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EXHIBIT 10.12
AURORA BIOSCIENCES CORPORATION
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SERIES D PREFERRED STOCK PURCHASE AGREEMENT
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DECEMBER 27, 1996
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SECTION 1 Sale of Shares....................................................1
1.2 Closing Date.......................................................1
1.3 Delivery...........................................................2
SECTION 2 Representations and Warranties of the Company.....................2
2.1 Organization and Standing..........................................2
2.2 Corporate Power....................................................3
2.3 Subsidiaries.......................................................3
2.4 Capitalization.....................................................3
2.5 Authorization......................................................4
2.6 Contracts and Other Commitments....................................5
2.7 Compliance with Other Instruments, etc.............................5
2.8 Litigation, etc....................................................5
2.9 Registration Rights................................................6
2.10 Permits...........................................................6
2.11 Governmental Consent, etc.........................................6
2.12 Disclosure........................................................6
2.13 Offering..........................................................7
2.14 Liabilities.......................................................7
2.15 Changes...........................................................7
2.16 Title to Properties and Assets; Liens, Leases, etc................9
2.17 Patents and Trademarks............................................9
2.18 Tax Returns; Taxes...............................................10
2.19 Employees........................................................10
2.20 No Defaults......................................................11
2.21 Insurance........................................................11
2.22 Brokers or Finders...............................................12
2.23 Environmental and Safety Laws....................................12
2.24 No Dividends.....................................................12
2.25 Employee Benefit Plan Obligations................................12
2.26 Qualification as a Qualified Small Business......................12
2.27 Financial Statements.............................................12
2.28 Transactions with Affiliates.....................................12
2.29 Proprietary Information and Inventions Agreements................13
2.30 U.S. Real Property Holding Corporation...........................13
SECTION 3 Investment Representations.......................................13
3.1 Power and Authority...............................................13
3.2 Due Execution.....................................................13
3.3 Experience; Accredited Investor...................................14
3.4 Investment........................................................14
3.5 Rule 144..........................................................14
3.6 No Public Market..................................................14
3.7 Disclosure of Information.........................................14
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SECTION 4 Conditions of the Purchaser's Obligations at Closing.............15
4.1 Representations and Warranties....................................15
4.2 Covenants.........................................................15
4.3 No Material Adverse Change........................................15
4.4 Securities Laws...................................................15
4.5 Compliance Certificate............................................15
4.6 Opinion of Counsel................................................15
4.7 Investors' Rights Agreement.......................................15
4.8 Proceedings and Documents.........................................15
4.9 Supporting Documents..............................................16
4.10 Management Rights Agreements.....................................16
4.11 Voting Agreement.................................................16
4.12 Amendment to Employment Agreement................................17
4.13 Charter..........................................................17
4.14 Bylaws...........................................................17
4.14 Proprietary Information Agreements...............................17
4.15 Election of Directors............................................17
4.16 Certificate as to Disqualified Persons...........................17
4.18 Fees of Purchasers' Counsel......................................17
SECTION 5 Conditions of the Company's Obligations at Closing...............18
5.1 Representations and Warranties....................................18
5.2 Covenants.........................................................18
SECTION 6 Miscellaneous....................................................18
6.1 Governing Law.....................................................18
6.2 Successors and Assigns............................................18
6.3 Entire Agreement..................................................18
6.4 Notices, etc......................................................18
6.5 Expenses..........................................................19
6.6 Counterparts......................................................19
6.7 Severability......................................................19
6.8 Survival of Agreements............................................19
6.9 Brokerage.........................................................19
6.10 Amendments.......................................................20
EXHIBIT
A RESTATED CERTIFICATE OF INCORPORATION
B SCHEDULE OF EXCEPTIONS
C INVESTORS' RIGHTS AGREEMENT
D FORM OF VOTING AGREEMENT
E FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
F FORM OF LEGAL OPINION OF COMPANY COUNSEL
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AURORA BIOSCIENCES CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 27, 1996 between Aurora Biosciences
Corporation, a Delaware corporation (the "COMPANY"), with its principal office
at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the purchasers
listed on Schedule of Purchasers attached hereto (the "SCHEDULE OF PURCHASERS")
who execute this Agreement (each a "Purchaser," and collectively, the
"PURCHASERS").
WHEREAS, the Company has authorized the issuance and sale of up to 572,536
shares of its Series D Preferred Stock (the "SHARES") having the rights,
preferences, privileges and restrictions set forth in the Restated Certificate
of Incorporation of the Company in the form attached to this Agreement as
Exhibit A (the "RESTATED CERTIFICATE").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
SECTION 1
SALE OF SHARES
1.1 SALE OF SHARES. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined) each Purchaser (severally but not jointly)
agrees to purchase from the Company, and the Company agrees to sell and issue,
at a purchase price per share of $3.60, that number of Shares as is set forth
opposite such Purchaser's name on the Schedule of Purchasers.
CLOSING DATE. The purchase and sale of the Shares hereunder (the
"CLOSING") shall take place at the law offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date of this
Agreement or at such other time upon which the Company and the Purchasers shall
agree.
1.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser a
certificate representing the Shares being purchased by such Purchaser upon
payment of the aggregate purchase price therefor (as set forth opposite each
Purchaser's name on the Schedule of Purchasers) by check payable to the order of
the Company or wire transfer of immediately available funds made payable to the
order of the Company, or any combination of the foregoing.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit B, the Company hereby represents and warrants to the Purchasers as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Delaware
and is in good standing under such laws. The Company has all requisite corporate
power to own and operate its assets and to carry on its business as presently
conducted and as proposed to be conducted. The Company is qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
or where the failure to so qualify would have a Material Adverse Effect. As used
in this Agreement, "Material Adverse Effect" shall mean material adverse effect
on the Company's business as presently conducted or planned to be conducted or
the Company's financial condition or operations.
2.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, the Amended and Restated Investors'
Rights Agreement in substantially the form attached hereto as Exhibit C (the
"AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT") and the Voting Agreement in
substantially the form attached hereto as Exhibit D (the "VOTING AGREEMENT")
(this Agreement, the Investors' Rights Agreement and the Voting Agreement are
hereinafter collectively referred to as the "AGREEMENTS"), to sell and issue the
Shares under this Agreement, to issue the Common Stock issuable upon conversion
of the Shares and to carry out and perform its obligations under the terms of
the Agreements, including all exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own (of record or beneficially) or
control, directly or indirectly, any equity interest in any other corporation,
association or business entity (other than investments in marketable
securities). The Company is not a participant in any joint venture, partnership
or similar arrangement.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, of which 3,574,450 shares will be issued
and outstanding immediately prior to the Closing, and 25,000,000 shares of
Preferred Stock, of which 10,500,000 are designated Series A Preferred Stock,
833,332 are designated Series B Preferred Stock, 800,000 are designated Series C
Preferred Stock and 572,536 are designated Series D Preferred Stock. Immediately
prior to the Closing, 10,239,115 shares of Series A Preferred Stock, 833,332
shares of Series B Preferred Stock and 750,000 shares of Series C Preferred
Stock will be outstanding. No shares of Series D Preferred Stock will be issued
and outstanding immediately prior to the Closing. No other shares of capital
stock or other securities of the Company are outstanding. All such issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable and have been offered, issued, sold and delivered by the
Company in compliance with applicable federal and state securities laws. The
Shares have the rights, preferences and privileges set forth in the Restated
Certificate, and all
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such rights, preferences and privileges are valid, binding and enforceable in
accordance with all applicable laws. The stockholders of record and holders of
subscriptions, warrants, options, convertible securities and other rights to
purchase or otherwise acquire equity securities of the Company, and the number
of shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each are as set
forth in Exhibit B. All of the outstanding shares of stock held by each such
holder are subject to vesting as described in Exhibit B, and the Company has the
right to repurchase unvested shares upon the termination of such holder's
employment or other business relationship with the Company at the original
purchase price per share paid to the Company by such holder. The Company has
reserved 1,000,000 shares of its Common Stock (the "Reserved Shares") for
issuance pursuant to the Company's 1996 Stock Plan. Except for the transactions
contemplated in the Agreements, the conversion privileges of the Company's
Series A, Series B, Series C and Series D Preferred Stock specified in the
Restated Certificate, and except as set forth in Exhibit B, there are no
options, warrants, conversion privileges or other rights or agreements presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company and there is
no commitment by the Company to issue shares, options, warrants, convertible
securities or other rights to purchase or otherwise acquire shares of the
Company's capital stock or other securities of the Company. Except as set forth
in Section 45 of the Company's Bylaws and as contemplated by the Agreements or
as provided for in Exhibit B, to the best of the Company's knowledge, there are
no voting trusts or agreements, stockholders' agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights or proxies
relating to securities of the Company (whether or not the Company is a party
thereto). The Company has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its equity securities.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Shares (and the Common Stock issuable upon
conversion of the Shares) and the performance of the Company's obligations under
the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles and limitations
upon rights to indemnity. This Agreement has been duly executed and delivered by
the Company. The Shares, when issued in compliance with the provisions of this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will be free and clear of all liens, encumbrances or restrictions imposed by or
through the Company. The Common Stock issuable upon conversion of the Shares has
been duly and validly reserved and, when issued in compliance with the
provisions of the Restated Certificate, will be duly and validly issued, fully
paid and nonassessable and will be free and clear of all liens, encumbrances or
restrictions imposed by or through the Company. The issuance
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of the Shares (and the Common Stock issuable upon conversion of the Shares) is
not subject to any preemptive rights, rights of first refusal or similar rights
that have not been waived; provided, however, that the Shares (and the Common
Stock issuable upon conversion of the Shares) are subject to a right of first
refusal as set forth in Section 45 of the Company's Bylaws, and may be subject
to restrictions on transfer under state and/or federal securities laws as set
forth herein.
2.6 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment, or proposed transaction, written or
oral, absolute or contingent, other than contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $100,000 individually or $500,000 in the aggregate. For
the purpose of this paragraph, employment and consulting contracts (including
any severance arrangements), license agreements and any other agreements
relating to the acquisition or disposition of the Company's technology (other
than pursuant to the Company's standard form of Proprietary Information and
Inventions Agreement (the "PROPRIETARY INFORMATION AGREEMENT")) shall not be
considered to be contracts entered into in the ordinary course of business. The
Company is not a party to or bound by any judgment, order, writ or decree
restricting or affecting the development, manufacture or distribution of the
Company's products or services or proposed products or services or limiting or
restricting the Company's right to compete with any person in any respect.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation (with or without the
passage of time or giving of notice or both) of any term of the Restated
Certificate or its Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any material order, statute, rule or regulation applicable
to the Company, other than any of the foregoing such violations that do not
impair the Company's ability to enter into or perform its obligations under the
Agreements or which, either individually or in the aggregate, do not have a
Material Adverse Effect. Entering into and performing the Agreements and the
transactions contemplated thereunder by the Company will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company or its properties or business.
2.8 LITIGATION, ETC. There is neither pending nor, to the Company's
knowledge and belief, threatened any action, suit, proceeding, investigation,
governmental inquiry, or claim, or any basis therefor or threat thereof, whether
or not purportedly on behalf of the Company, to which the Company is or may be
named as a party or its property is or may be subject or, to the Company's
knowledge, to which any officer, key employee, key
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consultant, or principal shareholder of the Company is subject; and the Company
has no knowledge (i) of any unasserted claim, the assertion of which is likely
and which, if asserted, will seek damages, an injunction or other legal,
equitable, monetary or nonmonetary relief, which claim individually or
collectively with other such unasserted claims if granted would have a Material
Adverse Effect, or (ii) that there exists, or there is pending or planned, any
patent, trademark, tradename, invention, device, application or principle, or
any statute, rule, law, regulation, standard or code which would result in a
Material Adverse Effect. There is no pending or, to the Company's knowledge and
belief, threatened claim or litigation against or affecting the Company
contesting, or which if adversely determined might materially impair, its right
to produce, manufacture, sell or use any product, process, method, substance,
part or other material presently produced, manufactured, sold or used or planned
to be produced, manufactured, sold or used by the Company in connection with the
operations of the Company. The Company has no current plans to initiate any
action, suit or proceeding.
