EXHIBIT (d)(5)
7.50% CONVERTIBLE PROMISSORY NOTE
$50,000,000.00 Durham, North Carolina
December 9, 2002
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS NOTE IS ALSO SUBJECT TO
RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 17 HEREOF.
FOR VALUE RECEIVED, the undersigned, TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation (the "COMPANY"), promises to pay to GILEAD SCIENCES, INC.
(the "INVESTOR"), in lawful money of the United States and in immediately
available funds, the principal amount of Fifty Million Dollars ($50,000,000.00)
(together with increases to such amount pursuant to Section 1 below, the "FACE
AMOUNT") together with interest thereon calculated from the date hereof and
delay or default amounts payable pursuant to, and in accordance with, the
provisions of this Note.
This Note was issued in connection with that Agreement and Plan of Merger
among the Investor, Simbolo Acquisition Sub, Inc., and the Company dated
December 3, 2002 (the "MERGER AGREEMENT"). As used herein, "NOTE" means this
7.50% Convertible Promissory Note and any similar convertible promissory note
issued by the Company in exchange for, upon the partial conversion of, or to
effect a transfer of, this Note.
1. ACCRUAL OF INTEREST. Except as otherwise expressly provided in Section 9
hereof, interest shall accrue at the rate of seven and one half percent (7.50%)
per annum (based on a year of 365 days for the actual days elapsed) on the Face
Amount and, if not paid in cash on the Interest Payment Date (as defined below)
shall result, on each Interest Payment Date, in a corresponding increase in the
then outstanding Face Amount of this Note.
2. PAYMENT OF PRINCIPAL AND INTEREST ON NOTE.
(a) SCHEDULED PAYMENT OF PRINCIPAL. The Company shall pay the Face
Amount, together with all accrued and unpaid interest and unpaid delay or
default amounts thereon, if any, in cash to the Holder of this Note on the
earlier of (i) December 9, 2007 or (ii) the termination of the Merger Agreement
pursuant to Section 8.1(h) (in each case, the "MATURITY DATE").
(b) PAYMENT OF INTEREST. Commencing with a payment on December 31, 2002,
the Company shall pay interest on this Note in cash quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year and on the Maturity
Date, or if any such day is
not a business day, on the next succeeding business day (each an "INTEREST
PAYMENT DATE") to Holders of record on the immediately preceding March 15,
June 15, September 15 and December 15, respectively.
(c) REDUCTION OF FACE AMOUNT ON HSR CLEARANCE DELAY. The Face
Amount of the Note may be reduced in accordance with, and subject to, the
provisions of Sections 8.1(e) and 8.1(f) of the Merger Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) REQUISITE POWER AND AUTHORITY. The Company has all requisite power
and authority to execute and deliver this Note and the other Note Documents, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. All action on the Company's part necessary
for the execution and delivery of this Note and the other Note Documents, the
consummation of the transactions contemplated hereby and thereby and the
performance of all obligations of the Company hereunder and thereunder prior to
the issuance of this Note has been taken. The Note Documents have been or will
be duly executed and delivered by the Company. The Note Documents (assuming due
execution and delivery by the Investor) are legal, valid and binding obligations
of the Company, enforceable against it in accordance with their terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(b) OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Investor contained in Section 5 hereof, the offer, sale and
issuance of the Note and the conversion of the Note into the Conversion Shares
will be exempt from the registration requirements of the Securities Act and will
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
(c) NO GENERAL SOLICITATION. Neither the Company, nor any of its
Subsidiaries or Affiliates, or, to its knowledge, any person acting on its or
their behalf has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Note or the Conversion Shares.
(d) NO INTEGRATED OFFERING. Neither the Company, nor any of its
Subsidiaries or Affiliates, nor to its knowledge any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration under the Securities Act of the Note or the
Conversion Shares. The issuance of the Note and the Conversion Shares to the
Investor or any other Holder will not be integrated with any other issuance of
the Company's securities (past, current or future) which requires stockholder
approval under the rules of the Nasdaq National Market.
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(e) FORM S-3. The Company is eligible as of the Issue Date to file the
of the Issue Date Form S-3 under the Securities Act and the rules promulgated
thereunder, and as of the Issue Date Form S-3 is permitted under the Securities
Act and the rules promulgated thereunder to be used for the transactions
contemplated by the Note Documents.
4. COVENANTS OF THE COMPANY.
(a) PAYMENT OF NOTE. The Company shall promptly pay the principal of
and interest on this Note on the dates and in the manner provided herein.
(b) SEC REPORTS AND AVAILABLE INFORMATION. The Company shall file with
the SEC the annual reports and the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that are specified in Sections 13 and 15(d) of the
Exchange Act within the time periods specified therein.
(c) LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not
permit any of its Subsidiaries to, Incur or suffer to exist any Indebtedness
except: (i) Indebtedness evidenced by this Note; (ii) Permitted Indebtedness;
(iii) Indebtedness owing by any of the Wholly-Owned Subsidiaries to any other
Wholly-Owned Subsidiaries or the Company; (iv) other Indebtedness in an
aggregate amount not to exceed $42,500,000 at any time; and (v) refinancings,
extensions or other modifications of any of the items of Indebtedness and
described in the foregoing clauses (i) through (iv).
(d) REPURCHASE RIGHT UPON A CHANGE OF CONTROL. The Company shall not
agree to or permit a Change of Control unless it has available to it cash or
committed financing sufficient to repurchase this Note, and irrevocably and
unconditionally agrees to repurchase this Note pursuant to Section 8 hereof.
(e) CORPORATE EXISTENCE. The Company shall, and shall cause each of its
Subsidiaries to: (i) do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its and their corporate existence,
and its rights and franchises; and (ii) use commercially reasonable efforts to
maintain, preserve and protect all of its material patents, trademarks and trade
names, and preserve all the remainder of its material assets, in use or useful
in the conduct of its business and keep the same in good repair, working order
and condition (taking into consideration ordinary wear and tear) and from time
to time make, or cause to be made, all needful and proper repairs, renewals and
replacements, betterments and improvements thereto consistent with industry
practices.
