CHEMOCENTRYX, INC.
TECHNE CORPORATION
INVESTMENT AGREEMENT
November 18, 1997
TABLE OF CONTENTS
Page
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1. Definitions 3
1.1 Specific Definitions 3
1.2 Definitional Provisions 5
2. Purchase and Sale of Stock 6
2.1 Sale and Purchase of Shares; Grant of Warrants 6
2.2 Closings 6
3. Representations and Warranties by Company 7
3.1 Organization, Standing, etc 7
3.2 Qualification 7
3.3 Capital Stock 7
3.4 Financial Statements 8
3.5 Title to Properties and Encumbrances 8
3.6 Litigation; Governmental Proceedings 8
3.7 Compliance with Applicable Laws and Other Instruments 8
3.8 Preferred Shares, Warrants, Conversion Stock and
Warrant Stock 8
3.9 Securities Laws 9
3.10 Patents and Other Intangible Rights 9
3.11 Outstanding Debt 9
3.12 Corporate Acts and Proceedings 9
3.13 No Brokers or Finders 10
3.14 Conflicts of Interest 10
3.15 Licenses 10
3.16 Registration Rights 10
3.17 Retirement Plans 10
3.18 Application of Proceeds 10
3.19 Disclosure 10
4. Representations and Warranties of Investor 11
4.1 Investment Intent 11
4.2 Location of Principal Office and Qualification as
Accredited Investor 11
4.3 Acts and Proceedings 11
4.4 No Brokers or Finders 11
4.5 Disclosure of Information 11
4.6 Investment Experience 12
4.7 Restricted Securities 12
4.8 Further Limitations on Disposition 12
4.9 Legends 12
5. Conditions of Investor's Obligation 12
5.1 Representations and Warranties 13
5.2 Compliance with Agreement 13
5.3 Additional Financial Statements 13
5.4 Certificate of Officers 13
5.5 Opinion of Company's Counsel 13
5.6 Qualification Under State Securities Laws 16
5.7 Proceedings and Documents 17
5.8 Reservation of Shares for ▇▇▇▇▇▇ and Others 17
5.9 Employment Agreement and Proprietary Information and
Inventions Agreement 17
5.10 Co-Sale Agreement 17
5.11 Research and License Agreement 17
5.12 Directors 17
6. Affirmative Covenants 17
6.1 Corporate Existence 18
6.2 Books of Account and Reserves 18
6.3 Furnishing of Financial Statements and Information 18
6.4 Inspection 20
6.5 Preparation and Approval of Budgets 20
6.6 Payment of Taxes and Maintenance of Properties 20
6.7 Insurance 21
6.8 Scientific Advisory Committee 21
6.9 Directors' and Stockholders' Meetings 21
6.10 Replacement of Certificates 21
6.11 Application of Proceeds 22
6.12 Patents and Other Intangible Rights 22
6.13 Rights to Purchase Additional Securities 22
6.14 Confidentiality Agreements 23
7. Negative Covenants 23
7.1 Future Registration Rights 23
7.2 Other Restrictions 23
8. Registration Rights 23
8.1 Required Registration 23
8.2 Incidental Registration 24
8.3 Registration Procedures 25
8.4 Expenses 27
8.5 Indemnification 27
9. Termination of Certain Covenants 29
10. Miscellaneous 29
10.1 Changes, Waivers, etc 29
10.2 Payment of Fees and Expenses 29
10.3 Notices 29
10.4 Survival of Representations and Warranties, etc 29
10.5 Parties in Interest 30
10.6 Headings 30
10.7 Arbitration 30
10.8 Choice of Law 30
10.9 Counterparts 30
Exhibits
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Exhibit 1A - Amended and Restated Certificate of Incorporation
Exhibit 1B - Bylaws
Exhibit 2 - Form of Warrant
Exhibit 3 - Exceptions
Exhibit 4 - Vesting Agreement
Exhibit 5 - Employment Agreement
Exhibit 6 - Proprietary Information and Inventions Agreement
Exhibit 7 - Co-Sale Agreement
Exhibit 8 - Research and License Agreement
Schedules
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Schedule A - Subscription/Warrant Obligation
Schedule B - Patent Applications
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made and entered into as of the 18th day
of November 1997, by and between ChemoCentryx, Inc., a Delaware corporation
(the "Company") and Techne Corporation, a Minnesota corporation (the
"Investor").
