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CONVERTIBLE SECURED NOTE, OPTION
AND WARRANT
PURCHASE AGREEMENT
by and among
SUPERGEN, INC.,
a California corporation,
TAKO VENTURES, LLC,
a California limited liability company,
and,
solely for purposes of Sections 5.3 and 5.5,
XXXXXXXX X. XXXXXXX,
dated as of June 17, 1997
TABLE OF CONTENTS
Page
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ARTICLE I SALE AND PURCHASE OF SECURITIES............................... 1
Section 1. Sale and Purchase of Securities............................... 1
1.1 Conversion of Convertible Secured Note........................ 2
1.2 Conversion Price and Exercise Price........................... 3
1.3 Certain Adjustments........................................... 6
1.4 No Future Funding Commitment or Obligation.................... 8
ARTICLE II CLOSING AND EXERCISE PROCEDURES............................... 9
Section 2. Closing Dates; Delivery....................................... 9
2.1 Purchase of the Convertible Secured Note...................... 9
2.2 Option Closings; Exercise of the Option....................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 9
Section 3. Representations and Warranties of the Company................. 9
3.1 Organization, Standing and Power; Qualification............... 10
3.2 Subsidiaries.................................................. 10
3.3 Capitalization................................................ 10
3.4 Authority; No Conflicts; Approvals............................ 11
3.5 Financial Statements.......................................... 12
3.6 Absence of Undisclosed Liabilities............................ 12
3.7 Absence of Certain Changes or Events.......................... 13
3.8 Taxes......................................................... 14
3.9 Tangible Assets and Real Property............................. 15
3.10 Intellectual Property......................................... 15
3.11 Product Liability............................................. 17
3.12 Contracts..................................................... 17
3.13 Environmental Matters......................................... 18
3.14 SEC Reports................................................... 18
3.15 Employee Benefit Plans........................................ 19
3.16 Employees..................................................... 19
3.17 Interested Party Transactions................................. 20
3.18 Brokers or Finders............................................ 20
3.19 Compliance with Laws.......................................... 20
3.20 Litigation.................................................... 20
3.21 Restrictions on Business Activities........................... 20
3.22 No Misrepresentation.......................................... 21
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER................... 21
Section 4. Representations and Warranties of Purchaser................... 21
4.1 Organization.................................................. 21
4.2 Authority..................................................... 21
4.3 Acquisition for Investment.................................... 22
4.4 Brokers or Finders............................................ 23
ARTICLE V ADDITIONAL AGREEMENTS......................................... 24
Section 5. Additional Agreements......................................... 24
5.1 Pre-Emption Right with Respect to Company Offerings........... 25
5.2 Stock Plans................................................... 25
5.3 Board Representation.......................................... 27
5.4 Certain Agreements of Directors, Officers and Key Employees of
the Company................................................... 27
5.5 Standstill Provisions......................................... 27
5.6 Financial Statements and Other Reports........................ 28
5.7 Confidentiality. ............................................ 29
5.8 Public Announcements.......................................... 29
5.9 HSR Act....................................................... 29
5.10 Certain Restrictions.......................................... 30
5.11 Legends....................................................... 33
5.12 Indemnification............................................... 34
5.13 Further Assurances. ......................................... 35
ARTICLE VI REGISTRATION RIGHTS........................................... 36
Section 6. Registration Rights........................................... 36
6.1 Definitions................................................... 36
6.2 Request for Registration...................................... 36
6.3 Company Registration.......................................... 38
6.4 Form S-3...................................................... 39
6.5 Obligations of the Company.................................... 39
6.6 Provision of Information...................................... 41
6.7 Expenses of Demand Registration............................... 41
6.8 Expenses of Company Registration.............................. 41
6.9 Delay of Registration......................................... 41
6.10 Indemnification............................................... 41
6.11 Reports Under the Exchange Act................................ 43
6.12 Assignment of Registration Rights............................. 44
6.13 "Market Stand-Off" Agreement.................................. 44
6.14 Termination of Registration Rights............................ 44
6.15 No Inconsistent Agreements.................................... 44
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ARTICLE VII CONDITIONS TO CLOSINGS........................................ 45
Section 7. Conditions to Closing......................................... 45
7.1 Conditions to Purchaser's Obligation to Acquire the Convertible
Secured Note. ............................................... 45
7.2 Conditions to Company's Obligation to Issue the Convertible
Secured Note.................................................. 46
7.3 Conditions to Issuance of Option Common....................... 46
ARTICLE VIII MISCELLANEOUS................................................. 47
Section 8. Miscellaneous................................................. 47
8.1 Access to Information......................................... 47
8.2 Waivers and Amendments........................................ 47
8.3 Governing Law................................................. 47
8.4 Survival...................................................... 47
8.5 Successors and Assigns........................................ 48
8.6 Entire Agreement.............................................. 48
8.7 Notices....................................................... 48
8.8 Severability.................................................. 48
8.9 Expenses...................................................... 48
8.10 Interpretation................................................ 49
8.11 Counterparts.................................................. 49
8.12 Delays or Omissions........................................... 49
Exhibit A - Convertible Secured Promissory Note
Exhibit B - Series 1 Warrant
Exhibit C - Series 2 Warrant
Exhibit D - Pledge and Security Agreement
Exhibit E - Confidentiality Agreement
Exhibit F - Shareholder Agreement
Exhibit G - Shareholder Agreement
Exhibit H - Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation
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CONVERTIBLE SECURED NOTE, OPTION AND
WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE SECURED NOTE, OPTION AND WARRANT PURCHASE AGREEMENT (the
"AGREEMENT") is made as of June 17, 1997 by and among SUPERGEN, INC., a
California corporation (the "COMPANY"), TAKO VENTURES, LLC, a California limited
liability company ("PURCHASER"), and, solely for purposes of Sections 5.3
and 5.5, XXXXXXXX X. XXXXXXX ("XXXXXXX").
WHEREAS, Purchaser wishes to purchase, and the Company wishes to sell,
certain securities convertible into or exercisable for shares of the Company's
common stock, par value $.001 per share ("COMMON STOCK");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SECURITIES
1. SALE AND PURCHASE OF SECURITIES. On the terms and subject
to the conditions set forth in this Agreement, the Company will issue and sell
to Purchaser, and Purchaser will purchase:
(a) a convertible secured promissory note (the "CONVERTIBLE
SECURED NOTE") in the principal amount of fifteen million three hundred thousand
dollars ($15,300,000) (the "PRINCIPAL AMOUNT"), in the form annexed hereto as
EXHIBIT A;
(b) an option to purchase (the "OPTION"), exercisable at any
time or from time to time prior to the earlier of the date of the Notice of
Demand (as defined in Section 1.1) and 5:00 p.m. Pacific Standard Time on
January 31, 1998 (the "OPTION TERMINATION DATE"), in whole or in part, eight
hundred fifty thousand (850,000) shares of Common Stock (such number to be
adjusted pursuant to Section 1.3) (shares purchased pursuant to the Option are
hereinafter referred to as the "OPTION COMMON"); and
(c) warrants to purchase (the "WARRANTS"), at any time or from
time to time, prior to the earlier of the date of the Notice of Demand (as
defined in Section 1.1) and the tenth anniversary of the date of this Agreement,
in whole or in part, a number of shares of Common Stock equal to one-half the
sum of (i) the Option Common and (ii) the shares of Common Stock issued upon
conversion in full of the Convertible Secured Note (subject, in each case, to
adjustment in accordance with Sections 1.2(b) and 1.3 of this Agreement, and
subject further to the provisions of Section 2.1(b) which shall govern the
number and series of Warrants issued to Purchaser at the Note Closing).
Warrants to purchase 500,000 shares of Common Stock shall be denominated as
Series 1 Warrants (the "SERIES 1 WARRANTS") and shall have the
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rights set forth in the form of Series 1 Warrant attached hereto as EXHIBIT B,
and the remaining Warrants shall be denominated as Series 2 Warrants (the
"SERIES 2 WARRANTS") and shall have the rights set forth in the form of Series 2
Warrant attached hereto as EXHIBIT C.
1.1 CONVERSION OF CONVERTIBLE SECURED NOTE. At Purchaser's election,
upon delivery to the Company of a written notice of demand for repayment (a
"NOTICE OF DEMAND") in accordance with the provisions of Section 8.7 at any time
prior to 5:00 p.m. Pacific Daylight Savings Time on the earlier of (i) July 25,
1997 and (ii) the execution and delivery of a definitive transaction agreement
to the effect described in the letter of Purchaser to the Company of even date
herewith (the "TRIGGER TRANSACTION"), the principal terms of which having been
timely communicated by the Company to Purchaser as provided in Section 1.1(a)
(the "CONVERSION TIME"), the Principal Amount of the Convertible Secured Note
shall be immediately due and payable by the Company to Purchaser, in full,
without interest, and shall be paid by the Company by wire transfer of
immediately available funds, to the account specified by Purchaser in the Notice
of Demand, on the next business day after delivery of the Notice of Demand. In
the absence of a Notice of Demand delivered within the applicable time period,
(a) the Convertible Secured Note shall automatically be converted, to the
maximum extent permitted under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT") and any other applicable laws, effective at
the Conversion Time, into a number of shares of Common Stock equal to the
quotient of the Principal Amount divided by the Conversion Price (as hereinafter
defined), rounded up to the nearest whole share and adjusted as provided in
Sections 1.2(b) and 1.3; (b) a certificate for such shares of Common Stock shall
forthwith be issued to Purchaser upon surrender of the Convertible Secured Note
to the Company for cancellation (and, in the event of a partial conversion,
reissuance of a replacement note in the same form in the applicable new
principal amount); and (c) any unconverted portion of the Convertible Secured
Note shall remain outstanding, without interest, until the expiration or early
termination of the applicable waiting periods under the HSR Act and the receipt
of any other required approvals under any other applicable laws (the "SECOND
CONVERSION TIME"), at which time such unconverted portion shall automatically be
converted into shares of Common Stock consistent with the provisions of clause
(a) of this Section 1.1, and a certificate therefor shall be issued to Purchaser
in accordance with the provisions of clause (b) of this Section 1.1, unless a
Material Adverse Effect (as defined in Section 3.1) shall have occurred at or
prior to the Second Conversion Time or there shall exist at the Second
Conversion Time any fact or circumstance which would reasonably be expected to
result in a Material Adverse Effect, in which event the Company shall so notify
Purchaser and the remaining unconverted portion of the Convertible Secured Note
shall not be converted into shares of Common Stock, but, at Purchaser's
election, shall be surrendered to the Company for cancellation and
simultaneously with such surrender the then-outstanding principal amount thereof
shall be repaid by the Company to Purchaser by wire transfer of immediately
available funds to an account designated by Purchaser. In the event that any
portion of the Convertible Secured Note shall remain unconverted on the Option
Termination Date because the applicable waiting period(s) under the HSR Act have
not expired or been terminated or required approvals under applicable laws have
not been received, the Convertible Secured Note (or any replacement note issued
pursuant to this Section 1.1) shall be surrendered to the Company for
cancellation promptly following the Option Termination Date, and simultaneously
with such surrender the then-outstanding principal amount thereof shall be
repaid by the Company to Purchaser by wire
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transfer of immediately available funds to an account designated by Purchaser.
Upon such cancellation, conversion in full or repayment, the Company shall have
no further obligations to Purchaser pursuant to the Convertible Secured Note and
any replacement note issued pursuant to this Section 1.1. The Common Stock
issuable upon conversion of the Convertible Secured Note is hereinafter referred
to as the "INITIAL COMMON".
(a) TRIGGER TRANSACTION: The principal terms of the proposed Trigger
Transaction shall be communicated by the Company to Purchaser not less than
twenty four (24) hours prior to the execution and delivery of a definitive
agreement with respect to such Trigger Transaction. Such communication may be
made in any reasonable manner, including telephonically. No Notice of Demand
shall be given after the execution and delivery of a definitive transaction
agreement providing for a Trigger Transaction, and no Notice of Demand given
after the execution and delivery of a definitive transaction agreement providing
for a Trigger Transaction shall have any force or effect.
1.2 CONVERSION PRICE AND EXERCISE PRICES.
(a) Subject in each case to adjustment in accordance with the
provisions of Sections 1.2(b) and 1.3, the conversion price for each share of
Initial Common shall be nine dollars ($9.00) per share (the "CONVERSION PRICE").
Subject to adjustment in accordance with the provisions of Section 1.3, the
purchase price for each share of Common Stock purchased upon exercise of the
Option shall be nine dollars ($9.00) (the "OPTION EXERCISE PRICE"). Subject to
adjustment in accordance with the applicable provisions of this Agreement and
the terms of the Warrants, the purchase price for each share of Common Stock
purchased upon exercise of any of the Warrants shall be thirteen dollars fifty
cents ($13.50) per share (the "WARRANT EXERCISE PRICE").
