EXHIBIT 4(ii)
Form of
OPTION AGREEMENT
and
ZERO COUPON CONVERTIBLE NOTE
November 8, 2000
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Dear Sirs:
Alliance Pharmaceutical Corp. (the "Company") wishes to confirm its
arrangement with you (the "Purchasers") in connection with (a) the issuance to
each of you, in exchange for a payment by each of you of $750,000 in immediately
available funds (so that the aggregate amount being paid by the Purchasers
hereunder is $1,500,000) as of the Closing Date (as defined herein) , of an
option (the "Series A Option") to purchase, on the terms set forth herein, zero
coupon convertible notes in the form attached hereto as Annex I (the "Series A
Convertible Notes"), in a principal amount underlying each Series A Option of
$4,935,898 (so that the aggregate principal amount underlying the Series A
Options being purchased by the Purchasers hereunder is $9,871,795) and each
convertible initially into 222,619.5 (445,239 for both Purchasers combined)
fully paid and non-assessable shares (each a "Share") of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), subject to adjustment as
set forth in the Series A Convertible Notes, and (b) the issuance from time to
time between the date hereof and December 31, 2000 (or such later date as you
and we agree), in exchange for payments in amounts to be agreed between each of
you and us in writing (such subsequent written agreements to be attached hereto
and become a part hereof), of options to purchase, on the terms set forth
herein, additional convertible notes, issuable in series, having such principal
amounts, with such series designation and convertible initially into such number
of Shares as agreed between us and set forth in such subsequent written
agreements, but in all other respects having the terms set forth in the form
attached hereto as Annex I (and with the applicable series designation,
principal amount and Conversion Rate inserted therein). The Series A Option and
all other Options which you purchase hereunder are collectively referred to as
the "Options". The Series A Convertible Notes and all other series of
convertible notes the subject of Options which you purchase hereunder are
collectively referred to as the "Convertible Notes."
Simultaneously with the execution and delivery of this Agreement, you
and the Company have entered into a Registration Rights Agreement, dated as of
the date hereof (the "Registration Rights Agreement"), pursuant to which the
Company has agreed to register the Convertible Notes and the Shares under
certain circumstances. All capitalized terms not defined herein shall have the
meaning ascribed in the form of Convertible Notes.
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1. AGREEMENT TO ISSUE AND ACCEPT.
(a) On the basis of the representations and warranties and subject to
the terms and conditions set forth herein, the Company agrees to issue to each
of you, and each of you agrees, severally, to purchase from the Company, the
Series A Option, in consideration of which each of you agrees to make a payment
in the amount of $750,000 to the Company, as of the Closing Date, by wire
transfer to the Company's account TR# _______________ at _______________. The
closing of the issuance and purchase of the Series A Option shall take place on
November 15, 2000 (the "Closing Date").
(b) Any subsequent issuance of Options will be similarly effected on
the basis of the representations and warranties and subject to the terms and
conditions set forth herein, in consideration of your agreement to make the
scheduled payments therefor, as set forth in writing as agreed between us. The
obligations of the Purchasers to purchase any such Options shall be several and
not joint. The closing of the issuance and purchase of each Option shall take
place on such date and time as you and the Company agree, at which time the
Company shall deliver to you a signed copy of the applicable terms, which shall
thereupon be attached to and become part of this Agreement.
(c) The Company agrees that each of you may make a one-time election,
on or prior to December 31, 2000 to exchange Options of any two or more series
for Options of a single series, to purchase convertible notes having a
Conversion Rate equal to the weighted average of the Conversion Rates of the
convertible notes underlying the Options surrendered for exchange, but in all
other respects having the terms set forth in Annex I.
2. EXERCISE OF CALL OPTION.
(a) Each Purchaser may exercise any Options issued hereunder at any
time on or prior to November 15, 2005, by delivering a written notice to the
Company (a "Purchaser's Call Option Notice") requiring the Company to issue and
sell (in which event such Purchaser shall purchase) Convertible Notes covered by
such Option having the principal amount specified in such notice (but not less
than $1,000,000 nor in excess of the maximum amount covered by such Option as
specified in the applicable terms) and the Conversion Rate specified in the
applicable terms but having the maturity date and in all other respects having
the terms set forth in the form attached hereto as Annex I (and with the
applicable series designation, principal amount and Conversion Rate inserted
therein), at a purchase price of 100% of the principal amount (or face amount)
thereof.
(b) Any issuance of Convertible Notes will be effected subject to the
accuracy of the representations and warranties and subject to the terms and
conditions set forth herein, against payment of the above-specified purchase
price therefor. The closing of the issuance and acceptance of such Convertible
Notes subject to an Option held by a Purchaser against such payment shall take
place on such date and time as may be specified in the Purchaser's Call Option
Notice but no earlier than three Business Days and no later than twenty Business
Days after the date of delivery of the Purchaser's Call Option Notice, at which
time the Company shall deliver to
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the Purchaser such Convertible Notes in certificated form against delivery by
such Purchaser of a wire transfer of the purchase price to the Company's
account TR# _______________ at _______________. Upon the occurrence of any
Change of Control, the Company shall take appropriate action to ensure that
each Purchaser shall have the right to exercise the Options after the Change
of Control.
(c) Subject to the conditions set forth in this Section 2(c), the
Company, upon five Business Days' notice to the Purchaser exercising an Option,
may elect, in lieu of delivering Convertible Notes subject thereto pursuant to
this Section 2, to deliver the number of shares of Common Stock determined
pursuant to the following formula:
N = P x CR
----
1000
where N = the number of shares of Common Stock so deliverable,
P = the principal amount of the Convertible Notes in lieu of
which such shares of Common Stock are delivered; and
CR = the number of shares of Common Stock issuable pursuant to
the Conversion Rate of the Convertible Notes in lieu of which
such shares of Common Stock are delivered, as set forth in
the applicable terms.
(d) The Company covenants and agrees with the Purchasers that:
(1) If any Convertible Notes or shares of Common Stock to be
issued in lieu thereof pursuant to this Section 2 require registration
with or approval of any governmental authority under any State law or
any other Federal law (other than the Act (as defined below) and Blue
Sky laws) before such shares may be validly issued or delivered, such
registration shall have been completed, have become effective and such
approval shall have been obtained, in each case, at or prior to the
time of issuance of such Convertible Notes or shares;
(2) The shares of Common Stock issuable upon conversion of
such Convertible Notes or so deliverable shall have been approved for
quotation in the Nasdaq National Market or listed on a national
securities exchange at or prior to the time of issuance of such
Convertible Notes or shares; and
(3) All shares of Common Stock issuable upon conversion of
such Convertible Notes or so deliverable shall be issued out of the
Company's authorized but unissued Common Stock and will, upon issue, be
duly and validly issued and fully paid and non-assessable and free of
any preemptive rights.
Notwithstanding any other provision of this Agreement, the
Company shall, if the holder so elects, deliver any shares of Common Stock
issuable pursuant to this Section 2 to any
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third party designated in writing by the holder, provided that the Company
shall be reasonably satisfied that such delivery is in compliance with
Section 4 below and in compliance with any applicable state securities laws.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THe Company hereby
makes the representations and warranties to you set forth on Annex II hereto.
The Company will promptly notify you if at any time prior to the completion of
the purchases of Convertible Notes pursuant to the Agreement, for any reason
such representations and warranties are no longer in all material respects true
and correct.
4. AGREEMENTS OF PURCHASER. You covenant and agree with (and in the
case of Section 4(c) represent and warrant to) the Company that:
(a) You will not offer, sell, assign, hypothecate or otherwise transfer
the Convertible Notes except in compliance with applicable state securities laws
and (i) pursuant to an effective registration statement under the Securities Act
of 1933 (the "Act"), (ii) to a person you reasonably believe to be an
"accredited investor" within the meaning of Rule 501 under the Act, pursuant to
an available exemption under the Act or (iii) in offshore transactions within
the meaning and meeting the requirements of Rule 903 under the Act. The Company
may require, as a condition to any transfer pursuant to clause (ii) of this
Section 4(a) and to any subsequent transfer by the transferee, an opinion of
counsel reasonably satisfactory to the Company that such transfer is exempt from
the registration requirements of the Act; provided that this sentence shall not
apply to any transfer of Convertible Notes to _______________ or any of its
affiliates.
