EXHIBIT 10.23
SECOND EXCHANGE OPTION AGREEMENT
SECOND EXCHANGE OPTION AGREEMENT (THE "AGREEMENT")
dated as of February 17, 1998
BY AND BETWEEN
American Pharmed Labs, Inc., a Delaware corporation ("APL"),
AND
tbg Technologie-Beteiligungs-Gesellschaft mbh der Deutschen Ausgleichsbank,
a German limited liability company ("tbg").
WHEREAS; on October 31, 1997 APL, Inc. sold to certain investors certain shares
of its Series A Convertible Preferred Stock, $.01 par value per share ("Series A
Preferred Stock"), and warrants to purchase additional shares of Series A
Preferred Stock pursuant to a Series A Convertible Preferred Stock Purchase
Agreement dated as of such date (the "Stock Purchase Agreement"), and
WHEREAS; tbg desires to participate in the financing contemplated by the Stock
Purchase Agreement but cannot currently do so due to restrictions and
constraints currently applicable to it, and
WHEREAS; instead of participating in such Series A Preferred Stock financing tbg
is establishing a silent partnership with APL's subsidiary, Pharmed Labs GmbH, a
German limited liability company ("Pharmed GmbH") in the principal amount of DEM
4,000,000.00 (the "Principal amount") (the "Silent Partnership II"), and
WHEREAS; tbg acquired shares in Pharmed GmbH in the nominal amount of DEM
4,700.00 and APL is the holder of the remaining share capital of Pharmed GmbH
after such acquisition, and
WHEREAS; tbg and APL desire to provide for the exchange of the Principal Amount
of the Silent Partnership II for shares of Stock in certain circumstances;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the Parties agree as follows:
1. Exchange of Silent Partnership and Securities
(a) APL shall have the right in connection with the occurrence of a Triggering
Event (as hereafter defined), to require tbg to terminate the Silent
Partnership II and to exchange the claim for the Principal Amount of the
Silent Partnership II for shares of Common Stock, the number of which is
to be calculated in accordance with Section 1(b) hereafter. The term
"Triggering Event" shall mean (i) a sale of all or substantially all of
the assets of APL; (ii) a sale of more than 50% in voting power of the
outstanding equity securities of APL; (iii) a merger or consolidation
involving APL in which the stockholders of APL immediately before such
merger or consolidation do not own, immediately after such merger or
consolidation, capital stock or other equity interests of the surviving
corporation or entity representing more than 50% of the voting power of
the capital stock or other equity interest of such surviving corporation
or entity outstanding at such time; (iv) the automatic conversion of the
Series A Preferred Stock pursuant to article FOURTH, Section 2 of APL's
Certificate of Incorporation; (v) a public offering of APL's Common Stock,
$.01 par value per share (the "Common Stock") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act").
(b) The number of shares of Common Stock to be exchanged pursuant to Section
1(a) (the "Call Shares") shall be the greatest whole number less than or
equal to the
2
quotient calculated as follows: (i) in the case of Section 1 (a)(iv) and
(v) by dividing the Principal Amount of the Silent Partnership II by the
arithmetic mean of $2.02 and the price to the public per share provided
for in the respective public offerings (the "Calculated IPO Price") or
(ii) in the case of Section 1(a)(i) to (iii) by dividing the Principal
Amount of the Silent Partnership II by the arithmetic mean of $2.02 and
the consideration paid per share in the respective transaction such
consideration per share being calculated on a Common Stock equivalent
basis at the time of the exchange, assuming conversion of all outstanding
and reserved (pursuant to the First Exchange Option Agreement) shares of
convertible preferred stock into Common Stock at the then applicable
conversion rates for such convertible preferred stock (the "Calculated
Trade Sale Price"); provided, however, that if the Calculated IPO Price or
the Calculated Trade Sale Price are less than $2.02, the Calculated IPO
Price or the Calculated Trade Sale Price, respectively, shall be adjusted
upward for purposes of such calculation to the Minimum Share Price, and if
the Calculated IPO Price or the Calculated Trade Sale Price are higher
than $7.07 (the "Maximum Share Price"), the Calculated IPO Price or the
Calculated Trade Sale Price, respectively, shall be adjusted downward for
purposes of such calculation to the Maximum Share Price.
