EXHIBIT 10.22
FIRST EXCHANGE OPTION AGREEMENT
FIRST EXCHANGE OPTION AGREEMENT (THE "AGREEMENT")
dated as of December 3l, 1997
by and between American Pharmed Labs, Inc., a Delaware corporation ("APL"),
and
tbg Technologie-Beteiligungs-Gesellschaft mbh der Deutschen Ausgleichsbank,
a German limited liability company ("tbg"),
WHEREAS; on October 31, 1997 APL sold to certain investors certain shares of
Series A Convertible Preferred Stock, $.01 par value per share ("Series A
Preferred Stock"), and warrants to purchase additional shares of Series A
Preferred Stock pursuant to a Series A Convertible Preferred Stock Purchase
Agreement dated as of such date (the "Stock Purchase Agreement"), and
WHEREAS; tbg desires to participate in the financing contemplated by the Stock
Purchase Agreement but cannot currently do so due to restrictions and
constraints currently applicable to it, and
WHEREAS; instead of participating in such Series A Preferred Stock financing tbg
acquired an equity interest in APL's subsidiary, Pharmed Labs GmbH, a German
limited liability company ("Pharmed GmbH"), in the amount of 8.59 % of the
nominal share capital of Pharmed GmbH, and
WHEREAS; APL is the holder of the remaining share capital of Pharmed GmbH, and
WHEREAS; tbg and APL desire to provide for the exchange of all of tbg's equity
interest in Pharmed GmbH for shares of Series A Preferred Stock in certain
circumstances;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement; the Parties agree as follows:
1. Exchange of Securities
(a) APL shall have the right, (i) at any time after November 1, 1998, or (ii)
in connection with the occurrence of a Triggering Event (as hereafter
defined), to require tbg to exchange all of tbg's equity interest in
Pharmed GmbH, (the "GmbH Share") for 829,901 shares of Series A Preferred
Stock (the "Series A Share"). The term "Triggering Event" shall mean (i) a
sale of all or substantially all of the assets of APL; (ii) a sale of more
than 50% in voting power of the
outstanding equity securities of APL; (iii) a merger or consolidation
involving APL in which the stockholders of APL immediately before such
merger or consolidation do not own, immediately after such merger or
consolidation, capital stock or other equity interests of the surviving
corporation or entity representing more than 50 % of the voting power of
the capital stock or other equity interests of such surviving corporation
or entity outstanding at such time; (iv) the automatic conversion of the
Series A Preferred Stock pursuant to Article FOURTH, Section 2 of APL's
Certificate of Incorporation; (v) a public offering of APL's Common Stock,
$.01 par value per share (the "Common Stock") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in which the public offering price per share is not
less than $8.08 and the gross proceeds to APL arte not less than
$15,000,000.00; or (vi) a transfer by tbg of the GmbH Share, with or
without consideration.
(b) tbg shall have the right, at any time after the date hereof and on or
before the occurrence of a Triggering Event, to require APL to issue the
Series A Shares, or the shares of APL Common Stock issuable upon
conversion of the Series A Shares pursuant to Article FOURTH, Section 2 of
APL's Certificate of Incorporation if the outstanding Series A Preferred
Stock has previously been converted into Common Stock, in exchange for the
GmbH Share.
(c) The rights of APL and tbg under this Section 1 are hereafter referred to
as the "Exchange Option."
2. Adjustments in Securities
In the event that after the date hereof there shall be any stock dividend,
stock split, reverse stock split, combination of shares, reclassification
or other similar event with respect to the Series A Preferred Stock, the
number of shares of Series A Preferred Stock issuable upon exercise of the
Exchange Option in exchange for the GmbH Share shall be proportionately
adjusted, and the term "Series A Shares" shall be deemed to mean such
number as so adjusted. In addition, if the Exchange Option is being
exercised in connection with a Triggering Event; then at the option of APL
the cash, securities or other property that would be issuable upon
exchange or conversion of the Series A Shares in connection with the
closing of such Triggering Event may be issued to tbg directly in exchange
for the GmbH Share instead of the Series A Shares.
3. Exercise of Exchange Option; Closing
(a) The party desiring to exercise the Exchange Option shall give the other
party written notice of its intention to exercise the Exchange Option (the
"Exercise Notice").
(b) A closing (the "Exchange Option Closing") with respect to the exercise of
the Exchange Option shall be held on such date as may be agreed upon by
APL and
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tbg but in any event (i) in the case of any exercise of the Exchange
Option in connection with the occurrence of a Triggering Event, not later
than the closing of the Triggering Event, unless APL otherwise agrees in
writing, and (ii) in all other cases, not later than twenty (20) business
days after the date of the Exchange Notice, unless both parties otherwise
agree in writing. At the Exchange Option Closing:
(i) if necessary, tbg shall make all declarations, conclude all
agreements, render all resolutions and take all further
actions necessary to transfer the GmbH Share to APL, free and
clear of all liens, claims and encumbrances;
(ii) tbg shall deliver to APL a certificate dated the Exchange
Option Closing date and confirming, as of the Exchange Option
Closing date, its representations and warranties as set forth
in Section 5;
(iii) APL shall deliver to tbg a stock certificate representing the
Series A Shares; and
(iv) APL shall give notice to Pharmed GmbH of the transfer of the
GmbH Share from tbg to APL having become effective upon
satisfaction of the condition provided for under the agreement
attached hereto as Exhibit 4(a) in accordance with Section 16
German Code on Limited Liability Companies ("GmbHGesetz").
