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EXHIBIT 10.8
COMBICHEM, INC.
SERIES D PREFERRED
STOCK PURCHASE AGREEMENT
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November 15, 1996
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock.................................................. 1
1.1 Sale and Issuance of Series D Preferred Stock........................ 1
1.2 Closing.............................................................. 1
2. Representations and Warranties of the Company............................... 2
2.1 Organization; Good Standing; Qualification........................... 2
2.2 Authorization........................................................ 2
2.3 Valid Issuance of Preferred and Common Stock......................... 2
2.4 Governmental Consents................................................ 3
2.5 Capitalization and Voting Rights..................................... 3
2.6 Subsidiaries......................................................... 4
2.7 Contracts and Other Commitments...................................... 4
2.8 Related-Party Transactions........................................... 5
2.9 Registration Rights.................................................. 5
2.10 Permits.............................................................. 5
2.11 Compliance with Other Instruments.................................... 6
2.12 Litigation........................................................... 6
2.13 Disclosure........................................................... 6
2.14 Offering............................................................. 6
2.15 Title to Property and Assets; Leases................................. 7
2.16 Financial Statements................................................. 7
2.17 Changes.............................................................. 7
2.18 Patents and Trademarks............................................... 8
2.19 Manufacturing and Marketing Rights................................... 8
2.20 Employees; Employee Compensation..................................... 8
2.21 Proprietary Information and Inventions Agreements.................... 9
2.22 Tax Returns, Payments and Elections.................................. 9
2.23 Insurance............................................................ 9
2.24 Environmental and Safety Laws........................................ 10
2.25 Minute Books......................................................... 10
2.26 Real Property Holding Corporation.................................... 10
2.27 Small Business Concern............................................... 10
2.28 Qualified Small Business............................................. 10
3. Representations and Warranties of the Investors............................. 10
3.1 Authorization........................................................ 10
3.2 Purchase Entirely for Own Account.................................... 10
3.3 Reliance Upon Investors' Representations............................. 11
3.4 Receipt of Information............................................... 11
3.5 Investment Experience................................................ 11
3.6 Accredited Investor.................................................. 11
3.7 Restricted Securities................................................ 12
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3.8 Legends.............................................................. 12
3.9 Public Sale.......................................................... 13
3.10 Non-U.S. Person...................................................... 13
4. Covenants of the Company.................................................... 14
5. Conditions of Investor's Obligations at Closing............................. 14
5.1 Representations and Warranties....................................... 14
5.2 Performance.......................................................... 14
5.3 Compliance Certificate............................................... 14
5.4 Qualifications....................................................... 14
5.5 Proceedings and Documents............................................ 14
5.6 Small Business Concern Documents..................................... 15
5.7 Opinion of Company Counsel........................................... 15
5.8 Investors' Rights Agreement.......................................... 15
5.9 Co-Sale Agreements................................................... 15
5.10 Filing of Restated Articles.......................................... 15
6. Conditions of the Company's Obligations at Closing.......................... 15
6.1 Representations and Warranties....................................... 15
6.2 Qualifications....................................................... 15
6.3 Co-Sale Agreements................................................... 15
7. Miscellaneous............................................................... 16
7.1 Entire Agreement..................................................... 16
7.2 Survival of Warranties............................................... 16
7.3 Successors and Assigns............................................... 16
7.4 Governing Law........................................................ 16
7.5 Counterparts......................................................... 16
7.6 Titles and Subtitles................................................. 16
7.7 Notices.............................................................. 16
7.8 Finder's Fees........................................................ 16
7.9 Expenses............................................................. 17
7.10 Attorneys' Fees...................................................... 17
7.11 Amendments and Waivers............................................... 17
7.12 Severability......................................................... 17
7.13 Corporate Securities Law............................................. 17
7.14 Exculpation Among Investors.......................................... 18
Exhibit A Amended and Restated Articles of Incorporation
Exhibit B Amended and Restated Investors' Rights Agreement
Exhibit C Current Shareholders
Exhibit D Co-Sale Agreement
Schedule A Schedule of Investors
Schedule of Exceptions
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COMBICHEM, INC.
SERIES D PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 15th day of November, 1996, by and between CombiChem, Inc., a
California corporation (the "Company"), and each of the persons listed on
Schedule A hereto, each of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series D Preferred Stock.
1.1.1 The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit A (the
"Restated Articles").
1.1.2 Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series D Preferred Stock set
forth opposite each Investor's name on Schedule A hereto under the heading
"Closing," at a price of $1.00 per share for an aggregate amount to be sold to
all Investors at the Closing of at least 9,869,205 shares.
1.2 Closing. The purchase and sale of the Series D Preferred Stock shall
take place at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx X Xxxxxx,
Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx, at 10:00 a.m., on November 15, 1996, or at
such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series D Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series D Preferred Stock that such
Investor is purchasing against payment of the purchase price therefor by check
or wire transfer.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished each Investor and special counsel for the Investors,
which exceptions shall be deemed to be representations and warranties as if made
hereunder:
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2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, has all requisite corporate power and authority to
own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Amended and Restated Investors' Rights Agreement dated the date
hereof in the form attached as Exhibit B ("the Investors' Rights Agreement"),
and any other agreement to which the Company is a party and the execution and
delivery of which is contemplated hereby (the "Ancillary Agreements"), to issue
and sell the Series D Preferred Stock and the Common Stock issuable upon
conversion thereof, and to carry out the provisions of this Agreement, the
Investors' Rights Agreement, the Restated Articles and any Ancillary Agreement.
The Company is not qualified to do business as a foreign corporation in any
jurisdiction and such qualification is not now required.
2.2 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and any
Ancillary Agreement, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale and delivery of the Series D Preferred Stock being sold
hereunder, the Series D-1 Preferred Stock issuable upon conversion of the Series
D Preferred Stock and the Common Stock issuable upon conversion of the Series D
Preferred Stock or Series D-1 Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement, the Investors' Rights Agreement, and
any Ancillary Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, moratorium and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investors' Rights Agreement may be
limited by applicable federal or state securities law.
2.3 Valid Issuance of Preferred and Common Stock. The Series D Preferred
Stock that is being purchased by the Investors hereunder will upon issuance and
delivery hereunder be duly and validly issued, fully paid and nonassessable, and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Investors' Rights Agreement and under applicable
state and federal securities laws. The Series D-1 Preferred Stock issuable upon
conversion of the Series D Preferred Stock purchased under this Agreement and
the Common Stock issuable upon conversion of such Series D Preferred Stock and
the Series D-1 Preferred Stock have been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Articles, will
be duly and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws. The Series D Preferred Stock that is being purchased
hereunder, the Series D-1 Preferred Stock issuable upon conversion of the Series
D Preferred Stock and the Common Stock issuable upon conversion of the Series D
Preferred
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Stock and Series D-1 Preferred Stock are not subject to any pre-emptive rights
or rights of first refusal which have not been previously waived.
2.4 Governmental Consents. No consent, approval, qualification, order or
authorization of, or filing with, any local, state or federal governmental
authority is required on the part of the Company in connection with the
Company's valid execution, delivery or performance of this Agreement, the offer,
sale or issuance of the Series D Preferred Stock by the Company, the issuance of
Series D-1 Preferred Stock upon conversion of the Series D Preferred Stock or
the issuance of Common Stock upon conversion of the Series D Preferred Stock or
Series D-1 Preferred Stock, except (i) the filing of the Restated Articles with
the Secretary of State of the State of California, and (ii) such filings as have
been made prior to the Closing, except Form D or any notices of sale required to
be filed under applicable state securities laws, which will be timely filed
within the applicable periods therefor.
2.5 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
2.5.1 Preferred Stock. 63,196,296 shares of Preferred Stock, no par
value (the "Preferred Stock"), of which 1,000,000 shares have been designated
Series A Preferred Stock, all of which are issued and outstanding, 2,226,667
shares have been designated Series B Preferred Stock, all of which are issued
and outstanding, 17,519,776 have been designated Series C Preferred Stock,
17,158,486 of which are issued and outstanding, 1,500,000 shares have been
designated Series Z Preferred Stock, 532,777 of which are issued and
outstanding, 465,000 shares have been designated Series J Preferred Stock, none
of which are issued and outstanding, 1,000,000 shares have been designated
Series A-1 Preferred Stock, none of which are issued and outstanding, 2,226,667
shares have been designated Series B-1 Preferred Stock, none of which are issued
and outstanding, 17,519,776 shares have been designated Series C-1 Preferred
Stock, none of which are issued and outstanding, 9,869,205 shares have been
designated Series D Preferred Stock, all of which will be issued pursuant to
this Agreement, and 9,869,205 shares have been designated Series D-1 Preferred
Stock, none of which are issued and outstanding. The rights, privileges and
preferences of the Series A, Series B, Series C, Series D, Series J, Series Z,
Series A-1, Series B-1, Series C-1 and Series D-1 Preferred Stock will be as
stated in the Restated Articles.
2.5.2 Common Stock. 80,000,000 shares of common stock ("Common
Stock"), no par value, of which 2,714,327 shares are issued and outstanding.
2.5.3 The outstanding shares of Preferred Stock and Common Stock are
owned by the shareholders and in the numbers specified in Exhibit C hereto.
2.5.4 The outstanding shares of Preferred Stock and Common Stock
have been issued in accordance with the registration or qualification provisions
of the Securities Act of 1933, as amended (the "Securities Act") and any
relevant state securities laws or pursuant to valid exemptions therefrom.
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2.5.5 Except for (A) the conversion privileges of the Preferred
Stock, (B) the rights provided in paragraph 2.3 of the Investors' Rights
Agreement, (C) currently outstanding options to purchase 40,000 shares of Common
Stock granted to an employee prior to the adoption of the Company's 1995 Stock
Option/Stock Issuance Plan (the "Plan"), (D) currently outstanding options to
purchase 4,420,337 shares of Common Stock granted to employees or consultants
pursuant to the Plan, (E) options to purchase 465,000 shares of Series J
Preferred Stock to be granted to certain employees in connection with their
employment by the Company, (F) up to 196,558 shares of Series Z Preferred Stock
issuable upon exercise of warrants issued (or to be issued) in connection with
the Company's equipment lease line, (G) 35,000 shares of Common Stock issuable
upon exercise of warrants outstanding at the Closing, (H) up to 240,321 shares
of Series C Preferred Stock issuable upon exercise of warrants issued (or to be
issued) in connection with the Company's equipment lease line and (I) 120,968
shares of Series C Preferred Stock issuable upon exercise of warrants
outstanding at the Closing, there are not outstanding any options, warrants,
rights (including conversion or preemptive rights and rights of first refusal)
or agreements for the purchase or acquisition from the Company of any shares of
its capital stock. In addition to the aforementioned options, the Company has
reserved an additional 599,937 shares of its Common Stock for purchase or upon
exercise of options to be granted in the future under the Plan or other employee
arrangement approved by the Board of Directors of the Company. The Company is
not a party or subject to any agreement or understanding, and, to the best of
the Company's knowledge, there is no agreement or understanding between any
persons that affects or relates to the voting or giving of written consents with
respect to any security or the voting by a director of the Company.
2.6 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other corporation, association or other business
entity. The Company is not a participant in any joint venture, partnership or
similar arrangement.
2.7 Contracts and Other Commitments. The Schedule of Exceptions contains
a complete list of all of the following agreements and instruments to which the
Company is a party: (a) all contracts, agreements and instruments which involve
a commitment by, or payments to, the Company in excess of $50,000; (b) all stock
purchase or redemption agreements; (c) all loan or debt agreements and other
evidences of indebtedness, including guarantees; (d) all employment agreements
and other agreements with or for the benefit of any director, officer, employee
or 10% stockholder of the Company; (e) all licenses of any patent, trade secret
or other proprietary right to or from the Company; and (f) all indemnification
and noncompetition agreements (collectively, the "Material Agreements"). All the
Material Agreements are valid and binding obligations of the Company, in full
force and effect in all material respects. The Company is not aware of any
material default, either pending or threatened, with respect to the Material
Agreements. The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its charter
documents or Bylaws, which adversely affects its business as presently conducted
or as currently proposed to be conducted, its properties or its financial
condition.
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The Company has not (I) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital
stock, (II) incurred any indebtedness for money borrowed or incurred any other
liabilities individually in excess of $25,000 or in excess of $50,000 in the
aggregate, (III) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (IV) sold, exchanged or otherwise disposed of
any of its assets or rights, nor entered into any agreement therefor, other than
the sale of its inventory in the ordinary course of business. The Company has
not engaged in the past three months in any discussion (i) with any
representative of any corporation or corporations regarding the consolidation or
merger of the Company with or into any such corporation or corporations, (ii)
with any corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which more than 50% of the voting power of the Company is
disposed of, or (iii) regarding any other form of acquisition, liquidation,
dissolution or winding up of the Company.
2.8 Related-Party Transactions. No employee, officer or director of the
Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that employees, officers or directors of the Company and members
of their immediate families may own stock in publicly traded companies that may
compete with the Company. To the best of the Company's knowledge, no officer or
director or any member of their immediate families is, directly or indirectly,
interested in any material contract with the Company.
2.9 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently 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, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.11 Compliance with Other Instruments. The Company is not in violation
or default in any material respect of any provision of its Restated Articles or
Bylaws or in any material respect of any provision of, and no consent or
approval of any third party is required under, any mortgage, indenture,
agreement, instrument or contract to which it is a party or by
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which it is bound or, to the best of its knowledge, of any federal or state
judgment, order, writ, decree, statute, rule or regulation applicable to the
Company. The execution, delivery and performance by the Company of this
Agreement, the Investors' Rights Agreement and any Ancillary Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in material conflict with or constitute, with or
without the passage of time or giving of notice, either a material default under
any such provision or an event that results in the creation of any material
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations, or any of its assets or properties.
2.12 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company. The foregoing includes,
without limitation, any action, suit, proceeding, or investigation pending or
currently threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to, or to the best
of its knowledge, named in any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit or
proceeding by the Company currently pending or that the Company currently
intends to initiate.
2.13 Disclosure. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series D Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. Neither this Agreement nor any other
written statements or certificates made or delivered in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
2.14 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series D Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of 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.
2.15 Title to Property and Assets; Leases. Except (a) as reflected in the
Financial Statements (as defined below), (b) for liens for current taxes not yet
delinquent, (c) for liens imposed by law and incurred in the ordinary course of
business for obligations not past due to carriers, warehousemen, laborers,
materialmen and the like, (d) for liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, or (e) for minor defects in
title, none of which, individually or in the aggregate materially interferes
with the use of such property, the Company owns its property and assets free and
clear of all mortgages,
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liens, claims and encumbrances. With respect to the property and assets it
leases, the Company is in compliance with such leases and, to the best of its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (a)-(e) above.
2.16 Financial Statements. The Company has delivered to each Investor its
audited financial statements (balance sheet and profit and loss statement,
statement of shareholders' equity and statement of changes in financial position
including notes thereto) at December 31, 1995 and for the fiscal year then ended
(the "Audited Financial Statements") and its unaudited financial statements
(balance sheet and profit and loss statement including notes thereto) as at and
for the eight-month period ended August 31, 1996 (the "Unaudited Financial
Statements" and, collectively with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
Unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to August 31, 1996 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
generally accepted accounting principles.
2.17 Changes. To the best of the Company's knowledge, since August 31,
1996, there has not been any event or condition of any type that has materially
and adversely affected the business, properties, prospects or financial
condition of the Company.
2.18 Patents and Trademarks. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks,
servicemarks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes 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. Except for agreements with its
own employees or consultants, substantially in the form referenced in paragraph
2.21 below, there are no outstanding options, licenses or agreements of any kind
relating to the foregoing, 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, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by
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conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights of any other person or entity. After inquiry, the Company is
not aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would 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. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.19 Manufacturing and Marketing Rights. The Company has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.20 Employees; Employee Compensation. To the best of the knowledge of
the Company, there is no strike or labor dispute or union organization
activities pending or threatened between it and its 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 employment opportunity and other laws
related to employment. To the best of the Company's knowledge, no employee of
the Company is or will be in violation of any judgment, decree or order, or any
term of any employment contract, patent disclosure agreement or other contract
or agreement relating to the relationship of any such employee with the Company
or any other party because of the nature of the business conducted or to be
conducted by the Company or to the utilization by the employee of his best
efforts with respect to such business. The Company is not aware that any officer
or key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment 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.
2.21 Proprietary Information and Inventions Agreements. Each employee and
officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms that have been delivered to special
counsel for the Investors, and each consultant or other person who has
contributed to the development of the Company's proprietary rights has assigned
his or her rights therein to the Company.