(f) TAX COMPLIANCE. The Company shall pay all transfer, excise or
similar taxes (not including income or franchise taxes) in connection with the
issuance, sale, delivery or transfer by the Company to the Holders of this Note
and the Conversion Shares, and shall indemnify and save each Holder harmless
without limitation as to time against any and all liabilities with respect to
such taxes. The Company shall not be responsible for any taxes in connection
with the transfer of this Note or such Conversion Shares by the Holder thereof.
The obligations of the Company under this Section 4(f) shall survive the
payment, prepayment, conversion or redemption of this Note.
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(g) STATEMENT BY OFFICERS AS TO DEFAULT. The Company shall deliver to
the Holders, as soon as possible and in any event within five days after the
Company becomes aware of the occurrence of any Event of Default or an event
which, with notice or the lapse of time or both, would constitute an Event of
Default, an Officers' Certificate setting forth the details of such Event of
Default or Default and the action which the Company proposes to take with
respect thereto.
(h) APPROVED MARKET LISTING. The Company shall not voluntarily
remove the Common Stock from listing on an Approved Market.
(i) RESERVATION OF SHARES; STOCK EXCHANGE LISTING.
(i) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note and the issuance of the Conversion Shares,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Note and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of this Note, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose, including without limitation engaging in best
efforts to obtain the requisite shareholder approval. Without in any way
limiting the foregoing, the Company agrees to reserve and at all times keep
available solely for purposes of conversion of this Note such number of
authorized but unissued shares of Common Stock that is at least equal to 150% of
the aggregate shares issuable upon conversion of this Note, which number shall
be appropriately adjusted for any stock split, reverse split, stock dividend or
reclassification of the Common Stock.
(ii) The Company shall at its expense (i) not less than thirty
(30) days prior to the first anniversary of the date of issuance of this Note,
prepare and submit an application to Nasdaq for listing the Conversion Shares
and (ii) cause all shares of Common Stock issued upon the conversion of this
Note to be listed at the time of such issuance on Nasdaq and/or such other
national securities exchange shares on which shares of Common Stock are then
listed on and shall maintain such listing.
(j) NOTE ISSUABLE ON CONVERSION. Upon any partial conversion by the
Investor (or then Holder) of this Note into Common Stock pursuant to the terms
hereof, the Company shall issue and deliver to the Investor (or Holder) within
three (3) trading days of the conversion date, a new Note for the principal
amount of this Note which the Investor (or Holder) has not yet elected to
convert but which is evidenced in part by this Note submitted to the Company in
connection with such conversion (with the number of and denomination of such new
Note(s) designated by the Investor or Holder).
(k) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to this Note and Conversion Shares, as required under Regulation D and
to provide a copy thereof to the Investor promptly after such filing. The
Company has taken such action as the Company shall have reasonably determined is
necessary to qualify this Note and Conversion Shares for sale to the Investor
under applicable securities or "blue sky" laws of the states of the
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United States (or to obtain an exemption from such qualification), and has
provided evidence of any such action so taken to the Investor.
(l) SUBORDINATED INDEBTEDNESS. The Company will not make any payment in
respect to any Indebtedness that is subordinated to the Indebtedness owing by
the Company to the Holder under the Note Documents, except in compliance with
the terms of such Indebtedness, or amend any provision contained in any
documentation relating to such Indebtedness that would adversely affect the
Investor's rights without the consent of the Investor.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
(a) REQUISITE POWER AND AUTHORITY. The Investor has all requisite power
and authority to execute and deliver this Note and the other Note Documents, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. All action on the Investor's part
necessary for the execution and delivery of this Note and the other Note
Documents, the consummation of the transactions contemplated hereby and thereby
and the performance of all obligations of the Investor hereunder and thereunder
prior to the issuance of this Note has been taken. The Note Documents have been
or will be duly executed and delivered by the Investor. The Note Documents
(assuming due execution and delivery by the Company) are legal, valid and
binding obligations of the Investor, enforceable against it in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(b) INVESTMENT REPRESENTATIONS. The Investor acknowledges that neither
this Note nor the Conversion Shares have been registered under the Securities
Act or under any state securities laws. The Investor (a) is acquiring this Note
and the Conversion Shares for its own account, not as a nominee or agent, and
not with the present view to, or for resale in connection with, any distribution
thereof in violation of applicable securities laws, (b) is an "accredited
investor" within the meaning of Regulation D, Rule 501(a), promulgated by the
SEC, (c) acknowledges that this Note and the Conversion Shares must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from the registration requirements of the Securities Act is
available and (d)represents that by reason of its business or financial
experience, the Investorhas the capacity to protect its own interests in
connection with the transactions contemplated by the Note Documents.
(c) NO BROKER. The Investor has not employed any broker or finder or
incurred any liability for any brokerage or finders' fees or any similar fees or
commissions in connection with the transactions contemplated by this Note.
(d) DISCLOSURE OF INFORMATION. Without limiting any of the
representations and warranties of the Company set forth in the Merger Agreement,
the Investor represents that it has conducted its own due diligence
investigation of the Company, that it has had an opportunity to ask questions
and receive answers from the Company regarding this Note and the business,
properties and financial condition of the Company.
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6. OPTIONAL REDEMPTION.
(a) OPTIONAL REDEMPTION. From and after the third (3rd) anniversary of
the Issue Date (as hereinafter defined), or upon a Change of Control during the
first year after the Issue Date, the Company, at its option, may upon written
notice to the Holder of this Note redeem this Note, in whole but not in part, to
the extent it has funds legally available and irrevocably reserved therefor and
such redemption is not prohibited by the terms of its outstanding indebtedness,
at the redemption price of 100% of the Face Amount thereof, plus an amount equal
to all accrued and unpaid interest and unpaid delay or default amounts thereon,
if any, to the redemption date; PROVIDED, HOWEVER, that in the event of such
redemption by the Company from and after the third (3rd) anniversary of the
Issue Date, (i) a registration statement covering the Conversion Shares has been
declared effective by the SEC and is currently effective, and (ii) the Company
is permitted (without the necessity of any further approvals or action) by law
and under the rules of any securities exchange on which the Common Stock is
traded to convert this Note into shares of Common Stock and the Company intends
and has the financial resources and ability to redeem this Note. Nothing in this
Section 6 shall prevent the Holder from converting this Note into Common Stock
at any time after the first anniversary of the Issue Date prior to the payment
of the redemption proceeds of this Note.