(c) tbg shall have the right, at any time after the date hereof and on or
before the occurrence of a Triggering Event, to terminate the Silent
Partnership II and to require APL to issue shares of Common Stock the
number of which is to be calculated in accordance with Section 1(d)
hereafter in exchange for the claim for the Principal Amount of the Silent
Partnership II.
(d) The number of shares of Common Stock to be exchanged pursuant to Section
1(c) (the "Put Shares") shall be the greatest whole number less than or
equal to the quotient of the Principal Amount of the Silent Partnership II
divided by $7.07.
(e) The rights of APL and tbg under this Section 1 are hereafter referred to
as the "Exchange Option." The Call Shares and the Put Shares are each
referred to as the "Exchange Shares".
3
(f) In the event that tbg has not entirely contributed the Principal Amount to
Pharmed GmbH or has been repaid the Principal Amount entirely or in part
by the Exchange Option Closing date tbg will pay any outstanding balance
to APL in cash.
(g) For the purpose of calculation of the number of shares to be exchanged
pursuant to this Section 1 the Deutschmark to US-Dollar exchange rate
shall be $1 equals DEM1.75.
2. Adjustments in Securities
In the event that after the date hereof there shall be any stock dividend,
stock split, reverse stock split, combination of shares, reclassification
or other similar event with respect to the Common Stock, the number of
shares of Common Stock issuable upon exercise of the Exchange Option in
exchange for the Principal Amount of the Silent Partnership II shall be
proportionately adjusted, and the term Exchange Shares shall be deemed to
mean such number as so adjusted. In addition, if the Exchange Option is
being exercised in connection with a Triggering Event, then at the option
of APL the cash, securities or other property that would be issuable upon
exchange or conversion of the Series A Shares in connection with the
closing of such Triggering Event may be issued to tbg directly in exchange
for the Principal Amount instead of the Series A Shares.
3. Exercise of Exchange Option; Closing
(a) The party desiring to exercise the Exchange Option shall give the other
party written notice of its intention to exercise the Exchange Option (the
"Exercise Notice").
(b) A closing (the "Exchange Option Closing") with respect to the exercise of
the Exchange Option shall be held on such date as may be agreed upon by
APL and tbg but in any event (i) in the case of any exercise of the
Exchange Option in connection with the occurrence of a Triggering Event,
not later than the closing of
4
the Triggering Event, unless APL otherwise agrees in writing, and (ii) in
all other cases, not later than twenty (20) business days after the date
of the Exchange Notice, unless both parties otherwise agree in writing. At
the Exchange Option Closing:
(i) tbg shall make all declarations, conclude all agreements, render all
resolutions and take all further actions necessary to transfer the
Principal Amount to APL, free and clear of all liens, claims and
encumbrances, and in the event of Section 1(f) pay such respective
amount outstanding to APL;
(ii) tbg shall deliver to APL a certificate dated the Exchange Option
Closing date and confirming, as of the Exchange Option Closing date,
its representations and warranties as set forth in Section 5; and
(iii) APL shall deliver to tbg a stock certificate representing the Series
A Shares.
4. Transfer; Restrictions on Transfer
(a) As of the date hereof tbg and APL will enter into a separate agreement in
the form attached hereto as Exhibit 4(a) providing for the assignment of
the claim for the Principal Amount by tbg to APL such assignment becoming
effective with the Exchange Option Closing and being conditional upon the
delivery of the stock certificate pursuant to Section 3(b)(iii).
(b) For so long as the Exchange Option remains in effect, tbg shall not
transfer the Silent Partnership II, with or without consideration, without
the prior written consent of APL.
(c) If tbg desires to transfer the Silent Partnership II, with or without
consideration, while the Exchange Option remains in effect, tbg shall
immediately give written notice to APL, specifying:
5
(i) the address and registered office, if any, of the prospective
transferee;
(ii) the purchase price, if any, or other consideration to be paid or
given for the intended transfer;
(iii) the date for the closing of such intended transfer;
(iv) the nominal amount of shares intended to be transferred;
(v) the representations and warranties, if any, made or to be made by
tbg in connection with the intended transfer.
(d) tbg agrees that for a period of up to one hundred eighty (180) days from
the effective date of any registration of securities of APL under the
Securities Act (upon request of APL or the underwriters managing any
underwritten offering of APL's securities), tbg will not sell, make any
short sale or loan of, grant any option for the purchase of, or otherwise
dispose of the Silent Partnership II, Series A Shares, shares of Common
Stock or other securities of APL or Pharmed GmbH held by tbg without the
prior written consent of APL or such underwriters, as the case may be.