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2.22 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 341(f) or Section
1362(a) of the Code, nor has it made any other elections pursuant to the Code
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a material effect on the business, properties,
prospects or financial condition of the Company. The Company has never had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has ever been
audited by governmental authorities. Since the date of the Financial Statements,
the Company has made adequate provisions on its books of account for all taxes,
assessments and governmental charges with respect to its business, properties
and operations for such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes (including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositaries.
2.23 Insurance. The Company has in full force and effect fire, general
liability, and casualty insurance policies, with extended coverage, in amounts
customary for companies similarly situated. The Company has in full force and
effect term life insurance, payable to the Company, on the lives of those
executive officers and in the amounts set forth in the Schedule of Exceptions.
2.24 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.
2.25 Minute Books. The copy of the minute books of the Company provided
to the Investor's special counsel contain minutes of all meetings of directors
and shareholders and all actions by written consent without a meeting by the
directors and shareholders since the time of incorporation and reflect all
actions by the directors (and any committee of directors) and shareholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.26 Real Property Holding Corporation. The Company is not a real
property holding corporation within the meaning of the Code Section 897(c)(2)
and any regulations promulgated thereunder.
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2.27 Small Business Concern. The Company, together with its "affiliates"
(as that term is defined in Section 121.401 of Title 13 of the Code of Federal
Regulations), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended, and the regulations thereunder,
including Section 121.802(a)(2) of Title 13 of the Code of Federal Regulations.
The information set forth in the documents provided to the Investors pursuant to
Section 5.6 below is accurate and complete.
2.28 Qualified Small Business. The Company represents and warrants to the
Investors that, to the best of its knowledge, the shares of Series D Preferred
Stock offered hereby should qualify as "Qualified Small Business Stock" as
defined in Section 1202(c) of the Code as of the date hereof. The Company will
use reasonable efforts to comply with the reporting and recordkeeping
requirements of Section 1202 of the Code and any regulations promulgated
thereunder, and agrees not to repurchase any stock of the Company if such
repurchase would cause such shares not to so qualify as "Qualified Small
Business Stock."
3. Representations and Warranties of the Investors. Each Investor hereby
represents and warrants that:
3.1 Authorization. Each Investor represents that it has full power and
authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
3.2 Purchase Entirely for Own Account. This Agreement is made with each
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series D Preferred Stock to be purchased by such Investor and the
Series D-1 Preferred Stock and the Common Stock issuable upon conversion thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.3 Reliance Upon Investors' Representations. Each Investor understands
that the Series D Preferred Stock is not, and any Series D-1 Preferred Stock or
any Common Stock acquired on conversion thereof at the time of issuance may not
be, registered under the Securities Act on the ground that the sale provided for
in this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
the Company's reliance on such exemption is predicated on the Investors'
representations set forth herein. Each Investor realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Investor has in mind merely acquiring the Securities for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise. No Investor has any such intention.
10.
14
3.4 Receipt of Information. Each Investor 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 Series D Preferred Stock and the
business, properties, prospects and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.5 Investment Experience. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities. If other than an individual, Investor
also represents it has not been organized for the purpose of acquiring the
Securities.
3.6 Accredited Investor. Each Investor as to itself severally and not
jointly further represents to the Company that except as otherwise disclosed to
the Company, in writing, prior to its execution hereof:
3.6.1 such Investor is an "Accredited Investor" (as defined in the
rules and regulations promulgated under the Securities Act); or
3.6.2 the capital contribution of the Investor does not exceed 10%
of the Investor's net worth or, in the case of an individual, joint net worth
with that person's spouse.
3.7 Restricted Securities. Each Investor understands that the Securities
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Securities Act, the Securities must be
held indefinitely. In particular, each Investor is aware that the Securities may
not be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of that Rule are met. Among the conditions for use of Rule 144
is the availability of current information to the public about the Company. Such
information is not now available and the Company has no present plans to make
such information available.
3.8 Legends. To the extent applicable, each certificate or other
document evidencing any of the Securities shall be endorsed with the legends set
forth below, and each Investor covenants that, except to the extent such
restrictions are waived by the Company, such Investor shall not transfer the
shares represented by any such certificate without complying with the
restrictions on transfer described in the legends endorsed on such certificate:
11.
15
3.8.1 The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH
RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
3.8.2 In the case of an Investor who is not a citizen or resident of
the United States or Canada, or any state, territory or possession thereof,
including but not limited to any estate of any such person, or any corporation,
partnership, trust or other entity created or existing under the laws thereof,
or any entity controlled or owned by any of the foregoing (a "U.S. Person") and
is not an Accredited Investor:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF PRIOR TO ONE YEAR FROM THE DATE OF THE CLOSING
AT WHICH SUCH SHARES WERE PURCHASED, WITHIN THE UNITED STATES,
CANADA, THEIR TERRITORIES AND POSSESSIONS OR ANY AREA SUBJECT TO
THEIR JURISDICTION OR TO ANY CITIZEN OR RESIDENT OF THE UNITED
STATES OR CANADA, OR ANY STATE, TERRITORY OR POSSESSION THEREOF,
INCLUDING ANY ESTATE OF SUCH PERSON OR ANY CORPORATION, PARTNERSHIP,
TRUST OR OTHER ENTITY CREATED OR EXISTING UNDER THE LAWS THEREOF,
AND THEREAFTER MAY NOT BE SO TRANSFERRED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
3.9 Public Sale. Each Investor agrees not to make, without the prior
written consent of the Company, any public offering or sale of the Securities,
although permitted to
12.
16
do so pursuant to Rule 144(k) promulgated under the Securities Act, until the
earlier of (i) the date on which the Company effects its initial registered
public offering pursuant to the Securities Act or (ii) the date on which it
becomes a registered company pursuant to section 12(g) of the Securities
Exchange Act of 1934, as amended, or (iii) August 17, 2000.
3.10 Non-U.S. Person. If Investor is not a U.S. Person, such Investor
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
shares of Series D Preferred Stock offered hereunder or any use of this
Agreement, including (i) the legal requirements within its jurisdiction for the
purchase of such shares, (ii) any foreign exchange restrictions applicable to
such purchase, (iii) any governmental or other consents which may need to be
obtained and (iv) the income tax and other tax consequences, if any, which may
be relevant to the purchase, holding, redemption, sale or transfer of the
Interest. Such Investor's subscription and payment for, and its continued
beneficial ownership of the shares of Series D Preferred Stock offered hereunder
will not violate any applicable securities or other laws of its jurisdiction.
4. Covenants of the Company.
4.1 Continuing Covenants. So long as any shares of Preferred Stock are
outstanding, the Company shall not, without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of a majority of the
shares of Preferred Stock then outstanding:
4.1.1 change the authorized number of directors to be other than
between five (5) and nine (9); or
4.1.2 put into place or effect any acceleration of vesting of stock
options or waiver of repurchase rights with respect to stock beneficially held
by an employee or consultant of the Company, each in the event of a sale of all
or substantially all of the assets of the Company, a merger of the Company with
or into another entity or a liquidation of the Company.
5. Conditions of Investor's Obligations at Closing. The obligations of each
Investor under Section 1.1.2 or Section 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as 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.
13.
17
5.2 Performance. The Company shall have performed and complied with all
agreements, obligations, covenants and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
5.3 Compliance Certificate. The President of the Company shall deliver
to each Investor at the Closing a certificate certifying that the conditions
specified in paragraphs 5.1, 5.2, 5.4, 5.6, 5.8, 5.9 and 5.10 have been
fulfilled.
5.4 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series D Preferred Stock pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.5 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
Investors' special counsel, which shall have received all such counterpart
original and certified or other copies of such documents as it may reasonably
request.
5.6 Small Business Concern Documents. The Company shall have executed
and delivered to each Investor who requests them, a Size Status Declaration on
SBA Form 480 and an Assurance of Compliance on SBA Form 652, and shall have
provided to each Investor who so requests information necessary for the
preparation of a Portfolio Financing Report on SBA Form 1031.
5.7 Opinion of Company Counsel. Each Investor shall have received from
Xxxxxxx, Xxxxxxx & Xxxxxxxx, counsel for the Company, an opinion, dated the date
of the Closing, in form and substance satisfactory to special counsel to the
Investors.
5.8 Investors' Rights Agreement. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached as
Exhibit B.
5.9 Co-Sale Agreements. Xxxxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxx
Xxxx, Xxxxxx Xxxxxxx, Xxx Xxxxx, Chi-Xxxx Xxxx and Xxxx Xxxxx (collectively, the
"Founders"), a majority of the Shareholders (as defined thereunder) and the
Company shall each have entered into a Co-Sale Agreement in the form attached
hereto as Exhibit D.
5.10 Filing of Restated Articles. The Company shall adopt and file with
the Secretary of State of California the Restated Articles, and such Restated
Articles shall have been accepted for filing by the Secretary of State of
California.
6. Conditions of the Company's Obligations at Closing. The obligations of the
Company to each Investor under this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions by that Investor:
14.
18
6.1 Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
6.2 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series D Preferred Stock pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
6.3 Co-Sale Agreements. The Founders, a majority of the Shareholders (as
defined thereunder) and the Company shall each have entered into a Co-Sale
Agreement in the form attached hereto as Exhibit D.
7. Miscellaneous.
7.1 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
7.2 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series D Preferred Stock sold hereunder
or any Series D-1 Preferred Stock or any Common Stock issued upon conversion
thereof). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
7.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15.
19
7.7 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified by hand or professional
courier service or five (5) days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.
7.8 Finder's Fees. Except for a finder's fee of $80,000 owed by the
Company to Hanuko Xxxxx, each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction.
Each Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees or
representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.9 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors of not more than $20,000 and shall,
upon receipt of a xxxx therefor, reimburse the reasonable out-of-pocket expenses
of such counsel incurred in connection with the Closing.
7.10 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or the Restated Articles, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.11 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of more than 50% of the
Common Stock (that has not been sold to the public) issued or issuable upon
conversion of the Series D Preferred Stock (or Series D-1 Preferred Stock). Any
amendment or waiver effected in accordance with this Section shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have been
converted), each future holder of all such securities and the Company.
16.
20
7.12 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.13 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.14 Exculpation Among Investors. Each Investor acknowledges that it is
not relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Investor agrees that no Investor nor the respective controlling
persons, officers, directors, partners, agents or employees of any Investor
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them in connection with the Series D Preferred Stock (and Common
Stock issued upon conversion thereof).
[Remainder of This Page Intentionally Left Blank]
17.
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx, President
INVESTORS:
---------------------------------
NAME OF INVESTOR
By:______________________________________
Title:___________________________________
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Japan Associated Finance Co., Ltd.
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Title: President
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
JAFCO G-5 Investment Enterprise Partnership
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
President Japan Associated Finance Co., Ltd
Title: Its Executive Partner
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
JAFCO R-1(A) Investment Enterprise Partnership
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
President Japan Associated Finance Co., Ltd
Title: Its Executive Partner
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
JAFCO R-1(B) Investment Enterprise Partnership
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
President Japan Associated Finance Co., Ltd
Title: Its Executive Partner
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
JAFCO R-2 Investment Enterprise Partnership
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
President Japan Associated Finance Co., Ltd
Title: Its Executive Partner
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Brentwood Associates VII, L.P.
By: Brentwood VII Ventures Its General Partner
-----------------------------------------
NAME OF INVESTOR
By: /s/ illegible
-------------------------------------
Title: General Partner
----------------------------------
Address:_________________________________
_________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: _____________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
S.R. One, Limited
-----------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Title: Vice President
----------------------------------
Address: Bay Colony Executive Park
---------------------------------
000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
---------------------------------
Xxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Sprout Capital VII, L.P.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
----------------------------------------
Title: Vice President Sprout Group
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
DLJ Capital Corporation
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxxx
----------------------------------------
Title: Vice President Sprout Group
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
31
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
C.V. Sofinnova Ventures Partners III
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx Xxxxxxx, M.D.
----------------------------------------
Title: General Partner Sofinnova Management L.P.
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
SINGAPORE BIO-INNOVATIONS PTE LTD
--------------------------------------------
NAME OF INVESTOR
By: /S/ Yong-Sea Teoh
----------------------------------------
Title: Director & General Manager
-------------------------------------
Address: 000 Xxxxx Xxxxxx Xxxx #0000
-----------------------------------
Raffles City Tower
-----------------------------------
Xxxxxxxxx 000000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
SEQUOIA CAPITAL VI
SEQUOIA TECHNOLOGY PARTNERS VI
SEQUOIA 1995
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Title: General Partner
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
34
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Xxxxx Xxxxxx, Custodian FBO
Xxxxxxx Xxxxxxxx, XXX R/O
--------------------------------------------
NAME OF INVESTOR
By: /s/ illegible
----------------------------------------
Title: Branch Manager
-------------------------------------
Address: 000 X. Xxxxxxxx, Xxxxx 0000
-----------------------------------
Xxx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
35
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Xxxxxx X. Xxxx
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx X. Xxxx
----------------------------------------
Title:
-------------------------------------
Address: 00000 Xxxx Xxxx Xx.
-----------------------------------
Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
36
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXXXXX X. XXXXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Title:
-------------------------------------
Address: 0000 Xxxxxxxxx Xxxxx
-----------------------------------
Xx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
37
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXXX XXXXXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxx Xxxxxxx
----------------------------------------
Title:
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
38
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
The X. X. Xxxxxxxx Trust
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Title: Trustee
-------------------------------------
Address: 0000 Xxxxxx Xxxxxx
-----------------------------------
Xxxxxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXXXX INC.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
Title: Chief Financial Officer
-------------------------------------
Address: 000 Xxxxx Xxxxxx Xxxxx, 5000 Sears
Tower
-----------------------------------
Xxxxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
40
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
SORRENTO VENTURE II, L.P.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
President, Sorrento Associates, Inc.
General Partner, Sorrento Equity Partners L.P.
Title: General Partner, Sorrento Ventures II, L.P.
-------------------------------------
Address: 0000 Xx Xxxxx Xxxxxxx Xx., Xxx 0000
-----------------------------------
Xxx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
41
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
SORRENTO GROWTH PARTNERS I, L.P.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
President, Sorrento Growth, Inc.
General Partner, Sorrento Equity Growth Partners I, L.P.
Title: General Partner, Sorrento Growth Partners I, L.P.
-------------------------------------
Address: 0000 Xx Xxxxx Xxxxxxx Xx., Xxx 0000
-----------------------------------
Xxx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
42
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
COMDISCO, INC.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Title: Assistant Vice President
-------------------------------------
Address: 0000 X. Xxxxx Xx.
-----------------------------------
Xxxxxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
43
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Xxxxxxx Venture Capital Fund III, L.P.
by its general partner, Xxxxxxx Partners, Inc.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxx Xxxxx
----------------------------------------
Title: Partner Xxxxxxx Partners, Inc.
-------------------------------------
Address: c/x Xxxxxxx Partners, Inc.
-----------------------------------
000 Xxxxx XxXxxxx Xxxxxx Xxxxx 000
-----------------------------------
Xxxxxxx, XX 00000-0000
Xxxxxxx Trust Company as Trustee of the
Xxxxxxx MAP Venture Capital Fund III
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxx Xxxxx
----------------------------------------
Title: Assistant Trust Officer Xxxxxxx Trust
Company
-------------------------------------
Address: c/x Xxxxxxx Partners, Inc.
-----------------------------------
000 Xxxxx XxXxxxx Xxxxxx Xxxxx 000
-----------------------------------
Xxxxxxx, XX 00000-0000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
44
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXX XXXXXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx Xxxxxxx
----------------------------------------
Title:
-------------------------------------
Address: 00000 Xxxxx Xxxxxxx Xxxx
-----------------------------------
Xxxxxxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
45
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Xxxxxxx Xxxxx, Xx.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxxx Xxxxx, Xx.
----------------------------------------
Title: President & CEO
-------------------------------------
Address: 0000 Xxxxxxx Xxxxx
-----------------------------------
Xxxxxx xxx Xxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
46
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXX X. XXXXXXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx X. Xxxxxxxx
----------------------------------------
Title: Anido designee
-------------------------------------
Address: 0000 Xxxxx Xxxx
-----------------------------------
Xxxxxxxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
47
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
THE XXXXX X. XXXXXXXX TRUST, DATED 6/21/91
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxx X. XxXxxxxxx
----------------------------------------
Title: Trustee
-------------------------------------
Address: 000 Xxxxx Xxx
-----------------------------------
Xxxx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
48
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXXXX XXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxxxx Xxxx
----------------------------------------
Title:
-------------------------------------
Address: ___________________________________
___________________________________
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
49
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
FORWARD VENTURES II., L.P.
