CONFORMED COPY
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PROTEIN POLYMER TECHNOLOGIES, INC.
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SECURITIES PURCHASE AGREEMENT
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Dated as of January 6, 1997
____________________________________________________________________________
____________________________________________________________________________
Exhibit 99.3
TABLE OF CONTENTS Page
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1. Definitions............................................... 1
2. Authorization of Securities............................... 3
3. Sale and Purchase of the Shares........................... 3
4. Register of Securities; Restrictions on Transfer
of Securities; Removal of Restrictions on Transfer
of Securities............................................. 4
4.1 Register of Securities.............................. 4
4.2 Restrictions on Transfer............................ 4
4.3 Removal of Transfer Restrictions.................... 7
5. Representations and Warranties by the Company............. 8
5.1 Organization, Standing, etc......................... 8
5.2 Qualification....................................... 8
5.3 Capital Stock....................................... 8
5.4 Corporate Acts and Proceedings...................... 9
5.5 Compliance with Other Instruments................... 9
5.6 Binding Obligations................................. 9
5.7 Securities Laws..................................... 10
5.8 Financial Statements................................ 10
5.9 Changes............................................. 10
5.10 Litigation.......................................... 10
5.11 Brokers or Finders.................................. 10
5.12 Disclosure.......................................... 10
6. Conditions of Parties' Obligations........................ 11
6.1 Conditions of Investors' Obligations
at the Closing...................................... 11
6.2 Conditions of Company's Obligations................. 12
7. Registration of Restricted Stock.......................... 12
7.1 Required Registration............................... 12
7.2 Registration Procedures............................. 12
7.3 Expenses............................................ 14
7.4 Indemnification..................................... 14
7.5 Reporting Requirements Under the
Exchange Act........................................ 17
7.6 Stockholder Information............................. 17
7.7 Delay of Registration............................... 18
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Page
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8. Miscellaneous............................................. 18
8.1 Waivers and Amendments.............................. 18
8.2 Effect of Waiver or Amendment....................... 18
8.3 Rights of Holders Inter Se.......................... 18
8.4 Exculpation Among Investors and Holders............. 19
8.5 Notices............................................. 19
8.6 Severability........................................ 19
8.7 Parties in Interest................................. 20
8.8 Headings............................................ 20
8.9 Choice of Law....................................... 20
8.10 Expenses............................................ 20
8.11 Counterparts........................................ 20
8.12 Publicity........................................... 20
ANNEXES
A - Schedule of Investors and Required Payment
B - Risk Factors
C - Schedule of Exceptions
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into
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as of January 6, 1997 among Protein Polymer Technologies, Inc., a Delaware
corporation (the "Company"), and the other Persons listed on Annex A hereto
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(sometimes referred to herein individually as "Investor" and sometimes
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collectively as "Investors").
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1. Definitions. Unless the context otherwise requires, the terms
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defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined in this Section 1
and those accounting terms used in this Agreement not defined in this Section 1
shall, except as otherwise provided for herein, be construed in accordance with
those generally accepted accounting principles employed by the Company,
consistently applied. If and so long as the Company has any Subsidiary, the
accounting terms defined in this Section 1 and those accounting terms appearing
in this Agreement but not defined in this Section 1 shall be determined on a
consolidated basis for the Company and each of its Subsidiaries, if any, and the
financial statements and other financial information to be furnished by the
Company pursuant to this Agreement shall be consolidated.
"1995 Annual Report" shall mean the Company's Report on Form
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10-KSB for the fiscal year ended December 31, 1995.
"Action" shall mean any action, suit, arbitration or other
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legal, administrative or other proceeding by or before any court, arbitrator or
Governmental Entity.
"Agreement" shall mean this Securities Purchase Agreement.
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"Balance Sheet" shall have the meaning assigned to it in
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Section 5.8 hereof.
"Balance Sheet Date" shall have the meaning assigned to it
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in Section 5.8 hereof.
"Board" shall mean the Board of Directors of the Company.
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"California Securities Law" shall mean the California
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Corporate Securities Law of 1968, as amended.
"Closing" and "Closing Date" shall have the meanings
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assigned to such terms in Section 3(b) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
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amended.
"Common Stock" shall mean the Company's common stock, par
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value $0.01 per share.
"Commission" shall mean the Securities and Exchange
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Commission.
"Equity Security" shall mean the Common Stock, or any
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security convertible into the Common Stock, or any security carrying any warrant
or right to subscribe to or purchase the Common Stock, or any such warrant or
right.
"Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended.