(b) Subject to the limitations set forth in Section 1.2(c), if
at any time or from time to time during the two-year period immediately
following the Note Closing Date (as defined below) the Company shall sell or
issue shares of Common Stock, or if the Company shall agree in such two-year
period to sell or issue shares of Common Stock and thereafter shall sell any
shares of Common Stock pursuant to such agreement either within such two-year
period or at any time in the six months immediately following such two-year
period, to any person other than Purchaser or a majority-owned and controlled
affiliate of Purchaser at a price less than nine dollars ($9.00) per share (as
the same may be adjusted from time to time pursuant to Section 1.3) (each such
price, a "LESSER PRICE"; the shares sold at such Lesser Price, the "LESSER PRICE
SHARES"; and the number of shares sold at each such Lesser Price, the "LESSER
PRICE SHARE NUMBER"), then (i) the Conversion Price for a number of shares of
Initial Common equal to the applicable Lesser Price Shares Number shall be
reduced to the applicable Lesser Price; (ii) the aggregate number of shares of
Initial Common issuable upon conversion of the Convertible Secured Note shall
thereupon automatically be increased to reflect such reduction in the Conversion
Price (and additional shares of Initial Common shall forthwith be issued to
Purchaser if the Convertible Secured Note shall already have been converted
either in whole or in part into Initial Common); and (iii) the Warrant Exercise
Price for a number of shares of Common Stock equal to one-half the applicable
Lesser Price Share Number shall thereupon automatically be reduced so as to
equal 150% of such Lesser Price (and additional shares of Common Stock shall
forthwith be issued to
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the Warrant holder to the extent that any Warrant shall theretofore have been
exercised); PROVIDED, that, if the cumulative number of shares of Company Common
Stock sold or issued (or agreed to be sold or issued) by the Company at any
Lesser Price during such two-year period shall exceed 50% of the number of
shares of Initial Common issuable upon conversion in full of the Convertible
Secured Note (without giving effect to the provisions of this Section 1.2(b)),
then (A) the Conversion Price for all shares of Common Stock issuable (or
therefore issued) pursuant to the Convertible Secured Note shall thereupon
automatically be reduced so as to equal the weighted average of such Lesser
Prices relating to all of such Lesser Price Shares (the "WEIGHTED AVERAGE
PRICE"); (B) the aggregate number of shares of Initial Common issuable upon
conversion of the Convertible Secured Note shall be thereupon automatically be
increased to reflect such reduction in the Conversion Price (and additional
shares of Initial Common shall forthwith be issued to Purchaser if the
Convertible Secured Note shall already have been converted either in whole or in
part into Initial Common); (C) the Warrant Exercise Price for all shares of
Common Stock purchasable (or theretofore purchased) pursuant to the Warrants
shall thereupon automatically be reduced so as to equal 150% of such Weighted
Average Price (and additional shares of Common Stock shall forthwith be issued
to the Warrant holder to the extent that any Warrant shall theretofore have been
exercised); and (D) the Option Exercise Price for all shares of Option Common
theretofore purchased pursuant to the Option shall be reduced to such Weighted
Average Price and additional shares of Option Common shall forthwith be issued
to Purchaser. The provisions of clauses (A) and (B) of this Section 1.2(b)
shall be applicable to all shares of Common Stock issued or issuable pursuant to
the Convertible Secured Note, and the provisions of clause (C) of this
Section 1.2(b) shall be applicable to all shares of Common Stock issued or
issuable pursuant to the Warrants, in each case including shares previously
adjusted pursuant to clauses (i), (ii) or (iii) of this Section 1.2(b). In the
event of successive sales or issuances of Common Stock at Lesser Prices,
(X) successive adjustments shall be made to the Conversion Price and the Warrant
Exercise Price pursuant to clauses (i) through (iii) of this Section 1.2(b), and
each successive adjustment pursuant to such clauses (i) through (iii) shall be
applied to shares that have not previously been adjusted pursuant to such
clauses, and (Y) successive adjustments may be made to the Weighted Average
Price and may either increase or decrease any previously applicable Weighted
Average Price, but no adjustment to the Weighted Average Price, the Conversion
Price or the Warrant Exercise Price under any provision of this Section 1.2(b)
shall be applied so as to require the cancellation or return by Purchaser of any
shares of Common Stock theretofore issued to Purchaser or otherwise to affect
Purchaser's entitlement to and retention of such previously issued shares. No
adjustment pursuant to clauses (i) through (iii) of this Section 1.2(b) shall be
applied so as to increase the Conversion Price or the Warrant Exercise Price
with respect to any shares of Common Stock covered by the Convertible Secured
Note or the Warrants; no adjustment under any provision of this Section 1.2(b)
shall be applied so as to increase the Option Exercise Price; and in no event
shall any cash refund be paid to Purchaser pursuant to any adjustment of the
Conversion Price, the Option Exercise Price or the Warrant Exercise Price
pursuant to this Section 1.2(b). The Company shall notify Purchaser of each
sale or issuance of, and each agreement to sell or issue, Common Stock at a
Lesser Price within five business days after the consummation of such sale or
the execution of such agreement.
(c) Notwithstanding any other provision of this Agreement,
Section 1.2(b) shall not apply to the following sales and issuances of Common
Stock:
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(i) Common Stock issued to employees, officers, directors and
consultants pursuant to any stock option plan, stock inventive or purchase
plan or agreement approved by the Board of Directors of the Company,
subject to the limitations set forth in Section 5.2;
(ii) Common Stock issued pursuant to or upon exercise or conversion of
securities issued in connection with a merger, consolidation, share
exchange, or other reorganization or business combination, approved by Tako
(whose approval shall not be unreasonably withheld), involving the Company,
in which the Company is the acquiring corporation or shareholders of the
Company immediately prior to such merger, consolidation or other
reorganization or business combination own securities with a majority of
the voting power of the resulting entity (including, but not limited to,
the proposed merger of the Company into a wholly-owned Delaware subsidiary
of the Company in connection with a proposed reincorporation of the Company
in Delaware, on the terms set forth in the Company's proxy statement dated
April 25, 1997);
(iii) Common Stock, in an aggregate amount up to five percent (5%)
of the Company's outstanding Common Stock as of the date hereof, issued
pursuant to or upon exercise or conversion of securities issued in
connection with (A) any equipment financing in an amount in excess of
$250,000 or (B) any technology licensings, drug product licensings,
research or development agreements or asset acquisitions approved by the
Board of Directors;
(iv) Common Stock issued upon exercise of securities issued pursuant
to rights distributed to holders of Common Stock generally;
(v) Common Stock issued in connection with any stock split, stock
dividend or recapitalization of the Company;
(vi) Common Stock issued upon conversion of Company Preferred Stock;
and
(vii) Common Stock issued pursuant to the exercise of any stock
options or warrants or any other rights to acquire shares of Common Stock
(including, but not limited to, the warrants issued in connection with the
Company's initial public offering) outstanding on the date hereof.
Notwithstanding any other provision of this Agreement, the provisions set forth
in Section 1.2(b) shall terminate upon the earlier of: (i) the Company's sale
of all or substantially all of its assets, (ii) a merger, consolidation, share
exchange, or other reorganization or business combination involving the Company
in which the Company is not the surviving corporation or shareholders of the
Company immediately prior to such merger, consolidation, share exchange or other
reorganization or business combination own less than fifty percent (50%) of the
voting capital stock of the resulting entity or (iii) the second anniversary of
the Note Closing.
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1.3 CERTAIN ADJUSTMENTS. The following adjustments shall apply to
the then-unconverted portion (if any) of the Convertible Secured Note and the
then-unexercised portion (if any) of the Option.
(a) In the event that the Company shall (i) pay a dividend in,
or make a distribution of, shares of capital stock or other securities
(including, without limitation, any rights or options to subscribe to or
purchase any additional shares of any class of its capital stock, any evidence
of its indebtedness or assets, or any other rights or options) on its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of such shares or (iii) combine its outstanding shares of
Common Stock into a smaller number of such shares, the total number of shares of
Common Stock purchasable pursuant to the Option and the total number of shares
issuable upon conversion of the Convertible Secured Note shall be adjusted so
that Purchaser shall be entitled to receive at the same aggregate Conversion
Price and Option Exercise Price the number of shares of capital stock and other
securities (of one or more classes) which Purchaser would have owned or would
have been entitled to receive immediately following the happening of any of the
events described above had Purchaser acquired all shares of Common Stock
purchasable under the then-unexercised portion of the Option and issuable upon
conversion of the then-unconverted portion of the Convertible Secured Note, in
full, immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this Section 1.3(a) shall, in the case of a dividend
or distribution of Common Stock or other securities of the Company, become
effective as of the record date therefor and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of an
adjustment made pursuant to this Section 1.3(a), Purchaser shall become entitled
to receive shares or other units of two or more classes of capital stock or
other securities of the Company upon a subsequent conversion under the
Convertible Secured Note or a subsequent exercise of purchase rights under the
Option, the Board of Directors of the Company (whose reasonable determination
shall be conclusive and, upon request by Purchaser, shall be evidenced by a
certified Board resolution delivered to Purchaser) shall determine the
allocation of the adjusted purchase price or exercise price between or among
shares of such classes of capital stock.
(b) In the event of a capital reorganization or a
reclassification of the Common Stock (except as provided in Section 1.3(a) above
or Section 1.3(c) below), Purchaser shall be entitled to receive, in
substitution for the Common Stock to which Purchaser would have become entitled
upon exercise immediately prior to such reorganization or reclassification, the
shares (of any class or classes) or other securities or property of the Company
(or cash) that Purchaser would have been entitled to receive at the same
aggregate Conversion Price or Option Exercise Price upon such reorganization or
reclassification if Purchaser had acquired all shares of Common Stock issuable
upon conversion of the Convertible Secured Note and purchasable under the
Option, in full, immediately prior to the record date with respect to such
event; and in any such case, appropriate provision (as determined by the Board
of Directors of the Company, whose reasonable determination shall be conclusive
and, upon request by Purchaser, shall be evidenced by a certified Board
resolution delivered to Purchaser) shall be made for the application of this
Section 1.3(b) with respect to the rights and interests thereafter of Purchaser
(including but not limited to the allocation of the purchase or exercise price
between or among shares of classes of capital stock or other securities), to the
end that this Section 1.3(b) (including the adjustments of the
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number of shares of Common Stock or other securities purchasable and the
purchase or exercise price thereof) shall thereafter be reflected, as nearly as
reasonably practicable, in all subsequent conversions and purchases pursuant to
this Agreement for any shares or securities or other property (or cash)
thereafter deliverable upon the conversion or purchase thereof.
(c) In the event of any consolidation or share exchange
reorganization of the Company with, or merger of the Company into, another
corporation (other than a consolidation, share exchange reorganization or merger
which does not result in any reclassification or change of the outstanding
Common Stock), or in case of any sale or conveyance to another person of the
property of the Company as an entirety or substantially as an entirety, the
entity formed by such consolidation, share exchange reorganization, or merger or
the person which shall have acquired such property, as the case may be, shall
execute and deliver to Purchaser a supplemental agreement providing that
Purchaser shall have the right thereafter (until the expiration of all
conversion rights under the Convertible Secured Note and all purchase rights
under the Option) to receive, pursuant to such supplemental agreement, solely
the kind and amount of shares of stock and other securities and property (or
cash) receivable upon such consolidation, share exchange reorganization, merger,
sale or transfer by a holder of the number of shares of Common Stock of the
Company which Purchaser might have acquired pursuant to the Convertible Secured
Note and Option immediately prior to such consolidation, share exchange
reorganization, merger, sale or transfer. Such supplemental agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided in this Section 1.3(c).
(d) For the purpose of this Section 1.3, the term "COMMON STOCK"
shall mean (i) the class of stock designated as Common Stock in the Restated
Articles of Incorporation of the Company (the "RESTATED ARTICLES"), at the date
of this Agreement, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock. In the event that at any
time as a result of an adjustment made pursuant to this Section 1.3, Purchaser
shall become entitled to receive any shares of capital stock of the Company
other than shares of Common Stock, thereafter the number of such other shares so
receivable pursuant to this Agreement or any of the other documents required to
be executed and delivered by the Company hereunder (the "TRANSACTION DOCUMENTS")
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in this Section 1.3, and all other provisions of this Agreement
and the other Transaction Documents with respect to the Common Stock shall apply
on like terms to any such other shares.
(e) Whenever the number of shares of Common Stock purchasable
pursuant to the Option or issuable upon conversion of the Convertible Secured
Note is adjusted as provided in this Section 1.3, the Conversion Price and
Option Exercise Price, respectively, for each share of Common Stock payable upon
such exercise or conversion shall be adjusted by multiplying such purchase price
or exercise price, as the case may be, immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of shares of Common Stock
purchasable pursuant to the then-unexercised portion of the Option or issuable
upon conversion of the then-unconverted portion of the Convertible Secured Note
immediately prior to such
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adjustment, and the denominator of which shall be the number of shares of Common
Stock so purchasable or issuable immediately thereafter.
(f) The provisions of Section 1.3 shall apply similarly to
successive stock dividends, subdivisions and combinations; successive
reorganizations or recapitalizations; and successive consolidations, share
exchange reorganizations, mergers, sales and transfers.
1.4 NO FUTURE FUNDING COMMITMENT OR OBLIGATION. Nothing in this
Agreement or any of the other Transaction Documents shall be construed as a
commitment or obligation of any kind on the part of Purchaser or any of its
members to provide any funding or other property or resources of any kind to the
Company or any of its Subsidiaries, principals or affiliates, currently or at
any time in the future, except as expressly set forth in Section 2.1(b)(i) of
this Agreement. Except as expressly set forth in Section 2.1(b)(i) of this
Agreement, no future commitment or obligation of any kind on the part of
Purchaser or any of its members to provide any funding or other property or
resources of any kind shall be created or effective unless it is in a signed
written instrument, manually signed by or on behalf of Purchaser or such member
and delivered to the Company by Purchaser or by such member, and the Company
shall not rely on any other writing, or on any alleged or actual oral
statements, assurances or promises, or any electronic mail, to create or effect
any such commitment or obligation.
ARTICLE II
CLOSING AND EXERCISE PROCEDURES
Section 2. CLOSING DATES; DELIVERY.
2.1 PURCHASE OF THE CONVERTIBLE SECURED NOTE.
(a) TIME AND PLACE OF CLOSING. The closing of the purchase and
sale of the Convertible Secured Note (the "NOTE CLOSING") shall be held at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000 at 10:00 a.m. on June 17, 1997, or
at such other time and place as the Company and Purchaser shall agree upon in
writing (the "NOTE CLOSING DATE").
(b) DELIVERY. At the Note Closing, (i) Purchaser shall deliver
the sum of fifteen million three hundred thousand dollars ($15,300,000), less
the amount of expenses payable to Purchaser by the Company pursuant to Section
8.9, and (ii) the Company shall deliver to Purchaser (A) the Convertible Secured
Note, duly executed by the Company, registered in the name of Purchaser and
bearing the applicable legend(s) set forth in Section 5.11, (B) a Pledge and
Security Agreement, in the form set forth in EXHIBIT D hereto, duly executed by
the Company, (C) a Series 1 Warrant and a Series 2 Warrant, in each case duly
executed by the Company and registered in the name of Purchaser, entitling
Purchaser to purchase, in the aggregate, 850,000 shares of Common Stock (subject
to adjustment as set forth therein), and (D) the indemnification agreement
between the Company and Xxxxxxx contemplated by Section 5.3(c), effective as of
the election of Xxxxxxx to the Board of Directors of the Company, duly executed
by the Company.
8
The Series 1 Warrant delivered to Purchaser at the Note Closing shall entitle
Purchaser to purchase, on the terms and subject to the conditions set forth
therein, 500,000 shares of Common Stock (subject to adjustment as set forth
therein). The Series 2 Warrant delivered to Purchaser at the Note Closing shall
entitle Purchaser to purchase, on the terms and subject to the conditions set
forth therein, 350,000 shares of Common Stock (subject to adjustment as set
forth therein).
