict of laws.
Section 10. Survival. The representations and warranties of the
--------
Company and the Investor contained in Article II and the
agreements and covenants set forth in Articles I, III
and VII shall survive the Closing.
Section 11. Execution. This Agreement may be executed in two or
---------
more counterparts, all of which shall be considered one
and the same agreement and shall become effective when
counterparts have been signed by each party and
delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the
event any signature is delivered by facsimile
transmission, the party using such means of delivery
shall cause the
manually executed signature page(s) to be physically
delivered to the other party within five days of the
execution hereof.
Section 12. Publicity. The Company agrees that it will not
---------
disclose, and will not include in any public
announcement, the name of the Investor without its
consent, unless and until such disclosure is required by
law or applicable regulation, and then only to the
extent of such requirement.
Section 13. NASDAQ. The term "NASDAQ" or "NASDAQ National
------
Market" herein refers to the principal market on which
the Common Stock of the Company is traded. If the Common
Stock is listed on a securities exchange, or if another
market becomes the principal market on which the Common
Stock is traded or through which price quotations for
the Common Stock are reported, the term "NASDAQ" or
"NASDAQ National Market" shall be deemed to refer to
such exchange or other principal market.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
Xxxxxxx Pharmaceutical Corporation
By:
--------------------------------
Name:
Its:
THE INVESTOR
By:
--------------------------------
Name:
Its:
Investor's address:
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[_] 4.99% [_] 9.99% [_] no limitation
If no box is marked, no limitation shall be
applicable.
Name and address of Investor's counsel:
Exhibit A
Subsidiaries
------------
Xxxxxxx Laboratories, Inc.
Xxxx-Xxxxxxx, Inc.
Pronetics Health Care Group, Inc.*
VRG International, Inc.
Monmouth Pharmaceuticals, Ltd.
Xxxxxxx Pharma GmbH
Xxxxxxx Pharmaceutical of Canada, Inc.
Xxxxxxx Investments, Inc.
RPC Acquisition Corp.
Geriatric Pharmaceutical Corp.
* Pronetics Healthcare Group, Inc. is the name of 4 separate subsidiary
corporations organized in New Jersey, New York, North Carolina and South
Carolina. In 1995, the Company adopted a plan to discontinue and divest the
operations of each of these subsidiaries.
Preemptive or Similar Rights
----------------------------
Rights granted to Yamanouchi Pharmaceutical Corporation (or its designee)
("Yamanouchi") pursuant to Stock Purchase Agreement dated January 22, 1996
(the "Yamanouchi Agreement").
Other Rights
------------
Purchase price adjustment rights granted to investors pursuant to Section 3
of the Stock Purchase Agreements dated as of July 17, 1996 (the "DFA
Agreements").
Registration Rights
-------------------
1. Rights granted to Yamanouchi pursuant to Yamanouchi Agreement.
2. Rights granted to investors pursuant to the DFA Agreements.
3. Rights granted pursuant to warrants issued to designees of Xxxxxxxx & Xxxxxx
Capital Corp. with respect to 15,000 shares of Common Stock and 420,000
shares of 5% Preferred (the "Xxxxxxxx Warrants").
4. Rights granted to Xx. Xxxxxx X. Xxxxxxxx pursuant to Registration Rights
Agreement dated August 9, 1996.
Outstanding options, Warrants Etc.
----------------------------------
1. Restricted Stock option Plan - options with respect to 175,440 shares of
Common Stock outstanding.
2. Incentive Stock option Plan - options with respect to 1,034,027 shares of
Common Stock outstanding.
3. Employee Stock Purchase Plan covering up to 500,000 shares, none of which
have been issued as yet.
4. 1996 Equity Incentive Plan - 1,500,000 shares reserved.