(e) Any purported transfer of the Silent Partnership II in violation of this
Section 4 shall be null and void, and Pharmed GmbH shall not be required
to record on its books any such purported transfer or to recognize the
purported transferee as the holder of title of the Silent Partnership II.
5. Representations and Warranties of tbg
tbg represents and warrants to APL as follows:
(a) (i) The individual executing this Agreement on behalf of tbg has been duly
authorized to execute and deliver this Agreement;
(ii) the signature of such individual is binding upon tbg;
6
(iii) tbg is duly organized, validly existing and in good standing in its
jurisdiction of incorporation or organization and has all requisite
power and authority to execute and deliver this Agreement;
(iv) and the execution and delivery of this Agreement will not result in
the violation of, constitute a breach or default under, or conflict
with, any term or provision of the Charter, Bylaws, or other
governing document of tbg or any material agreement, judgment,
decree, order, statute or regulation by which it is bound or
applicable to it.
(b) Upon any exercise of the Exchange Option tbg will be acquiring the Common
Shares, for its own account, for investment and not for, with a view to,
or in connection with, any distribution or public offering thereof within
the meaning of the Securities Act.
(c) tbg understands that the Series A Shares and the shares of Common Stock
issuable upon conversion of the Series A Shares will not be registered
under the Securities Act or any state securities law, by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act and such laws, and that they must be held indefinitely
unless they are subsequently registered under the Securities Act and such
laws or a subsequent disposition thereof is exempt from registration. tbg
further understands that such exemption depends upon, among other things,
the bona fide nature of tbg's investment intent expressed herein. tbg
acknowledges that the certificates for the Series A Shares and the shares
of the Common Stock issuable upon conversion thereof shall bear a legend
to such effect, and that appropriate stop transfer instructions may be
issued.
(d) tbg has not been formed for the specific purpose of acquiring the Series A
Shares. tbg understands the term "accredited investor" as used in
Regulation D promulgated under the Securities Act and represents and
warrants that it is an "accredited investor."
7
(e) tbg has sufficient knowledge and experience in business and financial
matters and with respect to investment in securities of privately held
companies so as to enable it to analyze and evaluate the merits and risks
of the investment contemplated hereby and is capable of protecting its
interest in connection with this transaction. tbg is able to bear the
economic risk of such investment, including a complete loss of the
investment.
(f) tbg acknowledges that it and its representatives have had the opportunity
to ask questions and receive answers from officers and representatives of
APL and Pharmed GmbH concerning its investment in the GmbH Shares and the
Series A Shares, and to obtain any additional information which it desires
regarding APL and Pharmed GmbH.
(g) tbg understands that the exemption from registration afforded by Rule 144
(the provisions of which are known to tbg) promulgated by the Securities
and Exchange Commission under the Securities Act depends upon the
satisfaction of various conditions, that such exemption is not currently
available and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
6. Representations and Warranties of APL
APL represents and warrants to tbg as follows:
(a) (i) The individual executing this Agreement on behalf of APL has been duly
authorized to execute and deliver this Agreement;
(ii) the signature of such individual is binding upon APL;
(iii) APL is duly organized, validly existing and in good standing in its
jurisdiction of incorporation or organization and has all requisite
power and authority to execute and deliver this Agreement;
(iv) and the execution and delivery of this Agreement will not result in
the violation of, constitute a breach or default under, or conflict
with, any term
8
or provision of the Charter, Bylaws, or other governing document of
APL or any material agreement, judgment, decree, order, statute or
regulation by which it is bound or applicable to it.
(b) The entire authorized capital stock of APL consists of:
(i) 20,000,000 shares of Common Stock; and
(ii) 3,424,150 shares of Series A Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock").
(c) The number of shares of Common Stock and Series A Preferred Stock that are
issued and outstanding, held as treasury shares or issuable upon the
exercise of outstanding options, warrants, convertible securities or
rights to purchase such capital stock as of the date hereof is as set
forth in Exhibit 6(c); no additional Series A Preferred Stock may be
issued or reserved without the consent of the preferred shareholders.
7. Expenses.
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby.
8. Survival of Agreements
All covenants, agreements, representations and warranties made herein or
in any agreement, certificate or instruments delivered to APL or tbg, as
the case may be, pursuant to or in connection with this Agreement shall
survive the execution and delivery of this Agreement.
