A3808.A(BF)
STOCK PURCHASE AGREEMENT
(SERIES A CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of
the 25th day of June, 1992 between and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the parties listed in Exhibit 1(a) to this
Agreement (hereinafter sometimes referred to individually as an "Investor"
and collectively as the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and the
Investors desire to purchase from the Company in the aggregate 3,900,000
shares of the Company's Series A Convertible Preferred Stock (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, as well as the expression of intention by the
parties hereto to be legally bound by this, a written agreement, subject to
the terms and conditions hereof and in reliance upon the representations,
warranties and covenants contained herein, it is agreed as follows:
Section 1. PURCHASE OF SHARES.
(a) PURCHASE AND SALE. The Company shall sell, and each
Investor shall purchase, the Shares in the number and for the consideration
set forth opposite such Investor's name on Exhibit 1(a) annexed hereto.
(b) CLOSING. The closing ("Closing") of the purchase by the
Investors of the Shares shall be held at the offices of Xxxxxxx Xxxxx Xxxxxxx
& Xxxxxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000 on June
25, 1992 commencing at 10:00 a.m., or at such other time, date or place as
may be mutually agreed upon (the "Closing Date").
(c) DELIVERY OF CERTIFICATES. At Closing, the Company shall
deliver to each Investor a certificate or certificates evidencing the Shares
to be issued and delivered to each such Investor at Closing in accordance
with Exhibit 1(a) annexed hereto.
(d) PAYMENT. The Investors shall pay the purchase price to be
paid at Closing by delivery to the Company
at Closing of a check or checks or by wire transfer in immediately
available funds in the amounts set forth on Exhibit 1(a) annexed hereto.
Section 2. CONDITIONS TO THE OBLIGATIONS OF THE
INVESTORS AT CLOSING.
The obligation of each of the Investors to purchase and pay for the
Series A Convertible Preferred Stock to be purchased by such Investor at
Closing is subject to the satisfaction on or prior to the date of Closing of
the following conditions, any of which may be waived by such Investor:
(a) OPINION OF COUNSEL TO THE COMPANY. The Investors shall
have received from Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, counsel for the
Company, their opinion dated the date of the Closing substantially in the
form of Exhibit 2(a) hereto.
(b) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects at and as of the date of
Closing with the same effect as if made on the date of Closing, except to the
extent of changes contemplated hereby or caused by the transactions
contemplated hereby.
(c) PERFORMANCE OF COVENANTS. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the date of Closing shall have been performed in a
manner reasonably satisfactory in all respects to the Investors and their
counsel.
(d) AMENDED ARTICLES OF INCORPORATION. The Company's Articles
of Incorporation shall have been duly amended substantially as set forth on
Exhibit 2(d)(i) annexed hereto (the "Amended Articles"), and the Company
shall have filed with the Department of State of the Commonwealth of
Pennsylvania (the "Department") a Statement Affecting Class or Series of
Shares (the "Statement") establishing the Series A Convertible Preferred
Stock in the form of Exhibit 2(d)(ii) annexed hereto.
(e) BOARD REPRESENTATION. The maximum number of directors of
the Company shall have been increased to four, Xxxxxxx X. Wall shall have
resigned as a director of the Company and Xxxxxx Xxxxxxx shall have been
elected as Chairman of the Company's Board of Directors.
(f) LEGAL ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the
2
transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the financial condition or
operations of the Company.
(g) CONSENTS. All consents required to enable the Company to
observe and comply with all of its obligations under this Agreement and in
connection with the transactions contemplated hereby shall have been obtained
and all "blue sky" filings necessary in connection with the issuance and sale
of the Shares shall have been made.
(h) CLOSING DOCUMENTS. The Company shall have delivered to the
Investors (i) an officer's certificate dated the date of Closing (A) stating
that the conditions in paragraphs (b) through (g) of this Section 2 have been
satisfied, and (B) attaching the Company's Articles of Incorporation, Bylaws,
all resolutions of the Board of Directors relating to the issuance and sale of
the Shares and a good standing certificate issued by the Commonwealth of
Pennsylvania, and (ii) such certificates, other documents and instruments as the
Investors may reasonably request in connection with, and to effect, the
transactions contemplated by this Agreement.
(i) PROCEEDINGS. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investors
and their counsel.
(j) PURCHASE OF COMMON STOCK. The individuals listed on Exhibit
2(j) annexed hereto shall have purchased the number of shares of Common Stock
for the consideration set forth on Exhibit 2(j).
(k) SHAREHOLDERS' AGREEMENT. The individuals listed on
Exhibit 2(j) annexed hereto shall have entered into a Shareholders' Agreement
in substantially the form of Exhibit 2(k) annexed hereto.
(l) PURCHASE OF COMMON STOCK BY CENTOCOR. Centocor, Inc.
("Centocor") shall have purchased the number of shares of Common Stock and for
the consideration set forth on Exhibit 2(l) annexed hereto.
(m) MARKETING AGREEMENT. The Company and Centocor shall have
entered into a Marketing and Development Agreement (the "Marketing Agreement")
in substantially the form of Exhibit 2(m) annexed hereto.
3
(n) FACILITIES USE AGREEMENT. The Company and Centocor shall
have entered into a Facilities Use Agreement (the "Use Agreement") in
substantially the form of Exhibit 2(n) annexed hereto.
(o) SHAREHOLDER PURCHASE AGREEMENT. The Company, Xxxxxxx X.
Xxxxxxxx, Xx., Ph.D. and the Investors shall have entered into the
Shareholder Purchase Agreement in substantially the form of Exhibit 2(o)
annexed hereto.
Section 3. CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AT CLOSING.
The obligation of the Company to issue and deliver the Series A
Convertible Preferred Stock to be purchased by each Investor at Closing is
subject to the satisfaction on or prior to the date of Closing of the
following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Investors contained in this Agreement
shall be true and correct in all material respects at and as of the date of
Closing with the same effect as if made on the date of Closing, except to the
extent of changes contemplated hereby or caused by the transactions
contemplated hereby.
(b) DELIVERY OF CONSIDERATION. The Investors shall have
delivered, in accordance with Paragraph 1(d), the consideration for the
Shares set forth opposite such Investor's name on Exhibit 1(a) attached
hereto.
(c) LEGAL ACTION. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the transactions contemplated by this Agreement or cause
such transactions to be rescinded.
(d) CLOSING DOCUMENTS. The Investors shall have delivered to
the Company such certificates, other documents and instruments as the Company
may reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
(e) PROCEEDINGS. All corporate proceedings taken by Centocor
or to be taken by Centocor in connection with the transactions contemplated
hereby to be consummated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and its
counsel. True and complete copies of all resolutions relevant to
4
the transactions contemplated by this Agreement shall have been delivered by
Centocor to the Company at or prior to Closing, and such resolutions shall not
have been amended or repealed.
(f) MARKETING AGREEMENT. The Company and Centocor, Inc. shall
have entered into the Marketing Agreement in substantially the form of
Exhibit 2(m) annexed hereto.
(g) USE AGREEMENT. The Company and Centocor shall have
entered into the Use Agreement in substantially the form of Exhibit 2(n)
annexed hereto.
Section 4. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.
The Company represents and warrants to each Investor as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to carry on its business as currently
conducted and as proposed to be conducted, to own its properties, and to
enter into and perform this Agreement. The Company is not qualified as a
foreign corporation in any jurisdiction and the Company's conduct of its
business or its ownership or leasing of property does not make any such
qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the financial condition or results of
operations of the Company.
(b) CAPITAL STOCK. The authorized capital stock, and the
outstanding capital stock, of the Company consists in each case solely of the
shares indicated on Exhibit 4(b)(i) annexed hereto. All of the outstanding
shares have been duly authorized and are fully paid and non-assessable. An
accurate list of the Company's shareholders and their holdings is set forth
in Exhibit 4(b)(ii) annexed hereto. No person or entity is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as described on Exhibit 4(b)(iii) annexed
hereto, there are no outstanding warrants, options, convertible securities or
other agreements or arrangements of any character under which the Company is
or may be obligated to issue any equity securities of any kind, or to
transfer any equity securities of any kind owned by it, and the Company is
not obligated to issue any equity securities of any kind, or to transfer any
equity securities of any kind owned by it. Except as listed on Exhibit
4(b)(iii) annexed hereto, the Company does not know of any voting
5
agreements, buy-sell agreements, option or right of first purchase agreements
or other agreements of any kind among any of the security holders of the
Company relating to the securities held by them. The Company has not agreed,
and has no present intention, to register any of its securities under the
Securities Act (as hereinafter defined). The voting rights, designations,
preferences, limitations and special rights of the Shares when issued, shall
be as fully set forth in the Amended Articles and the Statement. When issued,
delivered and paid for pursuant to this Agreement, the Shares will be validly
issued, fully paid and non-assessable.
(c) SUBSIDIARIES. The Company does not own any shares of
stock, partnership interest, joint venture interest or any other security or
interest in any other corporation or other organization or entity.
