PARTICIPATION AND REGISTRATION AGREEMENT
This Participation and Co-Registration Agreement, dated March 20, 1996,
effective as of March 20, 1996, by and among RAQ, LLC., having a place of
business at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("RAQ"), Triad
Pharmaceuticals, Inc., having a place of business at 000 Xxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000 and Dr. Xxxxxx Xxxxxxx, a resident of the State
of Virginia ("Xxxxxxx").
WITNESSETH:
WHEREAS, Triad Pharmaceuticals, Inc., a Delaware corporation ("Corporation"),
has entered into a Stock Purchase Agreement dated as of March 20, 1996 with
Xxxxxxx contemporaneous herewith (the "Agreement");
WHEREAS, RAQ is a shareholder of the Corporation; and
WHEREAS, Xxxxxxx, as a condition precedent to entering into the Agreement,
Xxxxxxx is requiring that the Corporation and RAQ execute and deliver this
Participation and Co-Registration Agreement in favor of Xxxxxxx.
NOW, THEREFORE in consideration of the foregoing, the parties agree as follows:
1. PARTICIPATION RIGHTS
RAQ agrees that:
A. If RAQ is seeking to transfer a number of shares of capital stock of the
Corporation (the "Transferring Shareholder") other than through a
registered broker-deaker in a public market transaction, for which there
is an effective registration under the Securities Act of 1933 or pursuant
to rule 144, Xxxxxxx may elect to include shares of his stock in the sale
to the proposed transferee, at such price and upon such terms as have been
given to the Transferring Shareholder by the transferee. The number of
shares of Xxxxxxx'x stock that Xxxxxxx shall be entitled to have included
in such sale will be equal to the number of such shares of Common Stock
times a ratio, the numerator of which is the number of shares of Common
Stock being transferred by the Transferring Shareholder on a Fully Diluted
Basis and the denominator of which is the total number of shares of Common
Stock owned by the Transferring Stockholder as of the date of the Transfer
Notice on a Fully Diluted Basis. Xxxxxxx must make this election within
ten (10) days of receiving the notice from the Transferring Shareholder of
the Transferring Shareholder's intent to transfer by giving written
notice, such notice stating the number of shares being transferred, the
purchase price and other material terms of the transfer to the
Transferring Stockholder of such election to participate in the sale,
stating in such notice the number of shares desired to be sold. If no such
notice is given within such ten (10) day period,
1
Xxxxxxx shall be deemed to have chosen not to participate. This provision
shall immediately and permanently terminate upon Xxxxxxx'x ability to sell
his shares either pursuant to Rule 144 of the Securities Act of 1933 or
pursuant to an effective registration statement under the Securities Act
of 1933.
2. REDEMPTION RIGHTS The Corporation agrees that:
A. If at any time the Corporation elects to transfer all or substantially all
of the assets of the Corporation, (other than (i) in a reorganization
qualifying under Section 368 of the Internal Revenue Code of 1986, as
amended in which the shareholders of the Corporation immediately preceding
the reorganization continue to own 50% or more of voting power of the
surviving entity and or (ii) in a transaction in which the Corporation
plans to distribute all of the consideration or proceeds to the
shareholders of the Corporation) then unless the the Corporation shall
notify Xxxxxxx in writing at least twenty (20) days before the
consummation of such transfer. Upon receipt of such notice, Xxxxxxx shall
have the right to require the Corporation to redeem all, but not less than
all, of Xxxxxxx'x shares of stock of the Corporation by giving written
notice thereof (the "Redemption Notice") to the Corporation within fifteen
(15) days of his receipt of the Corporation's notice of its intent to
transfer such assets. Immediately following its receipt of the Redemption
Notice, the Corporation shall redeem all of Xxxxxxx'x shares at a price
equal to an amount determined by an appraisal of the value of the
Corporation by an appraiser to be mutually agreed upon. If the Corporation
or Xxxxxxx are unable to agree on an appraiser, then the Corporation and
Xxxxxxx shall within 10 days each choose an appraiser and the value of the
Corporation shall be the arithmetic mean of the values determined by each
appraiser. If the parties agree on an appraiser, the cost of appraisal
shall be divided between them equally. If two appraisers are chosen, the
Corporation and Xxxxxxx shall pay the costs of the appraiser each has
chosen. The running of all time periods provided herein shall be tolled
until such appraisal is completed and delivered to the Corporation and
Xxxxxxx. This provision shall immediately and permanently terminate after
the Corporation is a reporting company under the Securities Exchange Act
of 1934.
