INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of May 5, 1999, by and
among ViroPharma Incorporated, a Delaware corporation (the "Company"), and
Perseus-▇▇▇▇▇ BioPharmaceutical Fund, LP, a Delaware limited partnership (the
"Purchaser").
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, (i) shares (the "Shares") of the
Company's Series A Convertible Participating Preferred Stock, par value $.001
per share, having the terms and conditions set forth in a Certificate of
Designation substantially in the form attached hereto as Exhibit A (the
"Preferred Stock"), and (ii) warrants to purchase shares of Common Stock (the
"Warrants") having the terms and conditions set forth in the form of Warrant
certificate attached hereto as Exhibit B, in each case, upon the terms and
subject to the conditions set forth herein and therein. The Warrants, together
with the shares of Preferred Stock, are referred to herein as the "Securities."
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Company and the Purchaser agree as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following meanings
for all purposes of this Agreement:
"1998 Form 10-K" has the meaning set forth in Section 3.1(a).
"Act" means the Securities Act of 1933, as amended, or any superseding
Federal statute, and the rules and regulations promulgated thereunder, all as
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any such superseding Federal statute.
An "Affiliate" of, or a person "affiliated" with, a specified Person,
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. The term "control" (including the terms "controlling," "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management, policies or
investment decisions of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
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"Annual Reports" means the Company's Annual Reports on Form 10-K for
the years ended December 31, 1998 and 1997, each as filed with the SEC
(including, in each case, all amendments thereto filed with the SEC prior to the
date of this Agreement, all exhibits and schedules thereto and documents
incorporated by reference therein, but excluding any amendments thereto made
subsequent to the date hereof).
"Benefit Plans" has the meaning set forth in Section 3.17.
"Board of Directors" means the Board of Directors of the Company, as
constituted from time to time.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in New York City.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock.
"Certificate of Designation" means the Certificate of the Powers
Designations, Preferences and Rights of the Preferred Stock substantially in the
form of Exhibit A hereto.
"Certificate of Incorporation" means the Second Amended and Restated
Certificate of Incorporation of the Company, as amended through the date hereof.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means a share of the Company's Common Stock, par value
$.002 per share.
"Company" has the meaning set forth in the preamble to this Agreement.
"Encumbrance" means any mortgage, pledge, lien, security interest,
restriction upon voting or transfer, claim or other encumbrance of any kind.
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"Environmental Laws" means all Federal, state, local and foreign laws,
principles of common law, regulations, codes and ordinances, as well as orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder relating to pollution, protection of the environment, or health and
safety, as in effect at the time.
"ERISA" has the meaning set forth in Section 3.17.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of such superseding
Federal statute.
"FDA" means the United States Food and Drug Administration.
"General Partner" means Perseus-▇▇▇▇▇ Partners, LLC, a Delaware limited
liability company, the sole general partner of the Purchaser.
"Governmental Authority" means the government of any nation or state,
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Intellectual Property" has the meaning set forth in Section 3.12.
"Knowledge of the Company" means the actual knowledge of the executive
officers of the Company without investigation.
"Law" means any law, treaty, rule or regulation of a Governmental
Authority or judgment, order, writ, injunction or determination of an arbitrator
or a court or other Governmental Authority as in effect on the date hereof.
"License Agreement" means the agreement by and between Sanofi, a
corporation organized and existing under the laws of France ("Sanofi"), and the
Company, dated as of December 22, 1995, and all amendments thereto.
"Licenses" means any certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
Governmental Authorities.
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"Losses" has the meaning set forth in Section 7.
"Material Adverse Effect" means a material adverse effect on the
assets, results of operations, business, prospects or condition (financial or
otherwise) of the Company.
"Options" has the meaning set forth in Section 3.7.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in the first recital of
this Agreement.
"Purchaser" has the meaning set forth in the preamble to this
Agreement.
"Purchaser Director" means the person serving as a member of the Board
of Directors who has been designated by the Company in accordance with Section
5.3.
"Quarterly Reports" means the Company's Quarterly Reports on Form 10-Q
for the quarters ended September 30, 1998, June 30, 1998 and March 31, 1998,
each as filed with the SEC.
"Registrable Securities" means the shares of Common Stock issued or
issuable upon conversion or exercise of the Securities.
"Related Directors" means those members of the Board of Directors who
are either employees of the Company or are associated with investors in the
Company.
"Representatives" means the officers and directors of the General
Partner and the employees, counsel, accountants and other authorized
representatives of the Purchaser, the General Partner or any Affiliates of
either person.
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"Research Agreement" means the agreement by and between Boehringer
Ingelheim Pharmaceuticals, Inc., a Delaware corporation ("BI"), and the Company,
dated as of July 23, 1996, and all amendments thereto.
"Restricted Securities" means the Securities or shares of capital stock
issued or issuable upon conversion or exercise of the Securities.
"Rights" means any rights, title, interest or benefit of whatever kind
and nature.
"Rights Plan" means the Stockholders' Rights Plan, dated as of
September 10, 1998, by and among the Company and StockTrans, Inc., as Rights
Agent, as amended on May 5, 1999.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means the Annual Reports, the Quarterly Reports and all
other documents filed by the Company with the SEC thereafter prior to the date
hereof pursuant to Sections 13 or 15(d) of the Exchange Act (including all
exhibits and schedules thereto and documents incorporated by reference therein),
but shall not include any portion of any document which is not deemed to be
filed under applicable SEC rules and regulations.
"Securities" has the meaning set forth in the first recital of this
Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, joint venture, association, limited liability
company or partnership, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which 50% or more of the
equity ownership is, at the time, owned, directly or indirectly by such Person.
"Tax" or "Taxes" has the meaning set forth in Section 3.14.
"Transaction Documents" means (i) this Agreement (including the
exhibits and schedules attached hereto) and (ii) the Warrants.
"Transfer" means any sale, assignment, transfer or disposition by gift
or otherwise, including without limitation, any distribution in liquidation or
otherwise by a corporation or partnership or other Person.
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"Warrants" has the meaning set forth in the first recital of this
Agreement.
2. CLOSING.
2.1 Time and Place of the Closing. Subject to the terms and
conditions of this Agreement, the closing of the sale and purchase of the
Securities contemplated hereby (the "Closing") shall take place at the offices
of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at 10:00 A.M., New York time, on the date hereof. The
"Closing Date" shall be the date the Closing occurs.
2.2 Transactions at the Closing. At the Closing, subject to
the terms and conditions of this Agreement, the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase, Preferred Stock and Warrants
for an aggregate purchase price of $14,260,000 (the "Purchase Price") by wire
transfer of immediately available funds to an account or accounts previously
designated by the Company. At the Closing, the Company shall deliver to the
Purchaser certificates representing such number of shares of Preferred Stock and
Warrant certificates representing the number of Warrants as are set forth
opposite the Purchaser's name on Schedule 2.2, each registered in the name of
the Purchaser or its nominees, against payment by the Purchaser of the Purchase
Price payable by the Purchaser in respect thereof.
2.3 Perseus-▇▇▇▇▇ Management, LLC Fee. At the Closing, subject
to the terms and conditions of this Agreement, the Company shall pay to
Perseus-▇▇▇▇▇ Management, LLC, a Delaware limited liability company ("Perseus-
▇▇▇▇▇ Management"), a fee in an amount equal to $499,100, by wire transfer of
immediately available funds to an account or accounts designated by
Perseus-▇▇▇▇▇ Management.
2.4 Rights Plan. Prior to, or concurrently with, the Closing,
the Company will adopt the amendment to the Rights Plan substantially in the
form attached hereto as Exhibit C.
2.5 Opinion of Counsel. At the Closing, the Purchaser shall
receive the favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel to the
Company, dated the Closing Date, substantially in the form of Annex A.
2.6 Secretary's Certificate. At the Closing, the Purchaser
shall receive a certificate, dated the Closing Date and signed by the secretary
or an
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assistant secretary of the Company on behalf of the Company, certifying the
correctness of attached copies of the Certificate of Incorporation (including
amendments thereto), the By-laws (including amendments thereto), and resolutions
of the Board of Directors approving the sale of the Securities to the Purchaser
and the other transactions contemplated hereby.
2.7 Reservation of Stock. At the Closing, 3,195,000 shares of
Common Stock shall have been duly authorized and reserved for issuance upon
conversion or exercise of the Securities, as the case may be.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser that the
following are true and correct as of the Closing Date:
3.1 Corporate Existence and Power.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Company's annual
report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K").