4. Restrictions on Transfer
(a) As of the date hereof tbg and APL will enter into a separate agreement in
the form attached hereto as Exhibit 4(a) providing for the assignment of
the GmbH Share by tbg to APL such assignment becoming effective with the
Exchange Option Closing and being conditional upon the delivery of the
stock certificate pursuant to Section 3 (b)(iii) hereof.
(b) For so long as the Exchange Option remains in effect, tbg shall not
transfer the GmbH Share, with or without consideration, without the prior
written consent of APL.
(c) If tbg desires to transfer the GmbH Share, with or without consideration,
while the Exchange Option remains in effect, tbg shall immediately give
written notice to APL, specifying;
(i) the address and registered office, if any, of the prospective
transferee;
(ii) the purchase price, if any, or other consideration to be paid
or given for the intended transfer;
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(iii) the date for the closing of such intended transfer;
(iv) the representations and warranties, if any, made or to be made
by tbg in connection with the intended transfer.
(d) tbg agrees that for a period of up to one hundred eighty (180) days from
the effective date of any registration of securities of APL under the
Securities Act (upon request of APL or the underwriters managing any
underwritten offering of APL's securities), tbg will not sell, make any
short sale or loan or grant any option for the purchase of, or otherwise
dispose of any GmbH Share, Series A Shares, shares of Common Stock or
other securities of APL or Pharmed GmbH held by tbg without the prior
written consent of APL or such underwriters, as the case may be.
(e) Any purported transfer of the GmbH Share in violation of this Section 4
shall be null and void and Pharmed GmbH shall not be required to record on
its books any such purported transfer or to recognize the purported
transferee as the owner of the GmbH Share.
5. Representations and Warranties of tbg
tbg represents and warrants to APL as follows:
(a) (i) The individual executing this Agreement on behalf of tbg has been
duly authorized to execute and deliver this Agreement;
(ii) the signature of such individual is binding upon tbg;
(iii) tbg is duly organized, validly existing and in good standing in
its jurisdiction of incorporation or organization and has all
requisite power and authority to execute and deliver this
Agreement;
(iv) and the execution and delivery of this Agreement will not
result in the violation of, constitute a breach or default
under, or conflict with, any term or provision of the Charter,
Bylaws, or other governing document of tbg or any material
agreement judgment, decree, order, statute or regulation by
which it is bound or applicable to it.
(b) tbg is acquiring the GmbH Share, and upon any exercise of the Exchange
Option will be acquiring the Series A Shares, for its own account, for
investment and not for, with a view to, or in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act;
(c) tbg understand that the GmbH Share has not been, and the Series A Shares
and the shares of Common Stock issuable upon conversion of the Series A
Shares will not, be registered under the Securities Act or any state
securities law, by reason of
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their issuance in a transaction exempt from the registration requirements
of the Securities Act and such laws, and that they must be held
indefinitely unless they are subsequently registered under the Securities
Act and such laws or subsequent disposition thereof is exempt from
registration. tbg further understands that such exemption depends upon,
among other things, the bona fide nature of tbg's investment intent
expressed herein. tbg acknowledges that the certificates for the Series A
Shares and the shares of the Common Stock issuable upon conversion thereof
shall bear a legend to such effect, and that appropriate stop transfer
instructions may be issued.
(d) tbg has not been formed for the specific purpose of acquiring the GmbH
Share or the Series A Shares. tbg understands the term "accredited
investor" as used in Regulation D promulgated under the Securities Act and
represents and warrants that it is an "accredited investor."
(e) tbg has sufficient knowledge and experience in business and financial
matters and with respect to investment in securities of privately held
companies so as to enable it to analyze and evaluate the merits and risks
of the investment contemplated hereby and is capable of protecting its
interest in connection with this transaction. tbg is able to bear the
economic risk of such investment, including a complete loss of the
investment.
(f) tbg acknowledges that it and its representatives have had the opportunity
to ask questions and receive answers from officers and representatives of
APL and Pharmed GmbH concerning its investment in the GmbH Share and the
Series A Shares, and to obtain any additional information which it desires
regarding APL and Pharmed GmbH.
(g) tbg understands that the exemption from registration afforded by Rule 144
(the provisions of which are known to tbg) promulgated by the Securities
and Exchange Commission under the Securities Act depends upon the
satisfaction of various conditions, that such exemption is not currently
available and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
6. Representations and Warranties of APL
APL represents and warrants to tbg as follows:
(a) (i) The individual executing this Agreement on behalf of APL has
been duly authorized to execute and deliver this Agreement;
(ii) the signature of such individual is binding upon APL;
(iii) APL is duly organized, validly existing and in good standings
in its jurisdiction of incorporation or organization and has
all requisite power and authority to execute and deliver this
Agreement;
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(iv) and the execution and delivery of this Agreement will not
result in the violation of, constitute a breach or default
under, or conflict with, any term or provision of the Charter,
Bylaws, or other governing document of APL or any material
agreement, judgment decree, order, statute or regulation by
which it is bound or applicable to it.