B. Should Xxxxxxx elect to have the Corporation redeem his shares pursuant to
this section, Xxxxxxx shall, on or before the date of such share
redemption, deliver to the Corporation during regular business hours, at
the principal office of the Corporation, the certificate or certificates
for the number of shares of stock to be redeemed, duly endorsed or
assigned in blank or to the Corporation (if required by it). On the date
of such redemption, the Corporation shall deliver to Xxxxxxx a certified
or cashier's check in respect of the aggregate price for the number of
shares so redeemed or at the Corporation's option publicly traded
securities of equivalent fair market value.
2
3. REGISTRATION RIGHTS
The Corporation agrees that:
A. If at any time or from time to time the Corporation proposes to register
any of its equity securities under the Securities Act of 1933 (the "Act")
in connection with a primary or secondary public offering of such
securities solely for cash on a form that would also permit the
registration of the shares of capital stock of the Corporation purchased
by Xxxxxxx pursuant to a certain Stock Subscription Agreement between
Xxxxxxx and the Corporation dated March 20, 1996 (including, without
limitation, any shares of capital stock of the Corporation which Xxxxxxx
may purchase pursuant to the anti-dilution provisions thereof and any
securities of the Corporation issued as a dividend or other distribution
with respect to, or in exchange or in replacement of any shares of the
Corporation held by Xxxxxxx), the Corporation shall, each such time,
promptly give Xxxxxxx written notice of such determination. Upon the
written request of Xxxxxxx given within fifteen (15) days after mailing of
any such notice by the Corporation, the Corporation shall use its best
efforts to cause to be registered under the Act all shares of capital
stock of the Corporation held by Xxxxxxx that Xxxxxxx has requested be
registered. This right shall terminate upon Xxxxxxx'x ability to resell in
whole or in part his shares under Rule 144 of the Securities Act of 1933,
as amended. The Corporation shall bear all registration and qualification
fees and expenses (excluding underwriters' discounts and commissions),
including any additional costs and disbursements of counsel for the
Corporation that result from the inclusion of securities held by Xxxxxxx
in such registration.
B. Notwithstanding the preceding paragraph, in connection with any offering
involving an underwriting of shares of the Corporation's Common Stock, the
Corporation shall not be required to include any of Xxxxxxx'x shares in
such underwriting unless Xxxxxxx accepts the terms of the underwriting as
agreed upon between the Corporation and the underwriters selected by the
Corporation (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the
Corporation. If the total amount of securities, including the shares of
Xxxxxxx, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Corporation that the
underwriters determine in their sole discretion is compatible with the
success of the offering, then the Corporation shall be required to include
in the offering only that number of such securities, including the shares
requested by Xxxxxxx, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities
so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as
shall mutually be agreed to by such selling stockholders).
3
C. To the extent permitted by law, the Corporation will indemnify and hold
harmless Xxxxxxx upon his requesting or joining in a registration, any
underwriter (as defined in the Act) for it, and each person, if any, who
controls such underwriter within the meaning of the Act or the Securities
Exchange Act of 1934 (the "1934 Act") against any losses, claims, damages
or liabilities, joint or several, to which they may become subject under
the Act, the 1934 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any such material fact
contained in such registration statement by the Corporation (but not
Xxxxxxx requesting or joining in the registration), including any
preliminary prospectus or final prospectus, or any amendments or
supplements thereto, or arise out of or are based upon 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
arise out of any violation by the Corporation of any rule or regulation
promulgated under the Act or the 1934 Act applicable to the Corporation
and relating to action or inaction required of the Corporation in
connection with any such registration; and will reimburse Xxxxxxx, such
underwriter, or such 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 paragraph 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
Corporation (which consent shall not be unreasonably withheld) nor shall
the Corporation 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 an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by
Xxxxxxx or any such underwriter or controlling person.