The Company is duly qualified to transact business as a foreign corporation and
is in good standing (if applicable) in each jurisdiction in which the conduct of
its business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other failures reasonably be
expected to have a Material Adverse Effect.
(b) True, correct and complete copies of the
Certificate of Incorporation and the By-Laws as in effect on the date hereof
have been provided by the Company to the Purchaser.
3.2 Power and Authority. The Company has the full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. The execution, delivery and performance by the
Company of this Agreement and each of the Transaction Documents and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized and approved by the Board of Directors and no further corporate
action on the part of the Company (other than the filing of the Certificate of
Designation under the Delaware General Corporation Law) is necessary to
authorize
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the execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby. The Board
of Directors has duly adopted the Certificate of Designation. This Agreement has
been duly executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3.3 Subsidiaries. The Company has no Subsidiaries and does not
otherwise own or control, directly or indirectly, any other person, corporation,
association, or business entity. Except as described in the 1998 Form 10-K, the
Company is not a participant in any joint venture, partnership, or similar
arrangement.
3.4 Affiliate Transactions. Except as disclosed in the
Company's Proxy Statement as filed with the SEC on April 6, 1999, the Company is
not a party to any transaction or series of transactions or any contract with
any officer, director, employee or Affiliate of the Company, in each case, the
value of which is in excess of $60,000.
3.5 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of this Agreement and each Transaction Document to
which it is a party by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with, contravene or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under, or result in the creation or imposition of any Encumbrance upon
any assets or properties of the Company or cause the Company to be required to
redeem, repurchase or offer to repurchase any of their respective indebtedness
under (i) the Certificate of Incorporation, the By-laws or other organizational
document of the Company, (ii) any material Law of any Governmental Authority
having jurisdiction over the Company or any of its assets, properties or
operations or (iii) any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any material lease, permit, license or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the assets, properties or operations of the Company
is subject. The consummation of the transactions contemplated by the Transaction
Documents including, without limitation, the (i) acquisition by the Purchaser of
the Securities pursuant hereto, (ii) conversion of the Preferred Stock into
Common Stock as provided for in the Certificate of Designation and/or (iii)
exercise of the Warrants, will not:
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(a) result in any anti-dilution adjustment or change
in conversion or exercise ratio or conversion or exercise price or similar
adjustment with respect to any outstanding equity or debt securities of the
Company; or
(b) in the Company's belief, result in a change in
control of the Company under the License Agreement or otherwise give Sanofi the
right to discontinue or terminate the License Agreement.
3.6 Consents. No consent, approval, authorization, order,
registration, filing or qualification of or with any (i) Governmental Authority,
(ii) stock exchange on which the securities of the Company are traded or (iii)
other Person (whether acting in an individual, fiduciary or other capacity) is
required to be made or obtained by the Company for the execution, delivery and
performance by the Company of this Agreement and each Transaction Document to
which it is a party and the consummation of the transactions contemplated hereby
and thereby, except such approvals as may be required under the Act and state
securities laws in connection with the performance by the Company of its
obligations under Section 8 hereof and except consents which are not material to
the business or operations of the Company. Shareholder approval is not required
to be obtained by the Company for the execution, delivery and performance by the
Company of this Agreement and each Transaction Document to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
3.7 Capitalization. Schedule 3.7 sets forth, as of April 30,
1999, (i) the authorized Capital Stock of the Company, (ii) the issued and
outstanding Capital Stock of the Company and (iii) in the aggregate, all
outstanding options, warrants, conversion privileges or other rights to purchase
or otherwise acquire any authorized but unissued or treasury shares of Capital
Stock (collectively, "Options") of the Company. No shares of the Company's
Preferred Stock, par value $.001 per share (the "Company Preferred Stock"), are
issued and outstanding as of the date hereof. Since April 30, 1999, the Company
has not issued any additional shares of Capital Stock (other than Common Stock
issued upon exercise of outstanding Options). Schedule 3.7 sets forth the number
of shares of Common Stock reserved for (i) issuance upon exercise of all
outstanding Options, (ii) issuance upon conversion of the Preferred Stock and
(iii) issuance upon exercise of the Warrants. Except as set forth in Schedule
3.7, no other shares of the Company's Capital Stock are reserved for future
issuance. The shares of Preferred Stock and the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock, and the Warrants and the
shares of Common Stock issuable upon exercise of the Warrants, when issued and
paid for in compliance with the provisions of this Agreement, the Certificate of
Designation, the Warrants and the Certificate of Incorporation, will be duly
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authorized, validly issued, fully paid and nonassessable, will not have been
issued in violation of the preemptive or similar rights of any Person. The
issued and outstanding shares of Capital Stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with the registration and qualification requirements of all
applicable federal securities laws or an exemption therefrom.
3.8 SEC Documents.
(a) The Company has made all filings required to be
made with the SEC since November 19, 1996.
(b) As of its filing date, each SEC Document filed
pursuant to the Exchange Act (i) complied in all material respects with the
applicable requirements of the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) Each final registration statement filed with the
SEC, as amended or supplemented prior to the Closing Date, if applicable,
pursuant to the Act, as of the date such statement or amendment became or will
become effective (i) complied or will comply in all material respects with the
applicable requirements of the Act and (ii) did not or will not contain any
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
(in the case of any prospectus, in light of the circumstances under which they
were made).
3.9 Financial Statements. The audited financial statements and
notes included in the SEC Documents comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, were prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved except as noted
therein, and fairly present in all material respects the financial condition,
results of operations, cash flows and changes in stockholders' equity of the
Company at the dates and for the periods presented. Since December 31, 1998, the
Company has not incurred any material liabilities other than in the ordinary
course of business of the Company, and there has been no change, and no
development or event involving a prospective change, which has had or could
reasonably be expected to have, a Material Adverse Effect.
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3.10 No Existing Violation, Default, Etc. The Company is not
in violation (i) of any provision of its Certificate of Incorporation, By-laws
or other organizational documents or (ii) of any applicable Law or regulation,
which violation has or would reasonably be expected to have a Material Adverse
Effect. No breach, event of default or event that, but for the giving of notice
or the lapse of time or both, would constitute an event of default exists under
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, permit, license or other agreement to which the Company is a
party or by which the Company is bound or to which any of the properties, assets
or operations of the Company is subject, which breach, event of default, or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default, has or would reasonably be expected to have a
Material Adverse Effect.
3.11 Licenses and Permits. The Company has such Licenses as
are necessary to own, lease or operate its properties and to conduct its
businesses in the manner described in the SEC Documents and as currently owned
or leased and conducted and all such Licenses are valid and in full force and
effect, except Licenses the failure of which to have or to be in full force and
effect individually or in the aggregate has not had, and would not reasonably be
expected to have, a Material Adverse Effect. The Company has not received any
written notice that any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the Knowledge of the
Company, threatened, to suspend, revoke or limit any such License the effect of
which would reasonably be expected to have a Material Adverse Effect. The
Company is in compliance with its respective obligations under such Licenses,
with such exceptions as individually or in the aggregate have not had, and would
not reasonably be expected to have, a Material Adverse Effect, and no event has
occurred that allows, or after notice or lapse of time would allow, revocation,
suspension, limitation or termination of such Licenses, except such events as
have not had, or would not reasonably be expected to have, a Material Adverse
Effect.
