EXECUTION COPY
July 6, 1998
Oncormed, Inc.
Attn: Xx. Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Re: CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT DATED FEBRUARY 27, 1998
Dear Xx. Xxxxxx:
On February 27, 1998, Oncormed, Inc., a Delaware corporation (the
"Company"), and each of Southbrook International Investments, Ltd., Xxxxxxxx
Investments, Ltd., Xxxxx Xxxxxxx Strategic Growth Fund, L.P., Xxxxx Xxxxxxx
Strategic Growth Fund, Ltd. and Incyte Pharmaceuticals, Inc. (collectively, the
"Investors") entered into that certain Convertible Preferred Stock Purchase
Agreement (as amended on March 17, 1998, the "Agreement"). In connection with
the transactions contemplated by the Agreement, among other things, (i) the
Company issued to the Investors an aggregate of 333 shares of the Company's 6%
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Shares"); (ii) the Company and the Investors entered into that certain
registration rights agreement dated February 27, 1998 (the "Registration Rights
Agreement"); and (iii) the Company filed with the Secretary of State of the
State of Delaware that certain Certificate of Designation, Preferences and
Rights of 6% Series A Convertible Preferred Stock of Oncormed, Inc. (the
"Certificate of Designation"). Unless defined herein, all capitalized terms
used herein shall have the definition ascribed to such terms in the Agreement.
As you may know, the Company has been in discussions with Gene Logic Inc.,
a Delaware corporation ("Gene Logic"), related to the proposed acquisition of
the Company by Gene Logic in accordance with the terms and conditions of an
Agreement and Plan of Merger and Reorganization (the "Merger Agreement") to be
entered into between the Company, Gene Logic and a wholly-owned subsidiary of
Gene Logic ("Merger Sub"). Under the Merger Agreement, the Company would merge
with and into Merger Sub (together with any other structure by which the
businesses of the Company and Gene Logic may be combined, the "Merger") with
Merger Sub continuing as the surviving corporation. Each of the Investors
understands and acknowledges that, until such time as the Company announces the
Merger, any and all discussions and other information relating to the proposed
Merger is confidential and agrees not to disclose the existence or substance of
any such discussions or information to any third party. In addition, each
Investor acknowledges and agrees that this letter agreement is entered into, in
part, for the benefit of Gene Logic and Merger Sub and that each of Gene Logic
and Merger Sub are intended to be, and shall be third party beneficiaries to
this letter agreement and are entitled to all rights and remedies afforded to
them as third party beneficiaries.
In consideration of the mutual covenants contained herein, and for good and
valuable consideration the receipt and sufficiency is hereby acknowledged, each
of the Investors (severally and not jointly) hereby agrees with the Company as
follows:
1.
1. WAIVER OF PURCHASE OF SERIES B SHARES. Pursuant to Section 1.3(b) of
the Agreement, subject to certain terms and conditions set forth in the
Agreement, the Investors have the right to purchase from the Company an
aggregate of 333 Series B Shares. In accordance with Section 5.4 of the
Agreement, each of the Investors hereby, subject to Section 7(e) below,
irrevocably waives its rights to purchase any Series B Shares from the
Company pursuant to Section 1.3 of the Agreement.
2. WAIVER OF REDEMPTION RIGHTS. Pursuant to Section 5(c)(vii) of the
Certificate of Designation, each of the Investors has the right, in the
event of a Change of Control Transaction (as defined in the Certificate of
Designation), to cause the Company to redeem, from funds legally available
therefor at the time of such redemption, such Investor's respective Series
A Shares in accordance with the terms of the Certificate of Designation
(the "Redemption Rights"). Each of the Investors hereby, subject to
Section 7(e) below, irrevocably waives its right to exercise Redemption
Rights with respect to the Merger.
3. DELIVERY OF HOLDER CONVERSION NOTICES. In furtherance of each
Investor's agreement and covenant contained in Section 2 hereof, and in
accordance with the Section 5(a)(i) of the Certificate of Designation, each
of the Investors covenants and agrees to convert its respective Series A
Shares (including any accrued but unpaid dividends thereon) into shares of
Common Stock as set forth herein. Prior to 5:00 P.M. (New York time) on
the Announcement Date (as defined in the Certificate of Designation) (the
"Delivery Time"), each of the Investors shall deliver to the Company
executed Holder Conversion Notices (as defined in the Certificate of
Designation) identical in both form and substance to the form attached
hereto as EXHIBIT A. For the purpose of the Holder Conversion Notices,
each of the Investors hereby agrees that the Conversion Price (as defined
in Section 5(c)(1) of the Certificate of Designation) shall be the
Conversion Price in effect on the Announcement Date; provided, however,
that if the Announcement Date is after July 9, 1998, the Investor shall
have the option to set the Conversion Price at either the Conversion Price
in effect on July 9, 1998 or the Conversion Price in effect on the
Announcement. In addition, each of the Investors agrees and covenants that
the Holder Conversion Dates (as defined in the Certificate of Designation)
with respect to the conversion of all of the Series A Shares shall not be
later than immediately prior to the Effective Time of the Merger.