1. Definitions.
1.1 Specific Definitions. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"Additional Securities" is defined in Section 6.16.
"Amendment" is defined in Section 2.1.
"Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the
Closing Date, except the Conversion Stock.
"Closing" is defined in Section 2.2.
"Closing Date" is defined in Section 2.2.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Common Stock" shall mean the Company's authorized common stock,
par value $0.001 per share, any additional common shares which may be
authorized in the future by the Company, and any stock into which such
common shares may hereafter be changed, and shall also include stock
of the Company of any other class which is not preferred as to dividends
or as to distributions of assets on liquidation, dissolution or winding
up of the Company over any other class of stock of the Company, and
which is not subject to redemption.
"Company" shall mean ChemoCentryx, Inc., a Delaware corporation.
"Conversion Price" shall mean such price at which the Preferred
Shares are convertible into Common Stock pursuant to Section 11 hereof
and the Amendment.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are at any time directly or
indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
"GAAP" shall mean United States generally accepted accounting
principles, applied on a consistent basis.
"Indebtedness for Borrowed Money" shall include only indebtedness
of the Company and its Subsidiaries incurred as the result of a direct
borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to
trade accounts.
"Investor" shall mean Techne Corporation, a Minnesota
corporation.
"Permitted Liens" shall mean (a) liens for taxes and assessments
or governmental charges or levies not at the time due or in respect of
which the validity thereof shall currently be contested in good faith
by appropriate proceedings; and (b) liens in respect of pledges or
deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanics', laborers' and materialmen's,
landlord's and statutory and similar liens, if the obligations secured
by such liens are not then delinquent or are being contested in good
faith, and liens and encumbrances incidental to the conduct of the
business of the Company or any Subsidiary which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the
value of its property or materially impair the use thereof in the
operation of its business.
"Preferred Shares" is defined in Section 2.1.
"Public Offering" shall mean a firm underwritten public offering
of the Company's Common Stock pursuant to a registration filed under
the Securities Act and through NASD member firms.
"Purchased Stock" shall mean the Preferred Shares, the Conversion
Stock, the Warrant Stock and the stock or other securities of the
Company issued in a stock split or reclassification of, or a stock
dividend or other distribution on or in substitution or exchange for,
or otherwise in connection with, any of the foregoing securities, or
in a merger or consolidation involving the Company or a sale of all or
substantially all of the Company's assets.
"R&D Systems" shall mean Research & Diagnostic Systems, Inc., a
subsidiary of the Investor.
"▇▇▇▇▇▇" shall mean ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Securities" shall mean the Preferred Shares, Warrants, Conversion
Stock and Warrant Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Indebtedness" shall mean (a) the principal of all
Indebtedness for Borrowed Money of the Company and its Subsidiaries to
banks, insurance companies or other financial institutions, (b) the
present value of net minimum lease payments of all leases under which
the Company or any of its Subsidiaries is the lessee and which are
required to be capitalized under generally accepted accounting
principles, (c) the principal of all indebtedness of the Company or
any of its Subsidiaries under installment purchase agreements, and
(d) the principal of all indebtedness of the Company or any of its
Subsidiaries to the owners of any real property leased by the Company
for leasehold improvements financed by such owners.
"Series A Preferred Stock" shall collectively mean the Company's
authorized Series A-1, Series A-2, and Series A-3 Preferred Stock, par
value $0.001 per share, and any stock into which such preferred shares
may hereafter be changed.
"Subsidiary" shall mean any corporation, association or other
business entity more than a majority (by number of votes) of the
voting stock of which is owned or controlled, directly or indirectly,
by the Company or by one or more of its Subsidiaries or both.
"Warrants" are defined in Section 2.1.
"Warrant Stock" shall mean the shares of Series A Preferred Stock
issuable upon exercise of the Warrants and all shares of Series A
Preferred Stock or Common Stock issued in exchange or substitution
therefor.