2.9 REGISTRATION RIGHTS. Except as set forth in the Amended and Restated
Investors' Rights Agreement, the Company is not under any obligation to register
(as defined in the Amended and Restated Investors' Rights Agreement), and has
not granted any rights to register, any of its presently outstanding securities
or any of its securities that may hereafter be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it and as proposed to be conducted, the lack of which would have a
Material Adverse Effect. The Company is not in default or violation in any
material respect under any of such franchises, permits, licenses, or other
similar authority, and the execution and delivery of the Agreements will not
result in any such default or violation, with or without the passage of time or
giving of notice or both.
2.11 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Shares (and
the Common Stock issuable upon conversion of the Shares) or the consummation of
any other transaction contemplated thereby, except the filing of the Restated
Certificate in the Office of the Secretary of State of the State of Delaware and
the qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
(and the Common Stock issuable upon conversion of the Shares) under the
California Corporate Securities Law, which filing and qualification, if
required, will be accomplished in a timely manner prior to or promptly upon
completion of the Closing.
2.12 DISCLOSURE. The Company has provided each Purchaser with all the
information reasonably available to it without undue expense that such Purchaser
has requested or could reasonably be expected to be material in deciding whether
to purchase
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the Shares. The Agreements and the Exhibits thereto as well as any other
document, certificate, schedule, financial, business or other statement
furnished to such Purchaser by or on behalf of the Company in connection with
the transactions contemplated hereby do not contain any untrue statement of a
material fact and do not omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading.
2.13 OFFERING. Subject to the accuracy of the representations set forth in
Section 3 hereof, the offer, sale and issuance of the Shares pursuant to this
Agreement and the issuance of the Common Stock to be issued upon conversion of
the Shares constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
neither the Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemption.
2.14 LIABILITIES. The Company has no indebtedness for borrowed money that
the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, other than obligations not in excess of $100,000
individually or $500,000 in the aggregate. The Company has not assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other person (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
2.15 CHANGES. Since November 30, 1996, there has not been:
(A) any change in the assets, liabilities, financial condition, or
operating results of the Company except changes in the ordinary course of
business that have not been, in the aggregate, materially adverse;
(B) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(C) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(D) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted);
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(E) to the best of the Company's knowledge, any material change
to a material contract or arrangement by which the Company or any of its
assets is bound or subject;
(F) any material change in any compensation arrangement or
agreement with any employee, consultant, officer, director or shareholder;
(G) any sale, assignment, license or transfer of any patents,
trademarks, copyrights, trade secrets, Proprietary Information (as defined
herein) or other intangible assets;
(H) any resignation or termination of employment of any key officer of
the Company or termination of engagement of any key consultant of the Company;
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer or termination of
engagement of any such consultant;
(I) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;
(J) any mortgage, pledge, transfer of a security interest in, or lien
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(K) any loans or guarantees made by the Company to or for the benefit
of any person, other than travel advances to employees and/or consultants and
other advances to employees and/or consultants made in the ordinary course of
its business;
(L) to the best of the Company's knowledge, any other event or
condition of any character that might, individually or in the aggregate,
materially and adversely affect the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted);
(M) any amount borrowed or any liability (absolute, accrued or
contingent) incurred, or to which the Company has become subject, except
liabilities not in excess of $50,000 individually or $100,000 in the aggregate
and except current liabilities incurred and liabilities under contracts entered
into in the ordinary course of business which have not been, individually or in
the aggregate materially adverse;
(N) any transaction except in the ordinary course of business
or as otherwise contemplated hereby; or
(O) any agreement or commitment by the Company to do any of the
things described in this paragraph 2.15.
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2.16 TITLE TO PROPERTIES AND ASSETS; LIENS, LEASES, ETC. The Company has
good and marketable title to its properties and assets and has good title to all
of its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances that do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and which have not arisen
otherwise than in the ordinary course of business.
Set forth on Exhibit B is a correct and complete list (including the
amount of rents called for and a description of the leased property) of all
material leases (involving more than $100,000 either individually or $500,000 in
the aggregate if such leases are of a similar nature or with the same lessor)
under which the Company is a lessee. The Company enjoys peaceful and undisturbed
possession under all such leases, all of such leases are valid and subsisting
and, except as would not result in a Material Adverse Effect, the Company and,
to the Company's knowledge, each other party to such leases is not in default
thereunder.
2.17 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, applications for each of
the foregoing, trade names, copyrights, trade secrets, information, proprietary
rights and processes (collectively "PROPRIETARY INFORMATION"), or has, or
believes to the best of its knowledge that it has the ability to acquire on
commercially reasonable terms, valid licenses to such Proprietary Information
(as described further on Exhibit B), as necessary for its business as now
conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. The Schedule of Exceptions contains a
complete list of patents and pending patent applications of the Company or of
which the Company is a licensee. There are no outstanding options, licenses, or
agreements of any kind relating to Proprietary Information owned by the Company,
nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, applications
for each of the foregoing, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company is not aware of any impropriety with regard to the granting of any
licenses of Proprietary Information to or from the Company, and no claim is
pending or, to the Company's knowledge, threatened to the effect that any such
Property Information owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company (and
to the Company's knowledge, there is no basis for any such claim). Neither the
Company nor, to the Company's knowledge, any of its employees or consultants has
received any written communications alleging, nor does the Company know of any
grounds for any claims or allegations now or in the future, that the Company or
its employees or consultants has violated or infringed or that the Company or
its employees or consultants would, by conducting its business as proposed,
violate or infringe any of the patents, trademarks, service marks, applications
for each of the foregoing, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees or consultants is obligated under any contract (including
licenses, covenants, or
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commitments of any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would, in the case
of employees, interfere with the use of such employee's best efforts to promote
the interests of the Company or that would conflict with the Company's business
as proposed to be conducted or, in the case of consultants, which would conflict
with their obligations in serving as consultants to the Company. No third party,
including the employers or former employers of the Company's employees and
consultants, has asserted any rights or claims to the Proprietary Information or
any inventions used or proposed to be used in the Company's business, and the
Company does not believe that any such third party has a right to assert any
such rights or claims, except to the extent that such Proprietary Information or
such inventions are licensed to or from such third party. Except pursuant to the
terms of the Proprietary Information Agreements, there are no agreements,
understandings, instruments, or contracts to which the Company is a party or by
which it is bound that involve the license of any patent, copyright, trade
secret or other similar proprietary right to or from the Company.
2.18 TAX RETURNS; TAXES. The Company has accurately prepared and timely
filed all federal, state and other tax returns which are required to be filed
and has timely paid all taxes covered by such returns which have become due and
payable. The Company has not been advised that any of its returns, federal,
state or other, have been or are being audited as of the date hereof. The
Company is not delinquent in taxes or assessments and has no tax deficiency
proposed or assessed and has made no waiver of the statute of limitations
regarding assessments or collections. All taxes, if any, imposed by law in
connection with the issuance, sale and delivery of the Shares shall have been
paid, and all laws imposing such taxes shall have been fully complied with,
prior to the Closing. Neither the Company nor any of its present or former
stockholders has ever filed an election pursuant to Section 1362 of the Internal
Revenue Code of 1986, as amended (the "CODE"), that the Company be taxed as an S
corporation.
2.19 EMPLOYEES. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of or consultant to the Company is or will be in
violation of any judgment, decree, or order, or any term of any employment
contract, patent disclosure agreement, proprietary information and inventions
agreement, or any restrictive covenant, or any other common law obligation to a
former employer, or any other contract or agreement relating to the relationship
of any such person with the Company, or any other party, or to the use of trade
secrets or proprietary information of others, because of the nature of the
business conducted or to be conducted by the Company or the use by any such
employee of his best efforts with respect to such business or the performance by
any such consultant of his obligations to the Company. To the knowledge of the
Company, no third party has claimed or has reason to claim that any employee of
or consultant to the Company has disclosed or may be disclosing or utilized or
may be utilizing any trade secret or proprietary information or documentation of
such third party, or interfered or may be interfering in the employment
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relationship between such third party and any of its present or former employees
and, to the Company's knowledge, no such person proposes to do any of such
things. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement, other than with respect to the Company's 1996 Stock Plan, a true and
correct copy of which has been provided to each Purchaser. The Company is not
aware that any officer, key employee or key consultant, or that any group of key
employees or key consultants, intends to terminate their employment or
consultancy with the Company, nor does the Company have a present intention to
terminate the employment or engagement as a consultant of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company. The Company has delivered to counsel for the Purchasers a copy
of each consulting agreement to which it is a party.
2.20 NO DEFAULTS. The Company has, in all material respects, performed all
material obligations required to be performed by it to date and is not in
default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.
2.21 INSURANCE. The Company maintains adequate insurance on its properties
of a character and in such amounts and on such terms usually insured by
corporations engaged in the same or a similar business against loss or damage
resulting from fire or other risks insured against by such corporations, and
maintains in full force and effect public liability insurance against claims for
personal injury, death or property damage occurring upon, in, about or in
connection with the use of any of its properties, products or services and
maintains such other insurance as may be required by law or other agreement to
which the Company is a party.
2.22 BROKERS OR FINDERS. The Company has not incurred, and will not incur,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with the Agreements.
2.23 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
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14
2.24 NO DIVIDENDS. The Company has never made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
2.25 EMPLOYEE BENEFIT PLAN OBLIGATIONS. The Company does not maintain or
have any obligations with respect to any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")). The Company is not, nor was it at any time, obligated to contribute
to any employee pension benefit plan which is or was a multi-employer plan
within the meaning of Section 3(37) of ERISA.
2.26 QUALIFICATION AS A QUALIFIED SMALL BUSINESS. The Company is a
"qualified small business," as defined in Section 1202(b) of the Internal
Revenue Code (the "Code") and the Shares constitute "qualified small business
stock" as defined in Section 1202(c) of the Code. The Company covenants and
agrees to comply with the reporting and recordkeeping requirements of Section
1202 of the Code and any regulations promulgated thereunder and to execute and
deliver to the Purchasers and the Internal Revenue Service, from time to time,
such forms, documents, schedules and other instruments as may be reasonably
requested thereby to cause the Shares and the shares of Common Stock issuable
upon conversion of the Shares to qualify as a "qualified small business stock,"
as defined in Section 1202(c) of the Code.
2.27 FINANCIAL STATEMENTS. The Company has furnished to the Purchasers the
unaudited balance sheet of the Company as of November 30, 1996 and the related
unaudited statement of income for the period from April 1, 1996 through November
30, 1996. All such financial statements fairly present the financial position of
the Company as of November 30, 1996, and the results of operations during such
period.
2.28 TRANSACTIONS WITH AFFILIATES. No director or officer or, to the
Company's knowledge, employee or stockholder of the Company, or, to the
Company's knowledge, member of the family of any such person, or, to the
Company's knowledge, any corporation, partnership, trust or other entity in
which any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, is a party to any
material transaction with the Company, including any contract, agreement or
other arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payments to any
such person or firm, other than employment-at-will arrangements in the ordinary
course of business.
2.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each of the
officers of the Company, each key employee and each other employee now employed
by the Company who has access to confidential information of the Company has
executed the Proprietary Information Agreement substantially in the form of
Exhibit E (collectively, the "PROPRIETARY INFORMATION Agreements"), and such
agreements are in
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15
full force and effect. The Company is not aware that any of such persons is in
violation of any such agreement.
2.30 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of such Regulations.
SECTION 3
INVESTMENT REPRESENTATIONS
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company as follows:
3.1 POWER AND AUTHORITY. Such Purchaser has the requisite power and
authority to enter into this Agreement, to purchase the Shares hereunder, to
convert the Shares into Common Stock, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 DUE EXECUTION. This Agreement has been duly authorized, executed and
delivered by such Purchaser, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of such Purchaser,
subject to laws of general application relating to bankruptcy, insolvency, the
relief of debtors and general equity principles.