3.12 Intellectual Property. There are no patents, patent
applications, and other patent rights (including any divisions, continuations,
continua tions-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are modified or resubmitted) owned or licensed by the Company
("Intellectual Property") other than as disclosed in Schedule 3.12. Except as
disclosed in Schedule 3.12: (i) the Company owns or possesses sufficient legal
rights to all Intellectual Property and Related Intellectual Property (as
defined below in this Section 3.12) necessary for its business as presently
conducted without any conflict or infringement of rights of others; (ii)
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other than the License Agreement, those agreements listed on Schedule 3.18 and
those contracts, agreements, and instruments required to be filed as an exhibit
to the 1998 Form 10-K, there are no material outstanding options, licenses, or
agreements of any kind relating to the Intellectual Property nor is the Company
bound by or a party to any material options, licenses, or agreements of any kind
with respect to the intellectual property of any other person or entity; (iii)
to the Knowledge of the Company, the Company has not infringed upon or otherwise
violated the intellectual property rights of any third party; (iv) other than as
previously disclosed to the Purchaser in writing, the Company has not received
any claim, charge, demand, notice or other communication alleging that the
Company has violated or, by conducting its business as proposed, would violate
any intellectual property rights of any other person or entity; (v) other than
as previously disclosed to the Purchaser in writing, the Company is unaware of
any facts that would form a reasonable basis for an action or claim by others
alleging infringement by the Company of Intellectual Property of others; and
(vi) all of the Company's Intellectual Property is owned by the Company, free
and clear of all liens and encumbrances and held in the Company's name. None of
the execution or delivery of this Agreement or any Transaction Documents, or the
carrying on of the Company's business by the employees of the Company, will
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument related to
the Company's Intellectual Property. The Company has taken all action reasonably
necessary and desirable to maintain and protect each item of Intellectual
Property owned by the Company. Each employee, officer and director of the
Company has executed an agreement regarding inventions and confidentiality
substantially in the form or forms delivered to the Purchaser. The Company is
unaware of uncited prior art that is more pertinent than the art already of
record in the U.S. Patent and Trademark Office in connection with the patents
and patent applications of the Company's Intellectual Property.
As used in this Agreement, the term "Related Intellectual Property"
means all intellectual property rights and other intangible property rights
(other than standard license agreements and other related rights acquired by the
Company or under which the Company is the licensee in connection with the
Company's use of administrative, ministerial, accounting and financial office
automation software and related products) including, without limitation, (i)
trademarks, service marks, fictitious or assumed names, trade dress, trade
names, brand names, Internet domain names, designs, logos, or corporate names,
whether registered or unregistered, and all registrations and applications for
registration thereof; (ii) copyrights, including all renewals and extensions
thereof, copyright registrations and applications for registration thereof, and
non-registered copyrights; (iii) trade secrets, concepts, ideas, designs,
research, processes, procedures, techniques, methods, know-how, data, mask
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works, discoveries, inventions, modifications, extensions, improvements,
formulae and other proprietary rights (whether or not patentable or subject to
copyright, mask work, or trade secret protection); and (iv) computer software
programs, including, without limitation, all source code, object code, and
documentation related thereto.
3.13 Environmental Matters. The Company and its operations and
properties are and have been in compliance in all material respects with all
applicable Environmental Laws, and to the Knowledge of the Company, no material
expenditures are or will be required in order to comply with any applicable
Environmental Laws. There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to the Knowledge of the Company,
threatened against the Company pursuant to Environmental Laws which could
reasonably be expected to result in a material fine, penalty or other
obligation, cost or expense. There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company with, or which have given rise to,
or will give rise to, material liability to the Company under Environmental
Laws.
3.14 Taxes. The Company has filed or caused to be filed, or
has properly filed extensions for, all material Tax returns that are required to
be filed and has paid or caused to be paid all material Taxes as shown on said
returns and on all material assessments received by it to the extent that such
Taxes have become due, except Taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves, in accordance with generally accepted accounting principles,
have been set aside. These returns are true and correct in all material
respects. The Company has paid or caused to be paid, or have established
reserves that the Company reasonably believes to be adequate in all material
respects, for all Tax liabilities applicable to the Company for all fiscal years
that have not been examined and reported on by the taxing authorities (or closed
by applicable statutes). Schedule 3.14 sets forth the tax year through which
United States Federal income tax returns of the Company have been examined and
closed. For purposes of this Section 3.14, "Tax" or "Taxes" means any federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
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3.15 Litigation. Other than as disclosed in Schedule 3.15,
there are no actions, suits, proceedings, or investigations pending or, to the
Knowledge of the Company, threatened against the Company or its properties
before any court or governmental agency (nor, other than as previously disclosed
to the Purchaser in writing, to the Knowledge of the Company, is there any basis
therefor). The foregoing includes, without limitation, any action, suit,
proceeding, or investigation pending or currently threatened against the Company
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any, information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, negotiations by the Company with potential
backers of, or investors in, the Company or in connection with any investment
agreement, rights agreement, stock purchase agreement, shareholder(s) agreement
or similar agreement, arrangement or understanding entered into by the Company.
The Company is not a party to, or to the Knowledge of the Company, named in any
order, writ, injunction, judgment or decree of any court, government agency, or
instrumentality. There is no action, suit or proceeding by the Company currently
pending, or that the Company currently intends to initiate.
3.16 Labor Relations. No (i) grievance or arbitration
proceeding arising out of or under collective bargaining agreements is pending
or, to the Knowledge of the Company, threatened against the Company and (ii)
strike, labor dispute, slowdown or stoppage has occurred within the past 36
months or is pending or, to the Knowledge of the Company, threatened against the
Company. The Company is not a party to any collective bargaining agreement or
contract and to the Knowledge of the Company, no union organizing activities are
taking place that affect the employees of the Company.
3.17 Employee Benefits.
(a) Except for the plans described in the SEC
Documents filed with the SEC prior to the date of this Agreement and those
listed in Schedule 3.17 (the "Benefit Plans"), there are no employee benefit
plans or arrangements of any type (including, without limitation, plans
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder ("ERISA") under which the
Company has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and
(o) of the Code), any material liability with respect to any current or former
employee of the Company or any Commonly Controlled Entity. No such Benefit Plan
is a "multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)) or
subject to Title IV of ERISA
15
and, during the previous six years, the Company has not contributed to, or had
any obligation to contribute to, any such multiemployer plan or any plan subject
to Title IV of ERISA.
(b) With respect to each Benefit Plan: (i) such
Benefit Plan has been maintained and administered at all times in material
compliance with its terms and applicable law and regulation; (ii) no event has
occurred and to the Knowledge of the Company, there exists no circumstance under
which the Company could directly, or indirectly through a Commonly Controlled
Entity, incur any material liability under ERISA, the Code or otherwise (other
than routine claims for benefits); (iii) there are no actions, suits or claims
(other than routine claims for benefits) pending or, to the Knowledge of the
Company, threatened, with respect to any Benefit Plan or against the assets of
any Benefit Plan with respect to which suits management of the Company
reasonably believes the Company could incur any material liability; (iv) all
contributions and premiums due and owing to any Benefit Plan have been made or
paid on a timely basis and no "accumulated funding deficiency", as defined in
Code Section 412, has been incurred, whether or not waived; and (v) if such
Benefit Plan is intended to be qualified under Section 401(a) of the Code, such
Benefit Plan has been determined to be so qualified and each trust created under
such Benefit Plan has been determined to be exempt from tax under Section 501(a)
of the Code and to the Knowledge of the Company, no event has occurred since the
date of such determinations, including effective changes in laws or regulations
or modifications to the Benefit Plans, that would adversely affect such
qualification or tax exempt status.
(c) The Company has no Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of post-retirement health and medical benefits for current and former
employees of the Company. No condition exists that would prevent the Company
from amending or terminating any plan providing health or medical benefits in
respect of current or former employees of the Company.
(d) No employee or former employee of the Company
will become entitled to any bonus, retirement, severance, job security or
similar benefit or enhanced such benefit (including acceleration of vesting or
exercise of an incentive award, stock option or restricted security) as a result
of the transactions contemplated hereby.
(e) All persons classified by the Company as
independent contractors satisfy the requirements of applicable law to be so
classified
16
and the Company has no obligation to provide benefits to any such person under
any Benefit Plan.
3.18 Contracts. Except as disclosed in Schedule 3.18, all
contracts, agreements, and instruments required to be filed as an exhibit to the
1998 Form 10-K are legal, valid, binding, and in full force and effect, and, to
the Knowledge of the Company, are enforceable by the Company in accordance with
their respective terms, subject to (x) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, (y) rules of law governing
specific performance, injunctive relief or other equitable remedies, and (z)
actions or omissions of parties other than the Company; provided, however, that
the Company has no Knowledge of any such actions or omissions. Except as
disclosed in Schedule 3.18, other than (i) those contracts, agreements, and
instruments filed as an exhibit to the 1998 Form 10- K and (ii) agreements
relating exclusively to the Company's preclinical development activities, the
Company has not granted to any Person rights, whether exclusive or nonexclusive,
to develop, manufacture, assemble, distribute, market, or sell its (i)
pleconaril, (ii) hepatitis C or (ii) respiratory syncytial virus products, and
has not granted any rights that limit the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell such products.