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx Xxxxxxx
----------------------------------------
Title: General Partner
-------------------------------------
Address: 00000 Xxxxxxxxx Xx., Xxx 000
-----------------------------------
Xxx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
50
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
XXXXX XXXXXXXX
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx Xxxxxxxx
----------------------------------------
Title: Vice President
-------------------------------------
Address: 0000 Xxxxxx xxx Xxx
-----------------------------------
Xx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
51
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMBICHEM, INC.
By: ________________________________________
Xxxxxxx Xxxxx, President
INVESTORS:
Xxxx Xxxxxx Xxxxxxx Trust U/A Dtd 7/11/88
--------------------------------------------
NAME OF INVESTOR
By: /s/ Xxxx Xxxxxx Xxxxxxx
----------------------------------------
Title: Trustee
-------------------------------------
Address: X.X. Xxx 0000
-----------------------------------
Xx Xxxxx, XX 00000
-----------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
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52
EXHIBIT A
Amended and Restated
Articles of Incorporation
53
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF COMBICHEM, INC.,
a California Corporation
The undersigned Xxxxxxx Xxxxx and Xxxx Xxxxxxx hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said corporation.
TWO: The Articles of Incorporation of said corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is CombiChem, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
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 One Hundred Forty-Three Million One Hundred Seventy-Six Thousand Two Hundred
Ninety-Six (143,196,296) shares. Eighty Million (80,000,000) shares shall be
Common Stock and Sixty Three Million One Hundred Seventy-Six Thousand Two
Hundred Ninety-Six (63,196,296) shares shall be Preferred Stock. The Preferred
Stock authorized by these Restated Articles of Incorporation shall be issued by
series as set forth herein. The first series of Preferred Stock shall be
designated "Series A Preferred Stock" and shall consist of One Million
(1,000,000) shares. The second series of Preferred Stock shall be designated
"Series B Preferred Stock" and shall consist of Two Million Two Hundred
Twenty-Six Thousand Six Hundred Sixty-Seven (2,226,667) shares. The third series
of Preferred Stock shall be designated "Series C Preferred Stock" and shall
consist of Seventeen Million Five Hundred Nineteen Thousand Seven Hundred
Seventy-Six (17,519,776) shares. The fourth series of Preferred Stock shall be
designated "Series D Preferred Stock" and shall consist of Nine Million Eight
Hundred Fifty-Nine Thousand Two Hundred Five (9,869,205) shares. The fifth
series of Preferred Stock shall be designated "Series J Preferred Stock" and
shall consist of Four Hundred Sixty- Five Thousand (465,000) shares. The sixth
series of Preferred Stock shall be designated "Series Z Preferred Stock" and
shall consist of One Million Five Hundred Thousand
54
(1,500,000) shares. The seventh series of Preferred Stock shall be designated
"Series A-1 Preferred Stock: and shall consist of One Million (1,000,000)
shares. The eighth series of Preferred Stock shall be designated "Series B-1
Preferred Stock" and shall consist of Two Million Two Hundred Twenty-Six
Thousand Six Hundred Sixty-Seven (2,226,667) shares. The ninth series of
Preferred Stock shall be designated "Series C-1 Preferred Stock" and shall
consist of Seventeen Million Five Hundred Nineteen Thousand Seven Hundred
Seventy-Six (17,519,776) shares. The tenth series of Preferred Stock shall be
designated "Series D-1 Preferred Stock" and shall consist of Nine Million Eight
Hundred Fifty-Nine Thousand Two Hundred Five (9,869,205) shares.
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by these Restated Articles of Incorporation may be
issued from time to time in one or more series. The rights, preferences,
privileges and restrictions granted to and imposed on the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock, the Series J Preferred Stock, the Series Z Preferred Stock, the
Series A-1 Preferred Stock, the Series B-1 Preferred Stock, the Series C-1
Preferred Stock and the Series D-1 Preferred Stock are as set forth below in
this Article III(B). Subject to compliance with applicable protective voting
rights ("Protective Provisions") which have been or may be granted to the
Preferred Stock or any series thereof in Certificates of Determination or this
corporation's Articles of Incorporation, as amended from time to time, the Board
of Directors is also authorized to increase or decrease the number of shares of
any series (other than the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series
A-1 Preferred Stock, the Series B-1 Preferred Stock, the Series C-1 Preferred
Stock and the Series D-1 Preferred Stock), prior or subsequent to the issue 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 which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1. Dividend Provisions.
(a) The holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock shall be entitled to receive
dividends in any fiscal year, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Series J Preferred Stock or
the Common Stock of this corporation, at the rate of $0.04 per share of Series A
Preferred Stock, $0.06 per share of Series B Preferred Stock, $0.0496 per share
of Series C Preferred Stock, $0.08 per share of Series D Preferred Stock, $0.04
per share of Series Z Preferred Stock, $0.04 per share of Series A-1 Preferred
Stock, $0.06 per share of Series B-1 Preferred Stock, $0.0496 per share of
Series C-1 Preferred Stock and $0.08 per share of Series D-1 Preferred Stock
(each subject
2.
55
to appropriate adjustments for stock splits, stock dividends, combinations or
other recapitalizations) per annum, payable quarterly when, as and if declared
by the Board of Directors. Such dividends shall not be cumulative. After full
dividends on the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock, the Series Z Preferred
Stock, the Series A-1 Preferred Stock, the Series B-1 Preferred Stock, the
Series C-1 Preferred Stock and the Series D-1 Preferred Stock for all past
dividend periods and the then current dividend period have been paid, the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series Z Preferred Stock, Series
A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock and the holders of shares of Series J Preferred Stock
and Common Stock shall participate ratably in any dividends or other
distributions (as distributions are defined below).
(b) For purposes of this subsection 1, unless the context
otherwise requires, "distribution(s)" shall mean the transfer of cash or
property without consideration, whether by way of dividend or otherwise, or the
purchase or redemption of shares of this corporation (other than repurchases of
common stock held by directors, employees or consultants of this corporation
upon termination of their employment or services pursuant to agreements
providing for such repurchase) for cash or property, including any such
transfer, purchase or redemption by a subsidiary of this corporation.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series Z Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets of this corporation to the holders of
Series J Preferred Stock or Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of (i) $0.50 for each outstanding share of
Series A Preferred Stock (the "Original Series A Issue Price"), (ii) $0.75 for
each outstanding share of Series B Preferred Stock (the "Original Series B Issue
Price"), (iii) $0.62 for each outstanding share of Series C Preferred Stock (the
"Original Series C Issue Price"), (iv) $1.00 for each outstanding share of
Series D Preferred Stock (the "Original Series D Issue Price"), (v) $0.50 for
each outstanding share of Series Z Preferred Stock (the "Original Series Z Issue
Price"), (vi) $0.50 for each outstanding share of Series A-1 Preferred Stock
(the "Original Series A-1 Issue Price"), (vii) $0.75 for each outstanding share
of Series B-1 Preferred Stock (the "Original Series B-1 Issue Price"), (viii)
$0.62 for each outstanding share of Series C-1 Preferred Stock (the "Original
Series C-1 Issue Price"), (ix) $1.00 for each outstanding share of Series D-1
Preferred Stock (the "Original Series D-1 Issue Price") (each subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and (x) an amount equal to declared but unpaid dividends on
such share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series Z Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock, respectively. If upon the occurrence of such event,
the assets and funds thus
3.
56
distributable among the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, subject to the rights of series of Preferred Stock that may from time to
time come into existence, the entire assets and funds of the corporation legally
available for distribution shall be distributed (x) first ratably among the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock
in proportion to the aggregate liquidation preferences of each respective
series, and ratably among the holders of that series in proportion to the amount
of such stock owned by each such holder, and (y) thereafter ratably among the
holders of the Series Z Preferred Stock in proportion to the amount of such
stock owned by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2 and any other distribution that may be
required with respect to series of Preferred Stock that may from time to time
come into existence, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock, Series
D-1 Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (with each share of Preferred Stock participating on
an "as-converted-into-Common- Stock" basis).
(c) A consolidation or merger of this corporation with or into any
other corporation or corporations in which fifty percent (50%) or more of the
voting power of the corporation held by the shareholders of the corporation
immediately prior to the merger or consolidation is transferred (excluding
reincorporations of the corporation the sole purpose of which is to change the
state of incorporation), or a sale, conveyance or disposition of all or
substantially all of the assets of this corporation or the effectuation by the
corporation of a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the corporation is transferred,
shall be deemed to be a liquidation, dissolution or winding up within the
meaning of this Section 2.
3. Redemption.
(a) At any time after December 31, 1998, but within forty-five
(45) days (the "Redemption Date") after the receipt by this corporation of a
written request from the holders of not less than seventy percent (70%) of the
then outstanding shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock treated as a single class, that all of such holders' shares be redeemed,
and immediately prior to the surrender by such holders of the certificates
representing such shares, this corporation shall, to the extent it may lawfully
do so, redeem all of the then outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series
4.
57
D Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock,
Series C-1 Preferred Stock and Series D-1 Preferred Stock by paying in cash
therefor a sum per share equal to the Original Series A Issue Price (as adjusted
for any stock dividends, combinations or splits with respect to such share) plus
an amount equal to declared but unpaid dividends on such share for each share of
Series A Preferred Stock, the Original Series B Issue Price (as adjusted for any
stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series B Preferred Stock, the Original Series C Issue Price (as adjusted for any
stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series C Preferred Stock, the Original Series D Issue Price (as adjusted for any
stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series D Preferred Stock, the Original Series A-1 Issue Price (as adjusted for
any stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series A-1 Preferred Stock, the Original Series B-1 Issue Price (as adjusted for
any stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series B-1 Preferred Stock, the Original Series C-1 Issue Price (as adjusted for
any stock dividends, combinations or splits with respect to such share) plus an
amount equal to declared but unpaid dividends on such share for each share of
Series C-1 Preferred Stock and the Original Series D-1 Issue Price (as adjusted
for any stock dividends, combinations or splits with respect to such share) plus
an amount equal to declared but unpaid dividends on such share for each share of
Series D-1 Preferred Stock (such amounts are hereinafter referred to herein as
the "Redemption Prices").
(b) Not less than fifteen (15) days prior to the Redemption Date,
written notice shall be mailed, first class postage prepaid, to each holder of
record (at the close of business on the business day next preceding the day on
which notice is given) of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1
Preferred Stock at the address last shown on the records of this corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder (which shall be all of the
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock held
by such holder), the Redemption Date, the Redemption Prices of each of the
respective series to be redeemed from such holder, the place at which payment
may be obtained and calling upon such holder to surrender to this corporation,
in the manner and at the place designated, his, her or its certificate or
certificates representing all of the shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock held by such holder (the "Redemption
Notice"). Except as provided in subsection 3(c) of this Division B of Article
III, on or after the Redemption Date, each holder of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock shall surrender to this corporation the
certificate or certificates representing such shares, in the
5.
58
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Prices of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled.
(c) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Prices, all rights of the holders of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock as
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock,
respectively (except the right to receive the respective Redemption Prices
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of this corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the corporation legally available for
redemption of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock on the Redemption Date are insufficient to redeem the total number of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series A- 1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock in proportion to the
Redemption Prices of the respective series, and ratably among the holders of
each series in proportion to the amount of such stock owned by each such holder.
Notwithstanding anything herein to the contrary, the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the corporation are legally
available for the redemption of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the corporation has become obliged to redeem on the
Redemption Date but which it has not redeemed.
(d) The shares of Series J Preferred Stock and Series Z Preferred
Stock are not redeemable.
4. Conversion. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1
6.
59
Preferred Stock and Series D-1 Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share and, in the case of the shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock, on or prior to
the fifth day prior to the Redemption Date, if any, as may have been fixed in
the Redemption Notice, at the office of this corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Original Series A Issue Price
for each share of Series A Preferred Stock, (ii) the Original Series B Issue
Price for each share of Series B Preferred Stock, (iii) the Original Series C
Issue Price for each share of Series C Preferred Stock, (iv) the Original Series
D Issue Price for each share of Series D Preferred Stock, (v) $0.10 for each
share of Series J Preferred Stock (the "Original Series J Issue Price"), (vi)
the Original Series Z Issue Price for each share of Series Z Preferred Stock,
(vii) the Original Series A-1 Issue Price for each share of Series A-1 Preferred
Stock, (viii) the Original Series B-1 Issue Price for each share of Series B-1
Preferred Stock, (ix) the Original Series C-1 Issue Price for each share of
Series C-1 Preferred Stock and (x) the Original Series D-1 Issue Price for each
share of Series D-1 Preferred Stock, in each case by the Conversion Price at the
time in effect for such share. The initial Conversion Price per share for shares
of Series A Preferred Stock shall be the Original Series A Issue Price, for
shares of Series B Preferred Stock shall be the Original Series B Issue Price,
for shares of Series C Preferred Stock shall be the Original Series C Issue
Price, for shares of Series D Preferred Stock shall be the Original Series D
Issue Price, for shares of Series J Preferred Stock shall be the Original Series
J Issue Price, for shares of Series Z Preferred Stock shall be the Original
Series Z Issue Price, for shares of Series A-1 Preferred Stock shall be the
Original Series A-1 Issue Price, for shares of Series B-1 Preferred Stock shall
be the Original Series B-1 Issue Price, for shares of Series C-1 Preferred Stock
shall be the Original Series C-1 Issue Price and for shares of Series D-1
Preferred Stock shall be the Original Series D-1 Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock, the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and the
Series Z Preferred Stock shall each be subject to adjustment as set forth in
subsections 4(d) and 4(e) of this Division B of Article III and the Conversion
Price for the Series J Preferred Stock, the Series A-1 Preferred Stock, the
Series B-1 Preferred Stock, the Series C-1 Preferred Stock and the Series D-1
Preferred Stock shall be subject to adjustment as set forth in subsection 4(e)
of this Division B of Article III.
(b) Automatic Conversion. Each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such series immediately upon the
earlier of (i) the closing of the corporation's sale of its Common
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Stock in a firm commitment underwritten public offering pursuant to a
registration statement on Form S-1 under the Securities Act of 1933, as amended,
the public offering price of which (exclusive of underwriting discounts,
commissions and expenses) is not less than $4.00 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations) and $12,000,000
in the aggregate or (ii) the date specified by written consent or agreement of
the holders of at least seventy percent (70%) of the then outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock, voting together as a single class.
(c) Mechanics of Conversion. Before any holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock or
Series D-1 Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he, she or it shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for such stock and shall give written notice to this corporation at its
principal corporate office of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to each such holder, or to the
nominee or nominees of each such holder, (i) a certificate or certificates for
the number of shares of Common Stock to which each such holder shall be entitled
as aforesaid and (ii) a cash payment of all declared but unpaid dividends on the
converted shares as of the date of conversion. 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 Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series J Preferred Stock,
Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock
for conversion, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and/or Series D-1
Preferred Stock shall not be deemed to have converted such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A- 1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1
Preferred Stock until immediately prior to the closing of such sale of
securities.
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(d) Conversion Price Adjustments of Series A, Series B, Series C,
Series D and Series Z Preferred Stock for Certain Dilutive Issuances. The
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series Z Preferred Stock
shall be subject to adjustment from time to time as follows:
(i)(A) If the corporation shall issue, after the date upon
which any shares of Series D Preferred Stock were first issued (the "Purchase
Date"), any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for such series in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such series in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause (i)) be adjusted to a
price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including, without limitation, the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock) plus
the number of shares of Common Stock that the aggregate consideration received
by the corporation for such issuance would purchase at such Conversion Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including, without limitation,
the number of shares of Common Stock issuable upon the conversion of the
Preferred Stock) plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series Z Preferred Stock shall be made in an amount less than
one cent per share, provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to three (3) years
from the date of the event giving rise to the adjustment being carried forward,
or shall be made at the end of three (3) years from the date of the event giving
rise to the adjustment being carried forward. Except to the limited extent
provided for in subsections 4(d)(i)(E)(3) and 4(d)(i)(E)(4) of this Division B
of Article III, no adjustment of such Conversion Price pursuant to this
subsection 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
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(E) In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options or warrants to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options or warrants to purchase or rights to
subscribe for such convertible or exchangeable securities, the following
provisions shall apply for all purposes of this subsection 4(d)(i) and
subsection 4(d)(ii) of this Division B of Article III:
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments)
of such options or warrants to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such options,
warrants or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 4(d)(i)(C)
and (d)(i)(D) of this Division B of Article III), if any, received by the
corporation upon the issuance of such options, warrants or rights plus the
minimum exercise price provided in such options, warrants or rights
(without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking
into account potential antidilution adjustments) for any such convertible
or exchangeable securities or upon the exercise of options or warrants to
purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed
to have been issued at the time such securities were issued or such
options, warrants or rights were issued and for a consideration equal to
the consideration, if any, received by the corporation for any such
securities and related options, warrants or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options, warrants or rights (the consideration in
each case to be determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D) of this Division B of Article III).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options, warrants or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series Z Preferred Stock, to the extent in any
way affected by or computed using such
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options, warrants, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the
exercise of any such options, warrants or rights or the conversion or
exchange of such securities.