2.2 OPTION CLOSINGS; EXERCISE OF THE OPTION.
(a) EXERCISE. The Option may be exercised by Purchaser, in
whole or in part, at any time or from time to time prior to 5:00 p.m. California
time on the Option Termination Date. In the event that Purchaser wishes to
exercise the Option, Purchaser shall deliver to the Company written notice (an
"EXERCISE NOTICE") specifying the total number of shares of Common Stock, up to
the number of such shares provided by Section 1(b), that Purchaser wishes to
purchase. Notwithstanding the expiration or termination of the Option,
Purchaser shall be entitled to receive the shares of Common Stock with respect
to which Purchaser had delivered an Exercise Notice prior to 5:00 p.m. on the
Option Termination Date.
(b) OPTION CLOSINGS. Each closing of a purchase of shares of
Common Stock under the Option (an "OPTION CLOSING") shall occur at the offices
of the Company at 9:00 a.m. California time (or such other time and place as may
be agreed by the parties) on a date designated by Purchaser in an Exercise
Notice delivered not less than five (5) and not more than twenty (20) business
days prior to the date of such Option Closing (the "OPTION CLOSING DATE"). At
each Option Closing: (i) the Company shall deliver to Purchaser or its designee
(A) a single certificate representing the number of shares of Common Stock
designated by Purchaser for purchase in the applicable Exercise Notice (the
"OPTION EXERCISE NUMBER"), such certificate to be registered in the name of
Purchaser and to bear the legend set forth in Section 5.11, and (B) a Series 2
Warrant, registered in the name of Purchaser, entitling Purchaser to purchase,
on the terms set forth therein, a number of shares of Common Stock (subject to
adjustment as set forth therein) equal to one half the Option Exercise Number;
and (ii) Purchaser shall deliver the aggregate Option Exercise Price for the
shares of Common Stock so designated for purchase to the Company in cash (in
immediately available funds). Upon request by Purchaser, the Option Closing
Date will be deferred as reasonably necessary until the conditions to
consummation of the Option Closing and the Company's obligation to issue the
Option Common at such Option Closing pursuant to Section 7.3 are satisfied (if
such conditions are capable of being satisfied).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
disclosed in the Company SEC Reports (as defined in Section 3.14) or as set
forth in the disclosure schedule delivered by the Company to Purchaser on or
before the date of this Agreement (which disclosure schedule shall be organized
into numbered sections corresponding with the section numbers of
9
this Agreement) (the "COMPANY DISCLOSURE SCHEDULE"), the Company represents and
warrants to Purchaser as follows:
3.1 ORGANIZATION, STANDING AND POWER; QUALIFICATION. The Company and
each Subsidiary (as defined in Section 3.2 below) thereof are corporations duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation, have all requisite corporate power to own,
lease and operate their property and to carry on their businesses as now being
conducted and as proposed to be conducted, and are duly qualified to do business
and are in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified and in good standing would have a material
adverse effect on the business, assets (including intangible assets),
properties, liabilities (contingent or otherwise), financial condition,
operations, or results of operation of the Company or its Subsidiaries, taken as
a whole (a "MATERIAL ADVERSE EFFECT"). Except for the shares held by the
Company listed in Section 3.1 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries directly or indirectly owns any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity. The Company has delivered true
and correct copies of the Restated Articles and Bylaws, as amended (the
"BYLAWS"), of the Company to Purchaser. The Company is not in violation of any
of the provisions of the Restated Articles or Bylaws.
3.2 SUBSIDIARIES.
(a) For purposes of this Agreement, "SUBSIDIARY" means, with
respect to any party, any corporation, limited liability company, partnership,
joint venture, or other business association or entity, at least a majority of
the voting securities or economic interests of which is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries.
(b) Section 3.2 of the Company Disclosure Schedule sets forth a
list of all Subsidiaries of the Company, including the name of such Subsidiary
and the jurisdiction in which such Subsidiary is organized. Except as set forth
in Section 3.2 of the Company Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Subsidiary are owned by the Company
and are validly issued, fully paid, and nonassessable, and there are no
outstanding subscriptions, options, call contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants with respect to any such Subsidiary's capital stock, including any
right obligating any such Subsidiary to issue, deliver, or sell additional
shares of its capital stock.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $.001 par value, and 2,000,000
shares of preferred stock, $.001 par value ("PREFERRED STOCK"). As of June 10,
1997, there were 17,009,292 shares of Common Stock issued and outstanding and
there were no issued and outstanding shares of Preferred Stock. All such issued
and outstanding shares have been duly authorized and validly issued, are fully
paid and nonassessable, have been issued in compliance with all applicable state
and federal laws concerning the issuance of securities, and are not subject to
any preemptive or
10
similar rights. The Company has reserved 2,431,550 shares of Common Stock for
issuance under the Company's 1993 Stock Plan and 250,000 shares for issuance
under the 1996 Director's Stock Option Plan and 294,000 shares for issuance
under other stock option plans and agreements, stock purchase plans and
agreements, stock bonus plans and agreements, or other similar arrangements
established for employees, directors or consultants of the Company (together
with the 1993 Stock Plan and the 1996 Director's Stock Option Plan, the "STOCK
PLANS"). In addition, the Company has reserved 4,205,402 shares of Common Stock
for issuance upon exercise of outstanding warrants. Except for such shares of
Common Stock reserved for issuance under such warrants and under the Company
Stock Plans, and except for shares reserved for issuance pursuant to the
Convertible Secured Note, the Option and the Warrants, there are no outstanding
options, warrants, rights (including conversion and preemptive rights or rights
of first refusal), or other agreements to issue or purchase any shares of Common
Stock or Preferred Stock of the Company. Except as set forth in Section 3.3 of
the Company Disclosure Schedule, the Company has not granted or otherwise
promised registration rights to any holder of the Company's securities. Neither
the Company nor any of its Subsidiaries nor, to the knowledge of the Company and
its Subsidiaries, any of the Company's shareholders is a party or subject to any
agreement or understanding between any persons or entities which affects or
relates to the voting or giving of written consents (x) with respect to any
securities or (y) by any director of the Company or any of its Subsidiaries.
3.4 AUTHORITY; NO CONFLICTS; APPROVALS.
(a) The Company has all requisite corporate power and authority
to enter into this Agreement and the other documents required to be executed and
delivered by the Company hereunder (collectively, the "TRANSACTION DOCUMENTS"),
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors of the Company, and no other corporate
or shareholder action or proceedings on the part of the Company, its
shareholders or directors are necessary to authorize the execution and delivery
of this Agreement or the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. This Agreement and the other
Transaction Documents have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and general
principles of equity.
(b) The execution and delivery by the Company of this Agreement
and the other Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation of or breach of any provision of the Restated Articles
or Bylaws of the Company, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any benefit under any license, assignment, note,
mortgage, indenture, lease, contract or other agreement or obligation to which
the Company or any of its Subsidiaries is a party or by which the Company or
11
any of its Subsidiaries or any of its properties or assets may be bound,
(iii) conflict with or violate any judgment, order, decree, statute, law,
ordinance, rule or regulation or any material permit, concession, franchise or
license applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, except in the case of (ii) for such violations,
breaches, defaults, rights of termination, cancellation or acceleration, or
losses of benefits which would not be reasonably likely to have a Material
Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and the other Transaction Documents or
the consummation of the transactions contemplated hereby or thereby, except that
the filing of one or more notification and report forms under the HSR Act may be
required with respect to the acquisition by Purchaser of certain of the shares
of Common Stock issuable upon conversion of the Convertible Secured Note and
purchasable pursuant to the Option, the Warrants, and Section 5.1 of this
Agreement, and except for (i) the filing by the Company of one or more
registration statements with the Securities and Exchange Commission (the "SEC")
in accordance with the Securities Act of 1933, as amended (the "SECURITIES
ACT"), pursuant to Article VI, (ii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country, and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect.
(d) The shares of Common Stock issuable upon conversion of the
Convertible Secured Note and upon exercise of the Option and Warrants, when
issued in accordance with the terms of this Agreement and upon receipt by the
Company of the applicable Conversion Price, Option Exercise Price and Warrant
Exercise Price, will be duly authorized, validly issued, fully paid and
non-assessable.
3.5 FINANCIAL STATEMENTS. The Company has delivered to Purchaser
copies of the Company's audited consolidated financial statements (balance
sheet, statement of operations, statement of shareholders' equity, and statement
of cash flows) for the year ended December 31, 1996 and its unaudited
consolidated financial statements (balance sheet, statement of operations,
statement of shareholders' equity, and statement of cash flows) for the quarter
ended March 31, 1997 (the "COMPANY FINANCIAL STATEMENTS"). The Company
Financial Statements were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved. The Company Financial Statements present fairly in all
material respects the financial position of the Company and its Subsidiaries as
of the respective dates and the consolidated results of its operations and cash
flows for the periods indicated.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any liabilities, either accrued or contingent (whether
or not required to be reflected in financial statements in accordance with
GAAP), and whether due or to become due, other than (i) liabilities reflected or
provided for on the balance sheet as of March 31, 1997 (the "COMPANY BALANCE
SHEET") contained in the Company Financial Statements, (ii) liabilities
12
specifically described in this Agreement or Section 3.6 of the Company
Disclosure Schedule, and (iii) normal or recurring liabilities incurred since
March 31, 1997 in the ordinary course of business consistent with past practices
that could not reasonably be expected to result in a Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.7 of the Company Disclosure Schedule, and except as reflected in the
Company Financial Statements, since March 31, 1997, the Company and its
Subsidiaries have conducted their businesses in the ordinary course and in a
manner consistent with past practices, and have not:
(a) suffered any event or occurrence that has had or could
reasonably be expected to have a Material Adverse Effect;
(b) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition of such
shares, except for purchases of stock from terminated non-officer employees in
the ordinary course of business and in a manner consistent with past practices;
(c) issued any shares of their capital stock or any warrants,
rights, or options for, or entered into any commitment relating to such capital
stock, except for issuances made in the ordinary course of business in arm's
length transactions for value and in a manner consistent with past practices
(including issuances made upon exercises and conversions of employee and
director stock options);
(d) made any material change in the accounting methods or
practices they follow, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates;
(e) sold, leased, abandoned or otherwise disposed of any real
property or machinery, equipment or other operating property except in the
ordinary course of business and in a manner consistent with past practices and
in an amount that is not material to the Company and its Subsidiaries taken as a
whole;
(f) sold, assigned, transferred, licensed, pledged, or otherwise
disposed of or encumbered any patent, trademark, trade name, brand name, Food
and Drug Administration ("FDA") license or approval application, copyright (or
pending application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible asset, except for non-exclusive licenses which were
granted in the ordinary course of business and in a manner consistent with past
practices and in an amount that is not material to the Company and its
Subsidiaries taken as a whole;
13
(g) entered into any material commitment or transaction
(including without limitation any borrowing or capital expenditure) other than
the transactions contemplated by this Agreement and the other Transaction
Documents; or
(h) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets or rights under license to, or entered into
any agreement or arrangement with any of its officers, directors or shareholders
or any affiliate of any of the foregoing, other than employee compensation and
benefits and reimbursement of employment related business expenses incurred in
the ordinary course of business.
3.8 TAXES. As used in this Agreement, the terms "TAX" and,
collectively, "TAXES" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) The Company and its Subsidiaries have prepared and timely
filed all returns, estimates, information statements and reports required to be
filed with any taxing authority ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company or its Subsidiaries or their
operations with respect Taxes for any period ending on or before the Note
Closing Date, and such Returns have been completed in all material respects in
accordance with applicable law or an adequate reserve has been made for such
Taxes on the Company Balance Sheet.
(b) The Company and its Subsidiaries have (i) paid all Taxes
shown to be payable on such Returns covered by Section 3.8(a), and (ii) withheld
with respect to its employees all Taxes required to be withheld.
(c) There is no Tax deficiency outstanding or assessed against
the Company or any of its Subsidiaries that is not reflected as a liability on
the Company Balance Sheet.
(d) Neither the Company nor any of its Subsidiaries has any
material liabilities for unpaid Taxes that have not been accrued for or reserved
on the Company Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
(e) Neither the Company nor any of its Subsidiaries is a party
to any tax-sharing agreement or similar arrangement with any other party, or any
contractual obligation to pay any Tax obligations of, or with respect to any
transaction relating to, any other person or to indemnify any other person with
respect to any Tax.
14
(f) Except as set forth in Section 3.8 of the Company Disclosure
Schedule, neither the Internal Revenue Service ("IRS") nor any foreign, state,
local or other taxing authority has, since the Company's inception, examined or
is in the process of examining any Returns of the Company or any of its
Subsidiaries. To the knowledge of the Company and its Subsidiaries, neither the
IRS nor any foreign, federal, state, local or other taxing authority is now
asserting or threatening to assert any deficiency or claim for additional Taxes
(or interest thereon or penalties in connection therewith).
3.9 TANGIBLE ASSETS AND REAL PROPERTY. All material real property
leases of the Company and its Subsidiaries ("MATERIAL LEASES") are in good
standing, valid and effective in accordance with their respective terms, and
neither the Company nor any of its Subsidiaries is in default under any of such
leases, except where the lack of such good standing, validity and effectiveness
or the existence of such default would not be reasonably likely to have a
Material Adverse Effect. To the knowledge of the Company and its Subsidiaries,
no other party to any of the Material Leases is in default under or in breach or
violation of, nor is there any valid basis for any claim of default, breach or
violation against any other party under any of the Material Leases or any other
agreement or instrument to which any of the Material Leases is subject or
subordinate except for such breaches, violations and defaults as would not be
reasonably likely, either individually or in the aggregate, to have a Material
Adverse Effect.
3.10 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries own or have the right to
use, free and clear of all liens, claims and restrictions, all patents, patent
applications, trademarks, trade names, services marks, and copyrights; all
applications for and registrations of the foregoing; all licenses, trade secrets
including know-how, inventions, designs, processes, clinical studies, formulae,
methods, schematics, works of authorship, computer programs and technical data
and information and rights with respect to the foregoing; and all clinical
studies, drug approval or evaluation applications to the FDA or any other
domestic or foreign regulatory authority ("APPLICATIONS"), designs, drawings,
specifications, documentation, flow charts and diagrams incorporating, embodying
or reflecting any product of the Company or any of its Subsidiaries at any stage
of its development (a "COMPANY PRODUCT"), which are used in or necessary for the
conduct of the business of the Company and its Subsidiaries as now conducted
and, except as set forth in Section 3.10(a) of the Company Disclosure Schedule,
as planned to be conducted (as set forth in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996) (all of which are referred to as
the "COMPANY INTELLECTUAL PROPERTY RIGHTS"), without infringing upon or
otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the foregoing. To
the knowledge of the Company and its Subsidiaries without having conducted any
special infringement or patent search or other investigation, the Company's and
its Subsidiaries' products and processes do not infringe any patent not
licensed to the Company and its Subsidiaries held by any person, corporation or
other entity. The Company and its Subsidiaries are not aware of any facts or
information likely to have an adverse affect on the validity or enforceability
of patents licensed by the Company and its Subsidiaries. The Company and its
Subsidiaries have not received any communication alleging that the Company or
any of its Subsidiaries have violated any of the patents, trademarks, services
15
marks, trade names, copyrights, works of authorship, trade secrets or other
proprietary rights and processes of any other person or entity. To the
knowledge of the Company and its Subsidiaries, there are, and have been, no
infringements by any third party of any of the Company Intellectual Property
Rights. The Company and its Subsidiaries are not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark,
service xxxx, trade name, work of authorship, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise.