"Form 10-QSB" shall mean the Company's Report on Form 10-QSB
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for the quarterly period ended September 30, 1996.
"Governmental Entity" shall mean any federal, state, local
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or foreign governmental bureau, commission, board, agency or instrumentality.
"Holder" of any security shall mean the record or beneficial
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owner of such security.
"Holders of a Majority of the Restricted Stock" shall mean,
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on a given date, the Person or Persons who are the Holders of greater than 50%
of the Restricted Stock.
"Investor" shall have the meaning assigned to it in the
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introductory paragraph of this Agreement.
"Material Effect" shall mean a material and adverse effect
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on the business, assets, property or financial condition of the Company.
"Person" shall mean any natural person, corporation, trust,
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association, company, partnership, limited liability company, joint venture and
other entity and any government, governmental agency, instrumentality or
political subdivision.
"Required Payment" shall mean, with respect to each
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Investor, the number of Shares purchased by such Investor, multiplied by $2.50,
as set forth on Annex A hereto.
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"Restricted Stock" shall mean (a) the Shares, and (b) any
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securities issued or issuable with respect to the Common Stock referred to in
clause (a) above by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger or consolidation or
reorganization; provided, however, that shares of Common Stock shall only be
treated as Restricted Stock if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect to such Common Stock are removed upon the consummation of such
sale.
"Rule 144" shall mean Rule 144 of the Commission under the
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Securities Act.
"Securities" shall have the meaning assigned to it in
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Section 2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
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amended.
"Series D Preferred Stock" shall mean the Company's Series D
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10% Cumulative Convertible Preferred Stock.
"Shares" shall have the meaning assigned to such term in
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Section 2 hereof.
"Subsidiary" shall mean any Person, at least 50% of the
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outstanding voting stock of which is at the time owned or controlled directly or
indirectly by the Company or by one or more of such subsidiary entities or both,
where "voting stock" means any shares of stock having general voting power in
electing the board of directors.
"Suspension Period" shall have the meaning assigned to it in
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Section 7.1(b) hereof.
2. Authorization of Securities. The Company has authorized the
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issue and sale of up to 2,000,000 shares (the "Shares") of its Common Stock for
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sale to the Investors pursuant to this Agreement. The Shares are sometimes
referred to herein as the "Securities."
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3. Sale and Purchase of the Shares.
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(a) Upon the terms and subject to the condi tions herein contained,
the Company agrees to sell to each
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Investor, and each Investor severally agrees to purchase from the Company, at
the Closing on the Closing Date, the number of Shares set forth opposite its
name on Annex A hereto, and each Investor shall pay to the Company the Required
Payment.
(b) The closing of the sale to and purchase by the
Investors of the Shares (the "Closing") shall occur at the offices of ▇▇▇▇,
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Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, at the hour of 10 o'clock A.M., California time, on January 6, 1997
or at such different time or day as the Investors and the Company shall agree
(the "Closing Date"). At the Closing (or within one week thereafter to allow for
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processing by the Company's transfer agent), the Company will deliver to each
Investor instruments or certificates evidencing the Securities being purchased
by it, each of which shall be registered in such Investor's name as stated on
Annex A hereto, against delivery to the Company of payment by cashier's check or
wire transfer in an amount equal to the Required Payment of such Investor.
4. Register of Securities; Restrictions on Transfer of Securities;
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Removal of Restrictions on Transfer of Securities.
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4.1 Register of Securities. The Company or its duly appointed
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agent shall maintain a separate register for the Common Stock in which it shall
register the issue and sale of all the Shares. All transfers of the Securities
shall be recorded on the register maintained by the Company or its agent, and
the Company shall be entitled to regard the registered holder of the Securities
as the actual holder of the Securities so registered until the Company or its
agent is required to record a transfer of such Securities on its register.
Subject to Section 4.2(c) hereof, the Company or its agent shall be required to
record any such transfer when it receives the Security to be transferred duly
and properly endorsed by the registered holder thereof or by its attorney duly
authorized in writing.
4.2 Restrictions on Transfer.
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(a) Each Investor understands and agrees that the
Securities it will be acquiring have not been registered under the Securities
Act, and that accordingly they will not be fully transferable except as
permitted under various exemptions contained in the Securities Act, or upon
satisfaction of the registration and prospectus delivery requirements of the
Securities Act. Each Investor acknowledges that it must bear the economic risk
of its investment in the Securities for an indefinite period of time since they
have not been registered under the Securities Act
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and therefore cannot be sold unless they are subsequently registered or an
exemption from registration is available.