(4) Upon the expiration of any such options, warrants
or rights, the termination of any such rights to convert or exchange or
the expiration of any options, warrants or rights related to such
convertible or exchangeable securities, the Conversion Price of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series Z Preferred Stock, to the extent in any
way affected by or computed using such options, warrants, rights or
securities or options, warrants or rights related to such securities,
shall be recomputed to reflect the issuance of only the number of shares
of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options, warrants or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options, warrants or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and (2) of this Division B of Article III shall be
appropriately adjusted to reflect any change, termination or expiration of
the type described in either subsection 4(d)(i)(E)(3) or (4) of this
Division B of Article III.
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E) of this
Division B of Article III) by this corporation after the Purchase Date other
than:
(A) shares of Common Stock issued upon conversion of the
Preferred Stock; or
(B) up to 5,020,274 shares of Common Stock (as adjusted for
any stock splits or other recapitalization) issuable or issued to
employees, consultants or directors of this corporation pursuant to stock
option plans or arrangements approved by the Board of Directors of the
corporation; or
(C) Common Stock issued pursuant to a transaction described
in subsection 4(e)(i) of this Division B of Article III; or
(D) shares of Common Stock or warrants to purchase shares of
Common Stock issued in connection with a bona fide acquisition of another
business, whether by merger, consolidation or purchase of assets, or bona
fide equipment leasing transactions unanimously approved by the Board of
Directors of this corporation; or
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(E) shares of Preferred Stock issued upon exercise of any
options or warrants to purchase the corporation's Preferred Stock
outstanding as of the Purchase Date.
(e) Conversion Price Adjustments of Preferred Stock for Certain
Splits and Combinations. The Conversion Price of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series J Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase in
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in subsection 4(d)(i)(E) of this Division B of
Article III.
(ii) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(f) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(e)(i) of this
Division B of Article III, then, in each such case for the purpose of this
subsection 4(f), the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series J Preferred
Stock,
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Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the corporation into
which their shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series J Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock or Series D-1 Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
corporation entitled to receive such distribution.
(g) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2 of this Division B of Article III) provision shall
be made so that the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series J Preferred
Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1
Preferred Stock, respectively, the number of shares of stock or other securities
or property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(h) No Impairment. Unless approved in accordance with Sections 6
and 7 of this Division B of Article III, this corporation will not, by amendment
of its Articles of Incorporation or through any reorganization,
recapitalization, 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 this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 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 the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock
against impairment.
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(i) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the conversion
of any share or shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series J Preferred
Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock and
the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock,
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series J Preferred Stock,
Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock pursuant to this
Section 4, this corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series J Preferred Stock,
Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This corporation shall,
upon the written request at any time of any holder of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1 Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion Price for
such series of Preferred Stock at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1
Preferred Stock.
(j) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock,
at least 20 days prior to the date specified therein, a
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notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(k) Reservation of Stock Issuable Upon Conversion. This
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 the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series J Preferred
Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock; 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 the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series J Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock, in addition to such other
remedies as shall be available to each holder of any of such Preferred Stock,
this corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, using its best efforts to obtain the requisite
shareholder approval of any necessary amendment to these articles.
(l) Notices. Any notice required by the provisions of this Section
4 to be given to the holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series J
Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
this corporation.
(m) Special Mandatory Conversion.
(i) At any time following the Purchase Date, if (a) the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock are entitled to exercise the right
of first refusal (the "Right of First Refusal") set forth in Section 2.3 of the
Amended or Restated Investors' Rights Agreement dated on or about November 16,
1996, by and between this corporation and certain investors, as amended from
time to time (the "Rights Agreement"), with respect to an equity financing of
the corporation in an aggregate amount of at least $500,000 (the "Equity
Financing"), (b) this corporation has complied with its notice obligations, or
such obligations have been waived, under the Right of First Refusal with respect
to such Equity Financing and this corporation thereafter proceeds to consummate
the Equity Financing and (c) such holder, including such holder's affiliates
(collectively, a "Non-Participating Holder") does not by
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exercise of such holder's Right of First Refusal acquire his, her or its Pro
Rata Share (as defined in Section 2.3 of the Rights Agreement) offered in such
Equity Financing (a "Mandatory Offering"), then all of such Non-Participating
Holder's shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and/or Series D Preferred Stock shall automatically and without
further action on the part of such holder be converted effective upon, subject
to and immediately prior to, the consummation of the Mandatory Offering (the
"Mandatory Offering Date") into an equivalent number of shares of Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock, respectively ("Special Mandatory Conversion");
provided, however, that no such conversion shall occur in connection with a
particular Equity Financing if, pursuant to the written request of the Board of
Directors and subject to the approval of the holders of a majority of the
outstanding Preferred Stock, such holder agrees in writing to waive his, her or
its Right of First Refusal with respect to such Equity Financing. Upon
conversion pursuant to this subsection 4(m)(i), the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock so converted shall be cancelled and not subject to reissuance.
(ii) The holder of any shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock converted pursuant to this subsection 4(m) shall deliver to this
corporation during regular business hours at the office of any transfer agent of
the corporation for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock or at such other place as
may be designated by the corporation, the certificate or certificates for the
shares so converted, duly endorsed or assigned in blank or to this corporation.
As promptly as practicable thereafter, this corporation shall issue and deliver
to such holder, at the place designated by such holder, a certificate or
certificates for the number of full shares of the Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and/or Series D-1
Preferred Stock to be issued and such holder shall be deemed to have become a
shareholder of record of such Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock and/or Series D-1 Preferred Stock on the
Mandatory Offering Date unless the transfer books of this corporation are closed
on that date, in which event he, she or it shall be deemed to have become a
shareholder of record of such Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock and/or Series D-1 Preferred Stock on the next
succeeding date on which the transfer books are open.
(iii) In the event that any shares of Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and/or Series D-1
Preferred Stock are issued, concurrently with such issuance, this corporation
shall use its best efforts to take all such action as may be required, including
amending its Articles of Incorporation, (a) to cancel all authorized shares of
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock that remain unissued after such issuance,
(b) to create and reserve for issuance upon Special Mandatory Conversion of any
then outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock a new series of Preferred Stock
equal in number to the number of shares of Series A-1 Preferred Stock, Series
B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock
so cancelled and designated Series A-2 Preferred Stock, Series B-2 Preferred
Stock, Series C-2 Preferred Stock and Series D-2 Preferred Stock, with
16.
69
the designations, powers, preferences and rights and the qualifications,
limitations and restrictions identical to those then applicable to the Series
A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock, respectively, except that the Conversion Price for
such shares of Series A-2 Preferred Stock, Series B-2 Preferred Stock, Series
C-2 Preferred Stock and Series D-2 Preferred Stock once initially issued shall
be the Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price and the Series D Conversion Price, respectively, in effect
immediately prior to such issuance and (c) to amend the provisions of this
subsection 4(m) to provide that any subsequent Special Mandatory Conversion will
be into shares of Series A-2 Preferred Stock, Series B-2 Preferred Stock, Series
C-2 Preferred Stock and Series D-2 Preferred Stock rather than Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock or
Series D-1 Preferred Stock, respectively. This corporation shall take the same
actions with respect to the Series A-2 Preferred Stock, Series B-2 Preferred
Stock, Series C-2 Preferred Stock and Series D-2 Preferred Stock and each
subsequently authorized series of Preferred Stock upon initial issuance of
shares of the last such series to be authorized. The right to receive any
dividend declared but unpaid at the time of conversion on any shares of
Preferred Stock converted pursuant to the provisions of this subsection 4(m)
shall accrue to the benefit of the new shares of Preferred Stock issued upon
conversion thereof.
(iv) A copy of the Rights Agreement is on file at the offices
of this corporation and will be made available upon request and without charge.
5. Voting Rights. The holder of each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series J Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred
Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1
Preferred Stock or Series D-1 Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any shareholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote, together with holders of Common Stock, with respect to any question
upon which holders of Common Stock have the right to vote. Fractional votes
shall not, however, be permitted and any fractional voting rights available on
an as-converted basis (after aggregating all shares into which shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series J Preferred Stock, Series Z Preferred Stock, Series A-1
Preferred Stock, Series B-1 Preferred Stock, and Series C-1 Preferred Stock and
Series D-1 Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
6. Protective Provisions for Series A, Series B, Series C, Series D,
Series Z, Series A-1, Series B-1, Series C-1 and Series D-1 Preferred Stock. So
long as any shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series Z Preferred Stock, Series
A-1 Preferred Stock, Series B-1 Preferred
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Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least seventy percent
(70%) of the then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock and Series D-1 Preferred Stock, voting together as a single
class:
(a) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1
Preferred Stock so as to affect materially or adversely the shares; or
(b) increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series Z
Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C-1 Preferred Stock or Series D-1 Preferred Stock; or
(c) reclassify any shares of Common Stock or Preferred Stock to
give those shares a preference over, or to make those shares on a parity with,
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series Z Preferred Stock, Series A-1 Preferred
Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1
Preferred Stock with respect to dividends, redemption or voting rights or upon
liquidation; or
(d) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any share or shares of Common Stock;
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock from employees, officers, directors, consultants or other
persons performing services for the Company or any subsidiary pursuant to
agreements under which the Company has the option to repurchase such shares at
cost or upon the occurrence of certain events, such as the termination of
employment.
7. Protective Provisions for Series C and Series C-1 Preferred Stock.
So long as any shares of Series C Preferred Stock or Series C-1 Preferred Stock
are outstanding, this corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of a majority of
the then outstanding shares of Series C Preferred Stock and Series C-1 Preferred
Stock voting together as a single class:
(a) amend the corporation's Articles of Incorporation to alter or
change the rights, preferences or privileges of the shares of Series C Preferred
Stock or Series C-1 Preferred Stock so as to affect materially or adversely the
shares; or
(b) increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Series C Preferred Stock or Series C-1
Preferred Stock
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71
(other than pursuant to subsection (m) of Section 4 of Division B of this
Article III hereof); or
(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series C Preferred Stock or Series C-1 Preferred Stock with respect to
dividends, redemption or voting rights or upon liquidation; or
(d) reclassify any shares of Common Stock to give those shares a
preference over, or to make those shares on a parity with, the Series C
Preferred Stock or Series C-1 Preferred Stock with respect to dividends,
redemption or voting rights or upon liquidation; or
(e) pay dividends upon or redeem, purchase or otherwise acquire
(or pay into or set aside for a sinking fund for such purpose) any share or
shares of Preferred Stock or Common Stock other than shares of Series C
Preferred Stock or Series C-1 Preferred Stock; provided, however, that this
restriction shall not apply to (i) the repurchase of shares of Common Stock from
employees, officers, directors, consultants or other persons performing services
for the Company or any subsidiary pursuant to agreements under which the Company
has the option to repurchase such shares at cost or upon the occurrence of
certain events, such as the termination of employment, or (ii) the redemption of
any share or shares of Preferred Stock in accordance with the provisions of
Section 3 of this Division B of Article III; or
8. Protective Provisions for Series D and Series D-1 Preferred Stock.
So long as any shares of Series D Preferred Stock or Series D-1 Preferred Stock
are outstanding, this corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of a majority of
the then outstanding shares of Series D Preferred Stock and Series D-1 Preferred
Stock voting together as a single class:
(a) amend the corporation's Articles of Incorporation to alter or
change the rights, preferences or privileges of the shares of Series D Preferred
Stock or Series D-1 Preferred Stock so as to affect materially or adversely the
shares; or
(b) increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Series D Preferred Stock or Series D-1
Preferred Stock (other than pursuant to subsection (m) of Section 4 of Division
B of this Article III hereof); or
(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series D Preferred Stock or Series D- 1 Preferred Stock with respect to
dividends, redemption or voting rights or upon liquidation; or
(d) reclassify any shares of Common Stock to give those shares a
preference over, or to make those shares on a parity with, the Series D
Preferred Stock or
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72
Series D-1 Preferred Stock with respect to dividends, redemption or voting
rights or upon liquidation; or
(e) pay dividends upon or redeem, purchase or otherwise acquire
(or pay into or set aside for a sinking fund for such purpose) any share or
shares of Preferred Stock or Common Stock other than shares of Series D
Preferred Stock or Series D-1 Preferred Stock; provided, however, that this
restriction shall not apply to (i) the repurchase of shares of Common Stock from
employees, officers, directors, consultants or other persons performing services
for the Company or any subsidiary pursuant to agreements under which the Company
has the option to repurchase such shares at cost or upon the occurrence of
certain events, such as the termination of employment, or (ii) the redemption of
any share or shares of Preferred Stock in accordance with the provisions of
Section 3 of this Division B of Article III; or
9. Protective Provisions for Series C, Series D, Series C-1 and Series
D-1 Preferred Stock. So long as any shares of Series C Preferred Stock, Series D
Preferred Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of a majority of the
then outstanding shares of Series C Preferred Stock, Series D Preferred Stock,
Series C-1 Preferred Stock and Series D-1 Preferred Stock, voting together as a
single class:
(a) sell, convey or otherwise dispose of or encumber all or
substantially all of its assets or business or merge with or into or consolidate
with any other entity (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of; or
(b) increase the authorized number of directors of the corporation
to more than eight (8).
10. Status of Redeemed or Converted Stock. In the event (a) any shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred
Stock, Series C-1 Preferred Stock or Series D-1 Preferred Stock shall be
redeemed pursuant to Section 3 of this Division B of Article III or (b) any
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series J Preferred Stock, Series Z Preferred
Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1
Preferred Stock or Series D-1 Preferred Stock shall be converted pursuant to
Section 4 of this Division B of Article III, the shares so redeemed or converted
shall be cancelled, together with a like number of shares of Common Stock, and
such shares and shall not be issuable by the corporation. The Articles of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
11. Repurchase of Shares. Each holder of an outstanding share of
Preferred Stock shall be deemed to have consented, for purposes of Sections 502,
503 and 506 of the California Corporations Code, to distributions made by the
corporation in connection with the
20.
73
repurchase of shares of Common Stock issued to or held by employees, officers,
directors, consultants or other persons performing services for the Company or
any subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or upon the occurrence of certain events, such as
the termination of employment.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up
of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of division B of this Article III.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall have
the right to one vote with respect to such share, and shall be entitled to
notice of any shareholders' meeting in accordance with the bylaws of this
corporation, and shall be entitled to vote upon such matters and in such manner
as may be provided by law.
ARTICLE IV
A. Elimination of Liability. The liability of the directors of this
corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
B. Indemnification. This corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the California
Corporations Code) through bylaw provisions, agreements with the agents, vote of
shareholders or disinterested directors, or otherwise in excess of the
indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject only to applicable limits set forth in Section 204 of
the California Corporations Code with respect to actions for breach of duty to
the corporation and its shareholders.
C. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article IV by the shareholders of the corporation shall not
adversely affect any right or protection of an officer or director of the
corporation pursuant to this Article IV existing at the time of such repeal or
modification.
* * *
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THREE: The foregoing amendment has been approved by the Board of Directors
of said corporation.
FOUR: The foregoing amendment and restatement was approved by the holders
of the requisite number of shares of said corporation in accordance with
Sections 902 and 903 of the California Corporations Code; the total number of
outstanding shares of each class entitled to vote with respect to the foregoing
amendment was 2,618,327 shares of Common Stock, 1,000,000 shares of Series A
Preferred Stock, 2,226,667 shares of Series B Preferred Stock, 17,158,486 shares
of Series C Preferred Stock and 532,777 shares of Series Z Preferred Stock. No
shares of Series J Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock or Series C-1 Preferred Stock are outstanding. The number of
shares voting in favor of the foregoing amendment equaled or exceeded the vote
required, such required vote being (1) a majority of the outstanding shares of
Common Stock voting separately, (2) a majority of the outstanding shares of each
of Series A, Series B, Series C and Series Z Preferred Stock, each voting
separately, (3) a majority of the outstanding shares of Preferred Stock, voting
together as a single class, (4) seventy percent (70%) of the outstanding shares
of Series A, Series B, Series C and Series Z Preferred Stock, voting together as
a single class, (5) a majority of the outstanding shares of Series C Preferred
Stock, and (6) a majority of the outstanding shares of Common Stock, Series A,
Series B, Series C and Series Z Preferred Stock, voting together as a single
class.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this certificate on
October ___, 1996.