3.3 EXPERIENCE; ACCREDITED INVESTOR. Such Purchaser has, from time to
time, evaluated investments in start-up companies and has, either individually
or through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in start-up companies. Such
Purchaser is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act.
3.4 INVESTMENT. Such Purchaser is acquiring the Shares (and any Common
Stock issuable upon conversion of the Shares) for investment for its own account
and not with the view to, or for resale in connection with, any distribution
thereof. Such Purchaser understands that the Shares (and any Common Stock
issuable upon conversion of the Shares) to be purchased have not been registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein.
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16
3.5 RULE 144. Such Purchaser acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "BROKER'S TRANSACTION" or in transactions directly with a
"MARKET MAKER" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. Such
Purchaser is aware that the conditions for resale set forth in Rule 144 have not
been satisfied and that the Company has no plan to satisfy these conditions in
the foreseeable future.
3.6 NO PUBLIC MARKET. Such Purchaser understands that no public
market now exists for the Shares and that a public market may never exist for
the Shares.
3.7 DISCLOSURE OF INFORMATION. Such Purchaser believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Shares. Such Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares.
SECTION 4
CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING
Each Purchaser's obligation to purchase the Shares at the Closing is
subject to the fulfillment on or prior to the Closing of the following
conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 2 shall be true when made and on and as of the
date of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing shall have
been performed or complied with in all material respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's business or financial condition or affairs between the
date of this Agreement and the date of the Closing, if different.
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17
4.4 SECURITIES LAWS. The Company shall have obtained all necessary permits
and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Common
Stock issuable upon conversion of the Shares.
4.5 COMPLIANCE CERTIFICATE. The Company shall have delivered on the date of
the Closing a certificate signed by the President and Director of Finance and
Administration of the Company certifying that the conditions specified in
Sections 4.1, 4.2, 4.3, 4.7, 4.9, 4.10, and 4.11 have been fulfilled.
4.6 OPINION OF COUNSEL. The Purchasers purchasing shares in the Closing shall
have received from ▇▇▇▇▇▇ Godward LLP, counsel for the Company, an opinion dated
as of the Closing in substantially the form attached hereto as Exhibit F.
4.7 AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. The Company and the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
number of outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall have executed and delivered the Amended
and Restated Investors' Rights Agreement.
4.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers' counsel, which shall have received all such counterpart original and
certified or other copies of such documents as it may reasonably request.
4.9 SUPPORTING DOCUMENTS. The Purchasers and their counsel shall have
received copies of the following documents:
(i) (A) the Certificate of Incorporation of the Company, certified as of
a recent date by the Secretary of State of the State of Delaware and (B) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and good standing of the Company, the payment of all excise
taxes by the Company and listing all documents of the Company on file with
said Secretary.
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company dated the date of the Closing and certifying: (A) that attached
thereto is a true and complete copy of the Bylaws of the Company as in effect
on the date of such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors or the
stockholders of the Company authorizing the execution, delivery and
performance of the Agreements, the issuance, sale and delivery of the Shares,
and the reservation, issuance and delivery of the shares of
14
18
Common Stock issuable upon conversion of the Shares, and that all such
resolutions are in full force and effect and are all the resolutions adopted
in connection with the transactions contemplated by the Agreements; (C) that
the Certificate of Incorporation has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to clause
(i)(B) above, except for the filing of the Restated Certificate; and (D) to
the incumbency and specimen signature of each officer of the Company
executing the Agreements, the stock certificates representing the Shares and
any certificate or instrument furnished pursuant hereto, and a certification
by another officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Purchasers or
their counsel reasonably may request.
4.10 CHARTER. The Certificate of Incorporation of the Company shall read in
its entirety as set forth in Exhibit A.
4.11 FEES OF PURCHASERS' COUNSEL. The Company shall have paid in accordance
with Section 6.5 the reasonable fees and disbursements of Hamada & Matsumoto in
connection with this Agreement and related transactions as specified on a
reasonably detailed invoice, detailing all time entries and costs, submitted to
counsel to the Company a reasonable time in advance of such Closing.
SECTION 5
CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The Company's obligation to issue and sell the Shares at the Closing is
subject to the fulfillment on or prior to the Closing of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchasers contained in Section 3 shall be true when made and on and as of
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the date of the
Closing shall have been performed or complied with in all respects.
15
19
5.3 AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. The Purchasers and the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
number of outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall have executed and delivered the Amended
and Restated Investors' Rights Agreement.
5.4 VOTING AGREEMENT. Each of the Purchasers shall have executed a
counterpart signature page to the Voting Agreement pursuant to which such
Purchaser agrees to be bound by the provisions of the Voting Agreement.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by residents of California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Purchasers to purchase the Shares
shall not be assignable without the consent of the Company, and the Company's
obligations hereunder shall not be assignable without the consent of the
Purchasers.
6.3 ENTIRE AGREEMENT. This Agreement, its Exhibits, and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or mailed
by registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to a Purchaser, to the address set forth on
the Schedule of Purchasers, or at such other address as shall have been
furnished to the Company in writing by such Purchaser, or (b) if to the Company,
one copy to its address set forth above and addressed to the attention of the
President, or at such other address or addresses as the Company shall have
furnished in writing to the Purchasers, and one copy to ▇▇▇▇▇▇ Godward LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
All notices and other communications pursuant to the provisions of this Section
6.4 shall be deemed delivered when mailed or sent by facsimile or delivered by
hand or messenger. Notwithstanding the foregoing, any notice or communication to
an address outside the United
16
20
States shall be sent by facsimile and confirmed in writing contemporaneously
sent by two-day guaranteed international courier.
6.5 EXPENSES. Each party to this Agreement shall bear its own expenses and
legal fees incurred by it with respect to this Agreement and all related
transactions; provided, however, that the Company shall pay the reasonable fees
and expenses of the Purchasers' special counsel, Hamada & Matsumoto, not to
exceed $5,000, in connection with this Agreement and such transactions and any
subsequent amendment, waiver, consent or enforcement thereof.
6.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.8 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations and
warranties made herein or in the other Agreements, or any certificate or
instrument delivered to the Purchasers pursuant to or in connection with the
Agreements, shall survive the execution and delivery of the Agreements, the
issuance, sale and delivery of the Shares, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, and all
statements contained in any certificate or other instrument delivered by the
Company hereunder or thereunder or in connection herewith or therewith shall be
deemed to constitute representations and warranties made by the Company.
6.9 BROKERAGE. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
6.10 AMENDMENTS. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the shares of Common Stock issued or
issuable upon conversion of the Shares.
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21
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
22
The foregoing Preferred Stock Purchase Agreement is hereby executed as of
the date first above written.
THE COMPANY:
AURORA BIOSCIENCES CORPORATION
By:
------------------------------------
Title:
---------------------------------
THE PURCHASERS:
JAPAN ASSOCIATED FINANCE CO., LTD.
By:
------------------------------------
Title:
---------------------------------
JAFCO R-2 INVESTMENT ENTERPRISE PARTNERSHIP
By:
------------------------------------
Title:
---------------------------------
JAFCO R-3 INVESTMENT ENTERPRISE PARTNERSHIP
By:
------------------------------------
Title:
---------------------------------
19
23
JAFCO G-6(A) INVESTMENT ENTERPRISE PARTNERSHIP
By:
------------------------------------
Title:
---------------------------------
JAFCO G-6(B) INVESTMENT ENTERPRISE PARTNERSHIP
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇
▇▇
SCHEDULE OF PURCHASERS
AGGREGATE PURCHASE SHARES
SHAREHOLDER PRICE PURCHASED
----------------------------------- -------------------- --------------
JAPAN ASSOCIATED FINANCE CO., LTD.
Tekko ▇▇▇▇, ▇-▇-▇ ▇▇▇▇,▇▇▇.▇▇ ▇▇▇,▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Fax: ▇▇-▇-▇▇▇▇-▇▇▇▇
JAFCO R-2 INVESTMENT ENTERPRISE
PARTNERSHIP $434,548.80 ▇▇▇,▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Fax: ▇▇-▇-▇▇▇▇-▇▇▇▇
JAFCO R-3 INVESTMENT ENTERPRISE
PARTNERSHIP $416,232.00 ▇▇▇,▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Fax: ▇▇-▇-▇▇▇▇-▇▇▇▇
JAFCO G-6(A) INVESTMENT ENTERPRISE
PARTNERSHIP $374,608.80 ▇▇▇,▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Fax: ▇▇-▇-▇▇▇▇-▇▇▇▇
JAFCO G-6(B) INVESTMENT ENTERPRISE
PARTNERSHIP $374,608.80 ▇▇▇,▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Fax: ▇▇-▇-▇▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ $61,131.60 16,981
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------- --------
TOTAL $2,061,129.60 572,536
============= =======
25
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
26
RESTATED CERTIFICATE OF INCORPORATION
OF
AURORA BIOSCIENCES CORPORATION
AURORA BIOSCIENCES CORPORATION, a corporation organized and existing
under the laws of the state of Delaware, hereby certifies as follows:
FIRST. The name of the corporation is Aurora Biosciences Corporation.
SECOND. The date of the filing of the corporation's original Certificate
of Incorporation with the Secretary of State of Delaware was
January 22, 1996.
THIRD. This Restated Certificate of Incorporation was duly adopted by the
corporation in accordance with Section 245 of the General
Corporation Law of the State of Delaware.
FOURTH. The Certificate of Incorporation of the corporation shall be
amended and restated to read in full as follows.
I.
The name of this corporation is AURORA BIOSCIENCES CORPORATION.
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27
II.
The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is ▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ of Kent; and the name of the registered agent of the
corporation in the State of Delaware at such address is CorpAmerica Inc.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
IV.
A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK."
The total number of shares which the corporation is authorized to issue is
seventy-five million (75,000,000) shares. Fifty million (50,000,000) shares
shall be Common Stock, each having a par value of one-tenth of one cent
($0.001). Twenty-five million (25,000,000) shares shall be Preferred Stock, each
having a par value of one-tenth of one cent ($0.001). Notwithstanding Section
242 of the General Corporation Law of the State of Delaware, the number of
authorized shares of Common Stock may be increased or decreased (but not below
the number of shares then outstanding) by the affirmative vote of holders of a
majority of the outstanding shares of capital stock of the corporation, with
each such share being entitled to such number of votes per share as is provided
in this Article IV.
The Preferred Stock may be issued from time to time in one or more
series. Subject to compliance with applicable voting rights, if any, which may
have been granted to the Preferred
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28
Stock or any series thereof, the Board of Directors is hereby authorized, by
filing a certificate pursuant to the Delaware General Corporation Law, to fix or
alter from time to time the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof, including without limitation the dividend rights, dividend rate,
conversion rights, voting rights and the liquidation preferences of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series and the designation thereof, or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status that they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
Of the Preferred Stock, ten million five hundred thousand
(10,500,000) shares shall be designated "SERIES A PREFERRED STOCK," eight
hundred thirty-three thousand three hundred thirty-two (833,332) shares shall be
designated "SERIES B PREFERRED STOCK", eight hundred thousand (800,000) shares
shall be designated "SERIES C PREFERRED STOCK" and five hundred seventy-two
thousand five hundred thirty-six (572,536) shares shall be DESIGNATED "SERIES D
PREFERRED STOCK." The Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and the Series D Preferred Stock is hereinafter
sometimes collectively referred to as the "DESIGNATED PREFERRED."
B. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF THE SERIES A,
SERIES B, SERIES C AND SERIES D PREFERRED STOCK.