(d) CORPORATE PROCEEDINGS. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of the officers, directors and shareholders of the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights. The
Shares, when issued pursuant hereto, will be free and clear of all encumbrances
and restrictions except for restrictions on transfer imposed by applicable
securities laws or by this Agreement. The Company has reserved a sufficient
number of shares of its Common Stock (as hereinafter defined) for issuance upon
the conversion of the Shares and such shares of Common Stock, when issued in
accordance with the terms of the Shares, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws or by this Agreement.
(e) LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Company
or any officer, director or key employee of the Company, threatened against
or affecting the Company, or against the assets or business of the Company,
or against any key employee, officer, director or shareholder of the Company
in his capacity as such person or relating to any of his activities with the
Company, at law or in equity or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality.
6
(f) TAX MATTERS. The Company has not filed and has not been
required to file under any applicable laws any Federal, state or local
income, profits, franchise, sales, use, occupation, property, excise,
payroll, withholding or other taxes through May 31, 1992. The Company has
not paid or been required to pay any amounts in connection with any such
taxes from its formation through May 31, 1992. Any of such taxes accrued by
the Company from June 1, 1992 to the date hereof have been fully paid or are
adequately provided for. There exist no tax assessments or deficiencies
assessed against or payable by the Company. The Company has not made any
election or filed any consent pursuant to Section 341(f) of the Internal
Revenue Code of 1986, as amended, relating to collapsible corporations.
(g) COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither the
execution, delivery or performance of this Agreement, nor the offer,
issuance, sale or delivery of the Shares to the Investors, nor the issuance
of shares of Common Stock upon conversion of the Shares, with or without the
giving of notice or passage of time, or both, will (i) violate, or result in
any breach of, or constitute a default under, or result in the imposition of
any encumbrance upon any asset of the Company pursuant to, any provision of
its Articles of Incorporation or Amended Articles, as the case may be, or
By-laws or any contract, law, rule, regulation, judgment, decree or other
document or instrument to which the Company is a party or by which it is
bound or (ii) cause the Company to lose the benefit of any right or privilege
it presently enjoys, except as contemplated by this Agreement.
(h) GOVERNMENTAL CONSENTS; OFFERING OF SHARES. Except as set
forth on Exhibit 4(h)(i) annexed hereto, no consent, authorization, approval,
permit or order of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery
and performance of this Agreement or the offer, issuance, sale or delivery of
the Shares. Neither the Company nor any agent acting on its behalf has,
directly or indirectly, sold or offered for sale, or solicited any offers to
buy, any securities, or otherwise approached or negotiated with any person or
persons, so as to subject the offer or sale of the Shares to the Investors to
the provisions of Section 5 of the Securities Act, and the Company agrees
that neither it nor any agent acting on its behalf will take any action that
would subject the offer or sale of the Shares to those provisions. Except as
set forth on Exhibit 4(h)(ii) hereto, neither the Company nor anyone acting
on its behalf has directly or indirectly offered the Series A Convertible
Preferred Stock or any part thereof or any similar security of the Company
(or any other securities convertible or exchangeable for the Series A
Convertible Preferred Stock or any
7
similar security), for sale to, or solicited any offer to buy the same from,
anyone other than the Investors. Assuming the accuracy of the
representations and warranties of the Investors made herein, the offering,
sale and issuance of the Series A Convertible Preferred Stock and the Common
Stock issuable upon conversion of the Series A Convertible Preferred Stock do
not and will not require registration under the Securities Act.
(i) PRIOR ISSUANCE OF SECURITIES. All securities of the
Company heretofore sold and issued by it were sold and issued in compliance
with all applicable federal and state securities laws.
(j) ENCUMBRANCES. The Company owns, or has a valid leasehold
interest in, or valid license for, all of its property and assets, real,
personal or fixed, tangible or intangible, subject to no mortgages, liens,
security interests, pledges, charges or other encumbrances of any kind.
(k) BUSINESS PLAN. The Company has previously presented and
delivered to the Investors the Business Plan, which Business Plan has been
material to the Investors in their decision to enter into this Agreement and
to purchase the Series A Preferred Stock hereunder. The description of the
business, operations (as presently conducted and as proposed to be
conducted), properties and assets of the Company contained in the Business
Plan, as well as all other factual statements contained therein, are true,
correct and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading as of the date of such description or
statement. The financial projections and other estimates contained in the
Business Plan are based on the best estimates of the Company derived from
reasonable expectations at the time such projections and estimates were made.
Neither the projections nor the assumptions on which the projections are
based have been prepared, reviewed or approved by the Company's counsel or
accountants. The projections are subject to change inasmuch as all material
events and circumstances cannot be predicted and unanticipated events and
circumstances are likely to occur. Accordingly, it is likely that there will
be differences between the projected results and the Company's actual
results. These differences may be material. Therefore, no representation or
warranty as to the accuracy of these projections can be or is being made by
the Company or any of their principals or affiliates and no assurance can be
given that the projected results will actually be achieved.
(l) COMPLIANCE. The Company has complied with its Articles of
Incorporation or Amended Articles, as the case
8
may be, and its Bylaws, and has complied in all material respects with all
federal, state, local and foreign laws, ordinances, regulations and orders
applicable to its business or the ownership of its assets and all decrees,
orders or judgments of any court of competent jurisdiction. The Company has
all federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business; such licenses and
permits are in full force and effect, no violations have been recorded in
respect of any such licenses or permits, and no proceeding is pending or
threatened to revoke or limit any thereof. None of the aforesaid licenses
and permits shall be affected in any material respect by this Agreement or
the Shareholders' Agreement.
(m) INSURANCE. All policies of liability, property, casualty,
workmen's compensation, health and other forms of insurance held by the
Company or by Centocor on behalf of the Company are, to the best of the
Company's knowledge, valid and enforceable policies and are outstanding and
duly in force and all premiums with respect thereto are paid to date. The
amounts of coverage under such policies of insurance for the assets and
properties of the Company are adequate against risks usually insured against
by persons operating similar businesses and operating similar properties.
The Company does not carry professional liability or indemnification of
directors and officers insurance. The Company is using its best efforts to
obtain a key-man life insurance on Xxxxxxx Xxxxxxxx, Xx., Ph.D in an amount
not less than $1,000,000 and shall be the named beneficiary of such key-man
insurance policy.
(n) RELATED TRANSACTIONS. Except as set forth on Exhibit 4(n)
hereof, no current or former shareholder, director, officer or employee of
the Company (other than the Investors) nor any "associate" (as defined in the
rules and regulations promulgated under the Exchange Act) of any such person,
is presently, directly or indirectly through his or its affiliation with any
other person or entity, a party to any transactions with the Company
providing for the furnishing of services (other than employment of such
individuals by the Company) by or to, or rental of real or personal property
from or to, or otherwise requiring cash payments to or by, any such person in
excess of $15,000. For purposes of this Agreement, a transaction of the type
described in this Paragraph 4(n) is sometimes herein referred to as a
"Related Transaction".
(o) REGISTRATION RIGHTS. Except as contemplated by this
Agreement, no person has any right to cause the Company to effect the
registration under the Securities Act of any shares of Common Stock or any
other securities (including debt securities) of the Corporation.
9
(p) COMPLIANCE WITH ERISA; BENEFIT PLANS. The Company does
not sponsor, maintain and is not required, either by law or by contract, to
contribute to any employee welfare benefit plan, within the meaning of
section 3(1) of ERISA, nor to any employee pension benefit plan, within the
meaning of section 3(2) of ERISA. The Company has not contributed to and is
not required to contribute to any multiemployer plan within the meaning of
section 3(37) of ERISA.
(q) INVESTMENT COMPANY ACT. The Company is not an "investment
company" as that term is defined in, and is not otherwise subject to
regulation under, the Investment Company Act of 1940, as amended.
(r) PATENTS, TRADEMARKS, ETC. The Company owns or possesses
the patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights listed on
Exhibit 4(r)(i) annexed hereto (collectively, the "Intellectual Property"),
without any known conflict with the rights of others. Except as provided in
Exhibit 4(r)(ii) annexed hereto, the Company knows of no additional
Intellectual Property required to conduct its business as now conducted
without conflict with the rights or claimed rights of others. The Company
has not received notice of any alleged infringement by it, nor is the Company
aware of any infringement or any basis for an alleged infringement by it, of
any third-party patent, trademark, service xxxx, trade name, copyright or
license. The Company has confidentiality agreements with all of its
employees substantially in the form of Exhibit 4(r)(iii) annexed hereto.
Except as set forth on Exhibit 4(r)(iv) annexed hereto, to the best knowledge
of the Company after due inquiry, none of the Company's employees are subject
to confidentiality or similar types of agreements which would hinder or
prevent them from fully and lawfully performing their responsibilities as
employees.
(s) NO DEFAULTS. The Company has in all material respects
performed all obligations required to be performed by it, and is not in
default in any material respect, under any material contract, commitment or
instrument, and no event or condition has occurred which, with the giving of
notice or passage of time, or both, would constitute such a default. To the
best knowledge of the Company, all parties having material contracts or
commitments with the Company are in compliance therewith in all material
respects. Exhibit 4(s) annexed hereto contains an accurate list of all
material contracts or commitments as of the date of this Agreement, oral or
written.
10
(t) EMPLOYEE MATTERS. Exhibit 4(t) annexed hereto sets
forth a true and correct list of all officers and employees of the Company,
together with a statement describing any agreement or arrangement any such
person has with the Company with respect to such person's employment or
otherwise.
