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EXHIBIT 4.9
TERMS OF PREFERRED STOCK
Section 1. Designation, Amount and Par Value. The series of preferred stock
shall be designated as 5% Series [ ] Preferred Stock (the "Preferred Stock") and
the number of shares so designated shall be [ ] (which shall not be subject to
increase without the consent of the holders of the Preferred Stock (each, a
"Holder" and collectively, the "Holders")); Each share of Preferred Stock shall
have a par value of $.001 and a stated value of $10,000 (the "Stated Value").
Section 2. Dividends.
(a) Holders shall be entitled to receive, when and as declared by the Board
of Directors out of funds legally available therefor, and the Corporation shall
pay, cumulative dividends at the rate per share (as a percentage of the Stated
Value per share) equal to 5% per annum, payable, subject to the provisions of
this Section 2(a), on each yearly anniversary of the Original Issue Date (as
defined in Section 8) while such share is outstanding (each a "Dividend Payment
Date") and on each Conversion Date (as defined herein) for such share,
commencing on the earlier to occur of the Conversion Date for such share and the
first Dividend Payment Date following the Original Issue Date, in cash or shares
of Common Stock (as defined in Section 8). Subject to the terms and conditions
herein, the decision whether to pay dividends hereunder in Common Stock or cash
shall be at the discretion of the Corporation. Dividends on the Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the Original Issue Date and shall be deemed to accrue from such
date whether or not earned or declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends. A party that holds shares of Preferred Stock on the record date with
respect to a Dividend Payment Date will be entitled to receive such dividend
payment and any other accrued and unpaid dividends which accrued prior to such
Dividend Payment Date, without regard to any sale or disposition of such
Preferred Stock subsequent to the applicable record date. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued on account of the Preferred Stock, such payment shall
be distributed ratably among the Holders based upon the number of shares of
Preferred Stock held by each Holder. The Corporation shall provide the Holders
notice of its intention to pay dividends in cash or shares of Common Stock not
less than 10 Trading Days (as defined in Section 8) prior to any Dividend
Payment Date, it being understood that a failure of the Corporation to timely
provide such notice shall be deemed an election (if permitted hereunder) to pay
such dividends in shares of Common Stock pursuant to the terms hereof. If the
Corporation has properly elected, and is permitted hereunder, to pay dividends
in shares of Common Stock, then such dividends will be due and payable on each
Conversion Date for the applicable shares of Preferred Stock (and not on each
Dividend Payment Date) and the number of shares of Common Stock issuable on
account of such dividend shall equal the cash amount of such dividend on such
Conversion Date divided by the Conversion Price (as defined below) on such date.
Any dividends to be paid in cash hereunder that are not paid on a Dividend
Payment Date shall continue to accrue and shall entail a late fee, which must be
paid in cash, at the rate of 15% per annum or the maximum amount that is
permitted by applicable law, whichever is less (such fees to accrue daily, from
the date such dividend is due hereunder through and including the date of
payment).
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(b) Notwithstanding anything to the contrary contained herein, the
Corporation may not issue shares of Common Stock in payment of dividends on the
Preferred Stock (and must deliver cash in respect thereof) if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes is insufficient to pay such dividends
in shares of Common Stock;
(ii) after the Dividend Effectiveness Date (as defined in Section 8),
such shares (x) are not registered for resale pursuant to an effective
Underlying Securities Registration Statement (as defined in Section 8) and (y)
may not be sold without volume restrictions pursuant to Rule 144 promulgated
under the Securities Act (as defined in Section 8), as determined by counsel to
the Corporation pursuant to a written opinion letter, addressed to the
Corporation's transfer agent in the form and substance acceptable to the
applicable Holder and such transfer agent;
(iii) such shares are not then listed or quoted on the Nasdaq National
Market (the "NASDAQ"), or on the New York Stock Exchange, American Stock
Exchange or Nasdaq SmallCap Market (each, a "Subsequent Market");
(iv) the Corporation has failed to timely satisfy its conversion
obligations hereunder; or
(v) the issuance of such shares would result in a violation of Section
5(a)(iii).