In connection with the License Agreement: (i) no violation,
breach, event of default or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default exists thereunder;
(ii) through the date hereof, Sanofi has selected, with respect to each Product
(as defined in the License Agreement) developed by the Company, the option set
forth in Section 3.2(b) therein which provides that Sanofi has the right to use
all information and data developed by the Company thereunder for applying for
Registrations (as defined in the License Agreement) of the Products in the
European Union, without joining the Company in the Development Work (as defined
in the License Agreement) of the Products in the Territory (as defined in the
License Agreement); and (iii) the License Agreement permits the Company to
develop all therapeutic applications for diseases caused by picornaviruses which
the Company is now developing, including but not limited to viral meningitis and
viral respiratory illness. None of the compounds currently in development by the
Company for treatment of hepatitis C are subject to any rights of BI under the
Research Agreement.
3.19 No Material Adverse Change. Except as disclosed in
Schedule 3.19, since December 31, 1998: (i) the Company has not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that would reasonably be expected to result
in a Material
17
Adverse Effect; (ii) the Company has not sustained any loss or interference with
its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had or that would
reasonably be expected to have a Material Adverse Effect; (iii) there has been
no material change in the indebtedness of the Company; (iv) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its Capital Stock; (v) the Company has not made (nor does it
propose to make) (a) any material change in its accounting methods or practices,
(b) any material change in the depreciation or amortization policies or rates
adopted by it, in the case of both (a) and (b), except as may be required by law
or applicable accounting standards or (c) in a manner inconsistent with the
Company's past practice, any grant or award of stock-based compensation or
material increase in compensation to any employee or material modification to
any such grant or award or any Benefit Plan; and (vi) there has been no event
causing a Material Adverse Effect, nor any development that would, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
3.20 Insurance. The Company has in full force and effect (i)
product liability, (ii) fire and (iii) casualty insurance policies, in each
case, with financially sound and responsible insurance companies, and with
respect to clauses (ii) and (iii) above, with extended coverage, sufficient in
amount (subject to reasonable deductions) in respect of its properties that
might be damaged or destroyed.
3.21 Rights Plan. The Company has not adopted a stock holders
rights plan, poison pill or similar arrangement other than the Rights Plan. The
consummation of the transactions contemplated by the Transaction Documents
(including, without limitation, the (i) acquisition by the Purchaser of the
Securities pursuant hereto, (ii) conversion of the Preferred Stock into Common
Stock as provided for in the Certificate of Designation and/or (iii) exercise of
the Warrants) will not by itself cause any holder of a Right (as defined in the
Rights Plan) to have the right to exercise any such Right in whole or in part.
3.22 Broker's Fees. Except for any fees payable to
Perseus-▇▇▇▇▇ Management and as previously disclosed to the Purchaser in
writing, the Company has not incurred, and 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 or any transaction contemplated hereby.
3.23 Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
18
3.24 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchaser set forth in Section 4.5 hereof are true and correct in all
material respects, the offer and sale of the Securities made pursuant to this
Agreement will be exempt from the registration requirements of the Act. Neither
the Company nor any Person acting on its behalf has, in connection with the
offering of the Securities engaged in (i) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Act, or (iii) any action that would require the
registration under the Act of the offering and sale of the Securities pursuant
to this Agreement or that would violate applicable state securities or "blue
sky" laws. The Company has not made and will not prior to the Closing make,
directly or indirectly, any offer or sale of shares of its Capital Stock, or any
Options, if as a result the offer and sale of the Securities contemplated
hereby, or any of them, could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company that the
following are true and correct as of the Closing Date:
4.1 Existence and Power. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to own, lease
and operate its properties and to conduct its business as currently conducted.
4.2 Power and Authority. The Purchaser has the full power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to perform its obligations hereunder. The execution, delivery and
performance by the Purchaser of this Agreement and the other Transaction
Documents and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by the Purchaser. Each this
Agreement and the other Transaction Documents has been duly executed and
delivered by the Purchaser and each is a valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms.
4.3 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of this Agreement and the other Transaction
19
Documents by the Purchaser and to which it is a party and the consummation of
the transactions contemplated hereby and thereby will not conflict with,
contravene or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, (i) the partnership agreement or other
organizational documents of the Purchaser, (ii) any Law of any Governmental
Authority having jurisdiction over the Purchaser, or (iii) any material
agreement to which the Purchaser is a party.
4.4 Consents. No consent, approval, authorization, order,
registration, filing, or qualification of or with any Governmental Authority or
other Person (whether acting in an individual, fiduciary or other capacity) is
required to be made or obtained by the Purchaser for the consummation of the
transactions contemplated hereby and by the other Transaction Documents.
4.5 Acquisition for Own Account. The Securities to be acquired
by the Purchaser pursuant to this Agreement and the shares of capital stock
issuable under the exercise or conversion of the Securities are being and will
be acquired by the Purchaser for its own account and with no intention of
distributing or reselling the Securities in any transaction that would be in
violation of the Act or the securities laws of any state, without prejudice,
however, to the rights of the Purchaser at all times to sell or otherwise
dispose of all or any part of the Securities and the shares of capital stock
issuable under the exercise or conversion of the Securities under an effective
registration statement under the Act, under an exemption from such registration
available under the Act, and subject, nevertheless, to the disposition of the
Purchaser's property being at all times within its control. The Purchaser (i) is
an "accredited investor," as defined in Regulation D promulgated by the SEC
under the Act, (ii) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Securities and the shares of capital stock
issuable under the exercise or conversion of the Securities, and (iii) can bear
the economic risk of an investment in the Securities and the shares of capital
stock issuable under the exercise or conversion of the Securities and can afford
a complete loss of such investment. Neither the Purchaser nor any Affiliate of
the Purchaser, including Perseus-▇▇▇▇▇ Management, has made any offer to any
Person to sell or a solicitation of an offer to buy securities of the Company,
nor has such party engaged in any form of general solicitation or general
advertising in connection with the purchase of securities of the Company
hereunder. Notwithstanding the foregoing, nothing contained in this Section 4.5
shall affect or be deemed to modify any representation or warranty made by the
Company.
4.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The Purchaser is its own Ultimate
Parent Entity. As calculated under Section 801.11 of the regulations promulgated
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, the
20
Purchaser has less than $10 million in each of Annual Net Sales and Total
Assets. The capitalized terms in this Section 4.6 shall have the meanings
ascribed to them in the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
5. CERTAIN COVENANTS AND AGREEMENTS.
5.1 Publicity. From and after the date of this Agreement,
except as required by law, regulation or stock exchange requirements, neither
(i) the Company or any of its Affiliates nor (ii) the Purchaser or any of its
Affiliates shall, without the written consent of the other, make any public
announcement or issue any press release with respect to the transactions
contemplated by this Agreement. In no event will either (i) the Company or any
of its Affiliates or (ii) the Purchaser or any of its Affiliates make any public
announcement or issue any press release with respect to the transactions
contemplated by this Agreement without consulting with the other party, to the
extent feasible, as to the content of such public announcement or press release.
5.2 Use of Proceeds. The proceeds from the sale of Securities
shall be used by the Company for general corporate purposes.
5.3 Board of Directors.
(a) So long as the Purchaser or its Affiliates hold,
in the aggregate, at least: (i) 10.0% of the outstanding Common Stock; or (ii)
1.5 million shares of the Common Stock (with appropriate adjustment made for any
stock dividend, split-up or subdivision or any combination or reclassification
made or effected subsequent to the Closing Date), in each case, assuming that
the Securities or other rights convertible into or exchangeable or exercisable
for shares of the Common Stock have been converted, exchanged or exercised, the
Company shall use its best efforts to ensure that the Company's Board of
Directors shall consist of at least one Purchaser Director.
(b) In connection with the foregoing paragraph, the
Purchaser shall be entitled to recommend two candidates to the Company to become
members of the Board of Directors, one of whom the Company shall nominate and
unanimously recommend to the stockholders to become a member of the Board of
Directors (the "Purchaser Director"). A vacancy in the directorship held by the
Purchaser Director shall be filled by the Board of Directors, who shall select
one of two candidates recommend by the Purchaser.