(b) PAYMENT OF REDEMPTION PRICE.
(i) The amount of the redemption price, on any redemption set
forth herein, shall be paid to the Holder of this Note in cash.
(ii) The Company's written notice shall specify the time and place
of the redemption of this Note, calling upon the Holder to surrender this Note
to the Company on the redemption date at the place designated in the notice. The
date such written notice is received by a Holder is the "REDEMPTION RECORD
DATE." The redemption date shall be not fewer than thirty (30) nor more than
sixty (60) trading days after the Redemption Record Date. On or after the
redemption date, the Holder of this Note shall present and surrender this Note
to the Company at the place designated in the redemption notice and thereupon
the redemption price of this Note, and any unpaid interest and unpaid delay or
default amounts thereon to the redemption date, shall be paid in cash to or on
the order of the person whose name appears in the Note Register (as herein
defined) as the owner thereof, and the surrendered Note shall be canceled by the
Company. Any notice of redemption by the Company shall be irrevocable, and any
failure by the Company to redeem this Note for cash on the redemption date under
this Section 6 shall result (without limiting the Holder's other rights under
Section 9 and the other provisions of the Transaction Documents) in the
automatic and permanent termination of all of the Company's rights under this
Section 6.
(iii) If a notice of redemption has been given pursuant to this
Section 6 and the Holder of this Note shall, prior to the close of business on
the business day immediately preceding the redemption date, give written notice
to the Company pursuant to Section 7 below of the conversion of this Note (or
any portion thereof), then such redemption shall not become effective as to this
Note (or the portion thereof) to be converted and such conversion shall become
effective as provided in Section 7 below.
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7. CONVERSION RIGHTS; ADJUSTMENTS. The Holders of this Note shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) HOLDER'S RIGHT TO CONVERT. At any time after the first anniversary
of the Issue Date, the Face Amount of this Note plus all accrued and unpaid
interest and unpaid delay or default amounts thereon shall be convertible, in
whole or inpart, at the option of the Holder thereof, at any time and from time
to time into fully paid and nonassessable shares of the Company's Common Stock,
par value $0.001 per share (the "COMMON STOCK") at the Conversion Price (as
defined below) in effect as of the applicable Conversion Date (as defined
below); PROVIDED, HOWEVER, that this Note may only be converted in such amounts
and to the extent that such conversion would not violate the HSR Act (as defined
in the Merger Agreement). The price at which shares of Common Stock shall be
issuable upon conversion of this Note (the "CONVERSION PRICE") shall initially
be $6.90. The Conversion Price shall be subject to adjustment as provided below.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of fractional shares, the Company
shall pay cash equal to such fraction multiplied by the Closing Price per Share
of Common Stock on the trading date immediately preceding the related Conversion
Date.
(c) MECHANICS OF CONVERSION.
(i) In order to exercise its conversion rights under this Note, the
Holder shall deliver written notice in the form of Exhibit 1 to the Company
stating that such Holder elects to convert all or part of the Face Amount, plus
the ratable portion of any accrued but unpaid interest and unpaid delay or
default amounts, represented by this Note. Such notice shall state the portion
of the Face Amount proposed to be converted into Common Stock, plus the ratable
portion of any accrued but unpaid interest and unpaid delay or default amounts
proposed to be converted into Common Stock, and shall be accompanied within one
(1) trading day by this Note. The date contained in the notice shall be the
conversion date ("CONVERSION DATE") and the Holder shall be deemed to own the
underlying Common Stock as of such date. As soon as practicable (but no later
than three (3) days) after the Conversion Date, the Company shall issue and
deliver to such Holder a certificate or certificates for the number of shares of
Common Stock determined by dividing (i) the portion of the Face Amount proposed
to be converted into Common Stock, plus the ratable portion of any accrued and
unpaid interest and Payments proposed to be converted into Common Stock, by (ii)
the Conversion Price in effect as of such Conversion Date whereupon, in the case
where this Note shall have been converted in its entirety, this Note shall be
cancelled and, in the case where only part of this Note is converted (by
election of the Holder), the amount outstanding under this Note shall be
correspondingly reduced and the Company shall execute and deliver (at its own
expense) a new Note of any authorized denomination as requested by the Holder in
an aggregate principal amount equal to and in exchange for the unconverted
portion of the principal amount of this Note so surrendered. Notwithstanding
anything to the contrary in this Section 7, in the case where only a part of
this Note is converted, the amount of the unconverted portion of this Note shall
be at least $10,000. The conversion pursuant to Section 7 shall be deemed to
have been made immediately prior to the close of business on the Conversion
Date. The person or persons entitled to receive the
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Common Stock issuable upon such conversion shall be treated for all purposes
as the record Holder of such Common Shares at the close of business on the
Conversion Date.
(ii) If this Note shall have been surrendered for conversion as
herein provided it shall no longer be deemed to be outstanding and all rights
with respect to this Note, including the rights, if any, to receive interest,
notices and consent rights shall immediately cease and terminate on the
Conversion Date, except only the right of the Holder to receive shares of Common
Stock or cash, as the case may be, in exchange therefor, and, if applicable,
cash for any fractional shares of Common Stock and a replacement Note in respect
of the portion of this Note that has not been converted into Common Stock. This
Note, to the extent so converted, shall be retired and canceled.
(d) ADJUSTMENTS TO CONVERSION PRICE.
(i) SPECIAL DEFINITIONS. For purposes of this Section 7, the
following definitions shall apply:
(a) "OPTION" shall mean Rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, other than such Rights, options or warrants granted to employees,
directors or bona fide consultants of the Company pursuant to plans or
arrangements approved by the Company's board of directors.
(b) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(c) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued (or, pursuant to Section 7(d)(x) below, deemed to be
issued) by the Company after the Issue Date.