(c) So long as any Preferred Stock shall remain outstanding, neither the
Corporation nor any subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 8),
nor shall the Corporation directly or indirectly pay or declare any dividend or
make any distribution (other than dividends due and paid in the ordinary course
on preference shares of the Corporation at such times when the Corporation is in
compliance with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities.
Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of all of the
shares of the Preferred Stock then outstanding, alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, authorize or create any class of stock ranking
as to dividends or distribution of assets upon a Liquidation (as defined in
Section 4) senior to or otherwise pari passu with the Preferred Stock, amend its
certificate of incorporation or other charter documents so as to affect
adversely any rights of the Holders, increase the authorized number of shares of
Preferred Stock, or (e) enter into any agreement with respect to the foregoing
that is not conditioned upon the receipt of an affirmative vote pursuant to this
Section.
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Section 4. Liquidation. Upon any liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Corporation, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value plus all due but unpaid dividends per share, whether
declared or not, before any distribution or payment shall be made to the holders
of any Junior Securities, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be distributed among the Holders ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of all or substantially all of the assets of the Corporation or the effectuation
by the Corporation of a transaction or series of related transactions in which
more than 33% of the voting power of the Corporation is disposed of, or a
consolidation or merger of the Corporation with or into any other company or
companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Corporation shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record Holder.
Section 5. Conversion.
(a) (i) (i) Conversions at Option of Holder. Each share of Preferred
Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section 5(a)(iii) hereof) at the Conversion Ratio (as
defined in Section 8) at the option of the Holder, at any time and from time to
time, from and after the Original Issue Date. Holders shall effect conversions
by surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Corporation, together with the form of
conversion notice attached hereto as Exhibit A (a "Conversion Notice"),
provided, that Holders shall not be required to surrender any such certificate
if the Corporation has failed to deliver such certificate to the Holders
pursuant to the Purchase Agreement prior the applicable Conversion Date. Each
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered hereunder. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Corporation shall promptly
deliver to such Holder (in the manner and within the time set forth in Section
5(b)) a certificate representing the number of shares of Preferred Stock as have
not been converted.
(ii) Automatic Conversion. Subject to the provisions in this paragraph,
all outstanding shares of Preferred Stock for which conversion notices have not
previously been received or for which redemption has not been made or required
hereunder shall be automatically converted on the fifth anniversary of the
Closing Date (as defined in Section 8). The conversion contemplated by this
paragraph shall not occur at such time as (a) (1) an Underlying Securities
Registration Statement is not then effective or (2) the Holder is not permitted
to resell Underlying Shares (as defined in Section 8) pursuant to Rule 144(k)
promulgated under the Securities Act, without volume restrictions, as evidenced
by an opinion letter of counsel
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acceptable to the Holder and the transfer agent for the Common Stock; (b) there
are not sufficient shares of Common Stock authorized and reserved for issuance
upon such conversion; or (c) the Corporation shall have defaulted on its
covenants and obligations hereunder or under the Purchase Agreement (as defined
in Section 8) or Registration Rights Agreement (as defined in Section 8).
Notwithstanding the foregoing, the five-year period for conversion under this
Section shall be extended (on a day-for-day basis) for any Trading Days after
the date that the Commission declares effective an Underlying Securities
Registration Statement that a Holder is both unable to resell Underlying Shares
pursuant to Rule 144(k) promulgated under the Securities Act, without volume
restrictions and unable to resell Underlying Shares under an Underlying
Securities Registration Statement due to (a) the Common Stock not being listed
for trading on the NASDAQ or any Subsequent Market, (b) the failure of such
Underlying Securities Registration Statement to remain effective during the
Effectiveness Period (as defined in the Registration Rights Agreement) as to all
Underlying Shares; or (c) the suspension of the Holder's ability to resell
Underlying Shares thereunder. Notwithstanding anything to the contrary contained
herein, a conversion pursuant to this Section shall not be subject to the
provisions of Section 5(a)(iii)(A) and (B).
(iii) Certain Conversion Restrictions.