(b) Each Investor hereby represents and warrants to the Company that:
(i) Such Investor is acquiring the Securities it has agreed to
purchase for investment purposes only, for its own account, and not as nominee
or agent for any other Person, and not with the view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act.
(ii) Such Investor knows of no public solicitation or
advertisement of an offer in connection with the Securities.
(iii) Such Investor has carefully reviewed this Agreement. Such
Investor has had, during the course of the transaction and prior to its purchase
of the Shares, the opportunity to ask questions of and receive answers from the
Company concerning the terms and conditions of the offering and to obtain
additional information (to the extent the Company possesses such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. Such
Investor has received all information that it has requested regarding the
Company and believes that such information is sufficient to make an informed
decision with respect to the purchase of the Shares. Without limiting the
generality of the foregoing, such Investor has received a copy of (A) the 1995
Annual Report, (B) the Form 10-QSB, and (C) the Risk Factors attached as Exhibit
B hereto, currently contemplated to be included in the registration statement
referred to in Section 7.1(a) hereof.
(iv) Such Investor is able to bear the economic risk of its
investment in the Shares and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of, and
protecting its interests with respect to, its investment in the Shares. Such
Investor is aware of the risk involved in its investment in the Shares and has
determined that such investment is suitable for it in light of its financial
circumstances and available investment opportunities.
(v) This Agreement, when executed and delivered by such Investor,
constitutes the legal, valid and binding obligation of such Investor and is
enforceable against such Investor in accordance with its terms.
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(vi) Such Investor is an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
(vii) Such Investor's jurisdiction of formation or incorporation
(if applicable) and principal place of business or its residency as set forth on
the signature page hereof or the annexes hereto by such Investor are accurate.
(viii) The purchase by such Investor of the Shares hereunder does
not violate or conflict with any law or regulation applicable to such Investor.
(ix) No Person engaged by such Investor has, or will have, any
right or claim against the Company for any commission, fee or other compensation
as a finder or broker, or in any similar capacity.
(c) Each Investor hereby further agrees with the Company as follows:
(i) Subject to Section 4.3 hereof, the instruments or certificates
evidencing the Securities it has agreed to purchase, and each instrument or
certificate issued in transfer thereof, will bear the following legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 and have been taken for investment
purposes only and not with a view to the distribution thereof, and,
except as stated in an agreement between the holder of this
certificate, or its predecessor in interest, and the issuer
corporation, such securities may not be sold or transferred unless
there is an effective registration statement under such Act covering
such securities or the issuer corporation receives an opinion, in form
and content reasonably satisfactory to the issuer corporation, of
counsel reasonably acceptable to the issuer corporation (which may be
counsel for the issuer corporation) stating that such sale or transfer
is exempt from the registration and prospectus delivery requirements
of such Act."
(ii) The instruments or certificates representing such Securities,
and each instrument or certificate issued in transfer thereof, will also bear
any legend required under any applicable state securities law.
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(iii) Prior to any proposed sale, assignment, transfer or
pledge of any Securities by an Investor, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Investor shall give written notice to the Company of such Investor's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail and shall be accompanied at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall, and whose legal opinion shall, be reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Securities may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Commission to the effect that the transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, whereupon the
holder of such Securities shall be entitled to transfer such Securities in
accordance with the terms of the notice delivered by the holder to the Company.
The Company will not require such a legal opinion or "no action" letter in any
transaction in compliance with Rule 144, unless otherwise required by the
Company's independent transfer agent.
(iv) Such Investor consents to the Company's making a
notation on its records or giving instructions to any transfer agent of the
Common Stock in order to implement the restrictions on transfer of the
Securities mentioned in this subsection (c).
(d) Each Investor, or each Person executing this Agreement on
behalf of an Investor, further represents and warrants to the Company that such
Investor or other Person, as the case may be, has been duly authorized to, and
has, and as of the Closing will have, full power and authority (including
corporate, if applicable) to, execute and deliver this Agreement on behalf of
such Investor, and to make the representations and warranties to the Company in
this Section 4 on behalf of such Investor, and to perform the obligations of
such Investor under this Agreement.
4.3 Removal of Transfer Restrictions. Any legend endorsed on a
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certificate evidencing a Security pursuant to Section 4.2(c)(i) hereof and the
stop transfer instructions and record notations with respect to such Security
shall be removed and the Company shall issue a certificate without such legend
to the holder of such Security (a) upon the sale thereof if such Security and
such sale are registered under the Securities Act, (b) if such holder
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provides the Company with an opinion, in form and content reasonably
satisfactory to the Company, of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) if such Security may be sold under Rule 144.