SECTION 1. DIVIDENDS. The holders of the Designated Preferred
shall be entitled to receive dividends at the rate per annum of $0.1064 per
share of Series A Preferred
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29
Stock, $0.1440 per share of Series B Preferred Stock, $0.1600 per share of
Series C Preferred Stock and $0.288 per share of Series D Preferred Stock, when,
as and if declared by the Board of Directors out of any funds legally available
therefor, prior and in preference to any declaration or payment of any dividend
on the Common Stock of this corporation ("COMMON") payable other than in Common.
Such dividends shall not be cumulative. Such dividends shall be distributed
ratably among the holders of each Series of Designated Preferred based on the
full dividend to which such holder is entitled. No dividends or other
distributions shall be made with respect to the Common in any year, other than
dividends payable solely in Common, unless and until (i) the full amount of the
dividend provided for above with respect to the Designated Preferred for such
year has been paid or declared and set apart for payment, and (ii) an equal
dividend per share shall have been paid or declared and set apart for payment to
the holders of the Designated Preferred (in addition to the dividend provided
for above) for each share of Common which the holders of the Designated
Preferred then have the right to acquire upon conversion of their respective
shares under this Certificate.
SECTION 2. LIQUIDATION PREFERENCE.
A. In the event of any liquidation, dissolution or winding up
of the corporation, either voluntary or involuntary, the holders of the
Designated Preferred shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the corporation to the
holders of the Common by reason of their ownership thereof: (i) the sum of $1.33
per share of Series A Preferred Stock, $1.80 per share of Series B Preferred
Stock, $2.00 per share of Series C Preferred Stock and $3.60 per share of Series
D Preferred Stock then held by them (such amounts per share with respect to each
such Series are hereinafter referred to as the "Original Issue Price"), and (ii)
an amount equal to all declared but unpaid dividends on
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the Designated Preferred then held by them. If, upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Designated
Preferred shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amount, then the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Designated Preferred in proportion to the preferential
amount each such holder would have been entitled to receive pursuant to this
Section 2a. if such distribution had been sufficient to permit the full payment
of such preferential amount.
B. Upon the completion of the distribution provided for in
Section 2a., all of the assets remaining in the corporation, if any, shall be
distributed pro rata among the holders of the Common, based upon the number of
shares of Common held by each such holder.
C. For purposes of this Section 2, a merger or consolidation of
this corporation with or into any other corporation or corporations where the
stockholders of this corporation immediately prior to such merger or
consolidation do not beneficially own more than 50% of the outstanding voting
stock of the surviving entity immediately following such merger or consolidation
and in which the stockholders of this corporation receive distributions in cash
or in securities of another corporation as a result of such merger or
consolidation, or a sale or other disposition of all or substantially all of the
assets of the corporation, shall be treated as a liquidation, dissolution or
winding up of the corporation.
SECTION 3. CONVERSION. The holders of the Designated Preferred shall
have conversion rights as follows (the "CONVERSION RIGHTS"):
A. OPTIONAL CONVERSION. Each share of Designated Preferred
shall be convertible at the option of the holder thereof, without payment of
additional consideration, at any
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time, at the office of the corporation or any transfer agent for the Designated
Preferred, into one share of Common, subject to adjustment as provided in
Sections 3.d. and 3.e. below.
B. AUTOMATIC CONVERSION. Each share of Designated Preferred
shall automatically be converted into the number of shares of Common into which
such share of Designated Preferred is then convertible pursuant to Section 3a
(i) in the event that the holders of not less than sixty-seven percent (67%) of
the outstanding Designated Preferred consent to such conversion, or (ii) upon
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "ACT"), covering the offer and sale by the corporation of Common to the
public at an aggregate offering price of not less than $10,000,000 (prior to
underwriters' discounts and expenses), and at a public offering price not less
than $6.00 per share, subject to adjustment for stock splits, stock dividends,
reorganizations and the like with respect to the Common.
C. MECHANICS OF CONVERSION.
(1) No fractional shares of Common shall be issued upon
conversion of the Designated Preferred. In lieu of any fractional share, the
corporation shall pay cash equal to such fraction multiplied by the then current
fair market value of a share of Common as determined in good faith by the Board
of Directors of the corporation. Before any holder of Designated Preferred shall
be entitled to convert the same into shares of Common, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
corporation or of any transfer agent for the Designated Preferred, and shall
give written notice to the corporation at such office that it elects to convert
the same (except that no such written notice of election to convert shall be
necessary in the event of an automatic conversion pursuant to Section 3b.). The
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corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Designation Preferred a certificate or certificates,
registered in such names as specified by the holder, for the number of shares of
Common to which such holder shall be entitled as aforesaid, and a check payable
to the holder in the amount of any amounts payable for fractional shares and any
declared and unpaid dividends on the converted Designated Preferred. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of the Designated Preferred
to be converted, and the person or persons entitled to receive the shares of
Common issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common on such date (except that in
the event of an automatic conversion pursuant to Section 3b.(i), such conversion
shall be deemed to have been made at the close of business on the date fixed in
the vote approving such automatic conversion and in the event of automatic
conversion pursuant to Section 3b.(ii), such conversion shall be deemed to have
been made immediately prior to the closing of the offering referred to in
Section 3b.(ii)). If the conversion is in connection with an underwritten offer
of securities registered pursuant to the Act, the conversion may, at the option
of any holder tendering Designated Preferred for conversion, be conditioned upon
the closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common issuable
upon such conversion of Designated Preferred shall not be deemed to have
converted such Designated Preferred until immediately prior to the closing of
such sale of securities. If such conversion is in connection with a merger,
consolidation or sale of assets which would be treated as a liquidation,
dissolution or winding up of the corporation in accordance with and for purposes
of Section 2, the conversion may, at the option of the holder tendering
Designated Preferred for conversion, be conditioned upon the consummation of
such transaction, in which
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event the person(s) entitled to receive the Common issuable upon such conversion
of Designated Preferred shall not be deemed to have converted such Designated
Preferred until immediately prior to the consummation of such transaction.
D. ADJUSTMENTS FOR SUBDIVISIONS, DIVIDENDS, COMBINATIONS OR
CONSOLIDATIONS OF COMMON.
(1) In the event the outstanding shares of Common shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common, the number of shares of Common into which the Designated
Preferred is convertible immediately prior to such combination or consolidation
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately decreased.
(2) In the event the corporation shall declare or pay any
dividend on the Common payable in Common or in the event the outstanding shares
of Common shall be subdivided, by reclassification or otherwise than by payment
of a dividend in Common, into a greater number of shares of Common, the number
of shares of Common into which the Designated Preferred is convertible
immediately prior to such dividend or subdivision shall be proportionately
increased:
(A) in the case of any such dividend, immediately after
the close of business on the record date for the determination of holders of any
class of securities entitled to receive such dividend, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
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(3) If such record date shall have been fixed and such
dividend shall not have been fully paid on the date fixed therefor, the
adjustment previously made in accordance with this Subsection d. shall be
canceled (to the extent such dividend was not paid) as of the close of business
on the date so fixed, and thereafter the number of shares of Common into which
the Designated Preferred is convertible shall be adjusted as of the time of
actual payment of such dividend.
E. ADJUSTMENTS FOR OTHER RECLASSIFICATIONS, DIVIDENDS AND
DISTRIBUTIONS. If there occurs any capital reorganization or any
reclassification of the capital stock of the corporation (other than any
subdivision, dividend, combination, consolidation or other transaction provided
for in Section 3d), each share of Designated Preferred shall thereafter be
convertible into the same kind and amounts of securities or other assets, or
both, that were issuable or distributable to the holders of shares of
outstanding Common Stock of the corporation upon such reorganization or
reclassification, in proportion to that number of shares of Common Stock into
which such shares of Designated Preferred might have been converted immediately
prior to such reorganization or reclassification; and in any such case,
appropriate adjustments (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of Designated Preferred to the end that
the provisions of this Certificate shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Designated Preferred.
F. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation, by filing a Certificate of Designation or through
any reorganization,
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transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
corporation but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Designated Preferred against impairment.
G. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment, pursuant to this Section 3, of the number of shares
of Common into which any shares of Designated Preferred are convertible, the
corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
such shares of Designated Preferred a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon the written request at any
time of any holder of Designated Preferred, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the number of shares of Common into which the Designated
Preferred is then convertible, and (iii) the number of shares of Common and the
amount, if any, of other property which at the time would be received upon the
conversion of Designated Preferred.
H. NOTICES OF RECORD DATE. In the event that this Corporation
shall propose at any time:
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(1) to declare any dividend or distribution upon the Common,
whether in cash, property, stock or other securities, whether or not a regular
cash dividend and whether or not out of earnings or earned surplus;
(2) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(3) to effect any reclassification or recapitalization of its
Common shares outstanding involving a change in the Common shares; or
(4) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this corporation shall send to the holders of the Designated
Preferred:
(A) at least 10 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common shares shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (1) and (2) above; and
(B) in the case of the matters referred to in (3) and (4)
above, at least 10 days' prior written notice of the date when the same shall
take place (and specifying, if practicable, or estimating the date on which the
holders of Common shares shall be entitled to exchange their Common shares for
securities or other property deliverable upon the occurrence of such event).
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(C) Each such written notice shall be given by first
class mail, postage prepaid, addressed to the holders of the Designated
Preferred at the address for each such holder as shown on the books of this
Corporation; provided that any such notice to an address outside the United
States shall be given by facsimile and confirmed in writing contemporaneously
sent by two-day guaranteed international courier.
I. COMMON STOCK RESERVED. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Designated Preferred, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding shares of
Designated Preferred, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then-outstanding shares of Designated Preferred, the Corporation shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
J. ISSUE TAX. The issuance of certificates for shares of Common
upon conversion of Designated Preferred shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Designated Preferred which is being
converted.
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K. CLOSING OF BOOKS. The corporation will at no time close its
transfer books against the transfer of any Designated Preferred or of any shares
of Common issued or issuable upon the conversion of any shares of Designated
Preferred in any manner which interferes with the timely conversion of such
Designated Preferred, except as may otherwise be required to comply with
applicable securities laws.
SECTION 4. VOTING RIGHTS.
A. GENERAL. Except as otherwise required by law or this
Certificate of Incorporation, (i) each share of Common issued and outstanding
shall have one vote; (ii) each share of Designated Preferred issued and
outstanding shall have a number of votes equal to the number of Common shares
(including fractions of a share) into which such share of Designated Preferred
is then convertible as adjusted from time to time pursuant to Section 3 hereof;
and (iii) the Common and the Designated Preferred and any other class and series
of Stock of the corporation shall vote together as a single class.
B. BOARD SIZE. The corporation shall not, without the written
consent or affirmative vote of the holders of at least sixty-seven percent (67%)
of the then outstanding shares of Designated Preferred, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as a
class, increase the maximum number of directors constituting the Board of
Directors to a number of excess of nine (9).
C. BOARD SEATS. The holders of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (collectively, the "VOTING
PREFERRED"), voting together as a separate class, shall be entitled to elect
five (5) directors of the corporation. The
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holders of Common, voting as a separate class, shall be entitled to elect two
(2) directors of the corporation. The holders of Series D Preferred Stock shall
not be entitled to vote for the election of directors of the corporation. At any
meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Voting Preferred then outstanding
shall constitute a quorum of the Voting Preferred for the election of directors
to be elected solely by the holders of the Voting Preferred. A vacancy in any
directorship elected by the holders of the Voting Preferred shall be filled only
by vote or written consent of the holders of the Voting Preferred and a vacancy
in any directorship elected by the holders of Common shall be filled only by
vote or written consent of the holders of Common. A director elected by the
holders of Voting Preferred may be removed without cause only by vote of holders
of a majority of the outstanding shares of Voting Preferred and a director
elected by the holders of Common may be removed without cause only by vote of
holders of a majority of the outstanding shares of Common.
SECTION 5. COVENANTS.