21
(c) The Purchaser Director shall not be entitled to
any compensation for his or her participation on the Company's Board of
Directors other than reimbursement for the reasonable out-of-pocket expenses, if
any, incurred by such Purchaser Director in connection with the performance of
his or her duties. Notwithstanding the foregoing sentence, the Purchaser
Director shall be entitled to receive the same consideration paid to other
Related Directors in their capacity as members of the Company's Board of
Directors.
5.4 Purchaser Rights. From and after the Closing Date, so long
as the Purchaser or its Affiliates hold, in the aggregate, at least: (i) 10.0%
of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock
(with appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected subsequent
to the Closing Date), in each case, assuming that the Securities or other rights
convertible into or exchangeable or exercisable for shares of the Common Stock
have been converted, exchanged or exercised (the "Consultation Period"):
(a) The Purchaser shall be able to appoint a
non-voting representative to attend meetings of the Board of Directors of the
Company, to change the representative so appointed at any time and, upon the
resignation or other vacancy of such representative for any reason, to reappoint
such a representative. In addition, the Company shall provide the Purchaser with
a copy of any materials to be distributed or discussed at such meetings at the
same time as provided to members of the Board of Directors.
(b) During the Consultation Period, the Purchaser
shall be entitled, from time to time, to make proposals, recommendations and
suggestions to the Company relating to the business and affairs of the Company.
(c) During the Consultation Period, the Company shall
permit the Purchaser at all reasonable times and at the Purchaser's expense, to
discuss the Company's business and affairs with its officers and directors.
(d) During the Consultation Period, the Company shall
permit the Purchaser, at all reasonable times and at the Purchaser's expense, to
examine such books, records, documents and other written information in the
possession of the Company relating to its affairs as the Purchaser may
reasonably request.
(e) Anything in this Section 5.4 to the contrary
notwithstanding, the rights granted to the Purchaser under this Section 5.4
22
shall be suspended during any period of time during which the Company's Board of
Directors includes at least one Purchaser Director.
5.5 SEC Filings. From and after the date of this Agreement,
the Company agrees that it will use commercially reasonable efforts to file with
the SEC, within the time periods specified in the SEC's rules and regulations,
(i) all quarterly and annual financial information required to be filed with the
SEC on Forms 10-Q and 10-K, (ii) all current reports required to be filed with
the SEC on Form 8-K and (iii) any other information required to be filed with
the SEC. Further, the Company agrees that it will, for so long as the Purchaser
or its Affiliates continues to hold any Securities, use its best efforts to
qualify for use of Form S-3 under the Act.
5.6 Restrictions on Transfer; Legends.
(a) The Purchaser agrees that it will not Transfer
any of the Restricted Securities, except pursuant to an effective registration
statement under the Act or an applicable exemption from registration under the
Act.
(b) So long as the Restricted Securities are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Restricted Securities shall be subject to a
stop-transfer order and the certificates therefor shall bear the following
legend by which each holder thereof shall be bound:
"THE [WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE/SHARES
REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT
FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
(c) The Company shall, upon the written request of
the holder of the Restricted Securities and receipt by the Company of evidence,
including an opinion of counsel to the Purchaser that is acceptable to the
23
Company, reasonably satisfactory to it that such legend may be removed, issue
certificates for such Restricted Securities that do not bear the legend
described in Section 5.6(b).
5.7 Preemptive Rights. After the date hereof, the Company
shall give prior written notice to the Purchaser of the proposed private
placement of any Capital Stock or other equity securities by the Company for
cash, other than (i) issuances pursuant to the Company's equity compensation or
stock option plans and (ii) issuances pursuant to the Rights Plan (each a "New
Issuance") at a price below $6.20 per share (with appropriate adjustment made
for any stock dividend, split-up or subdivision or any combination or
reclassification made or effected subsequent to the Closing Date). Such notice
shall specify the number and class of securities to be issued, the rights, terms
and privileges thereof and the price at which such securities will be issued. By
written notice to the Company given within 15 Business Days of being notified of
such New Issuance, the Purchaser shall be entitled to purchase all, but not less
than all, of the Capital Stock or other securities contemplated by the New
Issuance; provided, however, that the Purchaser shall not have any right to
purchase securities pursuant to this Section 5.7 if, prior to a sale of
securities to the Purchaser pursuant to this Section 5.7, such securities would
be required to be registered under the Act; provided further that if the
Purchaser does not timely notify the Company of its election to purchase all of
the New Issuance on the terms specified in the foregoing notice, or unless the
Company or the placement agent for the New Issuance reasonably believes that
including the Purchaser in the group of investors for the New Issuance will
materially adversely affect the Company's ability to consummate the New Issuance
on the terms specified in such notice, then the Purchaser shall be permitted to
invest in the New Issuance in such amount to be reasonably determined in good
faith by the Company.
The closing of any purchase pursuant to this Section 5.7 shall be held
at the time and place of the closing of, and on the same terms and conditions
as, the New Issuance, or at such other time and place as the parties to the
transaction may agree.
5.8 Tax Reporting. The parties hereto agree and acknowledge
that neither party hereto will take the position that the Securities issued
pursuant to this Agreement are "Preferred Stock" under Section 305 of the Code
and the parties agree to file all tax returns, reports, forms and other such
documents ("Tax Returns") accordingly (the "Reporting Agreement"). The parties
further agree that neither party shall take any position inconsistent with the
Reporting Agreement upon examination of any Tax Return, in any refund claim, in
any litigation or otherwise.
24
5.9 Board of Directors. As soon as practicable after the date
hereof but no later than May 13, 1999, the Board of Directors shall have
appointed a Purchaser Director to the Board of Directors to serve until the
Company's 2001 annual meeting.
5.10 Indemnification Agreement. Concurrently with the
appointment of the initial Purchaser Director, and thereafter with respect to
future Purchaser Directors, the Company shall enter into an indemnification
agreement with any Purchaser Directors, substantially similar in form and
content to the indemnification agreements between the Company and any current
directors. Such indemnification agreement shall provide that each Purchaser
Director will be indemnified against all liabilities and expenses incurred in
connection with his services to the Company to the fullest extent permitted by
Delaware law.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties, covenants and agreements contained
herein shall survive the execution and delivery of this Agreement and the
Closing hereunder. The foregoing notwithstanding, the Company's liability to the
Purchaser for breaches of, or inaccuracies in, any of the Company's
representations and warranties contained in Section 3 (other than Sections 3.2
(Power and Authority) and 3.7 (Capitalization)), shall expire 24 months
following the Closing Date (unless the Purchaser shall have given notice to the
Company claiming a breach thereof prior to such date) and there shall be no
expiration of the time when a claim may be made by the Purchaser for breach of
or any inaccuracy or misrepresentation in Sections 3.2 (Power and Authority),
and 3.7 (Capitalization). All statements contained herein or in any certificate,
exhibit, schedule or other writing delivered in connection with the transactions
contemplated hereby shall be deemed representations and warranties of the
respective parties making them.
7. INDEMNIFICATION.
Except as otherwise provided in this Section 7, the Company agrees to
indemnify, defend and hold harmless the Purchaser and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners,
members and controlling persons to the fullest extent permitted by law from and
against any and all claims, losses, liabilities, damages, deficiencies,
judgements, assessments, fines, settlements, costs or expenses (including
interest, penalties and reasonable fees, dis bursements and other charges of
counsel) (collectively, "Losses") based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any
25
representation, warranty, covenant or agreement of the Company contained in this
Agreement or any other Transaction Document.
Notwithstanding anything to the contrary in this Section 7, the
indemnification and contribution provisions of Section 8 shall govern any claim
made with respect to registration statements filed pursuant thereto or sales
made thereunder.
8. REGISTRATION RIGHTS.
The Company hereby agrees to provide registration rights with respect
to the Registrable Securities as set forth below.
8.1 Securities Subject to this Agreement.
(a) Registrable Securities. For the purposes of this
Section 8, Registrable Securities will cease to be Registrable Securities when
such Registrable Securities are sold and otherwise transferred pursuant to Rule
144 under the Act or a registration statement covering such Registrable
Securities has been declared effective under the Act by the SEC and such
Registrable Securities have been disposed of pursuant to such effective
registration statement.
(b) Holders of Registrable Securities. A Person is
deemed to be a holder of Registrable Securities whenever such Person owns of
record Registrable Securities, or holds a warrant to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting instructions, notices or elections from two or more
persons with respect to the same Registrable Securities, the Company may act
upon the basis of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable Securities issuable
upon exercise of an option or upon conversion of another security shall be
deemed outstanding for the purposes of this Section 8.