(A) A Holder may not convert shares of Preferred Stock or receive
shares of Common Stock as payment of dividends hereunder to the extent such
conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act (as defined in Section 8) and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of, and payment of dividends on, the shares of Preferred Stock held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Corporation the number of shares of Common Stock it may hold at
the time of a conversion hereunder, unless the conversion at issue would result
in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Corporation shall notify the Holder of this fact and shall honor
the conversion for the maximum number of shares of Preferred Stock permitted to
be converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Corporation. Other Holders shall be unaffected by any such waiver.
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(B) A Holder may not convert shares of Preferred Stock or receive
shares of Common Stock as payment of dividends hereunder to the extent such
conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
dividends on, the shares of Preferred Stock held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Corporation the number of shares of Common Stock it may hold at the time of
a conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Corporation shall notify the Holder of this fact and shall honor
the conversion for the maximum number of shares of Preferred Stock permitted to
be converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Corporation. Other Holders shall be unaffected by any such waiver.
(C) At any time when the Common Stock is listed for trading on
the Nasdaq or the Nasdaq SmallCap Market and the Corporation has not obtained
the Shareholder Approval (as defined below), then the Corporation may not issue
in excess of [ ] shares of Common Stock (which equals 19.999% of the number of
shares of Common Stock outstanding on the Trading Day immediately preceding the
Original Issue Date) (i) upon conversions of shares of Preferred Stock, (ii) as
payment of dividends upon the shares of Preferred Stock, (iii) upon conversions
of debentures issued by the Corporation in accordance with the terms of the
Purchase Agreement (the "Debentures"), and (iv) as payment of interest on the
principal amount outstanding under the Debentures (such number of shares, the
"Issuable Maximum"). If on any Conversion Date: (A) the shares of Common Stock
are listed for trading on the Nasdaq or Nasdaq SmallCap Market, (B) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion in full of all then
outstanding shares of Preferred Stock, together with any shares of Common Stock
previously issued (i) upon conversions of shares of Preferred Stock and (ii) as
payment of dividends upon the shares of Preferred Stock, (iii) upon conversion
of Debentures and (iv) as payment of interest on the principal amount
outstanding under the Debentures would exceed the Issuable Maximum, and (C) the
Corporation shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the applicable rules and
regulations of the Nasdaq (or any successor entity) applicable to approve the
issuance of
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shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Corporation shall issue to a Holder requesting a conversion a
number of shares of Common Stock equal to the lesser of (x) the number of shares
of Common Stock issuable upon such conversion at the applicable Conversion Price
and (y) such portion of the Issuable Maximum less all shares of Common Stock
previously issued (i) upon conversions of Preferred Stock and (ii) as payment of
dividends upon the shares of Preferred Stock, (iii) upon conversions of
Debentures, and (iv) as payment of interest on the principal amount outstanding
under the Debentures (the "Current Issuable Maximum") as is applicable to the
shares of Preferred Stock to be converted. The Current Issuable Maximum
applicable to each share of Preferred Stock at any time shall be determined pro
rata by reference to the number of shares of Preferred Stock then outstanding.
With respect to the remainder of the aggregate Stated Value of the shares of
Preferred Stock tendered for conversion by such Holder for which a conversion in
accordance with the Conversion Price would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "Excess Stated Value"), the
converting Holder shall have the option to require the Corporation to either (1)
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request, or (2) pay cash to the converting Holder in an amount equal
to the Mandatory Redemption Amount (as defined in Section 8) for the Excess
Stated Value. If the converting Holder shall have elected the first option
pursuant to the immediately preceding sentence and the Corporation shall have
failed to obtain the Shareholder Approval on or prior to the 60th day after such
request, then within three (3) days of such 60th day, the Corporation shall pay
cash to the converting Holder an amount equal to the Mandatory Redemption Amount
for the Excess Stated Value. If the Corporation fails to pay the Mandatory
Redemption Amount in full pursuant to this Section within seven days after the
date payable, the Corporation will pay interest thereon at a rate of 18% per
annum or such lesser maximum amount that is permitted to be paid by applicable
law, to the converting Holder, accruing daily from the Conversion Date until
such amount, plus all such interest thereon, is paid in full. The Corporation
and the Holder understand and agree that shares of Common Stock issued to and
then held by the Holder as a result of conversions of Preferred Stock shall not
be entitled to cast votes on any resolution to obtain Shareholder Approval
pursuant hereto.