(b) Subject to (i) the receipt and terms of requisite
governmental approvals, (ii) the geographic restrictions and royalty obligations
disclosed in the Company's SEC Reports (as defined in Section 3.14 below) and
the exhibits thereto, and (iii) the potential procurement by third parties of
additional patents extending beyond the scheduled and anticipated expiration
dates of previously disclosed patents, the Company and its Subsidiaries own, or
are licensed or otherwise possess legally enforceable rights, to make, use, and
sell, free and clear of all liens, claims and restrictions, all drugs for which
the Company or any of its Subsidiaries has submitted or publicly announced its
intention to submit any Application or for which human clinical trials sponsored
by the Company or any of its Subsidiaries are presently being conducted.
(c) Section 3.10(c) of the Company Disclosure Schedule contains
an accurate and complete list of (i) all material patents and patent
applications, all material Applications, and all material trademarks, trade
names, service marks and registered copyrights, included in the Company
Intellectual Property Rights, including the jurisdictions in which each such
Company Intellectual Property Right has been issued or registered or in which
any such application for such issuance, approval or registration has been filed,
and (ii) all material licenses, sublicenses, assignments, distribution
agreements and other agreements to which the Company or any of its Subsidiaries
is a party and pursuant to which any person is authorized to use any material
Company Intellectual Property Rights or has the right to manufacture, reproduce,
market or exploit any material Company Product or any adaptation, derivative or
reformulation based on any Company Product or any portion thereof. Except as
set forth in Section 3.10(c) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement or arrangement
that requires or contemplates the payment to or receipt from any third party of
royalties or similar payments in connection with the development, manufacture or
commercial exploitation of any material Company Product or Company Intellectual
Property Rights.
(d) Neither the Company nor any of its Subsidiaries is (or as a
result of the execution and delivery of this Agreement or any of the other
Transaction Documents or the performance of any obligation hereunder or
thereunder will be) in breach of any license, sublicense, assignment or other
material agreement relating to the Company Intellectual Property Rights or any
other material license, sublicense, assignment, asset purchase agreement and
other agreement to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries acquired or is
authorized to use any third party technology, trade secret, know-how, process,
clinical studies, Application, patent, trademark or copyright ("LICENSED
INTELLECTUAL PROPERTY"), which is exploited by, incorporated in or forms a part
of any Company Product.
16
(e) Neither the Company nor any of its Subsidiaries (i) has
received notice that it has been sued in any suit, action or proceeding which
involves a claim of infringement of any patent, trademark, service xxxx,
copyright, trade secret, or other proprietary right of any third party; (ii) has
knowledge (without having conducted any special investigation) that the
manufacturing, marketing, licensing or sale of any Company Product materially
infringes any material patent, trademark, service xxxx, copyright, trade secret,
or other proprietary right of any third party; or (iii) has knowledge of any
claim challenging or questioning the validity or effectiveness of any material
license or agreement relating to any Company Intellectual Property Rights or
Licensed Intellectual Property.
(f) The Company and its Subsidiaries have at all times used
commercially reasonable efforts to treat the Company Intellectual Property
Rights as containing trade secrets and have not disclosed or otherwise dealt
with such items in such a manner as to cause the loss of such trade secrets by
their release into the public domain.
(g) Each person currently or formerly employed by the Company or
its Subsidiaries (including consultants, if any), that has or had access to
confidential information of the Company or any of its Subsidiaries, has executed
and delivered to the Company a confidentiality and non-disclosure agreement
("CONFIDENTIALITY AGREEMENT") substantially in the form previously provided to
Purchaser annexed as EXHIBIT E. To the knowledge of the Company and its
Subsidiaries without having conducted any special investigation, neither the
execution nor the delivery of any Confidentiality Agreement, nor the carrying on
of the business of the Company and its Subsidiaries by each such employee and
consultant, will 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 persons is obligated.
3.11 PRODUCT LIABILITY. Neither the Company nor any of its
Subsidiaries (i) has received notice that it has been sued in any suit, action
or proceeding which involves a claim of death, personal injury, inadequate
labelling, failure to warn or other product liability claim relating to any
Company Product; (ii) has knowledge of any threat of any such suit, action or
proceeding or any basis therefor; or (iii) has knowledge of any study, report,
claim, or investigation questioning the safety of any Company Product.
3.12 CONTRACTS. Neither the Company nor any of its Subsidiaries is in
default under or in breach or violation of, nor is there any valid basis for any
claim of default by the Company or any of its Subsidiaries under, or breach or
violation by the Company or any of its Subsidiaries of, any contract, license,
commitment or restriction to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties or assets is bound or affected, except for such breaches,
violations and claims of default as would not be reasonably likely, either
individually or in the aggregate, to have a Material Adverse Effect. To the
knowledge of the Company and its Subsidiaries, without having conducted any
special investigation, no other party is in default under or in breach or
violation of, nor, to the knowledge of the Company and its Subsidiaries, is
there any valid basis for any claim of default against any other party under, or
any breach or violation by any other
17
party of, any contract, license, commitment, or restriction to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound or
affected, except for such breaches, violations and claims of default as would
not be reasonably likely, either individually or in the aggregate, to have a
Material Adverse Effect.
3.13 ENVIRONMENTAL MATTERS. As of the date hereof, no underground
storage tanks are present under any property that either the Company or any of
its Subsidiaries has at any time owned, operated, occupied or leased and no
amount of any substance that has been designated by applicable law or regulation
to be radioactive, toxic, hazardous or otherwise a danger to health or the
environment ("HAZARDOUS MATERIAL") is present as a result of the actions of the
Company or any of its Subsidiaries, or, to the knowledge of the Company and its
Subsidiaries, any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water, that the Company or any of its Subsidiaries has at any time owned,
operated, occupied or leased, where the presence of such underground storage
tanks or Hazardous Material is reasonably likely to have a Material Adverse
Effect. At no time has the Company or any of its Subsidiaries transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials (collectively, "HAZARDOUS MATERIALS ACTIVITIES")
in violation of any law, rule, regulation, treaty or statute promulgated by any
governmental entity to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity, which violation has had or is reasonably likely to
have a Material Adverse Effect. The Company and its Subsidiaries hold all
environmental approvals, permits, licenses, and clearances necessary for the
conduct of business ("ENVIRONMENTAL PERMITS"), the absence of which would be
reasonably likely to have a Material Adverse Effect. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is pending
or, to the knowledge of the Company and its Subsidiaries, threatened concerning
any Environmental Permit or any Hazardous Materials Activity of the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
aware of any fact or circumstance which is reasonably likely to involve the
Company or any of its Subsidiaries in any environmental litigation or impose
upon the Company or any of its Subsidiaries any environmental liability which
would be reasonably likely to have a Material Adverse Effect.
3.14 SEC REPORTS. The Company has timely filed all reports,
registration statements, proxy statements and other materials, together with any
amendments thereto, required to be filed by the Company with the Securities and
Exchange Commission ("SEC") under the Securities Exchange of 1934, as amended
(the "EXCHANGE ACT"), since January 1, 1996 (the "SEC REPORTS"). The Company
has furnished to Purchaser copies of its Annual Report on Form 10-K for the year
ended December 31, 1996, its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, and all Current Reports on Form 8-K and proxy statements, as
filed with the SEC. As of the date filed, the SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they were
made, not misleading. The financial statements contained in the SEC Reports
fairly present the financial position of the Company and its Subsidiaries as at
the dates thereof and for the periods covered thereby and have been prepared in
accordance with GAAP and with the published rules and regulations of the SEC
with respect thereto.
18
3.15 EMPLOYEE BENEFIT PLANS.
(a) No event has occurred, and there exists no condition or set
of circumstances, with respect to the employee benefit plans of the Company
("COMPANY EMPLOYEE PLANS"), which could reasonably be expected to subject the
Company or any of its Subsidiaries to any liability, other than liabilities
which would not be reasonably likely, either individually or in the aggregate,
to have a Material Adverse Effect.
(b) With respect to the Company Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves on the
Company's Financial Statements.
(c) Except as set forth in Section 3.15 of the Company
Disclosure Schedule, all the Company Employee Plans comply with and are and have
been operated in accordance with each applicable provision of the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Internal Revenue Code of
1986, as amended (the "CODE"), other federal statutes, state law (including,
without limitation, state insurance law) and the regulations and rules
promulgated pursuant thereto or in connection therewith. Each Company Employee
Plan which is a group health plan (within the meaning of Section 5000(b)(1) of
the Code) complies with and has been maintained and operated in accordance with
each of the requirements of Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA.
(d) Neither the Company nor any of its Subsidiaries nor any
current or former employee of the Company or any of its Subsidiaries or any
trade or business (whether or not incorporated) which is a member or which is
under common control with the Company within the meaning of Section 414 of the
Code ("ERISA AFFILIATE"), nor any officer, director, agent or employee of the
Company has made any oral or written statement regarding any Company Employee
Plan which could result in any material additional liability to Purchaser, the
Company or any ERISA Affiliate, whether direct or indirect, in excess of any
current or potential liability of the Company or any ERISA Affiliate.
3.16 EMPLOYEES. The Company has heretofore furnished to Purchaser a
true, complete and correct copy of the Company's employee manual and each
employment, consulting, severance and other similar agreement heretofore entered
into between the Company or any of its Subsidiaries and each person currently or
formerly employed, or engaged as a consultant, by the Company or any of its
Subsidiaries. To the Company's knowledge, no such employee or consultant is in
material violation of any material term of any such employment or consulting
agreement, Confidentiality Agreement, or any other contract or agreement
relating to the relationship of such employee or consultant with the Company or
any of its Subsidiaries or any other party because of the nature of the business
conducted or to be conducted by the Company or any of its Subsidiaries. Except
as set forth in Section 3.16(ii) of the Company Disclosure Schedule, all
employees and consultants are terminable at will.
19
3.17 INTERESTED PARTY TRANSACTIONS. Since the date of the Company's
most recent proxy statement to its shareholders, no event has occurred that
would be required to be reported by the Company as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
3.18 BROKERS OR FINDERS. Except as contemplated by Article VI, no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement or any of the other Transaction Documents, and the Company and its
Subsidiaries agree to indemnify and hold Purchaser harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by the Company or any of its Subsidiaries.
3.19 COMPLIANCE WITH LAWS. The Company and its Subsidiaries have
complied in all material respects with all applicable federal, state, local and
foreign statutes, laws and regulations, and are not in violation of, and have
not received any notices of violation with respect to, any such statute, law or
regulation, with respect to the conduct, ownership or operation of their
businesses, including, without limitation, the federal Food and Drug Act,
Foreign Corrupt Practices Act and all United States statutes, laws and
regulations as from time to time in effect that govern the license and delivery
of technology and products abroad by persons subject to the jurisdiction of the
United States. The Company and its Subsidiaries have obtained each governmental
consent, license, permit, grant or other authorization of a governmental entity
that is required for the operation of its business as currently conducted
(collectively, the "COMPANY AUTHORIZATIONS"), and all such Company
Authorizations are in full force and effect, except for such Company
Authorizations which, if not obtained by the Company or any of its Subsidiaries,
would not be reasonably likely, either individually or in the aggregate, to have
a Material Adverse Effect.
3.20 LITIGATION. Except as set forth in Section 3.20 of the Company
Disclosure Schedule, there is no action, suit, proceeding, claim, arbitration or
investigation, pending before any agency, court or tribunal, or to the knowledge
of the Company and its Subsidiaries, threatened, against the Company, its
Subsidiaries or any of their respective properties or officers or directors (in
their capacities as such), and, to the knowledge of the Company and its
Subsidiaries, there is no valid basis for any action, suit, proceeding, claim,
arbitration or investigation, against the Company which if determined adversely
to the Company or any of its Subsidiaries, could reasonably be expected to have
a Material Adverse Effect. There is no judgment, decree or order against the
Company or any of its Subsidiaries or, to the knowledge of the Company and its
Subsidiaries, any of their respective directors or officers (in their capacities
as such) that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement or that could reasonably be expected
to have a Material Adverse Effect.
3.21 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries which limits or
20
restricts the Company from competing (geographically, by field of endeavor, or
otherwise) or which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material current business practice of
the Company or any of its Subsidiaries, or the conduct of business by the
Company or any of its Subsidiaries as currently conducted or as proposed to be
conducted in public announcements by the Company.
3.22 NO MISREPRESENTATION. No representation or warranty by the
Company in this Agreement or any of the other Transaction Documents, and no
statement, certificate or schedule furnished or to be furnished by or on behalf
of the Company pursuant to this Agreement or any of the other Transaction
Documents, when taken together, contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances under which they
were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Section 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company as follows:
4.1 ORGANIZATION. Purchaser is duly organized and validly existing
under the laws of the State of California. Purchaser has the requisite power
and authority to enter into this Agreement and to carry out its obligations
hereunder.
4.2 AUTHORITY.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been authorized by all
necessary company action on behalf of Purchaser and constitutes the legal, valid
and binding obligation of Purchaser, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and general principles of equity.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required by
or with respect to Purchaser in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except that the filing of one (1) or more notification and report forms under
the HSR Act may be required with respect to the acquisition by Purchaser of
certain of the shares of Common Stock issuable upon conversion of the
Convertible Secured Note and the shares of Common Stock purchasable pursuant to
the Option, the Warrants, and Section 5.1 of this Agreement, and except for
(i) the filing by the Company of one or more registration statements with the
SEC in accordance with the Securities Act pursuant to Article VI, (ii) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be
21
required under applicable federal and state securities laws and the laws of any
foreign country, and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably likely to have a material adverse effect on the ability of Purchaser
to execute and deliver this Agreement and to perform its obligations thereunder.