-----------------------------------------
Xxxxxxx Xxxxx, President
-----------------------------------------
Xxxx X. Xxxxxxx, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Amended and Restated Articles of Incorporation and know the contents
thereof, and that the statements therein are true.
Executed at San Diego, California, on October ___, 1996.
-----------------------------------------
Xxxxxxx Xxxxx
-----------------------------------------
Xxxx X. Xxxxxxx
76
EXHIBIT B
Amended and Restated
Investors' Rights Agreement
77
COMBICHEM, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
November 15, 1996
78
TABLE OF CONTENTS
Page
----
SECTION 1 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS......................................................... 1
1.1 Certain Definitions......................................................... 1
1.2 Requested Registration...................................................... 3
1.3 Company Registration........................................................ 6
1.4 Expenses of Registration.................................................... 7
1.5 Registration on Form S-3.................................................... 8
1.6 Registration Procedures..................................................... 8
1.7 Indemnification............................................................. 10
1.8 Information by Holder....................................................... 12
1.9 Limitations on Registration of Issues of Securities......................... 13
1.10 Rule 144 Reporting.......................................................... 13
1.11 Transfer or Assignment of Registration Rights............................... 13
1.12 Restrictions on Transfer.................................................... 14
1.13 "Market Stand-Off" Agreement................................................ 15
1.14 Allocation of Registration Opportunities.................................... 15
1.15 Delay of Registration....................................................... 16
1.16 Termination of Registration Rights.......................................... 16
SECTION 2 COVENANTS OF THE COMPANY.................................................... 16
2.1 Basic Financial Information................................................. 16
2.2 Additional Information and Rights........................................... 17
2.3 Right of First Refusal...................................................... 18
2.4 Key Person Life Insurance................................................... 20
2.5 Representation on Board of Directors........................................ 21
2.6 Termination of Covenants.................................................... 21
SECTION 3 MISCELLANEOUS............................................................... 21
3.1 Governing Law............................................................... 21
3.2 Successors and Assigns...................................................... 21
3.3 Entire Agreement; Amendment; Waiver......................................... 21
3.4 Notices, etc................................................................ 22
3.5 Delays or Omissions......................................................... 22
3.6 Rights; Separability........................................................ 22
3.7 Information Confidential.................................................... 22
3.8 Titles and Subtitles........................................................ 23
3.9 Counterparts................................................................ 23
79
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (this "Agreement")
is made and entered into as of the 15th day of November, 1996 by and among
CombiChem, Inc., a California corporation (the "Company"), and the persons
identified on Exhibit A attached hereto (the "Investors").
RECITALS
WHEREAS, certain of the Investors possess registration rights pursuant to
that certain Investors' Rights Agreement dated August 17, 1995, as amended
through the date hereof between the Company and such Investors (the "Rights
Agreement") and certain of the Investors possess information rights, rights of
first refusal and other rights, and the Company is obligated thereunder,
pursuant to the Rights Agreement; and
WHEREAS, the Rights Agreement may be modified or amended with the written
consent of the Company and the holders of a majority of the Registrable
Securities (as defined in the Rights Agreement) then outstanding; and
WHEREAS, the Investors which are parties thereto, which Investors hold at
least a majority of the Registrable Securities, desire to amend and restate the
Rights Agreement and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Rights Agreement; and
WHEREAS, certain Investors are parties to the Series D Preferred Stock
Purchase Agreement dated as of the date hereof among the Company and such
Investors (the "Series D Agreement"), certain of the Investors' obligations
under which are conditioned upon the execution and delivery by such Investors
and the Company of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Investors who are parties to the Rights Agreement agree that
the Rights Agreement shall be amended and restated in its entirety as set forth
herein, and all parties hereto further agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; REGISTRATION RIGHTS
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
80
(a) "Closing" shall mean the date of the initial sale of shares of
the Company's Series D Preferred Stock.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(c) "Holder" shall mean any Investor who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 1.11 hereof.
(d) "Initial Offering" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under the
Securities Act.
(e) "Initiating Holders" shall mean any Holder or Holders who in
the aggregate hold not less than fifty percent (50%) of the outstanding
Registrable Securities. For purposes of such calculation, Holders of Shares
shall be considered to hold the shares of Common Stock then issuable upon
conversion of such Shares.
(f) "JAFCO Funds" shall mean Japan Associated Finance Co., Ltd.
("JAFCO") and certain Investment Enterprise Partnerships affiliated with JAFCO
which are holders of Shares.
(g) "Other Shareholders" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include their
securities in certain registrations.
(h) "Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and (ii) any Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to or in exchange for or in replacement of the shares referenced in
(i) above; provided, however, that Registrable Securities shall not include any
such securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under this Section 1 are not assigned.
(i) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(j) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all
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registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, fees and disbursements of one
counsel for the Holders (solely with respect to registrations pursuant to
Sections 1.2 and 1.3 hereof), blue sky fees and expenses, expenses of any
regular or special audits incident to or required by any such registration, but
shall not include Selling Expenses (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).
(k) "Rule 144" shall mean Rule 144 as promulgated by the SEC under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(l) "Rule 145" shall mean Rule 145 as promulgated by the SEC under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(m) "SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time, corresponding
to such act.
(o) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of the one counsel included in Registration Expenses).
(p) "Shares" shall mean shares of the Company's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series Z Preferred Stock, Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C-1 Preferred Stock and Series D-1 Preferred Stock held
by the Investors.
1.2 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than the earlier of (i)
January 1, 1998 or (ii) six (6) months after the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public, a written request specifying that
it is made pursuant to this Section 1.2 that the Company effect a registration
with respect to all or a part of the Registrable Securities having a reasonably
anticipated aggregate offering price, net of underwriting discounts and
commissions, that exceeds $12,000,000, the Company will:
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(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with the Securities Act) as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after such written notice from the Company is effective.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act; or
(B) After the Company has effected two such
registrations pursuant to this Section 1.2(a) and such registrations have been
declared or ordered effective; or
(C) During the period starting with the date of filing
of and ending on a date one hundred eighty (180) days after the effective date
of a registration pursuant to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(D) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made under Section 1.5 hereof.
(b) Subject to the foregoing Section 1.2(a)(ii) (A) through (D),
the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Initiating Holders; provided, however, that if
(i) in the good faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental to the Company and the Board of
Directors of the Company concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii) 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 of the
Company, it would be seriously detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore, essential to
defer the filing of such registration statement, then the Company shall have the
right to defer
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83
such filing for the period during which such disclosure would be seriously
detrimental, provided, that the Company may not defer the filing for a period of
more than ninety (90) days after receipt of the request of the Initiating
Holders, and, provided further, that (except as provided in Section
1.2(a)(ii)(C) above) the Company shall not defer its obligation in this manner
more than once in any twelve-month period.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 1.2(b) and 1.14 hereof,
include other securities of the Company and may include securities of the
Company being sold for the account of the Company.
(c) Underwriting. If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 1.2 and the Company shall include such information in the written notice
referred to in Section 1.2(a)(i) above. The right of any Holder to registration
pursuant to Section 1.2 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
(d) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 1.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section 1
(including Section 1.13). The Company shall (together with all Holders, and
other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders, which underwriter(s) are
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 1.2, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.14
hereof. If the person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter
or the Initiating Holders. The securities so excluded shall also be withdrawn
from registration. Any Registrable Securities or other securities excluded shall
also be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
1.2(d), then the Company shall offer to all holders who have retained rights to
include securities in the registration the right to include additional
securities
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in the registration in an aggregate amount equal to the number of shares
withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Section 1.14.
1.3 Company Registration.
(a) Company Registration. If 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 pursuant to Section 1.2 hereof), other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 transaction, or a registration on any registration form which does
not permit secondary sales, or the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public,
the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 1.3(b) below, and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by any Holder within twenty (20) days after the written notice from the Company
described in Section 1.3(a)(i) above is effective. Such written request may
specify all or a part of a Holder's Registrable Securities for inclusion.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event the right of any Holder to
registration pursuant to Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting and 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 holders of other securities of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter as set forth in Section 1.14. If any person does not
agree to the terms of any such underwriting, he shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable
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Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.14 hereof.
1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof, and the first two registrations pursuant to Section
1.2 hereof shall be borne by the Company; provided, however, that if the Holders
bear the Registration Expenses for any registration proceeding begun pursuant to
Section 1.2 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof, except in the event that such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 1.2, in which event such
registration shall not be treated as a counted registration for purposes of
Section 1.2 hereof even though the Holders do not bear the Registration Expenses
for such registration. All Selling Expenses relating to securities so registered
shall be borne by the holders of such securities pro rata on the basis of the
number of shares of securities so registered on their behalf.
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1.5 Registration on Form S-3.
(a) After the Initial Offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 1,
the Holders of Registrable Securities 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
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $500,000, or (ii) in the event that the Company shall
furnish the certification described in paragraph 1.2(a)(ii) (but subject to the
limitations set forth therein) or (iii) in a given twelve-month period, after
the Company has effected one (1) such registration in any such period.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii) and Section 1.2(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Sections 1.2(c)
and 1.2(d) hereof shall apply to such registration.
1.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration 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; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
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(b) Prepare and file with the SEC 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 such number of prospectuses and other documents
incident thereto, including any preliminary prospectus or amendment of or
supplement to the prospectus, as a Holder from time to time may reasonably
request;
(d) Notify each seller 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 on 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 or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Use all reasonable efforts to register and qualify the
securities covered by the registration statement under such other securities or
Blue Sky laws of such jurisdiction as shall be reasonably requested by the
Holders; provided, however, 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 state or jurisdiction;
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(h) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve (12) months, but not more than eighteen (18) months, beginning with
the first month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section II(a) of the
Securities Act;
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(i) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions; and
(j) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that such registration statement with respect to such
securities becomes effective, (A) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (B) a letter dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
1.7 Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel and accountants 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 within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages and liabilities (or
actions, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) 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 not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder 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
reimburse each such Holder, each of its officers, directors, partners, legal
counsel and accountants 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 in connection with investigating and
defending or settling any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such
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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 based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 1.7(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel and accountants and 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, each other such Holder and Other Shareholder
and each of their officers, directors and partners, and each person controlling
such Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) 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 omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Shareholders,
directors, officers, partners, legal counsel and accountants, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating 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
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated specifically for use therein,
provided, however, that the obligations of such Holder hereunder shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7
(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 any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, 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, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
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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 of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 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 which 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.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
1.8 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.9 Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.
1.10 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
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(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following 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) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Registrable Securities, furnish
to the Holder forthwith upon written request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following 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 so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the SEC allowing a Holder to sell any such securities
without registration.
1.11 Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to a Holder by the Company under
Sections 1.2, 1.3 and 1.5 may be transferred or assigned by a Holder only to a
transferee or assignee of not less than 25,000 shares of Registrable Securities
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits and the like), and only provided
that the Company is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and provided further that
the transferee or assignee of such rights assumes the obligations of such Holder
under this Article 1.
1.12 Restrictions on Transfer.
(a) Each Holder agrees not to transfer or dispose of all or any
portion of the Registrable Securities unless and until the proposed transferee
has agreed in writing for the benefit of the Company to be bound by this Section
1.12, provided and to the extent this Section 1.12 is then applicable and:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
requested by the Company,
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such Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, to the effect that such disposition will
not require registration of such shares under the Securities Act.
Notwithstanding the provisions of subsections (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
(A) by a Holder which is a partnership to its partners or retired partners in
accordance with partnership interests, (B) to a Holder's family member or trust
for the benefit of an individual Holder, provided that the transferee will be
subject to the terms of this Section 1.12 to the same extent as if he were an
original Holder hereunder, or (C) pursuant to Rule 144(k); provided, however,
that the Company must be satisfied in its reasonable discretion that the
proposed sale of securities fully qualifies with all Rule 144 requirements.
(b) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
1.13 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, an Investor
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Investor (other than those included in
the registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that all Holders and officers and directors of the
Company enter into similar agreements.
The obligations described in this Section 1.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms which may be promulgated in the future, or a registration
relating solely to a Rule 145 transaction on Form S-4, Form S-14 or Form S-15 or
similar forms which may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said one hundred eighty (180) day
period.
1.14 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company
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(including shares of Common Stock issued or issuable upon conversion of shares
of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling shareholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares which may be so included, the number of
shares of Registrable Securities and Other Shares which may be so included shall
be allocated among the Holders and other selling shareholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
shareholders, assuming conversion; provided, however, that, so that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, if any Holder
or other selling shareholder does not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to him pursuant to
the above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling shareholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares that would be held by such
Holders and other selling shareholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares that may be included in the registration on behalf of the Holders and
other selling shareholders have been so allocated. The Company shall not limit
the number of Registrable Securities to be included in a registration pursuant
to this Agreement in order to include shares held by shareholders with no
registration rights or to include Founder's Stock or any other shares of stock
issued to employees, officers, directors or consultants pursuant to the
Company's stock option plan, or with respect to registrations under Sections 1.2
or 1.5 hereof, in order to include in such registration securities registered
for the Company's own account or included at the request of the Company pursuant
to Section 1.3 hereof without the prior written consent of seventy percent (70%)
of the Holders; provided, further, that in no event will the amount of
securities of the selling Holders included in a registration pursuant to Section
1.3 hereof be reduced below twenty percent (20%) of the total amount of
securities included in such offering, unless such offering is the Initial
Offering of the Company's securities in which case the selling shareholders may
be excluded entirely if the underwriters make the determination described above
and no other shareholder's securities are included. For purposes of determining
allocation hereunder, (a) for any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons will be deemed to be a single "selling
shareholder," and (b) all of the JAFCO Funds together shall be deemed to be a
"selling shareholder." Any pro-rata reduction with respect to any such "selling
shareholder" will be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder."
1.15 Delay of Registration. No Holder shall have any right to take any,
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
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1.16 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to Sections 1.2,
1.3 or 1.5 shall terminate on the closing of the first Company-initiated
registered public offering of Common Stock of the Company, provided that all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any 90-day period, or
on such date after the closing of the first Company-initiated registered public
offering of Common Stock of the Company as all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may immediately be
sold under Rule 144 during any 90-day period.
SECTION 2
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Shares as follows:
2.1 Basic Financial Information. The Company will furnish the following
reports to each Holder:
(a) As soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and sources and applications
of funds of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
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.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and sources and
applications of funds of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in
comparative form the figures for the corresponding periods of the previous
fiscal year and to the Company's operating plan then in effect and approved by
its Board of Directors, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such balance sheet need not
contain the notes required by generally accepted accounting principles.
2.2 Additional Information and Rights.
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(a) The Company will permit any Investor, so long as such Investor
or its representative (treating all the JAFCO Funds as a single Investor) owns
at least 500,000 Shares, or such number of shares of Common Stock issued upon
conversion of 500,000 or more Shares, or any combination thereof (as presently
constituted and subject to subsequent adjustment for stock splits, stock
dividends, reverse stock splits, recapitalizations and the like) (a "Significant
Holder") (or a representative of any Significant Holder) to visit and inspect
any of the properties of the Company, including its books of account and other
records (and make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with the Company's officers and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request.
(b) Until the earlier to occur of (i) the date on which the
Company is subject to the reporting requirements of Sections 13(a) or 15(d) of
the Exchange Act, or (ii) the date on which quotations for the Common Stock of
the Company are reported by the automated quotations systems operated by the
National Association of Securities Dealers, Inc., or by an equivalent quotations
system, the Company will deliver the reports described below in this Section 2.2
to each Significant Holder:
(i) As soon as practical after the end of each month and in
any event within thirty (30) days thereafter a consolidated balance sheet of the
Company and its subsidiaries, if any, as at the end of such month and
consolidated statements of income and of sources and applications of funds of
the Company and its subsidiaries, for each month and for the current fiscal year
of the Company to date, all subject to normal year-end audit adjustments,
prepared in accordance with generally accepted accounting principles
consistently applied and certified by the principal financial or accounting
officer of the Company, together with a comparison of such statements to the
corresponding periods of the prior fiscal year and to the Company's operating
plan then in effect and approved by its Board of Directors.