(u) BROKERS AND FINDERS. No person or firm has, or will have,
any right, interest or valid claim against the Company or any Investor, for
any commission, fee or other compensation as a finder or broker or in any
similar capacity as a result of any act or omission by the Company or anyone
acting on behalf of the Company in connection with any transaction
contemplated by this Agreement.
(v) DISCLOSURE. Neither the representations and warranties
made by the Company in this Agreement nor the Exhibits annexed hereto nor any
writing furnished to any Investor pursuant to this Agreement or in connection
with this Agreement by the Company or anyone acting on its behalf contains
any untrue statement of a material fact or omits to state any material fact
required to make the statements herein or therein not misleading in the light
of the circumstances under which those statements were made. There exists no
fact or circumstance which, to the knowledge of the Company or any officer or
director of the Company, materially adversely affects or could reasonably be
anticipated to have a materially adverse effect on, the existing or expected
financial condition, operating results, assets or business prospects of the
Company.
(w) FDA APPROVAL. The Company has no reason to believe that
the U.S. Food and Drug Administration will ultimately prohibit the marketing,
sale, license or use in the United States of any product currently under
research and development by the Company.
Section 5. REPRESENTATIONS AND WARRANTIES
OF INVESTORS.
Each Investor severally represents and warrants to the Company as
follows:
(a) ORGANIZATION; CAPACITY. If such Investor is not an
individual, it is a partnership or corporation organized under the laws of
the jurisdiction as indicated under its name on the signature page of this
Agreement, with full authority (corporate or otherwise) to make and perform
its obligations under this Agreement. If such Investor is an individual,
such Investor is SUI JURIS and of full capacity to make and perform his or
her obligations under this Agreement.
11
(b) AUTHORIZATION; NO BREACH. The execution, delivery and
performance by such Investor of this Agreement has been duly authorized and
will not violate any partnership agreement or articles of incorporation of
such Investor or constitute a breach of or default under any instrument to
which such Investor is a party or by which any of its, his or her properties
are bound.
(c) BINDING OBLIGATION. This Agreement constitutes a valid
and binding obligation of such Investor enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
relating to or affecting the enforcement of creditors' rights.
(d) NO BROKER. No person or firm has, or will have, any
right, interest or valid claim against the Company or any other Investor, for
any commission, fee or other compensation as a finder or broker or in any
similar capacity as a result of any act or omission by such Investor or
anyone acting on behalf of such Investor in connection with any transaction
contemplated by this Agreement.
(e) PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Shares for its, his or her own account and not with a view to or for sale in
connection with any distribution of the Shares.
(f) SUITABILITY. (i) Such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the risks and the merits of an investment in the Company; (ii) such Investor
can bear the economic risk of its, his or her investment in the amount set
forth opposite its, his or her name on Exhibit 1(a) annexed hereto (i.e., at
the time of the investment such Investor can afford a complete loss of the
investment and can afford to hold the investment for an indefinite period of
time), and (iii) such Investor is an "Accredited Investor" as that term is
defined in Regulation D under the Securities Act or to the extent such
Investor is not an "Accredited Investor," such Investor is fully capable of
making all of the representations and warranties in this Section 5, including
(i) and (ii) above, and by its, his or her execution hereof does so affirm.
(g) REGISTRATION OR SALES. (i) Such Investor understands that
the Securities are not registered under the Securities Act nor any regulatory
authority of any state and must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state law
or an exemption from such registration is available; (ii) such Investor
12
is aware that any routine sales of the Shares or any shares received upon
conversion of the Shares made under Rule 144 of the Commission (as
hereinafter defined) under the Securities Act may only be made in limited
amounts and in accordance with the terms and conditions of that Rule and that
in cases where that Rule is not applicable, compliance with Regulation A or
some other disclosure exemption will be required; and (iii) such Investor
understands that, except as otherwise provided herein, the Company is under
no obligation whatsoever and has no intention to register the Shares or any
shares that might be received upon conversion of the Shares under the
Securities Act, to comply with any such Rule or exemption, or to supply such
Investor with any information necessary to enable such Investor to make
routine sales of the Shares, or any shares received upon conversion of the
Shares, under Rule 144.
(h) LEGENDED CERTIFICATES. Such Investor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to
an effective registration statement), will bear a legend substantially in the
following form until the Company's counsel determines that the legend is no
longer advisable:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT; (II) IN
COMPLIANCE WITH RULE 144; OR (III) AFTER RECEIPT OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION."
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Shares so legended.
(i) CONFIDENTIALITY. Such Investor shall hold in confidence
any confidential information about the Company that such Investor has
received or hereafter receives pursuant to any provision of this Agreement
under circumstances indicating the confidentiality of such information until
the Company shall have publicly disclosed such information, except
information that otherwise comes into the public domain or is disclosed by a
third party having the right to disclose it to the Investor without breach of
this Agreement or any other agreement by which the disclosing party is bound.
13
(j) LOCK UP. Such Investor shall not, with respect to any
public offering of the Company's securities which occurs following the
Closing Date, effect any public sale or distribution of the Securities (as
hereinafter defined) during such period of time, if any, not to exceed 120
days, as any underwriter shall reasonably require in connection with such
public offering.
(k) INVESTMENT COMPANY STATUS. Such Investor is not an
"investment company" within the meaning of the Investment Company Act of 1940.
Section 6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Investors as follows:
(a) USE OF PROCEEDS. The cash proceeds of the sale of the
Shares to the Investors will be used for working capital and general
corporate purposes.
(b) BOOKS AND ACCOUNTS. The Company will (i) make and keep
books, records and accounts, which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets; and (ii)
devise and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and in
accordance with the Company's past practices or any other criteria applicable
to such statements, and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management's general or specific
authorization, and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(c) PERIODIC REPORTS; BUDGETS.
(i) The Company will furnish to each member of the
Company's Board of Directors (a "Director") as soon as practicable, and in
any event within 90 days after the end of each fiscal year of the Company,
an annual report of the Company, including a balance sheet as at the end of
such fiscal year and statements of operations, shareholders' equity and
cash flows for such fiscal year, together with the related notes thereto,
setting forth in each case in comparative form corresponding figures for
the preceding
14
fiscal year, all of which will present fairly the financial position
of the Company and the results of its operations and changes in its
financial position as of the time and for the period then ended. The
financial statements shall be accompanied by an unqualified report, in form
and substance reasonably satisfactory to 66 2/3% of the members of the
Company's Board of Directors then in office, of independent public
accountants of recognized national standing reasonably satisfactory to 66
2/3% of the members of the Company's Board of Directors then in office to
the effect that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with prior years (except as otherwise specified in such report), and
present fairly the financial position of the Company and the results of
its operations and changes in its financial position as of the time and
for the period then ended. The Company will conduct its business so that
such report of the independent public accountants will not contain any
qualifications as to the scope of the audit, the continuance of the
Company, or with respect to the Company's compliance with generally
accepted accounting principles, except for changes in methods of accounting
in which such accountants concur.
(ii) The Company will furnish to each Director as soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter of the Company, a report of the Company consisting of an unaudited
balance sheet as of the end of such quarter, and unaudited statements of
operations, shareholders' equity and cash flows for such quarter, and for
the fiscal year-to-date, setting forth in each case in comparative form the
corresponding figures for the preceding year. All such reports shall be
certified by the Treasurer of the Company to present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended and to
have been prepared in accordance with generally accepted accounting
principles, subject to normal year-end adjustments, which shall not be
material in nature or amount.
(iii) The Company will furnish to each Director as soon as
practicable, and in any event within 30 days after the end of each of the
first two calendar months in each fiscal quarter, a report of the Company
consisting of an unaudited balance sheet as of the end of such month, and
unaudited statements of operations, shareholders' equity and cash flows for
such month, and for the fiscal year to date, setting forth in each case in
comparative form the
15
corresponding figures for the preceding year. All such reports shall be
certified by the Treasurer of the Company to present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended and to
have been prepared in accordance with generally accepted accounting
principles, subject to normal year-end adjustments which shall not be
material in nature or amount.
(iv) The Company will furnish to each Director as soon as
practicable and in any event at least 30 days prior to the end of each
fiscal year of the Company, an annual operating budget for the Company for
(A) the first succeeding fiscal year containing statements of operations,
cash flows and ending balance sheets for each month of such fiscal year and
(B) the second succeeding fiscal year containing statements of operations
and cash flows and ending balance sheets for each quarter of such fiscal
year. Promptly upon preparation thereof, the Company will furnish to each
Director any other budgets that the Company may prepare and any revisions
of such previously furnished budgets.
(d) OTHER REPORTS AND INSPECTION. The Company will furnish to
each Director (i) as soon as practicable after issuance, copies of any
financial statements or reports prepared by the Company for, or otherwise
furnished to, its shareholders or the Commission and (ii) promptly, such
other documents, reports and financial data as such Director may reasonably
request. In addition the Company will, upon reasonable prior notice, make
available during regular business hours to each Director or his
representatives or designees (i) all assets, properties and business records
of the Company for inspection and copying and (ii) the officers and employees
of the Company for interviews concerning the business, affairs and finances
of the Company.