5. Representations and Warranties by the Company. In order to
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induce each Investor to enter into this Agreement and to purchase the Shares,
the Company hereby represents and warrants to each Investor that, except as set
forth on Annex C hereto:
5.1 Organization, Standing, etc. The Company is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to carry
on its business as presently conducted and as proposed to be conducted, to own
and hold its properties and assets, to enter into this Agreement, to issue the
Securities and to carry out the provisions hereof and thereof.
5.2 Qualification. The Company is duly qualified as a foreign
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corporation and in good standing in the State of California. The Company is not
qualified to do business as a foreign corporation in any other jurisdiction and
such qualification is not required as of the date hereof, except where the
failure to be so qualified would not have a Material Effect.
5.3 Capital Stock.
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(a) As of the Closing Date, the authorized capital stock of the
Company will consist of (i) 5,000,000 shares of preferred stock, par value $0.01
per share, 71,600 shares of which have been designated as Series D Preferred
Stock; and (ii) 25,000,000 shares of Common Stock; and the Company will have no
authority to issue any other capital stock. There are 49,187 shares of Series D
Preferred Stock issued and outstanding, and, as of the Closing, before giving
effect to the transactions contemplated by this Agreement, 7,208,228 shares of
Common Stock are issued and outstanding, and all such outstanding shares of
Series D Preferred Stock and Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
(b) Except as contemplated by this Agreement or as expressly provided
in Annex C to this Agreement, the Company has no outstanding subscription,
option, warrant, right of first refusal, preemptive right, call, contract,
demand, commitment, convertible security or
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other instrument, agreement or arrangement of any character or nature whatever
under which the Company is or may be obligated to issue Common Stock, preferred
stock or other Equity Security of any kind.
5.4 Corporate Acts and Proceedings. The Company has, and as of
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the Closing will have, full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and the transactions
contemplated hereby. All corporate acts and proceedings required for the
authorization, execution and delivery of this Agreement and the offer, issuance
and delivery of the Securities and the performance of this Agreement have been
lawfully and validly taken or will have been so taken prior to the Closing.
5.5 Compliance with Other Instruments. The execution, delivery
---------------------------------
and performance by the Company of this Agreement (a) will not require from the
Board or stockholders of the Company any consent or approval that has not been
validly and lawfully obtained, (b) will not require the Company to obtain or
effect any authorization, consent, approval, license, exemption of or filing or
registration with any Person, except such as shall have been lawfully and
validly obtained prior to the Closing and such as may subsequently be required
pursuant to Section 7 hereof, (c) will not cause the Company to violate or
contravene, except where such violation or contravention would not have a
Material Effect, (i) any provision of law, (ii) any rule or regulation of any
Governmental Entity, (iii) any order, writ, judgment, injunction, decree,
determination or award binding upon the Company, or (iv) any provision of the
Certificate of Incorporation or Bylaws of the Company, (d) will not cause the
Company to violate or be in conflict with, result in a breach by the Company of
or constitute (with or without notice or lapse of time or both) a default by the
Company under, any material agreement, lease or instrument, commitment or
arrangement to which the Company is a party or by which the Company or any of
its properties, assets or rights are bound or affected, except where such
violation, conflict, breach or default would not have a Material Effect, and (e)
will not result in the creation or imposition of any lien.
5.6 Binding Obligations. This Agreement constitutes the legal,
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valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally, and by general equitable principles.
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5.7 Securities Laws. Subject to the accuracy of the representations
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and warranties contained in Section 4.2, the offer, issue and sale of the Shares
are exempt from the registration and prospectus delivery requirements of the
Securities Act, and are exempt from qualification under the California
Securities Law and the state securities laws of the jurisdictions where the
Investors are resident.
5.8 Financial Statements. Included in the Form 10-QSB are the
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Company's unaudited balance sheet (the "Balance Sheet") as of September 30, 1996
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(the "Balance Sheet Date"), and the unaudited statement of operations for the
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nine-month period then ended. Included in the 1995 Annual Report are the
Company's audited balance sheets as of December 31, 1993, 1994 and 1995 and the
audited statements of operations, cash flow and shareholders' equity for the
period then ended, together with the related opinion of ▇▇▇▇▇ & Young LLP,
independent certified public accountants. The foregoing financial statements
(i) are in accordance with the books and records of the Company, (ii) present
fairly the financial condition of the Company at the Balance Sheet Date and the
results of operations and changes in financial position of the Company for the
periods therein specified, and (iii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods, except that the unaudited financial statements are
subject to year-end audit adjustments and do not contain footnotes or statements
of shareholders' equity and cash flow.