8.2 Demand Registration.
(a) Request for Demand Registration. At any time
after the date hereof, the holders of 25.0% of the outstanding Registrable
Securities (the "Stockholders") may make a written request (the "Demand Notice")
for registration of Registrable Securities under the Act, and under the
securities or blue sky laws of any jurisdiction designated by such holder or
holders (a "Demand Registration"); provided, that the Company will not be
required to effect more than
26
two Demand Registrations in the aggregate at the request of the holders of
Registrable Securities pursuant to this Section 8.2(a); provided, further, that
the Company shall not be required to effect more than one registration pursuant
to this section in any six-month period. Notwithstanding the foregoing, the
Company shall not be required to effect any Demand Registration unless the
anticipated aggregate proceeds to the selling holders would equal or exceed
$2,000,000. Upon a request for a Demand Registration, the Company shall use its
best efforts to prepare and file with the SEC, as soon as practicable, a
registration statement for an offering to be made on a continuous basis pursuant
to Rule 415 of the Act (or any successor rule or similar provision then in
effect) (a "Shelf Registration Statement") registering the resale from time to
time by the Stockholders thereof of their Registrable Securities (the "Demand
Shelf Registration"). Within fifteen (15) days after the receipt of the Demand
Notice, the Company shall give written notice thereof to all holders holding
Registrable Securities and include in such registration all Registrable
Securities held by a holder thereof with respect to which the Company has
received written requests for inclusion therein at least ten (10) days prior to
the filing of the Demand Shelf Registration.
No Person has been granted registration rights that are inconsistent
with the rights to be granted to the Purchaser in this Agreement. Other than the
Amended and Restated Investors' Rights Agreement, dated May 31, 1996 (the
"Investors' Rights Agreement"), the Company has not entered into any agreement
pursuant to which the Company has granted registration rights. Except those
Persons having the right to piggy-back on a Demand Registration pursuant to the
Investors' Rights Agreement and disclosed in Schedule 8.2, no Person has the
right to piggy-back on a Demand Registration. To the extent any Person has the
right to piggy-back on a Demand Registration, the Company shall use its best
efforts to promptly obtain a waiver of any such rights. Unless holders of a
majority of the Registrable Securities to be included in the Demand Registration
consent in writing, no other Person (other than (i) any other holder of
Registrable Securities and (ii) any Person disclosed in Schedule 8.2 who has the
right to piggy-back on a Demand Registration pursuant to the Investors' Rights
Agreement for which the Company has not obtained a waiver of such right after
using its best efforts to promptly obtain such waiver), shall be permitted to
offer securities under any such Demand Registration.
(b) Effective Demand Registration. A registration
shall not constitute a Demand Registration until it has become effective under
the Act and remains effective until the earlier of the (i) completion of any
offering of securities thereunder and (ii) expiration of the second anniversary
(plus any Blackout Period, as defined below) from date on which it first became
effective under the Act (unless withdrawn upon the written request of the
holders). The Company shall use its best efforts to cause any registration
statement filed pursuant to Section 8.2(a) to
27
be declared effective under the Act as soon as practicable (and shall promptly
notify in writing the Stockholders once any such registration statement has been
declared effective).
(c) Blackout Periods. If the Demand Shelf
Registration (or any Subsequent Shelf Registration, as defined below) is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof (including, without limitation, amend the registration
statement concerned in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof), and such Demand Shelf
Registration (or any Subsequent Shelf Registration) will be deemed not to have
been effective during the period of such interference until the offering of
Registrable Securities pursuant to such Shelf Registration Statement (or
Subsequent Shelf Registration Statement) may legally resume (the "Blackout
Period").
(d) Subsequent Shelf Registration. Notwithstanding
the foregoing paragraph, if prior to the second anniversary (plus any Blackout
Period) from the date the Demand Shelf Registration covering the Registrable
Securities has been declared effective under the Act, the Company has failed to
obtain the withdrawal of any stop order, injunction or other order suspending
the effectiveness within 60 days of such cessation of effectiveness, the Company
shall file an additional Shelf Registration covering the Registrable Securities
(a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective until the earlier
of the (i) completion of any offering of securities thereunder; (ii) expiration
of the second anniversary (plus any Blackout Period, as defined below) from date
on which it first became effective under the Act (unless withdrawn upon the
written request of the holders); and (iii) date another Subsequent Shelf
Registration covering the Registrable Securities has been declared effective
under the Act. If the registration required under this Section 8 is deemed not
to have been effected then the Company shall continue to be obligated to effect
a registration statement pursuant to this Section 8.
(e) Underwriting Procedures. If holders of a majority
of the Registrable Securities included in the Demand Registration so elect, the
offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be a nationally
recognized investment banking firm selected by the Company with the consent of
such holders,
which consent will not be unreasonably delayed or withheld (an "Approved
Underwriter"). In such event, if the Approved Underwriter advises the Company in
writing that in its opinion the aggregate amount of such securities requested to
be included in such offering is sufficiently large to have a material adverse
effect on the success of such offering, the Company shall include in such
registration only the aggregate amount of securities that in the opinion of the
Approved Underwriter may be sold without any such material adverse effect and
shall first reduce (to zero, if necessary) the amount of securities sought to be
included therein by the holders of Registrable Securities and, if such reduction
is not sufficient, reduce, pro rata the amount of securities to be included by
each holder who wishes to participate in the Demand Registration through the
exercise of piggy-back registration rights as contemplated by Section 8.2(a). To
the extent more than 10.0% of the Registrable Securities so requested to be
registered are excluded from the offering, then the holders of such Registrable
Securities shall have the right to one additional Demand Registration under this
Section 8.2 with respect to such Registrable Securities.
(f) Deferral of Registration. Notwithstanding the
foregoing, if, at any time prior to the effective date of the registration
statement with respect to a Demand Registration, the Company is: (i) pursuing an
underwritten offering of shares of its Capital Stock for its own account, or
engaged in or proposes to engage in (A) financing, (B) acquisition of the
capital stock or substantially all the assets of any other person (other than in
the ordinary course of business) or (C) any disposition of material assets
(other than in the ordinary course of business), any tender offer or any merger,
consolidation, corporate reorganization or restructuring or other similar
transaction; and (ii) the Board of Directors, using good faith, determines that
it would be seriously detrimental to the Company for a registration statement to
be filed at such time, the Company may defer the filing of a registration
statement with respect to any Demand Registration required by this Section 8.2
until a date not later than 90 days from the date of the Deferral Notice (as
defined below) (the "Deferral Period"). If the Board of Directors of the Company
makes such determination, the Company shall give written notice (the "Deferral
Notice") of such determination to the holders of Registrable Securities;
provided, that, the Company may exercise its right to delay a Demand
Registration hereunder only once in any twelve-month period. The Company shall
notify the holders of the expiration of the Deferral Period and shall cause the
registration statement with respect to the Demand Registration to be filed on
the fifth Business Day following the expiration of the Deferral Period (the
"Withdrawal Period") (or, if registration on such date is not practicable, as
promptly as possible thereafter) unless, prior to the expiration of the
Withdrawal Period, the holders holding a majority of Registrable Securities to
be included in any such Demand Registration, by written notice to the Company,
withdraws the request made under this Section 8.2, in which case, such request
shall
29
not count as one of the Demand Registrations permitted hereunder and the Company
shall pay all Registration Expenses in connection with such registration.
8.3 Holdback Agreements.
(a) Restrictions on Public Sale by Holders of
Registrable Securities. To the extent not inconsistent with applicable law, the
Purchaser agrees that in connection with a registered public offering of the
Company's equity securities, it will not effect any public sale or distribution
of any Registrable Securities or of any securities convertible into or
exchangeable or exercisable for such Registrable Securities, including a sale
pursuant to Rule 144 under the Securities Act, during the 10 Business Days prior
to, and during the 30 days beginning on, the effective date of the Company's
registration statement (except as part of such registration), if and to the
extent reasonably requested by the Company in writing in the case of a
non-underwritten public offering or to the extent reasonably requested by the
Underwriter in writing in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company. The
Company agrees not to effect any public sale or distribution of any of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such equity securities (except pursuant to registrations on
Forms S-4 or S-8 of the Act or any successor or other forms not available for
registering equity securities for sale to the public) during the 10 Business
Days prior to, and during the 30 day period beginning on the effective date of
any registration statement in which the holders of Registrable Securities are
participating.