(d) "RIGHTS TO ACQUIRE COMMON STOCK" (or "RIGHTS") shall mean
all rights issued by the Company to acquire Common Stock whether by exercise of
a warrant, option or similar call, or conversion of any existing instruments, in
either case for consideration fixed, in amount or by formula, as of the date of
issuance.
(ii) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time after the Issue Date combine the outstanding
shares of Common Stock, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(iii) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the Issue Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price in effect
immediately prior to such event shall be decreased as
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of the time of such issuance, by multiplying such Conversion Price by a
fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of such
Additional Shares of Common Stock issuable in payment of such dividend or
distribution.
(iv) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time, or from time to time after the Issue Date
shall make or issue, a dividend or other distribution payable in securities
of the Company (other than shares of Common Stock) or other assets or
properties (including, without limitation, cash dividends), then and in each
such event provision shall be made so that the Holder of this Note shall
receive in addition to the number of shares of Common Stock receivable upon
conversion of this Note, the amount of securities of the Company or other
assets or properties that they would have received had this Note been
converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the Conversion
Date, retained such securities or other assets or properties receivable by
them as aforesaid during such period giving application to all adjustments
called for during such period, under this paragraph with respect to the
rights of the Holder of this Note; PROVIDED that, in the event rights or
benefits under such securities, assets or properties shall terminate prior to
the time that the Holder of this Note may elect to convert this Note into
shares of Common Stock, such amount of securities, assets or properties that
the Holder would have received had such Holder converted his or her notes
immediately prior to the distribution shall be distributed to the Holder of
this Note on the date the securities, assets or properties are distributed to
the holders of Common Stock.
(v) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If
the Common Stock issuable upon the conversion of this Note shall be changed
into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares, stock dividend or
reorganization, reclassification, merger, consolidation or asset sale
provided for elsewhere in this Section 7), then and in each such event the
Holder of this Note (whether then outstanding or thereafter issued) shall
have the right thereafter to convert this Note into the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the number
of shares of Common Stock into which this Note might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein or with respect to such
other securities or property by the terms thereof.
(vi) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR ASSET SALES. If at
any time after the Issue Date there is a tender offer, exchange offer, merger,
consolidation, recapitalization, sale of all or substantially all of the
Company's assets or reorganization involving the Common Stock (collectively, a
"CAPITAL REORGANIZATION") (other than a merger, consolidation, sale of assets,
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 7), as part of
such Capital Reorganization, subject to Section 6, provision shall be made so
that the Holder of this Note will thereafter be entitled to receive upon
conversion of this Note the number of shares of stock or other securities or
property of the Company to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such Capital
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Reorganization, subject to adjustment in respect to such stock, securities or
other property by the terms thereof. In any such case, appropriate adjustment
will be made in the application of the provisions of this Section 7 with
respect to the rights of the Holder of this Note after the Capital
Reorganization to the end that the provisions of this Section 7 (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of this Note) will be applicable after that event
and be as nearly equivalent as practicable to the conversion rights of the
Holder of this Note prior to such Capital Reorganization. In the event that
the Company is not the surviving entity of any such Capital Reorganization,
this Note shall become a Note of such surviving entity, with the holder of
such Note having the same powers, rights and preferences as provided herein.
The adjustment provided in this Section 7(d)(vi) shall not impact the rights
of the Holder of this Note set forth in Section 8.
(vii) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 7 and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of
the Holder of this Note against impairment to the extent required hereunder.
Nothing in this Section 7 shall affect the continued accrual of interest on
this Note in accordance with the terms of this Note.
(viii) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section
7, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder of
this Note a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment are
based and shall file a copy of such certificate with its corporate records.
The Company shall, upon the reasonable written request of the Holder of this
Note, furnish or cause to be furnished to the Holder a similar certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price then in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which then would be received upon the
conversion of this Note. Despite such adjustment or readjustment, the form of
this Note, if the same shall reflect the initial or any subsequent Conversion
Price, need not be changed in order for the adjustments or readjustments to
be valid in accordance with the provisions of this Note, which shall control.
(ix) NOTICE OF RECORD DATE. In the event:
(A) that the Company declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities
of the Company;
(B) that the Company subdivides or combines its outstanding
shares of Common Stock;
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(C) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of Common
Stock or a stock dividend or stock distribution thereon);
(D) of any Capital Reorganization; or
(E) of the involuntary or voluntary dissolution, liquidation
or winding up of the Company;
THEN the Company shall cause to be filed at its principal office, and
shall cause to be mailed to the Holder of this Note at their last addresses
as shown on the records of the Company, at least ten (10) days prior to the
record date specified in (A) below or twenty (20) days prior to the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, 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, subdivision or combination are to be determined, or
(B) the date on which such reclassification, Capital
Reorganization, 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 or other property deliverable upon such reclassification,
Capital Reorganization, dissolution or winding up.
(x) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. If the Company at any time or from time to time after the Issue
Date issues (other than pursuant to the Transaction Documents) any Options or
Convertible Securities or Rights to Acquire Common Stock, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options, Rights
to Acquire Common Stock or, in the case of Convertible Securities, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue;
PROVIDED, HOWEVER, that in any such case:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of shares of Common Stock upon the exercise of
such Options, Rights or conversion or exchange of such Convertible Securities;
(B) Upon the expiration or termination of any unexercised
Option, Right or Convertible Security issued or granted after the Issue Date,
the Conversion Price shall be adjusted immediately to reflect the applicable
Conversion Price which would have been in effect had such Option, Right or
Convertible Security (to the extent outstanding immediately prior to such
expiration or termination) never been issued; and
(C) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any
Option, Right or Convertible Security, including, but not limited to, a
change resulting from the provisions thereof, the
11
Conversion Price then in effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had the Conversion Price
adjustment that was originally made upon the issuance of such Option, Right
or Convertible Security which were not exercised or converted prior to such
change been made upon the basis of such change, but no further adjustment
shall be made for the actual issuance of Common Stock upon the exercise or
conversion of any such Option, Right or Convertible Security.