4.3 ACQUISITION FOR INVESTMENT.
(a) Purchaser is acquiring the Convertible Secured Note, the
Option and the Warrants, and will acquire any shares of Initial Common issued
upon conversion of the Convertible Secured Note, any shares of Option Common
purchased upon exercise of the Option and any shares of Common Stock purchased
upon exercise of the Series 1 Warrants and Series 2 Warrants (collectively, the
"SECURITIES"), solely for Purchaser's own account for investment and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act. Purchaser further represents that Purchaser does
not have any present intention of selling, offering to sell or otherwise
disposing of or distributing the Securities or any portion thereof. Purchaser
acknowledges and understands that the entire legal and beneficial interest of
the Securities Purchaser is acquiring is being purchased for, and will be held
for the account of, Purchaser only and neither in whole nor in part for any
other person. Purchaser understands that the Securities have not been
registered under the Securities Act or other securities laws in reliance on
specific exemptions therefrom, which exemptions depend upon, among other things,
the bona fide nature of Purchaser's investment intent as expressed herein.
(b) Purchaser is an "accredited" investor as defined in
Regulation D under the Securities Act.
(c) Purchaser further acknowledges and understands that the
Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser understands that the certificate(s) evidencing the Securities will be
imprinted with a legend that prohibits the transfer of the Securities unless
they are registered or such registration is not required.
(d) Purchaser understands that Rule 144 promulgated under the
Securities Act permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the Securities, the availability of
certain current public information about the Company, more than one year having
elapsed between the resale and the date the security to be sold was last held by
the Company or an affiliate of the Company, the sale being made through a
"broker's transaction" or in transactions directly with a "market maker," and
the number of shares being sold during any three-month period not exceeding
specified limitations. Purchaser is further aware that Rule 144(k) permits
persons who have not been affiliates of the Company for at least three months
and whose shares have been beneficially owned by a person other than the Company
or its affiliates for at least two years after full payment for such shares to
sell such shares without regard to the current public information, manner of
sale and volume limitations described above.
22
(e) The Company has not, and will not, incur, directly or
indirectly, as a result of any action taken by Purchaser, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
(f) Purchaser has reviewed with its own tax advisers the
federal, state, and local tax consequences of this investment and the
transactions contemplated by this Agreement and has relied solely on such
advisers and not on any statements or representations of the Company or any of
its agents. Purchaser understands that it (and not the Company) shall be
responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
4.4 BROKERS OR FINDERS. Except as contemplated by Article VI, no
agent, broker, investment banker, financial adviser or other firm or person is
or will be entitled to any broker's or finder's fee, or any other commission or
similar fee, in connection with any of the transactions contemplated by this
Agreement or any of the other Transaction Documents, and Purchaser agrees to
indemnify and hold the Company and its Subsidiaries harmless from and against
any and all claims, liabilities or obligations with respect to any such fees or
commissions asserted by any person on the basis of any act or statement
determined to have been made to such person by Purchaser.
23
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5. ADDITIONAL AGREEMENTS.
5.1 PRE-EMPTION RIGHT WITH RESPECT TO COMPANY OFFERINGS.
(a) TO PURCHASE ADDITIONAL SHARES OF COMMON STOCK. Prior to any
sale or issuance by the Company of any shares of capital stock of the Company or
any security exercisable for or convertible into such capital stock ("CAPITAL
STOCK") (other than a sale or issuance within the meaning of Section 5.1(d)),
the Company shall give Purchaser written notice (the "NOTICE OF ISSUANCE") of
the Company's intention to sell and issue such Capital Stock, setting forth the
proposed price, quantity and other material terms and conditions under which the
Company proposes to make such sale (the date such notice is received by
Purchaser is hereinafter referred to as the "NOTICE DATE"). Prior to any sale
or issuance by the Company of any Capital Stock, Purchaser shall have the right
to purchase a portion of such Capital Stock on terms which, subject to this
Section 5.1, are at least as favorable to Purchaser as the terms on which the
Company is willing and proposes to sell such Capital Stock to other prospective
investors. Purchaser shall have twenty (20) days after the Notice Date to
notify the Company in writing that it elects to purchase some or all of its
share of the Capital Stock so offered. The amount of Capital Stock which
Purchaser is entitled to acquire shall be equal to (i) the amount of Capital
Stock proposed to be sold or issued by the Company multiplied by (ii) a fraction
calculated by dividing (A) the number of shares of Common Stock (including
Initial Common) owned by Purchaser or issued and issuable upon exercise,
conversion or exchange of the Convertible Secured Note and all Warrants, Options
and other securities of the Company held by Purchaser as of the Notice Date by
(B) the total number of shares of Common Stock issued and outstanding or
issuable upon exercise, conversion or exchange of all outstanding options,
warrants and other convertible securities of the Company ("TOTAL EQUITY
SECURITIES") as of the Notice Date (shares purchasable by Purchaser pursuant to
this Section 5.1(a) are referred to as "PURCHASER'S CAPITAL STOCK").
Notwithstanding the foregoing, in no event shall Purchaser be entitled to
purchase pursuant to this Section 5.1(a) shares in excess of the 25% limitation
set forth in Section 5.5(a) below.
(b) COMPANY SALE. If, within twenty (20) days after the Notice
Date, Purchaser does not notify the Company that it desires to purchase all or a
portion of Purchaser's Capital Stock, then the Company may, during a period of
ninety (90) days following the end of such twenty (20) day period, sell and
issue such Capital Stock not otherwise purchased by Purchaser to other third
parties at a price and upon terms and conditions no more favorable to such
parties than those set forth in the Notice of Issuance. In the event that the
Company has not sold such Capital Stock to such parties within such ninety (90)
day period, the Company shall not thereafter issue or sell any Capital Stock
without first offering such securities to Purchaser in the manner provided in
this Section 5.1.
(c) PURCHASE; PAYMENT. If Purchaser elects to purchase Capital
Stock pursuant to this Section 5.1, Purchaser and the Company shall use their
reasonable best efforts to
24
consummate the purchase and sale of such Capital Stock within sixty (60) days
after the Notice Date, and, subject to this Section 5.1(c), the terms of such
purchase and sale shall be at least as favorable to Purchaser as those set forth
in the Notice of Issuance. The closing of such purchase shall take place as
promptly as practicable after all regulatory filings required for the
consummation of such purchase have been obtained, at such time, on such date,
and at such location as the parties shall mutually agree. Payment for such
Capital Stock shall be by check (or wire transfer of immediately available funds
to an account designated by the Company by written notice delivered to Purchaser
not less than two (2) business days prior to the scheduled closing of such
purchase) against delivery of Purchaser's Capital Stock at the executive offices
of the Company at the time of the scheduled closing therefor. The Company shall
take all such action as may reasonably be required by any regulatory authority
in connection with the exercise by Purchaser of the right to purchase Capital
Stock as set forth in this Section 5.1(c).
(d) LIMITATION. The right contained in this Section 5.1 shall
not apply to the issuance by the Company on or after the date hereof of shares
of Capital Stock within the scope of Section 1.2(c).
(e) TERMINATION. The right contained in this Section 5.1 shall
terminate upon the earliest of (i) the closing of any merger, consolidation,
share exchange, or other reorganization or business combination of the Company
with any corporation in which the shareholders of the Company immediately prior
to such merger, consolidation, share exchange or other reorganization or
business combination do not own more than fifty percent (50%) of the voting
Capital Stock of the surviving or acquiring corporation or resulting entity
immediately following such merger, consolidation, share exchange or other
reorganization or business combination, (ii) the sale of all or substantially
all of the Company's assets, or (iii) at such time as Purchaser no longer owns
at least five percent (5%) of the Common Stock of the Company on either a
primary or fully diluted basis.
5.2 STOCK PLANS. Until the earlier of the seventh anniversary of the
date of this Agreement or such time as Purchaser no longer owns, either outright
or pursuant to rights to acquire, at least five percent (5%) of the Common Stock
of the Company on either a primary or fully diluted basis, the Company shall not
cause or permit the aggregate number of shares of Common Stock issued or
issuable under all Stock Plans to exceed twelve percent (12%) of the Company's
Total Equity Securities. Any waiver by Purchaser of this twelve percent (12%)
limit shall constitute a like modification of the twelve percent (12%)
limitation referenced in Section 1.2(c)(i).
5.3 BOARD REPRESENTATION.
(a) Effective on the day after the Note Closing Date, the
Company shall increase by one (1) the number of members of the Board of
Directors of the Company and shall elect and appoint a representative of
Purchaser designated by Purchaser and reasonably acceptable to the Company (the
"PURCHASER REPRESENTATIVE") to such newly created directorship. The Company and
Purchaser agree that Xxxxxxx will be the initial Purchaser Representative. From
and after the election of Purchaser Representative as a Director of the Company,
and for as long
25
as Purchaser Representative shall remain a Director of the Company pursuant to
this Section 5.3, Purchaser Representative shall be entitled to serve as a
member of any executive committee of the Board of Directors of the Company and
any other committee or body performing the functions of an executive committee
(the "EXECUTIVE COMMITTEE"). As long as Purchaser beneficially owns not less
than 850,000 shares of Common Stock (as adjusted for the events described in
Section 1.3 in a manner consistent therewith), (i) the Board of Directors of the
Company shall nominate and recommend the Purchaser Representative for election
as a Director of the Company, and shall otherwise use its reasonable best
efforts to cause the election of such Purchaser Representative as a Director of
the Company at each meeting of the Company's shareholders at which the Purchaser
Representative's term as a Director would otherwise expire, and (ii) Purchaser
shall be entitled to designate one individual who shall receive notice of all
meetings of the Board of Directors and the Executive Committee of the Company
and who shall be entitled to attend and participate in all such meetings as an
observer on behalf of Purchaser (the "OBSERVER"). Subject to Section 5.3(b),
each Purchaser Representative shall be treated equally with the other Directors
and the other members of the Executive Committee in their capacities as such and
shall be entitled to the same information (including reports, financial
statements, notices and other information) at the same time (subject to the same
general conflicts-of-interest rules applicable to all other members of the Board
of Directors and Executive Committee of the Company, reasonably and consistently
applied) and the same compensation and benefits, as shall be provided to other
Directors of the Company and other members of the Executive Committee, and
copies of all such information shall be provided or made available to the
Observer at the same time such information is provided or made available to
Purchaser and other Directors or Executive Committee members.
(b) Notwithstanding any other provisions of this Agreement, the
rights of the Purchaser Representative to serve as a Director and as a member of
the Executive Committee, and the rights of the Observer to attend and
participate in meetings of the Board of Directors and the Executive Committee,
pursuant to Section 5.3(a) shall terminate upon the earlier of: (i) the
Company's sale of all or substantially all of its assets, (ii) a merger,
consolidation, share exchange, or other reorganization or business combination
involving the Company in which shareholders of the Company immediately prior to
such merger, consolidation, share exchange or other reorganization or business
combination own less than fifty percent (50%) of the voting capital stock of the
surviving or acquiring corporation or the resulting entity, or (iii) such time
as Purchaser no longer owns 850,000 shares of Common Stock (as adjusted for the
events described in Section 1.3 in a manner consistent therewith). At any time
Purchaser is no longer entitled to Board representation pursuant to this
Section 5.3, then at the request of the Company, the Purchaser Representative
shall immediately resign and the Observer shall immediately cease attending any
meetings of the Board of Directors and the Executive Committee.
(c) In addition to any other indemnification and insurance
rights the Purchaser Representative and the Observer may have, (i) each
Purchaser Representative (A) shall have the same indemnification rights, as set
forth in the Company's Restated Articles and Bylaws, as the other members of the
Board of Directors of the Company, and the Company shall afford each Purchaser
Representative an opportunity to enter into an indemnification agreement
substantially similar to the then effective indemnification agreement between
the Company and the
26
other members of the Board of Directors; and (B) shall be covered by director
and officer liability insurance to the same extent as other members of the Board
of Directors of the Company, and (ii) to the maximum extent applicable, each
Observer (A) shall have analogous rights to indemnification from the Company
which are substantially similar in scope to those of the Purchaser
Representative and (B) shall be covered at the Company's expense by liability
insurance comparable in scope to the insurance required to be obtained for
Purchaser Representative to the extent such issuance is available on
commercially reasonable terms at commercially reasonable cost.
5.4 CERTAIN AGREEMENTS OF DIRECTORS, OFFICERS AND KEY EMPLOYEES OF
THE COMPANY. The Company shall use its reasonable best efforts to cause Xxxxxx
Xxxxxxxxx, Ph.D., Xxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxxxxx to execute
and deliver to Purchaser, at or prior to the Note Closing, an agreement in
substantially the form set forth in EXHIBIT F, and to cause each other officer
of the Company to execute and deliver to Purchaser, at or prior to the Note
Closing, an agreement in substantially the form set forth in EXHIBIT G.
5.5 STANDSTILL PROVISIONS.
(a) Except with the prior written consent of the Company's Board
of Directors, neither Purchaser nor Xxxxxxx shall (and neither Purchaser nor
Xxxxxxx shall permit its or his majority-owned and controlled affiliates to)
acquire, either directly or indirectly, agree to acquire, or make a tender or
exchange offer to acquire, any shares of voting capital stock, any securities
convertible into or exchangeable for voting capital stock, or any other right to
acquire voting capital stock ("VOTING STOCK") of the Company, unless (a) such
Voting Stock is acquired for investment purposes only and not with a view to any
change in control of the Company; and (b) following such acquisition, Purchaser,
Xxxxxxx, and its and his majority-owned and controlled affiliates will
beneficially own, in the aggregate, not more than twenty five percent (25%) of
the Company's Total Equity Securities.
(b) PARTICIPATION IN SOLICITATIONS. Except with the prior
written consent of the Company's Board of Directors, neither Purchaser nor
Xxxxxxx shall (and neither Purchaser nor Xxxxxxx shall permit its or his
majority-owned and controlled affiliates to) (i) solicit proxies in respect of
any Voting Stock, (ii) become a "participant" or "participant in a
solicitation", as those terms are defined in Rule 14a-11 under the Exchange Act,
in opposition to a solicitation by the Company, (iii) form or join any group
with any other person for the purpose of voting, holding, purchasing or
disposing of Voting Stock, or (iv) deposit any shares of Voting Stock in a
voting trust or, except as otherwise provided herein, subject any Voting Stock
to any arrangement or agreement with respect to the voting of such Voting Stock
with any person or group other than the Company.