Consequently, effective as immediately prior to the Effective Time of the
Merger, all of the Series A Shares then outstanding shall be automatically
converted into shares of Common Stock in accordance with the Certificate of
Designation using the Conversion Price set forth on the Holder Conversion
Notices, and the Company may provide instructions to its transfer agent to
such effect.
4. ESCROW OF HOLDER CONVERSION NOTICES. In order to ensure compliance
with Section 3 hereof, each of the Investors covenants and agrees that, by
the end of the day on which this letter agreement is executed, such
Investor will deliver its Holder Conversion Notices with respect to all of
its Series A Shares, along with irrevocable instructions to deliver the
same to the Company prior to the Delivery Time, to Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx & Xxxxxx LLP to be held in escrow until the Delivery Time.
Copies of such Holder Conversion Notices, and the irrevocable instructions
relating
2.
thereto, will be provided by the end of the day on which this letter
agreement is executed to Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel to the
Company.
5. VOTING OF COMPANY SECURITIES. (a) Each Investor hereby agrees, with
respect to any shares of the Company's Common Stock or Preferred Stock
beneficially owned by such Investor on the record date relating to, or at
the time of, any Company stockholder meeting called to approve the Merger,
to vote all such shares of Common Stock or Preferred Stock (i) in favor of
the Merger, (ii) in favor of any exchange of shares between the acquiring
entity in the Merger and the Company, (iii) in favor of the execution,
delivery and performance by the Company of any agreements relating to the
Merger (the "Transaction Agreements"), (iv) in favor of each of the other
actions contemplated by the Transaction Agreements, (v) in favor of any
action reasonably required in furtherance thereof, (vi) against any action
or agreement that would result in a breach of any representation, warranty,
covenant or obligation of the Company in any agreement relating to the
Merger, or (vii) against the following actions (other than the Merger and
the transactions contemplated by the Merger): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company, (B) any sale, lease or transfer of
substantially all of the assets of the Company, (C) any reorganization,
recapitalization, dissolution or liquidation of the Company, (D) any change
in a majority of the board of directors of the Company, (E) any amendment
to the Company's Certificate of Incorporation or Bylaws, (F) any material
change in the capitalization of the Company or the Company's corporate
structure, or (G) any other action which is intended to, or would, impede,
interfere with, delay, postpone, discourage or adversely affect the Merger
or any of the other transactions contemplated by the agreement governing
the Merger or this letter agreement.
(b) In furtherance of each Investor's agreement and covenant
contained in Section 5(a) hereof, each of the Investors has executed and
delivered to the Company an irrevocable proxy in the form attached hereto
as EXHIBIT B.
6. NO DISPOSITION OF COMPANY SECURITIES. Each Investor hereby agrees and
covenants that, prior to the Announcement Date, such Investor will not,
directly or indirectly, (i) offer, sell, offer to sell, sell against the
box, short sell, contract to sell, pledge, grant any option to purchase or
otherwise dispose of or transfer (or announce any offer, sale, offer of
sale, short sale, contract of sale or grant of any option to purchase or
other disposition or transfer of) any shares of the Company's Common Stock
or Preferred Stock to any person, (ii) reduce such Investor's beneficial
ownership of, interest in or risk relating to, any shares of the Company's
Common Stock or Preferred Stock except as occurs due to fluctuations in the
market price of the Common Stock, or (iii) commit or agree to do any of the
foregoing. Furthermore, each of the Investors hereby agrees and covenants
that such Investor shall not sell or otherwise transfer any Series A
Shares, including transfers to any affiliate or partner of the Investor,
unless the transferee of such shares of Preferred Stock agrees in writing
to be bound by the terms of this letter agreement. Except pursuant to
restrictions contained in this letter agreement, including, without
limitation, the restrictions in the immediately prior sentence, or in the
Certificate of Designation, after the Delivery Time there shall be no
contractual restrictions on the ability of the Investors to buy, sell or
execute other trades in the securities of the Company.
3.
7. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This letter agreement together with the
Agreement, the Certificate of Designation, the Registration Rights
Agreement and the other documents and transactions contemplated by the
Agreement contains the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such
matters. All other terms set forth in the Agreement, the Certificate
of Designation, the Registration Rights Agreement and the other
documents and transactions contemplated by the Agreement unless
amended or waived hereby shall remain in full force and effect.
