Exhibit 4.1
AMENDMENT AGREEMENT
This Amendment Agreement (this "Agreement") is being entered into on
December 31, 2001 by and among Pharmos Corporation, a Nevada corporation (the
"Company"), and Millennium Partners, L.P., a Delaware limited partnership
("Millennium"), and St. Alban's Partners, Ltd. (each a "Purchaser," and
collectively, the "Purchasers"). Terms used herein but not defined shall have
the meaning set forth in that certain related Purchase Agreement dated as of
September 1, 2000 (the "Purchase Agreement") by and among the Company and the
Purchasers, except where the context expressly indicates to the contrary.
RECITALS:
WHEREAS, pursuant to the Purchase Agreement, the Company sold and issued to
the Purchasers 6% Convertible Debentures due February 28, 2002 (the
"Debentures"), in the aggregate principal amount of $6,000,000 at an aggregate
purchase price of $6,000,000, on the terms and conditions set forth therein; and
WHEREAS, in connection with the sale and issuance of the Debentures, the
Company also issued to the Purchasers warrants (the "Warrants"), exercisable for
shares of common stock, par value $.03, of the Company (the "Common Stock");
WHEREAS, pursuant to Section 19 of the Debentures, no Debenture nor any
term thereof may be amended, waived, discharged or terminated other than by
written instrument signed by the company and the holder thereof (the "Holder");
WHEREAS, in connection with the Purchase Agreement, the Company and the
Purchasers entered into that certain Escrow Agreement, dated September 1, 2000
(the "Escrow Agreement,"), whereby each Purchaser deposited 50% of the amount of
its Purchase Price from each purchase of Debentures (the "Escrow Proceeds") into
a separate escrow account maintained by the Escrow Agent (as defined in the
Escrow Agreement) for such Purchaser (a "Purchaser Escrow Account"); and
WHEREAS, pursuant to Section 12 of the Escrow Agreement, no provision of
the Escrow Agreement may be amended or waived without the prior written consent
of the Company and Purchasers holding a majority in the principal amount of the
Debentures; and
WHEREAS, in connection with the Purchase Agreement, the Company and the
Purchasers entered into that certain Registration Rights Agreement, dated
September 1, 2000 (the "Registration Rights Agreement," and together with the
Purchase Agreement, the Debentures, the Warrants (as defined in the Purchase
Agreement), and the Escrow Agreement (the "Original Transaction Documents"),
whereby the Company provided the Purchasers with certain registration rights
with respect to the Common Shares (as defined in the Registration Rights
Agreement) and the Warrant Shares (as defined in the Registration Rights
Agreement); and
WHEREAS, the Company and Purchasers wish to amend certain terms and
conditions in connection with the Debentures and amend certain terms and
conditions of the Escrow Agreement pursuant to Section 12 of the Escrow
Agreement;
NOW THEREFORE, the parties hereto agree as follows:
TERMS:
1. Conversion of the Debentures. The following changes shall be effected to
the terms and conditions of 50% of the Debentures held by each Purchaser on the
date hereof (the "Initial Debentures"):
(a) The term "Maturity Date" shall be defined as June 30, 2003.
(b) Section 5(c) is hereby amended to read as follows, "Subject to
adjustments pursuant to Sections 4 and 7, this Debenture will have a
conversion price (the "Conversion Price") equal to $2.15.
The fully paid, validly issued and non-assessable shares of Common Stock into
which such Debentures will be convertible shall be hereinafter referred to as
the "Conversion Shares." The remaining 50% of the Debentures held by the
Purchasers on the date hereof shall hereinafter be referred to as the "Remaining
Debentures." The shares of Common Stock issuable upon exercise of the Remaining
Debentures shall hereinafter be referred to as "Remaining Debenture Shares."
2. Remaining Debentures. The following changes shall be effected to the
terms and conditions of the Remaining Debentures:
(a) The term "Maturity Date" shall be defined as June 30, 2003.
(b) Section 5(c) is hereby amended to read as follows, "Subject to
adjustments pursuant to Sections 4 and 7, this Debenture will have a
conversion price (the "Conversion Price") equal to $2.63
3. Escrow Agreement.
(a) Section 2 of the Escrow Agreement is hereby amended in its
entirety to read as follows:
"Upon conversion by an Investor, individually or in the aggregate of at
least 50.00% of the initial principal amount of the Debentures held by such
Investor plus the interest that has accrued thereon since the date of issuance
of the Debentures, the Investor and the Company shall promptly thereafter
execute a joint certificate to the Escrow Agent (as defined in the Escrow
Agreement) certifying that at least 50.00% in aggregate principal amount of such
Investor's Debentures plus the interest that has accrued thereon since the
issuance of the Debentures has been converted by the Investor (a "50.00%
Conversion Notice"). Upon receipt of a 50.00% Conversion Notice, the Escrow
Agent, shall release the Escrowed Proceeds received from such Investor to the
Company."
