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EXHIBIT 4.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 3rd
day of May, 2000 by and between APPLIED MOLECULAR EVOLUTION, INC., a Delaware
corporation (the "Company"), and each of the persons or entities listed on
Schedule A hereto (individually each, an "Investor", collectively the
"Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Restated Certificate. The Company shall adopt and file with the
Secretary of State of the State of Delaware on or before the Closing (as defined
below) the Restated Certificate of Incorporation in the form attached hereto as
Exhibit A (the "Restated Certificate").
1.2 Sale and Issuance of Series F Preferred Stock. Subject to the terms
and conditions of this Agreement, each Investor agrees to purchase severally and
not jointly 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 F Preferred Stock set forth opposite each Investor's name
on Schedule A for the purchase price of $4.50 per share.
1.3 Closing.
(a) Initial Closing. The initial purchase and sale of the shares of
Series F Preferred Stock indicated on Part 1 of Schedule A shall take place at
the offices of the Company at 0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx, at
10:00 a.m. on May 3rd, 2000 the (the "Initial Closing"), or such other times
and places as the Company and the Investors mutually agree upon, verbally or in
writing. At the Closing the Company shall deliver to each Investor a certificate
representing the Series F Preferred Stock which such Investor is purchasing
against delivery to the Company by Investor of a bank check or bank wire equal
to the amount of the purchase price set forth in Part of Schedule A hereto,
payable to the Company's order.
(b) Second Closing. The purchase and sale of the shares of Series F
Preferred stock indicated in Part II of Schedule A hereto shall take place on or
prior to June 15, 2000 (the "Second Closing") at the offices of the Company at a
time and date as the Company and the Investors purchasing shares at the Second
Closing mutually agreed upon, verbally or in writing. At the Second Closing the
Company shall deliver to each Investor a certificate representing the Series F
Preferred Stock which such investor is purchasing against delivery to the
Company by Investor of a bank check or bank wire equal to the amount of the
purchase price set forth in Part II of Schedule A hereto payable to the
Company's order. For purposes of this Agreement the Initial Closing and Second
Closing shall each be deemed a "Closing."
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on the
Schedule of Exceptions furnished to each Investor and specifically identifying
the relevant subparagraph hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
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2.1 Organization, Good Standing and Qualification. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted. The Company and each Subsidiary is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or
will consist prior to the Closing, of:
(a) Preferred Stock. 14,055,110 shares of preferred stock (the
"Preferred Stock"), of which 500,000 shares have been designated Convertible
Preferred Stock, par value $.001 per share (the "Convertible Preferred Stock"),
1,062,802 shares have been designated Series A Preferred Stock, par value $.001
per share (the "Series A Preferred Stock"), 3,097,625 shares have been
designated Series B Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock"), 4,375,000 shares have been designated Series C Preferred
Stock, par value $.001 per share (the "Series C Preferred Stock"), 1,108,572
shares have been designated Series D Preferred Stock, par value $.001 per share
(the "Series D Preferred Stock"), 1,666,667 shares have been designated Series E
Preferred Stock, par value $.001 per share (the "Series E Preferred Stock") and
2,244,444 shares have been designated Series F Preferred Stock, par value
$.001 per share (the "Series F Preferred Stock"). Prior to the filing of the
Restated Certificate, there are 500,000 shares of Convertible Preferred Stock,
1,062,802 shares of Series A Preferred Stock, 3,097,625 shares of Series B
Preferred Stock, 4,271,125 shares of Series C Preferred Stock, 1,108,572 shares
of Series D Preferred Stock and 1,600,000 shares of Series E Preferred Stock
issued and outstanding and, based upon the Company's records, such outstanding
shares of Convertible Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock are owned by the persons and in the numbers specified in the
stockholder list made available to Investor upon request. The outstanding shares
of Preferred Stock will be convertible immediately prior to the Initial Closing
into an aggregate of 11,640,124 shares of Common Stock. The rights, preferences
and privileges of the Convertible Preferred Stock, the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock will be as stated
in the Restated Certificate.
(b) Common Stock. 27,296,832 shares of common stock (the "Common
Stock"), of which 2,590,831 shares are issued and outstanding and, based upon
the Company's records, are owned by the persons and in the numbers specified in
the stockholder list made available to Investor upon request.
(c) Agreements for Purchase of Shares. Except for (i) the conversion privileges
of the Convertible Preferred Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, (ii) the rights of Investor provided for in
Section 8.4, hereof, (iii) the rights of first offer provided for in Section 8.4
of the Stock Purchase Agreement dated as of October 6, 1989 between the Company
and the investor listed in Schedule A thereto, as amended, (the "1989 Purchase
Agreement") (iv) the rights of first offer provided for in Section 8.4 of the
Stock Purchase Agreement dated as of March 7, 1990 between the Company and the
investors listed on Schedule A
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thereto, as amended (the "Series A Agreement"), (v) the rights of first offer