5. The Xxxxxxxx Warrants.
SCHEDULE I
RESOLUTION ESTABLISHING PREFERENCES
OF
5% CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the Class B
Preferred Stock of the Corporation designated "5% Convertible Preferred Stock";
that the number of shares of such series shall be 5,500,000 and that the rights
and preferences of such series (the "5% Preferred") and the limitations or
restrictions thereon, shall be as follows:
1. Dividends.
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(a) The holders of the 5% Preferred shall be entitled to receive out
of any assets legally available therefor cumulative dividends at the rate of
$1.25 per share per annum, payable quarterly on March 31, June 30, September 30
and December 31 of each year, when and as declared by the Board of Directors, in
preference and priority to any payment of any dividend on the Common Stock or
any other class or series of stock of the Corporation. Such dividends shall
accrue on any given share from the day of original issuance of such share and
shall accrue from day to day whether or not earned or declared. If at any time
dividends on the outstanding 5% Preferred at the rate set forth above shall not
have been paid or declared and set apart for payment with respect to all
preceding periods, the amount of the deficiency shall be fully paid or declared
and set apart for payment, but without interest, before any distribution,
whether by way of dividend or otherwise, shall be declared or paid upon or set
apart for the shares of any other class or series of stock of the Corporation.
(b) Any dividend payable on a dividend payment date more than 90 days
after the date of issuance may be paid, at the option of the Corporation, either
(i) in cash or (ii) in shares of 5% Preferred valued at $25 per share, if the
Common Stock issuable upon conversion of such shares has been registered for
resale under the Securities Act of 1933, as amended (the "Act"), and the
registration statement including a current prospectus with respect thereto
remains in effect at the date of delivery of such shares, and if the Corporation
shall have given written notice of its intention to pay such dividend in stock
to all holders of the 5% Preferred at least 10 days before the record date for
such dividend. No holder that is a bank holding company or subsidiary
thereof shall be required to accept 5% Preferred in lieu of cash in payment of a
dividend unless after giving effect thereto the provisions of Section 10 hereof
would permit one share of 5% Preferred to be converted by such holder.
2. Liquidation Preference.
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(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the 5% Preferred
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of any other class or series of shares,
the amount of $25 per share plus any accrued but unpaid dividends (the
"Liquidation Preference").
(b) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Corporation, shall, at the option of the holders of the 5%
Preferred, be deemed a liquidation, dissolution or winding up within the meaning
of this Section 2 if the shares of stock of the Corporation outstanding
immediately prior to such transaction represent immediately after such
transaction less than a majority of the voting power of the surviving
corporation (or of the acquiror of the Corporation's assets in the case of a
sale of assets). Such option may be exercised by the vote or written consent of
holders of a majority of the 5% Preferred at any time within thirty calendar
days after written notice (which shall be given promptly) of the essential terms
of such transaction shall have been given to the holders of the 5% Preferred in
the manner provided by law for the giving of notice of meetings of shareholders.
3. Forced Conversion.
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(a) The Company at its option may cause all outstanding shares of the
5% Preferred to be converted into Common Stock at any time beginning twelve
months after the date of issuance, on at least 20 days' notice, at a conversion
price determined as set forth in Section 4 hereof (the "Conversion Price") as of
the date specified in such notice (the "Conversion Date") and otherwise on the
terms set forth in said Section 4; provided, that the Corporation may not
exercise such right of conversion unless (i) the Closing Price (last trade
price) of the Common Stock as reported by NASDAQ for the 20 consecutive trading
days prior to the date the Conversion Notice is mailed has not on any day been
less than 120% of the Conversion Cap (as defined in Section 4(c)(ii) hereof)
(subject to adjustment for stock dividends, stock splits and reverse stock
splits), and (ii) the shares issuable upon conversion of the 5% Preferred are
registered for resale by an effective registration statement ("Registration
Statement") under the Act which became effective not more than 90 days after the
date of issuance of the 5% Preferred, and a current prospectus
meeting the requirements of Section 10 of the Act is available for delivery at
the Conversion Date.