9. Parties in Interest
All representations, warrants, covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and
inure to the
9
benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
10. Notices
All notices, requests, consents and other communications hereunder shall
be deemed to be sufficient if contained in a written instrument delivered
in person or duly sent by facsimile or DHL, Federal Express, or any other
recognized express international courier service, addressed to such party
at the address set forth below or such other address as may hereafter be
designated in writing by the addressee to the addressor listing all
parties:
(a) if to APL:
American Pharmed Labs, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx
XX 00000
XXX
Attention: President
Fax: 000 (000) 000-0000
(b) if to tbg:
tbg Technologie-Beteiligungs-Gesellschaft mbH
der Deutschen Ausgleichsbank
Xxxxxx-Xxxxxx-Xxxxx 0-0
00000 Xxxx Xxx Xxxxxxxxx
Xxxxxxx
Fax: 0000-000-0000
10
11. Governing Law
This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware, USA,
without regard to its principles of conflicts of laws.
12. Entire Agreement
This agreement constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
negotiations, commitments, agreements and understandings among them with
respect thereto.
13. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. Amendments and Waivers
This Agreement may be amended or modified, and provisions hereof may be
waived, only with the written consent of APL and tbg.
15. Titles and Subtitles
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any provision
of this Agreement.
16. No Waiver; Cumulative Remedies
No failure or delay on the part of any party to this Agreement in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise of any other remedy
hereunder. The remedies herein provided
11
are cumulative and not exclusive of any remedies provided by law,
agreement or otherwise.
17. Specific Enforcement
Each party expressly agrees that a violation of this Agreement by such
party could not be adequately compensated by money damages alone and the
parties agree that they will not claim an adequate remedy at law. Upon a
breach or threatened breach of the terms, covenants and/or conditions of
this Agreement by any party, the other party shall, in addition to all
other remedies, be entitled to a temporary or permanent injunction, and/or
decree for specific performance, in accordance with the provisions hereof.
In witness whereof, APL and tbg have executed this Agreement as of the day and
year first above written,
American Pharmed Labs, Inc.
by: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
tbg Technologie-Beteiligungs-Gesellschaft
mbH der Deutschen Ausgleichsbank
by: /s/ Illegible
-----------------------------
12
EXHIBIT 4 (a)
AGREEMENT
BETWEEN
American Pharmed Labs, Inc., 000 Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxxx, XX 00000, XXX
- in the following: "APL" -
AND
tbg Technologie-Beteiligungs-Gesellschaft mbH der Deutschen Ausgleichsbank,
Xxxxxx- Xxxxxx-Xxxxx 0-0, 53179 Bonn
- in the following: "tbg" -
The parties have entered into a separate Second Exchange Option Agreement as of
the date hereof.
tbg and Pharmed Labs GmbH have entered into a "Beteiligungsvertrag" on the
establishment of a silent partnership pursuant to which tbg has paid an amount
of DM 4.000.000,-- as contribution to Pharmed Labs GmbH (in the following:
"Principal Amount").
Pursuant to Section 4 (a) of the Second Exchange Option Agreement tbg has
undertaken to assign its claim for the Principal Amount to APL in exchange for
Shares of Common Stock in APL the number of which is to be calculated on the
basis of Section 1 of the Second Exchange Option Agreement.
EXHIBIT 6C
Therefore the parties hereto agree as follows:
SECTION 1
ASSIGNMENT
tbg herewith assigns to APL its claim for the Principal Amount pursuant to
Section 4 para. 3 of the Beteiligungsvertrag between tbg, APL and Pharmed Labs
GmbH as of the date hereof provided, however, that the transfer shall be
conditional upon (i) the occurrence of the Exchange Option Closing as defined in
the Second Exchange Option Agreement and (ii) the delivery of a stock
certificate representing the Common Shares to be transferred from APL to tbg
pursuant to the Second Exchange Option Agreement. APL herewith accepts such
transfer.
SECTION 2
MISCELLANEOUS
(1) This Agreement shall be governed by and construed under the laws of the
Federal Republic of Germany.
(2) Any amendment to this Agreement shall be in writing.
Munchen, 17.2.1998
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------
American Pharmed Labs, Inc.