(b) The parties agree that after execution of this Amendment
Agreement, upon receipt by each Purchaser of all of its Conversion Shares
(upon conversion of the Initial Debentures) and Remaining Debentures, all
proceeds held in escrow may be released. The
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parties acknowledge that the Escrow Agent may rely upon certificates
executed by each of Purchasers to the effect that it has received its
Conversion Shares and Remaining Debentures in releasing the Escrowed
Proceeds.
4. Registration Rights. The Company hereby represents that the Company's
Registration Statement (No. 333-46818) (the "Registration Statement"), which
covers the disposition of Registrable Securities pursuant to the Original
Transaction Documents, has been declared effective by the Securities and
Exchange Commission and is effective as of the date hereof, and that the
prospectus to be delivered in connection therewith is current and deliverable.
(a) The Company hereby acknowledges that all shares received and
issuable upon conversion of the Debentures, including those issuable
pursuant to Section 1 of this Amendment Agreement and those issuable upon
conversion of the Remaining Debentures, shall be considered Registrable
Securities for the purpose of the Registration Rights Agreement. The
Conversion Shares are registered pursuant to the Registration Statement,
which covers the disposition of Registrable Securities issuable pursuant to
the Original Transaction Documents, and will be issued free of legend and
stop-order. The Company acknowledges that the Registration Statement also
covers the resale of an additional 1,421,945 shares of Common Stock
issuable upon conversion of the Remaining Debentures, and such shares, when
issued will be issued free of legend and stop order. The Company also
covenants and agrees to register an additional 1,084,519 shares of Common
Stock on an additional registration statement (the "Additional Registration
Statement") in accordance with the provisions of Section 2 of the
Registration Rights Agreement, to cover the resale of any additional
Remaining Debenture Shares not covered by the Registration Statement. Any
delays in obtaining the effectiveness of the Additional Registration
Statement will result in the obligation of the Company to make Delay
Payments, as provided in the Registration Rights Agreement, as well as
result in the other rights and remedies contained in the Registration
Rights Agreement. Pursuant to Section 3.10 of the Purchase Agreement, the
Company shall be required to reserve and keep available for purposes of
conversion of the Remaining Debentures no less than 1,879,848 shares of
authorized but unissued shares of Common Stock, which number shall be
appropriately adjusted for any stock split, reverse split, stock dividend
or reclassification of the Common Stock. The parties acknowledge that the
foregoing use of specific numbers in this Section 4(a) does not constitute
any waiver of the Company's obligations to reserve a greater number of
shares for purposes of conversion of the Remaining Debentures or to
register a greater number of Remaining Debenture Shares in the event of a
downward adjustment in Conversion Price pursuant to Section 4 or Section 7
of the Remaining Debentures.
(b) The Company shall, as expeditiously as reasonably possible after
the date hereof, and in any event within 30 days hereafter, prepare and
file the Additional Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Act"), or in the event the Company is
ineligible to use such form, such other form as the Company is eligible to
use under the Act. The Additional Registration Statement, to the extent
allowable under the Act and the rules promulgated thereunder (including
Rule 416), shall state that the Additional Registration Statement also
covers such number of Additional Shares of Common Stock as may become
issuable to prevent dilution resulting from stock splits, stock dividends
or similar events. The Company shall use its best efforts to cause the
Additional Registration Statement to be declared effective as soon as
practicable, and in any event prior to the earlier of (i) 75 days
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following the date hereof or, in the event the Additional Registration
Statement is reviewed by the SEC, by April 15, 2002, or (ii) five days
after SEC clearance to request acceleration. The earlier of such two dates
shall be deemed the Effectiveness Deadline for purposes of the rights and
remedies contained in the Registration Rights Agreement. The Company shall
provide the holders of Remaining Debenture Shares and their legal counsel
reasonable opportunity to review the Additional Registration Statement or
any amendment or supplement thereto prior to filing.