(b) At least 20 days prior to the Conversion Date, written notice (the
"Conversion Notice") shall be mailed, first class postage prepaid, by the
Corporation to each holder of record of the 5% Preferred, at the address last
shown on the records of the Corporation for such holder, notifying such holder
of the conversion which is to be effected, specifying the Conversion Date and
calling upon each such holder to surrender to the Corporation, in the manner and
at the place designated, a certificate or certificates representing the number
of shares of 5% Preferred held by such holder. Subject to the provisions of the
following subsection (c), on or after the Conversion Date, each holder of 5%
Preferred shall surrender to the Corporation the certificate or certificates
representing the shares of 5% Preferred owned by such holder as of the
Conversion Date, in the manner and at the place designated in the Conversion
Notice, and thereupon the shares issuable upon such conversion shall be
delivered as provided in Section 4(b) hereof.
(c) If at the Conversion Date the registration condition specified in
clause (ii) of subsection (a) shall not be satisfied, then no shares shall be
converted and the Conversion Notice shall be deemed to be withdrawn. In such
event, any certificates for 5% Preferred which have been surrendered for
conversion shall be returned to the persons surrendering the same; provided,
however, that if a holder shall have received shares of Common Stock upon
conversion of 5% Preferred after the Conversion Notice was given but before the
Conversion Date, such holder may elect either to retain such Common Stock or
rescind such conversion by tendering such shares of Common Stock to the
Corporation.
(d) On the second anniversary of the Closing Date, all then
outstanding shares of 5% Preferred shall be automatically converted into Common
Stock at the Conversion Price and otherwise pursuant to the applicable
provisions set forth in Section 4 hereof.
4. Optional Conversion. The holders of the 5% Preferred shall
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have optional conversion rights as follows:
(a) Right to Convert. At any time after the earlier of (i) the date
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at which a Registration Statement has been declared effective and the requisite
shareholder approval referred to in subsection (l) of this Section 4 has been
obtained, or (ii) the close of business on the 91st day following the Closing
Date, each share of 5% Preferred shall be convertible, at the option of the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (x) the Liquidation Preference of the
5% Preferred determined pursuant to
Section 2 hereof on the date the notice of conversion is given, by (y) the
Conversion Price determined as hereinafter provided in effect on said date.
(b) Mechanics of Conversion. To convert shares of 5% Preferred into
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shares of Common Stock, the holder shall give written notice to the Corporation
(which notice may be given by facsimile transmission) that such holder elects to
convert the same and shall state therein the number of shares to be converted
and the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. Promptly thereafter the
holder shall surrender the certificate or certificates representing the shares
to be converted, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares, or at such other place designated by the
Corporation. The Corporation shall, immediately upon receipt of such notice,
issue and deliver to or upon the order of such holder, against delivery of the
certificates representing the shares which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. The Corporation shall effect such issuance within two business days
and shall transmit the certificates by messenger or overnight delivery service
to reach the address designated by such holder within two business days after
the receipt of such notice. Notice of conversion may be given by a holder at
any time during the day up to midnight New York time and such conversion shall
be deemed to have been made immediately prior to the close of business on the
date such notice of conversion is given. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at the close of business on such date.
(c) Determination of Conversion Price.
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(i) At any date following the earlier of (x) the date at which a
Registration Statement is declared effective, or (ii) the 90th day following the
Closing Date, subject to the provisions of subparagraph (ii) below, the
Conversion Price shall be 90% of the lowest trade price of the Common Stock as
reported by NASDAQ during a specified period of consecutive trading days
immediately preceding such date, which periods are set forth in the table below:
Period during which such Period of consecutive trading
date occurs: days preceding such date:
Through the 120th day after Closing 5 days
121st to 150th day after Closing 6 days
151st to 180th day after Closing 7 days
181st to 210th day after Closing 8 days
211th to 240th day after Closing 9 days
241st to 270th day after Closing 10 days
271st to 300th day after Closing 11 days
301st to 330th day after Closing 12 days
331st day after Closing or later 13 days
(ii) The Conversion Price shall not be greater than the Conversion
Cap. The Conversion Cap shall be calculated as follows: the mean between the
closing bid price and closing ask price (as reported on NASDAQ) for each trading
day during the 90-day period following the Closing Date (not including the
Closing Date) shall be averaged; the Conversion Cap shall be equal to 115% of
the resulting average.