(b) (i) (i) Not later than three (3) Trading Days after any Conversion
Date, the Corporation will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those required by Section 4.9 of the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of shares of Preferred Stock (subject to the limitations set forth in
Section 5(a)(iii) hereof), (ii) one or more certificates representing the number
of shares of Preferred Stock not converted, (iii) a bank check in the amount of
accrued and unpaid dividends (if the Corporation has elected to pay accrued
dividends in cash) and the Floor Redemption Price (as defined in Section
5(c)(i)(B), if applicable, and (iv) if the Corporation has elected and is
permitted hereunder to pay accrued dividends in shares of Common Stock,
certificates, which shall be free of restrictive legends and trading
restrictions (other than those required by Section 4.9 of the Purchase
Agreement), representing such shares of Common Stock; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of any shares of Preferred Stock
until one Trading Day after certificates evidencing such shares of Preferred
Stock are delivered for conversion to the
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Corporation, or the Holder of such Preferred Stock notifies the Corporation that
such certificates have been lost, stolen or destroyed and provides a bond (or
other adequate security) reasonably satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith. The
Corporation shall, upon request of the Holder, if available, use its best
efforts to deliver any certificate or certificates required to be delivered by
the Corporation under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate or
certificates, including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid dividends
hereunder, are not delivered to or as directed by the applicable Holder by the
third (3rd) Trading Day after the Conversion Date, the Holder shall be entitled
by written notice to the Corporation at any time on or before its receipt of
such certificate or certificates thereafter, to rescind such conversion, in
which event the Corporation shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.
(ii) If the Corporation fails to deliver to the Holder such certificate
or certificates pursuant to Section 5(b)(i), including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid dividends hereunder, by the third (3rd) Trading Day after the
Conversion Date, the Corporation shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
third (3rd) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Corporation's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Corporation shall not have delivered any cash due in respect of
conversions of Preferred Stock or as payment of dividends thereon by the third
(3rd) Trading Day after the Conversion Date, the Holder may, by notice to the
Corporation, require the Corporation to issue shares of Common Stock pursuant to
Section 5(c), except that for such purpose the Conversion Price applicable
thereto shall be the lesser of the Conversion Price on the Conversion Date and
the Conversion Price on the date of such Holder demand. Any such shares will be
subject to the provision of this Section.
(iii) In addition to any other rights available to the Holder, if the
Corporation fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, by the third (3rd) Trading Day after the Conversion Date,
and if after such third (3rd) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to
receive upon such conversion (a "Buy-In"), then the Corporation shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
was entitled to receive from the conversion at issue multiplied by (2) the
market
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price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either return the shares of
Preferred Stock for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had the
Corporation timely complied with its conversion and delivery obligations under
Section 5(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the market price
of the Underlying Shares on the date of conversion was a total of $10,000 under
clause (A) of the immediately preceding sentence, the Corporation shall be
required to pay the Holder $1,000. The Holder shall provide the Corporation
written notice indicating the amounts payable to the Holder in respect of the
Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder
requires the Corporation to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Corporation timely pays in full
such payment, the Corporation shall not be required to pay such Holder
liquidated damages under Section 5(b)(ii) in respect of the certificates
resulting in such Buy-In.