1.2 Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provisions of this
Agreement.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice-versa.
(c) References to an "Exhibit" or to a "Schedule" are, unless
otherwise specified, to one of the Exhibits or Schedules attached to
or referenced in this Agreement, and references to a "Section" or
"paragraph" are, unless otherwise specified, to one of the Sections or
paragraphs of this Agreement.
(d) All accounting terms defined below shall, except as
otherwise expressly provided, be determined by reference to the
Company's books of account and in conformity with generally accepted
accounting principles as applied to such books of account in the
opinion of the independent certified public accountants selected by
the Board of Directors of the Company as required under the provisions
of Section 6.3(b) hereof.
(e) The term "person" includes any individual, partnership,
joint venture, corporation, trust, unincorporated organization or
government or any department or agency thereof.
2. Purchase and Sale of Stock.
2.1 Sale and Purchase of Shares; Grant of Warrants. Subject to the
terms and conditions hereof, the Company agrees to sell to the Investor,
and the Investor agrees to purchase from the Company, Series A Preferred
Stock pursuant to and in accordance with the terms of Schedule A to this
Agreement. The term "Preferred Shares" as used herein shall mean the up to
5,000,000 shares of Series A Stock purchased in accordance with Schedule A
and all shares of the Company issued in a stock split or reclassification
of, or a stock dividend or other distribution on, such Preferred Shares or
in exchange, conversion or substitution therefor. Furthermore, the Company
agrees to issue to Investor Warrants pursuant to and in accordance with the
terms of Schedule A to this Agreement in the form attached hereto as
Exhibit 2. The term "Warrants" as used herein shall mean the warrants so
issued.
2.2 Closings. The closing of the sales to, and purchases by, the
Investor of the Preferred Shares (the "Closing") and the issuances of the
Warrants shall occur at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., 1100
International Centre, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, at
10:00 A.M., Minneapolis time, within five business days of the later to
occur of the applicable date or attainment of the applicable milestone as
set forth on Schedule A hereto, or on such other day or at such other time
or place as the Investor and the Company shall agree upon (the "Closing
Date").
At the Closing, the Company will deliver to the Investor certificates
representing the Preferred Shares being purchased by the Investor and the
Warrants to be granted to the Investor, registered in its name, against
delivery to the Company of a check or wire transfer in the amount of the
cash consideration as set forth on Schedule A hereto, in payment of the
total purchase price of the Preferred Shares being purchased by the
Investor.
3. Representations and Warranties by Company. Except as discloses in
Exhibit 3 hereto (specifying the Section or Sections making reference to
certain disclosures), the Company represents and warrants to the Investor
that:
3.1 Organization, Standing, etc. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power and authority to
own its properties and to carry on its business in all material respects as
it is now being conducted. The Company has the requisite corporate power
and authority to issue the Preferred Shares, the Warrants, the Conversion
Stock and the Warrant Stock, and to otherwise perform its obligations under
this Agreement. The certified copies of the Amended and Restated
Certificate of Incorporation and Bylaws of the Company, attached as
Exhibits 1A and 1B, respectively, hereto, are true and complete copies of
the duly authorized Amended and Restated Certificate of Incorporation and
Bylaws of the Company in effect as of the date of this Agreement. The
Company does not have any direct or indirect equity interest in any other
firm, corporation, partnership, joint venture association or other business
organization except as set forth in Exhibit 3 hereto. If the Company has
any Subsidiary, the representations and warranties set forth in this
Section 3 are being hereby restated with respect to such Subsidiary.
3.2 Qualification. The Company is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction wherein the
nature of its activities or of its properties owned or leased makes such
qualification or licensing necessary and failure to be so qualified or
licensed would have a material adverse impact on its business.
3.3 Capital Stock. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock (of which 5,143,750 shares
are issued and outstanding as of the date hereof) and 6,666,666 Series A
Preferred Stock (of which no shares are issued and outstanding as of the
date hereof) of which 4,000,000 are designated as Series A-1 Preferred,
1,333,333 are designated as Series A-2 Preferred and 1,333,333 are
designated as Series A-2 Preferred. The rights and preferences of the
Company's Common Stock and Series A Preferred Stock are as provided in the
Company's Amended and Restated Certificate of Incorporation, a copy of
which is attached hereto as Exhibit 1A (the "Certificate of Incorporation").