(b) GOVERNING LAW. This letter agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of New York without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the federal courts sitting in the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court or that such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under
this letter agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.
(c) REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
parties hereto will be entitled to specific performance of the
obligations of the other parties contained herein. Each of the
Investors and the Company agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of
its obligations described in the foregoing sentence and hereby agrees
to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
(d) SUCCESSORS AND ASSIGNS. This letter agreement shall be binding
upon and inure to the benefit of the parties and their successors and
permitted assigns. No Investor may assign this letter agreement or
any rights or obligations hereunder without the prior written consent
of the Company.
(e) TERMINATION. This letter agreement, including all of the waivers
and the Holder Conversion Notices to be provided in connection
herewith, shall terminate and be of no further effect if the
transactions contemplated by the Merger are not consummated or
otherwise terminated on or prior to December 31, 1998. Nothing set
forth in this letter agreement shall be construed to limit the
priority status of the Series A Shares in the event of the termination
of this letter agreement.
4.
(f) SIDE AGREEMENTS. The Company hereby acknowledges that it has not
entered into any side letter or similar agreement with any Investor
with respect to its investment in the Series A Shares or the matters
contained in this letter agreement.
(g) SUSPENSION OF FORM S-3. The Company agrees that, effective on
the Announcement Date, it will instruct its transfer agent to lift any
suspension of trading shares of the Company's Common Stock under the
Form S-3 Registration Statement relating to the Common Stock
underlying the Series A Shares.
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5.
Any notices relating to the issues described herein should be addressed to
each of the Investors at the addresses set forth in the Agreement (with a copy
of such notices being provided to Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
LLP). This letter agreement may be signed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other parties.
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.
BY: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
NAME: Xxxxxxx X. Xxxxxxxxx
TITLE: Attorney in Fact
XXXXXXXX INVESTMENTS, L.P.
BY: /s/ Xxxxx X. Xxxxx
--------------------------------
NAME: Xxxxx X. Xxxxx
TITLE: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
BY: /s/ Xxxxx X. Xxxxx
--------------------------------
NAME: Xxxxx X. Xxxxx
TITLE: Authorized Signatory
XXXXX XXXXXXX STRATEGIC GROWTH FUND,
L.P.
BY: /s/ Xxxx Xxxxxx
--------------------------------
NAME: Xxxx Xxxxxx
TITLE:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6.
XXXXX XXXXXXX STRATEGIC GROWTH FUND,
LTD.
BY: /s/ Xxxx Xxxxxx
--------------------------------
NAME: Xxxx Xxxxxx
TITLE:
INCYTE PHARMACEUTICALS, INC.
BY: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
NAME: Xxxxxx X. Xxxxxxx
TITLE: Executive Vice President and CFO
AGREED TO AND ACCEPTED ON JULY 6, 1998:
ONCORMED, INC.
BY: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
NAME: Xxxxxxx X. Xxxxxx
TITLE: Chairman and Chief Executive Officer
7.
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
Dated: Announcement Date
To be Executed by the Registered Holder in order to Convert Shares of Series A
Preferred:
Pursuant to the terms of a letter agreement, dated July 2, 1998, by and between
the Company and the undersigned, and subject to termination in accordance with
Section 7(e) thereof, the undersigned hereby elects to convert all of its shares
of the Company's 6% Series A Convertible Preferred Stock (the "Series A
Preferred") into shares of Common Stock, $.01 par value (the "Common Stock"), of
Oncormed, Inc. (the "Company") according to the conditions hereof, as of the
dates set forth below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
Subject to the terms of the Certificate of
Designation, as instructed in writing from
time to time by the undersigned to the
Company; provided, however, that to the
extent that any shares of Series A Preferred
held by the undersigned are outstanding as of
a date which is immediately prior to the
Effective Time of the Merger, the Company is
hereby authorized to instruct its transfer
agent to automatically convert all such
remaining shares of Series A Preferred into
shares of Common Stock in accordance with the
Certificate of Designation using the
Applicable Conversion Price set forth below.
---------------------------------------------
Dates to Effect Conversion
All shares of Series A Preferred held by the
undersigned as of July 1, 1998.
---------------------------------------------
Number of shares of Series A Preferred to be
Converted
To be determined in accordance with the
Certificate of Designation utilizing the
Applicable Conversion Price set forth below.