(b) You will not offer, sell, assign, hypothecate or otherwise transfer
any Shares issued upon conversion, repurchase or payment of the Convertible
Notes or pursuant to this Agreement except in compliance with applicable state
securities laws and (i) pursuant to an effective registration statement under
the Act; (ii) to a person you reasonably believe to be an "accredited investor"
within the meaning of Rule 501 under the Act, pursuant to an available exemption
under the Act or (iii) in an offshore transaction within the meaning and meeting
the requirements of Rule 903 under the Act. The Company may require, as a
condition to any transfer pursuant to clause (ii) of this Section 4(b) and to
any subsequent transfer by the transferee, an opinion of counsel reasonably
satisfactory to the Company that such transfer is exempt from the registration
requirements of the Act; provided that this sentence shall not apply to any
transfer of Shares to _______________ or any of its affiliates.
(c) You are an "accredited investor" within the meaning of Rule 501
under the Act.
5. CONDITIONS. Your obligations under this Agreement in respect of
each Option shall be subject to the condition that all representations and
warranties and other statements of the Company herein are true and correct in
all material respects at and as of the closing of the purchase and sale of
such Option; the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed in respect of such Option;
and the following additional conditions:
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(a) Counsel for the Company specified in Annex III hereto shall have
furnished to you their written opinion, dated the date of such closing, in form
and substance reasonably satisfactory to you, to the effect set forth in Annex
III hereto.
(b) On the date of such closing, the Company shall have furnished to
you such appropriate further information, certificates and documents as you may
reasonably request.
(c) Since the respective dates as of which information is given in the
Exchange Act Reports (as defined in Annex II hereto) to and including the date
of such closing, there shall not have been any material adverse change in the
capital stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, properties, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than (i) continuing operating losses in the ordinary
course of business and (ii) as set forth or contemplated in the Exchange Act
Reports.
(d) Since the date of the previous closing, if any, and up to and
including the date of such closing, there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or the Nasdaq National Market; (ii) a
suspension or material limitation in trading in the Company's securities on the
Nasdaq National Market; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or wary, if the effect
of any such event specified in this Clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the purchase of the Option on the
terms and in the manner contemplated in this Agreement.
6. MISCELLANEOUS.
(a) This Agreement shall be binding upon, and inure solely to the
benefit of, you and the Company and the respective executors, administrators,
successors and assigns thereof, and no other person shall acquire or have any
right under or by virtue of this Agreement. No purchaser of any Option from you
shall be deemed a successor or assign by reason merely of such purchase.
(b) Any notice or other communication required or permitted to be given
hereunder shall be deemed effectively given when made by telephone and confirmed
in writing by certified mail, facsimile or overnight courier service addressed
as follows (as applicable):
If to the Company, to:
Alliance Pharmaceutical Corp.
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxx
President
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Telephone Number:
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Facsimile Transmission Number:
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Attention: Xxxxx X. Xxxxxxx, Esq.
Vice President and General Counsel
Telephone Number:
-------------------------
Facsimile Transmission Number:
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If to _______________:
Attention:
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Telephone Number:
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Facsimile Transmission Number:
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with copies of the written notice to:
--------------------------
Attention:
-----------------------
Telephone Number:
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Facsimile Transmission Number:
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If to _______________:
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Attention:
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Telephone Number:
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Facsimile Transmission Number:
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or to such other address or number and to the attention of such other person as
either party may designate by written notice to the other party. Notice shall be
effective upon actual receipt.
For so long as any Purchaser is a holder of a Convertible Note, notices
to such Purchaser required or permitted to be given under the terms of such
Convertible Note shall be given in the manner provided in this Section.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(d) Time shall be of the essence in the performance of this Agreement.
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(e) This Agreement may be executed by the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
Very truly yours,
ALLIANCE PHARMACEUTICAL CORP.
By:
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Name:
Title:
Accepted as of the date hereof:
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By:
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Name:
Title:
By:
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Name:
Title:
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By:
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Name:
Title:
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THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.
ALLIANCE PHARMACEUTICAL CORP.
ZERO COUPON CONVERTIBLE NOTE DUE 2005
No. R-___
Alliance Pharmaceutical Corp., a corporation duly organized and
existing under the laws of New York (the "Company") for value received, hereby
promises to pay to ________________, or registered assigns, the principal sum of
Four Million Nine Hundred Thirty-Five Thousand Eight Hundred Ninety-Eight
Dollars ($4,935,898) on November 15, 2005. The principal of this Security shall
not bear interest except in the case of a default in payment of principal upon
acceleration, upon repurchase or at stated maturity and in such case the overdue
principal and any overdue premium shall bear interest at the rate of 20.0% per
annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or made
available for payment. Interest on any overdue principal or premium shall be
payable on demand. Any such interest on overdue principal or premium which is
not paid on demand shall bear interest at the rate of 20.0% per annum (to the
extent that payment of such interest on interest shall be legally enforceable),
from the date of such demand until the amount so demanded is paid or made
available for payment. Interest on any overdue interest shall be payable on
demand. Payment of the principal of (and premium, if any, on) this Security
shall be made upon the surrender of this Security to the Company, at its office
at 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (or such other office
within the United States as shall be notified by the Company to the holder
hereof) (the "Designated Office"), in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts, by transfer to a U.S. dollar account maintained by the
payee with a bank in the United States of America. Payment of any interest on
this Security shall be made by wire transfer to a U.S. dollar account maintained
by the payee with a bank in the United States of America, provided that if the
holder shall not have furnished wire instructions in writing to the Company no
later than the business day immediately prior to the date on which the Company
makes such payment, such payment may be made by U.S. dollar check mailed to the
address of the person entitled thereto as such address shall appear in the
Company security register.
1. REDEMPTION; PAYMENT AT MATURITY.
(a) This Security is subject to redemption, as a whole or in part (in
any amount that is an integral multiple of $1000), upon not less than 30 nor
more than 60 days' notice in the manner provided in Section 6(b), at any time on
or after November 15, 2001 (provided that the conditions set forth below in this
Section 1(a) are satisfied), at the election of the Company, at a redemption
price of 100% of the principal amount thereof; provided, however, that the
Company's right to redeem this Security is expressly made subject to the
conditions that (and the Company may not deliver a notice of redemption unless)
(i) the Closing Price of the Common Stock exceeds 300% of the Conversion Price
for each Trading Day in a period of 20 Consecutive Trading Days commencing not
earlier than November 15, 2001; and (iii) the Shares issuable upon conversion of
this Security have been registered under the Securities Act for resale by the
holder, all in accordance with the Registration Rights Agreement between the
Company and the
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initial holder of this Security. The term "Conversion Price" on any day shall
equal $1,000 divided by the Conversion Rate in effect on each such day.
(b) At the option of the Company, the principal of this Security may be
paid at stated maturity in cash or, subject to fulfillment by the Company of the
conditions set forth in Section 1(c), by delivery of shares of Common Stock
having a fair market value equal to the principal amount hereof as described in
Section 1(c). The Company agrees to give the holder of this Security notice, in
the manner provided in Section 6(b), of its intention to make payment in shares,
not less than ten Trading Days prior to the date such payment is due.