(c) SUSPENSION FROM RESTRICTIONS. The restrictions set forth in
the foregoing Sections 5.5(a) and 5.5(b) shall be suspended in the event that
any person or group (as such term is defined under the Exchange Act) (other than
Purchaser or Xxxxxxx, any person who is then an affiliate of Purchaser or
Xxxxxxx, or any person who is an affiliate of the Company as of the date of this
Agreement (a "THIRD PARTY")), (i) without the prior approval of the Board of
Directors of the
27
Company, acquires, directly or indirectly, in a single transaction or a series
of transactions, or commences or publicly announces its intention to commence an
unsolicited tender offer or exchange offer for, securities representing more
than twenty percent (20%) of the then-outstanding equity securities or voting
power of the Company or any of its material Subsidiaries, or (ii) files a proxy
statement under the Exchange Act, or commences or publicly announces its
intention to engage in a solicitation of proxies, for the election of persons as
directors of the Company who, if elected, would constitute a majority of the
Board of Directors of the Company, in opposition to the nominees of the
incumbent Board of Directors of the Company. The restrictions set forth in
Sections 5.5(a) and 5.5(b) shall be restored in the event that a Third Party
(x) ceases to own twenty percent (20%) or more of the outstanding shares of
Common Stock of the Company and (y) absolutely and unconditionally withdraws and
abandons (A) any tender or exchange offer theretofore commenced or announced by
such Third Party for more than twenty percent (20%) of the outstanding shares of
Common Stock of the Company, and (B) any solicitation of proxies within the
scope of clause (ii) of this Section 5.5(c); PROVIDED, HOWEVER, that in the
event the restrictions set forth in Sections 5.5(a) and 5.5(b) are restored,
Purchaser shall not be required to sell any Common Stock or other securities of
the Company acquired, or to withdraw, abandon or terminate any tender or
exchange offer, proposal, solicitation, or other action commenced, while the
restrictions set forth in Sections 5.5(a) and 5.5(b) were suspended pursuant to
this Section 5.5(c).
(d) NOTICE OF PURCHASER POSITION. Upon written request from the
Company, a duly authorized officer of Purchaser will certify to the Company in
writing the numbers and classes of shares of Voting Stock beneficially owned by
Purchaser and Xxxxxxx and its and his majority-owned and controlled affiliates
as of any record date or other date reasonably requested.
(e) TERMINATION OF STANDSTILL. Notwithstanding any other
provision in this Agreement all rights and obligations of any party under this
Section 5.5 will terminate and expire upon the seventh anniversary of the date
of the Note Closing.
5.6 FINANCIAL STATEMENTS AND OTHER REPORTS.
(a) As long as Purchaser beneficially owns, either outright or
pursuant to rights to acquire, at least five percent (5%) of the Common Stock of
the Company on either a primary or fully diluted basis, the Company shall
deliver to Purchaser, promptly after transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as the Company shall
send to its public stockholders and copies of all registration statements
(without exhibits), other than registration statements on Form S-8 or any
similar successor form, and all reports which it files with the SEC (or any
governmental body or agency succeeding to the functions of the SEC). Purchaser
shall have the right to discuss such financial statements, proxy statements,
notices, reports, registration statements and filings with such officers of the
Company as Purchaser may reasonably designate upon reasonable notice and at
reasonable times, and to share such information with Purchaser's professional
advisers, subject to the confidentiality provisions set forth in Section 5.7.
28
(b) Prior to the Option Termination Date, the Company shall
permit representatives of Purchaser to visit and inspect, at Purchaser's
expense, any of the properties of the Company, to examine the corporate books
and make copies or extracts therefrom and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the principal officers of the
Company, all upon reasonable notice and at such reasonable times and as often as
Purchaser may reasonably request.
5.7 CONFIDENTIALITY. Except as permitted by Section 5.8, Purchaser
agrees (and shall cause its professional advisers to agree) not to disclose to
any person any information or data obtained by them pursuant to Sections 5.6
until such information or data otherwise becomes publicly available or except
pursuant to a valid subpoena, judicial process or its equivalent or as otherwise
required by law. At the Company's request, Purchaser shall, and shall cause its
professional advisers to, sign a confidentiality agreement, in form and
substance reasonably satisfactory to Purchaser and the Company, as a condition
to the receipt of confidential nonpublic information of the Company by such
advisers pursuant to Sections 5.6.
5.8 PUBLIC ANNOUNCEMENTS. Each of the parties hereto will cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement and the
other Transaction Documents and any of the transactions contemplated hereby and
thereby, and neither party hereto directly or indirectly through its officers
and directors shall make any further announcement, news release or disclosure
without first consulting with the other party hereto except (a) with the prior
written consent of the other party or (b) to the extent such party believes in
good faith, after consultation with legal counsel, that such announcement,
release or disclosure is required by law. The Company shall not, and shall
cause its officers and directors not to, make or contribute to any public
statement, news release or other public communication or filing disclosing
personal information concerning Purchaser or any member of Purchaser without the
prior written consent of Purchaser and such member unless the Company believes
in good faith, after consultation with legal counsel, that such statement,
release, communication or filing is required by law.
5.9 HSR ACT. As soon as practicable (and in no event later than ten
(10) business days) after the Note Closing, the Company and Purchaser shall file
notification and report forms under the HSR Act, and shall thereafter promptly
make any and all further filings and submissions which may be required, relating
to the acquisition by Purchaser of shares of Common Stock pursuant to the
Convertible Secured Note, the Option and the Warrants). The Company and
Purchaser shall furnish to the other such necessary information and reasonable
assistance as may be reasonably requested in connection with the preparation of
necessary filings or submissions to any governmental agency or authority
necessary under the provisions of the HSR Act. The Company and Purchaser will
supply each other with copies of all correspondence, filings or communications
(or memoranda setting forth the substance thereof) between such party or its
representatives, on the one hand, and any such governmental agency or authority,
on the other hand, with respect to this Agreement and the other Transaction
Documents or the transactions contemplated hereby or thereby. The Company shall
be responsible for all applicable filing fees under the HSR Act relating to the
acquisitions of Common Stock under the Convertible Secured Note, the Option, and
the Warrants. Purchaser agrees not to designate an Option
29
Closing Date or exercise Warrants on any date prior to the expiration or early
termination of the applicable waiting periods under the HSR Act.
5.10 CERTAIN RESTRICTIONS. For a period of five years (or such
shorter period as may be specified elsewhere in this Section 5.10) commencing on
the date of this Agreement:
(a) RESTRICTIONS ON TRANSFER OF COMMON STOCK. Purchaser shall
not, directly or indirectly, sell or transfer any Voting Stock except (i) to the
Company or any person or group approved by the Company; or (ii) to any entity of
which Xxxxxxx owns securities representing not less than a majority of the
voting power and which agrees to accept such Voting Stock subject to the
restrictions and obligations set forth in Section 5.5; or (iii) pursuant to a
transaction involving the merger, sale or reorganization of the Company as
approved by the Board of Directors of the Company; or (iv) pursuant to a bona
fide public offering registered under the Securities Act of Voting Stock (which
shall be structured to distribute such shares or rights through an underwriter
or otherwise in the manner set forth in Article VI or in another manner
reasonably calculated not to result in the transfer to a single person or group
of beneficial ownership of Voting Stock with aggregate voting power of five
percent (5%) of more of the total Voting Stock of the Company then outstanding);
or (v) pursuant to Rule 144 (but not pursuant to Rule 144A) under the Securities
Act (but only to the extent the sale or transfer of Voting Stock is in
compliance with the volume limitations under paragraph (e) thereof, if
applicable); or (vi) in response to (A) an offer to purchase or exchange for
cash or other consideration any Voting Stock (1) which is made by or on behalf
of the Company or (2) which is made by another person or group and is not
opposed by the Board of Directors of the Company within the time such Board is
required, pursuant to regulations under the Exchange Act, to advise the
Company's shareholders of such Board's position on such offer, or (B) subject to
the Company's right of first refusal as set forth in Section 5.10(b)(ii), any
other tender offer made by another person or group to purchase or exchange for
cash or other consideration any Voting Stock which, if successful, would result
in such person or group owning or having the right to acquire Voting Stock with
aggregate voting power of more than forty percent (40%) of the total Voting
Stock of the Company then in effect; or (vii) subject to the Company's right of
first refusal as set forth in Section 5.10(b)(i), in transactions not otherwise
described herein as long as Purchaser reasonably believes that such transactions
will not, directly or indirectly, result in any single person or group acquiring
beneficial ownership of Voting Stock with aggregate voting power of five percent
(5%) or more of the total Voting Stock of the Company then outstanding.
(b) RIGHT OF FIRST REFUSAL ON PERMITTED SALES.
(i) GENERAL. Until the third anniversary of the date of
this Agreement, prior to making any sale or transfer of any Common Stock
pursuant to Section 5.10(a)(vii), if such sale or transfer could reasonably be
expected to result in any single person or group acquiring beneficial ownership
of Voting Stock with aggregate voting power of five percent (5%) or more of the
total Voting Stock of the Company then outstanding, Purchaser shall give the
Company the opportunity to purchase such Common Stock in the following manner:
30
(A) Purchaser shall give notice (the "TRANSFER
NOTICE") to the Company in writing of such intention, specifying the names of
the proposed purchasers or transferees, the securities proposed to be sold or
transferred, the proposed price per share therefor (the "TRANSFER PRICE") and
the other material terms upon which such disposition is proposed to be made.
(B) The Company shall have the right, exercisable by
written notice given by the Company to Purchaser within five (5) days after
receipt of such Transfer Notice to agree to purchase all or part of the
securities specified in such Transfer Notice. The Company shall have the right
to pay for such securities: (A) the same amount in cash per share, if the
consideration to be paid by the third party consists of cash, or (B) to the
extent the consideration to be paid by the third party does not consist of cash,
consideration per share equivalent to that offered by the third party, or an
amount of cash having equivalent value as determined by an investment banking
firm mutually agreed to by the Company and Purchaser.
(C) If the Company exercises its right of first
refusal hereunder, the closing of the purchase of the securities with respect to
which such right has been exercised shall take place within ten (10) days after
the Company gives notice of such exercise, or such longer period as Purchaser
and the Company may agree. Upon exercise of its right of first refusal, the
Company and Purchaser shall be legally obligated to consummate the purchase
contemplated thereby and shall use their reasonable best efforts to secure any
approvals required in connection therewith.
(D) If the Company does not exercise its right of
first refusal hereunder within the time specified for such exercise, Purchaser
shall be free, subject to the terms of Section 5.10(a), during the period of one
hundred and twenty (120) days following the expiration of such time for
exercise, to sell the securities specified in such Transfer Notice on terms no
less favorable to Purchaser than the terms specified in such Transfer Notice.
(ii) RIGHT OF FIRST REFUSAL ON TENDER OFFER. Prior to
making any sale or exchange of Voting Stock pursuant to Section 5.10(a)(vi)(B)
in response to a tender or exchange offer, Purchaser shall give the Company the
opportunity to purchase such Voting Stock in the following manner:
(A) Purchaser shall give notice (the "TENDER NOTICE")
to the Company in writing of its intention to tender such shares no later than
5:00 p.m. California time on the third business day prior to the latest date (as
the same may be extended) by which Voting Stock must be tendered in order to be
accepted pursuant to such offer or to qualify for any proration applicable to
such offer (the "TENDER DATE"), specifying the amount of Voting Stock proposed
to be tendered. For purposes hereof, a tender or exchange offer to purchase
Voting Stock shall be deemed to be an offer at the price or other consideration
specified therein, without regard to any provisions thereof with respect to
proration or conditions to the offeror's obligation to purchase (assuming such
conditions are not impossible of performance when the offer is made, without
giving effect to the Company's right of first refusal).
31
(B) If the Tender Notice is given, the Company shall
have the right, exercisable by giving notice (the "PURCHASE NOTICE") to
Purchaser no later than 5:00 p.m. California time on the business day
immediately preceding prior to the Tender Date, to purchase all or part of the
Voting Stock specified in the Tender Notice for cash. If the Company exercises
such right by giving such notice, the closing of the purchase of such Voting
Stock shall take place on the fifth business day after the consummation (or the
withdrawal or abandonment under the circumstances set forth in the proviso
below, as the case may be) of the tender or exchange offer or such earlier time
as the Company and Purchaser shall agree. As a condition to the effectiveness
of any exercise by the Company of its rights to purchase under
Sections 5.10(b)(ii), at the time the Company delivers a Purchase Notice, it
shall have provided for the payment to Purchaser of the purchase price for the
shares to be purchased by the Company, by an escrow of funds, letter of credit
facility, bank guarantee or similar arrangement reasonably acceptable to
Purchaser. If the purchase price specified in the tender or exchange offer
includes any property other than cash, the value of any property included in the
purchase price, for purposes of determining the amount to be provided for by the
Company pursuant to the preceding sentence only, shall be determined by an
investment banking firm mutually agreed to by the Company and Purchaser. Upon
exercise of the right of first refusal pursuant to this Section 5.10(b)(ii)
(including provision for payment as described above), the Company and Purchaser
shall be legally obligated to consummate the purchase and sale contemplated
thereby and shall use their reasonable best efforts to secure any approvals
required in connection therewith; PROVIDED, that the Company's obligation to
consummate such purchase shall cease if the tender or exchange offer is not
consummated (unless the minimum tender condition (if any) thereunder was not
satisfied and such condition would have been satisfied if Purchaser had tendered
the shares specified in its Tender Notice, in which event the Company's
obligation to consummate such purchase shall remain in effect); and PROVIDED
FURTHER, that Purchaser's obligation to consummate such sale shall cease if
Purchaser shall withdraw its Tender Notice and shall refrain from tendering the
shares specified therein.
(C) If the Company does not exercise its right of
first refusal in accordance with the procedures set forth in
Section 5.10(b)(ii)(B) or fails to timely complete any purchase pursuant to an
exercise of such rights, then Purchaser shall be free to accept the tender or
exchange offer. Purchaser may not tender any shares pursuant to such tender or
exchange offer unless Purchaser has provided the Company with a Tender Notice in
compliance with the requirements of Section 5.10(b)(ii)(A) and the Company has
failed to exercise its right of first refusal or failed to timely consummate the
purchase of shares in compliance with the requirements of
Section 5.10(b)(ii)(B).
(D) Notwithstanding any other provision of this
Agreement, no notice required by this Section 5.10(b)(ii) shall be deemed to
have been given, and no notice shall be effective, unless and until delivered by
hand or by fax with confirmation of receipt by telephone to the recipient.
(iii) ASSIGNMENT. The rights of first refusal
provided by this Section 5.10 may be assigned by the Company, but only on a
case-by-case basis and only with
32
respect to specific shares following the occurrence of an event giving rise to a
right of first refusal with respect to such shares.
5.11 LEGENDS. Each certificate representing shares of Common Stock
acquired pursuant to the Convertible Secured Note, Option and Warrants may be
endorsed with the following legends, and any other legends required by law:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.