(b) The entire authorized capital stock of APL consists of:
(i) 20,000,000.00 shares of Common Stock; and
(ii) 5,049,507 shares of Series A Convertible Preferred Stock, par
value $.01 per start ( the "Series A Preferred Stock").
(c) The number of shares of Common Stock and Series A Preferred Stock that are
issued and outstanding, held as treasury shares or issuable upon the
exercise of outstanding options, warrants, convertible securities or
rights to purchase such capital stock as of the date hereof is as set
forth in Exhibit 6 (c).
7. Amendment of Articles of Association of Pharmed Labs GmbH
(a) In the event that the holders of shares of Series A Preferred Stock shall
be entitled to be paid first out of the assets of APL available for
distribution for holders of APL's capital stock of all classes the amount
per share of the Series A Preferred Stock had all shares of Preferred
Stock been converted to Common Stock immediately prior to an event of
liquidation, dissolution or winding up, plus all dividends declared but
unpaid on each share of the Series A Preferred Stock to and including the
date full payment shall be tendered to the holders of the Series A
Preferred Stock with respect to such liquidation, dissolution or winding
up, the amount of DEM 63.829,79 payable to tbg per DEM 100.00 of the
nominal amount of the GmbH Share pursuant to Section 5 of the Articles of
Association of Pharmed GmbH as amended shall be adjusted; the respective
provisions of Section 2 of APL's certificate of incorporation shall apply
accordingly.
(b) In the event of a merger or consolidation of Pharmed GmbH into or with
another corporation (except one in which the holders of capital stock of
Pharmed Labs GmbH immediately prior to such merger or consolidation
continue to hold at least 80 % in voting power of the capital stock of the
surviving corporation) or the sale of all or substantially all of the
assets of Pharmed GmbH the parties hereto agree that the proceeds from
such transaction shall be distributed among them in accordance with
Section 6 of the articles of association of Pharmed GmbH. Whenever the
distributions shall be payable in property other than cash, the value of
such distributions shall be the fair market value of such property which
shall be in the case of shares registered at a stock exchange the stock
price quoted on the effective date of the transfer of the consideration
paid or in the case of other property as determined by the auditor of
Pharmed GmbH.
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8. Expenses
Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby.
9. Survival of Agreements
All covenants, agreements, representations anti warranties made herein or
in any agreement, certificate or instruments delivered to APL or tbg, as
the case may be, pursuant to or in connection with this Agreement shall
survive the execution and delivery of this Agreement.
10. Parties in Interest
All representations, warranties, covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the receptive successors and assigns of the
parties hereto whether so expressed or not.
11. Notices
All notices, requests, consents and other communications hereunder shall
be deemed to be sufficient if contained in a written instrument delivered
in person or duly sent by facsimile or DHL, Federal Express, or any other
recognized express international courier service; addressed to such party
at the address set forth below or such other address as may hereafter be
designated in writing by the addressee to the addressor listing all
parties:
(a) if to APL:
American Pharmed Labs, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, XX 00000
XXX
Attention: President
Fax: (201) 575 - 9244
(b) if to tbg:
tbg-Techno1ogie-Beteiligungsgesellschaft mbH
der Deutschen Ausgleichsbank
Xxxxxx-Xxxxxx-Xxxxx X-0
00000 Xxxx Xxx Xxxxxxxxx
Xxxxxxx
Fax: 0000-000-0000
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12. Governing Law
This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware, USA,
without regard to its principles of conflicts of laws.
13. Entire Agreement
This Agreement constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
negotiations, commitments, agreements and understandings among them with
respect thereto.
14. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
15. Amendments and Waivers
This Agreement may be amended or modified, and provisions hereof may be
waived, only with the written consent of APL and tbg.
16. Titles and Subtitles
The title and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any provision
of this Agreement.
17. No Waiver, Cumulative Remedies
No failure or delay on the part of any party to this Agreement in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise of any other remedy
hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law, agreement or otherwise.
18. Specific Enforcement
Each party expressly agrees that a violation of this Agreement by such
party could not be adequately compensated by money damages alone and the
parties agree that they will not claim an adequate remedy at law. Upon a
breach or threatened breach of the terms, covenants and/or conditions of
this Agreement by any party, the other party shall, in addition to all
other remedies, be entitled to a temporary or permanent injunction, and/or
decree for specific performance, in accordance with the provisions hereof.
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In witness whereof, APL and tbg have executed this Agreement as of the day and
year first above written,
American Pharmed Labs, Inc.
by: /s/ Xxxxxx Xxxxxxx
-------------------------------------
tbg Technologie-Beteiligungs-Gesellschaft mbH
der Deutschen Ausgleichsbank
by: ______________________________________
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