D. In order to provide for just and equitable contribution to joint liability
under the Act in any case in which either (i) Xxxxxxx exercising his
rights under this Agreement makes a claim for indemnification pursuant to
this paragraph but it is judicially determined (by the entry of a final
judgement or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding
the fact that this paragraph provides for indemnification in such case, or
(ii) contribution under the Act may be required on the part of Xxxxxxx in
circumstances for which indemnification is provided under this paragraph;
then, and in each such case, the Corporation and Xxxxxxx will contribute
to the aggregate losses, claims, damages or liabilities to which they may
be subject (after contribution from others) in such proportion so Xxxxxxx
is responsible for the portion represented by the percentage that the
public offering price of his shares of capital stock of the Corporation
offered by the registration statement bears to the public offering price
of
4
all securities offered by such registration statement, and the Corporation
is responsible for the remaining portion; provided, however, that, in any
such case, (A) Xxxxxxx will not be required to contribute any amount in
excess of the public offering price of all the shares of capital stock of
the Corporation offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent
misrepresentation.
E. Notwithstanding the foregoing, this section 3 shall not apply to any
registration of the common stock underlying the Series A Convertible
Preferred Stock issued pursuant to an offering from June 17, 1996 to
August 15, 1996 (including any extension of such offering for up to 120
days) or to any registration of a stock option plan or shares utilizing
Form S-8 or equivalent form.
4. MISCELLANEOUS PROVISIONS
A. This Agreement shall be governed by and construed in accordance with the
internal laws (without giving effect to the conflicts of law principles)
of the State of Delaware.
B. The parties hereto agree that the terms and provisions in this Agreement
are reasonable and shall be binding and enforceable in accordance with the
terms hereof and, in any event, that the terms and provisions of this
Agreement shall be enforced to the fullest extent permissible under law.
In the event that any term or provision of this Agreement shall for any
reason be adjudged to be unenforceable or invalid, then such unenforceable
or invalid term or provision shall not affect the enforceability or
validity of the remaining terms and provisions of this Agreement, and the
parties hereto hereby agree to replace such unenforceable or invalid term
or provision with an enforceable and valid arrangement which, in its
economic effect, shall be as close as possible to the unenforceable or
invalid term or provision.
C. All references in this Agreement to the Corporation shall include any and
all successors in interest to the Corporation whether by merger,
consolidation, sale of all or substantially all assets or otherwise, and
this Agreement shall inure to the benefit of the successors and assigns of
the Corporation and, subject to the terms herein set forth, shall be
binding upon the Purchaser, its successors and permitted assigns.
D. This Agreement may be executed in two counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
E. No modification, amendment or waiver of any provision of this Agreement
shall be effective against the Corporation unless the same shall be in a
written instrument signed by an officer of the Corporation on its behalf
and such instrument is approved by its Board of Directors. The failure at
any time to enforce any of the provisions of
5
this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of either party thereafter to enforce each
and every provision hereof in accordance with its terms.
F. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of
this Agreement.
G. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
H. The headings of the Sections and paragraphs of this Agreement have been
inserted for convenience of reference only and do not constitute a part of
this Agreement.
I. All notices and other communications which are required or permitted to be
given pursuant to the terms of this Agreement shall be in writing and
shall be sufficiently given (i) if personally delivered, (ii) if sent by
telex or facsimile, provided that "answer-back" confirmation is received
by the sender or (iii) upon receipt, if sent by registered or certified
mail, postage paid return receipt requested in any case addressed as
follows:
(i) If to the Corporation, to
Triad Pharmaceuticals, Inc.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
(ii) If to Xxxxxxx, to
Xxxxxx Xxxxxxx, M.D.
000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
(iii) If to RAQ at the address set forth in the first
paragraph of this Agreement.
The address of a party, for the purposes of this Section, may be changed
by giving written notice to the other party of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue in
effect for all purposes hereunder.
6
IN WITNESS WHEREOF, the parties have hereto have set their respective hands and
seals all on the day and year first above set forth.
RAQ, LLC.:
/s/ Xxxxxxx X. Xxxxxxxxx, M.D.
---------------------------------
By: Xxxxxxx X. Xxxxxxxxx, M.D.
Chief Executive
TRIAD PHARMACEUTICALS, INC.
/s/ Xxxxx X. Xxxxxx
---------------------------------
By: Xxxxx X. Xxxxxx
President
XXXXXX XXXXXXX, M.D.:
/s/ Xxxxxx Xxxxxxx, M.D.
---------------------------------
By: Xxxxxx Xxxxxxx, M.D.
7