---------------------------------------------
Aggregate Number of Shares of Common Stock to
be Issued
For purposes of determining the Conversion
Price (as defined in Section 5(c)(1) of the
Certificate of Designation), the "date of the
applicable Conversion Notice" is the
Announcement Date; provided, however, that if
the Announcement Date is after July 9, 1998,
the Investor shall have the option to set the
Conversion Price at either the Conversion
Price in effect on July 9, 1998 or the
Conversion Price in effect on the
Announcement. On the Announcement Date,
contemporaneous with the delivery of this
Holder Conversion Notice to the Company, the
undersigned agrees to deliver a schedule
setting forth the determination of the
Conversion Price with respect to all of the
shares of Series A Preferred (and any accrued
but unpaid dividends thereon) and the
aggregate number of shares of Common Stock to
be issued upon conversion of such shares of
Series A Preferred (including accrued but
unpaid dividends thereon).
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
By:
Name (include title or authorization):
Address (include name of entity):
8.
EXHIBIT B
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned stockholder of Oncormed, Inc., a Delaware corporation
("Company"), hereby irrevocably (to the fullest extent permitted by law)
appoints and constitutes Xxxxxxx X. Xxxxxxx, M.D., Ph.D. and Gene Logic Inc., a
Delaware corporation ("Gene Logic"), and each of them, the attorneys and proxies
of the undersigned with respect to voting (i) the shares of the Company's common
stock, $.01 par value per share (the "Common Stock"), and the shares of the
Company's 6% Series A Convertible Preferred Stock, $.01 par value per share (the
"Preferred Stock" and together with the Common Stock, the "Capital Stock"),
owned by the undersigned as of the date of this proxy, which shares are
specified on the final page of this proxy and (ii) any and all other shares of
the Capital Stock of Company which the undersigned may acquire after the date
hereof. The shares of the Capital Stock of Company referred to in clauses
(i) and (ii) of the immediately preceding sentence are collectively referred to
as the "Shares." Upon the execution hereof, all prior proxies given by the
undersigned with respect to any of the Shares are hereby revoked, and no
subsequent proxies will be given with respect to any of the Shares.
Subject to termination in accordance with the Letter Agreement, this proxy
is irrevocable, is coupled with an interest and is granted in connection with
the letter agreement, dated as of the date hereof, between the Company and the
beneficial owner of the Shares (the "Letter Agreement"), and is granted in
consideration of the execution of the Letter Agreement and the transactions
contemplated therein. Capitalized terms used herein shall have the definitions
ascribed to such terms in the Letter Agreement.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any time until the earlier to occur of the
termination of the Merger Agreement or the closing of the transactions
contemplated by the Merger Agreement at any meeting of the stockholders of the
Company, however called, or in any written action by consent of stockholders of
the Company:
1. in favor of the Merger, in favor of any exchange of shares between the
acquiring entity in the Merger and the Company, in favor of the execution,
delivery and performance by the Company of any agreements relating to the Merger
(the "Transaction Documents"), in favor of each of the other actions
contemplated by the Transaction Documents, and in favor of any action reasonably
required in furtherance thereof;
2. against any action or agreement that would result in a breach of any
representation, warranty, covenant or obligation of the Company in any agreement
relating to the Merger; and
3. against the following actions (other than the Merger and the
transactions contemplated by the Merger): (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company; (B) any sale, lease or transfer of substantially all of
the assets of the Company; (C) any reorganization, recapitalization, dissolution
or liquidation of the Company; (D) any change in a majority of the
9.
board of directors of the Company; (E) any amendment to the Company's
Certificate of Incorporation or Bylaws; (F) any material change in the
capitalization of the Company or the Company's corporate structure; or (G) any
other action which is intended to, or would, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement or the Letter Agreement.
The undersigned stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
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10.
This proxy shall terminate upon the earlier of (i) the termination of the
Letter Agreement, (ii) the termination of the Merger Agreement or (iii) the
closing of the transactions contemplated by the Merger Agreement.
Dated: July 6, 1998
STOCKHOLDER
----------------------------------------
Print Name
------------------------------
If executed by record holder on behalf
of the beneficial owner, print name of
beneficial owner:
----------------------------------------
Number of issued and outstanding shares of COMPANY COMMON STOCK Owned OF RECORD
as of the date hereof:
--------------------
Number of issued and outstanding shares of COMPANY PREFERRED STOCK Owned OF
RECORD as of the date hereof:
--------------------
Number of issued and outstanding shares of COMPANY COMMON STOCK Owned
BENEFICIALLY (but not of record) as of the date hereof:
--------------------
Number of issued and outstanding shares of COMPANY PREFERRED STOCK Owned
BENEFICIALLY (but not of record) as of the date hereof:
--------------------