(e) RETENTION OF AUDITORS. The Company shall select as auditors
independent public accountants of recognized national standing, subject to the
approval of the Company's Board of Directors.
(f) FEES OF INVESTORS' COUNSEL. The Company shall pay the
reasonable fees, not to exceed $20,000, and reasonable out-of-pocket
disbursements, of the Investors' special counsel, Dechert Price & Xxxxxx, in
connection with the negotiation and preparation of this Agreement and the sale
of the Shares to the Investors.
16
(g) MERGER; SALE OF ASSETS; DISSOLUTION. So long as shares of
Series A Convertible Preferred Stock issued hereunder are outstanding, the
Company will not become a party to any merger or consolidation, or sell, lease
or otherwise dispose of substantially all of its assets, other than sales and
leases of assets in the ordinary course of business, or dissolve or liquidate
its assets without the prior approval of holders of record of a majority of the
shares of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction, except
that (i) any subsequently formed Subsidiary may merge or consolidate with the
Company so long as the Company is the surviving entity of such merger or
consolidation, and (ii) any subsequently formed Subsidiary may lease, sell,
transfer or otherwise dispose of all or any part of its properties and assets to
the Company.
(h) ACQUISITION. So long as shares of Series A Convertible
Preferred Stock issued hereunder are outstanding, the Company will not
acquire any interest in any business from any person, firm or entity (whether
by a purchase of assets, purchase of stock, merger or otherwise) in which the
consideration to be paid, as of the date as of which any such agreement with
respect to such acquisition is entered into, represents more than 25% of the
total assets of the Company without the prior approval of holders of record
of a majority of the shares of Series A Convertible Preferred Stock
outstanding as of a record date between 10 and 90 days prior to the
consummation of any such transaction, except as otherwise specifically
permitted pursuant to the provisions of this Agreement.
(i) DIVIDENDS; REPURCHASES. So long as shares of Series A
Convertible Preferred Stock issued hereunder are outstanding, the Company shall
not declare or pay any dividends on, and shall not purchase, redeem, retire or
otherwise acquire, any shares of its capital stock (other than the shares of
Series A Convertible Preferred Stock), whether now or hereafter outstanding,
without obtaining the prior approval of holders of record of a majority of the
shares of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the declaration date or the date of consummation
of any such transaction, as applicable.
(j) CONSENTS. Prior to Closing the Company shall obtain all
consents and shareholder approvals needed to enable it to perform all of its
obligations under this Agreement and the transactions contemplated hereby.
(k) ISSUANCE OF ADDITIONAL SECURITIES. Except for the Common
Stock issued on conversion of the Series A
17
Convertible Preferred Stock and except for Common Stock or convertible
securities (including Common Stock issuable on conversion thereof) issued or
issuable to officers, directors, employees or consultants or to prospective
officers, directors, employees or consultants, pursuant to stock option,
stock incentive, stock appreciation, stock bonus, stock award or compensation
rights plans or arrangements or employment letters presently in effect or
hereafter adopted or entered into by the Company, the Company will not issue
or sell, or enter into any agreement providing for the issuance or sale of,
any equity or debt securities or options, warrants or other rights to
purchase or acquire any equity or debt securities, or any security
convertible into or exchangeable for any equity or debt security, without
obtaining the prior approval of holders of record of a majority of the shares
of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction,
which approval will not be unreasonably withheld.
(l) TAXES AND LIENS. The Company will duly pay and discharge,
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company or its properties, or any part thereof or upon the income
or profits therefrom, in each case before the same become delinquent and
before penalties accrue thereon, as well as all claims for labor, materials
or supplies which if unpaid might by law become a lien upon any of its
property, unless and to the extent that the same are being contested in good
faith and by appropriate proceedings and the Company has set aside on its
books adequate reserves with respect thereto.
(m) RESTRICTIVE AGREEMENT. Subsequent to Closing, the Company
will not be a party to any agreement or instrument which by its terms would
restrict the Company's performance of its obligations pursuant to this Agreement
or the terms of the Shares including any redemption or conversion thereof.
(n) NOTIFICATION OF REGISTRATION UNDER THE EXCHANGE ACT. The
Company will give each holder of record of the Shares prompt written notice
of the effectiveness of any registration statement filed pursuant to the
requirements of Section 12 of the Exchange Act (as hereinafter defined) or
pursuant to any equivalent provision of any similar federal law then in force
(a "1934 Act Registration Statement") relating to the Common Stock of the
Company, and the number of shares of such class of equity securities
outstanding at the time such registration statement becomes effective. If
the Company has filed a 1934 Act Registration Statement or a registration
statement on any Form other than Form S-8 (or any successor form)
18
pursuant to the requirements of the Securities Act, the Company further
covenants that it will file all reports required to be filed by it under the
Securities Act or the Exchange Act and the rules and regulations adopted by
the Commission thereunder or, if the Company is not required to file such
reports, it will, upon the request of a holder of Shares, make publicly
available such information as will enable such holder to sell such Shares
without a registration statement (as described below), and will take such
further action as such holder may request, all to the extent required from
time to time to enable such holder to sell such Shares, without registration
within the limitations of the exemptions provided by (i) Rule 144 and Rule
144A adopted by the Commission under the Securities Act, as such rules may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission.
(o) SALE OR TRANSFER OF RESTRICTED SECURITIES. An opinion of
counsel will not be necessary for a transfer by an Investor which is a
partnership to a partner of such partnership or to a retired partner of such
partnership who retires after the date hereof, or to the estate of any
partner or retired partner, or to a trust for the benefit of an Investor or
an Investor's family members or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or ancestors,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Investor hereunder.
(p) RIGHT OF FIRST OFFER.
(i) Except in the case of Excluded Securities (as
hereinafter defined) the Company shall not issue, call or exchange, agree
to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any (A) shares of Common Stock, (B) any other equity security of
the Company, (C) any debt security of the Company which, by its terms, is
convertible into or exchangeable for any equity security of the Company,
(D) any security of the Company that is a combination of debt and equity or
(E) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any equity security or any such debt security of the
Company, unless in each case the Company shall have first offered to sell
to the Investors such securities (the "Offered Securities"), at a price and
on such other terms as shall have been specified by the Company in writing
delivered to each of the Investors (the "Offer"), which Offer by its terms
shall remain open and irrevocable for a period of thirty (30) days from the
date it is delivered by the Company to the Investors.
19
(ii) Each of the Investors shall have the right to purchase
up to its pro rata share (as defined below) of the Offered Securities. For
the purposes of this subparagraph (ii), each Investor's "pro rata share"
shall be that amount of the Offered Securities which would result in such
Investor owning the same percentage of the Company's issued and outstanding
Common Stock after the issuance of Offered Securities as such Investors
owned immediately prior to the issuance (assuming in each case the issuance
of all Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock and of all shares issuable upon the conversion of the
Offered Securities).
(iii) Notice of an Investor's intention to accept, in whole
or in part, an Offer shall be evidenced by a writing signed by an Investor
and delivered to the Company prior to the end of the 30-day period of such
Offer, setting forth such portion of the Offered Securities as the Investor
elects to purchase (the "Notice of Acceptance").
(iv) In the event that the Investors do not elect to
purchase all of the Offered Securities, the Company shall within 5 days of
the earlier of (A) the receipt of all of the Notices of Acceptances from
the Investors or (B) the expiration of the 30-day period provided in
subparagraph 6(p)(i) provide each of the Investors who have delivered a
Notice of Acceptance with written notice of the number of Offered
Securities which have not been accepted by the Investors (the "Refused
Shares"), and each such Investor shall have 10 days to inform the Company
in writing of its intention to purchase its pro rata share of such Refused
Shares. For the purposes of this subparagraph (iv), "pro rata share" shall
mean the percentage obtained by dividing Securities and other shares of
Common Stock owned and to be purchased by an Investor who has delivered a
Notice of Acceptance pursuant to subparagraph (iii) above by the total
number of Securities or other shares of Common Stock owned and to be
purchased by Investors who have delivered Notices of Acceptance pursuant to
subparagraph (iii) above. Upon the expiration of such ten-day period, the
Company shall have 90 days to sell all or any part of such Refused Shares
as to which the Company has not received a notice from the Investors
pursuant to subparagraph 6(p)(iii) or this subparagraph (iv) to any other
person or persons, but only upon terms and conditions in all material
respects, including, without limitation, unit price and interest rates (but
excluding payment of legal fees of counsel of the purchaser), which are no
more favorable, in the aggregate, to such other person or persons or less
favorable to the Company that those set forth in the Offer. Upon the
closing
20
of the sale to such other person or persons of all the Refused
Securities, which shall include payment of the purchase price to the
Company in accordance with the terms of the Offer, the Investors shall
purchase from the Company, and the Company shall sell to the Investors, the
Offered Securities in respect of which a Notice of Acceptance was delivered
to the Company by an Investor, at the terms specified in the Offer. The
purchase by an Investor of any Offered Securities is subject in all cases
to the preparation, execution and delivery by the Company and the Investor
of a purchase agreement relating to such Offered Securities satisfactory in
form and substance to the Investor and its counsel.