8. REPURCHASE RIGHT UPON A CHANGE OF CONTROL.
(a) In the event that a Change of Control shall occur at any time
after the first (1st) anniversary of the Issue Date, then each Holder shall
have the right for ninety (90) days after delivery of the Company Notice (the
"REPURCHASE RIGHT"), at the Holder's option to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase
this Note in its entirety, or any portion of the principal amount hereof
requested by the Holder that is equal to $10,000 or any integral multiple
thereof. The date of such repurchase (the "REPURCHASE DATE") shall be thirty
(30) days after the date the Company Notice (as defined in Section 8(b)) is
required to be delivered. The repurchase price in the event of such Change of
Control shall be equal to the Redemption Price.
(i) "CHANGE OF CONTROL" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or Group of
shares representing a majority of the voting securities of the Company; (b)
any transaction or series of related transactions (including without
limitation, any reorganization, merger or consolidation) such that the
outstanding shares of the Common Stock (or securities which are convertible
into or exchangeable for Common Stock) are exchanged for or converted into
securities which represent less than a majority of the voting securities of
the surviving entity; (c) any transaction or series of related transactions
(including without limitation, any reorganization, merger or consolidation)
such that the Company's shareholders immediately prior to such transaction or
series of transactions own less than a majority of the voting securities of
the surviving entity; (d) the sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or
substantially all of the Company's assets; or (e) the occupation of a
majority of the seats (other than vacant seats) on the board of directors of
the Company by Persons who were neither (i) nominated by the board of
directors of the Company nor (ii) appointed by directors so nominated.
(ii) "CONVERSION VALUE" of this Note as of a particular date
means the value that the Holder would be entitled to receive upon (a)
conversion of this Note at the Conversion Price in effect as of such date,
followed by (b) the subsequent sale of the Conversion Shares received thereby
at the greater of the last Closing Price per Share of Common Stock
immediately prior to the time (A) of the closing of a repurchase of this Note
or (B) of the event triggering the right to repurchase.
(iii) "CLOSING PRICE PER SHARE OF COMMON STOCK" means the price
of one share of Common Stock determined as follows:
12
(A) If the Common Stock is approved for trading on the Nasdaq
National Market System or the Nasdaq Small-Cap Market, the last reported
"BID" price thereon on the date of valuation;
(B) If clause (A) above does not apply and the Common Stock
is listed on New York Stock Exchange or the American Stock Exchange, the
closing bid price on such exchange on the date of valuation;
(C) If neither clause (A) nor clause (B) above applies but
the Common Stock is quoted in the over-the-counter market, another recognized
exchange, on the pink sheets or bulletin board, (I) the last sales price on
the date of valuation or, if there is no such sales price, (II) the mean
between the last reported "BID" and "ASKED" prices thereof on the date of
valuation; and
(D) If neither clause (A), (B) or (C) above applies, the
market value as determined by a nationally recognized investment banking firm
or other nationally recognized financial advisor retained by the Company and
reasonably acceptable to the Holder for such purpose, taking into
consideration, among other factors, the earnings history, book value and
prospects for the Company, and the prices at which shares of Common Stock
recently have been traded. Such determination shall be conclusive and binding
on all persons.
(iv) "REDEMPTION PRICE" of this Note as of a particular date
means the greater of (A) the Conversion Value or (B) the sum of (i) the Face
Amount of this Note as of such date, (ii) accrued but unpaid interest hereon
as of such date, and (iii) unpaid delay or default amounts thereon as of such
date.
(b) Not later than three (3) days prior to the date of a Change of
Control after the first anniversary of the Issue Date, the Company shall give
to the Holder of this Note notice (the "COMPANY NOTICE"), of the Change of
Control and of the Repurchase Right set forth herein arising as a result
thereof. Each notice of a Repurchase Right shall be mailed to the Holder of
this Note at their last address as shown on the records of the Company and
shall state:
(i) the Repurchase Date;
(ii) the date by which the Repurchase Right must exercised;
(iii) the Redemption Price;
(iv) a description of the procedure which the Holder must follow
to exercise a Repurchase Right, and the place or places where this Note is to
be surrendered for payment of the Redemption Price;
(v) that on the Repurchase Date the Redemption Price will become
due and payable upon this Note, and that interest thereon shall cease to
accrue on and after said date;
13
(vi) the Conversion Price then in effect, the date on which
the right to convert the principal amount of this Note to be repurchased will
terminate and the place where this Note may be surrendered for conversion; and
(vii) the place or places that this Note shall be delivered
upon exercise of a Repurchase Right.
No failure of the Company to give the foregoing notices or defect
therein shall limit the Holder's right to exercise a Repurchase Right or affect
the validity of the proceedings for the repurchase of this Note.
If any of the foregoing provisions or other provisions of this Section
8 are inconsistent with applicable law, such law shall govern.
(c) To otherwise exercise a Repurchase Right, the Holder shall
deliver to the Company on or before the fifteenth (15th) day after the date of
the Company Notice written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the Face Amount, interest and
unpaid delay or default amounts of this Note, and a statement that an election
to exercise the Repurchase Right is being made thereby. Such written notice
shall be irrevocable, except that the right of the Holder to convert this Note
shall continue until midnight (Eastern Time) on the business day immediately
preceding the Repurchase Date.
(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 of this Note the Redemption Price, in cash within three (3) trading
days after the Repurchase Date.
(e) If this Note (or any portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the Redemption Price,
shall, until paid, bear interest to the extent permitted by applicable law from
the Repurchase Date at the rate of seventeen percent (17.0%) per annum, and this
Note shall remain convertible into Common Stock until the principal of this Note
(or portion thereof, as the case may be) shall have been paid or duly provided
for.
(f) When this Note is repurchased only in part it shall be
surrendered to the Company and the Company shall execute and make available for
delivery to the Holder of this Note without service charge, a new Note,
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 Note so surrendered.
9. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT"
shall be deemed to have occurred if:
(i) the Company fails to pay when due the principal of or
premium, if any, or interest on this Note when due at its stated maturity, upon
required repurchase, upon declaration or acceleration or otherwise;
14
(ii) (a) the Company or any of its Subsidiaries makes an
assignment for the benefit of creditors, (B) an order, judgment or decree is
entered adjudicating the Company or any of its Subsidiaries bankrupt or
insolvent, (C) any order for relief with respect to the Company or any of its
Subsidiaries is entered under the Bankruptcy Reform Act, Title 11 of the United
States Code, (D) the Company or any of its Subsidiaries petitions or applies to
any tribunal for the appointment of a custodian, trustee, receiver or liquidator
of the Company or any of its Subsidiaries or of any substantial part of the
assets of the Company or any of its Subsidiaries, or commences any proceeding
relating to the Company or any of its Subsidiaries under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, or (E) any such petition or application is
filed, or any such proceeding is commenced, against the Company or any of its
Subsidiaries and either (1) the Company or any of its Subsidiaries by any act
indicates its approval thereof, consent thereto or acquiescence therein or (2)
such petition, application or proceeding is not dismissed within forty-five (45)
days;
(iii) the Company or any of its Subsidiaries defaults under
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries), beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created, the aggregate outstanding
principal amount of which exceeds $1,000,000, other than indebtedness owed to
the Company or any of its Subsidiary, whether such indebtedness or guarantee now
exists, or is created after the date hereof;
(iv) the Company fails to comply with its obligations under
Section 7 or Section 8 of this Note; or
(v) the Company fails to comply with any of the covenants
set forth in Sections 4(c), 4(d), 4(e)(i), 4(h) and 4(i) hereof.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If an Event of Default has occurred pursuant to
Sections 9(a)(i) or (iv) of this Note, then the Holder of the Note may declare
all or any portion of the outstanding principal amount of and accrued but unpaid
interest and unpaid delay or default amounts on the Note due and payable and
demand immediate payment of the Redemption Price as of the date of such Event of
Default. If an Event of Default specified in Section 9(a)(ii) occurs, this Note
shall automatically and immediately become due and payable at the Redemption
Price as of the date of such Event of Default.
(ii) If an Event of Default has occurred pursuant to
Sections 9(a)(iii) or (v) of this Note, then (in addition to the other remedies
available) the Holder may declare, by written notice to the Company, all or any
portion of this Note due and payable at the applicable Redemption Price.
(iii) During the continuance of an Event of Default, the
interest on this Note shall accrue at a rate of seventeen percent (17.0%) per
annum (based on a year of 365 days)
15
on the Face Amount, plus any accrued but unpaid interest and unpaid delay or
default amounts hereon.
(iv) Subject to the other provisions of this Note, each
Holder of any portion of this Note shall also have, upon the occurrence and
continuance of an Event of Default, any other rights which such Holder may have
pursuant to applicable law or contract.
10. AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder.
11. PLACE OF PAYMENT. Payments of principal and interest and all
notices and other communications to the Investor hereunder or with respect
hereto are to be delivered to the Investor at the address identified on the
signature page of the Investor Rights Agreement or to such other address or to
the attention of such other person as specified by prior written notice to the
Company, including any transferee of this Note.
12. COSTS OF COLLECTION. In the event that the Company fails to pay
when due (including, without limitation upon acceleration in connection with an
Event of Default) the full amount of principal and/or interest hereunder, the
Company shall indemnify and hold harmless the Holder of any portion of this Note
from and against all reasonable costs and expenses incurred in connection with
the enforcement of this provision or collection of such principal and interest,
including, without limitation, reasonable attorneys' fees and expenses.
13. WAIVERS. The Company hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.
14. BENEFITS OF THE INVESTOR RIGHTS AGREEMENT. The Investor and all
transferees (to the extent permitted in the Investor Rights Agreement) shall be
entitled to the rights and benefits granted to them in the Investor Rights
Agreement.
15. REGISTRATION OF TRANSFER AND EXCHANGE GENERALLY.
(a) REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
GENERALLY. The Company shall keep at its principal executive offices a register
(the register maintained in such being herein sometimes collectively referred to
as the "NOTE REGISTER") in which the Company shall provide for the registration
of this Note and of transfers and exchanges of this Note. Subject to the
provisions of the Investor Rights Agreement regarding restrictions on transfer
and provided the transferee agrees to be bound by the terms of the Investor
Rights Agreement, upon surrender for registration of transfer of this Note at
its principal executive office, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Notes in
denominations of not less than $1,000,000 each (provided that if necessary to
enable the registration by the Holder of this entire Note, one Note may be in a
denomination of less than $1,000,000) or integral multiples thereof, of a like
aggregate principal amount and bearing such restrictive legends as may be
required by law.
16
At the option of a Holder, this Note may be exchanged for one or more
other Notes of any authorized denominations, of a like aggregate principal
amount and bearing such restrictive legends as may be required by law upon
surrender of this Note at the Company's principal executive offices. Whenever
this Note is so surrendered for exchange, the Company shall execute and make
available for delivery the Note which the Holder is entitled to receive upon
such exchange.
Any Note issued upon any registration of transfer or exchange of this
Note shall be the valid obligation of the Company, evidencing the same debt, and
entitled to the same benefits as the Note surrendered upon such registration of
transfer or exchange.
If this Note is presented or surrendered for registration of transfer
or for exchange it shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer, in form satisfactory to the
Company, duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of this Note.
(b) MUTILATED, DESTROYED, LOST AND STOLEN NOTE. If this Note
becomes mutilated and is surrendered to the Company, the Company shall execute
and make available for delivery in exchange therefor a new Note of like tenor
and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company (i) evidence to its
reasonable satisfaction of the destruction, loss or theft of this Note and (ii)
such security or indemnity as may be required by the Company to save itself
harmless, then, in the absence of notice to the Company that this Note has been
acquired by a protected purchaser, the Company shall execute and make available
for delivery, in lieu of such destroyed, lost or stolen Note, a new Note of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay the amount required to be paid hereunder with
respect to this Note, subject to the Holders' conversion rights pursuant to
Section 7 hereof.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Note shall be at any time enforceable by anyone.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Note.