5.9 Changes. Since the Balance Sheet Date, except as
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disclosed in the Form 10-QSB, there has been no event which would have a
Material Effect, and the Company has been operated only in the ordinary course
of business, consistent with past practice.
5.10 Litigation. There is no Action pending and, to the
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knowledge of the Company, there is no material Action threatened against the
Company or its properties, assets or business. To the Company's knowledge, the
Company is not in default with respect to any order, writ, judgment, injunction,
decree, determination or award of any court or of any Governmental Entity.
5.11 Brokers or Finders. The Company has not incurred, and
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will not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
5.12 Disclosure. The representations and warranties of the
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Company contained herein, when read together
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with the annexes hereto and the Form 10-QSB and the 1995 Annual Report, do not
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements therein not misleading.
6. Conditions of Parties' Obligations.
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6.1 Conditions of Investors' Obligations at the Closing. The
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obligation of each Investor to purchase and pay for the Shares which it has
agreed to purchase on the Closing Date is subject to the fulfillment prior to or
on the Closing Date of the following conditions, any of which may be waived in
whole or in part by such Investor.
(a) No Errors, etc. The representations and warranties of the Company
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under this Agreement shall be deemed to have been made again on the Closing Date
and shall then be true and correct in all material respects.
(b) Compliance with Agreement. The Company shall have performed
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and complied with, in all material respects, all agreements and conditions
required by this Agreement to be performed or complied with by it on or before
the Closing Date.
(c) Certificate of the Company. The Company shall have delivered to
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each Investor a certificate of the Company dated the Closing Date, executed by
its President, certifying the satisfaction of the conditions specified in
subsections (a), (b), (d) and (e) of this Section 6.1.
(d) Qualification. All authorizations, approvals or permits, if any,
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of any governmental authority or regulatory body of the United States or of any
state that are required from the Company in connection with the lawful issuance
and sale of the Shares to the Investors pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing.
(e) Waiver of Rights. The holders of the Series D Preferred Stock
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shall have waived their rights of first refusal with respect to the Shares.
(f) Proceedings and Documents. All corporate and other proceedings in
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connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors, and the Investors shall have received all such counterpart originals
and certified or other copies of such documents as they may reasonably request.
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6.2 Conditions of Company's Obligations. The Company's obligation to
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issue and sell the Shares to the Investors on the Closing Date is subject to the
fulfillment prior to or at such date of (i) the conditions precedent specified
in paragraphs (d) and (e) of Section 6.1 hereof, and (ii) the representations
and warranties of the Investors under this Agreement being deemed to have been
made again on the Closing Date and being then true and correct.
7. Registration of Restricted Stock.
--------------------------------
7.1 Required Registration.
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(a) Within one week after the Closing Date, the Company shall prepare
and file a registration statement under the Securities Act, on a form selected
by the Company, covering the Shares and shall use its best efforts to cause such
registration statement to become effective as expeditiously as possible and to
remain effective until the earlier to occur of the date (i) the Restricted Stock
covered thereby has been sold, or (ii) by which all Restricted Stock covered
thereby may be sold under Rule 144.
(b) Following the effectiveness of a registration statement filed
pursuant to this section, the Company may, at any time, suspend the
effectiveness of such registration for up to 60 days, as appropriate (a
"Suspension Period"), by giving notice to the Holders of Restricted Stock, if
-----------------
the Company shall have determined that the Company may be required to disclose
any material corporate development which disclosure may have a material effect
on the Company. Notwithstanding the foregoing, no more than two Suspension
Periods (i.e., 120 days) may occur in immediate succession. The Company shall
use its best efforts to limit the duration and number of any Suspension Periods.
The Holders of Restricted Stock agree that, upon receipt of any notice from the
Company of a Suspension Period, the Holders of Restricted Stock shall forthwith
discontinue disposition of Restricted Stock covered by such registration
statement or prospectus until the Holders of Restricted Stock (i) are advised in
writing by the Company that the use of the applicable prospectus may be resumed,
(ii) have received copies of a supplemental or amended prospectus, if
applicable, and (iii) have received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference into
such prospectus.