(v) In each case, any Offered Securities not purchased by
the Investors or other person or persons in accordance with subparagraphs
6(p)(ii), (iii) and (iv) hereof may not be sold or otherwise disposed of
until they are again offered to the Investors under the procedures
specified in subparagraphs 6(p)(i), (ii), (iii) and (iv).
(vi) The rights of the Investors under this paragraph (p)
shall not apply to the following securities (the "Excluded Securities"):
(A) Common Stock issued to officers, employees or
directors of, or consultants to, the Company, pursuant to any
agreement, plan or arrangement approved by the Board of Directors of
the Company, or options to purchase or rights to subscribe for such
Common Stock, securities by their terms convertible into or
exchangeable for such Common Stock, or options to purchase or rights
to subscribe for such convertible or exchangeable securities;
(B) Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of shares of
Common Stock;
(C) Common Stock issued upon conversion of any of the
Series A Preferred Stock;
(D) Common Stock issued upon conversion of any other
shares of convertible stock of the Company;
(E) securities issued in connection with any
acquisition by the Company if the issuance of such securities has been
approved by at least 66 2/3% of the Directors;
21
(F) securities issued by the Company in connection
with the redemption of the Series A Convertible Preferred Stock as
provided in the Articles of Incorporation; and
(G) securities issued by the Company in connection
with any public offering of any securities of the Company pursuant to
a registration statement filed by the Company under the Securities Act
on any Form other than Form S-8.
(vii) Notwithstanding the provisions of paragraph 9(c)
hereof, the rights under this paragraph (p) shall not be assignable except
(A) to a partner of any of the Investors or retired partner of any of the
Investors who retires after the date hereof or the estate of any such
partner or retired partner, or (B) to an Affiliate (as such term is defined
in Rule 501(b) of the Securities Act) of an Investor. An Investor shall
provide the Company with notice of any assignment under this subparagraph
(vii) within 10 days after its occurrence.
(q) DEBT. Without the prior approval of not less than 66 2/3%
of the Directors then in office, the Company shall not enter into any
commitments to incur or guarantee any debt for borrowed money (which for
purposes hereof shall include leases which are capitalized or financed) or
incur any indebtedness which by its terms is convertible into equity or
issued in connection with any options or warrants of the Company in the
aggregate in excess of $100,000.
(r) BOARD REPRESENTATION. The Company shall use its best
efforts to limit the number of persons constituting the Board of Directors to
four and to fill the vacancy on the Board of Directors existing as of the
Closing with a nominee named by DSV Partners. So long as each of Centocor
Delaware, Inc., the Chancellor Investors (as hereinafter defined) and DSV
Partners shall own at least 20% of the issued and outstanding Common Stock
and Securities, each shall have the right to nominate one person to the
Company's Board of Directors.
(s) INSURANCE. The Company shall obtain key-man life
insurance on Xxxxxxx X. Xxxxxxxx, Xx., Ph.D. in an amount not less than
$1,000,000 not more than 30 days after the date hereof. The Company shall
keep its insurable properties insured at all times to such extent and against
such risks, including fire, business interruption, and other risks insured
against by extended coverage, as is customary with companies of comparable
size and financial condition in the same or similar businesses; maintain in
full force and effect product liability insurance and
22
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by the Company, in such amount
as the Company shall reasonably deem necessary; and maintain workers'
compensation insurance, key-man life insurance on Xxxxxxx X. Xxxxxxxx, Xx.,
Ph.D in an amount not less than $1,000,000 and such other insurance as may be
required by law.
(t) OFFICER COMPENSATION. All compensation paid to the
president, treasurer, controller, secretary and all vice-presidents of the
Company, whether as salary, fringe benefits, stock bonuses or otherwise, as
currently in effect is hereby approved by the Investors. After the Closing
Date, all such compensation shall be determined by the Compensation Committee
of the Board of Directors, the members of which Committee shall initially be
Xxxxxxx X. Xxxxxxxx, Xx. and Xxxxxx Xxxxxxx. Upon the election of an
additional director to the Board of Directors of the Company who is not
affiliated with the Company, such person shall also be appointed to the
Compensation Committee.
(u) NON-DISCLOSURE AND PATENT AND INVENTION ASSIGNMENT
AGREEMENTS. The Company shall request each current employee of the Company,
within 30 days of the date hereof, and shall cause each person who becomes an
employee of the Company subsequent to the date hereof, and who shall have or
be proposed to have access to confidential or proprietary information of the
Company, to execute an agreement relating to matters of non-disclosure,
proprietary information and patent assignment substantially in the form
attached hereto as Exhibit 4(r)(iii) (which reflects the current Apollon form
of Agreement relating thereto) and such executed agreements shall not be
modified or amended in any respect without the prior written consent of a
majority of the holders of Shares.
(v) MEETINGS OF THE BOARD OF DIRECTORS. The Company shall
call, and use its best efforts to have, regular meetings of the Board of
Directors not less often than quarterly. The Company shall pay all
reasonable travel expenses and other out-of-pocket disbursements incurred by
a Director in connection with his attending such meeting. In addition, so
long as the Chancellor Investors shall own at least 20% of the issued and
outstanding Securities, the Company shall give notice of all meetings of the
Board of Directors to a designee of Chancellor Capital Management, Inc. at
the same time it gives such notice to the members of its Board of Directors
and shall allow such designee to attend all meetings of its Board of
Directors in a non-voting observer capacity and shall give such designee all
materials provided to its directors at such meetings; provided, however, that
such designee shall agree to hold in confidence and
23
trust and to act in a fiduciary manner with respect to all information so
provided and sign a non-disclosure agreement if so requested (except that
such designee may disclose such information to agents of Chancellor Capital
Management, Inc. who agree in writing to be bound by the non-disclosure
obligations hereof). Such designee may be changed at any time upon notice to
the Company by Chancellor Capital Management, Inc. All reasonable travel and
other out-of-pocket disbursements incurred by such designee in attending such
meetings shall be borne by the Company.
(w) REGISTRATION RIGHTS. In the event the Company makes an
offering of its securities subsequent to the Closing, it shall not grant
registration rights that are senior in any respect to the registration rights
granted to the Investors pursuant to Section 7 hereof; provided, however,
that the Company shall have the right to grant registration rights on a PARI
PASSU basis to the registration rights granted in Section 7 hereof.
(x) ADDITIONAL NEGATIVE COVENANTS. Without the approval by
majority vote of the Directors, the Company will not directly or indirectly:
(i) RELATED TRANSACTIONS. Except for employment
arrangements with its officers, enter into any agreement or understanding,
whether written or oral, with an officer, director or shareholder of the
Company or any entity in which such officer, director or shareholder has a
ten percent (10%) ownership interest or is otherwise deemed to be an
affiliate pursuant to Rule 501(b) of the Securities Act for the provision
of services or the purchase of products. All such Related Transactions
shall be conducted only on an arm's length basis and on terms no less
favorable to the Company than could be obtained from non-related persons.
(ii) AMENDMENTS TO ARTICLES OF INCORPORATION. Take any
action or to cause any amendment, alteration or repeal of any provisions of
the Amended Articles or Bylaws.
(iii) DISSOLUTION OR LIQUIDATION. Voluntarily dissolve,
liquidate or wind-up or carry out any partial liquidation or distribution.
Section 7. REGISTRATION OF COMMON STOCK.