All of the Company's outstanding shares of capital stock were duly authorized
and validly issued and are fully paid and nonassessable. There are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, Convertible Securities or other agreements or arrangements of
any character or nature whatever, except as disclosed in Exhibit 3 hereto or
as contemplated by this Agreement, under which the Company is or may be
obligated to issue capital stock or other securities of any kind representing
an ownership interest or contingent ownership interest in the Company. Except
as otherwise disclosed in Exhibit 3 hereto, neither the offer nor the issuance
or sale of the Securities, constitutes an event, under any anti-dilution
provisions of any securities issued or issuable by the Company or any
agreements with respect to the issuance of securities by the Company, which
will either increase the number of shares issuable pursuant to such provisions
or decrease the consideration per share to be received by the Company pursuant
to such provisions. No holder of any security of the Company is entitled to
any preemptive or similar rights to purchase securities from the Company which
has not been irrevocably waived, in writing, a copy of which waiver has
been delivered to the Investor; provided, however, that nothing in this
Section 3. shall affect, alter or diminish any right granted to the
Investor in this Agreement. All outstanding securities of the Company have
been issued in full compliance with an exemption or exemptions from the
registration and prospectus delivery requirements of the Securities Act and
from the registration and qualification requirements of all applicable
state securities laws.
3.4 Financial Statements. The Company has delivered to the Investor
an unaudited balance sheet as at October 31, 1997 and a statement of
operations for the period of inception through such date. Such financial
statements and notes thereto fairly present the financial condition and the
results of operations of the Company, all in accordance with GAAP.
3.5 Title to Properties and Encumbrances. The Company has good and
marketable title to all its owned properties and assets, and the properties
and assets used in the conduct of its business, which properties and assets
are not subject to any mortgage, pledge, lease, lien, charge, security
interest, encumbrance or restriction, except (a) those which are shown and
described in Exhibit 4 hereto or the notes thereto, and (b) Permitted Liens.
3.6 Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, its properties, assets or business, and the
Company is not aware of any facts which are likely to result in or form the
basis for any such action, suit or other proceeding. The Company is not in
default with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality.
3.7 Compliance with Applicable Laws and Other Instruments. The
business and operations of the Company have been and are being conducted in
accordance with all applicable laws, rules and regulations of all
governmental authorities, the violation of which could reasonably be
expected to have a material adverse impact on the Company. Neither the
execution nor delivery of, nor the performance of or compliance with, this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, or, with or without the giving of notice or passage of time,
result in any breach of, or constitute a default under, or result in the
imposition of any lien or encumbrance upon any asset or property of the
Company pursuant to, any applicable law, administrative regulation or
judgment, order or decree of any court or governmental body, any material
agreement or other instrument to which the Company is a party or by which
it or any of its properties, assets or rights is bound or affected, and
will not violate the Company's Certificate of Incorporation or Bylaws. The
Company is not in violation of its Certificate of Incorporation or its
Bylaws nor in violation of, or in default under, any lien, indenture,
mortgage, lease, material agreement, instrument, commitment or arrangement
in any material respect. There are no consents required to consummate the
transactions contemplated hereby, which have not been obtained, under any
lien, indenture, mortgage, lease, material agreement, instrument,
commitment or arrangement to which the Company is a party.
3.8 Preferred Shares, Warrants, Conversion Stock and Warrant Stock.
The Preferred Shares, when issued and paid for pursuant to the terms of
this Agreement, will be duly authorized, validly issued and outstanding,
fully paid and non-assessable, free and clear of all pledges, liens and
encumbrances; the Warrants, when issued and delivered pursuant to this
Agreement, will constitute valid and binding obligations of the Company in
accordance with their terms; the Conversion Stock and the Warrant Stock
have been reserved for issuance based upon the initial Conversion Price and
initial Warrant Exercise Price and when issued upon conversion or exercise
thereof in accordance with the Certificate of Incorporation and the terms
of the Warrants will be duly authorized, validly issued and outstanding,
fully paid, nonassessable and free and clear of all pledges, liens and
encumbrances. The certificates representing the Preferred Shares and
Warrants to be delivered by the Company hereunder, and the certificates
representing the Conversion Stock to be delivered upon the conversion of
the Preferred Shares and the certificates representing the Warrant Stock to
be delivered upon exercise of the Warrants, will be genuine, and the Company
has no knowledge of any fact which would impair the validity thereof.