7.2 Registration Procedures. When the Company effects the
-----------------------
registration of the Shares under the Securities Act pursuant to Section 7.1(a)
hereof, the Company will, at its expense, as expeditiously as possible:
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(a) In accordance with the Securities Act and the rules and
regulations of the Commission, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period described herein, and prepare and file with the Commission such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period and such registration statement and prospectus
accurate and complete for such period;
(b) Furnish to the Holders of securities participating in such
registration such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
Holders may reasonably request in order to facilitate the public offering of
such securities;
(c) Use its best efforts to register or qualify the securities covered
by such registration statement under such state securities or blue sky laws of
such juris dictions as such participating Holders may reasonably request within
twenty (20) days following the original filing of such registration statement,
except that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified;
(d) Notify the Holders participating in such registration, promptly
after it shall receive notice thereof, of the date and time when such
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(e) Notify such Holders promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(f) Prepare and file with the Commission, promptly upon the request of
any such Holders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such Holders, is required
under the Securities Act or the rules and regulations thereunder in connection
with the distribution of the Restricted Stock by such Holders;
(g) Prepare and promptly file with the Commission, and promptly notify
such Holders of the filing of,
-13-
such amendments or supplements to such registration statement or prospectus as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(h) In case any of such Holders is required to deliver a prospectus at
a time when the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare promptly
upon request such amendments or supplements to such registration statement and
such prospectus as may be necessary in order for such prospectus to comply with
the requirements of the Securities Act and such rules and regulations; and
(i) Advise such Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
7.3 Expenses. With respect to any registration effected
--------
pursuant to Section 7.1 hereof, all fees, costs and expenses of and incidental
to such registration and the public offering in connection therewith shall be
borne by the Company; provided, however, that the Holders of Restricted Stock
shall bear their own legal fees, if any, and their pro rata share of any
underwriting discounts or commissions.
7.4 Indemnification.
---------------
(a) The Company will indemnify and hold harmless each Holder of shares
of Restricted Stock which are included in a registration statement pursuant to
the provisions of Section 7 hereof and any underwriter (as defined in the
Securities Act) for such Holder, and any person who controls such Holder or such
underwriter within the meaning of the Securities Act, and any officer, director,
employee, agent, partner or affiliate of such Holder, from and against, and will
reimburse such Holder and each such underwriter, controlling person, officer,
director, employee, agent, partner and affiliate with respect to, any and all
claims, actions, demands, losses, damages, liabilities, costs and
-14-
expenses to which such Holder or any such underwriter or controlling person or
any such officer, director, employee, agent, partner or affiliate may become
subject under the Securities Act or otherwise, insofar as such claims, actions,
demands, losses, damages, liabilities, costs or expenses arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement 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;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, action, demand, loss, damage, liability, cost or
expense is caused by an untrue statement or alleged untrue statement or omission
or alleged omission so made in strict conformity with information furnished by
such Holder, such underwriter or such controlling person or such officer,
director, employee, agent, partner or affiliate in writing specifically for use
in the preparation thereof.
(b) Each Holder of shares of the Restricted Stock which are included
in a registration pursuant to the provisions of Section 7 hereof will indemnify
and hold harmless the Company, and any Person who controls the Company within
the meaning of the Securities Act, from and against, and will reimburse the
Company and such controlling Persons with respect to, any and all losses,
damages, liabilities, costs or expenses to which the Company or such controlling
Person may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or are caused by the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written information
furnished by such ▇▇▇▇▇▇ specifically for use in the preparation thereof.
Notwithstanding the foregoing, the liability of any Holder of Restricted Stock
pursuant to this subsection (b) shall be limited to an amount equal to the per
share sale price (less any underwriting discount and commissions) multiplied by
the number of shares of Restricted Stock sold by such Holder pursuant to the
registration statement which gives rise to such obligation to indemnify (less
the aggregate amount of any damages which such Holder has otherwise been
required to pay
-15-
in respect of such losses, damages, liabilities, costs or expenses or any
substantially similar losses, damages, liabilities, costs or expenses arising
from the sale of such Restricted Stock).
(c) Promptly after receipt by a party indemnified pursuant to the
provisions of paragraph (a) or (b) of this Section 7.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 7.4 and shall not relieve the indemnifying party from liability under
this Section 7.4 unless such indemnifying party is prejudiced by such omission.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of such paragraph
(a) or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall be liable to an indemnified
party for any settlement of any action or claim without the consent of the
indemnifying party. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in subsection (a) or (b) of
this Section 7.4 is held by a court of competent jurisdiction to be unavailable
to a party to be indemnified with respect to any claims, actions, demands,
losses, damages, liabilities, costs or expenses referred to therein, then each
indemnifying party under any such subsection, in lieu of indemnifying such
indemnified party thereunder, hereby agrees to contribute to the amount paid or
payable by such indemnified party as a result of such claims, actions, demands,
losses, damages, liabilities, costs or expenses in such proportion as is
appropriate to reflect
-16-
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which resulted in such claims, actions, demands, losses, damages, liabilities,
costs or expenses, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder of Restricted Stock shall
be obligated to contribute pursuant to this subsection (d) shall be limited to
an amount equal to the per share sale price (less any underwriting discount and
commissions) multiplied by the number of shares of Restricted Stock sold by such
Holder pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which such
Holder has otherwise been required to pay in respect of such claim, action,
demand, loss, damage, liability, cost or expense or any substantially similar
claim, action, demand, loss, damage, liability, cost or expense arising from the
sale of such Restricted Stock). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution hereunder from any person who was not guilty
of such fraudulent misrepresentation.