(c) The Company may elect to pay the principal of this Security at
maturity by delivery of shares of Common Stock pursuant to Section 1(b) if and
only if the following conditions have been satisfied:
(1) The shares of Common Stock deliverable in payment of such
principal amount shall have a fair market value as of the maturity date
of not less than such principal amount. For purposes of this Section
1(c), the fair market value of shares of Common Stock shall be equal to
the average of the Closing Prices for the five consecutive Trading Days
ending on and including the third Trading Day immediately preceding the
maturity date;
(2) The shares of Common Stock to be issued in payment of this
Security shall have been registered for resale by the holder upon
issuance pursuant to an effective registration statement under the
Securities Act of 1933, all in accordance with the Registration Rights
Agreement, dated as of November 8, 2000, between the Company and the
Purchasers named therein (the "Registration Rights Agreement");
(3) If any shares of Common Stock to be issued in payment of
this Security require registration with or approval of any governmental
authority under any State law or any other Federal law before such
shares may be validly issued or delivered in payment, such registration
shall have been completed, have become effective and such approval
shall have been obtained, in each case, prior to the maturity date;
(4) The shares of Common Stock deliverable in payment of the
principal hereof shall have been approved for quotation in the Nasdaq
National Market or listed on a national securities exchange immediately
prior to the maturity date;
(5) All shares of Common Stock deliverable in payment of the
principal hereof shall be issued out of the Company's authorized but
unissued Common Stock and will, upon issue, be duly and validly issued
and fully paid and non-assessable and free of any preemptive rights;
and
(6) The Company shall have delivered to the holder, prior to
the maturity date, an undertaking of the Company in the form attached
as Annex A hereto.
If all of the conditions set forth in this Section 1(c) are not
satisfied in accordance with the terms thereof, the principal hereof shall be
paid by the Company only in cash.
(d) If the Company elects payment in shares pursuant to Section 1 and
this Security is surrendered for payment in shares and is not so paid on the
maturity date, the principal amount of this Security shall, until paid, bear
interest to the extent permitted by applicable law from the maturity date at the
rate of 20.0% per annum, payable in cash, and shall remain convertible into
Common Stock until the
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principal of this Security shall have been paid or duly provided for.
(e) Any issuance of shares of Common Stock in payment hereof shall be
deemed to have been effected immediately prior to the close of business on the
maturity date and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such payment
shall be deemed to have become on the maturity date the holder or holders of
record of the shares represented thereby; PROVIDED, HOWEVER, that if the stock
transfer books of the Company shall be closed on the maturity date then the
person or persons in whose name or names the certificate or certificates for
such shares are to be issued shall be deemed to be the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open. Subject to Section 2(b), no payment
or adjustment shall be made for dividends or distributions on any Common Stock
issued upon payment of this Security declared prior to the maturity date.
(f) No fractions of shares shall be issued upon payment of this
Security. Instead of any fractional share of Common Stock which would otherwise
be issuable on the payment of this Security, the Company will deliver to the
holder its check for the current market value of such fractional share. The
current market value of a fraction of a share shall be determined by multiplying
the current market price of a full share by the fraction, and rounding the
result to the nearest cent. For purposes of this Section 1(f) the current market
price of a share of Common Stock shall be the Closing Price of the Common Stock
on the Trading Day immediately preceding the maturity date.
(g) Any issuance and delivery of certificates for shares of Common
Stock in payment of this Security shall be made without charge to the holder of
this Security for such certificates or for any tax or duty in respect of the
issuance or delivery of such certificates or the securities represented thereby;
PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or duty
which may be payable in respect of any transfer involved in the issuance or
delivery of certificates for shares of Common Stock in a name other than that of
the holder of this Security, and no such issuance or delivery shall be made
unless and until the person requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.
(h) Notwithstanding any other provision of this Security, the Company
shall, if the holder so elects, deliver the shares of common stock issuable
pursuant to this Section 1 to any third party designated by the holder.
2. CONVERSION. (a) The holder of this Security is entitled at any time
on or after November 15, 2001 and before the close of business on November 15,
2005 (or, in case this Security is called for redemption or the holder hereof
has exercised his right to require the Company to repurchase this Security or a
portion hereof pursuant to Section 3 hereof, then in respect of this Security or
such portion hereof, as the case may be, until and including, but (unless the
Company defaults in making the payment due upon redemption or repurchase) not
after, 5:00 p.m., San Diego, California time, on the redemption date or the
Repurchase Date, as the case may be), to convert this Security (or any portion
of the principal amount hereof that is an integral multiple of $1,000), into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company at the rate of 45.1021
shares of Common Stock for each $1,000 principal amount of Security (or at the
then current adjusted rate if an adjustment has been made as provided below)
(the "Conversion Rate" which term, where the context so permits, shall be deemed
to mean the number of shares of Common Stock issuable pursuant to such
Conversion Rate) by surrender of this Security, duly endorsed or assigned to the
Company or in blank to the Company at the Designated Office, accompanied by
written notice to the Company that the holder hereof elects to convert this
Security (or if less than the entire principal amount hereof is to be converted,
specifying the portion hereof to be converted). Notwithstanding the foregoing,
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unless the holder of this Security notifies the Company to the contrary, such
holder shall be deemed for all purposes to have converted this Security, subject
only to surrender of this Security against delivery of the Shares and cash
issuable upon such conversion (which surrender may take place before or after
the date of such deemed conversion, without affecting the validity thereof), (i)
immediately prior to the close of business on the redemption date, if this
Security is redeemed pursuant to Section 1(a) hereof, or (ii) immediately prior
to the close of business on November 15, 2005, if the Closing Price of the
Common Stock on the immediately preceding Trading Day exceeds 115% of the
Conversion Price. Subject to Section 2(b) below, no payment or adjustment is to
be made on conversion for dividends on the Common Stock issued on conversion
hereof. No fractions of shares or scrip representing fractions of shares will be
issued on conversion, but instead of any fractional interest, the Company shall
pay a cash adjustment, computed on the basis of the Closing Price of the Common
Stock on the date of conversion, or, at its option, the Company shall round up
to the next higher whole share.
Notwithstanding any other provision of this Security, the Company
shall, if the holder so elects, deliver the shares of Common Stock issuable upon
conversion of this Security to any third party designated by the holder.
Notwithstanding the foregoing, no holder of this Security that is
subject to the restrictions of Section 4 of the Bank Holding Company Act of
1956, as amended (the "BHCA") (a "BHCA Person") shall have the right to convert
this Security if, after giving effect to such conversion, the BHCA Person and
its affiliates and transferees would own or be deemed to own shares of Common
Stock in excess of either the maximum number of shares of Common Stock which the
BHCA Person is permitted to own under the BHCA and the regulations of the Board
of Governors of the Federal Reserve System thereunder or such lower number as
the relevant BHCA Person may have requested in writing to the Company. Any
Security held by an assignee or transferee of a holder subject to the
restriction on conversion in this paragraph shall continue to be subject to the
same restriction on conversion, unless such Security was assigned or transferred
(i) to the public in an offering registered under the Securities Act, (ii) in a
transaction pursuant to Rule 144 or 144A under the Securities Act in which no
person acquires Securities convertible into more than 2% of the outstanding
Common Stock, (iii) in a single transaction to a third party who acquires a
majority of the Common Stock without regard to the conversion of any Security so
transferred or (iv) in any other manner permitted under the BHCA. The Company
may rely on the representation of the relevant BHCA Person that a transfer has
been made in a manner which permits conversion of such Security. The holder of
this Security, by acceptance thereof, shall be deemed to have agreed to the
foregoing restriction on transfers.