(iii) The "lowest trade price" of the Common Stock on any day shall
be the lowest reported sale price of the Common Stock on NASDAQ or any other
principal securities price quotation system or market on which prices of the
Common Stock are reported. The term "trading day" means a day on which trading
is reported on the principal quotation system or market on which prices of the
Common Stock are reported.
(iv) If during any period of consecutive trading days provided for
above, the Corporation shall declare or pay any dividend on the Common Stock
payable in Common Stock or in rights to acquire Common Stock, or shall effect a
stock split or reverse stock split, or a combination, consolidation or
reclassification of the Common Stock, then the Conversion Price shall be
proportionately decreased or increased, as appropriate, to give effect to such
event. If any such event occurs after the Conversion Cap has been determined,
the Conversion Cap shall be proportionately decreased or increased, as
appropriate, to give effect to such event.
(d) Distributions. If the Corporation shall at any time or from time
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to time make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation or any of its subsidiaries other than additional
shares of Common Stock, then in each such event provision shall be made so that
the holders of 5% Preferred shall receive, upon the conversion thereof, the
securities of the Corporation which they would have received had they been the
owners on the date of such event of the number of shares of Common Stock
issuable to them upon conversion.
(e) Certificates as to Adjustments. Upon the occurrence of any
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adjustment or readjustment of the Conversion Price or the Conversion Cap
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
cause the independent public accountants regularly employed to audit the
financial statements of the Corporation to verify such computation
and prepare and furnish to each holder of 5% Preferred a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of 5% Preferred, furnish or cause to
be furnished to such holder a like certificate prepared by the Corporation
setting forth (i) such adjustments and readjustments, and (ii) the number of
other securities and the amount, if any, of other property which at the time
would be received upon the conversion of 5% Preferred with respect to each share
of Common Stock received upon such conversion.
(f) Notice of Record Date. In the event of any taking by the
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Corporation 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 (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, 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, the Corporation shall mail to each holder of 5%
Preferred at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right and the amount and character of
such dividend, distribution, security or right.
(g) Issue Taxes. The Corporation shall pay any and all issue and
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other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of 5% Preferred pursuant hereto; provided, however, that
the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(h) Reservation of Stock Issuable Upon Conversion. The Corporation
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shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the 5% Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the 5% Preferred, subject to the limitation set forth in
subsection (l) below, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the 5% Preferred, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including, without limitation, engaging in
best efforts to obtain the requisite shareholder approval.
(i) Fractional Shares. No fractional shares shall be issued upon the
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conversion of any share or shares of 5% Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
5% Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors of the
Corporation).
(j) Notices. Any notice required by the provisions of this Section to
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be given to the holders of shares of 5% Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation.
(k) Reorganization or Merger. In case of any reorganization or any
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reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person, and the holders of 5% Preferred do not elect to treat such transaction
as a liquidation, dissolution or winding up as provided in Section 2, then, as
part of such reorganization, consolidation, merger or sale, provision shall be
made so that each share of 5% Preferred shall thereafter be convertible into the
number of shares of stock or other securities or property (including cash) to
which a holder of the number of shares of Common Stock deliverable upon
conversion of such share of 5% Preferred would have been entitled upon the
record date of (or date of, if no record date is fixed) such event and, in any
case, appropriate adjustment (as determined by the Board of Directors) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the 5% Preferred, to the end
that the provisions set forth herein shall thereafter be applicable, as nearly
as equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of 5% Preferred.
