AGREEMENT CONCERNING CONVERSION OF
CONVERTIBLE NOTE AND CONNECTICUT PRESENCE
THIS AGREEMENT (the "AGREEMENT") is made as of August 24, 1998, by and
between GENAISSANCE PHARMACEUTICALS, INC. (the "COMPANY"), and CONNECTICUT
INNOVATIONS, INCORPORATED (the "INVESTOR").
WITNESSETH
WHEREAS, the Company issued to the Investor a $473,778.71 principal
amount 10% Senior Convertible Note, dated September 10, 1996 (the "NOTE"), the
outstanding principal amount of and accrued and unpaid interest on the Note on
the date hereof being $570,830.22; and
WHEREAS, the Company and the Investor have agreed to convert the Note
into shares of $.001 par value common stock of the Company, at the rate of one
share for each $2.50 so converted, thereby converting the Note into an aggregate
228,332 shares of common stock (the "COMMON SHARES"); and
WHEREAS, as of the date hereof the Investor has purchased (the
"PURCHASE") 250,000 shares of the Series A Redeemable Convertible Preferred
Stock of the Company (the "PREFERRED SHARES" and collectively with the Common
Shares, the "SHARES") pursuant to a Stock Purchase Agreement among the Company,
the Investor and certain other investors dated as of August 24, 1998 (the
"PURCHASE AGREEMENT"); and
WHEREAS, the Investor holds 187,500 shares of the Series A Redeemable
Convertible Preferred Stock of the Company purchased under a previous Stock
Purchase Agreement (the "PRIOR SHARES"), and on the date hereof there is
$39,945.21 of accrued and unpaid dividends on the Prior Shares;
WHEREAS, the Investor and the Company wish to set forth certain other
agreements regarding the Shares and the Purchase;
NOW, THEREFORE, the parties agree as follows:
1. CONVERSION OF NOTE. The Company and the Investor hereby convert all
of the outstanding principal of and accrued and unpaid interest on the Note into
the Common Shares.
2. PAYMENT OF ACCRUED DIVIDENDS. The Company and the Investor hereby
agree to pay all accrued and unpaid dividends on the Prior Shares by the
issuance to the Investor by the Company on the date hereof of one share of
common stock of the Company for each $4.00 of unpaid dividends; thus, the number
of shares of common stock issued hereby is 9,986. The Investor hereby agrees
that all accrued and unpaid dividends on the Prior Shares to and through the
date hereof are hereby converted into such shares and are no longer due and
owing.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor as follows:
(a) The Company has all requisite corporate power to enter into this
Agreement, to issue the Common Shares and to carry out and perform its
obligations under the terms of this Agreement;
(b) All action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Company of this Agreement and for the consummation
of the transactions contemplated herein has been taken. This Agreement
is a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of
this Agreement and compliance herewith, and the issuance and sale of
the Common Shares will not, with or without notice or the passage of
time or both, result in any violation of and will not conflict with, or
result in a breach of any of the terms of, or constitute a default
under any provision of, any state or federal law to which the Company
is subject, the Company's Certificate of Incorporation or Bylaws, as
amended, or any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation or other restriction to which the
Company is a party or by which it or any of its property is bound, or
may be affected, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the
Company pursuant to any such term or give to any other person or entity
the right to accelerate the time for performance of any obligation of
the Company. Other than the Investor, no shareholder has any preemptive
rights or rights of first refusal by reason of or in connection with
the issuance of the Common Shares;
(c) The issuance, sale and delivery of the Common Shares by the Company
have been duly authorized by all requisite corporate action of the
Company, and when so issued, sold and delivered and paid for as
contemplated by this Agreement, each Common Share will be validly
issued and outstanding, fully paid and nonassessable and not subject to
preemptive or any other similar rights of the stockholders of the
Company or others; and
(d) No consent, approval or authorization of, or designation,
declaration or filing with, any governmental or regulatory authority on
the part of the Company, including qualification under applicable state
securities laws of the offer and sale of the Common Shares, is required
in connection with the valid authorization, execution and delivery of
this Agreement, the offer, sale or issuance of the Common Shares or the
consummation of any other transaction contemplated by this Agreement,
other than those consents, approvals, authorizations, declarations or
filings which have been obtained or made, as the case may be.