provided for in Section 8.4 of the Stock Purchase Agreement dated as of August
6, 1991 between the Company and the investors listed on Schedule A thereto, as
amended and supplemented (the "Series B Agreement"), (vi) the rights of first
offer provided for in Section 8.4 of the Stock Purchase Agreement dated as of
February 19, 1993 between the Company and the investors listed on Schedule A
thereto, as amended and supplemented (the "Series C Agreement"), (vii) the right
of first offer provided for in Section 8.4 of the Stock Purchase Agreement dated
as of June 8, 1993 between the Company and the investors listed on Schedule A
thereto (the "Series D Agreement"), (viii) warrants to purchase 66,667 shares of
Series E Preferred Stock, (ix) the options to purchase an aggregate of 1,798,628
shares of Common Stock granted to certain employees and consultants of the
Company pursuant to the Company's 1992 Stock Plan and (x) the options to
purchase an aggregate of 800,000 shares of common stock pursuant to he Company's
2000 Option Plan, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock.
2.3 Subsidiaries. Except as set forth on the Schedule of Exceptions, the
Company does not own or control, directly or indirectly, any interest in any
other corporation, association, partnership or other business entity. The
Company is, directly or indirectly, the record and beneficial owner of all of
the outstanding shares of capital stock of each of its Subsidiaries, there are
no irrevocable proxies with respect to such shares and no equity securities of
any of the Subsidiaries are or may become required to be issued by reason of any
options, warrants, convertible or exchangeable securities, subscriptions, rights
(including any preemptive rights), stock appreciation rights, calls or
commitments of any character whatsoever relating to shares of any capital stock
of any Subsidiary, and there are no contracts or other agreements by which any
Subsidiary is bound to issue additional shares of capital stock or any options,
warrants, convertible or exchangeable securities, subscriptions, rights
(including any preemptive rights), stock appreciation rights, calls or
commitments of any character whatsoever relating to such shares. All of such
shares so owned by the Company are owned by it free and clear of any Liens with
respect thereto. Except for shares of capital stock of the Company's
Subsidiaries, the Company does not, directly or indirectly, own or control or
have any capital or other equity interest or participation, or any interest
convertible, exchangeable or exercisable for, any capital or other equity
interest or participation in, nor is the Company, directly or indirectly,
subject to any obligation or requirement to provide funds to or invest in, any
person.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder and the authorization, issuance (or reservation for issuance)
and delivery of the Series F Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Series F Preferred Stock has been taken or
will be taken on or prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
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2.5 Valid Issuance of Preferred and Common Stock.
(a) The Series F Preferred Stock which is being purchased by Investors
hereunder, when issued, sold and delivered in accordance with the terms hereof
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and, based in part upon the representations of each
Investor in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon conversion of
the Series F Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance and in accordance with the
terms of the Restated Certificate will be duly and validly issued, fully paid
and nonassessable.
(b) The outstanding shares of Preferred Stock of the Company are duly
and validly authorized, issued and outstanding, fully paid and nonassessable,
and were issued in compliance with all applicable federal and state securities
laws. The outstanding shares of Common Stock of the Company are duly and validly
authorized and issued, fully paid and nonassessable and were issued in
compliance with all federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for any post-sale filings pursuant to
applicable state securities laws, which filings will be effected within the
applicable time periods.
2.7 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company or any of its subsidiaries
listed in the Schedule of Exceptions (each a "Subsidiary") which questions the
validity of this Agreement or the right of the Company to enter into it, or to
consummate the transactions contemplated hereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company or any of the Subsidiaries,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of
the Company's employees, their use in connection with the Company's or any of
the Subsidiaries' business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. Neither the Company nor any of the Subsidiaries
is a party or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company or any Subsidiary
currently pending or which the Company or any Subsidiary intends to initiate.
2.8 Invention and Secrecy and Common Stock Purchase Agreements. Each key
employee and key consultant of the Company and its Subsidiaries with access to
the Company's proprietary information has executed an Employee's or Consultant's
Invention and Proprietary Information Agreement, as the case may be, in
substantially the form made available to Investors. The Company, after
reasonable investigation, is not aware that any key employees or key consultants
are in violation thereof, and the Company will use reasonable efforts to prevent
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any such violation. Each holder of Common Stock of the Company has entered into
a Common Stock Purchase Agreement, in substantially the form made available to
Investors.
2.9 Patents and Trademarks. The Company and, each of the Subsidiaries,
has sufficient title and ownership of all material patents, trademarks, service
marks, trade names, copyrights, trade secrets, 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.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, nor is the Company or any of the Subsidiaries 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,
which options, licenses or agreements are material to the Company or any of the
Subsidiaries or their respective business as now conducted and as proposed to be
conducted. Neither the Company nor any Subsidiary has received any
communications alleging that the Company or any Subsidiary has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its or any Subsidiary's key 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 key employee's best efforts to
promote the interests of the Company or of any Subsidiary, or that would
conflict with the Company's or any Subsidiary's business as proposed to be
conducted, which would, in the aggregate, be materially adverse to the Company.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the key employees of the Company, nor the conduct of the
Company's business as proposed or of any Subsidiary, will, to 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 key employees is now obligated, which
conflict, breach or default would be materially adverse to the Company or any of
the Subsidiaries. The Company does not believe it is or will be necessary to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company.