(l) Limitation on Number of Conversion Shares. The Corporation shall
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not be obligated to issue, in the aggregate, more than 3,717,529 shares of
Common Stock as presently constituted (the "NASDAQ Cap") upon (1) conversion of
the 5% Preferred, (2) exercise of the warrants issued to Xxxxxxxx & Xxxxxx
Capital Corp. or its designees in connection with the sale of the 5% Preferred
and the sale of stock to entities advised by Dimensional Fund Advisors, and (3)
the issuance of 600,000 shares
on or about July 17, 1996 to entities advised by Dimensional Fund Advisors, if
issuance of a larger number of shares would constitute a breach of the
Corporation's obligations under its agreements with the NASD or NASDAQ or the
rules of such organizations. Subject to the obligation to effect certain
redemptions pursuant to the last three sentences of this subsection (l), if
further issuances of shares of Common Stock pursuant to clauses (1) through (3)
would constitute a breach of the Corporation's obligations under any applicable
agreements with the NASD or NASDAQ or the rules of such organizations (i.e., all
of the shares permitted to be issued under the NASDAQ Cap shall have been so
issued), then so long thereafter as such limitation shall continue to be
applicable and any shares of 5% Preferred are submitted for conversion, such
shares shall receive in cash an amount equal to the greater of (i) 111.11% of
the Liquidation Preference of such shares or (ii) the current value of the
Common Stock which such shares would otherwise be entitled to receive upon
conversion (such value per share to be the closing price of such shares as
reported by NASDAQ on the Conversion Date), in lieu of the Common Stock which
such shares would otherwise be entitled to receive upon conversion, and such
shares will be deemed cancelled. Payment of said cash amount shall be made no
later than one business day after the time specified in Section 4(b) for the
delivery of Common Stock upon conversion, and shall bear daily interest
thereafter at the rate of one-tenth of one percent per day until paid. Such
maximum number of shares of Common Stock shall be proportionately and equitably
adjusted in the event of stock splits, stock dividends, reverse stock splits,
reclassifications or other such events, in such manner as the Board of Directors
of the Corporation shall reasonably determine. If the Corporation is unable to
obtain the requisite shareholder approval concerning the issuance of shares of
Common Stock in connection with the events specified in clauses (1) through (3)
above to satisfy all NASD and NASDAQ requirements prior to 91 days after the
date of issuance (the "Redemption Date"), the Corporation shall then redeem, at
a "Special Redemption Price" equal to 111.11% of the Liquidation Preference of
such shares, a number of shares equal to $75,000,000 (plus any earnings
accumulated thereon from the Closing Date until the Redemption Date) divided by
the Special Redemption Price. Any redemption effected pursuant to the preceding
sentence shall require no notice except the notification of pro-rata allocation
provided for in the following sentence. Such redemption shall be made pro rata
based on the number of shares of the 5% Preferred outstanding at 11:59 p.m. on
the day prior to the Redemption Date, and as early as practicable on the
Redemption Date the Corporation shall notify each holder of 5% Preferred by the
most rapid means of communication available to the Corporation, which may be
facsimile transmission, of the pro rata number of shares to be redeemed from
each holder. Such notice shall be binding upon holders who have submitted their
stock certificates for redemption prior to receipt of such notice, as well as on
holders who submit their stock
certificates thereafter. If there shall be a default in payment of the Special
Redemption Price, the amount so payable shall bear daily interest from and after
the Redemption Date at the rate of one-tenth of one percent per day until paid.
Shares so redeemed shall be deemed to have been redeemed at the opening of
business on the Redemption Date and shall no longer be treated as outstanding
shares except for purposes of receiving the Special Redemption Price. If the
requisite shareholder approval is obtained before the Redemption Date, no shares
shall be redeemed and any certificates submitted shall be returned to their
respective holders.
(m) Reissuance of Certificates. In the event of an optional
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conversion of 5% Preferred pursuant to Section 4(a) hereof or a redemption of 5%
Preferred pursuant to Section 4(l) hereof in which less than all of the shares
of 5% Preferred of a particular certificate are converted or redeemed, as the
case may be, the Company shall promptly cause to be issued and delivered to the
holder of such certificate, a certificate representing the remaining shares of
5% Preferred which have not been so converted or redeemed.