8.4 Registration Procedures.
(a) Obligations of the Company. Whenever registration
of Registrable Securities has been requested pursuant to Section 8.2 of this
Agreement, the Company shall use reasonable efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and in connection with any such request, the Company
shall, as soon as reasonably practicable:
(i) prepare and file with the SEC (in any
event not later than forty-five (45) days after receipt of a request to file a
registration statement with respect to Registrable Securities) a registration
statement, and use its best efforts to cause such registration statement to
become effective under the Act; provided, however, that before filing a
registration statement or
prospectus or any amendments or supplements thereto, the Company shall (A)
provide counsel selected by the holders of a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") with an
opportunity to participate in the preparation of such registration statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (B) notify the Holders' Counsel and each seller of
Registrable Securities of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period which will terminate when all Registrable
Securities covered by such registration statement have been sold (but not before
the expiration of the ninety (90) day period referred to in Section 4(3) of the
Act and Rule 174 thereunder, if applicable), and comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable
Securities, prior to filing a registration statement, copies of such
registration statement as is proposed to be filed, and thereafter such number of
copies of such regis tration statement, each amendment and supplement thereto
(in each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller of Registrable Securities requests, and to
continue such qualification in effect in such jurisdiction for as long as is
permissible pursuant to the laws of such jurisdiction, or for as long as any
such seller requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things which may be
reasonably necessary or advisable to enable any such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided, however, that the Company shall not be required to (A) qualify
31
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8.4(a)(iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(v) use reasonable efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers of Registrable Securities to consummate the disposition of
such Registrable Securities;
(vi) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, after delivery to the
purchasers of such Registrable Securities, such prospectus shall not contain 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
in light of the circumstances under which they were made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form with the
Approved Underwriter, if any, selected as provided in Section 8.2) and take such
other actions as are reasonably required in order to facilitate the disposition
of such Registrable Securities;
(viii) make available for inspection by any
seller of Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspec tors"), during
regular business hours and upon reasonable advance notice, all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
32
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such registration statement;
(ix) if such sale is pursuant to an
underwritten offering, obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as Holders' Counsel or
the managing underwriter reasonably requests;
(x) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as such seller may reasonably request and are
customarily included in such opinions;
(xi) otherwise use reasonable efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the registration statement, an
earnings statement covering a period of twelve (12) months beginning after the
effective date of the registration statement, in a manner which satisfies the
provisions of Section 11(a) of the Act;
(xii) cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
the Company are then listed (including NASDAQ), provided, that the applicable
listing requirements are satisfied;
(xiii) cooperate with each seller of
Registrable Securities and each underwriter participating in the disposition of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
33
(xiv) use reasonable efforts to take all
other steps necessary to effect the registration of the Registrable Securities
contemplated hereby.
(b) Notice to Discontinue. Each holder of Registrable
Securities agrees that, upon receipt of any written notice from the Company of
the happening of any event of the kind described in Section 8.4(a)(vi), such
holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Sec tion 8.4(a)(vi) and, if so directed by the
Company, such holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the prospectus covering such Registrable Securities which is current at the time
of receipt of such notice. If the Company shall give any such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective pursuant to this Agreement (including without limitation
the period referred to in Section 8.4(a)(ii)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 8.4(a)(vi) to and including the date when the holder shall have received
the copies of the supplemented or amended prospectus contemplated by and meeting
the requirements of Section 8.4(a)(vi).
8.5 Registration Expenses. The Company shall pay all expenses
(other than underwriting discounts and commissions) arising from or incident to
the Company's performance of, or compliance with, Section 8 of this Agreement,
including without limitation, (i) SEC, stock exchange, NASDAQ and NASD
registration and filing fees, (ii) all fees and expenses incurred by Company in
complying with securities or blue sky laws (including reasonable fees, charges
and disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery expenses,
and (iv) the fees, charges and disbursements of counsel to the Company and of
its independent public accountants and any other accounting and legal fees,
charges and expenses incurred by the Company (including without limitation any
expenses arising from any special audits incident to or required by any
registration or qualification) in connection with any Demand Registration
pursuant to the terms of this Agreement, regardless of whether such registration
statement is declared effective. In connection with each registration hereunder,
the Company shall reimburse the holders of Registrable Securities being
registered in such registration for the reasonable fees, charges and
disbursements of not more than one counsel chosen by the holders of a majority
of Registrable Securities being registered in such registration in an amount not
to exceed
34
$10,000. All of the expenses described in this Section 8.5 are referred to
herein as "Registration Expenses."
8.6 Indemnification; Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify, to the fullest extent permitted by law, each holder of
Registrable Securities, its officers, directors, partners, employees, advisors
and agents and each Person who controls (within the meaning of the Act or the
Exchange Act) such holder from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue, or alleged untrue, statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or a failure by such holder to deliver an updated prospectus that has
been filed with the SEC. The Company shall also indemnify any underwriters of
the Registrable Securities, their officers, directors and employees and each
Person who controls such underwriters (within the meaning of the Act and the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) Indemnification by Holders. In connection with
any registration statement in which a holder of Registrable Securities is
participating pursuant to Section 8.2 hereof, each such holder shall furnish to
the Company in writing such information with respect to such holder as the
Company may reasonably request in writing or as may be required by law for use
in connection with any such registration statement or prospectus and each
holder, by its participation in such registration, agrees to indemnify, to the
extent permitted by law, the Company, any underwriter retained by the Company
and their respective directors, officers, employees and each Person who controls
the Company or such underwriter (within the meaning of the Act and the Exchange
Act) to the same extent as the foregoing indemnity from the Company to the
holders of Registrable Securities, but solely with respect to any such
information furnished in writing by or on behalf of such holder.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder (the "Registration Rights
Indemnified Party") agrees to give prompt written notice to the indemnifying
party (the
35
"Registration Rights Indemnifying Party") after the receipt by the Registration
Rights Indemnified Party of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in writing for
which the Registration Rights Indemnified Party intends to claim indemnification
or contribution pursuant to this Agreement; provided, that the failure so to
notify the Registration Rights Indemnifying Party shall not relieve the
Registration Rights Indemnifying Party of any liability that it may have to the
Registration Rights Indemnified Party hereunder unless, and only to the extent
that, such failure results in the Registration Rights Indemnifying Party's
forfeiture of substantial rights or defenses. If notice of commencement of any
such action is given to the Registration Rights Indemnifying Party as above
provided, the Registration Rights Indemnifying Party shall be entitled to
participate in and, to the extent it may wish, jointly with any other
Registration Rights Indemnifying Party similarly notified, to assume the defense
of such action at its own expense, with counsel chosen by it and reasonably
satisfactory to such Registration Rights Indemnified Party. The Registration
Rights Indemnified Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by the
Registration Rights Indemnified Party unless (i) the Registration Rights
Indemnifying Party agrees to pay the same, (ii) the Registration Rights
Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Registration Rights Indemnified Party in its reasonable
judgment, (iii) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that either (A) representation of
such Registration Rights Indemnified Party and the Registration Rights
Indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there may be one or more legal defenses
available to the Registration Rights Indemnified Party which are different from
or additional to those available to the Registration Rights Indemnifying Party.
No Registration Rights Indemnifying Party shall, without the prior written
consent of each Registration Rights Indemnified Party, settle, compromise or
consent to the entry of any judgment unless such settlement, compromise or
consent includes an unconditional release of the Registration Rights Indemnified
Party from all liability relating thereto. In either of such cases the
Registration Rights Indemnifying Party shall not have the right to assume the
defense of such action on behalf of such Registration Rights Indemnified Party.
No Registration Rights Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
(d) Contribution. If the indemnification provided for
in this Section 8.6 from the Indemnifying Party is applicable by its terms but
unavailable to a Registration Rights Indemnified Party hereunder in respect of
any
36
losses, claims, damages, liabilities or expenses referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Registration Rights Indemnified
Party, shall contribute to the amount paid or payable by such Registration
Rights Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Registration Rights Indemnifying Party and Registration
Rights Indemnified Party in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative faults of such Registration Rights
Indemnifying Party and Registration Rights Indemnified Party shall be determined
by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Registration Rights Indemnifying Party or Registration Rights
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Sections 8.6(a), 8.6(b) and 8.6(c), any legal or other
fees, charges or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person.