(b) the Conversion Rate will be subject to adjustments from time to
time as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company payable in
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the Determination Date for such dividend or
other distribution shall be increased by dividing such Conversion Rate by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on such Determination Date and
the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
increase to become effective immediately after the opening of business on
the day following such Determination Date. For the purposes of this
paragraph (1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
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(2) Subject to the last sentence of paragraph (7) of this Section
2(b), in case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the current market
price per share (determined as provided in paragraph (8) of this Section
2(b)) of the Common Stock on the Determination Date for such
distribution, the Conversion Rate in effect at the opening of business on
the day following such Determination Date shall be increased by dividing
such Conversion Rate by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
such Determination Date plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at
such current market price and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on such
Determination Date plus the number of shares of Common Stock so offered
for subscription or purchase, such increase to become effective
immediately after the opening of business on the day following such
Determination Date. For the purposes of this paragraph (2), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not issue any rights, options or warrants
in respect of shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately increased,
and, conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion
Rate in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
reduced, such increase or reduction, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(4) Subject to the last sentence of paragraph (7) of this Section
2(b), in case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness, shares of
any class of capital stock, or other property (including securities, but
excluding (i) any rights, options or warrants referred to in paragraph
(2) of this Section 2(b), (ii) any dividend or distribution paid
exclusively in cash, (iii) any dividend or distribution referred to in
paragraph (1) of this Section 2(b) and (iv) any merger or consolidation
to which Section 2(h) applies), the Conversion Rate shall be adjusted so
that the same shall equal the rate determined by dividing the Conversion
Rate in effect immediately prior to the close of business on the
Determination Date for such distribution by a fraction of which the
numerator shall be the current market price per share (determined as
provided in paragraph (8) of this Section 2(b)) of the Common Stock on
such Determination Date less the then fair market value (as determined in
good faith by the Board of Directors of the Company) of the portion of
the assets, shares or evidences of indebtedness so distributed applicable
to one share of Common Stock and the denominator shall be such current
market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day
following such Determination Date. If the Board of Directors determines
the fair market value of any distribution for purposes of this paragraph
(4) by reference to the actual or when issued trading market for any
securities constituting such distribution, it must in doing so consider
the prices in such market over the same period used in computing the
current market price per share pursuant to paragraph (8) of this
5
Section 2(b).
(5) In case the Company shall, by dividend or otherwise, make a Cash
Distribution, then, and in each such case, immediately after the close of
business on the Determination Date for such Cash Distribution, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to
the close of business on such Determination Date by a fraction (a) the
numerator of which shall be equal to the current market price per share
(determined as provided in paragraph (8) of this Section 2(b)) of the
Common Stock on such Determination Date less an amount equal to the
quotient of (1) the amount of such Cash Distribution divided by (2) the
number of shares of Common Stock outstanding on such Determination Date
and (b) the denominator of which shall be equal to the current market
price per share (determined as provided in paragraph (8) of this Section
2(b)) of the Common Stock on such Determination Date.
(6) In case the Company or any Subsidiary shall make an Excess
Purchase Payment, then, and in each such case, immediately prior to the
opening of business on the day after the tender offer in respect of which
such Excess Purchase Payment is to be made expires, the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by
dividing the Conversion Rate in effect immediately prior to the close of
business on the Determination Date for such tender offer by a fraction
(a) the numerator of which shall be equal to the current market price per
share (determined as provided in paragraph (8) of this Section 2(b)) of
the Common Stock on such Determination Date less an amount equal to the
quotient of (A) the Excess Purchase Payment divided by (B) the number of
shares of Common Stock outstanding (including any tendered shares) as of
the Determination Date less the number of all shares validly tendered and
not withdrawn as of the Determination Date and (b) the denominator of
which shall be equal to the current market price per share (determined as
provided in paragraph (8) of this Section 2(b)) of the Common Stock as of
such Determination Date.
(7) The partial reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 2(h) applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be the Determination Date), and (b) a
subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification
into the number of shares of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or
"the day upon which such combination becomes effective", as the case may
be, and "the day upon which such subdivision or combination becomes
effective" within the meaning of paragraph (3) of this Section 2(b)).
Rights or warrants issued by the Company to all holders of its Common
Stock entitling the holders thereof to subscribe for or purchase shares
of Common Stock, which rights or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable
and (iii) are also issued in respect of future issuances of Common Stock,
in each case in clauses (i) through (iii) until the occurrence of a
specified event or events ("Trigger Event"), shall for purposes of this
Section 2(b) not be deemed issued until the occurrence of the earliest
Trigger Event.
(8) For the purpose of any computation under paragraphs (2), (4),
(5) or (6) of this Section 2(b) the current market price per share of
Common Stock on any date shall be calculated by the Company and be deemed
to be the average of the daily Closing Prices for the five consecutive
Trading Days commencing seven Trading Days before the earlier of (i) the
day in
6
question and (ii) the day before the "ex" date with respect to the
issuance or distribution requiring such computation. For purposes of this
paragraph, the term "ex date", when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades
regular way in the applicable securities market or on the applicable
securities exchange without the right to receive such issuance or
distribution.
(9) No adjustment in the Conversion Rate shall be required unless
such adjustment (plus any adjustments not previously made by reason of
this paragraph (9)) would require an increase or decrease of at least
one-half of one percent in such rate; PROVIDED, HOWEVER, that any
adjustments which by reason of this paragraph (9) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 2 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may
be.
(10) The Company may make such increases in the Conversion Rate, for
the remaining term of the Securities or any shorter term, in addition to
those required by paragraphs (1), (2), (3), (4), (5) and (6) of this
Section 2(b) as it considers to be advisable in order to avoid or
diminish any income tax to any holders of shares of Common Stock
resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event
treated as such for income tax purposes.
(c) Whenever the Conversion Rate is adjusted as provided in Section
2(b), the Company shall compute the adjusted Conversion Rate in accordance
with Section 2(b) and shall prepare a certificate signed by the chief
financial officer of the Company setting forth the adjusted Conversion Rate
and showing in reasonable detail the facts upon which such adjustment is
based, and shall promptly deliver such certificate to the holder of this
Security.
(d) In case:
(1) the Company shall declare a dividend or other distribution on
its Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require any adjustment
pursuant to Section 2(b); or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the Company, or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance, sale, transfer or lease of all or
substantially all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(5) the Company or any Subsidiary shall commence a tender offer for
all or a portion of the Company's outstanding shares of Common Stock (or
shall amend any such tender offer);
then the Company shall cause to be delivered to the holder of this Security, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable record, expiration or effective date
7
hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution, rights, options
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights, options or warrants are to be determined, (y) the date on which the
right to make tenders under such tender offer expires or (z) the date on which
such reclassification, consolidation, merger, conveyance, transfer, sale, lease,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (1) through (5) of
this Section 2(d).
(e) The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the Security, the full number of shares
of Common Stock then issuable upon the conversion of this Security.
(f) Except as provided in the next sentence, the Company will pay any
and all taxes and duties that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of the Security. The Company shall not,
however, be required to pay any tax or duty which may be payable in respect of
any transfer involved in the issue and delivery of shares of Common Stock in a
name other than that of the holder of this Security, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of any such tax or duty, or has established to
the satisfaction of the Company that such tax or duty has been paid.
(g) The Company agrees that all shares of Common Stock which may be
delivered upon conversion of the Security, upon such delivery, will have been
duly authorized and validly issued and will be fully paid and nonassessable (and
shall be issued out of the Company's authorized but unissued Common Stock) and,
except as provided in Section 2(f), the Company will pay all taxes, liens and
charges with respect to the issue thereof.