(c) Notwithstanding paragraph 4(b) above, the Company's obligation to
file the Additional Registration Statement shall be suspended if the
Company complies in full, from the date hereof, with the following
covenant:
(i) From the date hereof until March 1, 2002, the Company shall
not effect any transactions or reprice any existing instruments,
resulting in the issuance or sale of shares of Common Stock or
Convertible Securities where the Per Share Selling Price (as defined
in the Debentures) is less than $2.63 (as such price may be adjusted
for subsequent stock-splits, reverse splits and consolidations), other
than financings involving Millennium Partners, L.P.
If the foregoing covenant is not complied with in full, the obligation set
forth in paragraph 4(b) shall apply as of the date hereof.
(d) The Company hereby acknowledges that for purposes of Rule 144 of
the Act, the holding period of shares of Common Stock issuable upon
conversion of the Debentures, including the Conversion Shares and the
Remaining Debenture Shares, shall date from September 1, 2000.
(e) Neither the Company, nor any of its affiliates, nor to its
knowledge any person acting on its behalf has, directly or indirectly made
any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the
Debentures (including the Initial Debentures and Remaining Debentures), the
Warrants, the Common Shares, the Warrant Shares, the Conversion Shares or
the Remaining Debentures Shares under the Act. The issuance of the
Debentures (including the Initial Debentures and Remaining Debentures),
Warrants, Common Shares, Warrant Shares, Conversion Shares or the Remaining
Debentures Shares to the Purchasers will not be integrated with any other
issuance of the Company's securities (past, current or future) for purposes
of any rule that requires stockholder approval, including the rules of the
NASD.
5. Press Release and Form 8-K. As soon as practicable but in no event more
than two (2) Trading Days following the execution of this Amendment Agreement
and the satisfaction of the conditions in Section 8 by all of the parties, the
Company shall issue a press release in a form mutually agreeable to both
parties. If the Company fails to issue the press release within two (2) Trading
Days following such date, the Purchasers may issue a press release covering the
transaction and complying with any legal requirement applicable to the
Purchasers. In addition, within two (2) Trading Days following such date, the
Company shall file a Form 8-K with the SEC, which discloses the transactions
related to this Amendment Agreement, in a form mutually agreeable to both
parties. The Purchasers shall have the opportunity to review such Form 8-K prior
to its filing.
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6. Due Authorization. The Company hereby represents and warrants to each of
the Purchasers as of the date hereof that the Company has all requisite
corporate power and authority to enter into and perform this Amendment Agreement
and the transactions contemplated hereby and thereby. The Company further
represents and warrants that this Amendment Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
7. Expenses. The Company and the Purchasers shall each bear their own legal
expenses in connection with their entry into this transaction.
8. Closing Documents; Conditions. (a) Contemporaneously with the execution
and delivery of this Amendment Agreement, the Company shall deliver each of the
Closing Documents (as defined below) to the Purchasers. The obligations of each
Purchaser hereunder are subject to the Purchasers' receipt of such Closing
Documents. The requirement that the Purchasers receive the Closing Documents is
for each Purchaser's benefit and may be waived by each Purchaser at any time in
writing in its sole discretion. "Closing Documents" means (v) an opinion of
independent counsel of the Company, in the form annexed hereto as Exhibit A; (w)
an executed copy of the officer's certificate in the form attached hereto as
Exhibit B; (x) the Initial Debentures issued by the Company in accordance with
this Amendment Agreement; and (y) the Remaining Debentures issued by the Company
in accordance with this Amendment Agreement. Promptly following the execution
and delivery of this Amendment Agreement, the Purchasers shall tender to the
Company their respective certificates representing the Debentures prior to their
amendment pursuant to this Amendment Agreement.
(b) The obligations of both the Company and the Purchasers shall be
subject to the receipt by the Company, by no later than January 4, 2002, of
a waiver from Strong River Investments, Inc., in form and substance
satisfactory to the Company and the Purchasers, waiving its anti-dilution
rights under Section 7(a) of its Debenture with respect to the adjustments
on Conversion Prices effectuated pursuant to Sections 1 and 2 of this
Agreement.
9. Miscellaneous.
(a) Article 7 of the Purchase Agreement is hereby incorporated herein
by reference with such changes as may be necessary mutatis mutandis to
conform to this Amendment Agreement.
(b) Except as set forth above, the Original Transaction Documents and
the terms thereof shall remain unmodified and in full force and effect.
(c) The Company hereby represents that all of the Company's
representations and warranties contained in the Original Transaction
Documents were true and correct as of September 1, 2000 and, except as set
forth on Schedule 1 hereto, are true and correct as of the date hereof
(except for representations and warranties made as of an earlier date,
which shall be true and correct as of such date).