3.9 Securities Laws. Based in part upon the representations and
warranties contained in Section 4 hereof, no consent, authorization,
approval, permit or order of or filing with any governmental or regulatory
authority is required under current laws and regulations in connection with
the execution and delivery of this Agreement or the offer, issuance, sale
or delivery of the Securities other than the qualification thereof, if
required, under applicable state securities laws, which qualification has
been or will be effected as a condition of this sale. The Company has not,
directly or through an agent, offered the Securities, or any similar
securities for sale to, or solicited any offers to acquire such securities
from, persons other than the Investor and other accredited investors.
Under the circumstances contemplated hereby, the offer, issuance, sale and
delivery of the Preferred Shares, the issuance of the Warrants, the offer
of the Conversion Stock and Warrant Stock will not under current laws and
regulations require compliance with the prospectus delivery or registration
requirements of the Securities Act.
3.10 Patents and Other Intangible Rights. Except as otherwise set
forth in Exhibit 3 hereto, the Company (a) owns or has the exclusive right
to use, free and clear of all material liens, claims and restrictions, all
of the right, title and interest in the intellectual property acquired from
▇▇▇▇▇▇ in the exchange for Common Stock described in Section 5.8 below and
all patents, trademarks, service marks, trade names, copyrights, licenses
and rights with respect to the foregoing, (b) is not obligated or under any
liability to make any payments of a material nature by way of royalties,
fees or otherwise to any owner of, licensor of, or other claimant to, any
patent, trademark, trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise, (c) owns or has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, computer
programs and technical data necessary to the development, operation and
sale of all products and services sold or proposed to be sold by it, free
and clear of any rights, liens or claims of others, and (d) is not using
any confidential information or trade secrets of others. To the best of
its knowledge, the Company is not, nor has it received actual notice that
it is, infringing upon or otherwise acting adversely to any known right or
claimed right of any person under or with respect to any patents,
trademarks, service marks, trade names, copyrights, licenses or rights with
respect to the foregoing.
3.11 Outstanding Debt. The Company has no Indebtedness for Borrowed
Money except as set forth in Exhibit 3 hereto. The Company is not in
default in the payment of the principal of or interest or premium on any
such Indebtedness for Borrowed Money, and no event has occurred or is
continuing under the provisions of any instrument, document or agreement
evidencing or relating to any such Indebtedness for Borrowed Money which
with the lapse of time or the giving of notice, or both, would constitute
an event of default thereunder.
3.12 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of the Company and
has been duly executed and delivered by authorized officers of the Company.
All corporate action necessary to the authorization, creation, issuance and
delivery of the Securities, has been taken on the part of the Company, or
will be taken by the Company on or prior to the Closing Dates. This
Agreement is a valid and binding agreement of the Company enforceable in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
enforcement and other equitable remedies.
3.13 No Brokers or Finders. No person, firm or corporation has or
will have, as a result of any act or omission of the Company, any right,
interest or valid claim against or upon the Company or any Investor for any
commission, fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions contemplated by this
Agreement. The Company will indemnify and hold the Investor harmless
against any and all liability with respect to any such commission, fee or
other compensation which may be payable or determined to be payable in
connection with the transactions contemplated by this Agreement.
3.14 Conflicts of Interest. Except as disclosed on Exhibit 3 hereto,
no officer, director or stockholder of the Company or any affiliate (as
such term is defined in Rule 405 under the Securities Act) of any such
person has any direct or indirect interest (a) in any entity which does
business with the Company, or (b) in any property, asset or right which is
used by the Company in the conduct of its business, or (c) in any contractual
relationship with the Company other than as an employee.