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4. CONNECTICUT PRESENCE. The Company shall not relocate (as that
term is defined in Section 32-5a of the Connecticut General Statutes) outside of
the State of Connecticut and shall maintain a "CONNECTICUT PRESENCE," unless the
Company's failure to maintain a Connecticut Presence is the sole result of a
Liquidating Acquisition. A Connecticut Presence shall mean (a) maintaining the
Company's principal place of business (including its executive offices and
officers) in the State of Connecticut, (b) basing a majority of its employees
and those of its subsidiaries in the State of Connecticut, (c) conducting a
majority of its operations and those of its subsidiaries, including
manufacturing activities conducted directly or through subcontractors and
vendors, in the State of Connecticut, and (d) maintaining the Company's and each
subsidiary's principal bank accounts in the State of Connecticut.
The assets, revenues and employees attributable to any entity acquired
by the Company shall not be considered when determining whether the Company has
maintained a Connecticut Presence under the standards set forth above as long as
such entity (1) was acquired in an arms-length transaction, (2) was not an
Affiliate (as such term is defined in the Purchase Agreement) of the Company and
was not controlled by an Affiliate of the Company prior to such acquisition and
(3) had been in existence and operating as a business for at least one year at
the time of the acquisition.
For the purposes of this Section, a "LIQUIDATING ACQUISITION" shall
mean any acquisition of the Company by any third party pursuant to which the
Purchaser receives in the Liquidation Acquisition, in exchange for all of the
Shares then held by it, a distribution on substantially the same terms as other
holders of the Company's Series A Preferred Stock.
5. REMEDY FOR FAILURE TO MAINTAIN CONNECTICUT PRESENCE.
(a) The Investor shall have the right to sell to the Company, and the
Company agrees to purchase from the Investor, all of the Shares, for
the Put Price (as defined below) and on the terms and conditions herein
set forth (the "PUT").
(b) The rights of the Investor to Put all of its Shares shall become
exercisable:
(i) if the Company ceases to maintain a Connecticut Presence;
or
(ii) if the Board of Directors, stockholders, or officers of
the Company authorize the Company to take any action which, if
taken, would cause the Company to cease to maintain a
Connecticut Presence.
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(c) The "PUT PRICE" as to each Share at any date shall mean:
(x) as to a Preferred Share, the greater of:
(i) the Current Market Price of such Share (as
defined below); and
(ii) an amount equal to $4.00 plus an amount
calculated to yield to the Investor an aggregate
twenty-five percent (25%) annually compounded rate of
return on such $4.00 for the period from the date
hereof through and including the date when the Put
Price is paid to the Investor, less the amount of any
dividends previously paid to the Investor with
respect to such Share.
(y) as to a Common Share, the greater of:
(i) the Current Market Price of such Share (as
defined below); and
(ii) an amount equal to $2.50 plus an amount
calculated to yield to the Investor an aggregate
twenty-five percent (25%) annually compounded rate of
return on such $2.50 for the period from the date
hereof through and including the date when the Put
Price is paid to the Investor, less the amount of any
dividends previously paid to the Investor with
respect to such Share.
(d) The "CURRENT MARKET PRICE" as to a Share shall mean on any date:
(i) the average of the daily closing prices for the thirty
(30) consecutive business days ending no more than fifteen
(15) business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification
that took effect during such 30 business day period) with the
closing price for each day being the last reported sales price
regular way or, in case no such reported sales took place on
such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national
securities exchange on which the Share is listed or admitted
to trading or as reported by Nasdaq (or if the Shares are not
at the time listed or admitted for trading on any such
exchange or if prices of the Shares are not reported by Nasdaq
then such price as shall be equal to the average of the last
reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar
reputable quotation and reporting service, if such quotation
is not reported by The National Quotation Bureau
Incorporated); or
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(ii) if the Shares are not traded in such manner that the
quotations referred to in clause (i) are available for the
period required hereunder, the value determined in good faith
by the Board of Directors of the Company or, if such
determination cannot be made or is reasonably objected to by
the Investor within twenty (20) days of its notification
thereof, by a nationally recognized independent investment
banking firm (which has no past or present relationship with
the Company or the Investor) selected in good faith by the
Board of Directors of the Company, or if such selection cannot
be made or is reasonably objected to by the Investor within
twenty (20) days of its notification thereof, by a nationally
recognized independent investment banking firm selected by the
American Arbitration Association in East Hartford, Connecticut
in accordance with its rules.