16. GOVERNING LAW. THIS NOTE AND THE RIGHTS AND DUTIES OF THE COMPANY
AND THE HOLDER HEREOF SHALL BE GOVERNED BY, CONSTRUED IN AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. THE COMPANY AND THE
HOLDER HEREBY SUBMIT TO THE
17
EXCLUSIVE PERSONAL JURISDICTION AND WAIVE ANY OBJECTION AS TO VENUE IN EITHER
(I) THE STATE OF DELAWARE OR (II) THE COUNTY OF SAN FRANCISCO, STATE OF
CALIFORNIA. THE COMPANY AND THE HOLDER WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE.
17. TRANSFEREES.
(a) The provisions hereof shall inure to the benefit of, to be
binding upon and be enforceable by, any Transferee.
(b) Notwithstanding anything to the contrary in this Note, any
Transfer permitted or required by this Note shall be in compliance with federal
and state securities laws, including without limitation the Securities Act.
Notwithstanding anything to the contrary in this Note, the Holder agrees (and,
by its acceptance of this Note, each Transferee will be deemed to agree) that
prior to the earlier of the expiration of the applicable holding period under
Rule 144(a) of the Securities Act or registration of the Conversion Shares, that
without the Company's consent, it shall not Transfer this Note to any Person
that that is not an Affiliate of such Holder or an Institutional Investor. An
"Institutional Investor" shall be defined as a "qualified institutional buyer"
(as such term is defined under Rule 144A promulgated under the Securities Act or
any successor law, rule or regulation) or "accredited investor" (as such term is
defined under Regulation D promulgated under the Securities Act, or any
successor law, rule or regulation).
18. OTHER DEFINITIONS.
The following terms as used in this Note shall have the following
meanings:
(a) "Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such specified
Person, for so long as such Person remains so associated to the specified
Person; PROVIDED that beneficial ownership of 5% or more of voting interests of
a Person shall be deemed "control".
(b) "beneficial owner" or "beneficially own" has the meaning
given such term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of Common Stock or other voting stock of the Company shall be
calculated in accordance with the provisions of such Rule; PROVIDED, HOWEVER,
that for purposes of determining beneficial ownership, (i) a Person shall be
deemed to be the beneficial owner of any security which may be acquired by such
Person whether within 60 days or thereafter, upon the conversion, exchange or
exercise of any warrants, options, rights or other securities and (ii) no Person
shall be deemed to beneficially own any security solely as a result of such
Person's execution hereof.
(c) "Board of Directors" means the board of directors of the
Company.
(d) "business day" means any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law to be
closed in San Francisco, California.
18
(e) "Capital Stock" means, with respect to any Person at any
time, any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or
issued by such Person, and with respect to the Company includes, without
limitation, any and all shares of Common Stock and Preferred Stock.
(f) "Common Stock" means the Company's common stock, par value
$0.001 per share, and any securities issued in respect thereof, or in
substitution therefore, in connection with any stock split, dividend or
combination, or any reclassification, recapitalizations, merger, consolidation,
exchange or other similar reorganization.
(g) "Company" means TRIANGLE PHARMACEUTICALS, Inc., together
with its successors by merger or otherwise.
(h) "Conversion Shares" means the shares of Common Stock
issuable upon the conversion of this Note.
(i) "Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
(j) "Encumbrance" means any security interest, pledge, mortgage,
Lien (statutory or other), charge, option to purchase, lease or otherwise
acquire any interest or any claim, restriction, covenant, title defect,
hypothecation, assignment, deposit arrangement or other encumbrance of any kind
or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement).
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(l) "Fiscal Year" means the fiscal year of the Company ending on
December 31 of each year.
(m) "GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
(n) "Group" shall have the meaning assigned to it in Section
13(d)(3) of the Exchange Act.
(o) "Holder" means any noteholder and any other holder of this
Note (including any direct or indirect Transferees of a noteholder) entitled to
the rights, and bound by the obligations, under this Note.
(p) "HSR Act" means the Hart-Scott Rodino Antitrust Improvements
Act of 1976, as amended.
19
(q) "Incur" means issue, create, assume, guarantee, incur or
otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) will be deemed to be
incurred by such Subsidiary at the time it becomes a Subsidiary; and the terms
"Incurred" and "Incurrence" have meanings correlative to the foregoing.
(r) "Indebtedness" means, with respect to any Person on any date
of determination (without duplication) (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising
under any conditional sale or other title retention agreements with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all capital lease obligations, (v)
all guaranteed indebtedness, (vi) all Indebtedness referred to in clause (i),
(ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness (but only to the extent of
the fair market value of such property in the case of such indebtedness that has
not been assumed by such Person) and (vii) all liabilities under Title IV of the
Employee Retirement Income Security Act of 1974 (or any successor legislation
thereto), as amended from time to time and any regulations promulgated
thereunder.
(s) "Investor Rights Agreement" means the Investor Rights
Agreement, dated as of December 9, 2002, between the Company and the Investor.
(t) "Issue Date" shall mean December 9, 2002, the date of the
issuance of this Note.
(u) "Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
(v) "Note Documents" means the Investor Rights Agreement, this
Note and any other document, instrument or agreement entered into between
Company and the Holders in connection with this foregoing, all as amended or
extended from time to time.
(w) "Officer" means the Chairman of the Board of Directors, the
President, any Vice President, the Treasurer, the Corporate Controller or the
Secretary of the Company.
20
(x) "Officers' Certificate" means a certificate signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company.
(y) "Permitted Indebtedness" means, with respect to the Company,
(i) taxes or assessments or other governmental charges or levies, either not yet
due and payable or to the extent that nonpayment thereof is permitted by the
terms hereof; (ii) obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation;
(iii) bids, tenders, contracts (other than contracts for the payment of money)
or leases to which the Company or any of its Subsidiaries is a party as lessee
made in the ordinary course of business; (iv) Indebtedness as set forth in any
documents filed under the Exchange Act; and (v) Indebtedness that is
subordinated and junior in right of payment to this Note.
(z) "Person" means any individual, corporation, limited
liability company, limited or general partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any
agency or political subdivisions thereof or any Group comprised of two or more
of the foregoing.