(c) The provisions of Section 2.1 and this Section 2.2 shall not
be in limitation of any rights which any Holder or Significant Holder may have
with respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
(d) Anything in Section 2 to the contrary notwithstanding, no
Holder or Significant Holder by reason of this Agreement shall have access to
any trade secrets or classified information of the Company. Each Significant
Holder hereby agrees to hold in confidence and trust and not to misuse or
disclose any confidential information provided pursuant to this Section 2.2.
(e) Each Holder who represents to the Company that it is a
"venture capital operating company" for purposes of Department of Labor
Regulation ss.2510.3-101 shall in addition have the right to consult with and
advise the officers of the Company as to the management of the Company.
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2.3 Right of First Refusal. The Company hereby grants to each Holder and
its affiliates who own any shares of Series A, Series B, Series C, Series D,
Series A-1, Series B-1, Series C-1 or Series D-1 Preferred Stock (the "Cash
Preferred") or any shares of Common Stock issued upon conversion of the Cash
Preferred (the "Rights Holder") the right of first refusal to purchase a Pro
Rata Share (as defined in this Section 2.3) of New Securities (as defined in
this Section 2.3) which the Company may, from time to time, propose to sell and
issue. A Rights Holder's Pro Rata Share, for purposes of this right of first
refusal, is the ratio of the number of shares of Common Stock owned by such
Rights Holder immediately prior to the issuance of New Securities, assuming full
conversion of the Shares, to the total number of shares of Common Stock
outstanding immediately prior to the issuance of New Securities, assuming full
conversion of the Shares and exercise of all outstanding rights, options and
warrants to acquire Common Stock of the Company. For purposes of this Section
2.3, each of the JAFCO Funds shall be deemed to have purchased its Pro Rata
Share if one or more of the JAFCO Funds shall have purchased an amount of New
Securities equal to the Pro Rata Share of the JAFCO Funds in the aggregate. Each
Rights Holder shall have a right of over-allotment such that if any Rights
Holder fails to exercise its right hereunder to purchase its pro rata share of
New Securities, the other Rights Holders may purchase the non-purchasing Rights
Holder's portion on a pro rata basis within ten (10) days from the date such
non-purchasing Rights Holder fails to exercise its right hereunder to purchase
its Pro Rata Share of New Securities. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including
Common Stock and/or Preferred Stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "New Securities" does not include (i)
securities purchased under the Series D Agreement; (ii) securities issued upon
conversion of the Shares; (iii) securities issued pursuant to the acquisition of
another business entity or business segment of any such entity by the Company by
merger, purchase of substantially all the assets or other reorganization whereby
the Company will own not less than fifty-one percent (51%) of the voting power
of such business entity or business segment of any such entity; (iv) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the
Company; (v) securities issued to employees, consultants, officers or directors
of the Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors; (vi) securities
issued to vendors or customers or to other persons in similar commercial
situations with the Company if such issuance is approved by the Board of
Directors; (vii) securities issued in connection with obtaining lease financing,
whether issued to a lessor, guarantor or other person; (viii) securities issued
in a firm commitment underwritten public offering pursuant to a registration
under the Securities Act with an aggregate offering price to the public in
excess of $5.0 million; (ix) securities issued in
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connection with any stock split, stock dividend or recapitalization of the
Company; and (x) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New Securities
pursuant to subsections (i) through (ix) above.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Rights Holder written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each Rights
Holder shall have twenty (20) days after any such notice is effective to agree
to purchase such Rights Holder's Pro Rata Share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Rights Holders fail to exercise fully the
right of first refusal within said twenty (20)-day period and after the
expiration of the ten (10)-day period for the exercise of the over-allotment
provisions of this Section 2.3, 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) to sell the New Securities
respecting which the Rights Holders' right of first refusal option set forth in
this Section 2.3 was not exercised, at a price and upon terms no more favorable
to the purchasers thereof than specified in the Company's notice to Rights
Holders pursuant to Section 2.3(b). In the event the Company has not sold within
said one hundred twenty (120)-day period or entered into an agreement to sell
the New Securities within said one hundred twenty (120)-day period (or sold and
issued New Securities in accordance with the foregoing 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 again offering such securities
to the Rights Holders in the manner provided in Section 2.3(b) above.
(d) At any time following the date of this Agreement, if the
Company has complied with its notice obligations pursuant to this Section 2.3,
or such obligations have been waived, and the Company thereafter proceeds to
issue or sell New Securities and a Rights Holder does not acquire his, her or
its Pro Rata Share (a "NonParticipating Rights Holder"), then all of such
Non-Participating Rights Holder's Cash Preferred shall automatically and without
further action on the part of such holder be converted, in accordance with the
provisions of Article III(B)(4)(m) of the Company's Amended and Restated
Articles of Incorporation.
(e) The right of first refusal granted under this Agreement shall
expire upon, and shall not be applicable to, the first sale of Common Stock of
the Company to the public effected pursuant to a registration statement filed
with, and declared effective by, the SEC under the Securities Act, with proceeds
of more than $5,000,000.
(f) The right of first refusal set forth in this Section 2.3 may
not be assigned or transferred, except that (i) such right is assignable by each
Rights Holder to any
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wholly owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Securities Act, controlling, controlled by or under
common control with, any such Rights Holder, and (ii) such right is assignable
between and among any of the Rights Holders.
2.4 Key Person Life Insurance. The Company has as of the date hereof
obtained from financially sound and reputable insurers term life insurance on
the life of Xxxxx Xxxx in the amount of [$2,000,000] (the "Xxxx Insurance"), and
shall maintain with financially sound and reputable insurers the Xxxx Insurance
except as otherwise decided in accordance with policies adopted by the Company's
Board of Directors. Such policy shall name the Company as loss payee and shall
not be cancelable by the Company without prior approval of the Board of
Directors.
2.5 Representation on Board of Directors. So long as any Shares remain
outstanding, the Company will use its best efforts to cause and maintain the
election to the Board of Directors of (a) two people designated by the holders
of a majority of the Series C Preferred Stock outstanding, including Common
Stock issued upon conversion of such Series C Preferred Stock (each a "Series C
Director"), and (b) two people designated by the holders of a majority of the
Series A and Series B Preferred Stock outstanding, including Common Stock issued
upon conversion of such Series A and B Preferred Stock. One Series C Director
shall be designated by The Sprout Group and the other Series C Director shall be
designated, subject to the consent of The Sprout Group, by a holder of at least
2,419,355 shares of Series C Preferred Stock in the aggregate. In the event that
two or more holders of Series C Preferred Stock, other than The Sprout Group,
each hold in excess of 2,419,355 shares of Series C Preferred Stock, then that
holder holding the greatest number of shares of Series C Preferred Stock shall
have the right to designate the remaining Series C Director. In the event that
two or more such holders hold an equal number of Series C Preferred Stock, then
The Sprout Group shall determine which of them shall designate the remaining
Series C Director. For the purposes of this paragraph, a "holder" shall include
the affiliates of any holder.
2.6 Termination of Covenants. The covenants set forth in this Section 2
shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act.
SECTION 3
MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.
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3.2 Successors and Assigns. Except as otherwise expressly 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.
3.3 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the Company and the holders of at least
fifty percent (50%) of the Registrable Shares and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally addressed by hand or
special courier (a) if to a Holder, as indicated on the list of Holders attached
hereto as Exhibit A, or at such other address as such Investor or permitted
assignee shall have furnished to the Company in writing, or (b) if to the
Company, at 0000 Xxxxxx Xxxxx Xx, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such other
address as the Company shall have furnished to each holder in writing. All such
notices and other written communications shall be effective (i) if mailed, five
(5) days after mailing and (ii) if delivered, upon delivery.
3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
3.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.7 Information Confidential. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it
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will not use such confidential information in violation of the Exchange Act or
reproduce, disclose or disseminate such information to any other person (other
than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
3.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Investors Rights
Agreement effective as of the day and year first above written.
COMBICHEM, INC.
By:______________________________________
Title:___________________________________
HOLDER:
-----------------------------------------
[Name of Holder]
By:______________________________________
Title:___________________________________
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
102
EXHIBIT A
INVESTORS
Forward Ventures II, L.P.
Sequoia Capital VI
Sequoia Technology Partners VI
Sequoia XXIV
Sequoia 1995
Xxxx X. Xxxxxxxx
Xxxxxx Xxxxxxx
Sprout Capital VII, L.P.
DLJ Capital Corporation
C. V. Sofinnova Ventures Partners III
Singapore Bio-Innovations Pte, Ltd
PaineWebber Incorporated as Custodian of the Xxxxxxx Xxxxxxxx Rollover XXX
Xxxxxx X. Xxxx
First Interstate Bank as Trustee for SK International Securities
Corp. 401(k)PS em Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
XXX FBO Xxxxx X. Xxxxxxx
The X.X. Xxxxxxxx Trust
Xxxxxx Inc.
Sorrento Ventures II, L.P.
Sorrento Growth Partners I, L.P.
Comdisco, Inc.
Xxxxxxx Venture Capital Fund III, L.P. (The First National Bank of Chicago as
Custodian to the Xxxxxxx Venture Capital Fund III, L.P.)
Xxxxxxx Trust Company as Trustee of the Xxxxxxx MAP Venture Capital Fund III
(The First National Bank of Chicago as Custodian to the Xxxxxxx Trust Company
as Trustee of the Xxxxxxx MAP Venture Capital Fund III)
Japan Associated Finance Co., Ltd.
JAFCO G-5 Investment Enterprise Partnership
JAFCO R-1(A) Investment Enterprise Partnership
JAFCO R-1(B) Investment Enterprise Partnership
JAFCO R-2 Investment Enterprise Partnership
Brentwood Associates VII, L.P.
S.R. One Limited
Xxxxxxx X. Xxxxxx
Xxxx Xxxxxxx
Xxxxxxx Xxxxx
Xxxx X. Xxxxxxxx
The Xxxxx X. XxXxxxxxx Trust, dated 6/21/91
Xxxxx Xxxx
Xxxx Xxxxxx Xxxxxxx Trust U/A Dtd 7/11/88
Exhibit A
103
EXHIBIT C
Current Shareholders
104
EXHIBIT C
The outstanding shares of Preferred Stock and Common Stock are owned by
the shareholders and in the numbers specified herein:
CLASS/SERIES SHAREHOLDER NO. SHARES
------------ ----------- ----------
Common Xxx X. Xxxxx 175,000
Common Chi-Xxxx Xxxx 150,000
Common Xxxx X. Xxxxx 150,000
Common Xxxx Xxx 10,000
Common Xxxxxxxx Xxxxxxx 37,500
Common Trustees of Royston Family Trust UTA 37,500
2/12/82
Common Xxxxxx Xxxxxxx 150,000
Common Forward Ventures II, L.P. 225,000
Common Xxxxxxx Xxxxxxxxx 10,000
Common Xxxxxx X. Xxxxxx 229,160
Common Xxxx Xxxxx 2,500
Common Sequoia Capital VI 91,000
Common Sequoia Technology Partners VI 5,000
Common Sequoia XXIV 4,000
Common Xxxx X. Xxxxxxxx 175,000
Common Xxxxxx X. Xxxxxx 10,000
Common Xxxx Xxx 5,000
Common Xxxxxx Castillino, Ph.D. 20,000
Common Xxxxx X. Xxxx 20,000
Common Xxxx Xxxxx 20,000
Common Xxxxxx X. X. Sun 10,000
Common Xxxx Xxxxx 11,667
Common Xxxxxxxxx X. Xxxxx 14,000
Common Xxxxx X. Xxxxxxxxx, Ph.D. 11,764
Common Xxxxxxx X. Xxxxxx, M.D. 83,000
Common The Scripps Research Institute 305,236
105
CLASS/SERIES SHAREHOLDER NO. SHARES
------------ ----------- ----------
Common Xxxxx Xxxxx 350,000
Common Xxxxxxxx Xxxxxx 100,000
Common Xxxxxx Xxxx 200,000
Common Xxx Xxxxxxxxxx 6,000
Common Xxxxxxx Xxxxx 96,000
TOTAL COMMON: 2,714,327
Series A Forward Ventures II, L.P. 600,000
Series A Sequoia Capital VI 364,000
Series A Sequoia Technology Partners VI 20,000
Series A Sequoia XXIV 16,000
TOTAL SERIES A: 1,000,000
Series B Sequoia Capital VI 1,213,334
Series B Sequoia Technology VI 66,667
Series B Sequoia Capital VI 53,333
Series B Forward Ventures II, L.P. 866,666
Series B Xxxx X. Xxxxxxxx 26,667
TOTAL SERIES B: 2,226,667
Series C Sprout Capitol VII, L.P. 3,126,821
Series C DLJ Capital Corporation 260,276
Series C Sofinnova Ventures III, L.P. 1,129,033
Series C Singapore Bio-Innovation Ptd., Ltd. 564,517
Series C Sequoia Capital VI 1,335,646
Series C Sequoia Technology Partners VI 73,388
Series C Sequoia XXIV 58,710
Series C PainWebber Incorporated as Custodian of 37,218
the Xxxxxxx Xxxxxxxx Rollover XXX
Series C Xxxxxx X. Xxxx 16,185
106
CLASS/SERIES SHAREHOLDER NO. SHARES
------------ ----------- ----------
Series C First Interstate Bank as Trustee for SK 80,874
International Securities Corp. 401(k) PS em
Xxxxxxx X. Xxxxxx
Series C Xxxxx X. Xxxxxxx 56,452
Series C X.X. Xxxxxxxx Revocable Trust 225,807
Series C Xxxxxx Inc. 846,775
Series C Sorrento Ventures II, L.P. 564,517
Series C Sorrento Growth Partners I, L.P. 1,129,033
Series C Comdisco, Inc. 169,355
Series C Xxxxxxx Venture Capital Fund III, L.P. 1,941,441
Series C Xxxxxxx Trust Company as Trustee of the 316,624
Xxxxxxx MAP Venture Capital Fund III
Series C Xxxx Xxxxxxx 8,065
Series C Spout Capital VII, L.P. 1,340,066
Series C DLJ Capital Corporation 111,547
Series C CV Sofinnova Ventures Partners III 483,871
Series C Singapore Bio-Innovations Pte Ltd 241,936
Series C Sequoia Capital VI 572,420
Series C Sequoia Technology Partners VI 31,452
Series C Sequoia 1995 25,162
Series C Xxxxx X. Xxxxxxx 24,194
Series C X.X. Xxxxxxxx Trust 96,775
Series C Xxxxxx Inc. 362,904
Series C Sorrento Ventures II, L.P. 241,936
Series C Sorrento Growth Partners I, L.P. 483,871
Series C Comdisco, Inc. 72,581
Series C The First National Bank of Chicago as 832,046
Custodian to the Xxxxxxx Venture Capital
Fund III, L.P.
107
CLASS/SERIES SHAREHOLDER NO. SHARES
------------ ----------- ----------
Series C The First National Bank of Chicago as 135,696
Custodian to the Xxxxxxx Trust Company as
Trustee of the Xxxxxxx Map Venture Capital
Fund III
Series C Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities 112,904
Corporation Custodian F/B/O Xxxxx X.
Xxxxxxx, Account # 4GH 017650
Series C Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities 48,388
Corporation Custodian F/B/O Xxxxx X.
Xxxxxxx, Account # 4GH 017650
TOTAL SERIES C: 17,158,486
Series Z Xxxxxx Xxxxxxx 200,000
Series Z Molecular Simulations, Inc. 106,971
Series Z Molecular Simulations, Inc. 225,806
TOTAL SERIES Z: 532,777
108
EXHIBIT D
Co-Sale Agreement
109
COMBICHEM, INC.
AMENDED AND RESTATED
CO-SALE AGREEMENT
This Amended and Restated Co-Sale Agreement (the "Agreement") is made as
of the 15th day of November, 1996, by and among Xxxxxxx Xxxxx, Xxxxxx X. Xxxxxx,
Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxxxx, Xxx Xxxxx, Chi-Xxxx Xxxx and Xxxx
Xxxxx (individually, a "Founder" and, collectively, the "Founders"), CombiChem,
Inc., a California corporation (the "Company"), and the undersigned holders of
Series A, B, C or D Preferred Stock of the Company (the "Shareholders").