(e) The Investor may exercise its rights hereunder to sell all or any
part of the Shares by delivering to the Company a notice of Put (a
"NOTICE OF PUT") in the form attached hereto as EXHIBIT A.
(f) The closing (the "PUT CLOSING") of the purchase and sale of Shares
pursuant to this Section shall be held on the date (the "PUT DATE")
which is the sixtieth (60th) business day after delivery of the Notice
of Put. At the Put Closing, the Investor will deliver the Shares to the
Company, and the Company will deliver to the Investor the Put Price for
the Shares made the subject of the Notice of Put in cash, certified or
bank check, or by wire transfer. If the Investor shall have sold less
than all of its Preferred Shares or Common Shares, the Company shall
deliver to the Investor a new certificate (as requested by the
Investor), evidencing the Preferred Shares and/or Common Shares not
made the subject of the Notice of Put.
(g) All rights to exercise the Put shall terminate upon the occurrence
of a Qualified IPO, as such term is defined in the Company's
Certificate of Designations as to its Series A Convertible Preferred
Stock.
(h) All references to "Shares" in this Section 3 shall apply to the
Shares and any shares of the Company's Common Stock issued or issuable
upon conversion of the Preferred Shares, together with any securities
issued or issuable, directly or indirectly, in respect of such
securities upon any stock split, stock dividend, recapitalization or
the like.
6. CONNECTICUT EMPLOYMENT.
(a) The Company shall use its best efforts to create jobs in the State
of Connecticut and shall use its best efforts to employ residents of
Connecticut in these jobs.
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(b) If the Company is located in an enterprise zone designated pursuant
to Section 32-70 of the Connecticut General Statutes, the Company shall
not relocate (as that term is defined in Section 32-5a of the
Connecticut General Statutes) within the State of Connecticut without
first obtaining the express written consent of the Investor, which
consent the Investor may withhold in its reasonable discretion. If the
Company relocates within the State of Connecticut, it will offer
employment at its new location to its employees from the original
location if such employment is available.
(c) The Company shall furnish to the Investor copies of the quarterly
reports filed by the Company and any of its subsidiaries with the
Connecticut Department of Labor and upon request, employment records
and such other personnel records to the extent permitted by law as the
Investor may reasonably request to verify the creation or retention of
Connecticut employment.
(d) The Company hereby authorizes the Investor to examine, and will at
any time at the request of the Investor provide the Investor with such
authorization satisfactory to the Connecticut Department of Labor as
may be necessary to enable the Investor to examine all records of said
Department relating to the Company and/or any of its subsidiaries,
subject to any limitation imposed by applicable law.
7. EQUAL OPPORTUNITY. The Company agrees that it is an equal
opportunity employer and that it does not discriminate unlawfully. The Company
further agrees that:
(a) The Company will not discriminate or permit discrimination against
any employee or applicant for employment because of sex, sexual
orientation, race, color, religious creed, age, marital status, mental
retardation, physical disability, national origin, or ancestry. Such
action shall include, but not be limited to, the following: employment
upgrading, demotion or transfer; recruitment advertising; lay-off or
termination; rates of pay or other forms of compensation; and selection
for training, including apprenticeship.
(b) The Company agrees to take affirmative action to ensure that
applicants with job-related qualifications are employed.
(c) The Company will, in its solicitation for employees, state that it
is an "affirmative action-equal opportunity employer."