(aa) "Permits" means all material licenses, permits, orders,
consents, approvals, registrations, authorizations, qualifications and filings
with and under all federal, state, local or foreign laws and governmental
authorities and all industry or other non-governmental self-regulatory
organizations.
(bb) "Preferred Stock" means, with respect to the Company, any
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Common Stock.
(cc) "SEC" means the U.S. Securities and Exchange Commission or
any other federal agency then administering the Securities Act or the Exchange
Act and other federal securities laws.
(dd) "Securities Act" means the Securities Act of 1933, as
amended.
(ee) "Subsidiary" of any Person means any corporation,
association, partnership, joint venture, limited liability company or other
business entry of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership and joint venture
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (1) such Person, (2) such Person
and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of
such Person. Unless otherwise specified herein, each reference to a Subsidiary
will refer to a Subsidiary of the Company.
(ff) "Transaction Documents" means the Investor Rights
Agreement, this Note, the Merger Agreement and any other document, instrument or
agreement entered into between Company and the Holder in connection with this
foregoing, all as amended or extended from time to time.
21
(gg) "Transfer" means, directly or indirectly, to sell,
transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either
voluntarily or involuntarily, or to enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, assignment,
pledge, encumbrance, hypothecation or similar disposition of, this Note.
(hh) "Transferee" means any Person to whom any Holder or any
Transferee thereof Transfers this Note of the Company in accordance with the
terms hereof.
The words "hereof", "herein" and "hereunder" and words of similar import when
used in this Note shall refer to this Note as a whole and not to any particular
provision of this Note, and Section references are to this Note unless otherwise
specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms.
19. DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
Default or noncompliance by another party under the Note Documents, shall impair
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, Default or noncompliance, or any acquiescence therein, or of or in
any similar breach, Default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the Holders' part of any breach, Default or noncompliance under the Note
Documents or any waiver on such party's part of any provisions or conditions of
the Note Documents, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under the Note
Documents, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
20. SURVIVAL. The warranties, representations and covenants of the
Company and the Purchaser contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing, and shall
continue as long as this Note is outstanding or issuable.
21. SUBORDINATION. The indebtedness evidenced by this Note is hereby
expressly subordinated in right and time of payment to the prior payment in full
of the Company's indebtedness to Abbott Laboratories pursuant to the letter
agreement dated July 30, 2002, including any renewals or extensions thereof (the
"SENIOR INDEBTEDNESS").
If an event of default has occurred with respect to the Senior
Indebtedness, permitting the Holder thereof to accelerate the maturity thereof,
then unless and until such event of default shall have been cured or waived or
shall have ceased to exist, or the Senior Indebtedness shall have been paid in
full, no payment shall be made in respect of the principal of or interest on
this Note.
Nothing contained in the preceding paragraphs shall impair, as between
the Company and the Holder, the obligation of the Company, which is absolute and
unconditional, to pay to the Holder hereof the principal hereof and interest
hereon as and when the same shall become due and payable, or shall prevent the
Holder, upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law, all subject to the rights, if
any, of the holders of Senior Indebtedness under the preceding paragraphs to
amounts otherwise
22
payable or deliverable to the Holder pursuant to this Note.
22. NASDAQ LIMITATION ON CONVERSION OF SHARES.
Notwithstanding anything to the contrary contained herein, until
the requisite vote under the rule and regulation of the Nasdaq Stock Market (the
"Requisite Vote") is obtained, the number of shares of Common Stock that may be
acquired by the Holder upon conversion of this Note pursuant to the terms hereof
shall not exceed the number of shares which the Holder shall, in the aggregate,
be entitled to convert without violating the rules and regulations of the Nasdaq
Stock Market. This Section 22 shall terminate and be of no further force and
effect when the Requisite Vote is obtained.
23
IN WITNESS WHEREOF, the parties hereto have executed and delivered,
this NOTE on December 9, 2002.
COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ DANIEL G. WELCH
-------------------------------------------------
Name: Daniel G. Welch
Title: Chairman and Chief Executive Officer
INVESTOR:
GILEAD SCIENCES, INC.
By: /s/ JOHN C. MARTIN
--------------------------------------------------
Name: John C. Martin
Title: Chief Executive Officer
EXHIBIT 1
(TO BE EXECUTED BY REGISTERED HOLDER
IN ORDER TO CONVERT NOTE)
CONVERSION NOTICE
FOR
7.50% CONVERTIBLE PROMISSORY NOTE DUE 2007
The undersigned, as Holder of the 7.50% Convertible Promissory Note Due
2007 of TRIANGLE PHARMACEUTICALS, INC. (the "COMPANY"), in the outstanding
principal amount of U.S. $50,000,000 (the "Note"), hereby elects to convert that
portion of the outstanding principal amount of the Note shown on the next page
into shares of Common Stock, $.0001 par value per share (the "COMMON STOCK"), of
the Company according to the conditions of the Note, as of the date written
below. The undersigned hereby requests that share certificates for the Common
Stock to be issued to the undersigned pursuant to this Conversion Notice be
issued in the name of, and delivered to, the undersigned or its designee as
indicated below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any.
Conversion Information: NAME OF HOLDER:
--------------------------------------------
By:
----------------------------------------------------------
Print Name:
Print Title:
Print Address of Holder:
----------------------------------------------------------
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Issue Common Stock to:
------------------------------------
at:
--------------------------------------------------------
Electronically transmit and credit Common Stock to:
at:
---------- --------------------------------------------
----------------------------------------------------------
Date of Conversion
----------------------------------------------------------
Applicable Conversion Price
THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE
Page 2 to Conversion Notice for:
------------------------------------------------
(NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
A. Face Amount converted: $
-----------------
B. Accrued, unpaid interest on Face Amount converted: $
-----------------
C. Delay or default amounts due Holder on Face Amount
converted: $
-----------------
TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C) $
-----------------
=================
Conversion Price $
-----------------
Number of Shares of Common Stock = Total Dollar Amount Converted = $
----------------------------- -----------------
Conversion Price $
-----------------
Number of shares of Common Stock =
----------------------------------------
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):
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Please issue and deliver _____ new Note(s) in the following amounts:
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