/s/ Illegible
-------------------------------------
tbg Technologie-Beteiligungs-Gesellschaft mbH
der Deutschen Ausgleichsbank
14
EXHIBIT 6C
HOLDERS OF SECURITIES
% OF TOTAL
NO. SHARES OPTION COMMON &
OPTIONS & DATE ISSUED COMMON EXERCISE NO. OF CONV. PREFERRED
NAME WARRANTS OR ACQUIRED STOCK PRICE PFD. SHARES OUTSTANDING
---- -------- ----------- ----- ----- ----------- -----------
Xx. Xxxxxx X. Xxxxxxx-I 10/93 - 6/94 2,580,000 26.50%
60,000 04/97 3.00
Techno Venture Enterprises
No. III, L.P. 74,259 1997 2.02 1,485,164 15.25%
Xxx. Xxxxx Xxxxxxx 5/94 - 6/94 1,066,667 10.95%
Xx. Xxxxxx X. Xxxxxxx -II(2) - 1,003,610 10.31%
T.B.D 829,901(3) 8.52%
tbg Technologie-Beteiligungs-
Gesellschaft mbH der
Deutschen Ausgleichsbank
Alpinvest International B.V. 24,753 1997 2.02 495,054 5.08%
Pharmed Xx. Xxxxxxx GmbH 8/29/97 199,357 2.05%
Silent partners of Pharmed 443,789(4) 4.56%
Xx. Xxxxxxx GmbH
Mr. Johann Pogadl 5/19/95 294,667 3.03%
Xx. Xxxxxx Xxxxxxx 300,000(5)(6) 9/18/97 2.02
Mr. Hans Dickand 10/31/97 250,000 2.57%
Xxx. Xxxxxxx Xxxxxxxx 6/94 - 5/95 248,889 2.56%
Xx. Xxxxxxxx Xxxxxx 1/13/97 233,333 2.40%
Xx. Xxxxxxx Xxxxxxxx 11/30/97 125,000 1.28%
Xx. Xxxx X. Xxxxxx 9/21/95 110,000 1.13%
50,000(6) 9/21/95 0.75
90,000(6) 12/12/96 1.50
Xx. Xxxxxxx Xxxxxxxx 10/31/97 100,000 1.03%
Xx. Xxxxxxx X. Xxxxxxx 1/13/97 50,000 0.51%
Xx. Xxxxxxxxx X. Xxxxxxx 1/13/97 50,000 0.51%
Xxx. Xxxxxx Xxxx 43,320(6) 9/21/95 0.75
30,000(6) 12/12/96 1.50
5/04/97 31,333 0.32%
Xx. Xxxxx X. Xxxxxxx, Xx. 4/16/97 25,000 0.26%
Xx. Xxxxxxx X. Xxxxxx 12/12/96 20,000 0.21%
Xx. Xxxx X. Xxxxxx 50,000(6) 1/13/97 1.50
Xxxx. Xxxxxxxxx Xxxxxxx 9/21/95 16,667 0.17%
Xx. Xxxxxxx Xxxxxxx 25,000(6) 4/30/97 2.02
Xxx. Xxxxxxxx Xxxxxx 1/13/97 10,000 0.10%
Xx. Xxxx XxXxxxxxx 9/21/95 10,000 0.10%
Mr. John Softness 12/12/96 7,500 0.08%
Xxxxxx Softness 12/12/96 7,500 0.08%
Family Trust
Xx. Xxxxxx Xxxxxxxx 9/21/95 6,667 0.07%
Mr. Xxxxxxxxxxx Xxxx 4/02/97 10,000 0.10%
Ms. Tjasa Xxxx 4/02/97 12,500 0.13%
Xxx. Xxxxx Xxxx 4/02/97 2,500 0.03%
Dr. Wm. Xxxxxxxxx 4/02/97 12,500 0.13%
Xxx. Xxxxx Xxxxxxxx 10,000(6) 10/29/97 2.02
------- --------- --------- ------
757,332(7) 6,378,122 3,359,476 100.00%
1. Issued in consideration for assignment of personal intellectual property
rights.
2. Acquired from former stockholders.
3. 8.59% equity interest in Pharmed Labs GmbH reserved for conversion into
APL Preferred.
4. Shares result from conversion of an equal number of Preferred Shares
previously held by Pharmed Xx. Xxxxxxx GmbH.
5. Based on Employment Contract and Stock Option Plan.
6. Issued under Stock Option Plan covering a total of 1,036,320 Shares.
7. 598,320 Shares issued under Stock Option Plan.
15