WHEREAS, the Founders are subject to certain obligations and certain of
the Shareholders have certain rights pursuant to that certain Co-Sale Agreement
dated August 17, 1995 (the "Prior Agreement");
WHEREAS, the Prior Agreement may be amended or modified by the written
consent of the Company, of Shareholders (as defined under the Prior Agreement)
holding more than 50% in interest of the Common Stock then held and of each
Founder;
WHEREAS, the Company, the Shareholders (as defined under the Prior
Agreement) and each Founder executing this Agreement desire to amend and restate
the Prior Agreement and to accept the rights and obligations created hereunder
in lieu of the rights and obligations granted to them under the Prior Agreement;
and
WHEREAS, certain Shareholders are parties to the Series D Preferred Stock
Purchase Agreement dated the date hereof, certain of the Shareholders'
obligations under which are conditioned upon the execution and delivery by such
Shareholder and the Company of this Agreement.
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. Definitions.
(a) "Stock" shall mean shares of the Company's Common Stock or
Preferred Stock or Series Z Preferred Stock now owned or subsequently acquired
by the Founders.
(b) "Preferred Stock" shall mean the Company's outstanding Series
A, Series B, Series C, Series D, Series J, Series Z, Series A-1, Series B-1,
Series C-1 and Series D-1 Preferred Stock.
(c) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of the Company's
outstanding Preferred Stock.
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(d) "JAFCO Funds" shall mean Japan Associated Finance Co., Ltd.
("JAFCO") and certain Investment Enterprise Partnerships affiliated with JAFCO
which are holders of Series D Preferred Stock or Series D-1 Preferred Stock.
2. Sales by Founder.
(a) If a Founder proposes to sell or transfer any shares of Stock
in one or more related transactions which will result in (i) the transfer of
1,000 or more shares of Stock by such Founder or (ii) the transferee of such
shares holding more than 50% of the Common Stock, then such Founder shall
promptly give written notice (the "Notice") to the Company and the Shareholders
at least twenty (20) days prior to the closing of such sale or transfer. The
Notice shall describe in reasonable detail the proposed sale or transfer
including, without limitation, the number of shares of Stock to be sold or
transferred, the nature of such sale or transfer, the consideration to be paid
and the name and address of each prospective purchaser or transferee. In the
event that the sale or transfer is being made pursuant to the provisions of
Sections 3(a) or 3(b) hereof, the Notice shall state under which paragraph the
sale or transfer is being made.
(b) Each Shareholder shall have the right, exercisable upon
written notice to such Founder within 15 days after receipt of the Notice, to
participate in such sale of Stock on the same terms and conditions. To the
extent one or more of the Shareholders exercise such right of participation in
accordance with the terms and conditions set forth below, the number of shares
of Stock that the Founder may sell in the transaction shall be correspondingly
reduced.
(c) Each Shareholder may sell all or any part of that number of
shares of Stock equal to the product obtained by multiplying (i) the aggregate
number of shares of Stock covered by the Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by the Shareholders at
the time of the sale or transfer and the denominator of which is the total
number of shares of Common Stock owned by the Founder and the Shareholders at
the time of the sale or transfer.
(d) If any Shareholder fails to elect to fully participate in such
Founder's sale pursuant to this Section 2, the Founder shall give notice of such
failure to the Shareholders who did so elect (the "Participants"); provided,
however, that the JAFCO Funds shall be collectively deemed to be a single
participant. Such notice may be made by telephone if confirmed in writing within
two (2) days. The Participants shall have five (5) days from the date such
notice was given to agree to sell their pro rata share of the unsold portion.
For purposes of this Section 2(d), a Participant's pro rata share shall be the
ratio of (x) the number of shares of Common Stock held by such Participant to
(y) the total number of shares of Common Stock held by the Participants and the
Founder.
(e) Each Participant shall effect its participation in the sale by
promptly delivering to the Founder for transfer to the prospective purchaser one
or more certificates, properly endorsed for transfer, which represent:
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(i) the type and number of shares of Common Stock which such
Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at
such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(e)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(f) The stock certificate or certificates that the Participant
delivers to the Founder pursuant to Section 2(e) shall be transferred to the
prospective purchaser in consummation of the sale of the Stock pursuant to the
terms and conditions specified in the Notice, and the Founder shall concurrently
therewith remit to such Participant that portion of the sale proceeds to which
such Participant is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment or
otherwise refuses to purchase shares or other securities from a Participant
exercising its rights of co-sale hereunder, the Founder shall not sell to such
prospective purchaser or purchasers any Stock unless and until, simultaneously
with such sale, the Founder shall purchase such shares or other securities from
such Participant.
(g) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Stock made by the Founder shall
not adversely affect their rights to participate in subsequent sales of Stock
subject to Section 2(a).
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Shareholders shall not apply to (i) any pledge of Stock made pursuant to a bona
fide loan transaction that creates a mere security interest or (ii) any transfer
to the ancestors, descendants or spouse or to trusts for the benefit of such
persons or a Founder; provided that (A) the transferring Founder shall inform
the Shareholders of such pledge or transfer prior to effecting it and (B) the
pledgee or transferee shall furnish the Shareholders with a written agreement to
be bound by and comply with all provisions of this Agreement. Such transferred
Stock shall remain "Stock" hereunder, and such pledgee or transferee shall be
treated as a "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2
shall not apply to the sale of any Stock (i) to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) to the Company.
4. Prohibited Transfers.
(a) In the event a Founder should sell any Stock in contravention
of the co-sale rights of the Shareholders under this agreement (a "Prohibited
Transfer"), the
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Shareholders, in addition to such other remedies as may be available at law, in
equity or hereunder, shall have the put option provided below, and the Founder
shall be bound by the applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Shareholder shall
have the right to sell to the Founder the type and number of shares of Stock
equal to the number of shares each Shareholder would have been entitled to
transfer to the purchaser under Section 2(c) hereof had the Prohibited Transfer
been effected pursuant to and in compliance with the terms thereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold
to the Founder shall be equal to the price per share paid by the purchaser to
the Founder in the Prohibited Transfer. The Founder shall also reimburse each
Shareholder for any and all reasonable fees and expense, including reasonable
legal fees and expense, incurred pursuant to the exercise or the attempted
exercise of the Shareholder's rights under Section 2.
(ii) Within ninety (90) days after the later of the dates on
which the Shareholder (A) received notice of the Prohibited Transfer or (B)
otherwise became aware of the Prohibited Transfer, each Shareholder shall, if
exercising the option created hereby, deliver to the Founder the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Shareholder, pursuant to this
Section 4(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expense, as specified in Section 4(b)(i), in cash or by
other means acceptable to the Shareholder.
(iv) Notwithstanding the foregoing, any attempt by a Founder
to transfer Stock in violation of Section 2 hereof shall be void and the Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Shareholders.
5. Legend.
(a) Each certificate representing shares of Stock now or hereafter
owned by the Founders or issued to any person in connection with a transfer
pursuant to Section 3(a) hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND
CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
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113
(b) Each Founder agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
6.2 Amendment. Any provision may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to the Shareholders, by persons holding
more than fifty percent (50%) in interest of the Common Stock and Common Stock
equivalents then held by the Shareholders and their assignees, pursuant to
Section 6.3 hereof, and (iii) as to each Founder, such Founder, provided that
any Shareholder may individually waive any of his rights hereunder without
obtaining the consent of any other Shareholder. Any amendment or waiver effected
in accordance with clauses (i), (ii) and (iii) of this paragraph shall be
binding upon each Shareholder, its successors and assigns, the Company and the
Founder in question.
6.3 Assignment of Rights. This Agreement and the rights and
obligations of the parties hereunder shall inure to benefit of, and be binding
upon, their respective successors, assigns and legal representatives. The rights
of the Shareholders hereunder are only assignable (i) by each of such
Shareholders to any other Shareholder or (ii) to an assignee or transferee who
acquires all of the Common Stock purchased by a Shareholder or at least 25,000
shares of Common Stock.
6.4 Term. This Co-Sale Agreement shall terminate upon the earlier
of (i) the closing of a firm commitment underwritten public offering pursuant to
a registration statement on Form S-1 under the Securities Act of 1933, as
amended, the public offering price of which (exclusive of underwriting
discounts, commissions and expenses) is not less than $4.00 per share (adjusted
to reflect subsequent stock dividends, stock splits or recapitalizations) and
$12,000,000 in the aggregate, and (ii) the closing of the Company's sale of all
or substantially all of its assets or the acquisition of the Company by another
entity by means of merger or consolidation resulting in the exchange of the
outstanding shares of the Company's capital stock for securities or
consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary.
6.5 Ownership. Each Founder represents and warrants that he is the
sole legal and beneficial owner of the shares of Stock subject to this Co-Sale
Agreement and that no other person has any interest (other than a community
property interest) in such shares.
6.6 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given upon personal delivery to the
party to be
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notified or five days after deposit in the United States mail, by registered or
certified mail, postage prepaid and properly addressed to the party to be
notified as set forth on the signature page hereof or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties hereto. Notwithstanding the foregoing, the telephone notice permitted by
Section 2(d) shall be effective at the time it is given.
6.7 Severability. In the event one or more of the provisions of
this Co-Sale Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Co-Sale Agreement, and this
Co-Sale Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
6.8 Attorney Fees. In the event that any dispute among the parties
to this Co-Sale Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Co-Sale Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.9 Counterparts. This Co-Sale Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Remainder of This Page Intentionally Left Blank]
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115
The foregoing agreement is hereby executed as of the date first above
written.
COMBICHEM, INC.
By:______________________________________
Title:___________________________________
Address: 0000 Xxxxxx Xxxxx Xx
Xxx Xxxxx, Xxxxxxxxxx 00000
SHAREHOLDERS:
-----------------------------------------
(Print Name of Investor)
-----------------------------------------
(Signature)
-----------------------------------------
(Title, if applicable)
Address: _________________________________________
_________________________________________
_________________________________________
FOUNDERS:
-----------------------------------------
(Print Name of Founder)
-----------------------------------------
(Signature)
Address: _________________________________________
_________________________________________
_________________________________________
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
116
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the Company held of record by either or both of us,
including my community interest in such shares, if any, co-sale rights (as
described in the Agreement) must be granted to the Shareholders by the seller. I
hereby agree that those shares and my interest in them, if any, are subject to
the provisions of the Agreement and that I will take no action at any time to
hinder operation of, or violate, the Agreement.
-----------------------------------------
(Signature)
117
SCHEDULE A
SCHEDULE OF INVESTORS
Closing
---------------------------------------
Investor Number of Shares Cash
-------- ---------------- ----
Japan Associated Finance Co., Ltd. ........................... 400,000 $ 400,000.00
JAFCO G-5 Investment Enterprise Partnership .................. 677,300 $ 677,300.00
JAFCO R-1(A) Investment Enterprise Partnership ............... 316,450 $ 316,450.00
JAFCO R-1(B) Investment Enterprise Partnership ............... 316,450 $ 316,450.00
JAFCO R-2 Investment Enterprise Partnership .................. 289,800 $ 289,800.00
Brentwood Associates VII, L.P. ............................... 2,000,000 $2,000,000.00
S.R. One Limited ............................................. 1,000,000 $1,000,000.00
Sprout Capital VII, L.P. ..................................... 1,078,430 $1,078,430.00
DLJ Capital Corporation ...................................... 89,768 $ 89,768.00
C.V. Sofinnova Ventures Partners III ......................... 194,699 $ 194,699.00
Singapore Bio-Innovations PTE, Ltd. .......................... 194,700 $ 194,700.00
Sequoia Capital VI ........................................... 863,442 $ 863,442.00
Sequoia Technology Partners VI ............................... 47,442 $ 47,442.00
Sequoia 95 ................................................... 37,953 $ 37,953.00
PaineWebber, Inc. FBO "Xxxxxxx Xxxxxxxx," XXX R/O ............ 8,985 $ 8,985.00
Xxxxxx X. Xxxx ............................................... 3,908 $ 3,908.00
Xxxxxxx X. Xxxxxx ............................................ 19,525 $ 19,525.00
Xxxxx X. Xxxxxxx ............................................. 58,411 $ 58,411.00
The X.X. Xxxxxxxx Trust ...................................... 77,880 $ 77,880.00
Xxxxxx Inc. .................................................. 292,050 $ 292,050.00
Sorrento Ventures II, L.P. ................................... 192,753 $ 192,753.00
Sorrento Growth Partners I, L.P. ............................. 391,346 $ 391,346.00
Comdisco, Inc. ............................................... 58,410 $ 58,410.00
The First National Bank of Chicago as Custodian to the Xxxxxxx
Venture Capital Fund III, L.P. ............................... 515,868 $ 515,868.00
The First National Bank of Chicago as Custodian to the Xxxxxxx
Trust Company as Trustee of the Xxxxxxx MAP Venture Capital
Fund III ..................................................... 84,132 $ 84,132.00
Xxxx Xxxxxxx ................................................. 8,065 $ 8,065.00
Xxxxxxx Xxxxx ................................................ 240,000 $ 240,000.00
Xxxx X. Xxxxxxxx (Anido designee) ............................ 240,000 $ 240,000.00
The Xxxxx X. XxXxxxxxx Trust, dated 6/21/91 .................. 35,000 $ 35,000.00
118
SCHEDULE A
SCHEDULE OF INVESTORS
Closing
---------------------------------------
Investor Number of Shares Cash
-------- ---------------- ----
Xxxxx Xxxx.................................................. 20,000 $ 20,000.00
Forward Ventures II, L.P.................................... 100,000 $ 100,000.00
Xxxx Xxxxxxxx............................................... 6,438 $ 6,438.00
Xxxx Xxxxxx Xxxxxxx Trust U/A Dtd 7/11/88................... 10,000 $ 10,000.00
--------- -------------
TOTALS:............................................. 9,869,205 $9,869,205.00
========= =============
119
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series D Preferred Stock Purchase Agreement dated November 15, 1996 (the
"Agreement") by and among CombiChem, Inc. ("CombiChem") and the investors listed
on Schedule A thereto. The section numbers in this Schedule of Exceptions
correspond to the section numbers in the Agreement; however, any information
disclosed herein under any section number shall be deemed to be disclosed and
incorporated into any other section number where such disclosure would otherwise
be appropriate. Any terms defined in the Agreement shall have the same meaning
when used in this Schedule of Exceptions as when used in the Agreement unless
the context otherwise requires.
Nothing herein constitutes an admission of any liability or obligation on
the part of CombiChem nor an admission against CombiChem's interest. The
inclusion of any schedule herein or any exhibit hereto should not be interpreted
as indicating that CombiChem has determined that such an agreement or other
matter is necessarily material to CombiChem. The Investors acknowledge that
certain information contained in these schedules may constitute material
confidential information relating to CombiChem which may not be used for any
purpose other than that contemplated in the Agreement.
120
SCHEDULE 2.5
CAPITALIZATION AND VOTING RIGHTS
Xxxxxxx Xxxxx has been granted a right to purchase a number of shares
sufficient to allow him to maintain a 6% ownership percentage in the Company
upon future financings.
A Consulting Group is to be paid $50,000 in shares of Capital Stock upon
its completion of work.
121
SCHEDULE 2.7
CONTRACTS AND OTHER COMMITMENTS
The Company is a party to the following agreements:
(a) (i) Lease for 0000 Xxxxxx Xxxxx Xx, Xxx Xxxxx, XX 00000
dated December 22, 1995.
(ii) Industrial Lease for 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX
dated December 7, 1992.
(iii) Second Sublease for 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX
and draft of Addendum No. 1.
(iv) Pursuant to a License Agreement dated August 4, 1995
between the Company and Molecular Simulations
Inc.("MSI"), the Company has agreed to pay to MSI
royalties equal to: (A) in connection with the sale of a
single product, the lesser of 5% of net sales of such
product or $25,000; (B) in connection with the sale of
more than one product in a single transaction, the sum
of (I) with respect to the first product included in
such transaction, the lesser of 5% of net sales of such
product or $25,000 and (II) with respect to the
additional products, a flat royalty of $5,000 per
additional product; or (C) in connection with a
collaboration or contract research project, the lesser
of 2% of net sales for such collaboration or contract
research project or $100,000. The maximum aggregate
royalties payable under the agreement is $5.0 million.
(v) Pursuant to the Sublicense Agreement dated July 20, 1995
between the Company and Xxxxxxx & Xxxxxxx (the "J&J
Sublicense"), the Company has paid $40,000 to Xxxxxxx &
Xxxxxxx and is required to make the following additional
payments: (A) aggregate payments of $60,000 (subject to
certain time and performance milestones) (B) an
additional royalty of 1% of monetary compensation
received in connection with a further sublicense of
rights under the Agreement and (C) earned royalties 10%
of net sales value of products sold under the agreement
by the Company or affiliates or 10% of the royalty or
other income received by the Company from sublicensee or
third parties in consideration of granting of further
sublicenses.
(vi) See (c)(i) below.