(h) In case of any consolidation of the Company with any other person,
any merger of the Company into another person or of another person into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company) or any conveyance, sale, transfer or lease of all or substantially
all of the properties and assets of the Company, the person formed by such
consolidation or resulting from such merger or which acquires such properties
and assets, as the case may be, shall execute and deliver to the holder of this
Security a supplemental agreement providing that such holder have the right
thereafter, during the period this Security shall be convertible as specified in
Section 2(a), to convert this Security only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (including any Common Stock retainable) by a
holder of the number of shares of Common Stock of the Company into which this
Security might have been converted immediately prior to such consolidation,
merger, conveyance, sale, transfer or lease, assuming such holder of Common
Stock of the Company (i) is not a person with which the Company consolidated,
into which the Company merged or which merged into the Company or to which such
conveyance, sale, transfer or lease was made, as the case may be (a "Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease (PROVIDED that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, sale,
transfer, or lease is not the same for each share of Common Stock of the Company
held immediately prior to such consolidation, merger, conveyance, sale, transfer
or lease by others than a Constituent Person or an
8
Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("Non-electing Share"), then for the purpose of this
Section 2(h) the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance, sale, transfer or
lease by the holders of each Non-electing Share shall be deemed to be the
kind and amount so receivable per share by a plurality of the Non-electing
Shares). Such supplemental agreement shall provide for adjustments which, for
events subsequent to the effective date of such supplemental agreement, shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 2. The above provisions of this Section 2(h) shall similarly
apply to successive consolidations, mergers, conveyances, sales, transfers or
leases. In this paragraph, "securities of the kind receivable" upon such
consolidation, merger, conveyance, transfer, sale or lease by a holder of
Common Stock means securities that, among other things, are registered and
transferable under the Securities Act, and listed and approved for quotation
in all securities markets, in each case to the same extent as such securities
so receivable by a holder of Common Stock.
(i) The Company (i) will effect all registrations with, and obtain all
approvals by, all governmental authorities that may be necessary under any
United States Federal or state law (including the Securities Act of 1933, the
Securities Exchange Act of 1934 and state securities and Blue Sky laws) for the
shares of Common Stock issuable upon conversion of this Security to be lawfully
issued and delivered as provided herein, and thereafter publicly traded (if
permissible under such Securities Act) and qualified or listed as contemplated
by clause (ii) (it being understood that the Company shall not be required to
register the Common Stock issuable on conversion hereof under the Securities
Act, except pursuant to the Registration Rights Agreement between the Company
and the initial holder of this Security); and (ii) will list the shares of
Common Stock required to be issued and delivered upon conversion of Securities,
prior to such issuance or delivery, on each national securities exchange on
which outstanding Common Stock is listed or quoted at the time of such delivery,
or if the Common Stock is not then listed on any securities exchange, to qualify
the Common Stock for quotation on the Nasdaq National Market or such other
inter-dealer quotation system, if any, on which the Common Stock is then quoted.
(j) For purposes hereof:
"Affiliate" of any specified person means any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control", when used with respect to any specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Cash Distribution" means the distribution by the Company to all
holders of its Common Stock of cash, other than any cash that is distributed
upon a merger or consolidation to which Section 2(h) applies or as part of a
distribution referred to in paragraph (4) of Section 2(b).
"Closing Price" means, with respect to the Common Stock of the
Company, for any day, the reported last sale price per share on the Nasdaq
National Market, or, if the Common Stock is not admitted to trading on the
Nasdaq National Market, on the principal national securities exchange or
inter-dealer quotation system on which the Common Stock is listed or admitted
to trading, or if not admitted to trading on the Nasdaq National Market, or
listed or admitted to trading on any national securities exchange or
inter-dealer quotation system, the closing bid price per share in the
over-the-counter market as furnished by any New York Stock Exchange member
firm selected from time to time by the Company for that purpose.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company
9
authorized at the date of this instrument as originally executed. Subject to
the provisions of Section 2(h), shares issuable on conversion or repurchase
of this Security, or in payment of the principal hereof at maturity, shall
include only shares of Common Stock or shares of any class or classes of
common stock resulting from any reclassification or reclassifications
thereof; PROVIDED, HOWEVER, that if at any time there shall be more than one
such resulting class, the shares so issuable on conversion of this Security
shall include shares of all such classes, and the shares of each such class
then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all
such reclassifications.
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to all
shareholders, the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution and, in the case of a tender
offer, the last time that tenders could have been made pursuant to such
tender offer.
"Excess Purchase Payment" means the product of (A) the excess, if
any, of (i) the amount of cash plus the fair market value (as determined in
good faith by the Company's Board of Directors) of any non-cash consideration
required to be paid with respect to one share of Common Stock acquired or to
be acquired in a tender offer made by the Company or any subsidiary of the
Company for all or any portion of the Common Stock over (ii) the current
market price per share as of the last time that tenders could have been made
pursuant to such tender offer and (B) the number of shares validly tendered
and not withdrawn as of the Determination Date in respect of such tender
offer.
"Trading Day" means (i) if the Common Stock is admitted to trading
on the Nasdaq National Market or any other system of automated dissemination
of quotations of securities prices, a day on which trades may be effected
through such system; (ii) if the Common Stock is listed or admitted for
trading on the New York Stock Exchange or any other national securities
exchange, a day on which such exchange is open for business; or (iii) if the
Common Stock is not admitted to trading on the Nasdaq National Market or
listed or admitted for trading on any national securities exchange or any
other system of automated dissemination of quotation of securities prices, a
day on which the Common Stock is traded regular way in the over-the-counter
market and for which a closing bid and a closing asked price for the Common
Stock are available.
3. RIGHT TO REQUIRE REPURCHASE. (a) In the event that a Change in
Control (as hereinafter defined) shall occur, then the holder of this Security
shall have the right, at such holder's option, to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase,
this Security, or any portion of the principal amount hereof that is equal to
$1,000 or any integral multiple thereof, on the date (the "Repurchase Date")
that is 15 Trading Days after the date on which the Company gives notice of such
Change of Control to the holder of this Security, at a purchase price equal to
the Repurchase Price. At the option of the Company, the Repurchase Price may be
paid in cash or, subject to the fulfillment by the Company of the conditions set
forth in Section 3(b), by delivery of shares of Common Stock having a fair
market value equal to the Repurchase Price as described in Section 3(b). The
Company agrees to give the holder of this Security notice of any Change in
Control, in the manner provided in Section 6(b), promptly and in any event
within two Trading Days of the occurrence thereof.
(b) The Company may elect to pay the Repurchase Price by delivery of
shares of Common Stock pursuant to Section 3(a), if and only if the following
conditions have been satisfied:
(1) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the Repurchase Date of not less than
the Repurchase Price. For purposes of
10
this Section 3(b), the fair market value of shares of Common Stock shall be
equal to the average of the Closing Prices for the five consecutive Trading
Days ending on and including the third Trading Day immediately preceding the
Repurchase Date;
(2) The shares of Common Stock to be issued upon repurchase of this
Security shall have been registered for resale by the holder upon issuance
pursuant to an effective registration statement under the Securities Act of
1933, all in accordance with the Registration Rights Agreement;
(3) If any shares of Common Stock to be issued upon repurchase of this
Security require registration with or approval of any governmental authority
under any State law or any other Federal law before such shares may be validly
issued or delivered upon repurchase, such registration shall have been
completed, have become effective and such approval shall have been obtained, in
each case, prior to the Repurchase Date;
(4) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have been approved for quotation in the Nasdaq National Market or
listed on a national securities exchange immediately prior to the Repurchase
Date;
(5) All shares of Common Stock deliverable in payment of the Repurchase
Price shall be issued out of the Company's authorized but unissued Common Stock
and will, upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights; and
(6) The Company shall have delivered to the holder, prior to the
Repurchase Date, an undertaking of the Company in the form attached as Annex A
hereto.
Notwithstanding any other provision of this Security, the Company
shall, if the holder so elects, deliver the shares of Common Stock issuable
pursuant to this Section 3 to any third party designated by the holder.
If all of the conditions set forth in this Section 3(b) are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
(c) To exercise a repurchase right, the holder shall deliver to the
Company on or before the 10th day prior to the Repurchase Date, together with
this Security, written notice of the holder's exercise of such right, which
notice shall set forth the name of the holder, the principal amount of this
Security to be repurchased (and, if this Security is to be repurchased in part,
the portion of the principal amount thereof to be repurchased and the name of
the person in which the portion thereof to remain outstanding after such
repurchase is to be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and, in the event that the Repurchase
Price shall be paid in shares of Common Stock, the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
shall be issued. Such written notice shall be irrevocable, except that the right
of the holder to convert this Security (or the portion hereof with respect to
which the repurchase right is being exercised) shall continue until the close of
business on the Repurchase Date (or if the Company elects to pay the Repurchase
Price by delivery of shares of Common Stock, until the close of business on the
Trading Day immediately preceding the first delivery of Common Stock in respect
thereof).