3.15 Licenses. The Company possesses from the appropriate agency,
commission, board and government body and authority, whether state, local
or federal, all licenses, permits, authorizations, approvals, franchises
and rights which (a) are necessary for it to engage in the business
currently conducted by it, and (b) if not possessed by the Company, would
have a material adverse impact on the Company's business. The Company has
no knowledge that would lead it to believe that it will not be able to
obtain all material licenses, permits, authorizations, approvals, franchises
and rights that may be required for any business the Company proposes to
conduct.
3.16 Registration Rights. Except as disclosed on Exhibit 3 hereto,
the Company has not granted any registration rights under the Securities
Act relating to any of its authorized or outstanding securities which are
superior or preferential to those granted to the Investor pursuant to this
Agreement.
3.17 Retirement Plans. The Company does not have any retirement plan
in which any employees of the Company participate that is subject to any
provisions of the Employee Retirement Income Security Act of 1974, as
amended, and of the regulations adopted pursuant thereto ("ERISA").
3.18 Application of Proceeds. The proceeds from the issue and sale of
the Preferred Shares pursuant to this Agreement will be used to fund working
capital and other general corporate purposes.
3.19 Disclosure. The Company has not knowingly withheld from the
Investor any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or
warranty in this Agreement or in any certificate, schedule, statement,
exhibit, annex or other document furnished or to be furnished to any
Investor pursuant hereto or in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact required to be stated herein or
therein or necessary to make the statements herein or therein not misleading.
4. Representations and Warranties of Investor. The Investor hereby
represents and warrants that:
4.1 Investment Intent. The Securities being acquired by the Investor
hereunder or that will be acquired upon conversion of the Preferred Shares
or exercise of the Warrants are being or will be acquired, for the
Investor's own account, not as a nominee or agent, and not with a view to,
or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act and that the Investor has
no present intention of selling, granting, any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities. The Investor understands that the Securities have not been
registered under the Securities Act or any applicable state laws by reason of
their issuance or contemplated issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act and
such laws, and that the reliance of the Company and others upon this
exemption is predicated in part upon this representation and warranty. The
Investor further understands that the Securities may not be transferred or
resold without (a) registration under the Securities Act and any applicable
state securities laws, or (b) an exemption from the requirements of the
Securities Act and applicable state securities laws.
4.2 Location of Principal Office and Qualification as Accredited
Investor. The Investor's principal office is located in the state of
Minnesota. The Investor qualifies as an accredited investor within the
meaning of Rule 501 under the Securities Act. The Investor has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment to be made
hereunder. The Investor has, and has had, access to all of the Company's
material books and records and access to the Company's executive officers
has been provided to the Investor or to the Investor's qualified agents.
The Investor has received all information with respect to the Company it
deems necessary in order to make its investment decision regarding the
Preferred Shares and the Warrants.
4.3 Acts and Proceedings. Investor has full power and authority to
enter into this Agreement, and this Agreement has been duly authorized by
all necessary corporate action on the part of Investor, has been duly
executed and delivered by the Investor and is a valid and binding agreement
upon the Investor.
4.4 No Brokers or Finders. No person, firm or corporation has or
will have, as a result of any act or omission by the Investor, any right,
interest or valid claim against the Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
4.5 Disclosure of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Series A Preferred Stock. Such Investor
further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series A Preferred Stock and the business, properties,
prospects and financial condition of the Company. The foregoing, however,
does not limit or modify the representations and warranties of the Company
in Section 2 of this Agreement or the right of the Investors to rely thereon.
4.6 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it
is able to fend for itself, can bear the economic risk of its investment,
and has such knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of the investment in the
Series A Preferred Stock. Investor also represents it has not been organized
for the purpose of acquiring the Series A Preferred Stock.
4.7 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, such Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
4.8 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be
bound by this Section 3, and:
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and
(ii) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company that such disposition will not require registration of such
shares under the Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.
4.9 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933, as amended. They may not be sold, offered for sale, pledged
or hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel satisfactory
to the Company that such registration is not required or unless sold pursuant
to Rule 144 of such Act."
(b) Any legend required by state securities laws.