(vii) Pursuant to an agreement dated June 5, 1996 between the
Company and Cerep, the Company will pay Cerep $50,000 in
November or December 1996 in connection with a study of
2500 compounds.
(viii) Pursuant to an agreement dated August 27, 1996 between
the Company and DYAX CORP. ("Dyax"), the Company is
required to pay Dyax an aggregate of $250,000 in
increments of $50,000 at certain authorization or
deliver events in connection with developing a
separation and purification module.
(ix) Standard Office Lease for 000 Xxx Xxxxxxx Xxxx, Xxxx
Xxxx, XX 00000 dated October 29, 1996.
Schedule 2.7
122
(b) (i) Preferred Stock Purchase Agreement (600,000 Shares of
Series A Preferred Stock) dated August 26, 1994 between
the Company and Forward Ventures II, L.P.
(ii) Common Stock Purchase Agreement (225,000 Shares of
Common Stock) dated September 28, 1994 between the
Company and Forward Ventures II, L.P.
(iii) Preferred Stock Purchase Agreement (200,000 Shares of
Series Z Preferred Stock) dated October 12, 1994 between
the Company and Dr. Xxxxxx Xxxxxxx.
(iv) Stock Purchase Agreement Preferred and Common (400,000
Shares of Series A Preferred Stock and 100,000 Shares of
Common Stock) dated November 1, 1994 among the Company,
Sequoia Capital VI, Sequoia Technology Partners VI and
Sequoia XXIV.
(v) Stock Purchase Agreement (Series B Preferred) dated
November 29, 1994 among the Company, Sequoia Capital VI,
Sequoia Technology Partners VI, Sequoia XXIV and Forward
Ventures II, L.P.
(vi) Stock Purchase Agreement (Series B Preferred) dated
January 15, 1995 between the Company and Xxxx X.
Xxxxxxxx, Ph.D.
(vii) Common Stock Purchase Agreement dated March 20, 1995
between the Company and The Scripps Research Institute,
as amended through the date hereof.
(viii) The Company is party to the following Common Stock
Purchase Agreements:
AMOUNT OF
NAME DATE SHARES
CURRENTLY
OUT-STANDING
UNDER AGMTS
-----------------------------------------------------------------------------
Xxx X. Xxxxx 09/28/94 175,000
Chi Xxxx Xxxx 09/28/94 150,000
Xxxx X. Xxxxx 09/28/94 150,000
Xxxx Xxx 09/28/94 10,000
Xxxxxxxx Xxxxxxx 09/28/94 37,500
Trustee of Royston Family Trust UTA 09/28/94 37,500
2/12/82
Xxxxxx Xxxxxxx 09/28/94 150,000
Xxxxxxx Xxxxxxxxx 09/28/94 10,000
Xxxx X. Xxxxxxxx 11/08/94 175,000
Xxxxxx X. Xxxxxx 11/18/94 10,000
Xxxx X. Xxx 01/01/95 5,000
Schedule 2.7
123
AMOUNT OF
NAME DATE SHARES
CURRENTLY
OUT-STANDING
UNDER AGMTS
-----------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 01/19/95 20,000
Xxxxx X. Xxxx 01/23/95 20,000
Xxxx Xxxxx 01/23/95 20,000
Xxxxxx X.X. Sun 01/30/95 10,000
Xxxxxxxxx X. Xxxxx 04/24/95 14,000
Xxxxx Xxxxx 3/1/95 350,000
Xxxxx Xxxx 6/2/95 200,000
Xxxxxxxx Xxxxxx 6/3/95 100,000
(ix) The Company has entered into Series J Option Agreements
with each of Xxxxxx Xxxx, Xxxxxxxx Xxxxxx and Xxxxxx
Xxxxxxx, pursuant to which an aggregate of 465,000
shares of Series J Preferred Stock may be issued.
(x) The Company had previously entered into (A) that certain
Amended and Restated Stock Registration Rights Agreement
dated November 1, 1994, as amended on November 29, 1994,
January 15, 1995 and March 20, 1995 and (B) that certain
Stock Registration Rights Agreement dated October 12,
1994 which granted to certain investors registration
rights. These agreements were terminated pursuant to
Investors' Rights Agreement.
(xi) Warrant Agreement with Comdisco, Inc., dated December
20, 1994
(xii) Warrant Agreement with Sequoia Capital VI, dated August
17, 1995.
(xiii) Warrant Agreement with Sequoia Technology Partners VI,
dated August 17, 1995.
(xiv) Warrant Agreement with Sequoia XXIV, dated August 17,
1995.
(xv) Warrant Agreement with Xxxxx Xxxxxx Incorporated as
Custodian of the Xxxxxxx Xxxxxxxx Rollover XXX, dated
August 17, 1995.
(xvi) Warrant Agreement with First Interstate Bank as Trustee
of SK International Securities Corp. 401(k) PS EM
Xxxxxxx X. Xxxxxx, dated August 17, 1995.
(xvii) Warrant Agreement with Forward Ventures II, L.P., dated
August 17, 1995.
(xviii) Warrant Agreement with Xxxxxx X. Xxxx, dated August 17,
1995.
(xix) Two Warrant Agreements with Comdisco, Inc., dated April
15, 1996.
(xx) Warrant Agreement with Silicon Valley Bank, dated May
20, 1996.
(xxi) Warrant Agreement with MMC/GATX Partnership No. 1, dated
May 20, 1996.
(xxii) Warrant Agreement with Comdisco, Inc., dated June 27,
1996.
(xxiii) The Company entered into a consulting agreement with Xxx
Xxxxxxxxxx pursuant to which Xx. Xxxxxxxxxx received
6,000 shares of the Company's common stock.
Schedule 2.7
124
(xxiv) Stock Purchase Agreement (Series C Preferred) dated August
17, 1995 among the Company and the persons listed on
Schedule A thereto.
(xxv) Stock Purchase Agreement (Series C Preferred) dated April
9, 1996 among the Company and the persons listed on
Schedule A thereto.
(c) (i) Master Lease Agreement with Comdisco, Inc. ("Comdisco")
dated November 16, 1994.
(ii) The Company has made a loan to Xxxxx Xxxxx in the
principal amount of $150,0 00.
(iii) The Company loaned $66,125 to Xxxx Xxxxxxxx for purchase
of a home; this loan is secured by a deed of trust.
(iv) Loan and Security Agreement by and among Silicon Valley
Bank and MMC/GATX Partnership No. 1 dated as of May 20,
1996.
(d) (i) The Company is party to employment agreements with the
following individuals: Xxxx X. Xxxxxxxx; Xxxxx Xxxxx;
Xxxxxxxx Xxxxxx; X. XxXxxxxxx; X. Xxxxxxxx; Xxxxxx Xxxx;
Xxxxxx Xxxxxxx; and Xxxxxxx Xxxxx. In addition, the
Company is a party to offer letters and/or memoranda
with the following employees in which certain terms and
conditions of the employee's employment are set forth:
Xxxxxxx Xxxxxxx; X. Xxxxxx; X. Xxxxx; X. Xxxxxx; X.
Xxxxxxxxxx; X. Xxxxxx; X. Xxxxx; X. Xxxxx; X. Xxxx; Xxxx
Xxx; X. Xxxxxxxxxxx; X. Xxxxxxxx-Xxxxx; X. Xxxxxx; X.
Xxxxx; X. Xxxxx; A. Purshottham; X. Xxxxxxx-Xxxxxxxxx;
X. Xxxx; X. Xxxx; X. Xxxxxx; X. Xxxxxxx; X. Xxxxx; X.
Xxxxx; X. Xxxxxxxx; X. Xxxx.
(ii) The Company is a party to the following consulting
agreements: X. Xxxxxx (dated 01/19/96); Xxxx X. Xxxxx
(dated 05/01/94); Xxx X. Xxxxx (dated 08/09/94); Xxxxxx
Xxxxxxx (dated 08/10/94); Chi-Xxxx Xxxx (dated 08/11/94)
and an ongoing relationship with a consulting group for
team building and leadership. The Company entered into a
letter agreement dated July 25, 1995 with Transpect
Incorporated ("Transpect") pursuant to which Transpect
is retained as an advisor and consultant with respect to
the establishment of a relationship with Daiichi
Pharmaceutical Co., Ltd (or any company mutually agreed
to). In addition, the Company is a party to Scientific
Advisory Board Agreement with the following individuals:
X. Xxxx (dated 09/07/95); X. Xxxxxxxxxxx (dated
04/08/95); X. Xxxxxxxxx (dated 05/18/95).
(e) (i) Agreement for Purchase and Sale of Assets dated
September 28, 1994 among the Company, Combichem, Inc., a
Delaware corporation, KPCB VI and KPCB IV-FF.
(ii) License Agreement with The Scripps Research Institute
("Scripps License").
(iii) Assignments of Dr. Xxxxxx Xxxxxxx.
(iv) Sublicense Agreement dated July 20, 1995 between the
Company and Xxxxxxx & Xxxxxxx.
Schedule 2.7
125
(v) Option Agreement with The Scripps Research Institute
("Scripps Option").
(vi) Evaluation Study and Test Site Agreement between the
Company and Chugai Pharmaceutical pursuant to which
Chugai has paid to the Company an amount equal to
$300,000 in order to Beta Test the Company's product,
which sum may be applied to future purchases of the
Company's products, and a portion of which sum the
Company may be required to return to Chugai in certain
circumstances.
(vii) Collaboration Agreement dated on or about March 29, 1996
between the Company and Teijin Limited to design,
synthesize and screen compound libraries for *** and ***
. The Company retains all rights with respect to
compounds in Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx xxx Xxxxx
Xxxxxxx subject to an option to acquire such rights
granted to Teijin. Teijin retains all rights with
respect to compounds in all other territories. The
Company is entitled to receive a *** upfront fee,
milestone payments, annual research funding and
royalties from Teijin.
(viii) License and Test Site Agreement by and between the
Company and X. XXXXXXXX A/S, a Danish corporation
("Lundbeck") dated May 20, 1996 pursuant to which
Lundbeck may pay $200,000 to the Company, which sum may
be applied to future purchases of the Company's
products. To date, Lundbeck has paid the Company
$120,000.
(ix) The Company has entered into a collaborative agreement
with Roche Bioscience pursuant to which certain rights
are licensed.
(x) See (a) above.
(f) The Company has entered into indemnification agreements with
each of the directors of the Company. In addition, other
agreements listed in this Schedule of Exceptions may contain
indemnification provisions. The Investors' Rights Agreement also
contains indemnification agreements.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Schedule 2.7
126
(I) None.
(II) See (a) above.
(III) See (c)(ii) and (c)(iii) above.
(IV) See (a)(iv) and (a)(v) above.
In connection with the MSI transaction discussed above and in addition to
the agreements noted above, the Company also entered into a separate License
Agreement (pursuant to which it obtained a license to certain MSI products), an
Acknowledgement and General Release (pursuant to which the operation of certain
sections of Xx. Xxxx'x prior contracts with MSI were waived and the Company and
Xx. Xxxx were released from claims arising out of such released sections of the
contracts).
The Company has performed all obligations and conditions required to be
performed or met by it through the date hereof under each of the Scripps License
and Scripps Option. The Scripps License is in full force and effect, and the
Scripps Option has not been exercised, as of the date hereof. The Company will
use its best efforts not to waive any rights of the Company under the Scripps
License or Scripps Option, without the consent of a majority of the outstanding
shares of Series C and D Preferred Stock (and shares of the Company's capital
stock issuable upon exchange or conversion of the Series C and D Preferred
Stock).
Schedule 2.7
127
SCHEDULE 2.8
RELATED-PARTY TRANSACTIONS
Venture capital funds affiliated with directors participated in the
Company's prior rounds of financing and will purchase shares of the Company's
Series D Preferred Stock pursuant to the Agreement. Such directors may engage in
the development and financing of other companies and/or research projects which
may be developing, or may in the future develop, products which may compete
directly, or indirectly, with the products intended to be developed by the
Company.
See Schedule 2.7(c) above.
Schedule 2.8
128
SCHEDULE 2.9
REGISTRATION RIGHTS
The Company is obligated to register shares of Common Stock issuable upon
conversion of Series Z Preferred Stock and Series C Preferred Stock issuable
upon exercise of warrants issued (or to be issued) in connection with the
Company's equipment lease lines.
Schedule 2.9
129
SCHEDULE 2.10
PERMITS
The Company is in the process of obtaining permits in connection with
certain tenant improvements being made, or planned to be made at the Company's
facility at 0000 Xxxxxx Xxxxx Xx, Xxx Xxxxx, XX 00000; compliance of such
improvements with the American Disability Act has not yet been approved.
Schedule 2.10
130
SCHEDULE 2.15
TITLE TO PROPERTY AND ASSETS; LEASES
Under the terms of the Company's lease lines, Comdisco retains all rights
to the equipment purchased under such lines, with the Company having an option
to purchase at the completion of the term of the agreement.
Under the terms of the Loan and Security Agreement by and among the
Company, Silicon Valley Bank and MMC/GATX Partnership No. 1, Combichem
Corporation retains all rights to the equipment, fixtures and personal property
purchased using such funds, subject to security interest of lessors.
Schedule 2.15
131
SCHEDULE 2.16
FINANCIAL STATEMENTS
The contingent severance payments due under certain employment
arrangements with the Company's employees are not reflected on the August 31,
1996 financial statements.
Schedule 2.16
132
SCHEDULE 2.18
PATENTS AND TRADEMARKS
The Company filed intent to use application Serial No. 74/363,514 with the
United States Patent and Trademark Office ("PTO") to register the xxxx COMBICHEM
on February 26, 1993 in Class 42 for the services of combinatorial chemistry and
molecular biology research and analysis. The application was inadvertently
abandoned and a petition to revive the application, filed on June 14, 1995 with
the PTO was rejected. The Company filed a duplicate application Serial No.
74/684,382 on June 5, 1995 in case the petition to revive was denied. This
application was suspended pending resolution of a prior application.
The Company filed intent to use application Serial No. 74/363,515 to
register the xxxx COMBICHEM on February 26, 1993 in Class 5 for the
pharmaceuticals and chemical compounds. The application was inadvertently
abandoned and a petition to revive the application was rejected. The Company
filed a duplicate application Serial No. 74/599,352 on November 15, 1994. This
application was suspended pending resolution of a prior application for the
Company.
An intent to use application for the xxxx COMBISYN was filed by the
Company on February 13, 1995, and a Notice of Allowance was issued by the PTO on
September 3, 1996. Upon the filing of an acceptable Statement of Use, the
application will proceed to registration. The application was filed in Class 9
for scientific apparatus for use in synthesizing by combinatorial chemistry
small molecules for use in scientific research.
An intent to use application for the xxxx COMBIWARE was filed by the
Company November 7, 1995 and was approved for publication by the PTO. The
application was filed in Class 9 for computer software for use in scientific
research, mainly, for the design and maintenance of chemical libraries and the
automation of molecular synthesis in the field of combinatorial chemistry, an
instruction and user manual sold as a unit therewith.
In connection with the MSI License Agreement, the Company received certain
licenses to use MSI proprietary technology and granted to MSI an exclusive
option to negotiate a distribution agreement with respect to a stand-alone
chemical diversity measure software program.
The J&J Sublicense contains a grant-back of a non-exclusive irrevocable
royalty-free license (with the right to sublicense affiliates) under all patent
improvements for the term of the agreement.
See Schedule 2.7.
The Company has applied for a patent application entitled "A TEMPLATE FOR
SOLUTION PHASE SYNTHESIS OF COMBINATORIAL LIBRARIES", Docket Number 215/288, as
of October 17, 1995.
Schedule 2.18
133
Xxxxxxxxx Xxxxxx assigned the Company all rights, title and interest in
and to the work described as and/or entitled the CombiSyn Synthesizer pursuant
to an Assignment Agreement dated as of January 1, 1996 and a Copyright
Assignment dated January 19, 1996.
Schedule 2.18
134
SCHEDULE 2.19
MANUFACTURING AND MARKETING RIGHTS
Pursuant to the MSI License Agreement, the Company has granted to MSI an
exclusive option to negotiate a distribution agreement with respect to a
stand-alone chemical diversity measure software program.
LJL Biosystems, Inc. has rights to manufacture original prototypes only;
these prototypes were revised, and currently LJL Biosystems, Inc. is not
manufacturing prototypes.
Schedule 2.19
135
SCHEDULE 2.23
INSURANCE
The Company has covenanted to certain investors to maintain key man life
insurance on the life of Xxxxxx Xxxx in the amount of $2,000,000. The Company
currently maintains only $1,350,000 in insurance on the life of Xx. Xxxx.