8.7 Rule 144. The Company covenants that it shall file any
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder; and that it shall take such further
action as each holder of Registrable Securities may reasonably request
(including providing any information necessary to comply with Rules 144 under
the Act), all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 under the Act, as such
rules may be amended from time to time, or (b) any similar rules or regulations
hereafter adopted by the SEC. The Company shall, upon the request of any holder
of Registrable Securities, deliver to such holder a written statement as to
whether the Company has complied with such requirements.
37
9. MISCELLANEOUS.
9.1 Performance; Waiver. The provisions of this Agreement may
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and the holders of 662/3% of the Common Stock issued in
connection with this Agreement (assuming that the Securities or other rights
conver tible into or exchangeable or exercisable for shares of the Common Stock
have been converted, exchanged or exercised). The failure at any time to require
performance of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter (unless performance thereof has
been waived in writing in accordance with the terms hereof for all purposes and
at all times by the parties to whom the benefit of such performance is to be
rendered). The waiver by any party to this Agreement of a breach of any
provision hereof shall not be taken or held to be a waiver of any succeeding
breach of such provision or of any other provision.
9.2 Binding Effect; Successors and Assigns. This Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the parties hereto. Subject to applicable securities laws and the
applicable provisions of this Agreement, the Purchaser may assign any of its
rights under this Agreement (or any of the Transaction Documents) to any of its
Affiliates, employees, members or partners other than the rights described in
Sections 5.3 (Board of Directors) and 5.4 (Purchaser Rights) which may only be
assigned to Perseus, LLC, ▇▇▇▇▇ Fund Management LLC or, in each case, to one of
their controlled investment funds. The Company may not assign any of its rights
under this Agreement (or any of the Transaction Documents), except to a
successor-in-interest to the Company, including as a result of a merger,
acquisition or reorganization, without the written consent of the Purchaser. No
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of this Agreement.
9.3 Notices. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
38
If to the Company:
ViroPharma Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
with a copies to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Purchaser:
Perseus-▇▇▇▇▇ BioPharmaceutical Fund, LP
c/o Perseus Capital, LLC
The Army and Navy Club Building
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Ph.D.
and
Perseus Capital, LLC
The Army and Navy Club Building
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and
▇▇▇▇▇ Fund Management, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
39
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
and
▇▇▇▇▇ Fund Management, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or at such other address as a party hereto shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
Notice given in accordance with this Section 9.3 shall be deemed given and
received as of the earlier of (i) actual receipt or (ii) first attempted
delivery which is refused (as opposed to being returned for insufficient
postage/fee, improper address or like cause). All references to days in this
Agreement shall be deemed to refer to calendar days, unless otherwise specified.
If any notice, filing, delivery or payment shall be required by the terms hereof
to be made on a day that is not a Business Day, such notice, filing, delivery or
payment shall be made on the immediately succeeding Business Day.
9.4 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the Company and the Purchaser directs that such
court interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
9.5 Headings; Interpretation. The index and section headings
herein are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
40
9.6 Entire Agreement. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchaser, or
between or among any agents, representatives, parents, Subsidiaries, Affiliates,
predecessors in interest or successors in interest, with respect to the subject
matter hereof.
9.7 No Third Party Rights. Except for the indemnified parties,
this Agreement is intended solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debtholder of the
Company) other than the parties hereto.
9.8 Remedies for Breach. The parties agree that in addition to
any other rights or remedies which may be available at law or equity, the
parties shall be entitled to seek specific performance of any post-Closing duty
or obligation of any party hereto. All remedies, either under this Agreement or
by law or otherwise afforded to any of the parties, shall be cumulative and not
alternative.
9.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties hereto
confirm that any facsimile copy of another party's executed counterpart of this
Agreement (or its signature page thereof) will be deemed to be an executed
original thereof.
9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law.
[SIGNATURE PAGE FOLLOWS]
41
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date first set forth above.
VIROPHARMA INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Ph.D.
Title: President and Chief Executive
Officer
PERSEUS-▇▇▇▇▇ BIOPHARMACEUTICAL FUND, LP
By: Perseus-▇▇▇▇▇ Partners, LLC,
General Partner
By: Perseus Management, LLC,
Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chairman
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
===============================================================================
INVESTMENT AGREEMENT
AMONG
VIROPHARMA INCORPORATED
AND
PERSEUS-▇▇▇▇▇ BIOPHARMACEUTICAL FUND, LP
-----------------------------------------------------
Dated May 5, 1999
-----------------------------------------------------
================================================================================
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
2. CLOSING...............................................................6
2.1 Time and Place of the Closing..............................6
2.2 Transactions at the Closing................................6
2.3 Perseus-▇▇▇▇▇ Management, LLC Fee..........................6
2.4 Rights Plan................................................6
2.5 Opinion of Counsel.........................................6
2.6 Secretary's Certificate....................................6
2.7 Reservation of Stock.......................................7
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................7
3.1 Corporate Existence and Power..............................7
3.2 Power and Authority........................................7
3.3 Subsidiaries...............................................8
3.4 Affiliate Transactions.....................................8
3.5 No Contravention, Conflict, Breach, Etc....................8
3.6 Consents...................................................9
3.7 Capitalization.............................................9
3.8 SEC Documents.............................................10
3.9 Financial Statements......................................10
3.10 No Existing Violation, Default, Etc.......................11
3.11 Licenses and Permits......................................11
3.12 Intellectual Property.....................................11
3.13 Environmental Matters.....................................13
3.14 Taxes.....................................................13
3.15 Litigation................................................14
3.16 Labor Relations...........................................14
3.17 Employee Benefits.........................................14
3.18 Contracts.................................................16
3.19 No Material Adverse Change................................16
3.20 Insurance.................................................17
3.21 Rights Plan...............................................17
3.22 Broker's Fees.............................................17
3.23 Investment Company........................................17
3.24 Exemption from Registration; Restrictions on Offer
and Sale of Same or Similar Securities....................18
i
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................18
4.1 Existence and Power.......................................18
4.2 Power and Authority.......................................18
4.3 No Contravention, Conflict, Breach, Etc...................18
4.4 Consents..................................................19
4.5 Acquisition for Own Account...............................19
4.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.........................................19
5. CERTAIN COVENANTS AND AGREEMENTS.....................................20
5.1 Publicity.................................................20
5.2 Use of Proceeds...........................................20
5.3 Board of Directors........................................20
5.4 Purchaser Rights..........................................21
5.5 SEC Filings...............................................22
5.6 Restrictions on Transfer; Legends.........................22
5.7 Preemptive Rights.........................................23
5.8 Tax.......................................................23
5.9 Board of Directors........................................24
5.10 Indemnification Agreement.................................24
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS............................................................24
7. INDEMNIFICATION......................................................24
8. REGISTRATION RIGHTS..................................................25
8.1 Securities Subject to this Agreement......................25
8.2 Demand Registration.......................................25
8.3 Holdback Agreements.......................................29
8.4 Registration Procedures...................................29
8.5 Registration Expenses.....................................33
8.6 Indemnification; Contribution.............................34
8.7 Rule 144..................................................36
9. MISCELLANEOUS........................................................37
9.1 Performance; Waiver.......................................37
9.2 Binding Effect; Successors and Assigns....................37
9.3 Notices...................................................37
9.4 Severability..............................................39
9.5 Headings; Interpretation..................................39
9.6 Entire Agreement..........................................40
9.7 No Third Party Rights.....................................40
9.8 Remedies for Breach.......................................40
9.9 Counterparts..............................................40
9.10 Governing Law.............................................40
ii
DISCLOSURE SCHEDULES, EXHIBITS AND ANNEXES
SECTIONS OF DISCLOSURE SCHEDULE
Schedule 2.2 Transactions at the Closing
Schedule 3.7 Capitalization
Schedule 3.12 Intellectual Property
Schedule 3.14 Taxes
Schedule 3.15 Litigation
Schedule 3.17 Employee Benefits
Schedule 3.18 Contracts
Schedule 3.19 No Material Adverse Change
Schedule 8.2 Demand Registration
EXHIBITS
Exhibit A Certificate of Designation
Exhibit B Warrant Certificate
Exhibit C Rights Plan Amendment
ANNEXES
Annex A Form of opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
iii