A. In addition to any other rights provided by law, this
corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than sixty-seven percent (67%) of all
outstanding shares of Designated Preferred, voting together as a class:
(1) make any amendment to the corporation's Certificate of
Incorporation or Bylaws that would materially and adversely alter or change the
rights, preferences, or privileges of the outstanding Designated Preferred;
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40
(2) increase or decrease the authorized number of shares of
Preferred Stock or any Series thereof;
(3) create (by reclassification, Certificate of Designation
or otherwise) any new class or series of shares of stock having a preference
over the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock with respect to voting rights, liquidation
preferences, or dividends; increase the authorized amount of any class or series
of shares of stock having a preference over the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock with
respect to voting rights, liquidation preferences or dividends; or create or
authorize (by reclassification, Certificate of Designation or otherwise) any
obligation or security convertible into shares of any class or series of stock
having a preference over the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock with respect to voting
rights, liquidation preferences or dividends; or
(4) take any action that results in any liquidation,
dissolution or winding up of the corporation or any merger, consolidation, or
other corporate reorganization, or effect any transaction in which all or
substantially all of the assets of the corporation are sold or otherwise
disposed of.
B. In addition to any other rights provided by law, this
corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of a majority of the outstanding shares of a particular
Series of Designated Preferred, take any action that would (i) materially and
adversely alter or change the rights, preferences, or privileges of such Series
in a manner different than the other Series, (ii) increase or decrease the
authorized number of shares
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of such Series or (iii) amend the terms of another Series of Designated
Preferred which, when established, was pari pasu with such Series with respect
to voting rights, liquidation preferences or dividends, if such amendment
results in the other Series having a preference over such Series with respect to
voting rights, liquidation preferences or dividends.
SECTION 6. STATUS OF CONVERTED STOCK. In case any shares
of Designated Preferred shall be converted pursuant to Section 3 hereof, the
shares so converted shall resume the status of authorized but unissued and
undesignated shares of Preferred Stock.
SECTION 7. RESIDUAL RIGHTS. All rights accruing to the
outstanding shares of this corporation not expressly provided for to the
contrary herein shall be vested in the Common.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. Subject to Section 4b of
Article IV, the number of directors which shall constitute the whole Board of
Directors shall be fixed by the Board of Directors in the manner provided in the
Bylaws, provided that such number shall not be less than the number of directors
provided for in Section 4 of Article IV.
B. Subject to Section 5 of Article IV, the Board of Directors may from
time to time make, amend, supplement or repeal the Bylaws; provided, however,
that (subject to such Section 5) the stockholders may change or repeal any Bylaw
adopted by the Board of Directors by
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the affirmative vote of the holders of a majority of the voting power of all of
the then outstanding shares of the capital stock of the corporation (considered
for this purpose as one class); and, provided further, that no amendment or
supplement to the Bylaws adopted by the Board of Directors shall vary or
conflict with any amendment or supplement thus adopted by the stockholders.
C. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
D. Following the effectiveness of the registration of any class of
securities of the corporation pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, no action shall be taken by the stockholders
of the corporation except at an annual or special meeting of stockholders called
in accordance with the Bylaws and no action shall be taken by the stockholders
by written consent.
E. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A director of the corporation shall, to the full extent not prohibited
by the Delaware General Corporation Law, as the same exists or may hereafter be
amended, not be liable to the corporation or its stockholders for monetary
damages for breach of his fiduciary duty as a director.
VII.
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The corporation is to have perpetual existence.
VIII.
Subject to the provisions of this Certificate of Incorporation, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon the stockholders herein are
granted subject to this right.
IN WITNESS WHEREOF, said Aurora Biosciences Corporation has caused this
Certificate to be signed by its President and Chief Executive Officer, ▇▇▇▇▇▇▇
▇. ▇▇▇▇, and attested to by its Secretary, ▇▇▇▇▇▇▇ ▇. Tower, this th day of
December, 1996.
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATTEST:
-------------------------------------
▇▇▇▇▇▇▇ ▇. TOWER
SECRETARY
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EXHIBIT B
SCHEDULE OF EXCEPTIONS
45
EXHIBIT C
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
46
AURORA BIOSCIENCES CORPORATION
AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
DECEMBER 27, 1996
47
AURORA BIOSCIENCES CORPORATION
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "AGREEMENT") is entered into as of
December 27, 1996 among (i) AURORA BIOSCIENCES CORPORATION, a Delaware
corporation (the "COMPANY"), with its principal office located at ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (ii) holders of the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (such
holders are listed on Exhibit A attached hereto and are referred to herein as
the "PREVIOUS INVESTORS"), and (iii) the purchasers listed on the Schedule of
Purchasers attached to that certain Series D Preferred Stock Purchase Agreement
of even date herewith (THE "PURCHASE AGREEMENT") and Exhibit B hereto (the
"PURCHASERS"). Each of the Previous Investors and the Purchasers are referred to
herein as a "STOCKHOLDER;" collectively they are referred to as the
"STOCKHOLDERS."
This Agreement supersedes, amends and restates in its entirety that
certain Investors Rights Agreement dated as of March 8, 1996, by and among the
Company and the Previous Investors, as amended by that certain Amendment
Agreement dated April 9, 1996 as further amended by that certain Second
Amendment Agreement dated April 29, 1996 (collectively, the "FORMER INVESTORS
RIGHTS AGREEMENT").
RECITALS
A. The Company proposes to issue and sell up to an aggregate of 572,536
shares of its Series D Preferred Stock pursuant to the Purchase Agreement (the
"FINANCING").
B. Each of the Previous Investors desire to waive his, her or its right to
receive notice of the Financing and to purchase a certain portion of the Series
D Preferred Stock to be sold by the Company in the Financing as set forth in
Section 3 of the Former Investors Rights Agreement.
C. As a condition of entering into the Purchase Agreement, the Purchasers
have requested that the Company extend to them registration rights, information
rights and other rights as set forth herein.
D. In order to induce the Purchasers to enter into the Purchase Agreement
and to induce the Purchasers to invest funds in the Company, the Company and the
Previous Investors have agreed to enter into this Agreement in order to amend
and restate the Former Investors Rights Agreement so that this Agreement is the
sole agreement with respect to the obligations and rights contained herein.
E. Section 4.7 of the Former Investors Rights Agreement provides that such
agreement may be amended with the written consent of the Company and the holders
of at least two-thirds (2/3) of the shares which are then Registrable Securities
(as defined in the Former
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Investors Rights Agreement) and that such amendment shall be binding upon the
Stockholders (as defined in the Former Investors Rights Agreement), each of
their transferees and the Company.
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree that the Former Investors Rights Agreement is amended and restated
in its entirety to read as set forth above and as follows (unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
in the Purchase Agreement):
AGREEMENT
1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1. RESTRICTIONS ON TRANSFERABILITY. Neither the shares of the Company's
Series A, Series B, Series C or Series D Preferred Stock issued to the
Stockholders pursuant to the Purchase Agreement or pursuant to that certain
Preferred Stock Purchase Agreement dated March 8, 1996, as amended by that
certain Amendment Agreement dated April 9, 1996, as further amended by that
certain Second Amendment Agreement dated April 29, 1996 (the "DESIGNATED
PREFERRED") nor the Registrable Securities (as defined below) shall be
transferable except upon compliance with (i) the Right of First Refusal set
forth in Section 45 of the Company's Bylaws, (ii) the conditions specified in
this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act (as defined below), and (iii) if such shares
are Restricted Securities (as defined below), upon such other terms as are in
the opinion of counsel to the Company necessary to comply with the provisions of
the Securities Act; provided, however that such restrictions shall not apply to
transfers under the circumstances described in Sections 1.5, 1.6 or 1.7 and that
the requirements of clause (iii) shall not apply to a transfer without
consideration to one or more partners or shareholders of a Stockholder (e.g., an
in-kind distribution pursuant to the terms of the Stockholder's governing
documents). Except for transfers made pursuant to Rule 144 of the Securities
Act, each Stockholder will cause any proposed transferee of Designated Preferred
or Registrable Securities held by such Stockholder to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Agreement and it will be a condition precedent to the effectiveness of any
such transfer that such Stockholder shall have secured a written agreement of
such transferee in form and substance satisfactory to the Company to that
effect, if so requested by the Company; provided, however, that this sentence
shall not apply with respect to any proposed transferee in whose hands the
transferred shares will not be Restricted Securities.
1.2. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
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49
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Company, as constituted on the date of this Agreement.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined below)
as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean each holder of Registrable Securities.
"INITIAL PUBLIC OFFERING" shall mean the Company's initial firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "ACT"), covering the offer and
sale by the Company of Common Stock to the public at an aggregate offering price
of not less than $10,000,000 (prior to underwriters' discounts and expenses),
and at a public offering price not less than $6.00 per share, subject to
adjustment for stock splits, stock dividends, reorganizations and the like with
respect to such shares.
"REGISTRABLE SECURITIES" means shares of the Company's Common Stock (i)
issued or issuable upon conversion of Designated Preferred which have not been
sold to the public, and (ii) issued in respect of the shares of Common Stock
referred to under the foregoing clause (i) by reason of any stock split, stock
dividend, recapitalization or similar event which have not been sold to the
public.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof other than Selling Expenses,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel, blue sky fees
and expenses (including counsel fees), and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legends set forth in Section 1.3 hereof or legends substantially
similar thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3. RESTRICTIVE LEGEND(S). Each certificate representing the shares of
Designated Preferred and Registrable Securities shall (unless otherwise
permitted by the provisions of Section 1.4 below) be stamped or otherwise
imprinted with legends in the following form (in addition to any other legend
required by the Bylaws of the Company, or under applicable California or other
state securities laws):
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(A) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
(B) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION'S STOCKHOLDERS, AS
PROVIDED IN THE BYLAWS OF THE CORPORATION.
1.4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply,
in addition to the requirements of Section 45 of the Company's Bylaws, in all
respects with the provisions of this Section 1.4. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144 and except for transfers without
consideration to one or more partners or shareholders of the holder (e.g., an
in-kind distribution pursuant to the terms of the holder's governing documents))
by either (i) a written opinion of legal counsel who shall be reasonably
satisfactory to the Company (it being agreed that ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ is
satisfactory) addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission, a copy of any
holder's request (together with all supplements or amendments thereto) for which
shall have been provided to the Company, at or prior to the time of first
delivery to the Commission's staff, to the effect that the transfer of such
securities without registration will not result in a recommendation by such
staff that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
provided for above shall bear the appropriate restrictive legends set forth in
Section 1.3 above, except that such certificate shall not bear the restrictive
legend set forth in Section 1.3(a) above if, in the opinion of counsel for the
Company or counsel for such holder, such legend is not required in order to
establish compliance with any provisions of the Securities Act and except that
such certificate shall not bear the restrictive legend set forth in Section
1.3(b) above if the right of first refusal set forth in the Company's Bylaws is
no longer applicable.
1.5. DEMAND REGISTRATION RIGHTS.
(A) Commencing on the earlier of (i) five (5) years after the date
hereof, or (ii) one (1) year after the Company's initial public offering of
securities pursuant to a registration statement
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under the Securities Act, if the Company shall receive a written request
(specifying that it is being made pursuant to this Section 1.5) from the Holders
of at least fifty percent (50%) of the Registrable Securities that the Company
file a registration statement or similar document under the Securities Act
covering the registration of the greater of (i) 20% of the shares which are then
Registrable Securities, or (ii) Registrable Securities the expected aggregate
offering price to the public of which is at least $5,000,000, then the Company
shall promptly notify all other Holders of such request and shall use its best
efforts to promptly and expeditiously cause all Registrable Securities that such
Holders have requested, within 15 days after receipt of such written notice, to
be registered in accordance with this Section 1.5 to be registered under the
Securities Act. The Holders making the written request pursuant to this Section
1.5 shall be referred to hereinafter as the "INITIATING HOLDERS".