7.5 Reporting Requirements Under the Exchange Act. The Company
---------------------------------------------
shall timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 of the Exchange Act. The Company
acknowledges and agrees that the purposes of the requirements contained in this
Section 7.5 are (a) to enable the Holders of Restricted Stock to comply with the
current public information requirement contained in paragraph (c) of Rule 144
should any such Holder ever wish to dispose of any of the Restricted Stock
without registration under the Securities Act in reliance upon Rule 144 (or any
other similar exemptive provision) and (b) to qualify the Company for the use of
registration statements on Form S-3.
7.6 Stockholder Information. The Company may require each
-----------------------
Holder of Restricted Stock to furnish the Company such information with respect
to such Holder and the distribution of its Restricted Stock as the Company may
from time to time reasonably request in writing as shall be required by law or
by the Commission in connection therewith.
-17-
7.7 Delay of Registration. The Holders of Restricted Stock shall not
---------------------
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.
8. Miscellaneous.
-------------
8.1 Waivers and Amendments.
----------------------
(a) With the written consent of the Holders of a Majority of the
Restricted Stock then outstanding, the obligations of the Company and the rights
of the Holders of the Securities under this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely), and with the same
consent the Company, when authorized by resolution of its Board, may enter into
a supplementary agreement for the purpose of changing in any manner or
eliminating any of the provisions of this Agreement or of any supplemental
agreement or modifying in any manner the rights hereunder of the Holders of the
Securities and the Company; provided, however, that no such waiver or
supplemental agreement shall reduce the aforesaid proportion of Restricted
Stock, the Holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the Holders of all of the
Restricted Stock; and provided further that the obligation of the Company to
register the Restricted Stock, as set forth in Section 7.1 hereof, may not be
waived or amended without the written consent of all the Holders of the
Restricted Stock then outstanding.
(b) Upon the effectuation of each such waiver, consent or agreement of
amendment or modification, the Company shall promptly give written notice
thereof to the Holders of the Restricted Stock who have not previously consented
thereto in writing.
8.2 Effect of Waiver or Amendment. Each Investor acknowledges
-----------------------------
that by operation of Section 8.1 hereof the Holders of a Majority of the
Restricted Stock then outstanding will, subject to the limitations contained in
such Section 8.1, have the right and power to diminish or eliminate certain
rights of such Investor under this Agreement.
8.3 Rights of Holders Inter Se. Each Holder of Securities shall
--------------------------
have the absolute right to exercise or refrain from exercising any right or
rights which such Holder may have by reason of this Agreement or any Security,
-18-
including, without limitation, the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such Holder shall not incur any liability
to any other Holder or Holders of Securities with respect to exercising or
refraining from exercising any such right or rights.
8.4 Exculpation Among Investors and Holders. Each Investor
---------------------------------------
acknowledges that it is not relying upon any other Investor, or any officer,
director, employee, agent, partner or affiliate of any such other Investor, in
making its investment or decision to invest in the Company or in monitoring such
investment. Each Investor agrees that no Investor nor any controlling person,
officer, director, stockholder, partner, agent or employee of any Investor shall
be liable for any action heretofore or hereafter taken or omitted to be taken by
any of them relating to or in connection with the Company or the Securities, or
both.
8.5 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
given personally, by air courier (with signed acknowledgement of receipt) or by
facsimile transmission (with confirmation of transmission):
(a) If to any Holder of any of the Securities, addressed to such
Holder at its address (or to its telecopier number) shown on his or
its signature page hereto, or at such other address (or telecopier
number) as such Holder may specify by written notice to the Company,
or
(b) If to the Company, addressed to it at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or, if by telecopier, to (▇▇▇) ▇▇▇-▇▇▇▇)
or at such other address (or telecopier number) as the Company may
specify by written notice to the Investors,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
upon receipt.