2.10 Compliance with Other Instruments. Neither the Company nor any of
the Subsidiaries is in violation or default of any provisions of (i) its
Restated Certificate or Bylaws or (ii) of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound or, to its
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company or any Subsidiary, which violation or default under
this clause (ii) would be materially adverse to the Company or any Subsidiary.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not result in any such violation or
default pursuant to the clause (ii) of the preceding sentence or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either such a violation or a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event which results in the
creation of any material lien, charge or encumbrance upon any assets of the
Company or any of the Subsidiaries, which violation, default, conflict or event
would be materially adverse to the Company or any of the Subsidiaries.
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2.11 Agreements; Action.
(a) Except for the agreements explicitly contemplated hereby, there are
no agreements, understandings or proposed transactions between (i) the Company
and any of its officers, directors, affiliates or any affiliate thereof; or (ii)
any of the Subsidiaries and any of the respective officers, directors,
affiliates or any affiliates thereof.
(b) There are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company or any Subsidiary is a party or by
which it is bound which involve (i) obligations of, or payments to the Company
or any Subsidiary in excess of, $50,000, other than obligations or liabilities
of the Company or any Subsidiary for compensation under employment, advisor or
consulting agreements, (ii) the license of any patent, copyright, trade secret
or other proprietary right of the Company or any Subsidiary, or (iii) any other
material agreement.
(c) Neither the Company or any Subsidiary has (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 $50,000 or
in excess of $100,000 in the aggregate, other than obligations or liabilities of
the Company or any Subsidiary for compensation under employment, advisor or
consulting agreements, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses or (iv) since December 31, 1999,
sold, exchanged or otherwise disposed of any of its material assets or rights,
other than the sale of its inventory in the ordinary course of business.
(d) Neither the Company nor any of its Subsidiaries is a party to and is
not bound by any contract, agreement or instrument, or subject to any
restriction under its Restated Certificate or Bylaws, which adversely affects in
any material respect its business as now conducted or as proposed to be
conducted, its properties, its financial condition or its prospects.
(e) Neither the Company nor any of its Subsidiaries has 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 percent of the voting power of the Company is disposed of, other than as
contemplated by this Agreement or (iii) regarding any other form of liquidation,
dissolution or winding up of the Company.
2.12 Disclosure. The Company believes it has fully provided each
Investor with all the information that each Investor has requested for deciding
whether to purchase the Series F Preferred Stock and all information reasonably
necessary to enable Investor to make such decision.
2.13 Information. Neither this Agreement nor any other 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.
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2.14 Registration Rights. Except as provided in Section 7 of this
Agreement, Section 7 of the Stock Purchase Agreement dated as of September 28,
1995 between the Company and the investor listed therein (the "Series E
Agreement"), Section 7 of the 1989 Purchase Agreement, Section 7 of the Series A
Agreement, Section 7 of the Series B Agreement, Section 7 of the Series C
Agreement, Section 7 of the Series D Agreement, the Company has not granted or
agreed to grant any registration rights, including piggy-back rights, to any
person or entity. None of such other agreements impairs or conflicts with any of
the rights granted to the Investors in Section 7 hereof. No other holder of
Company securities has demand registration rights which, if exercised, would
entitle the Investors only to piggyback registration rights.
2.15 Corporate Documents. The Restated Certificate of Incorporation is
in the form attached as Exhibit A and Bylaws of the Company are in the form made
available to Investors.
2.16 Title to Property and Assets. The Company and each Subsidiary owns
its property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's or the
Subsidiary's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company and each Subsidiary 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, which liens, claims or
encumbrances would be materially adverse to the Company or any of the
Subsidiaries.
2.17 Employee Benefit Plans. Neither the Company nor any Subsidiary has
any employee benefit plan described in section 3(2)(A) or section 3(2)(B) of the
Employee Retirement Income Security Act of 1974.
2.18 Tax Returns and Payments. The Company and each Subsidiary 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 and each Subsidiary has
paid all taxes and other assessments due prior to the time penalties would
accrue thereon. The provision for taxes of the Company and each Subsidiary is
adequate for taxes due or accrued as of the date thereof.
2.19 Minute Books. The minute books of the Company and each Subsidiary
made available to each Investor contain a complete summary of all meetings of
directors and stockholders since the Company's and each Subsidiary's
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
2.20 Labor Agreements and Actions. Neither the Company nor any
Subsidiary is bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company or any Subsidiary. There is
no strike or other labor dispute involving the Company or any Subsidiary
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its or any Subsidiary's employees. The
Company is not aware
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that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any of the foregoing.
2.21 Real Property Holding Company. Neither the Company nor any
Subsidiary is a "United States real property holding corporation" (as that term
is defined in Treasury Regulation section 1.897-2(b)). If at any time in the
future the Company or any of the Subsidiaries shall become a "United States real
property holding corporation," the Company shall, as promptly as practicable,
notify each foreign investor. Within 30 days after receipt of a request from a
foreign investor, the Company shall prepare and deliver to such foreign investor
the statement required under Treasury Regulation section 1.897-2(h)(1) and, in
the case of a disposition of an interest of the Company, either or both of the
following documents: (i) an affidavit in conformance with the requirements of
Internal Revenue Code of 1986, as amended ("IRC"), section 1445(b)(3), or (ii) a
notarized statement, executed by an officer having actual knowledge of the
facts, that the shares of Company stock held by such foreign investor are of a
class that is regularly traded on an established securities market, within the
meaning of IRC section 1445(b)(6). If the Company is unable to provide either of
the documents described in (i) or (ii) above, if requested, it shall promptly
notify such foreign investor in writing of the reasons for such inability.