Notwithstanding the foregoing: (i) the Company shall not be obligated to
effect a registration pursuant to this Section 1.5 during the period starting
with the date one hundred twenty (120) days prior to the Company's estimated
date of filing of, and ending on a date one hundred twenty (120) days following
the effective date of, a registration statement pertaining to an underwritten
public offering of the Company's securities, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; or (ii) if
the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company or its stockholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed six (6) months; provided, however, that the
Company shall not obtain such a deferral more than once in any 12-month period.
The Company shall not be obligated to effect more than two (2)
registrations pursuant to this Section 1.5 for which holders of Registrable
Securities are the Initiating Holders; provided, however that such obligation
shall be deemed satisfied only when a registration statement covering all
Registrable Securities requested by Holders to be registered pursuant to such
demand shall have become effective and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.
(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by a majority of
interest of the Initiating Holders and reasonably satisfactory to the Company.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the
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Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be reduced and shall be allocated pro rata among such Holders
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration.
If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter, and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration. If by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 1.5.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other securityholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited
and if such inclusion will not adversely affect the marketing of the Registrable
Securities.
Except for registration statements on Form ▇-▇, ▇-▇ or any successor
thereto, the Company will not file with the Commission any other registration
statement with respect to its Common Stock, whether for its own account or that
of other stockholders, from the date of receipt of a request for registration
from Initiating Holders pursuant to this Section 1.5 until the earlier of (a)
one hundred twenty (120) days from the receipt of the initial request pursuant
to Section 1.5(a) or (b) the completion of the period of distribution of the
registration contemplated thereby. Although the Company shall have no obligation
to register any Designated Preferred, in any underwritten public offering
contemplated by this Section 1.5 or Section 1.6 or 1.7, holders of Designated
Preferred shall be entitled to sell shares of Designated Preferred representing
Registrable Securities to be included in such underwriting to the underwriters
for conversion and sale of the Registrable Securities issued upon conversion
thereof.
1.6. COMPANY REGISTRATION.
(A) If, at any time or from time to time, the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration (A) relating solely to employee
benefit plans on Form S-8 or similar forms which may be promulgated in the
future, (B) a registration on Form S-4 or similar forms which may be promulgated
in the future relating solely to a Securities and Exchange Commission Rule 145
or similar transaction or (C) in connection with the Company's Initial Public
Offering, the Company will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance),
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and in any underwriting involved therein, all Registrable Securities of such
Holders as specified in a written request or requests made within 15 days after
receipt of such written notice from the Company.
(B) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 1.6(a). In such event the right
of any Holder to registration pursuant to this Section 1.6 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and in the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights to the extent such holders are not excluded from the
registration pursuant to the Underwriter Cutback described below.
Notwithstanding any other provision of this Section 1.6, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may exclude some or all Registrable
Securities or other securities from such registration and underwriting
(hereinafter an "UNDERWRITER CUTBACK"). In the event of an Underwriter Cutback,
the Company shall so advise all Holders and the other holders distributing their
securities through such underwriting, and the Underwriter Cutback shall be
implemented on the basis that the holders who are not Holders shall be cut back
before any cutback of Holders. If the limitation determined by the underwriter
requires an Underwriter Cutback with respect to the Registrable Securities to be
included, such Underwriter Cutback shall be in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
1.7. FORM S-3 REGISTRATION RIGHTS. After the Initial Public Offering, the
Company shall use its best efforts to qualify for registration on Form S-3, and
to that end the Company shall use its best efforts to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), within twelve (12) months following the effective date of the first
registration of any securities of the Company for an underwritten registered
public offering. After the Company has qualified for the use of Form S-3, and
subject to the provisions of Section 1.14, each Holder shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such Holder), subject only
to the following limitations:
(A) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred twenty (120) days following
the effective date of a Company initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145);
(B) The Company shall not be required to effect a registration
pursuant to this Section 1.7 unless the Holder or Holders requesting such a
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000 (unless the value of all of the
Registrable
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Securities held by all Holders is less than $1,000,000, in which case the
Holders shall be entitled to a final demand registration pursuant to this
Section 1.7 for an amount equal to the value of the Registrable Securities held
by all Holders at the time of such demand; provided that for purposes of the
foregoing, "value" shall be determined based on the average of the last sale
prices of the Company's Common Stock on the principal exchange or market on
which such Common Stock is traded during the five (5) trading days immediately
preceding such demand);
(C) The Company shall not be required to effect a registration
pursuant to this Section 1.7 if the Company shall furnish to the requesting
Holders 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 or its stockholders for the registration
statement to be filed at the date filing would be required, in which case the
Company shall have an additional period of not more than one hundred twenty
(120) days within which to file such registration statement; provided however,
that the Company shall not use this right more than once in any twelve- month
period;
(D) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof; and
(E) The Company shall not be obligated to cause a registration on
Form S-3 if in the prior twelve-month period the Company has caused a
registration on Form S-3 to become effective as the result of a request pursuant
to this Section 1.7.
The Company shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 1.7 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within 15
days after receipt of such written notice, be registered in accordance with this
Section 1.7 to be registered under the Securities Act. Subject to the foregoing,
the Company will use its best efforts to effect promptly any registration
pursuant to this Section 1.7. The provisions of Section 1.5(b) shall apply to
any registration effected pursuant to this Section 1.7
1.8. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of one special counsel to the selling Holders)
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement to
forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the foregoing, however, if at the time of
the withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
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1.9. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(A) Keep such registration, qualification or compliance effective
for a period of one hundred twenty (120) days or until the Holder or Holders
have completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(B) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(C) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them;
(D) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders or
the underwriters, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
(E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with (and provide customary due diligence materials and information to)
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(F) Notify each Holder of Registrable Securities covered by such
registration statement 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, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and
(G) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify shares in any state or jurisdiction which
requires the Company to qualify to do business or to file a general consent to
service of process.
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1.10. INDEMNIFICATION.
(A) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will promptly reimburse each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (as and when incurred) in
connection with investigating, preparing to defend or defending any such claim,
loss, damage, liability or action, provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder or underwriter and stated to be specifically for use therein.
(B) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, severally and not jointly indemnify the Company,
each of its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and partners and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof) including any of the foregoing
incurred in settlement of any litigation commenced or threatened, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification, or compliance,
and will promptly reimburse the Company, such Holders, such directors, officers,
partners, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred (as and when incurred) in connection with
investigation, preparing to defend or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
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omission) is made in such registration statement, prospectus, offering circular
or other document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each such Holder hereunder shall be
limited to an amount equal to the proceeds to each such Holder of Registrable
Securities sold in such registration as contemplated herein.
(C) Each party entitled to indemnification under this Section 1.10
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense; provided, however, that, if the defendants in any such claim or
litigation include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred, and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect of
such claim or litigation.
(D) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party 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
Indemnifying Party or by the Indemnified Party and the parties relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission, provided, however, that in no case will any seller of
Registrable Securities be required to contribute any amount in excess of the
amount of proceeds to such seller of Registrable Securities sold pursuant to the
registration statement with respect to which the contribution obligation arose.
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(E) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1 and otherwise.
1.11. INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.12. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(A) Use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act at all times after the effective date of the first registration
under the Securities Act filed by the Company for an offering of its securities
to the general public;
(B) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Exchange Act at any time after it has become subject to such reporting
requirements;
(C) So long as a Stockholder owns any Restricted Securities, to
furnish to the Stockholder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public) and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company as a Stockholder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Stockholder to sell any such
securities without registration.
1.13. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder," and the transferred shares shall be considered
"Registrable Securities," for purposes of this Section 1, provided that (i) said
transferee acquires Registrable Securities (including shares of Designated
Preferred prior to conversion into Registrable Securities) in a private
transaction, and (ii) the Company is given written notice by such Holder at the
time of or within a reasonable time (but not more than 30 days) after said
transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned, subject to said transferee's agreement to be bound by and comply
with the provisions of this Section 1.
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1.14. TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Section 1 shall terminate (i) upon the seventh anniversary of
the effective date of the Initial Public Offering or (ii) if earlier, as to any
individual Holder, at such time after the Company's Initial Public Offering as
all Registrable Securities held by such Holder can be sold within any
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.
1.15. "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that it
shall not, to the extent requested by the Company and the underwriters managing
any underwritten offering of the Company's Common Stock (or other securities),
sell or otherwise transfer or dispose of (other than to those who agree to be
similarly bound) any Registrable Securities or any other securities of the
Company during the one hundred eighty (180) day period following the effective
date of a registration statement of the Company filed in connection with the
Company's Initial Public Offering. In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to the
Registrable Securities and other securities of the Holders (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such one hundred eighty (180) day period.
1.16. OTHER REGISTRATION RIGHTS. The Company shall not grant to any third
party any registration rights more favorable than or inconsistent with any of
those contained herein, so long as any of the registration rights under this
Agreement remains in effect.
1.17. CHANGES IN COMMON STOCK OR PREFERRED STOCK. If, and as often as,
there is any change in the Common Stock or the Designated Preferred by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Designated Preferred as so changed.
2. AFFIRMATIVE COVENANTS OF THE COMPANY AND STOCKHOLDERS
2.1. FINANCIAL INFORMATION. Subject to Section 2.16, the Company will
furnish the following reports to the Stockholders for so long as the
Stockholders are Holders of Registrable Securities:
(A) As soon as practicable after the end of each fiscal year (other
than the fiscal year ended March 31, 1996), and in any event within 90 days
thereafter, audited consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of income, stockholders' equity and cash flows of the Company and its
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
certified by independent public accountants of recognized national standing
selected by the Company; and
(B) As soon as practicable after the end of each fiscal quarter, and
in any event within 45 days thereafter, unaudited consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such quarter, and
unaudited consolidated statements of income, stockholders'
13
60
equity and cash flows of the Company and its subsidiaries, if any, for such
quarter and for the period from the beginning of the fiscal year to the end of
such quarter, prepared in accordance with generally accepted accounting
principles (but subject to normal year-end audit adjustments) and certified by
the chief financial officer.
2.2. ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 and Section 2.3 may be assigned by the Stockholders (or
by any permitted transferee of any such rights) so long as (i) the Company is
given notice of any such assignment within a reasonable time after the date the
same is effected, (ii) the transferee shall have acquired Registrable Securities
(including shares of Designated Preferred prior to conversion into Registrable
Securities) in a private transaction, and (iii) the transferee is not engaged in
a business that is competitive with the Company.
2.3. INSPECTION AND VISITATION RIGHTS. Each Stockholder, so long as such
Stockholder holds Registrable Securities, shall have the right to visit and
inspect the Company's principal place of business, subject to such limitations
and restrictions as the President of the Company in good faith determines to be
necessary for the protection of the Company's Proprietary Information.
2.4. RESERVE FOR CONVERSION SHARES. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of effecting the conversion of the Designated Preferred and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Designated Preferred from time to time outstanding or
otherwise to comply with the terms of this Agreement. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Designated Preferred or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
The Company will obtain any authorization, consent, approval or other action by
or make any filing with any court or administrative body that may be required
under applicable state securities laws in connection with the issuance of shares
of Common Stock upon conversion of the Designated Preferred.
2.5. PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain and cause
each of its subsidiaries to maintain as to their respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient.
2.6. RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any of its
subsidiaries shall become a party to any agreement which by its terms restricts
the Company's performance of this Agreement, the Management Rights Agreements,
the Voting Agreements or the Restated Certificate.
2.7. TRANSACTIONS WITH AFFILIATES. Except for transactions contemplated by
the Agreements or as otherwise approved by the Board of Directors, neither the
Company nor any of its subsidiaries shall enter into any material transaction
with any director, officer, employee or holder of more than 5% of the
outstanding capital stock of any class or series of capital stock of the Company
or any of its subsidiaries, or to the Company's knowledge any member of the
family
14
61
of any such person, any corporation, partnership, trust or other entity in which
any such person, or member of the family of any such person, is a director,
officer, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, except for transactions on customary terms related to such
person's employment.
2.8. EXPENSES OF DIRECTORS. The Company shall promptly reimburse in full,
each director of the Company who is not an employee of the Company for all of
his reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company or any Committee thereof.