8.6 Severability. Should any one or more of the provisions of
------------
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or
-19-
provisions determined to be illegal or unenforceable and shall not be affected
thereby.
8.7 Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of the respective
successors of the parties hereto. This Agreement shall not run to the benefit
of or be enforceable by any Person other than a party to this Agreement and its
successors and permitted assigns.
8.8 Headings. 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.
8.9 Choice of Law. Except where the issue for determination
-------------
is one of corporate law, in which case the Delaware General Corporation Law
shall govern, it is the intention of the parties that the internal substantive
laws, and not the laws of conflicts, of California should govern the
enforceability and validity of this Agreement, the construc tion of its terms
and the interpretation of the rights and duties of the parties.
8.10 Expenses. Each party to this Agreement shall bear its own
--------
costs and expenses incurred with the negotiation and execution of this Agreement
and the perfor ▇▇▇▇▇ of the transactions contemplated hereby.
8.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
8.12 Publicity. No party hereto shall originate any press
---------
release or other public announcement, written or oral, relating to this
Agreement, or to performance hereunder or the existence of any arrangement among
the parties hereto without the prior approval of the other parties hereto which
may be the subject of such press release or announcement, except to the extent
that such press release or announcement is reasonably concluded by a party to be
required by applicable law. The Investors acknowledge that the Company will be
required to file a copy of this Agreement, and the other agreements and
instruments contemplated hereby, with the Commission and to describe these
transactions in its public filings, including in the registration statement
contemplated
-20-
by Section 7.1 (which registration statement shall also include the name of each
Investor). Subject to the foregoing, the Company will not use the name of any
Investor in a public announcement without such Investor's prior consent.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of the date first above written.
PROTEIN POLYMER TECHNOLOGIES, INC.
By: /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
INVESTORS:
THE ARIES TRUST
By: Paramount Capital Asset Management,
Inc., Its Investment Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.,
President
THE ARIES DOMESTIC FUND, L.P.
By: Paramount Capital Asset Management,
Inc., Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.,
President
BIOTECHNOLOGY VALUE FUND, L.P.
By: BVF Partners L.P.
Its General Partner
By: BVF Inc., Its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
-21-
BIOTECHNOLOGY VALUE FUND, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
BIOTECHNOLOGY VENTURE PARTNERS, L.P.
By: BVF Partners L.P.
Its General Partner
By: BVF Inc., Its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
FOUR PARTNERS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Managing General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ #3
INVESTMENT 10 L.L.C.
By: Grosvenor Multi-Strategy Fund, L.P.,
a Member
By: Grosvenor Capital Management, L.P.,
Its General Partner
By: Grosvenor Capital Management,
Inc., Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇▇▇▇▇▇▇,
Vice President
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ DEVELOPMENT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇, Vice President
-22-
VERTICAL FUND ASSOCIATES, L.P.
By: Vertical Group, L.P.,
Its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
General Partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-23-
ANNEX A
-------
SCHEDULE OF INVESTORS AND REQUIRED PAYMENT
Number of Shares Required
Name and Address Being Purchased Payment
---------------- ---------------- --------
The Aries Trust 266,667 $666,667.50
c/o Paramount Capital Asset
Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Aries Domestic Fund, L.P. 133,333 333,332.50
c/o Paramount Capital Asset
Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Biotechnology Value 340,000 850,000.00
Fund, L.P.
c/o ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Biotechnology Value 70,000 175,000.00
Fund, Ltd.
c/▇ ▇▇▇▇▇▇▇▇▇▇▇ Fund Managers
(Guernsey) Limited
P.O. Box 211, ▇▇▇▇▇▇▇▇▇▇▇ House
The Grange, St. ▇▇▇▇▇ Port
Guernsey GY1 3NQ
Channel Islands
Biotechnology Venture 240,000 600,000.00
Partners, L.P.
c/o ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Four Partners 300,000 750,000.00
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
A-1
Number of Shares Required
Name and Address Being Purchased Payment
---------------- ---------------- --------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ #3 20,000 $ 50,000.00
Fiduciary Trust Co.
c/o Mr. ▇▇▇ ▇▇▇▇▇
Two World Trade Center
New York, NY 10048-0772
Investment 10, L.L.C. 30,000 75,000.00
c/o ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Development 400,000 1,000,000.00
Corporation
One ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇
Vertical Fund Associates, L.P. 100,000 250,000.00
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ 4,000 10,000.00
▇▇▇ ▇▇▇▇ 46th, #1 ------------- -------------
New York, NY 10017
TOTAL 1,904,000 $4,760,000.00
============= =============
A-2