5. Conditions of Investor's Obligation. The obligation to purchase and
pay for the Preferred Shares which the Investor has agreed to purchase on
the Closing Dates is subject to the fulfillment prior to or on each Closing
Date of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be true in all material
respects as of each Closing Date with the same effect as though made on and
as of each Closing Date except the following changes which shall be permitted
at each Closing subsequent to the date of this Agreement:
(a) 3.3: exceptions created by issuances of securities duly
authorized by formal written resolution of the Board of Directors of
the Company and not inconsistent with the terms of this Agreement;
(b) 3.5: exceptions created by any mortgage, pledge, lease,
lien, charge, securities interest, encumbrance or restriction created
in the normal course of the Company's business or approved by the
Board of Directors of the Company;
(c) 3.6: exceptions created by matters of the nature referred
to in Section 3.6 which are disclosed to the Investor in writing prior
to the Closing Date and which if determined adversely to the Company,
would not have a material adverse effect on the business, operations,
assets, condition or prospects of the Company.
(d) 3.9: exceptions created by agreements duly authorized by
formal written resolution of the Board of Directors of the Company;
(e) 3.11: exceptions for the incurrence of Indebtedness for
Borrowed Money duly authorized by formal written resolution of the
Board of Directors of the Company but not for any default thereunder;
(f) 3.14: exceptions for conflicts of interest arising from
transactions duly authorized by formal resolution adopted by a
majority of the disinterested members of the Board of Directors of the
Company; and
(g) 3.17: exceptions created by plans duly authorized by formal
resolution of the Board of Directors of the Company.
5.2 Compliance with Agreement. The Company shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement and by the Research and License Agreement attached hereto as
Exhibit 7 to be performed and complied with by it prior to or as of each
Closing Date.
5.3 Additional Financial Statements. The Company shall have delivered
to the Investor the financial statements and information required by Section
6.3.
5.4 Certificate of Officers. The Company shall have delivered to the
Investor a certificate, dated each Closing Date, executed by the President
and the senior financial officer of the Company and certifying to the
satisfaction of the conditions specified in this Section 5.
5.5 Opinion of Company's Counsel. On the Closing Date coincident
with the date of this Agreement only, the Company shall have delivered to
the Investor an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Company, dated the Closing Date, to the effect that:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware; has the corporate power and authority to enter into this
Agreement, to issue and sell the Securities as contemplated by this
Agreement, and to carry out the provisions of this Agreement; has the
corporate power and authority to own and hold its properties owned and
leased and to carry on the business in which it is engaged; and has
not failed to qualify to do business as a foreign corporation in good
standing in any state or jurisdiction wherein the nature of its
activities or of its properties owned or leased makes such qualification
necessary and failure to be so qualified would have a material adverse
effect upon the Company.
(b) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a legal, valid and binding
agreement of the Company enforceable in accordance with its terms.
(c) The Proprietary Information and Inventions Agreement and
Vesting Agreement, each dated November 18, 1997 of and between the
Company and ▇▇▇▇▇▇, are legal, valid and binding agreements of the
Company and ▇▇▇▇▇▇ enforceable in accordance with their terms.
(d) The Amendment, substantially in the form set forth as
Exhibit 1 hereto, has been duly adopted by all necessary corporate
action, and has been duly filed with the Secretary of State of the
State of Delaware (no other or additional filing or recording being
necessary in order for the holders of the Preferred Shares to obtain
the rights and privileges of the Preferred Shares provided in the
Amendment).
(e) The Company is authorized by its Certificate of Incorporation
to issue 20,000,000 shares of Common Stock and 6,666,666 Shares of
Series A Preferred Stock. Other than the Series A Preferred Stock to be
issued pursuant to this Agreement, there are no shares of Series A
Preferred Stock issued and outstanding. There are 5,143,750 shares of
Common Stock duly issued and outstanding, all of which are, to our
knowledge, fully paid and nonassessable. The issuance and sale of such
outstanding shares of Common Stock were exempt from registration under
the Securities Act and such shares were issued in conformity with the
permit or qualification requirements of all applicable state securities
laws. Except for such preferred shares and such common shares, the
Company has no other authorized or outstanding series or class of
capital stock. Except for (i) the conversion privileges of the Series A
Preferred Stock, (ii) the Warrants and the 1,666,666 shares of Series A
Preferred Stock reserved for issuance pursuant to the exercise of the
Warrants to be issued pursuant to this Agreement, (iii) 500,000 shares
of Common Stock reserved for issuance pursuant to the Company's 1997
Stock Option/Stock Issuance Plan, and (iv) the rights set forth in
Section 6.13 of the Investment Agreement, there are no preemptive rights
or, to our knowledge, options, warrants, conversion privileges or other
rights (or agreements for any such rights) outstanding to purchase or
otherwise obtain from the Company any of the Company's equity securities.