UNTIL JUNE 17, 2002, THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER, INCLUDING RIGHTS OF FIRST
REFUSAL, SET FORTH IN AN AGREEMENT DATED AS OF JUNE 17, 1997, BY AND
AMONG SUPERGEN, INC., TAKO VENTURES, LLC AND, SOLELY FOR PURPOSES OF
SECTIONS 5.3 AND 5.5 THEREOF, XXXXXXXX X. XXXXXXX, A COPY OF WHICH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OR RECORD OF THIS CERTIFICATE TO THE SECRETARY OF SUPERGEN,
INC. AT SUPERGEN, INC.'S PRINCIPAL EXECUTIVE OFFICES.
The Company need not register a transfer of legended Securities, and may also
instruct its transfer agent not to register the transfer of the Securities,
unless the conditions specified in each of the foregoing legends are satisfied.
The first of the foregoing legends shall be removed from any security legended
pursuant to this Section 5.11, and the Company shall issue a certificate without
such legend to the holder of such Securities, if such Securities are registered
under the Securities Act and a prospectus meeting the requirements of Section 10
of the Securities Act is available or if such holder satisfies the requirements
of Rule 144(k), or the holder provides the Company with an opinion of counsel,
reasonably satisfactory to the Company, to the effect that (i) such holder meets
the requirements of Rule 144(k) or (ii) a public sale, transfer or assignment of
such Securities may be made without registration. The second of the foregoing
legends shall be removed from any Security legended in accordance with this
Section 5.11, and the Company shall issue a certificate without such legend to
the holder of such Security, at the earlier of (i) such time as such Security is
transferred in accordance with Section 5.10 (other than Section 5.10(a)(ii)) and
(ii) five years from the date hereof. The stop transfer instructions with
respect to any
33
legended Security shall be removed if both of the foregoing legends are removed
in accordance with this Section 5.11.
5.12 INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless Purchaser;
each person who controls Purchaser within the meaning of the Exchange Act
(including, without limitation, Cephalopod Corporation and Xxxxxxx); each of the
respective members, managers, partners, officers, directors, employees, agents
and affiliates of the foregoing; Purchaser Representative; and the Observer (the
"PURCHASER INDEMNITEES") from and against all actions, suits, claims,
proceedings, costs, damages judgments, amounts paid in settlement and expenses
(including, without limitations, attorneys' fees and disbursements) relating to
or arising out of any claim, demand or cause of action asserted by any third
party as a result of any of the transactions contemplated by this Agreement or
any of the other Transaction Documents (including without limitation acts or
omissions since the commencement of the negotiations leading to such
transactions); PROVIDED, HOWEVER, that the indemnification provided hereby shall
not extend to costs, damages, judgment, amounts paid in settlement and expenses
directly and primarily attributable to activities of a Purchaser Indemnitee
which do not involve any wrongful act or omission of the Company or any of its
directors (other than Xxxxxxx), officers, employees, agents or representatives.
(b) The Company shall reimburse the Purchaser Indemnitees for
all out-of-pocket expenses (including attorneys' fees and disbursements) as they
are incurred in connection with investigating, preparing to defend or defending
any such action, suit, claim or proceeding (including any inquiry or
investigation) whether or not a Purchaser Indemnitee is a party thereto. If a
Purchaser Indemnitee makes a claim hereunder for payment or reimbursement of
expenses, such expenses shall be paid or reimbursed promptly upon receipt of
appropriate documentation relating thereto even if the Company reserves the
right to dispute whether this Agreement requires the payment or reimbursement of
such expenses.
(c) A Purchaser Indemnitee seeking indemnification hereunder
shall give written notice to the Company of any claim with respect to which it
seeks indemnification promptly after the discovery by such party of any matters
giving rise to a claim for indemnification; PROVIDED that the failure of any
Purchaser Indemnitee to give notice as provided herein shall not relieve the
Company of its obligations under this Section 5.12 unless the Company shall have
been materially prejudiced by the failure of Purchaser Indemnitee to make such
notification. In case any such action, suit, claim or proceeding is brought
against Purchaser Indemnitee, the Company shall be entitled to participate in
the defense thereof and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to Purchaser Indemnitee, and after
notice from the Company of its election so to assume the defense thereof, the
Company will not be liable to such Purchaser Indemnitee under this Section 5.12
for any legal or other expense subsequently incurred by such Purchaser
Indemnitee in connection with the defense thereof; PROVIDED that (i) if the
Company shall elect not to assume the defense of such claim or action or (ii) if
Purchaser Indemnitee reasonably determines that there may be a conflict between
the positions of the Company and of Purchaser Indemnitee in defending such claim
or
34
action, then separate counsel shall be entitled to participate in and conduct
the defense, and the Company shall be liable for any legal or other expenses
incurred by Purchaser Indemnitee in connection with the defense; PROVIDED that
in no event shall be Company be required to pay the fees or expenses of more
than one counsel. The Company shall not be liable for any settlement of any
action, suit, claim or proceeding effected without its written consent;
PROVIDED, however, that the Company shall not unreasonably withhold, delay or
condition its consent. The Company further agrees that it will not, without
Purchaser Indemnitee's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof in any pending or threatened
action, suit, claim or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Purchaser Indemnitee is an actual or
potential party to such action, suit, claim or proceeding) unless such
settlement or compromise includes an unconditional release of Purchasers and
each other Purchaser Indemnitee from all liability arising out of such action,
suit, claim or proceeding.
(d) If the indemnification provided for in this Section 5.12 is
held by a court of competent jurisdiction to be unavailable to a Purchaser
Indemnitee with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Company, in lieu of indemnifying such Purchaser
Indemnitee hereunder, shall contribute to the amount paid or payable by such
Purchaser Indemnitee as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of Purchaser Indemnitee on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Company and of Purchaser Indemnitee
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Company or by Purchaser Indemnitee
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the provisions of this Section 5.12, to the
extent that the provisions on indemnification and contribution contained in any
underwriting agreement contemplated in Article VI and entered into in connection
with an underwritten public offering thereunder are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The rights of Purchaser under this Section 5.12 shall be in
addition to any liability that the Company might otherwise have to Purchaser,
the Purchaser Representative and the Observer under this Agreement, at common
law or otherwise.
5.13 FURTHER ASSURANCES.
(a) At any time or from time to time after the Note Closing and
each Option Closing and each exercise of the Warrants, each party shall execute
and deliver to the other party or parties such other documents and instruments,
provide such materials and information and take such other actions as either
party may reasonably request more effectively to carry out the provisions of
this Agreement and the other Transaction Documents.
35
ARTICLE VI
REGISTRATION RIGHTS
Section 6. REGISTRATION RIGHTS.
6.1 DEFINITIONS. For purposes of this Article VI:
(a) The term "HOLDER" means the Purchaser or any other person
who shall subsequently own or have the right to acquire Registrable Securities
or any assignee thereof in accordance with Section 6.12 hereof.
(b) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(c) The term "REGISTRABLE SECURITIES" means (i) the shares of
Common Stock issued and sold by the Company pursuant to this Agreement
(including all shares issued by the Company upon conversion of the Convertible
Secured Note or exercise of the Option or any of the Warrants); (ii) any and all
shares of the Common Stock issued or issuable upon exercise, conversion, or
exchange of equity securities acquired by Purchaser pursuant to Section 5.1;
(iii) the Warrants; (vi) any and all shares of Common Stock issued or issuable
upon exercise of the Warrants; (v) stock issued in lieu thereof in any
reorganization, which has not been sold to the public; or (vi) stock issued in
respect of the stock referred to in (i), (ii), (iii) or (iv) as a result of a
stock split, stock dividend, recapitalization or the like, which has not been
sold to the public excluding in all cases, however, any of the foregoing sold by
a Holder pursuant to a registration statement under this Agreement, a
transaction pursuant to Rule 144 promulgated under the Securities Act, or sold
in any other transaction in which registration rights are not transferred
pursuant to Article VI hereof.
(d) 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.
6.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the one
year anniversary date of the Note Closing Date, a written request from one or
more Holders representing at least 25% of the Registrable Securities then
outstanding, that the Company file a registration statement under the
Securities Act covering the registration with respect to all or a part of the
Registrable Securities then outstanding, having an aggregate offering price,
net of underwriting discounts and commissions, of at least $3,000,000, the
Company shall, within fifteen
36
(15) days of the receipt thereof, give written notice of such request to all
Holders of Registrable Securities identified to the Company in accordance
with Section 6.12 and shall, subject to the limitations of Section 6.2(d),
file as soon as practicable, and in any event within one hundred twenty (120)
days of the receipt of such request, a registration statement under the
Securities Act covering all Registrable Securities which such Holders request
to be registered within twenty (20) days of the mailing of such notice by the
Company in accordance with Section 8.7 of this Agreement. Any registration
statement filed pursuant to under this Section 6.2 may, subject to the
provisions of Section 6.2(b), include securities of the Company other than
Registrable Securities.
(b) If the Holders of Registrable Securities initiating the
registration request pursuant to Section 6.2(a) ("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 6.2 and the Company shall include such information in
the written notice referred to in Section 6.2(a). In such event, the right of
any such 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 Section 6.5(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, which underwriter or underwriters shall be reasonably acceptable to the
Company. If the Company, on its own behalf or on behalf of other holders of
securities other than Registrable Securities, requests inclusion in such
Registration, the Initiating Holders, to the extent they deem advisable and
consistent with the goals of such Registration, shall, on behalf of all Holders,
offer to include such securities other than Registrable Securities in the
underwriting (the "OTHER SECURITIES") and may condition such offer on the
acceptance by such persons of the terms of this Section 6.2. In the event,
however, that the number of shares so included exceeds the number of shares of
Registrable Securities included by all Holders, such Registration shall be
treated as governed Section 6.3 hereof rather than Section 6.2, and it shall not
count as a Registration for purposes of Section 6.2 hereof. Notwithstanding any
other provision of this Section 6.2, 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 Other Securities shall first be excluded
from such Registration to the extent required by such limitation. If a further
limitation of the number of shares to be underwritten is still required, 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
owned by each Holder. If any Holder of Registrable Securities, or a holder of
other securities entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders delivered at least seven (7) days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn
from the Registration Statement.
37
(c) The Company is obligated to effect only two (2)
registrations under this Section 6.2 and shall not be obligated to effect any
registrations under this Section 6.2 within one hundred twenty (120) days of the
effective date of any registration statement pertaining to securities of the
Company.
(d) Notwithstanding the foregoing, if the Company shall furnish
to the Initiating 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 shareholders 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 one hundred twenty (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 twelve-month period.
6.3 COMPANY REGISTRATION.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders, but excluding a registration
relating to an aggregate of 409,200 shares of Common Stock and Warrants to
purchase Common Stock issued pursuant to a private placement effected in
December 1995 through March 1996) any of its Common Stock under the Securities
Act in connection with a secondary offering of such securities solely for cash
(other than a registration relating solely to the sale of securities to
participants in a Company stock option, stock purchase or similar plan, or a
registration relating solely to a transaction of the type described in
Rule 145(a) under the Securities Act), the Company shall, at such time, promptly
give each Holder written notice of such registration. Upon the written request
of any Holder given within twenty (20) days after mailing of such notice by the
Company in accordance with Section 8.7 of this Agreement, the Company shall,
subject to the provisions of Section 6.3(b), include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable Securities that each such
Holder has requested to be registered.
(b) In connection with any offering involving an underwriting of
shares being issued by the Company, the Company shall not be required under
Section 6.3 to include any Holder's securities in such underwriting unless such
Holder accepts 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 shareholders 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 so long as all securities of all
other shareholders (including without limitation holders of registration rights)
but the Holders are excluded first. If any Holder disapproves of the terms
38
of any such underwriting, it may elect to withdraw therefrom by written notice
to the Company and the underwriter delivered at lease seven (7) days prior to
the effective date of the Registration Statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration. The Holders shall have no right to participate in the
selection of the underwriters for an offering pursuant to Section 6.3.
(c) The Company shall have the right to terminate or withdraw
any registration initiated by it under this Section 6.3 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
6.4 FORM S-3. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in the foregoing provisions of
this Article VI, one or more Holders shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by Purchaser), PROVIDED, HOWEVER, that the
Company shall not be obligated to effect any such registration: (a) 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) on Form S-3 at an aggregate price
to the public of less than $1,000,000; (b) in the event that the Company shall
furnish the certification described in Section 6.2(d) (but subject to the
limitations set forth therein); (c) in a given twelve-month period, after the
Company has effected two such registrations in any such period; or (d) within
one hundred twenty (120) days of the effective date of a Company registration
statement of the type described in Section 6.3.
6.5 OBLIGATIONS OF THE COMPANY. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its reasonable
best 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 one
hundred twenty (120) days;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish to the Holders covered by such registration
statement 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 such Registrable Securities;
(d) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such
39
jurisdictions as shall be reasonably requested by the Holders thereof, PROVIDED
that (i) 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 and (ii) notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waiveable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, such expenses shall be payable pro rata by
selling shareholders;
(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 participating in the registration 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; in the event of a pending material event or transaction not publicly
disclosed by the Company, then upon written notice of such event or transaction,
each Holder shall suspend any sales or trades of the Company's securities under
any registration statement for up to thirty (30) days immediately following such
notice;
(g) cause all such Registrable Securities registered pursuant to
this Agreement to be listed on each securities exchange or national market
system on which similar securities issued by the Company are then listed or
traded;
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(i) to the extent economically feasible, use its reasonable best
efforts to comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen (18) months, beginning with the first month after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(j) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, 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
40
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 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.
6.6 PROVISION OF INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Article VI
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.
6.7 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 6.2 and 6.4,
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
participating 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 6.2 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); PROVIDED, HOWEVER, that if at the time of such
withdrawal, such Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to such 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 6.2.
6.8 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 6.3 for each Holder thereof (which right may be assigned as
provided in Section 6.12), including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements of one counsel
for the participating Holders selected by a majority in interest thereof, but
excluding underwriting discounts and commissions relating to Registrable
Securities included in such registration.
6.9 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 Agreement.
6.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:
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(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder of such Registrable Securities, the officers and
directors of each such 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 Section 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 or delayed), 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 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
Section b shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement in effected without the
consent of the Holder from whom indemnification is sought (which consent shall
not be unreasonably withheld or delayed);
42
PROVIDED, that, in no event shall any indemnity under this Section b
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 6.10 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 6.10, 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 6.10, 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 6.10.
(d) The obligations of the Company and Holders under this
Section 6.10 shall survive the completion of any offering of Registrable
Securities in a registration statement filed pursuant to this Agreement, and
otherwise.