5. Other Provisions. For all purposes of this Resolution, the term
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"date of issuance" and the terms "Closing" or "Closing Date" shall mean the day
on which shares of the 5% Preferred are first issued by the Corporation. Any
provision herein which conflicts with or violates any applicable usury law shall
be deemed modified to the extent necessary to avoid such conflict or violation.
The term "NASDAQ" herein refers to the principal market on which the Common
Stock of the Company is traded. If the Common Stock is listed on a securities
exchange, or if another market becomes the principal market on which the Common
Stock is traded or through which price quotations for the Common Stock are
reported, the term "NASDAQ" shall be deemed to refer to such exchange or other
principal market.
6. Restrictions and Limitations. The Corporation shall not undertake
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the following actions without the consent of the holders of a majority of the 5%
Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences, or privileges of the 5% Preferred,
(ii) authorize or issue any other preferred equity security senior to or on a
parity with the 5% Preferred, as to dividends, liquidation preferences,
conversion rights, redemption rights or other rights, preferences or privileges,
or (iii) purchase or otherwise acquire for value any Common Stock or other
equity security of the Corporation either junior or senior to or on a parity
with the 5% Preferred while there exists any arrearage in the payment of
cumulative dividends hereunder.
7. Voting Rights. Except as provided herein or as provided for by
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law, the 5% Preferred shall have no voting rights.
8. Attorneys' Fees. Any holder of 5% Preferred shall be entitled to
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recover from the Corporation the reasonable attorneys' fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder.
9. No Adverse Actions. The Corporation shall not in any manner,
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whether by amendment of the Certificate of Incorporation (including, without
limitation, any Certificate of Designation), merger, reorganization,
recapitalization, consolidation, sales of assets, sale of stock, tender offer,
dissolution or otherwise, take any action, or permit any action to be taken,
solely or primarily for the purpose of increasing the value of any class of
stock of the Corporation if the effect of such action is to reduce the value or
security of the Preferred Stock.
10. Limits on Conversion of 5% Preferred Stock. Notwithstanding any
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right of conversion of 5% Preferred Stock provided for above, no such shares of
5% Preferred Stock originally issued by the Corporation to a bank holding
company or an affiliate of a bank holding company shall be converted into shares
of Common Stock or any other class or series of voting stock by the original
holder or any direct or indirect transferee thereof such that immediately after
such conversion such person and its affiliates (which term, for avoidance of
doubt, includes such bank holding company, any such transferee and their
respective affiliates) would own more than 4.9% of any class of voting
securities of the Corporation, unless such shares are being distributed,
disposed of or sold in any one of the following transactions (each a "Conversion
Event"):
(a) an initial public offering or other widely-dispersed public
distribution of the shares of the Company;
(b) transfers in small amounts pursuant to Rule 144 under the
Securities Act of 1933;
(c) a transfer to a single purchaser (or a group acting in concert)
which controls or which has negotiated the purchase of at least a
majority of the Company's voting stock held by persons other than
the bank holding company investor;
(d) a private sale of such equity so long as no purchaser acquires
more than 2% of the total equity outstanding upon conversion; or
(e) such shares are being sold in any other manner permitted by the
Federal Reserve Board.
For purposes of this Section 10, "persons" shall include any natural person and
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any corporation, partnership, joint venture, trust, unincorporated organization
and any other entity or organization and percentages of the Corporation's
outstanding voting securities shall include shares issuable upon exercise or
conversion of 5% Preferred Stock and other convertible securities, options,
warrants or other similar instruments owned by such bank holding company, its
transferees and their respective affiliates, but shall not include shares
issuable upon exercise or conversion of convertible securities, options,
warrants or other similar instruments owned by any other person. The provisions
of this Section 10 shall not limit or affect the right of the Corporation to
force conversion pursuant to Section 3(a) hereof nor the automatic conversion
provided for in Section 3(d) hereof. The Corporation shall have no obligation
to monitor compliance with the limits set forth in this Section 10 or the
holdings of any shareholder, and shall have no liability for the failure of any
person to comply with such limits.