Finally, upon the request of a foreign investor and without regard to whether
either document described in (i) or (ii) above has been requested, the Company
shall cooperate fully with the efforts of such foreign investor to obtain a
"qualifying statement," within the meaning of IRC section 1445(b)(4), or such
other documents as would excuse a transferee of a foreign investor's interest
from withholding of income tax imposed pursuant to IRC section 1445(a).
2.22 Financial Statements. The Company and each Subsidiary has made
available to each Investor its audited financial statements (balance sheet,
statement of operations and statement of cash flows) at and for the fiscal year
ended December 31, 1999 and its unaudited financial statements (balance sheet,
statement of operations and statement of cash flows) at and for the three-month
period ended March 31, 2000 (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects, subject, in the
case of the unaudited financial statements, to normal year-end adjustments, and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the period indicated and are consistent
with each other. The Financial Statements accurately set out and describe the
financial condition and operating results of the Company and the Subsidiaries as
of the dates, and for the periods, indicated therein, subject, in the case of
the unaudited financial statements, to normal year-end adjustments. Except as
set forth in the Financial Statements and the Schedule of Exceptions, the
Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to March 31, 2000, 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, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.23 Voting Arrangements. Except as provided in Section 5.5 hereof,
Section 5.6 of the 1989 Purchase Agreement, Section 5.6 of the Series A
Agreement, Section 5.6 of the
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Series B Agreement, Section 5.6 of the Series C Agreement, Section 5.6 of the
Series D Agreement and Section 5.6 of the Series E Agreement, to the Company's
knowledge, there are no outstanding stockholder agreements, voting trusts,
proxies or other arrangements or understandings among the stockholders of the
Company relating to the voting of their respective shares. None of such other
agreements impairs or conflicts with any of the rights granted to the Investors
in Section 5.5 hereof.
2.24 Qualified Small Business Stock.
(a) The Company is a domestic C corporation for federal income tax
purposes, and the aggregate gross assets (cash plus the adjusted tax basis of
other property) of the Company does not, and at all times on or after August 10,
1993 did not, exceed $50 million. For purposes of this Section 2.24(a), (x) the
adjusted tax basis of property contributed to the Company (or of other property
the basis of which is determined by reference to the basis of property so
contributed) shall be determined as if the basis of the contributed property
immediately after its contribution to the Company were its fair market value at
that time and (y) all corporations that are members of a "parent-subsidiary
controlled group" within the meaning of section 1202(d)(3) of the Code of which
the Company is also a member (a "Company Group") shall be treated as though such
corporations and the Company together constitute one corporation.
(b) The Company is not (i) a corporation having (or with a direct or
indirect subsidiary having) an election under section 936 of the Code (relating
to possession corporations) in effect, (ii) a regulated investment company,
(iii) a real estate investment trust, (iv) a real estate mortgage investment
conduit, (v) a financial asset securitization investment trust, or (vi) a
cooperative.
(c) Since the date that is one year prior to the issuance of the
Securities (the "Redemption Measurement Date"), the Company has not redeemed or
repurchased shares of its stock having an aggregate value (at the time of
purchase) in excess of five percent (5%) of the value of all the Company's
outstanding stock on the Redemption Measurement Date (excluding repurchases upon
death, disability, mental incapacity, or divorce of a shareholder if the
requirements of Treasury Regulation section 1.1202-2(d) are met).
3. Representations and Warranties of Investors. Each Investor hereby
represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
binding obligation.
3.2 Purchase Entirely for Own Account. This Agreement is made with
Investor in reliance upon Investor's representation to the Company, which by
Investor's execution of this Agreement Investor hereby confirms, that the Series
F Preferred Stock to be received by Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will be acquired for
investment for 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 Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking,
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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. Investor represents that it has full power and authority to enter
into this Agreement.
3.3 Disclosure of Information. Investor believes that it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series F Preferred Stock. Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series F Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement.
3.4 Investment Experience. Investor is an investor 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 Series F Preferred Stock. Investor
also represents that it has not been organized solely for the purpose of
acquiring the Series F Preferred Stock.
3.5 Restricted Securities. Investor understands that the shares of
Series F Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), only in certain limited circumstances. In this connection
Investor represents that it is familiar with Securities and Exchange Commission
(the "SEC") Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
3.6 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Series F Preferred Stock (or the Common
Stock issuable upon the conversion thereof) unless and until:
(a) 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
(b) (i) Investor 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 (ii) if reasonably
requested by the Company, Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, as currently in existence, except in
unusual circumstances.
3.7 Legends. It is understood that the certificates evidencing the
Series F Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
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(a) "These securities have not been registered under the Securities Act
of 1933. They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under such Act or if reasonably requested by the Company an opinion of counsel
reasonably satisfactory to the Company, that such registration is not required
or unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of California or other
jurisdiction, including any legend required by the California Department of
Corporations and sections 417 and 418 of the California Corporations Code.