(d) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the holder
the Repurchase Price in cash or shares of Common Stock, as provided above, on or
prior to the Repurchase Date.
11
(e) If this Security (or portion thereof) is surrendered for repurchase
and is not so paid on the Repurchase Date, the principal amount of this Security
(or such portion hereof, as the case may be) shall, until paid, bear interest to
the extent permitted by applicable law from the Repurchase Date at the rate of
20.0% per annum, payable in cash, and shall remain convertible into Common Stock
until the principal of this Security (or portion thereof, as the case may be)
shall have been paid or duly provided for.
(f) If this Security is to be repurchased only in part, it shall be
surrendered to the Company at the Designated Office (with, if the Company so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company duly executed by, the holder hereof or his attorney
duly authorized in writing), and the Company shall execute and make available
for delivery to the holder without service charge, a new Security or Securities,
containing identical terms and conditions, each in an authorized denomination in
aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Security so surrendered.
(g) Any issuance of shares of Common Stock in respect of the Repurchase
Price shall be deemed to have been effected immediately prior to the close of
business on the Repurchase Date and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such repurchase shall be deemed to have become on the Repurchase Date the
holder or holders of record of the shares represented thereby; PROVIDED,
HOWEVER, that any surrender for repurchase on a date when the stock transfer
books of the Company shall be closed shall constitute the person or persons in
whose name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open. Subject to Section 2(b), no payment or adjustment shall be made for
dividends or distributions on any Common Stock issued upon repurchase of this
Security declared prior to the Repurchase Date.
(h) No fractions of shares shall be issued upon repurchase of this
Security. Instead of any fractional share of Common Stock which would otherwise
be issuable on the repurchase of this Security, the Company will deliver to the
holder its check for the current market value of such fractional share. The
current market value of a fraction of a share shall be determined by multiplying
the current market price of a full share by the fraction, and rounding the
result to the nearest cent.
(i) Any issuance and delivery of certificates for shares of Common
Stock on repurchase of this Security shall be made without charge to the holder
of this Security for such certificates or for any tax or duty in respect of the
issuance or delivery of such certificates or the securities represented thereby;
PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or duty
which may be payable in respect of any transfer involved in the issuance or
delivery of certificates for shares of Common Stock in a name other than that of
the holder of this Security, and no such issuance or delivery shall be made
unless and until the person requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.
(j) For purposes of this Section 3:
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934;
(2) a "Change in Control" shall be deemed to have occurred at
the time, after the original issuance of this Security, of:
12
(i) the acquisition by any person of beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock of
the Company entitling such person to exercise more than 50% of the
total voting power of all shares of capital stock of the Company
entitled to vote generally in the elections of directors (any shares of
voting stock of which such person is the beneficial owner that are not
then outstanding being deemed outstanding for purposes of calculating
such percentage) other than any such acquisition by the Company or any
employee benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into,
any other person, any merger of another person with or into the
Company, or any conveyance, transfer, sale, lease or other disposition
of all or substantially all of the assets of the Company to another
person (other than (a) any such transaction (x) which does not result
in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock and (y) pursuant to which holders of
Common Stock immediately prior to such transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the
election of directors of the continuing or surviving person immediately
after such transaction and (b) any merger which is effected solely to
change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of
Common Stock into solely shares of common stock);
(3) the "current market price" of a share of Common Stock shall be the
Closing Price of the Common Stock on the Trading Day immediately preceding the
Repurchase Date.
(4) "Repurchase Price" means the sum of
(I) (a) in connection with any Change of Control involving a
Stock Merger, 105% of the principal amount of this Security to be
repurchased pursuant to this Section 3, and (b) in connection with any
other Change of Control, the greater of (x)120% of the principal amount
of this Security to be repurchased pursuant to this Section and (y) the
amount determined pursuant to the following formula:
R = ( P x CR x M)
----
1000
plus an amount as set forth in the following table:
IF REPURCHASED DURING THE 12 MONTHS ENDED NOVEMBER : APPLICABLE AMOUNT
---------------------------------------------------- -----------------
2001 $1,944,445
2002 1,555,556
2003 1,166,667
2004 777,778
2005 388,889
where R = the Repurchase Price;
P = the principal amount of this Security to be repurchased;
13
CR = the Conversion Rate in respect of this Security; and
M = the current market price of the Common Stock.
(5) "Stock Merger" means any merger or consolidation of the
Company with or into another entity in which holders of Common Stock
immediately prior to such transaction receive, in respect of such
Common Stock, consideration not less than 80% of which by value
consists of common equity securities listed on a U.S. national
securities exchange or traded on the NASDAQ National Market System.
4. EVENTS OF DEFAULT. (a) "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default by the Company in the performance of its
obligations in respect of any conversion of this Security (or any
portion hereof) in accordance with Section 2; or
(2) failure by the Company to give any notice of a Change of
Control required to be delivered in accordance with Section 3(a); or
(3) default in the performance, or breach, of any material
covenant or warranty of the Company herein (other than a covenant or
warranty a default in the performance or breach of which is
specifically dealt with elsewhere in this Section 4(a)) and continuance
of such default or breach for a period of 30 days after there has been
given, by registered or certified mail, to the Company by the holder of
this Security a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(4) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company, or under
any agreement, mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company, with a principal amount
then outstanding in excess of $1,000,000, whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay the principal of such indebtedness (in whole or in any
part greater than $1,000,000) when due and payable or shall have
resulted in such indebtedness (in whole or in any part greater than
$1,000,000) becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 20 days after there
shall have been given, by registered or certified mail, to the Company
by the holder of this Security a written notice specifying such default
and requiring the Company to cause such indebtedness to be discharged
or cause such acceleration to be rescinded or annulled and stating that
such notice is a "Notice of Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition
14
of or in respect of the Company under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official
of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
(b) If an Event of Default (other than an Event of Default specified in
Section 4(a)(5) or 4(a)(6)) occurs and is continuing, then in every such case
the holder of this Security may declare the principal hereof to be due and
payable immediately, by a notice in writing to the Company, and upon any such
declaration such principal shall become immediately due and payable. If an Event
of Default specified in Section 4(a)(5) or 4(a)(6) occurs and is continuing, the
principal of, and accrued interest on, this Security shall IPSO FACTO become
immediately due and payable without any declaration or other act of the holders.
(c) The Company will give the holder of this Security notice, within
five days of the occurrence thereof, of any Event of Default or any event that,
with the giving of notice or passage of time or both, would become an Event of
Default. Such notice shall be given in the manner provided in Section 6(b).
5. CONSOLIDATION, MERGER, ETC. (a) The Company shall not consolidate
with or merge into any other person or, directly or indirectly, convey,
transfer, sell or lease all or substantially all of its properties and assets to
any person, and the Company shall not permit any person to consolidate with or
merge into the Company or, directly or indirectly, convey, transfer, sell or
lease all or substantially all of its properties and assets to the Company,
unless:
(1) in case the Company shall consolidate with or merge into
another person or convey, transfer, sell or lease all or substantially
all of its properties and assets to any person, the person formed by
such consolidation or into which the Company is merged or the person
which acquires by conveyance, transfer or sale, or which leases, all or
substantially all the properties and assets of the Company shall be a
corporation, limited liability company, partnership or trust, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the holder of this Security in form satisfactory to the
holder, the due and punctual payment of the principal of (and premium,
if any) and any interest on this Security and the performance or
observance of every covenant of this Security on the part of the
Company to
be performed or observed, including the conversion rights provided
herein (which shall thereafter relate to common stock of such
successor, on a basis reasonably designed to preserve the economic
value to the holder of this Security of such conversion rights);
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
a subsidiary of the Company as a result of such transaction as having
been incurred by the Company or such subsidiary of the Company at the
time of such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and
(3) the Company has delivered to the holder of this Security
an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, conveyance, transfer, sale or lease and, if
a supplemental agreement is required in connection with such
transaction, such supplemental agreement, comply with this Section and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
(b) Upon any consolidation of the Company with, or merger of the
Company into, any other person or any conveyance, transfer, sale or lease of all
or substantially all of the properties and assets of the Company in accordance
with Section 5(a), the successor person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer, sale or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Security with the same effect as if such
successor person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor person shall be relieved of all obligations
and covenants under this Security.