(A) [The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be 101% of the
average of the ten (10) lowest Per Share Market Values during the thirty (30)
Trading Days immediately preceding the applicable Conversion Date (which, at the
Holder's option, may include Trading Days prior to the Original Issue Date),
provided, that such thirty (30) Trading Day period shall be extended for the
number of Trading Days, if any, during such period in which (A) trading in the
Common Stock is suspended from the NASDAQ or a Subsequent Market on which it is
listed for trading prior to such suspension, or (B) during the Effectiveness
Period (as defined in the Registration Rights Agreement), the Underlying
Securities Registration Statement is not effective, or (C) during the
Effectiveness Period, the Prospectus included in the Underlying Securities
Registration Statement may not be used by the Holder for the resale of
Underlying Shares.](1)
(c) (i) (i) (A) (A) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be the
lesser of (a) 120% of the Per Share Market Value on the Original Issue Date (the
"Initial Conversion Price") and (b) 101% of the average of the ten (10) lowest
Per Share Market Values during the thirty (30) Trading Days immediately
preceding the applicable Conversion Date (which, at the Holder's option, may
include Trading Days prior to the Original Issue Date), provided, that such
thirty (30) Trading Day period shall be extended for the number of Trading Days,
if any, during such period in which (A) trading in the Common Stock is suspended
from the NASDAQ or a Subsequent Market on which it is listed for trading prior
to such suspension, or (B) during the Effectiveness Period (as defined in the
Registration Rights Agreement), the Underlying Securities Registration Statement
is not effective, or (C) during the Effectiveness Period, the Prospectus
included in the Underlying Securities Registration Statement may not be used by
the Holder for the resale of Underlying Shares, provided, further, that during
the period from the Original Issue Date until
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(1) For Series B Preferred Stock
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the 90th day following the Original Issue Date, the Conversion Price shall be
the Initial Conversion Price.](2)
(B) If on any Conversion Date, the Conversion Price shall be
lower than $7.00 (which number shall be subject to equitable adjustments for
stock splits, recombinations and similar events) (such Conversion Price, the
"Floor Price" and a Conversion Date on which such condition is met, a "Record
Date"), then the Corporation will have the right, exercisable by delivery of a
written notice to the Holders delivered no later than twenty Trading Days prior
to the Record Date (the "Corporation Notice"), which notice shall remain in
effect until a subsequent such notice is provided by the Corporation to the
Holders, to elect to honor the conversion at issue by either: (x) issuing the
number of shares of Common Stock issuable at the actual Conversion Price
pursuant to Section 5(c)(i)(A), or (y) issue the number of shares of Common
Stock issuable upon the conversion at issue, as if the conversion price
applicable to such conversion was equal to the Floor Price and pay cash, no
later than the third Trading Day following the Record Date, to the Holder, in an
amount equal to the product of (A) the average of the Per Share Market Values
for the five Trading Days preceding the Conversion Date for such conversion and
(B) the number of shares of Common Stock otherwise issuable at the actual
Conversion Price then in effect less the number of shares of Common Stock
issuable upon such conversion at the Floor Price (the "Floor Redemption Price").
Failure by the Corporation to timely deliver the Corporation Notice to the
Holder pursuant to the terms of this Section shall result conclusively be deemed
an election by the Corporation under subsection (x) hereunder. Failure by the
Corporation to pay any portion of the Floor Redemption Price by the third
Trading Day following the applicable Conversion Date shall result in the
invalidation ab initio of the unpaid portion of such optional redemption. In
such event, the Corporation shall, at the option of the Holder, either, (i) not
later than three Trading Days from receipt of Holder's request for such
election, return to the Holder all of the shares of Preferred Stock for which
such Floor Redemption Price has not been paid in full (the "Unpaid Redemption
Shares") or (ii) convert all or any portion of the Unpaid Redemption Shares in
which event the applicable Conversion Price shall be the lower of the Conversion
Price calculated on the date the Floor Redemption Price was originally due and
the Conversion Price as of the Holder's written demand for conversion. If the
Holder elects option (ii) above, the Corporation shall within three Trading Days
of its receipt of such election deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such Holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto.
(ii) [If the Corporation, at any time while any shares of Preferred
Stock are outstanding, shall (a) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities or pari passu
securities payable in shares of Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification and exchange of the Common Stock any shares of capital stock of
the Corporation, then the Initial Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such
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(2) For Series C Preferred Stock
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event. Any adjustment made pursuant to this Section 5(c)(ii) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Corporation, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security other than with respect to rights granted
pursuant to a stockholders rights plan adopted by the Corporation, then in each
such case the Initial Conversion Price shall be adjusted by multiplying the
Initial Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness or
rights or warrants so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holders
of the portion of assets or evidences of indebtedness or rights or warrants so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(v) Whenever the Initial Conversion Price is adjusted pursuant to the
terms hereof, the Corporation shall promptly mail to each Holder, a notice
setting forth the Initial Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.](3)
(vi) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such shares only
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such reclassification
or share exchange, and the Holders of the Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as a holder of
the number of shares of Common Stock of the Corporation into which such shares
of Preferred Stock could have been converted immediately prior to such
reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
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(3) For Series C Preferred Stock
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(vii) If (a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock, (b) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (c) the
Corporation shall authorize the granting to all holders of Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (d) the approval of any stockholders of the Corporation
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Corporation is a party, any sale or
transfer of all or substantially all of the assets of the Corporation, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property, or (e) the Corporation shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation; then the Corporation shall cause to be filed at each office
or agency maintained for the purpose of conversion of Preferred Stock, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange. Holders are entitled to convert shares of
Preferred Stock during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.