2.9. BYLAWS. The Company shall at all times cause its Bylaws to provide
that (a) any three directors shall have the right to call a meeting of the Board
of Directors and (b) the number of directors fixed in accordance therewith shall
in no event conflict with any of the terms or provisions of the Designated
Preferred as set forth in the Restated Certificate. The Company shall at all
times maintain provisions in its Bylaws and/or Certificate of Incorporation
indemnifying all directors against liability and absolving all directors from
liability to the Company and its stockholders to the maximum extent permitted
under the laws of the State of Delaware.
2.10. PERFORMANCE OF CONTRACTS. The Company shall not amend, modify,
terminate, waive or otherwise alter, in whole or in part, any of the Proprietary
Information Agreements or the provisions contained in the Employment Amendment
without the approval of the Company's Board of Directors.
2.11. PROPRIETARY INFORMATION AGREEMENTS. The Company shall use its best
efforts to obtain, and shall cause its subsidiaries to use their best efforts to
obtain, a Proprietary Information Agreement in substantially the form of Exhibit
E to the Purchase Agreement from all future officers, key employees and other
employees who will have access to confidential information of the Company or any
of its subsidiaries, upon their employment or engagement by the Company or any
of its subsidiaries. The Company shall use its reasonable best efforts to cause
any consultant with whom the Company contracts to agree to maintain the
confidentiality of the Company's confidential or Proprietary information, and to
assign to the Company any proprietary rights arising from work performed by the
consultant for the Company.
2.12. COMPLIANCE WITH LAWS. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
2.13. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall keep, and
cause each subsidiary to keep, adequate records and books of account, in which
complete entries will be made in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied, reflecting
financial transactions of the Company and each subsidiary in accordance with
GAAP.
2.14. U.S. REAL PROPERTY INTEREST STATEMENT. The Company shall provide
prompt written notice to each Stockholder following any "determination date" (as
defined in Treasury Regulation Section 1.897-2(c)(i)) on which the Company
becomes a United States real property holding corporation. In addition, upon a
written request by any Stockholder, the Company shall provide such
15
62
Stockholder with a written statement informing the Stockholder whether such
Stockholder's interest in the Company constitutes a U.S. real property interest.
The Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company
shall provide timely notice to the Internal Revenue Service, in accordance with
and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any
successor regulation, that such statement has been made. The Company's written
statement to any Stockholder shall be delivered to such Stockholder within ten
(10) days of such Stockholder's written request therefor. In addition, upon
request by any foreign Stockholder but subject to the succeeding sentence, the
Company shall provide along with such statement either or both of the following
documents: (i) an affidavit in conformance with the requirements of Section
1445(b)(3) of the Code and the regulations thereunder or (ii) a notarized
statement, executed by an officer having actual knowledge of the facts, that the
shares of Company stock held by such Stockholder are of a class that is
regularly traded on an established securities market, within the meaning of
Section 1445(b)(6) of the Code and the regulations thereunder. If the Company is
unable to provide either of the documents described in (i) or (ii) above upon
request, it shall promptly, and in any event within such ten (10) day period,
notify such Stockholder in writing of the reason for such inability. Finally,
upon the request of a foreign Stockholder and without regard to whether either
document described in (i) or (ii) above has been requested, the Company shall
reasonably cooperate with the efforts of such foreign Stockholder to obtain a
"qualifying statement" within the meaning of Section 1445(b)(4) of the Code and
the regulations thereunder or such other documents as would excuse a transferee
of a foreign Stockholder's interest from withholding of income tax imposed
pursuant to Section 897(a) of the Code.
2.15. RULE 144A INFORMATION. The Company shall, at all times during which
it is not subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, provide in writing, upon the
written request of any Stockholder or a prospective buyer of Registrable
Securities (including Designated Preferred before conversion into Registrable
Securities) from any Stockholder, all information required by Rule 144A(d)(4)(i)
of the General Regulations promulgated by the Commission under the Securities
Act ("RULE 144A INFORMATION"). The Company's obligations under this Section 2.15
shall at all times be contingent upon the relevant Stockholder's obtaining from
the prospective buyer of such Registrable Securities a written agreement to take
all reasonable precautions to safeguard the Rule 144A Information from
disclosure to anyone other than a person who will assist such buyer in
evaluating the purchase of such Registrable Securities.
2.16. TERMINATION OF COVENANTS. The covenants set forth in Section 2.1,
Sections 2.3 through 2.13 and Section 2.15 shall terminate and be of no further
force or effect upon the earlier of (i) the closing of the Initial Public
Offering, or (ii) the date on which none of the Registrable Securities
(including shares of Designated Preferred prior to conversion into Common Stock)
is outstanding. The Covenants set forth in Section 2.14 shall terminate five (5)
years after the closing of the Initial Public Offering.
2.17. CONFIDENTIAL INFORMATION, ETC. Each Holder agrees that (i) all
information received by it pursuant to this Section 2 which the Company
designates as or promptly confirms in writing to be "Confidential" or the like,
and (ii) any other information relating to the Company's technology, processes
or formulas that is disclosed by the Company to any Holder in writing and is
marked "Confidential" or the like, shall be considered confidential information.
Each Holder further agrees that
16
63
it shall hold all such confidential information in confidence and shall not,
without the Company's prior express written consent, disclose any such
confidential information to any third party other than its counsel, accountants,
employees and other professional advisors, representatives and agents, all of
whom shall have a need to know such information and shall be bound by the
provisions of this Section 2.17, nor shall such Holder, without the Company's
prior express written consent, use such confidential information for any purpose
other than evaluation of such Holder's investment in the Company; provided,
however, that the foregoing obligation to hold in confidence and not to disclose
confidential information shall not apply to any such information that (a) was
known to the public or the Holder or its representatives prior to disclosure by
the Company, (b) becomes known to the public through no fault of such Holder,
(c) is disclosed to such Holder on a non-confidential basis by a third party
having a legal right to make such disclosure, (d) is independently developed by
such Holder, or (e) is required to be disclosed as a matter of law or pursuant
to court order; and provided further that the foregoing obligation to hold in
confidence and not to disclose confidential information shall not prohibit such
Holder from disclosing to its partners or shareholders financial and other
information described in clause (i) of this Section 2.17 which is of a type
customarily provided by such Holder to such partners or shareholders in the
ordinary course or from disclosing to a bona-fide prospective transferee of its
securities of the Company such financial and other information described in such
clause (i) which is reasonably necessary to provide such transferee with
adequate disclosure of material information.
3. RIGHTS OF FIRST REFUSAL
3.1. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
(A) The Company hereby grants to each Stockholder the right of first
refusal to purchase its Pro Rata Share (defined below) of all (or any part) of
New Securities (defined below) that the Company may from time to time propose to
sell and issue. Stockholder's "PRO RATA SHARE," for purposes of this Section 3,
is the ratio of the number of shares of Common Stock (assuming conversion of all
shares of Designated Preferred) then held by such Stockholder to the total
number of shares of Common Stock then outstanding (assuming conversion of all
shares of Designated Preferred). This right of first refusal shall be subject to
the following provisions:
(B) "NEW SECURITIES" shall mean any Common Stock or Preferred Stock
of the Company, whether now authorized or not, and rights, options, or warrants
to purchase said Common Stock or Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into or exchangeable for said
Common Stock or Preferred Stock; provided, however, that "NEW SECURITIES" does
not include (i) the Designated Preferred; (ii) securities issuable upon
conversion of or with respect to the Designated Preferred; (iii) shares of the
Company's Common Stock (or related options) issued to officers, directors,
employees of and/or consultants to the Company pursuant to plans or agreements
as approved by the Company's Board of Directors; (iv) shares of the Company's
Common Stock or Preferred Stock issued to holders of the Designated Preferred in
connection with any stock split, stock dividend, or recapitalization by the
Company; (v) securities issued in connection with any equipment leasing,
technology licensing, corporate partnering, strategic alliance, acquisition,
merger, purchase of assets or similar transaction as approved by the Company's
Board of Directors;
17
64
(vi) shares of Common Stock issued to holders of Common Stock in connection with
a stock split or stock dividend with respect to the Common Stock; and (vii)
shares issued in the Initial Public Offering.
(C) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give the Stockholders written notice of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. The Stockholders shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase for cash some or all of its Pro Rata Share of such New Securities for
the price and upon the general terms, including deferred payment, if any,
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.
(D) In the event that any Stockholder (a "NON-EXERCISING
STOCKHOLDER") fails to exercise in full the right of first refusal within said
twenty (20) day period, notice shall promptly be given by the Company to those
Stockholders who have exercised the right of first refusal in full. Such
Stockholders shall have the right for an additional ten (10) days to elect by
notice to the Company to purchase any or all of the New Securities which the
Non-exercising Stockholders were entitled to purchase but elected not to, with
such right of over-subscription to be allocated among such Stockholders in
accordance with their respective Pro Rata Shares or as they may otherwise agree.
After the aggregate thirty (30) day period during which Stockholders may
exercise their first refusal right, the Company shall have one hundred twenty
(120) days thereafter to sell (or enter into an agreement pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within one
hundred twenty (120) days from the date of said agreement) the New Securities
respecting which the Stockholder's rights were not exercised, at a price and
upon general terms no more favorable to the purchasers thereof than specified in
the Company's notice. In the event the Company has not sold the New Securities
within said one hundred twenty (120) day period (or sold and issued New
Securities in accordance with the foregoing agreement within one hundred twenty
(120) days from the date of said agreement), the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Stockholders in the manner provided above.
(E) The right of first refusal granted under this Section 3.1 shall
not apply to and shall expire upon the closing of the Company's Initial Public
Offering.
(F) The rights granted pursuant to this Section 3.1 may be assigned
by the Stockholder (or by any permitted transferee of any such rights) so long
as (i) the Company is given notice of any such assignment within a reasonable
time after the date the same is effected and (ii) the transferee shall have
acquired Registrable Securities (including shares of Designated Preferred prior
to conversion into Registrable Securities) in a private transaction.
18
65
4. MISCELLANEOUS
4.1. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
4.2. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to a Stockholder, to such Stockholder's address
set forth in the Purchase Agreement or to such other address as such Stockholder
shall have furnished to the Company in writing, (b) if to any other holder of
Registrable Securities, at such address as such holder shall have furnished the
Company in writing, or (c) if to the Company, to its address set forth above and
addressed to the attention of the President or at such other address as the
Company shall have furnished to the Stockholders. All notices and other
communications pursuant to the provisions of this Section 4.4 shall be deemed
delivered when mailed or sent by facsimile. Notwithstanding the foregoing, any
notice or communication to an address outside the United States shall be sent by
facsimile and confirmed in writing contemporaneously sent by two day guaranteed
international courier.
4.5. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
4.7. APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of (i) the Company and (ii) the holders
of at least two-thirds (2/3) of the shares which are then Registrable
Securities. Any amendment, termination or waiver effected in accordance with
this section shall be binding upon the Stockholders, each of their transferees
and the Company. The Stockholders acknowledge that by the operation of this
Section the holders of two-thirds (2/3) of the outstanding Registrable
Securities as aforesaid may have the right and power to diminish or eliminate
all rights of such Stockholder under this Agreement.
19
66
The foregoing Amended and Restated Investors Rights Agreement is hereby
executed as of the date first above written.
THE COMPANY:
AURORA BIOSCIENCES CORPORATION
By: __________________________
Title: __________________________
THE PURCHASERS:
JAPAN ASSOCIATED FINANCE CO., LTD. JAFCO G-6(A) INVESTMENT
ENTERPRISE PARTNERSHIP
By: __________________________ By: __________________________________
Title: __________________________ Title:__________________________________
JAFCO R-2 INVESTMENT JAFCO G-6(B) INVESTMENT
ENTERPRISE PARTNERSHIP ENTERPRISE PARTNERSHIP
By: __________________________ By: __________________________________
Title: __________________________ Title:__________________________________
JAFCO R-3 INVESTMENT
ENTERPRISE PARTNERSHIP
By: __________________________ ________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: __________________________
20
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
67
THE PREVIOUS INVESTORS:
AVALON MEDICAL PARTNERS, L.P.