(a) DEMAND REGISTRATION. Upon the written request of one or
more record holders of Securities, which request will state the intended method
of disposition by such
24
holders and will request that the Company effect the registration under the
Securities Act of all or part of the Registerable Common Stock (as
hereinafter defined) of such holders, the Company will, within 10 days after
receipt of such request, give written notice of such requested registration
to all registered holders of Securities, and thereupon (except as expressly
provided herein) will use its best efforts to effect the registration
("Demand Registration") under the Securities Act of (x) the shares of
Registerable Common Stock included in the initial request for registration
(for disposition in accordance with the intended method of disposition stated
in such request) and (y) all other shares of Registerable Common Stock the
holders of which have made written request to the Company for registration
thereof within 30 days after the receipt of such written notice from the
Company, provided that:
(i) the Company shall be required to effect only two Demand
Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Securities outstanding at
the time of the request; PROVIDED that the Company shall not be required to
effect more than one registration during any one year period pursuant to
this paragraph 7(a) (except that, upon request of any holder of Securities
(regardless of the number of Securities held by such holder), the Company,
if it is then qualified to do so, shall be required to effect up to four
registrations on Form S-3, or a similar short form registration statement,
which registrations (hereinafter referred to as "Short Form Registrations")
shall not be counted for purposes of this subparagraph 7(a)(i) as the
Demand Registration which the Company is required to effect);
(ii) if the holders of Registerable Common Stock who
initiated the request for registration intend to sell their Registerable
Common Stock by means of an underwriting (whether on a "best efforts" or a
"firm commitment" basis), they shall so advise the Company as part of their
request, and the Company shall include such information in the notice to
the other holders of Securities. In that event, the other holders of
Securities shall have the right to include their shares of Registerable
Common Stock in the underwriting (unless otherwise mutually agreed by a
majority in interest of the holders of the Securities). The managing
underwriter for such offering shall be selected by the Board of Directors
of the Company. Each such holder agrees, with respect to an underwritten
public offering which occurs following the Closing Date, by its acquisition
of Securities not to effect any public sale or distribution of such
Securities or Registerable Common
25
Stock (other than as part of such underwritten public offering) during
such period, if any, not to exceed 120 days, as shall reasonably be
requested by any underwriter;
(iii) the Company shall not include and shall not permit
third parties to include additional securities in a Demand Registration
without the consent of the holders of a majority of the shares of
Registerable Common Stock included in such Demand Registration;
(iv) if a Demand Registration under this paragraph 7(a) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock requested to be included in such registration
exceeds the amount of such Registerable Common Stock which can be
successfully sold in such offering, the Company will nevertheless include
in such registration, prior to the inclusion of any securities which are
not Registerable Common Stock (notwithstanding any consent obtained in
accordance with subparagraph 7(a)(iii) hereof), the amount of Registerable
Common Stock requested to be included which in the opinion of such
underwriters can be sold, pro rata among the holders of Registerable Common
Stock requesting inclusion on the basis of the number of shares of
Registrable Common Stock of such holders; provided, however, that if the
holders of Registerable Common Stock are unable to include in such offering
at least fifty percent (50%) of the Registerable Common Stock sought to be
registered in a Demand Registration under this paragraph 7(a), the holders
of Securities will be entitled to an additional Demand Registration under
this paragraph;
(v) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 7 a certificate signed by the
President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for a registration statement to be filed as requested, the Company
shall have the right to defer such filing for a period of not more than 120
days after receipt of the initial request for registration under this
paragraph 7(a); provided, however, that the Company may not utilize this
right more than once in any one-year period;
(vi) registrations under this paragraph 7(a) will be on a
form permitted by the rules and regulations of the Commission selected by
the underwriters if the Demand Registration is in connection with an
underwritten public offering or otherwise by the Company; and
26
(vii) notwithstanding anything else contained herein the
Company will not be required to effect a Demand Registration pursuant to
this paragraph 7(a) unless the aggregate number of shares of Common Stock
to be registered exceeds 20% of the shares of Common Stock then held by the
holders of the Securities or issuable to such holders upon conversion of
the Shares.
(b) INCIDENTAL REGISTRATIONS.
(i) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to paragraph
7(a) hereof), whether of its own accord or at the demand of any holder of
such securities pursuant to an agreement with respect to the registration
thereof (provided such agreement does not prohibit third parties from
including additional securities in such registration), and if the form of
registration statement proposed to be used may be used for the registration
of Registerable Common Stock, the Company will give notice to all holders
of record of Securities not less than 5 days nor more than 30 days prior to
the filing of such registration statement of its intention to proceed with
the proposed registration (the "Incidental Registration"), and, upon the
written request of any such holder made within 5 days after the receipt of
any such notice (which request will specify the Registerable Common Stock
intended to be disposed of by such holder and state the intended method of
disposition thereof), the Company will use its best efforts to cause all
Registerable Common Stock as to which registration has been requested to be
registered under the Securities Act, provided that if such registration is
in connection with an underwritten public offering, such holder's
Registerable Common Stock to be included in such registration shall be
offered upon the same terms and conditions as apply to any other securities
included in such registration. Notwithstanding anything contained in this
Section 7(b) to the contrary, the Company shall have no obligation to cause
Registerable Common Stock to be registered with respect to any Investor
whose Registerable Common Stock shall be eligible for resale under Rule
144(k) of the Securities Act.
(ii) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in
such registration (whether by the Company, the holders of registration
rights pursuant to subparagraph
27
7(b)(i) or other holders of its securities pursuant to any other rights
granted by the Company to demand inclusion of any such securities in such
registration) exceeds the amount of such securities which can be
successfully sold in such offering, the Company will include in such
registration the amount of securities requested to be included which in
the opinion of such underwriters can be sold, in the following order (A)
first, all of the securities the Company proposes to sell, (B) second, all
of the Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the
number of shares of Registrable Common Stock then owned by such holders,
and (C) third, any other securities requested to be included in such
registration, pro rata among the holders thereof on the basis of the
amount of such securities then owned by such holders.
(iii) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of securities requested to be included in such registration (whether by
such holders, by holders of registration rights pursuant to subparagraph
7(b)(i) or by holders of its securities pursuant to any other rights
granted by the Company to demand inclusion of securities in such
registration) exceeds the amount of such securities which can be sold in
such offering, the Company will include in such registration the amount of
securities requested to be included which in the opinion of such
underwriters can be sold, in the following order (A) first, all of the
securities requested to be included by holders demanding or requesting such
registration, (B) second, all of the Registerable Common Stock requested to
be included in such registration, pro rata among the holders thereof on the
basis of the number of shares of Registrable Common Stock then owned by
such holders, and (C) third, any other securities requested to be included
in such registration, pro rata among the holders thereof on the basis of
the amount of such securities then owned by such holders.
(c) REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registerable Common Stock under the Securities Act as provided in this
Section 7, the Company will, as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement with respect to such Registerable
28
Common Stock and use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to cause such
registration statement to become effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than six months or such
shorter period in which the disposition of all securities in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement shall be completed, and to comply
with the provisions of the Securities Act (to the extent applicable to the
Company) with respect to such dispositions;
(iii) furnish to each seller of such Registerable Common
Stock such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request, in order to facilitate the disposition of
the Registerable Common Stock owned by such seller;
(iv) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or
qualify such Registerable Common Stock covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests, and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registerable Common Stock owned by such seller, except that the Company
will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not,
but for the requirements of this subparagraph 7(c)(iv) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(v) provide a transfer agent and registrar for all such
Registerable Common Stock covered by such registration statement not later
than the effective date of such registration statement;
29
(vi) notify each seller of such Registerable Common Stock at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registerable Common
Stock, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact required to be stated therein or necessary
to make the statements therein not misleading;
(vii) use its best efforts to cause all such Registerable
Common Stock to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(viii) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort
letters in such transactions;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as reasonably required in order to expedite or facilitate the disposition
of such Registerable Common Stock; and
(x) make available for inspection by any seller of
Registerable Common Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by any such seller and/or representative of such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
(d) REGISTRATION AND SELLING EXPENSES.
(i) All expenses incurred by the Company in connection with
the Company's performance of or compliance with this Section 7, including,
without limitation (A) all
30
registration and filing fees (including all expenses incident to filing
with the National Association of Securities Dealers, Inc.), (B) blue sky
fees and expenses, (C) all printing expenses and (D) all fees and
disbursements of counsel and accountants for the Company (including the
expenses of any audit of financial statements), retained by the Company
(all such expenses being herein called "Registration Expenses"), will be
paid by the Company except as otherwise expressly provided in this
paragraph 7(d).
(ii) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees
performing legal, accounting or other duties in connection therewith and
expenses of audits of year-end financial statements), and the expenses and
fees for listing the securities to be registered on one or more securities
exchanges on which similar securities issued by the Company are then
listed.
(iii) The Company shall bear the Registration Expenses of
each Demand Registration, each Incidental Registration and each Short Form
Registration hereunder.
(iv) Notwithstanding any of the foregoing, all underwriting
discounts, selling commissions and stock transfer taxes applicable to sales
of Registerable Common Stock in connection with any Demand Registration,
Incidental Registration or Short Form Registration shall be borne by all
persons who are selling Registerable Common Stock pursuant to such
Registration Statement in proportion to the dollar value of the securities
being sold by each such person.
(v) All fees and expenses required to be paid by the
holders of Registerable Common Stock pursuant to subparagraph 7(d)(iv) in
connection with any Incidental Registration hereunder shall be borne by
said holders in proportion to the dollar value of the securities of such
holder covered by such Incidental Registration.
(e) OTHER CONDITIONS RELATING TO REGISTRATIONS. The Company
shall not be required to furnish any audited financial statements at the
request of any holder of Registerable Common Stock other than those
statements customarily prepared at the end of its fiscal year, unless (i) the
requesting holder of Registerable Common Stock shall agree to reimburse the
Company for the out-of-pocket costs incurred by the Company in the
preparation of such other audited financial statements or (ii) such other
audited financial statements shall be required by the
31
Commission as a condition to declaring a Demand Registration effective under
the Securities Act.
(f) OTHER PUBLIC SALES AND REGISTRATIONS. The Company agrees
(i) that if it has previously filed a registration statement with respect to
Registerable Common Stock in connection with a Demand Registration or
Incidental Registration hereunder, and if such previous registration has not
been withdrawn or abandoned, the Company will not file or cause to become
effective any other registration of any of its securities under the
Securities Act or otherwise effect a public sale or distribution of its
securities (except pursuant to registration on Form S-8 or any successor form
relating to a special offering to the employees or security holders of the
Company or any Subsidiary hereafter formed or acquired), whether on its own
behalf or at the request of any holder of such securities, until at least 60
days have elapsed after the effective date of such previous registration; and
(ii) to cause each holder of securities purchased from the Company any time
after the date of this Agreement (other than in a registered public offering)
to agree not to effect any such public sale or distribution during such 60
day period of any such securities or any securities issuable on the
conversion thereof or in redemption or exchange therefor. The foregoing
60-day limitation, however, shall not preclude the Company from proceeding
with a registration statement requested by a holder of securities with
"demand" registration rights who requests registration prior to the time a
registered holder of Securities requests a registration pursuant to paragraph
7(a).