3.8 Accredited or Foreign Investor. Except as otherwise disclosed to the
Company in writing, Investor either is (i) an accredited investor as defined in
Rule 501(a) of Regulation D of the SEC under the Securities Act, or (ii) neither
(x) a national or resident of the United States, its territories, possessions or
any area subject to its jurisdiction, nor (y) a corporation, partnership, trust
or other entity created or organized in the United States, its territories,
possessions or any area subject to its jurisdiction, nor (z) a corporation,
partnership, trust or other entity, any of the equity owners of which is
described in clause (x) or (y) above and agrees not to sell, hypothecate, pledge
or otherwise dispose of any interest in the Securities in the United States, its
territories, possessions or any area subject to its jurisdiction, or to any
person who is a national thereof or resident therein (including any estate of
such person), or any corporation, partnership or other entity created or
organized therein, unless such securities have been either registered under the
Securities Act, or are exempt from the registration requirements of the
Securities Act, in the opinion of the Company's counsel, and Investor has
complied with any restrictions on transfer contained in this Agreement.
3.9 Confidentiality. Investor hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without the
prior written consent of the Company, any information identified as confidential
that is furnished to it by the Company in connection with this Agreement,
including (without limitation) all financial statements, budget and other
information delivered or provided to Investor pursuant to Section 8 hereof. This
obligation of confidentiality shall not apply, however, to any information (a)
in the public domain through no unauthorized act or failure to act by Investor,
(b) lawfully disclosed to Investor by a third party who possessed such
information without any obligation of confidentiality or (c) known previously by
Investor or lawfully developed by Investor independent of any disclosure by the
Company. Investor further covenants that Investor shall return to the Company
all tangible materials containing such information upon request by the Company.
3.10 Removal of Legends; Further Covenants.
(a) Any legend endorsed on a certificate pursuant to Section 3.7 hereof
shall be removed (i) if the shares of the Series F Preferred Stock or Common
Stock issued upon conversion thereof represented by such certificate shall have
been effectively registered under the Securities Act or otherwise lawfully sold
in a public transaction, (ii) if such shares may be transferred in compliance
with Rule 144(k) promulgated under the Securities Act or (iii) if the holder of
such shares shall have provided the Company with an opinion of counsel, in form
and substance acceptable to the Company and its counsel and from attorneys
reasonably acceptable
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to the Company and its counsel, stating that a public sale, transfer or
assignment of such shares may be made without registration.
(b) Any legend endorsed upon a certificate pursuant to Section 3.7
hereof shall be removed if the Company receives an order of the appropriate
state authority authorizing such removal or if the holder of the Series F
Preferred Stock or Common Stock issued upon conversion thereof provides the
Company with an opinion of counsel, in form and substance acceptable to the
Company and its counsel and from attorneys reasonably acceptable to the Company
and its counsel, stating that such state legend may be removed.
(c) Investor further covenants that Investor will not transfer the
Series F Preferred Stock or any securities received in exchange therefor or on
conversion thereof, in violation of the Securities Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules of the SEC
promulgated thereunder, including Rule 144 under the Securities Act. Further,
Investor agrees that, prior to the closing of the Company's initial public
offering, Investor will not transfer any of such securities in a public offering
without the Company's prior consent, even if Investor is otherwise permitted to
transfer them pursuant to Rule 144(k). Investor further agrees to require any
transferee or assignee of any of Investor's shares of Series F Preferred Stock
in a private transaction to agree in a writing to be delivered to the Company
promptly following such transfer or assignment to be bound by lock-up provisions
substantially as set forth in Section 7.15 of this Agreement.
4. California Commissioner of Corporations.
4.1 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 THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATIONS 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.
5. Conditions of Investors' Obligations at Closing. The obligations of
each Investor under subsection 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 such Closing.
5.2 Performance. The Company shall have performed and complied with all
agreements, obligations 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 or a Vice President of the
Company shall deliver to Investors at the Closing a certificate certifying that
the conditions specified in
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Sections 5.1 and 5.2 have been fulfilled and stating that there has been no
material adverse change in the business, affairs, prospects, operations,
properties, assets or condition of the Company since the date of the Agreement.
5.4 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 each
Investor, and each Investor shall have received all such counterpart original
and certified or other copies of such documents as it may reasonably request.
5.5 Board of Directors. The Board of Directors, effective upon the
Closing, shall consist of five duly elected members: Xxxxxxx X. Xxxx, Xxxxx
Xxxxxxxxxx, Costa X. Xxxxxxxxxxxxx, Xxxx X. Xxxxxx and Xxxxx Xxxxx.
5.6 Opinion of Company Counsel. Investor shall have received from
Pillsbury Madison & Sutro, counsel for the Company, an opinion, dated as of the
Closing, in form and substance satisfactory to Investor, attached hereto as
Exhibit B:
The opinion of counsel for the Company under this Section 5.6 shall be
subject to such matters as are set forth in the Schedule of Exceptions to this
Agreement.
5.7 Related Agreements. The Company shall have entered into an Amended
and Restated Co-Sale Agreement, (the "Co-Sale Agreement") with each Investor or
its affiliates, as the case may be, each dated as of even date herewith in form
attached hereto as Exhibit C. The Company shall have entered into a Voting
Agreement in the form attached hereto as Exhibit D.
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 each
Investor:
6.1 Representations and Warranties. The representations and warranties
of each Investor contained in Section 3 hereof 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 Payment of Purchase Price. Each Investor shall have delivered the
purchase price specified in Section 1.2.