By: __________________________
Title: __________________________
AVALON BIOVENTURES II, L.P.
By: __________________________
Title: __________________________
▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, ▇.▇. ▇▇
By: ▇▇▇▇▇▇▇▇▇ Associates, L.P.
By: __________________________
Title: General Partner
ABINGWORTH BIOVENTURES SICAV
By: __________________________
Title: __________________________
21
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
68
NEW ENTERPRISES ASSOCIATES VI, LIMITED PARTNERSHIP
By: NEA Partners VI, Limited Partnership,
its General Partner
By: __________________________
Title: General Partner
NEA VENTURES 1996, L.P.
By: __________________________
Title: Authorized Signatory
DP III ASSOCIATES, L.P.
By: One ▇▇▇▇▇▇ Square Associates III, L.P.,
its General Partner
By: ___________________________
General Partner
DOMAIN PARTNERS III, L.P.
By: One ▇▇▇▇▇▇ Square Associates III, L.P.,
its General Partner
By: ___________________________
General Partner
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By: ___________________________
Attorney - in - Fact
22
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
69
PACKARD INSTRUMENT COMPANY, INC.
By: __________________________
Title: __________________________
SEQUANA THERAPEUTICS, INC.
By: __________________________
Title: __________________________
GC&H INVESTMENTS
By: __________________________
Title: __________________________
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. GLOBE
23
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
70
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ LUETOLF
FOR ▇▇▇▇▇▇ ▇.▇. LANGINGER
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
24
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
71
THE ▇▇▇▇▇▇ FAMILY TRUST
By:______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., TRUSTEE
By:______________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, TRUSTEE
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ GROUP
By:______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:___________________________
25
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
72
EXHIBIT A
PREVIOUS INVESTORS
Avalon Medical Partners, L.P.
Avalon Bioventures II, ▇.▇.
▇▇▇▇▇▇▇▇▇ Capital Partners, ▇.▇. ▇▇
Abingworth Bioventures SICAV
New Enterprises Associates VI, Limited partnership
NEA Ventures 1996, L.P.
DP III Associates, L.P.
Domain Partners III, L.P.
Biotechnology Investments Limited
Packard Instrument Company, Inc.
Sequana Therapeutics, Inc.
GC&H Investments
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. Globe
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ Luetolf
for ▇▇▇▇▇▇ ▇.▇. Langinger
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
The ▇▇▇▇▇▇ Family Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Group
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
73
EXHIBIT B
PURCHASERS
Japan Associated Finance Co., Ltd.
JAFCO R-2 Investment Enterprise Partnership
JAFCO R-3 Investment Enterprise Partnership
JAFCO G-6(A) Investment Enterprise Partnership
JAFCO G-6(B) Investment Enterprise Partnership
▇▇▇▇▇ ▇. ▇▇▇▇▇
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
74
1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.............................1
1.1. Restrictions on Transferability...................................1
1.2. Certain Definitions...............................................1
1.3. Restrictive Legend(s).............................................2
1.4. Notice of Proposed Transfers......................................3
1.5. Demand Registration Rights........................................4
1.6. Company Registration..............................................6
1.7. Form S 3 Registration Rights......................................6
1.8. Expenses of Registration..........................................8
1.9. Registration Procedures...........................................8
1.10. Indemnification..................................................9
1.11. Information by Holder...........................................11
1.12. Rule 144 Reporting..............................................11
1.13. Transfer of Registration Rights.................................12
1.14. Termination of Registration Rights..............................12
1.15. "Market Stand Off" Agreement....................................12
1.16. Other Registration Rights.......................................12
1.17. Changes in Common Stock or Preferred Stock......................13
2. AFFIRMATIVE COVENANTS OF THE COMPANY AND STOCKHOLDERS....................13
2.1. Financial Information............................................13
2.2. Assignment of Rights to Financial Information....................13
2.3. Inspection and Visitation Rights.................................13
2.4. Reserve for Conversion Shares....................................13
2.5. Properties, Business, Insurance..................................14
2.6. Restrictive Agreements Prohibited................................14
2.7. Transactions with Affiliates.....................................14
2.8. Expenses of Directors............................................14
2.9. Bylaws...........................................................14
2.10. Performance of Contracts........................................15
2.11. Proprietary Information Agreements..............................15
2.12. Compliance with Laws............................................15
i
75
2.13. Keeping of Records and Books of Account.........................15
2.14. U.S. Real Property Interest Statement...........................15
2.15. Rule 144A Information...........................................16
2.16. Termination of Covenants........................................16
2.17. Confidential Information, etc...................................16
3. RIGHTS OF FIRST REFUSAL..................................................17
3.1. Right of First Refusal on Company Issuances......................17
4. MISCELLANEOUS............................................................18
4.1. Governing Law....................................................18
4.2. Successors and Assigns...........................................18
4.3. Entire Agreement.................................................18
4.4. Notices, etc.....................................................18
4.5. Counterparts.....................................................19
4.6. Severability.....................................................19
4.7. Approval of Amendments and Waivers...............................19
ii
76
EXHIBIT D
VOTING AGREEMENT
77
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
JAPAN ASSOCIATED FINANCE CO., LTD.
By:
-------------------------------
Title
-------------------------------
Address: Tekko ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
78
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
JAFCO R-2 INVESTMENT ENTERPRISE PARTNERSHIP
By:
-------------------------------
Title
-------------------------------
Address: Tekko ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
79
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
JAFCO R-3 INVESTMENT ENTERPRISE PARTNERSHIP
By:
-------------------------------
Title
-------------------------------
Address: Tekko ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
80
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
JAFCO G-6(A) INVESTMENT ENTERPRISE PARTNERSHIP
By:
-------------------------------
Title
-------------------------------
Address: Tekko ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
81
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
JAFCO G-6(B) INVESTMENT ENTERPRISE PARTNERSHIP
By:
-------------------------------
Title
-------------------------------
Address: Tekko ▇▇▇▇, ▇-▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 100
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
82
COUNTERPART SIGNATURE PAGE TO
AURORA BIOSCIENCES CORPORATION
VOTING AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions contained
in the Voting Agreement dated as of March 8, 1996, by and among Aurora
Biosciences Corporation, a Delaware corporation, and the other individuals and
entities listed in the signature pages thereto (the "Voting Agreement"). Upon
the execution of this counterpart signature page, the undersigned shall be
deemed a "Stockholder" for all purposes under the Voting Agreement.
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
83
EXHIBIT E
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
84
EXHIBIT F
FORM OF LEGAL OPINION OF COMPANY COUNSEL
85
[LETTERHEAD]
December 27, 1996
To the Purchasers of Aurora Biosciences Corporation
Series D Preferred Stock listed on Schedule A attached hereto:
We have acted as counsel for Aurora Biosciences Corporation, a Delaware
corporation (the "Company"), in connection with the issuance and sale of
572,536 shares of the Company's Series D Preferred Stock (the "Shares") to the
Purchasers listed in the Schedule of Purchasers attached to the Series D
Preferred Stock Purchase Agreement dated as of December 27, 1996 (the
"Agreement"). We are rendering this opinion pursuant to Section 4.6 of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we
render an opinion "to the best of our knowledge" or concerning an item "known
to us" or our opinion otherwise refers to our knowledge, it is based solely
upon (i) an inquiry of attorneys within this firm who perform legal services
for the Company, (ii) receipt of a certificate executed by an officer of the
Company covering such matters, and (iii) such other investigation, if any, that
we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Amended and Restated Investors' Rights
Agreement (together, the "Agreements")), where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have also
assumed: that all individuals executing and delivering documents had the legal
capacity to so execute and deliver; that you have received all documents you
were to receive under the Agreements; that the Agreements are obligations
binding upon you; if you are a corporation or other entity, that you have filed
any required California franchise or income tax returns and have paid any
required California franchise or income taxes; and that there are no extrinsic
agreements or understandings among the parties to the Agreements that would
modify or interpret the terms of the Agreements or the respective rights or
obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of
the United States of America, the General Corporation Law of the State of
Delaware, and the laws of the State of California. We express no opinion as to
whether the laws of any particular jurisdiction apply, and no opinion to the
extent that the laws of any jurisdiction other than those identified above are
applicable to the subject matter hereof. We are not rendering any opinion as
to compliance with any antifraud law, rule or regulation relating to
securities, or to the sale or issuance thereof.
With regard to our opinion in paragraph 3 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
86
The Purchasers of Series D Preferred Stock
December 27, 1996
Page Two
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the
State of Delaware.
2. The Agreements have been duly and validly authorized, executed
and delivered by the Company and constitute valid and binding
agreements of the Company enforceable against the Company in
accordance with their terms, except as rights to indemnity
under section 1.10 of the Amended and Restated Investors'
Rights Agreement may be limited by applicable laws and except
as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of
equitable relief, including specific performance.
3. The Company's authorized capital stock consists of (a) fifty
million (50,000,000) shares of Common Stock, par value $.001
per share and (b) twenty-five million (25,000,000) shares of
Preferred Stock, par value $.001 per share, of which ten
million five hundred thousand (10,500,000) shares have been
designated Series A Preferred Stock, eight hundred thirty-three
thousand three hundred thirty-two (833,332) shares have been
designated Series B Preferred Stock, eight hundred thousand
(800,000) shares have been designated Series C Preferred Stock
and five hundred seventy-two thousand five hundred thirty-six
(572,536) shares have been designated Series D Preferred Stock.
Immediately prior to the Closing, 3,574,450 shares of Common
Stock, 10,239,115 shares of Series A Preferred Stock, 833,332
shares of Series B Preferred Stock and 750,000 shares of Series
C Preferred Stock were issued and outstanding. Immediately
prior to the Closing, no shares of Series D Preferred Stock
were outstanding. The outstanding shares of Common Stock and
Preferred Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The rights, preferences
and privileges of the Shares are as stated in the Restated
Certificate. The Shares have been duly authorized, and upon
issuance and delivery against payment therefor in accordance
with the terms of the Agreement, the Shares will be validly
issued, outstanding, fully paid and nonassessable. The shares
of Common Stock issuable upon conversion of the Shares have
been duly authorized, and upon issuance and delivery upon
conversion of the Shares in accordance with the terms thereof,
will be validly issued, outstanding, fully paid and
nonassessable. To the best of our knowledge, except as set
forth in the Agreement or Exhibit B thereto, there are no
options, warrants, conversion privileges, preemptive rights or
other rights presently outstanding to purchase any of the
authorized but unissued capital stock of the Company, other
than the conversion privileges of the Preferred Stock, rights
created in connection with the transactions contemplated by the
Agreement, and 1,000,000 shares reserved for issuance under the
Company's 1996 Stock Plan.
4. The execution and delivery of the Agreements by the Company do
not violate any provision of the Company's Certificate of
Incorporation or Bylaws.
5. To the best of our knowledge, there is no action, proceeding
or investigation pending or overtly threatened against the
Company before any court or administrative agency that
questions the validity of the Agreements or might result,
either individually or in the aggregate, in any material
adverse change in the assets, financial condition, or
operations of the Company.
6. All consents, approvals, authorizations, or orders of, and
filings, registrations, and qualifications with any regulatory
authority or governmental body in the United States required
for the consummation by the Company of the transactions
contemplated by the Agreements, have been
87
The Purchasers of Series D Preferred Stock
December 27, 1996
Page Three
made or obtained, except (a) for the filing of a Notice of
Transaction Pursuant To Section 25102(f) of the California
Corporate Securities Law of 1968, and (b) for the filing of a
Form D pursuant to Securities and Exchange Commission
Regulation D.
This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm, or entity without our
prior written consent.
Very truly yours,
▇▇▇▇▇▇ Godward LLP
By:________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇
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63000 v2/SD
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