(viii) In case of the closing of any: (1) merger or consolidation of
the Corporation with or into another Person, or (2) sale by the Corporation of
more than one-half of the assets of the Corporation (on a market value basis) in
one or a series of related transactions, a Holder shall have the right to: (A)
if permitted under Section 7 hereof, exercise its rights of redemption under
Section 7 with respect to such event, or (B) convert its shares of Preferred
Stock into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and such Holder shall be entitled upon conversion
of its shares of Preferred Stock to receive such amount of securities, cash and
property as the shares of Common Stock into which such shares of Preferred Stock
could have been converted immediately prior to such merger, consolidation or
sales would have been entitled. The terms of any such merger, sale or
consolidation shall include such terms so as to continue to give the Holders the
right to receive the securities, cash and property set forth in this Section
upon any conversion or redemption following such event. This provision shall
similarly apply to successive such events.
(d) The Corporation covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of Common Stock as shall (subject
to any additional requirements of the Corporation as to reservation of such
shares set
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forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(a) and Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock and payment of dividends
hereunder (assuming all such dividends are paid in shares of Common Stock). The
Corporation covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable, subject to the legend requirements of
Section 4.9 of the Purchase Agreement.
(e) Upon a conversion hereunder the Corporation shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Corporation elects not, or is unable, to make such a cash payment, the Holder of
a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock and as payment of dividends in shares of Common Stock shall be
made without charge to the Holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Corporation shall not be required to pay any tax
that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or redeemed
in accordance with the terms hereof shall be canceled and may not be reissued.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Corporation at
the facsimile telephone number or address of the principal place of business of
the Corporation as set forth in the Purchase Agreement. Any and all notices or
other communications or deliveries to be provided by the Corporation hereunder
shall be in writing and delivered personally, by facsimile or sent by a
nationally recognized overnight courier service, addressed to each Holder at the
facsimile telephone number or address of such Holder appearing on the books of
the Corporation, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
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Section 6. Optional Redemption.
(a) During the time that any shares of Preferred Stock remain outstanding,
the Corporation shall have the right, exercisable on any Trading Day in which
the Conversion Price shall be less than $6.00 (which number shall be subject to
equitable adjustments for stock splits, recombinations and similar events), in
accordance with the terms hereof and upon three Trading Days' prior written
notice to the Holders to be redeemed (an "Optional Redemption Notice"), to
redeem all or any portion of the outstanding shares of Preferred Stock which
have not previously been redeemed or for which Conversion Notices have not
previously been delivered. The redemption price applicable to redemptions under
this Section 6 shall equal the Optional Redemption Price (as defined in Section
8) and shall be paid in cash. The Holders shall have the right to tender, and
the Corporation shall honor, Conversion Notices delivered on or prior to the
expiration of the fifteenth Trading Day after receipt by the Holders of an
Optional Redemption Notice for such Debentures (the fifteenth Trading Day after
receipt by the Holders of an Optional Redemption Notice is referred to herein as
the "Optional Redemption Date").