6.3 Co-Sale Agreement. Each Investor or its affiliates, as the case may
be, shall have entered into the Co-Sale Agreement.
7. Registration Rights. The Company covenants and agrees as follows:
7.1 Definitions. For purposes of this Section 7:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with
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the Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Convertible Preferred Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock (ii) any
Common Stock of the Company 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,
such Preferred Stock or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such person's
registration rights are not assigned;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are exercisable or convertible into,
Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 7.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Securities Act subsequently
adopted by the SEC in lieu of Form S-3 which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the SEC.
7.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of (i)
May 3, 2004 or (ii) one year after the effective date of the first registration
statement for a public offering of securities of the Company (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction), a written request from the Holders of at least 50% of the
Registrable Securities then outstanding (25% if such request is made following
the closing of the offering referred to in subsection (ii) of this Section
7.2(a)) that the Company file a registration statement under the Securities Act
covering the registration of at least 20% of the Registrable Securities then
outstanding (or a lesser percent if the anticipated aggregate offering price,
net of underwriting discounts and commissions, would exceed $7,500,000), then
the Company shall, within 10 days of the receipt thereof, give written notice of
such request to all Holders and shall, subject to the limitations of subsection
7.2(b), file as soon as practicable, and in any event within 60 days of the
receipt of such request, a registration statement under the Securities Act
covering all Registrable Securities which the Holders request to be registered
within 20 days of the mailing of such notice by the Company in accordance with
Section 9.6.
(b) If the Holders initiating the registration request hereunder
("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 this Section 7.2 and the Company
shall include such information in the written notice referred to in
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subsection 7.2(a). In such event, the right of any Holder to include such
Holder's Registrable Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
subsection 7.4(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and consented to by the Company (which
consent shall not be unreasonably withheld). Notwithstanding any other provision
of this Section 7.2, if the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only two such registrations
pursuant to this Section 7.2; provided, however, that the Company shall not be
obligated to effect a registration pursuant to this Section 7.2 if within the 12
months immediately preceding a request hereunder the Company has effected a
demand registration under this Section 7.2. Notwithstanding the foregoing,
should the holders of Series F Preferred Stock (or of Common Stock issuable upon
conversion thereof) decline to participate in such demand registration, such
holders shall be entitled to initiate one additional demand registration;
provided such demand is made by the holders of at least 66-2/3% of the Series F
Preferred Stock (or of Common Stock issuable upon conversion thereof).
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 7.2 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 and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any 12-month period.
7.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Securities Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within 20 days after mailing of such notice
by the Company in accordance with Section 9.6, the Company shall, subject to the
provisions of
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Section 7.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
7.4 Obligations of the Company. Whenever required under this Section 7
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
(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 to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 7, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 7, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated 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, addressed to the underwriters, if any, and to the Holders requesting
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registration of Registrable Securities and (ii) a letter dated 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, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
7.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 7 that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of the Registrable Securities.
7.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 7.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 7.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 7.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business or prospects of
the Company from that known to the Holders at the time of their request, then
the Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 7.2.
7.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
7.3 for each Holder (which right may be assigned as provided in Section 7.13),
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
7.8 Underwriting Requirements. In connection with any offering involving
an underwriting of shares being issued by the Company, the Company shall not be
required under Section 7.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be
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apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below 20% of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities or an offering in which
securities other than Common Stock of the Company are to be sold in which case
the selling stockholders may be excluded if the underwriters make the
determination described above and no other stockholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a stockholder
exercising a demand registration right similar to that granted in Section 7.2 be
excluded from such offering.
7.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 7.
7.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any underwriter
(as defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the 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 (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 7.10(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
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities
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Act, any underwriter and any other Holder selling securities in such
registration statement or any of its directors or officers or any person who
controls such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, or underwriter or controlling person, or other such Holder or director,
officer or controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or controlling person, other Holder, officer, director, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 7.10(b) 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 Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 7.10(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
7.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
7.10.
(d) The obligations of the Company and Holders under this Section 7.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 7, and otherwise.
7.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary registration of its Common
Stock under section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) 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; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company), the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
7.12 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 7.12: (i) if Form S-3 is
not available for such offering by the Holders; (ii) if 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) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $2,000,000; (iii) if the
Company shall furnish to the 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 and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer
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the filing of the Form S-3 Registration Statement for a period of not more than
120 days after receipt of the request of the Holder or Holders under this
Section 7.12; provided, however, that the Company shall not utilize this right
more than once in any 12-month period; (iv) if the Company has, within the
six-month period preceding the date of such request, already effected a
registration on Form S-3 for the Holders pursuant to this Section 7.12 and other
similar provisions granting rights to registration on Form S-3; (v) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance; or (vi) if the Holders hold in the
aggregate less than 1% of the outstanding shares of the Company's capital stock.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 7.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration; provided, however, that the Company
shall bear and pay all such expenses, including (without limitation) all
registration filing and qualification fees, printer's and accounting fees and
the fees and disbursements of one counsel for the selling Holders, but excluding
underwriting discounts and commission relative to the Registrable Securities,
with respect to the first such registration pursuant to this Section 7.12.
Registrations effected pursuant to this Section 7.12 shall not be counted as
demands for registration effected pursuant to Section 7.2.