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(d) The Company hereby represents that it has performed all agreements
and satisfied all conditions required to be performed or satisfied prior to
the date hereof by the Original Transaction Documents when and as required.
(e) The Company hereby acknowledges and agrees that it has no pending
claims against any of the Purchasers and hereby releases, acquits and
forever discharges each of the Purchasers from any and all actions, causes
of action, claims, demands, damages, judgments, debts, dues and suits of
every kind, nature and description whatsoever, which the Company ever had,
now has or may have against any Purchaser on or by reason of any matter,
cause or thing whatsoever through the date hereof.
(f) The Company hereby represents that no Event of Default (as defined
in the Debentures) has occurred, is likely to occur or is threatened, and
no event has occurred which constitutes or would constitute an Event of
Default with notice or the passage of time or both, as of the date hereof.
(g) This Amendment Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same Amendment Agreement and shall become effective when counterparts
have been signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the executing
party with the same force and effect as if such facsimile signature page
were an original thereof.
(h) In consideration of the Purchasers' execution and delivery of this
Amendment Agreement, and in addition to all of the Company's other
obligations under the Original Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Purchasers and all of
their partners, officers, directors, employees, members and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Amendment Agreement)
(collectively, the "Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Amendment Agreement or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement
or obligation of the Company contained in this Amendment Agreement or any
other certificate or document contemplated hereby or thereby, (c) any cause
of action, suit or claim brought or made against such Indemnitee by a third
party and arising out of or resulting from (i) the execution, delivery,
performance, breach by the Company or enforcement of this Amendment
Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of
the Debentures (including the
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Initial Debentures and Remaining Debentures), the Warrants, the Common
Shares, the Warrant Shares, the Conversion Shares or the Remaining
Debentures Shares or (iii) the status of the Purchaser or holder of the
Debentures (including the Initial Debentures and Remaining Debentures), the
Warrants, the Common Shares, the Warrant Shares, the Conversion Shares or
the Remaining Debentures Shares as investors in the Company, and (d) the
enforcement of this Section. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee to the extent
it arises out of such Indemnitee's willful misconduct, gross negligence, or
fraudulent action(s). To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
(i) For the avoidance of doubt, the parties acknowledge that the
Conversion Shares and the Remaining Debentures Shares shall be considered
to be Common Shares, as defined in the Original Transaction Documents and
Registrable Securities as defined in the Registration Rights Agreement, and
the Initial Debentures and the Remaining Debentures shall be considered to
be Debentures as defined in the Original Transaction Documents.
(j) The parties acknowledge and agree that the Purchasers are not
agents, affiliates or partners of each other, that all representations,
warranties, covenants and agreements of the Purchasers hereunder are
several and not joint, that no Purchaser shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions
of any other Purchaser, and that any rights granted to "Purchasers"
hereunder shall be enforceable by each Purchaser hereunder.
(k) This Amendment Agreement, the Original Transaction Documents and
the agreements and other documents referred to herein and therein
constitute the full and entire understanding and agreement of the parties
with respect to the matters covered hereby and thereby, supercedes any
prior understanding, memoranda or other written or oral agreements between
or among any of them respecting the matters covered hereby and thereby and,
except as specifically set forth herein or therein, neither the Company nor
any Purchaser makes any representation, warranty, covenant or undertaking
with respect to such matters. No provision of this Amendment Agreement may
be waived or amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought.
(l) Notices to the parties hereto shall be sent to the addresses set
forth in the Purchase Agreement.
*** Signatures on the next page ***
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ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN:
COMPANY:
PHARMOS CORPORATION
By: /s/ Robert W. Cook
-------------------------------------
Name: Robert W. Cook
Title: EVP, CFO
PURCHASERS:
MILLENNIUM PARTNERS, LP
By: Daniel Cardella
By: /s/ Daniel Cardella
------------------------------------
Name: Daniel Cardella
Title: Portfolio Manager
ST. ALBANS PARTNERS LTD.
By:
By: /s/ John B. Wagner
-----------------------------------
Name: John B. Wagner
Title: Managing Partner
[Signature Page to Amendment Agreement]
SCHEDULE 1
Updates to Representations and Warranties
1. As of November 1, 2001, there were 55,356,307 shares of the Company's
Common Stock outstanding.
2. In October 2001, the Company sold it ophthalmic business to Bausch &
Lomb Incorporated, as reported in the Current Report of Form 8-K filed on
October 16, 2001.