6.11 REPORTS UNDER THE EXCHANGE ACT. With a view to making available
to the Holders the benefits of Rule 144 under the Securities Act and any other
rule or regulation of the Commission that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) 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 Rule 144, the
Securities Act and the Exchange Act, (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 Commission which permits
the selling of any such securities without registration.
43
6.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned by a Holder; PROVIDED, that within a reasonable time after such
transfer, the Company is 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. Any assignee or transferee asserting
rights under this Agreement shall be deemed to have consented to the terms and
conditions hereof. Holders' rights to cause the Company to register their
Registrable Securities and to keep information available, granted to them by the
Company under this Article VI, may be assigned (or assigned in part and retained
in part) to one or more transferees or assignees who receive Registrable
Securities which, upon full exercise and conversion, represent the right to
obtain at least 250,000 shares of Registrable Securities (as adjusted for stock
dividends, stock split, recapitalizations and the like that occur after the date
of this Agreement), PROVIDED that (i) the Company is given written notice by
such Holder at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such rights are being assigned,
and (ii) upon request by the Company, such permitted transferee or assignee
executes a counterpart to Article VI of this Agreement.
6.13 "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, make short sale of, loan,
grant any option for the purchase of or otherwise transfer or dispose (other
than to donees who agree to be similarly bound) of any Registrable Securities
for a period of time, as agreed to by the Company and the underwriter not to
exceed one hundred eighty (180) days, following the effective date of a
registration statement of the Company filed under the Securities Act for an
offering in which the Holder participates; PROVIDED, HOWEVER, that all officers
and directors of the Company and all other persons with registration rights
(whether or not pursuant to this Agreement) except passive, outside investors
enter into similar agreements.
6.14 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Agreement shall terminate as to any Holder of Registrable
Securities when the Holder can sell all of such Holder's Registrable Securities
pursuant to Rule 144(k) under the Securities Act and shall be suspended, but not
terminated, during any three-month period in which such Holder is entitled to
sell all shares issued or issuable to such Holder under Rule 144.
6.15 NO INCONSISTENT AGREEMENTS. The Company shall not on or after
the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Purchaser and
other Holders in this Article VI or otherwise conflicts with the provisions of
this Article VI. The Company represents and warrants to Purchaser that the
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with any registration rights granted to any holders of the
Company's securities.
44
ARTICLE VII
CONDITIONS TO CLOSINGS
Section 7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO PURCHASER'S OBLIGATION TO ACQUIRE THE CONVERTIBLE
SECURED NOTE. The obligation of Purchaser to purchase the Convertible Secured
Note hereunder is subject to the satisfaction, on or prior to the Note Closing
Date, of the following conditions, any of which may be waived by Purchaser, in
Purchaser's sole discretion, to the extent permitted by law:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in this Agreement and the other Transaction
Documents shall be true and correct in all material respects when made, and
shall be true and correct in all material respects on the Note Closing Date with
the same force and effect as if they had been made on and as of the Note Closing
Date, and the Company shall have delivered to Purchaser a certificate to such
effect, executed by the chief executive officer and chief financial officer of
the Company and dated the Note Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed in all material respects all covenants, agreements and other
obligations required to be performed or observed by the Company pursuant to this
Agreement on or prior to the Note Closing Date, and the Company shall have
delivered to Purchaser a certificate to such effect, executed by the chief
executive officer and chief financial officer of the Company and dated the Note
Closing Date.
(c) ABSENCE OF MATERIAL ADVERSE EFFECT. No Material Adverse
Effect shall have occurred, and there shall exist no fact or circumstance which
would reasonably be expected to result in a Material Adverse Effect.
(d) CONSENTS AND WAIVERS. The Company shall have obtained all
consents, permits and waivers necessary for the consummation of the transactions
contemplated by this Agreement (including the transactions contemplated by the
other Transaction Documents).
(e) LEGAL INVESTMENT. At the time of the Note Closing, the
issuance by the Company, and the acquisition by Purchaser, of the Convertible
Secured Note, Option and Warrants hereunder shall be legally permitted by all
laws and regulations to which Purchaser and the Company are subject, and no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such acquisition shall be in
effect.
(f) CERTAIN AGREEMENTS. Xxxxxx Xxxxxxxxx, Ph.D., Xxxxx X.
Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxxxxx shall have executed and delivered to
Purchaser an agreement in substantially the form set forth in EXHIBIT F, each
other officer of the Company shall have executed and delivered to Purchaser an
agreement in substantially the form set forth in EXHIBIT G, and each such
agreement shall be in full force and effect.
45
(g) OPINION OF COMPANY'S COUNSEL. Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, counsel to the Company, shall have delivered
an opinion addressed to Purchaser, dated the Note Closing Date, substantially in
the form as that attached hereto as EXHIBIT H.
7.2 CONDITIONS TO COMPANY'S OBLIGATION TO ISSUE THE CONVERTIBLE
SECURED NOTE. The Company's obligation to sell and issue the Convertible
Secured Note to Purchaser hereunder is subject to the satisfaction, on or prior
to the Note Closing Date, of the following conditions, any of which may be
waived by the Company, in its sole discretion, to the extent permitted by law:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by Purchaser in this Agreement shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the Note Closing Date with the same force and effect as if they had
been made on and as of the Note Closing Date, and Purchaser shall have delivered
to the Company a certificate to such effect, executed by a duly authorized
member of Purchaser and dated the Note Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
in all material respects all covenants, agreements and other obligations
required to be performed or observed by Purchaser pursuant to this Agreement on
or prior to the Note Closing Date, and Purchaser shall have delivered to the
Company a certificate to such effect, executed by a duly authorized member of
Purchaser and dated the Note Closing Date.
(c) LEGAL INVESTMENT. At the time of the Note Closing, the
issuance by the Company, and the acquisition by Purchaser, of the Convertible
Secured Note, the Option and the Warrants hereunder shall be legally permitted
by all laws and regulations to which either Purchaser or the Company is subject,
and no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such acquisition
shall be in effect.
7.3 CONDITIONS TO ISSUANCE OF OPTION COMMON. The consummation of
each Option Closing shall be subject to the condition (which may be waived by
Purchaser, in its sole discretion) that the Company shall have delivered to
Purchaser a certificate, executed by the chief executive officer and chief
financial officer of the Company, to the effect that the representations and
warranties of the Company set forth in this Agreement are true and complete in
all material respects on the Option Closing Date with the same force and effect
as if they had been made on and as of the Option Closing Date (except for
changes that could not reasonably be expected to have a Material Adverse Effect)
and that the Company has performed in all material respects the covenants,
agreements and other obligations that the Company is required to perform or
observe under this Agreement prior to the Option Closing Date. The Company's
obligation to issue and deliver to Purchaser the Option Common is subject to the
satisfaction, on or prior to the applicable Option Closing Date, of the
following conditions, any of which may be waived by the Company, in its sole
discretion, to the extent permitted by law:
46
(a) all waiting periods, if any, under the HSR Act applicable to
the issuance of the shares of Option Common by the Company and the acquisition
of such shares by Purchaser hereunder shall have expired or been terminated;
(b) no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect; and
(c) all consents, approvals, orders, authorizations and permits
of any federal, state, local or foreign governmental authority, if any, required
in connection with the issuance of the shares of Option Common by the Company
and the acquisition of such shares by Purchaser hereunder have been obtained.
(d) the representations and warranties made by Purchaser in
Section 4.3 of this Agreement shall be true and correct in all material respects
on and as of the Option Closing Date as if made on such date, and Purchaser
shall have delivered to the Company a certificate to such effect, executed by a
duly authorized member of Purchaser and dated the Option Closing Date.
ARTICLE VIII
MISCELLANEOUS
Section 8. MISCELLANEOUS.
8.1 ACCESS TO INFORMATION. No information or knowledge obtained in
any investigation by Purchaser shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the Transaction
Documents or the conditions to the respective obligations of the parties set
forth in Article VII.
8.2 WAIVERS AND AMENDMENTS. This Agreement or any provision hereof
may be amended, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the amendment, waiver,
discharge or termination is sought.
8.3 GOVERNING LAW. This Agreement shall be governed in all respects
by the internal laws of the State of California applicable to contracts to be
wholly performed therein, without respect to the conflicts or the laws or rules
thereof.
8.4 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive the closings of the transactions
contemplated hereby, notwithstanding any investigation made by Purchaser. All
statements as to factual matters contained in any certificate delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
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8.5 SUCCESSORS AND ASSIGNS. Except as expressly provided or
contemplated by this Agreement and the other Transaction Documents, neither this
Agreement nor any right, obligation or interest hereunder shall be assigned,
either in whole or in part, by any party hereto (other than by operation of law)
without the prior written consent of the other parties; PROVIDED, that nothing
herein shall prevent or limit the ability of Purchaser to assign any or all of
its rights under this Agreement or any of the other Transaction Documents to an
any majority-owned and controlled affiliate of Xxxxxxx. Subject to the
foregoing limitations, the provisions hereof shall inure to the benefit of, and
be binding upon and enforceable by, the parties hereto and their respective
successors and assigns.
8.6 ENTIRE AGREEMENT. This Agreement, the other Transaction
Documents, and the other certificates and documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and supersede the Outline of Principal Terms
dated April 4, 1997 and all other prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties with respect thereto.
8.7 NOTICES. Except as provided in Section 5.10(b)(ii), all notices
and other communications required or permitted hereunder shall be in writing and
shall be delivered personally or by overnight courier or mailed by first class
mail, or Express Mail, postage prepaid, or via facsimile, addressed (a) if to
Purchaser or Xxxxxxx, to Tako Ventures, LLC, c/o Howson & Simon, 000 Xxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, Attn: Xxxxxx Xxxxx, with copies of
said notice to be sent to Springs Xxxxx Xxxxxxxx Xxxxxxx & Stikker, 000
Xxxxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx, Xxx Xxxxxxxxx, XX 00000, Attn: Xxxxxx
Xxxxxxx, and Xxxx Xxxx Xxxx & Freidenrich, A Professional Corporation, 000
Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000, Attn: Xxx X. Xxxxxx, Esq., and Xxxx X.
Rock, Esq., or to such other address (including electronic mail address) as
Purchaser or Xxxxxxx shall have furnished to the Company in writing or by
electronic mail, or (b) if to the Company, to SuperGen, Inc., Xxx Xxxxxxx Xxxx,
Xxxxx 000, Xxx Xxxxx, XX 00000, Attn: Xx. Xxxxxx Xxxxxxxxx, with a copy of any
said notice to be sent to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000-0000, Attn: Page Xxxxxxxxx, Esq., or to such other
address (including electronic mail address) as the Company shall have furnished
to Purchaser and Xxxxxxx in writing or by electronic mail. Except as provided
in Section 5.10(b)(ii), notices that are mailed by (i) first class mail shall be
deemed received three (3) business days after deposit in the mail and
(ii) Express Mail or overnight courier shall be deemed received one (1) business
day after deposit in the mail or delivery to such courier. In the event that
the notice is sent by facsimile, notice shall be deemed to have been received
when sent and confirmed as to receipt.
8.8 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
8.9 EXPENSES. The Company shall reimburse Purchaser for all
(i) out-of-pocket expenses associated with this Agreement, the other Transaction
Documents and the transactions described herein and therein which are incurred
through or otherwise payable at
48
the Note Closing, including but not limited to travel and expenses associated
with Purchaser's due diligence, plus customary and reasonable legal fees and
expenses of Purchaser's counsel, and (ii) all filing fees and other
out-of-pocket expenses (whether incurred or payable before or after the Note
Closing), including but not limited to customary and reasonable legal fees and
expenses of counsel, in connection with any HRS filing(s) relating to the
transactions contemplated by this Agreement and the other Transaction Documents,
including any HSR filings required for Purchaser's exercise of the Option or
Warrants. The foregoing reimbursement shall be in addition to, and not in
limitation of the payment of expenses provided by Sections 6.7 and 6.8 and any
other express obligation to pay or reimburse expenses provided by any other
provision of this Agreement or any of the other Transaction Documents.
8.10 INTERPRETATION. The table of contents and the titles of the
Articles and Sections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement. When reference is
made in this Agreement to an "article" or "Article" or to a "section" or
"Section", such reference shall be to an Article or a Section of this Agreement
unless otherwise specified. Whenever the words "include", "includes", or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." The words "herein," "hereof" and words of
similar import refer to this Agreement as a whole, and not to any single
provision thereof. In determining whether a given percentage of shares of
Common Stock is owned by Purchaser either on a "primary or fully diluted basis,"
Purchaser's ownership percentage on a primary basis shall be calculated on the
basis of the number of shares of Common Stock then owned by Purchaser, measured
as a percentage of the shares of Common Stock of the Company then outstanding,
and Purchaser's ownership percentage on a fully diluted basis shall be
calculated on the basis of the shares of Common Stock then owned by Purchaser,
together with the shares of Common Stock issuable upon conversion of the
then-unconverted portion of the Convertible Secured Note and the shares of
Common Stock then purchasable by Purchaser pursuant to the then-unexercised
portion of the Option and the Warrants, measured as a percentage of the shares
of Common Stock of the Company then outstanding together with the shares of
Common Stock then issuable under then-outstanding notes, options, warrants and
other securities of the Company which are convertible then or in the future into
Common Stock.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.12 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Company or to Purchaser shall impair any such
right, power or remedy of the Company or Purchaser, nor shall it be construed to
be a waiver of any breach or default under this Agreement and the other
Transaction Documents, or an acquiescence therein or in any similar breach or
default thereafter occurring; nor shall any delay or omission to exercise any
right, power or remedy or any waiver of any single breach or default be deemed a
waiver of any other right, power or remedy or breach or default theretofore or
thereafter occurring. All remedies, either under this Agreement and the other
Transaction Documents, or by law otherwise afforded to the Company or Purchaser,
shall be cumulative and not alternative.
49
IN WITNESS WHEREOF, Purchaser, the Company and, solely with respect to
Sections 5.3 and 5.5 of the Agreement, Xxxxxxx have caused this Agreement to be
duly executed as of the date and year first above written.
SUPERGEN, INC.
By: /s/ Xx. Xxxxxx Xxxxxxxxx
------------------------
Name: Xx. Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer
President and Chief
Executive Officer
TAKO VENTURES, LLC
By CEPHALOPOD CORPORATION,
Member
By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------
Xxxxxxxx X. Xxxxxxx
Chief Executive Officer
/s/ Xxxxxxxx X. Xxxxxxx
------------------------
XXXXXXXX X. XXXXXXX
50