7.13 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 7 may be assigned by
(i) a Holder to a transferee or assignee of at least 50,000 shares (adjusted to
reflect stock dividends, stock splits or recapitalizations)of Registrable
Securities, (ii) any Holder who transfers all of its shares of Registrable
Securities or (iii) any Holder that is a partnership or limited liability
company to a partner or member or retired partner or retired member of such
partnership or amendment who after such assignment holds at least 7,500 shares
(adjusted to reflect stock dividends, stock splits or recapitalizations) of
Registrable Securities; provided, in each case, the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
7.14 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 7.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such holder's securities will not reduce the amount of the Registrable
Securities of the Holders which is
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included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 7.2(a) or within 120 days of the effective
date of any registration effected pursuant to Section 7.2.
7.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
shall not, to the extent requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities during a reasonable and customary period of time, as
agreed to by the Company and the underwriters, not to exceed 180 days, following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers shares (or securities) to be
sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company enter into similar
agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such reasonable and customary period.
7.16 Amendment of Registration Rights. Any provision of this Section 7
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company.
7.17 Termination of Registration Rights. The Company's obligations
pursuant to this Section 7 shall terminate as to any Holder of Registrable
Securities on the earlier of (i) when the Holder can sell all of such Holder's
shares pursuant to Rule 144 under the Securities Act during any 90-day period or
(ii) on the fifth anniversary of the closing of the Company's sale of its Common
Stock in a bona fide, firm commitment underwriting pursuant to a registration
statement on Form S-1 under the Securities Act which results in gross offering
proceeds of at least $25,000,000, the public offering price of which was not
less than $7.50 per share (adjusted to reflect stock dividends, stock splits or
recapitalizations); provided, however, in no event shall such obligations
terminate earlier than the first anniversary of the closing of the offering
described in subsection (ii) of this Section 7.17.
8. Covenants.
8.1 Delivery of Financial Statements. The Company shall deliver to each
Investor and each assignee of an Investor who acquires at least 50% of an
Investor's shares of Series F Preferred Stock purchased hereunder:
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(a) as soon as practicable, but in any event within 90 days after the
end of each fiscal year of the Company, a statement of operations for such
fiscal year, a balance sheet of the Company as of the end of such year, and a
statement of cash flows for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) within 30 days of the end of each month, an unaudited statement of
operations, statement of cash flows and balance sheet for and as of the end of
such month, in reasonable detail; such monthly statements shall also contain the
foregoing information on a year-to-date basis and shall also compare actual
performance to budget;
(c) within 60 days prior to the close of each fiscal year, a
comprehensive operating budget for the next fiscal year forecasting the
Company's revenues, expenses and cash position, prepared on a monthly basis,
including balance sheets and sources and applications of funds statements for
such months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company;
(d) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as Investor may from
time to time reasonably request, provided, however, that the Company shall not
be obligated to provide information which it deems in good faith to be
proprietary; and
(e) with respect to the financial statements called for in subsection
(a) of this Section 8.1, an instrument executed by the Treasurer or the
President of the Company and certifying that such financials were prepared in
accordance with internally consistent accounting methods consistently applied
with prior practice for earlier periods and fairly present the financial
condition of the Company and its results of operation for the period specified,
subject to year-end audit adjustment.
8.2 Inspection. The Company shall permit each Investor, at Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 8.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.
8.3 Termination of Covenants. The covenants set forth in Sections 8.1
and 8.2 hereof shall terminate and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting requirements of section
13(a) or 15(d) of the Exchange Act, whichever event shall first occur; provided
that the Company shall furnish, for five years following the termination of such
covenants, to Investor copies of its reports on Forms 10-K and 10-Q within 10
days after filing with the SEC.
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8.4 Right of First Offer. Subject to the terms and conditions specified
in this Section 8.4, the Company hereby grants to each Investor a right of first
offer with respect to future sales by the Company of its Shares (as hereinafter
defined). Investor shall be entitled to apportion the right of first offer
hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any class of its capital stock ("Shares"),
the Company shall first make an offering of such Shares to Investor in
accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
Investor stating (I) its bona fide intention to offer or issue such Shares, (ii)
the number of such Shares to be offered, and (iii) the price, if any, for which
it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares which equals the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion of
the Series F Preferred Stock then held, by Investor bears to the total number of
shares of outstanding Common Stock and Common Stock issuable upon conversion of
the Preferred Stock then outstanding.
(c) If all such Shares referred to in the Notice are not elected to be
obtained as provided in subsection 8.4(b) hereof, the Company may, during the
60-day period following the expiration of the period provided in Section 8.4(b)
hereof, offer the remaining unsubscribed Shares to any person or persons as a
price not less than, and upon terms no more favorable to the offeree than those,
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to Investor in accordance herewith.
(d) The right of first offer granted in this Section 8.4 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, directors, consultants or advisors of the Company
provided each such person executes an agreement relating to such issuance or
sale, in substantially the form as approved by the Company's Board of Directors,
(ii) to the issuance of securities of the Company in connection with the
acquisition by the Company of the stock or assets of a corporation, partnership
or other entity, (iii) to the issuance and sale of the Company's securities to a
corporation, partnership, educational institution or other entity in connection
with a research and development partnership, licensing or other collaborative
arrangement between the Company and such institution or entity, and (iv) to or
after consummation of a bona fide, firmly underwritten public offering of shares
of the Company's Common Stock registered under the Securities Act pursuant to a
registration statement on form S-1, which results in gross proceeds to the
Company of at least $25,000,000 at a price per share of at least $7.50 (adjusted
for any stock splits, stock dividends or other recapitalizations).