(b) The Corporation shall not be entitled to deliver an Optional Redemption
Notice to the Holder (and, if after delivery thereof and prior to the Optional
Redemption Date, any of the following conditions shall cease to be met, such
notice, at the option of the Holders, shall be deemed no longer effective) if:
(i) the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is insufficient to satisfy the Corporation's
conversion obligations of the shares of Preferred Stock then outstanding, or
(ii) there is neither an effective Underlying Shares Registration Statement
under which the Holders can resell all of the issued Underlying Shares and all
of the Underlying Shares as are issuable upon conversion in full of the shares
of Preferred Stock subject to an Optional Redemption Notice nor may all of such
issued and issuable Underlying Shares be sold by the Holders subject to such
redemption without volume restrictions pursuant to Rule 144 promulgated under
the Securities Act, as determined by counsel to the Corporation pursuant to a
written opinion letter, addressed to the Corporation's transfer agent in the
form and substance acceptable to the Holders and such transfer agent, or (iii)
the Common Stock is not then listed for trading on the NASDAQ or on a Subsequent
Market.
(c) If any portion of the Optional Redemption Price shall not be paid by
the Corporation by the Optional Redemption Date, the Optional Redemption Price
shall bear interest at the rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to accrue daily from the date
such interest is due hereunder through and including the date of payment (which
amount shall be paid as liquidated damages and not as a penalty). In addition,
if any portion of the Optional Redemption Price remains unpaid through the
expiration of the Optional Redemption Date, the Holder subject to such
redemption may elect by written notice to the Corporation to either (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 5 of any portion of the shares of Preferred Stock for which the
Optional Redemption Price, plus accrued interest thereon, has not been paid in
full (the "Unpaid Redemption Amount"), in which event the applicable Conversion
Price shall be the lower of the Conversion Price calculated on the Optional
Redemption Date and the Conversion Price as of the Holder's written demand for
conversion, or (y) invalidate ab initio such optional redemption,
notwithstanding anything herein contained to the contrary. If the
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Holder elects option (x) above, the Corporation shall, within three Trading Days
after such election is deemed delivered hereunder, deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption Amount
subject to such conversion demand and otherwise perform its obligations
hereunder with respect thereto. If the Holder elects option (y) above, the
Corporation shall promptly, and in any event not later than three (3) Trading
Days from receipt of notice of such election, return to the Holder new shares of
Preferred Stock for the full Unpaid Redemption Amount and shall no longer have
any redemption rights under this Section. If, upon an election under option (x)
above, the Corporation fails to deliver certificates representing the shares of
Common Stock issuable upon conversion of the Unpaid Redemption Amount within the
time period set forth in this Section, the Corporation shall pay to the Holder
in cash, as liquidated damages and not as a penalty, $5,000 per day until the
Corporation delivers such certificates to the Holder.
Section 7. Redemption Upon Triggering Events.
(a) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Corporation to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying Shares
issued in respect of conversions or as payment of dividends hereunder and then
held by the Holder (the "Redeemable Stock") and (B) the Per Share Market Value
on the date such redemption is demanded or the date the redemption price
hereunder is paid in full, whichever is greater (such sum, the "Redemption
Price"). The Redemption Price shall be due and payable within (10) days of the
date on which the notice for the payment therefor is provided by a Holder. If
the Corporation fails to pay the redemption price hereunder in full pursuant to
this Section on the date such amount is due in accordance with this Section, the
Corporation will pay interest thereon at a rate of 15% (or the maximum amount
permitted under applicable law, whichever is less) per annum, accruing daily
from such date until the redemption price, plus all such interest thereon, is
paid in full. For purposes of this Section, a share of Preferred Stock is
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof. Upon receipt of the full Redemption Price, the Holder shall deliver the
Redeemable Stock to the Company.