(g) TRANSFEREES OF SECURITIES. Notwithstanding anything else
set forth in this Section 7, no person to whom Securities are transferred
shall have any rights under this Section 7 as a holder of such Securities
unless (i) such person (A) is a partner of any Investor which is a
partnership or a retired partner of such partnership who retires after the
date hereof, (B) is a family member of or trust for the benefit of any
Investor, or (C) acquires at least 100,000 shares of Registerable Common
Stock, (ii) such person agrees to be bound by the terms and conditions of
this Agreement and (iii) the Company is given prompt written notice of such
transfer.
(h) INDEMNIFICATION.
(i) The Company hereby agrees to indemnify, to the extent
permitted by law, each holder of Registerable Common Stock, its officers
and directors, if any, and each person, if any, who controls such holder
within the meaning of the Securities Act, against all losses, claims,
damages, liabilities and expenses under the Securities Act, applicable
state securities laws, common law or otherwise
32
(including, as incurred, legal and other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
except to the extent limited by subparagraph 7(h)(iii) below) caused by
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (and as amended or
supplemented if the Company has furnished any amendments or supplements
thereto) or any preliminary prospectus, which registration statement,
prospectus or preliminary prospectus shall be prepared in connection with
a Demand Registration or Incidental Registration, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused
by any untrue statement or alleged untrue statement contained in or by any
omission or alleged omission from information furnished in writing to the
Company by such holder in connection with a Demand Registration or
Incidental Registration, provided the Company will not be liable pursuant
to this paragraph 7(h) if such losses, claims, damages, liabilities or
expenses have been caused by any selling security holder's failure to
deliver a copy of the registration statement or prospectus, or any
amendments or supplements thereto, after the Company has furnished such
holder with a sufficient amount of copies of the same.
(ii) In connection with any registration statement in which
a holder of Registerable Common Stock is participating, each such holder
shall furnish to the Company in writing such information as is reasonably
requested by the Company for use in any such registration statement or
prospectus and shall indemnify, to the extent permitted by law, the
Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses under the Securities Act,
applicable state securities laws, common law or otherwise (including, as
incurred, legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by subparagraph 7(h)(iii) below) caused by any untrue statement or
alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the
extent such losses, claims, damages, liabilities or expenses are caused by
an untrue statement or alleged untrue statement contained in or by an
omission or alleged omission
33
from information so furnished in writing by such holder in connection
with the Demand Registration or Incidental Registration. If the offering
pursuant to any such registration is made through underwriters, each such
holder agrees to enter into an underwriting agreement in customary form
with such underwriters and to indemnify such underwriters, their officers
and directors, if any, and each person who controls such underwriters
within the meaning of the Securities Act to the same extent as hereinabove
provided with respect to indemnification by such holder of the Company.
Notwithstanding the foregoing, no such holder of Registerable Common Stock
shall be liable under this subparagraph 7(h)(ii) for any amounts exceeding
the product of (A) the offering price per share of Registerable Common
Stock pursuant to the registration statement in which such holder is
participating (less any underwriting discounts or commissions which reduce
the amount such holder receives), multiplied by (B) the number of shares
of Registerable Common Stock being sold by such holder pursuant to such
registration statement.
(iii) Promptly after receipt by an indemnified party under
subparagraph 7(h)(i) or subparagraph 7(h)(ii) of notice of the commencement
of any action or proceeding, such indemnified party will, if a claim in
respect thereof is or is to be made against the indemnifying party under
such subparagraph, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under such subparagraph. In case any such action or
proceeding is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and, to the extent that it wishes,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under such subparagraph
for any legal or any other expenses subsequently incurred by such
indemnified party in connection with the defense thereof (other than
reasonable costs of investigation) unless incurred at the written request
of the indemnifying party. Notwithstanding the above, the indemnified
party will have the right to employ counsel of its own choice in any such
action or proceeding if the indemnified party has reasonably concluded that
there may be defenses available to it which are different from or
34
additional to those of the indemnifying party, or counsel to the
indemnified party is of the opinion that it would not be desirable for the
same counsel to represent both the indemnifying party and the indemnified
party because such representation might result in a conflict of interest
(in either of which cases the indemnifying party will not have the right to
assume the defense of any such action or proceeding on behalf of the
indemnified party or parties and such legal and other expenses will be
borne by the indemnifying party). An indemnifying party will not be liable
to any indemnified party for any settlement of any such action or
proceeding effected without the consent of such indemnifying party.
(iv) If the indemnification provided for in subparagraph
7(h)(i) or subparagraph 7(h)(ii) is unavailable under applicable law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the holders of
Registerable Common Stock on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities,
as well as any other relevant equitable considerations. The relative fault
of the Company on the one hand and of the holders of Registerable Common
Stock on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company or by the holders of Registerable Common Stock and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include, subject to the limitations
set forth in subparagraph 7(h)(iii), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.
(v) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of
35
any action or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the "contributing
party"), notify the contributing party of the commencement thereof; but
the omission so to notify the contributing party will not relieve it from
any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit, or proceeding is
brought against any party, and such party notifies a contributing party of
the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing
party similarly notified. No party shall be liable for contribution with
regard to the settlement of any action or proceeding effected without its
consent.
(i) CONVERSION OF PREFERRED STOCK. Any request for a Demand
Registration or Incidental Registration with respect to Registerable Common
Stock issuable upon the conversion of Shares will provide in the intended
method of disposition accompanying such request that conversion of Shares
into Common Stock in accordance with the terms thereof will be undertaken
promptly after a registration statement has become effective or the sale
thereof to underwriters has been consummated so that no Shares will be
distributed to the public under such registration statement.
(j) AMENDMENT OF SECTION 7. Any provision of this Section 7
may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and holders of record of a majority
of the Securities, voting as a class, outstanding as of a record date between
10 and 90 days prior to the effective date of such amendment or waiver. Any
amendment or waiver effected in accordance with this paragraph 7(j) shall be
binding upon each holder of Securities at the time outstanding (including
securities into which such Securities are convertible), each future holder of
all such Securities, and the Company.
Section 8. CERTAIN DEFINITIONS.
For the purposes of this Agreement the following terms have the
respective meanings set forth below:
(a) "BUSINESS PLAN" means the Business Plan of the Company
dated March 1992.
36
(b) "CHANCELLOR INVESTORS" means those Investors set forth on
the second and third signature pages of this Agreement.
(c) "COMMISSION" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
(d) "COMMON STOCK" means the Company's Common Stock, par value
$.01 per share.
(e) "ERISA" means, as of any given time, the Employee
Retirement Income Security Act of 1974, as amended.
(f) "EXCHANGE ACT" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
(g) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles, consistently applied; and any accounting
determination or calculation required to be made under this Agreement shall
be made (unless otherwise provided) in accordance with generally accepted
accounting principles, consistently applied.
(h) "REGISTERABLE COMMON STOCK" means any Common Stock issued
or issuable upon conversion of the Shares.
(i) "SECURITIES" means the Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not
include any such Shares or Common Stock sold in any public offering or in any
sale pursuant to Rule 144 under the Securities Act. For purposes of
computing at any date any percentage of Securities required in connection
with any action taken or to be taken under this Agreement, the Shares shall
be deemed to equal the number of shares of Common Stock issuable at such date
upon conversion thereof.
(j) "SECURITIES ACT" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law then in force.
(k) "SUBSIDIARY" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of
which are, at the time as of which any determination is being made, owned of
record or beneficially by the Company, directly or indirectly, through any
Subsidiary or otherwise.
(l) "TERMINATING PUBLIC OFFERING"
means an underwritten public offering (whether on a "best efforts" or a
37
"firm commitment" basis) for the account of the Company of Common Stock or
securities convertible into or exchangeable for shares of Common Stock, where
the aggregate sales price of the securities included in such sale (after
deduction of any underwriting commissions, discounts and concessions) is at
least $12,500,000 and the price per share of such securities is at least
$3.33.
Section 9. MISCELLANEOUS.
(a) EXHIBITS. The Exhibits attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by
reference and shall have the same force and effect as if set forth in full in
the main body of this Agreement.
(b) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any
other writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the date of Closing and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investors or on their behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for
the obligations of the Company under Section 7 hereof), including the
obligations of the Company under Section 6 hereof, will cease and be of no
further force and effect upon the closing of a Terminating Public Offering.
(c) ASSIGNS; PARTIES IN INTEREST. This Agreement shall bind
and inure to the benefit of the Company, the Investors, each other person who
shall become a registered holder of any certificate representing the
Securities and the respective successors and assigns of the Company, the
Investors and each such other person. The parties hereto understand and
agree that DSV Partners IV ("DSV") is a limited partnership formed under the
laws of the State of New Jersey and that the limited partners of DSV will not
be liable for any liabilities of DSV, nor will they be required to perform
any of the obligations of DSV, pursuant to the Agreement and that neither the
Company, nor the shareholders or officers of the Company, will seek to
enforce such liabilities and/or obligations or otherwise seek relief with
respect thereto against such limited partners.
(d) GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced
38
in accordance with the internal laws of said Commonwealth, and without giving
effect to conflicts of laws.