6. OTHER. (a) No provision of this Security shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest, if any, on this Security at the
times, places and rate, and in the coin or currency, herein prescribed or to
convert this Security as herein provided.
(b) The Company will give prompt written notice to the holder of
Security of any change in the location of the Designated Office. Any notice to
the Company or to the holder of this Security shall be given in the manner set
forth in the Option Agreement, dated as of November 8, 2000, among the Company
and the Purchasers named therein (the "Option Agreement"), provided that the
holder of this Security, if not a party to the Option Agreement, may specify
alternative notice instructions to the Company.
(c) The transfer of this Security is registrable on the Security
Register of the Company upon surrender of this Security for registration of
transfer at the Designated Office, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company duly executed by, the
holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
Such Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. No service charge
shall be made for any such registration of transfer, but the Company may require
payment of a sum sufficient to recover any tax or other governmental charge
payable in connection therewith. Prior to due presentation of this Security for
registration of transfer, the Company and any agent of the Company may treat the
person in whose name this Security is registered as the owner thereof for all
purposes, whether or not this Security be overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
16
(d) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS XX XXX XXXXX XX XXX XXXX, XXXXXX XXXXXX OF AMERICA.
7. SUBORDINATION OF SECURITIES. (a) The Company covenants and agrees,
and each holder of a Security, by his acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Section 7, the payment of the principal of (and premium, if any) on each and all
of the Securities are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness. "Senior
Indebtedness" shall mean any indebtedness, liabilities and other obligations of
the Company (whether as primary obligor or as guarantor) to any person (each a
"Senior Lender"), now existing or incurred hereafter, with respect to a Twenty
Five Million dollar ($25,000,000) basket of senior corporate debt from a
traditional lender, and debt incurred as a result of a transaction with a
corporate Strategic Partner. "Strategic Partner" means any established
biotechnology or pharmaceutical company, with a minimum market capitalization of
one billion dollars, with whom the Company executes a written agreement
providing that the Company and such entity will be "partnered" in the
development or distribution of one or more of the Company's chemical compounds.
(b) (1) No payment or distribution of cash or property (other
than Common Stock of the Company or other securities of the Company
that are subordinated to Senior Indebtedness to at least the same
extent as the Securities) of the Company will be made on account of
principal of the Securities, or to defease or acquire any of the
Securities, or on account of the conversion provisions of the
Securities and no action shall be taken (judicial or otherwise) to
collect any such payment or distribution (i) upon the maturity of any
Senior Indebtedness by lapse of time, acceleration or otherwise, unless
and until all Senior Indebtedness shall first be paid in full in cash,
or such payment duly made in a manner satisfactory to the holders of
such Senior Indebtedness or (ii) in the event that the Company defaults
in the payment of any principal of, premium, if any, or interest on or
any other amounts payable on or due in connection with any Senior
Indebtedness when it becomes due and payable, whether at maturity or at
a date fixed for prepayment or by declaration or otherwise, unless and
until such default has been waived in writing by the holders of the
Senior Indebtedness. Payments on the Securities may and shall be
resumed in the case of a payment default only upon the date on which
such default is waived in writing by the holders of the Senior
Indebtedness or their agent.
(2) If any default other than a default contemplated by
Section 7(b)(1)(ii) above shall have occurred and be continuing that
would permit the holders of the Senior Indebtedness to accelerate the
maturity of Senior Indebtedness, upon written notice (a "Payment
Blockage Notice") of the default given to the Company and the holders
of Securities by the holders of, or an agent, trustee or other
representative for, such Senior Indebtedness, then, unless and until
such default has been waived in writing, no payment or distribution of
cash or property (other than Common Stock of the Company or other
securities of the Company that are subordinated to Senior Indebtedness
to at least the same extent as the Securities) shall be made by the
Company with respect to the principal of the Securities or on account
of conversion of the Securities or to acquire or repurchase any of the
Securities for cash or property other than Common Stock of the Company,
and no action shall be taken (judicial or otherwise) to collect any
such payment or distribution. If such Senior Indebtedness is not
declared due and payable within 180 days after written notice of the
event of default is given, promptly after the end of the 180-day period
the Company will pay all sums due in respect of the Securities and not
paid during the 180-day period. During any 360-day consecutive period,
only one such period during which payment with respect to the
Securities may not be made as the result of a Payment Blockage Notice
may commence and the duration of such period may not exceed 180 days.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the holders of Security
shall be, or be made,
17
the basis for a subsequent Payment Blockage Notice unless such default
shall have been waived for a period of not less than 90 days.
(3) If any payment or distribution of assets of the Company is
received by any holder of Securities in respect of the Securities at a
time when that payment or distribution should not have been made
because of paragraph (1) or (2) of this Section 7(b), and provided that
prior to the Company's disbursement of such distribution or payment,
the holders of Securities shall have received a written notice from the
Company or from an agent or representative for one or more holders of
Senior Indebtedness, such payment or distribution will be received and
held and will be paid over to the holders of Senior Indebtedness (pro
rata as to each of such holders on the basis of the respective amounts
of Senior Indebtedness held by them) until all such Senior Indebtedness
has been paid in full, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior
Indebtedness.
(c) Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency, receivership or similar proceedings relating to the
Company or its property or upon an assignment for the benefit of creditors or
any marshalling of the Company's assets or liabilities or otherwise):
(1) the holders of all Senior Indebtedness will first be
entitled to receive payment in full of the principal of and interest
due on Senior Indebtedness (including interest accruing after the
commencement of a bankruptcy or insolvency) at the rate specified in
the applicable Senior Indebtedness documents and including, without
limitation, in respect of premiums, indemnities or otherwise, before
the holders of Securities are entitled to receive any payment or
distribution on account of the principal of the Securities;
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (except
that holders of Securities may receive securities that are subordinated
at least to the same extent as the Securities to Senior Indebtedness
and any securities issued in exchange for Senior Indebtedness), to
which holders of Securities would be entitled except for the provisions
of this Section 7(c) will be paid by the liquidating trustee or agent
or other persons legally empowered to make such a payment or
distribution directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives to the
extent necessary to make or provide for payment in full in cash of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness or provision for that payment or distribution; and
(3) if, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether
in cash, property or securities (except that holders of Securities may
receive securities that are subordinated at least to the same extent as
the Securities to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness) is received by the holders of
Securities on account of the principal of the Securities before all
Senior Indebtedness is paid in full, such payment or distribution will
be received and held in trust for and will be forthwith paid over to
the holders of the Senior Indebtedness remaining unpaid or unprovided
for or their representatives for application (in the case of cash) to,
or as collateral (in the case of non-cash property or securities) for
the payment of such Senior Indebtedness until all such Senior
Indebtedness has been paid in full, after giving effect to any
concurrent payment or distribution or provision therefor to the holders
of such Senior Indebtedness.
18
The Company will give prompt written notice to the holders of
Securities of any dissolution, winding up, liquidation or reorganization of it
or any assignment for the benefit of its creditors.