8.5 Designated Director. For so long as the Investors (or their
affiliates) hold at least 20% of the shares of Series F Preferred Stock or the
shares of Common Stock issued upon
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conversion of the shares of Series F Preferred Stock, the Company shall cause
(i) the nomination of Xxxxx Xxxxx ( or a nominee of Xxxxx Xxxxx, provided such
nominee is approved by the Board of Directors) as a member of the Board of
Directors of the Company and (ii) the nomination of Xxxxx Xxxxx to any Audit
and/or Compensation Committee of the Board of Directors of the Company. The
Company shall pay Xxxxx Xxxxx, as a director, (i) for all expenses incurred in
connection performing his duties as a director and (ii) compensation equal to
compensation of any other non-employee director, and the Company shall provide
directors and officers liability insurance coverage for Xxxxx Xxxxx, as a
director, and shall otherwise exculpate and indemnify him, to the maximum extent
of any non-employee director.
8.6 Additional Directors. The Board of Directors shall increase the
size of the board to seven duly elected members, provided the two additional
directors would qualify as "independent" directors under the rules of the Nasdaq
Stock Market, as approved by the SEC December 14, 1999.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations and
covenants of the Company contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of Investor.
9.2 Successors and Assigns. 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. 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.
9.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California (irrespective of its choice of law
principles).
9.4 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.
9.5 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.
9.6 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 (or upon the date of
attempted delivery where delivery is refused) or, if sent by telecopier, telex,
telegram, or other facsimile means, upon receipt of appropriate confirmation of
receipt, or upon deposit with the United States Postal Service, by registered or
certified mail, or next day air courier, with postage and fees prepaid and
addressed to the party entitled to such notice at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by 10 days' advance written notice to the other parties to this
Agreement.
9.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted
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liability) for which such 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 finder's 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.
9.8 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 any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Restated Certificate, 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. If the Closing
is effected, the Company and each Investor shall each bear their respective fees
and expenses associated with the transaction contemplated by this Agreement;
provided however, that the Company shall reimburse Investors for up to [$40,000]
in reasonable legal fees and expenses and up to an additional [$40,000] for fees
and expenses incurred in performing intellectual property due diligence on the
Company.
9.9 Amendments and Waivers. Except as specified in Section 7.16, 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 a majority of the Common Stock issued or issuable upon
conversion of the Series F Preferred Stock. Notwithstanding anything to the
contrary, the last sentence of Section 7.2(c) herein may only be amended by the
consent of the holders of a majority of the shares of Series F Preferred Stock.
Any waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, and the Company; provided, however, that no
condition set forth in Section 5 hereof may be waived with respect to Investor
if Investor does not consent thereto.
9.10 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 this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Aggregation of Stock. All shares of Series F Preferred Stock held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
9.12 Entire Agreement. This Agreement and the Related Agreements embody
the entire agreement and understanding of the parties hereto and thereto in
respect of the subject
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matter contained herein and therein and supersede all prior agreements and
understandings between the parties with respect to such subject matter. 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
APPLIED MOLECULAR EVOLUTION, INC.
By /s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and CEO
Address: 0000 Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Investor signature pages to follow:
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INVESTORS:
/s/ Xxxxx Manchester
------------------------------------
Xxxxx Manchester
Address:
----------------------------
------------------------------------
------------------------------------
BY: HILAL CAPITAL PARTNERS, LLC
AND
HILAL CAPITAL MANAGEMENT, LLC
/s/ Xxxxx Xxxxx
------------------------------------
BY: Xxxxx Xxxxx, Managing Member
On behalf of the following INVESTORS:
HILAL CAPITAL, L.P.
HILAL CAPITAL QP, LP
HILAL CAPITAL ASSOCIATES, LLC
HILAL CAPITAL INTERNATIONAL LTD.
HIGHBRIDGE INTERNATIONAL LLC
Investor signature pages to follow:
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SCHEDULE A
PART I - FIRST CLOSING
MAY 3, 2000
LIST OF INVESTORS
NUMBER OF SHARES
NAME OF INVESTOR PURCHASED PURCHASE PRICE
-------------------------------- ------- ------------
Hilal Capital, LP 1,111,111 $4,999,999.50
Hilal Capital QP, LP
------- ------------
Hilal Capital International Ltd.
------- ------------
Highbridge International LLC
Hilal Capital Associates LLC
Xxxxx Manchester 22,222 99,999.00
TOTALS 1,133,333 $5,099,998.50
========= =============
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PART II - SECOND CLOSING
JUNE 15, 2000
LIST OF INVESTORS
NUMBER OF SHARES
NAME OF INVESTOR PURCHASED PURCHASE PRICE
-------------------------- ------- -------------
Hilal Capital, LP 1,111,111 $4,999,999.50
------- -------------
TOTALS 1,111,111 $4,999,999.50
======= =============
31