(e) INDEMNIFICATION. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and each Investor shall, with respect to the representations,
warranties, covenants and agreements made by such Investor, indemnify, defend
and hold the Investors or the Company, as the case may be, harmless against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including legal and accounting fees and expenses),
arising from the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements of the Company or such Investor, as the
case may be. Without limiting the generality of the foregoing, the Investors
or the Company, as the case may be, shall be deemed to have suffered
liability, loss or damage as a result of the untruth, inaccuracy or breach of
any such representations, warranties, covenants or agreements if such
liability, loss or damage shall be suffered by the Company as a result of, or
in connection with, such untruth, inaccuracy or breach of any facts or
circumstances constituting such untruth, inaccuracy or breach.
(f) LIABILITY AND INDEMNIFICATION. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as amended from
time to time, indemnify all persons whom it may indemnify thereunder. To the
fullest extent permitted by the Business Corporation Law of the Commonwealth
of Pennsylvania, as amended from time to time, a director of the Company
shall not be liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director.
(g) REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Company or an Investor, an Investor or the Company, as the case may be, may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a
result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Agreement. An Investor or the
Company acting pursuant to this Paragraph 9(g) shall be indemnified against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including legal and accounting fees and expenses)
in accordance with Paragraph 9(e).
(h) EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon
surrender by an Investor to the Company of any certificate representing
shares of Series A Convertible
39
Preferred Stock (or Common Stock issuable upon conversion thereof) purchased
or acquired hereunder, the Company at its expense will issue in exchange
therefor, and deliver to such Investor, a new certificate or certificates
representing such shares, in such denominations as may be requested by the
Investors. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing any
Securities purchased or acquired by the Investors hereunder, and in case of
such loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Company at its expense
will issue and deliver to the Investors a new certificate for such Series A
Preferred Stock (or Common Stock issuable upon conversion thereof) of like
tenor, in lieu of such lost, stolen or mutilated certificate.
(i) NOTICES. All communications provided for in this
Agreement shall be in writing and shall be sent to each party as follows:
TO THE COMPANY TO INVESTORS
-------------- -------------
Xxxxxxx X. Xxxxxxxx, Xx., Ph.D. At the addresses set
Apollon, Inc. forth below their
000 Xxxxx Xxxxxx Xxxxxxx respective names on
Xxxxxxx, XX 00000 Exhibit 1(a) hereto.
FAX: (000) 000-0000
With a Copy To: With a copy to:
Xxxxxx Xxxxxxx, Xx. Esq. Xxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxx Xxxxxxx Dechert Price & Xxxxxx
& Ingersoll 214 Carnegie Center
0000 Xxxxxx Xxxxxx Xxxxx 000
Xxxxxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
FAX: (000) 000-0000 FAX: (000) 000-0000
and
Xxxxx X. Toner, Esq.
Corporate Counsel and
Secretary
Centocor, Inc.
000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
FAX: (000) 000-0000
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (i) physical
40
delivery, (ii) if given by facsimile transmission, when such facsimile is
transmitted to the telephone number specified in this Agreement and telephone
confirmation of receipt thereof is received, (iii) three days after mailing
by prepaid first class mail and (iv) two days after mailing by prepaid
overnight or express mail.
(j) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties regarding the transactions contemplated herein
and may not be modified or amended except by written agreement of all parties
hereto.
(k) HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
interpretation of this Agreement.
(l) PRONOUNS. If any Investor is an individual, neuter
pronouns used in reference to Investors shall be deemed to refer to
individuals as well as corporations or partnerships.
(m) EFFECT OF STOCK SPLITS, ETC. Whenever any rights under
this Agreement are available only when at least a specified minimum number or
percentage of Shares or price per share is involved, such number shall be
appropriately adjusted to reflect any stock split, stock dividend,
combination of securities into a smaller number of securities or
reclassification of stock.
(n) AMENDMENTS. This Agreement may be amended only by an
instrument in writing, signed by the Company and by Investors holding, on the
date of such amendment, a majority of the Securities held of record on such
date by all of the Investors.
(o) SHARES HELD BY AFFILIATES. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares is involved, each Investor shall be deemed to own any
Securities that are owned by any of the partners of such Investor or any
retired partners of such Investor who retire after the date hereof or the
estate of any such partner or retired partner or the spouse, lineal
descendants, ancestors or any Affiliates of such Investor or any such partner
or retired partner.
(p) COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which shall be deemed to be one and the same
instrument.
(q) DISCLOSURES ELSEWHERE. No representation or warranty
contained in this Agreement or in any exhibit, schedule,
41
certificate or other document delivered pursuant hereto shall be considered
to be breached due to the omission of matters required to be disclosed
pursuant to the terms of this Agreement if the matter or matters giving rise
to any such breach or omission is or are disclosed anywhere in this Agreement
or in any of the exhibits, schedules, certificates or other documents
delivered pursuant hereto.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /S/ XXXXXXX X. XXXXXXXX, XX.
----------------------------
Xxxxxxx X. Xxxxxxxx, Xx.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: ______________________
Xxxxxx Xxxxxxx,
General Partner
Address: 000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
42
CENTOCOR DELAWARE, INC.
By: /S/ H J P SCHOEMAKER
----------------------
Name: Xxxxxx X.X. Xxxxxxxxxx
Title: Chairman
Address: 0000 X. Xxxxxx Xxxxxx
Xxxxx 0000
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Fax: c/o Centocor, Inc.
(000) 000-0000
XXXX & CO FOR CHANCELLOR VENTURE CAPITAL,
L.P.
By:___________________________
Name:
Title:
Address: c/o Chancellor Capital Management,
Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By:___________________________
Name:
Title:
Address: c/o Chancellor Capital Management,
Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
43
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: ----------------------
Name
Title
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /S/ XXXXXX XXXXXXX
---------------------
Xxxxxx Xxxxxxx,
General Partner
Address: 000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
CENTOCOR, INC.
By: ----------------------
Name:
Title:
Address: 000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention:
Fax:
42
XXXX & CO FOR CHANCELLOR VENTURE
CAPITAL, L.P.
By: /S/ XXXXX X. XXXXX
-----------------------
Name: XXXXX X. XXXXX
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: ------------------------------
Name
Title:
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
FOCUS & CO
By: /S/ XXXXX X. XXXXX
-----------------------
Name: XXXXX X. XXXXX
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
XXXX & CO FOR CHANCELLOR VENTURE
CAPITAL, L.P.
By:--------------------------
Name: XXXXX X. XXXXX
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: /S/ [ILLEGIBLE SIGNATURE]
-------------------------
Name
Title: Vice President
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
FOCUS & CO
By: -----------------------
Name: XXXXX X. XXXXX
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: /S/ [ILLEGIBLE SIGNATURE]
--------------------------
Name
Title: Vice President
Address: c/o Chancellor Capital
Management, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
EXHIBITS
Exhibit 1(a) - Investors, Shares to be Purchased and Consideration
Exhibit 2(a) - Form of Opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx
Exhibit 2(d)(i) - Amended Articles
Exhibit 2(d)(ii) - Statement Affecting Class or Series of Shares
Exhibit 2(j) - Purchasers of Common Stock
Exhibit 2(k) - Form of Shareholders' Agreement
Exhibit 2(l) - Number of Shares of Common Stock Purchased by Centocor
Exhibit 2(m) - Form of Marketing and Development Agreement
Exhibit 2(n) - Form of Facilities Use Agreement
Exhibit 2(o) - Shareholder Purchase Agreement
Exhibit 4(b)(i) - Authorized Capital Stock
Exhibit 4(b)(ii) - Shareholders of the Company
Exhibit 4(b)(iii) - Warrants, Options or Agreements
Exhibit 4(h)(i) - Consents
Exhibit 4(h)(ii) - Offers of Securities
Exhibit 4(n) - Related Transactions
Exhibit 4(r)(i) - Intellectual Property
Exhibit 4(r)(ii) - Additional Intellectual Property Required
Exhibit 4(r)(iii) - Form of Confidentiality Agreement
Exhibit 4(r)(iv) - Confidentiality Agreements Restricting Employees
Exhibit 4(s) - Material Contracts
Exhibit 4(t) - Officers and Employees; Compensation Matters
D105213.A(BF)
EXHIBIT 1(a)
SCHEDULE OF INVESTORS
NUMBER OF AGGREGATE
NAME SHARES PURCHASED PURCHASE PRICE
---- ---------------- --------------
DSV Partners IV, L.P. 1,500,000 $2,500,050
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Centocor Delaware, Inc. 900,000 $1,500,030
0000 X. Xxxxxx Xxxxxx
Xxxxx 0000
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Xxxx & Co. for Chancellor 1,140,000 $1,900,038
Venture Capital, L.P.
Continental Bank, National 120,000 $ 200,004
Association as Custodian
for Municipal Employees
Annuity & Benefit Fund
of Chicago (as Directed
by Chancellor Capital
Management, Inc.
Investment Manager)
Focus & Co. 120,000 $ 200,004
Continental Bank, National 120,000 $ 200,004
Association as Custodian
(at the Direction of
Chancellor Capital
Management, Inc., as
Investment Manager) for
the Policemen's Annuity
and Benefit Fund of
Chicago