(d) Subject to the payment in full of all Senior Indebtedness, the
holders of Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until all
amounts owing on the Securities shall be paid in full; and, for the purposes of
such subrogation:
(1) no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders
of Securities would be entitled except for the provisions of this
Section 7 and no payment pursuant to the provisions of this Section 7
to the holders of Senior Indebtedness by the holders of Securities
shall, as between the Company, its creditors (other than holders of
Senior Indebtedness) and the holders of Securities, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness; and
(2) no payment or distributions of cash, property or
securities to or for the benefit of the holders of Securities pursuant
to the subrogation provision of this Section 7, which would otherwise
have been paid to the holders of Senior Indebtedness, shall be deemed
to be a payment by the Company to or for the account of the Securities.
(e) The provisions of this Section 7 are and are intended solely for
the purpose of defining the relative rights of the holders of Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Section 7 or elsewhere in this Security is intended to or
shall (x) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the holders of the Securities, the obligation of the
Company, which is absolute and unconditional to pay to the holders of the
Securities the principal of (premium, if any) and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (y) affect the relative rights against the Company of the holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (z) prevent the holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this Security,
subject to the rights, if any, under this Section 7 of the holders of Senior
Indebtedness to receive cash, property and securities otherwise payable or
deliverable to the holder upon the exercise of any such remedy.
(f) In the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon any assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, with respect to the filing of a claim for the unpaid balance of
any holders of Securities in the form required in those proceedings, if the
holder does not file a proper claim or proof of debt in the form required in
such proceeding at least thirty (30) days before the expiration of the time to
file such claim or claims, then the holders of Senior Indebtedness and their
agents, trustees, or other representatives are hereby authorized to have the
right to file, and are hereby authorized to file, an appropriate claim for and
on behalf of each such holder.
(g) No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Security, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
19
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the holders of the Securities, without
incurring responsibility to the holders of the Securities and without impairing
or releasing the subordination provided in this Section 7 or the obligations
hereunder of the holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other person.
(h) The Company shall give prompt written notice to the holders of
Securities, in the manner provided in Section 6(b), of any fact known to the
Company which would prohibit the making of any payment to or by the holders of
Securities in respect of the Securities. Notwithstanding the provisions of this
Section 7 or any other provision of this Security, the holders of Securities
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to the holders in respect of the Securities,
unless and until the holders of Securities shall have received written notice
thereof from the Company or a holder of Senior Indebtedness; and, prior to the
receipt of any such written notice, the holders of Securities shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
the holders of Securities shall not have received the notice provided for in
this Section 7(h) at least two business days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of, and premium, if any, or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the holders of Securities shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be received by it
within two business days prior to such date.
The holders of Securities shall be entitled to rely on the delivery to
them of a written notice by a person representing himself to be a holder of
Senior Indebtedness (or a representative thereof) to establish that such notice
has been given by a holder of Senior Indebtedness (or representative thereof).
In the event that the holders of Securities determine in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Indebtedness (or a representative thereof) to participate in any payment
or distribution pursuant to this Section 7, the holders of Securities may
request such person to furnish evidence to the reasonable satisfaction of the
holders of Securities as to the amount of Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Section 7, and if such evidence is not furnished, the holders
of Securities may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
(i) Upon the payment or distribution of assets of the Company referred
to in this Section 7, the holders of Securities shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which such
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of the creditors, agent
or other person making such payment or distribution, delivered to the holders of
Securities, for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 7.
(j) Neither the holders of Securities nor the Company shall enter into
any modification of
20
the Securities which is in any way adverse to the holders of the Senior
Indebtedness.
(k) The Company will furnish to the holders of Senior Indebtedness at
the time Senior Indebtedness is initially incurred, when there is a change in
the holders thereof, or at any time upon request therefor, a true and correct
copy of the then most current register setting forth the names and addresses of
the holders of Securities as of such date.
(l) The holder of this Security by its acceptance hereof agrees to
execute and deliver to any Senior Lender such subordination agreement as may be
reasonably requested by such Senior Lender, which may deviate in certain minor
respects from the subordination provisions contained herein but which is
commercially reasonable and customary, and to execute, acknowledge, deliver,
file, notarize and register all such further agreements, instruments,
certificates, documents and assurances, and perform such acts as such Senior
Lender shall deem necessary or appropriate to effectuate the purposes of the
subordination provisions contained herein.
21
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed under its corporate seal.
Dated: , 2000
ALLIANCE PHARMACEUTICAL CORP.
By:
--------------------------
Name:
Title:
Attest:
------------------------
Name:
Title:
22
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 3(a) of this Security, the undersigned hereby
elects to have all or a portion of this Security repurchased by the Company.
2. The undersigned hereby directs the Company to pay [choose one] (a)
it or (b) Name: __________________; address: __________________; Social Security
or Other Taxpayer Identification Number, if any: ____________, an amount in cash
or, at the Company's election, Common Stock valued as set forth in the Security,
equal to the Repurchase Price, as provided herein.
Dated:
--------------------------
--------------------------
Signature
Number of shares of Common Stock
owned by the holder and its affiliates:
--------------------
Principal amount to be repurchased
(an integral multiple of $1,000):
--------------------
Remaining principal amount following such repurchase
(not less than $1,000):
--------------------
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably exercises
the option to convert this Security, or any portion of the principal amount
hereof (which is an integral multiple of $1,000) below designated, into shares
of Common Stock in accordance with the terms of this Security, and directs that
such shares, together with a check in payment for any fractional share and any
Security representing any unconverted principal amount hereof, be delivered to
and be registered in the name of the undersigned unless a different name has
been indicated below. If shares of Common Stock or Securities are to be
registered in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
Dated:
---------------------
---------------------------
Signature
23
If shares or Securities are to be If only a portion of the Securities is to
registered in the name of a person be converted, please indicate:
other than the holder, please print
such person's name and address:
1. Principal amount to be converted:
-------------------- $______________
Name
2. Principal amount and denomination
of Security representing
unconverted principal amount to
be issued:
--------------------
Address
Amount: $_____________
Denominations: $____________
-------------------- (any integral multiple of $1,000)
Social Security or other Taxpayer
Identification Number, if any
24
ANNEX A
To: [name and address of holder]
Alliance Pharmaceutical Corp. (the "Company") is issuing this undertaking
pursuant to Section [1(c)] [3(b)] of its Zero Coupon Convertible Note Due 2005
("Notes"). The Company is delivering herewith _____________ shares of its Common
Stock in payment of the [principal amount][Repurchase Price] in respect of
$___________ principal amount] of Notes [, which Repurchase Price equals
$___________]. In consideration of your purchase of its Notes and acceptance of
such shares, the Company undertakes to pay to you, promptly on demand, an amount
in cash equal to the positive difference between such [principal
amount][Repurchase Price] and the aggregate proceeds realized by you upon resale
of such shares of Common Stock in the open market during the sixty days
following the [maturity date of the Notes][the Repurchase Date] (and you hereby
undertake to use commercially reasonable efforts to effect such resale), and if
such difference is a negative difference, the undersigned holder undertakes to
pay to the Company, promptly on demand, an amount in cash equal to such negative
difference. The calculation of such difference will be set forth in reasonable
detail in a certificate delivered by you to the Company. Such payment should be
made promptly upon demand following the delivery of the certificate contemplated
by the preceding sentence, against surrender of any shares of Common Stock
previously delivered to you pursuant to Section [1(c)][3(b)] and then remaining
unsold. The Company acknowledges that the manner of such resale shall be in your
absolute discretion, subject to your undertaking above, and that your
determination of the amount of such proceeds should be controlling, absent
manifest error, without affecting your undertaking above.
ALLIANCE PHARMACEUTICAL CORP.
By:
----------------------------------
Name:
Title:
Agreed and accepted:
[NAME OF HOLDER]
By:
-------------------------
Name:
Title:
25