(d) The Company agrees to provide each labor union or representative of
workers with which the Company has a collective bargaining agreement or
other contract or understanding and each vendor with which the Company
has a contract or understanding, a notice to be provided by the
Commission of Human Rights and Opportunities (the "CHRO") and to post
copies of the notice in conspicuous places available to employees and
applicants for employment.
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(e) The Company agrees to cooperate with CII, the State of Connecticut
and/or any of its agencies and the CHRO to insure that the purpose of
this equal opportunity clause is being carried out.
(f) The Company agrees to comply with all relevant regulations and
orders issued by the CHRO, to provide the CHRO with such information as
it may request, and to permit the CHRO access to pertinent books,
records, and accounts concerning the contractor's employment practices
and procedures.
(g) The Company agrees to comply with all of the requirements set out
by Section 4a-60 of the Connecticut General Statutes, as it may be
amended.
(h) The Company agrees to post a notice of this acceptance of the
foregoing equal employment opportunity provisions at its place of
business, clearly visible, in such form as is satisfactory to CII.
8. BOARD OBSERVER. So long as the Investor holds any Shares, the
Investor shall have the right to appoint a designee as an observer to the
Company's Board of Directors. Such observer shall have the right to attend all
meetings of the Board of Directors. Such observer shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred in attending
such meetings, including, but not limited to, food, lodging, transportation. The
Investor shall be given notice of such meetings at the same time and in the same
manner as directors of the Company are informed.
9. AMENDMENTS TO AGREEMENTS. The Company and the Investor agree
as follows:
(a) Section 8.3(iii) of that certain Purchase Agreement by and between
the Investor and the Company, dated as of March 10, 1994, is hereby
deleted without substitution;
(b) Section 9.3(b) of that certain Financing Agreement by and between
the Investor and the Company, dated as of November 16, 1994, is hereby
deleted without substitution;
(c) Section 9.3(b) of that certain Financing Agreement by and between
the Investor and the Company, dated as of September 10, 1996, is hereby
deleted without substitution; and
(d) Section 10 of that certain Financing Agreement by and between the
Investor and the Company, dated as of November 16, 1994, is hereby
deleted without substitution.
10. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of the
Shares); provided, however, that the provisions of Sections 2-6 shall
not succeed to or be assigned to any non-affiliate of the Investor.
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(b) NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given (i) upon personal delivery to the party to be
notified, (ii) four (4) days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid, or (iii) one
day after deposit with a reputable overnight courier service and
addressed to the party to be notified at the following address
indicated for such party or at such other address as such party may
designate by ten (10) days' advance written notice to the other
parties:
if to the Company:
Genaissance Pharmaceuticals, Inc.
5 Science Park
Xxx 0
Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxxx 00000
Attn: President
if to the Investor:
Connecticut Innovations, Incorporated
000 Xxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
(c) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Connecticut, without regard to
principles of conflicts of laws and rules of such state.
(d) 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------------------
Its Executive Vice President
CONNECTICUT INNOVATIONS,
INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
Its President and Executive Director
EXHIBIT A
NOTICE OF PUT
1. In accordance with an Agreement (the "AGREEMENT") dated as of August 24,
1998 between the undersigned (the "HOLDER") and Genaissance Pharmaceuticals,
Inc. (the "COMPANY"), the undersigned hereby exercises its right to sell, and
does hereby sell upon receipt of the Put Price as defined in the Agreement,
________ (___________) Preferred Shares and/or ________ Common Shares, each
as defined in the Agreement.
2. Attached hereto is/are certificate(s) number(s) _______ representing
_______ Shares held by the Holder, which certificate(s) is/are either duly
endorsed in favor of the Company or accompanied by a separate stock power in
favor of the Company.
3. The Put Price is to be paid in the manner set forth in the Agreement.
4. All capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned to them in the Agreement.
5. If this Notice of Put does not relate to all of the Shares held by the
Holder, the name in which a new certificate is to be issued for the shares of
Preferred Stock not covered hereby is:
6. Other Instructions:
CONNECTICUT INNOVATIONS,
INCORPORATED
By:
-------------------------------
Its