A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgement, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body):
(i) the failure of an Underlying Securities Registration Statement to
be declared effective by the Commission on or prior to the 180th day after the
Closing Date;
(ii) if, during the Effectiveness Period, the effectiveness of the
Underlying Securities Registration Statement lapses for any reason for more than
an aggregate of three (3) Trading Days, or the Holder shall not be permitted to
resell Registrable Securities under the Underlying Securities Registration
Statement for more than 5 consecutive Trading Days or an aggregate of 10 Trading
Days (which need not be consecutive Trading Days);
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(iii) the failure of the Common Stock to be listed for trading on the
NASDAQ or on a Subsequent Market or the suspension of the Common Stock from
trading on the NASDAQ or on a Subsequent Market, in either case, for more than 5
consecutive Trading Days or an aggregate of 10 Trading Days (which need not be
consecutive Trading Days);
(iv) the Corporation shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder that comply
with the provisions hereof prior to the 10th day after the Conversion Date or
the Corporation shall provide notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any Preferred Stock in accordance with the terms hereof;
(v) the Corporation shall, without the consent of the Holders of a
majority of the then outstanding shares of Preferred Stock, be a party to any
Change of Control Transaction, shall agree to sell (in one or a series of
related transactions) all or substantially all of its assets (whether or not
such sale would constitute a Change of Control Transaction) or shall redeem more
than a de minimis number of Common Stock or other Junior Securities (other than
redemptions of Underlying Shares);
(vi) an Event (as defined in the Registration Rights Agreement) shall
not have been cured to the satisfaction of the Holders prior to the expiration
of thirty (30) days from the Event Date (as defined in the Registration Rights
Agreement) relating thereto other than an Event resulting from a failure of an
Underlying Shares Registration Statement to be timely declared effective by the
Commission;
(vii) the Corporation shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In within seven (7) days after notice
therefor is delivered hereunder; or
(viii) the Corporation shall fail to have available a sufficient number
of authorized and unreserved shares of Common Stock to issue to such Holder upon
a conversion hereunder.
Section 8. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Corporation, by contract or otherwise) of in excess of 33% of the
voting securities of the Corporation, (ii) a replacement at one time or over
time of more than one-half of the members of the Corporation's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (iii) the merger
of the Corporation with or into another entity, consolidation or sale of all or
substantially all of the assets of the Corporation in
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one or a series of related transactions, or (iv) the execution by the
Corporation of an agreement to which the Corporation is a party or by which it
is bound, providing for any of the events set forth above in (i), (ii) or (iii).
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's Common Stock, par value $.001
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is Stated Value plus accrued but unpaid dividends but only to the extent
not paid in Common Stock in accordance with the terms hereof, and the
denominator of which is the Conversion Price at such time.
"Dividend Effectiveness Date" means the earlier to occur of (x) the
Effectiveness Date (as defined in the Registration Rights Agreement) and (y) the
date that an Underlying Securities Registration Statement is declared effective
by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Junior Securities" means the Common Stock and all other equity
securities of the Corporation which are junior in rights and liquidation
preference to the Preferred Stock.
"Mandatory Redemption Amount" for each share of Preferred Stock means
the sum of (i) the greater of (A) the Stated Value and all accrued dividends
with respect to such share and (B) the product of (a) the Per Share Market Value
on the Trading Day immediately preceding (x) the date of the Triggering Event or
the Conversion Date, as the case may be, or (y) the date of payment in full by
the Corporation of the applicable redemption price, whichever is greater, and
(b) the Conversion Ratio calculated on the date of the Triggering Event, or the
Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such share of Preferred Stock.
"Optional Redemption Price" shall be sum of 106% of the Stated Value of
the shares of Preferred Stock to be redeemed pursuant to the terms hereof and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such shares of Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest
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preceding such date, or (b) if the Common Stock is not then listed or quoted on
the NASDAQ or on a Subsequent Market, the closing bid price for a shares of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock are not then publicly traded the fair market value of a Common
Share as determined by an Appraiser selected in good faith by the Holders of a
majority of the shares of the Preferred Stock.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of September 21, 2000, to which the Corporation, NeoGene Technologies, Inc. and
the original Holders are parties, as amended, modified or supplemented from time
to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated September 21, 2000, to which the Corporation and the original
Holders are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock s not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Securities Registration Statement" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the recipient thereof, who
shall be named as a "selling stockholder" thereunder.
"Underlying Shares" means, collectively, the shares of Common Stock
into which the Shares are convertible and the shares of Common Stock issuable
upon payment of dividends thereon in accordance with the terms hereof.
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 5% Series
[ ] Preferred Stock with Conversion Features indicated below, into shares of
Common Stock, par value $.001 per share (the "Common Stock"), of
NeoTherapeutics, Inc. (the "Corporation") according to the conditions hereof, as
of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Corporation in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
Date to Effect Conversion
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Number of shares of Preferred Stock to be Converted
----------------------------
Number of shares of Common Stock to be Issued
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Applicable Conversion Price
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Signature
Name
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Address
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