To the knowledge of such counsel, except as set forth on Exhibit 3
hereto, there are no agreements or understandings on the part of the
Company with respect to the registration of any securities of the Company
under the Securities Act, other than those granted under this Agreement,
and there are no obligations on the part of the Company to purchase or
redeem any outstanding shares of capital stock of the Company, other
than as set forth in the Amendment.
(f) The respective rights, privileges, restrictions and preferences
of the Series A Preferred Stock are as stated in the Amendment.
(g) The Preferred Shares to be purchased at the Closing have
been duly authorized and, upon payment for and delivery of such
securities in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable. The certificates for
the Preferred Shares when issued, will be in valid and sufficient form,
and the Preferred Shares are entitled to the benefits of this Agreement
applicable thereto. The Conversion Stock has been duly authorized and
reserved for issuance upon conversion of the Preferred Shares and when
issued upon such conversion in accordance with the terms and conditions
of the Preferred Shares and those of this Agreement, the Conversion Stock
will be duly authorized and issued and will be fully paid and
nonassessable.
(h) The Warrants have been duly authorized and, when issued in
accordance with the terms and conditions of this Agreement, will be
duly authorized and issued. The Warrant Stock has been duly authorized
and reserved for issuance upon exercise of the Warrants and when issued
upon such exercise in accordance with the terms and conditions of the
Warrants and those of this Agreement, the Warrant Stock will be duly
authorized and issued and will be fully paid and nonassessable.
(i) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by the Board of Directors and
the stockholders of the Company on or prior to the Closing Date in
connection with the execution and delivery of this Agreement, the
offer, issuance and sale of the Securities, and in connection with the
consummation of the transactions contemplated by this Agreement, have
been duly and validly taken.
(j) All consents, approvals, permits, orders or authorizations
of, and all qualifications, registrations, designations or
declarations with, any federal or Delaware corporate authority on the
part of the Company required in connection with the execution and
delivery of the Investment Agreement and consummation at the Closings
of the transactions contemplated by the Investment Agreement have been
obtained, and are effective, and we are not aware of any proceedings,
or written threat of any proceedings, that question the validity thereof.
(k) The Company's execution and delivery of, and its performance
and compliance as of the date hereof with the terms of, the Investment
Agreement do not violate any provision of any federal, or Delaware
corporate law, rule or regulation applicable to the Company or any
provision of the Company's Amended and Restated Certificate of
Incorporation or Bylaws and do not conflict with or constitute a default
under the provisions of any judgment, writ, decree or order specifically
identified in the Schedule of Exceptions or the material provisions of
any material agreement specifically identified in the Schedule of
Exceptions.
(l) Assuming the accuracy of the representations of the Investor
set forth in Section 4. hereof, the offer, sale, issuance and delivery
of the Preferred Shares, the grant and issuance of the Warrants and
the offer of the Conversion Stock and Warrant Stock to the Investor
through conversion by it of the Preferred Shares or exercise by it of
the Warrants under the circumstances contemplated by the Amendment,
the Warrants and this Agreement are exempt from the registration and
prospectus delivery requirements of the Securities Act, and all
registrations, qualifications, permits and approvals required under
applicable state securities laws for the lawful offer, sale, issuance
and delivery of the Preferred Shares, the grant and issuance of the
Warrants and the offer of the Conversion Stock and Warrant Stock shall
have been obtained.
(m) Such counsel has no knowledge of any litigation, proceeding
or governmental investigation pending or threatened against the
Company, its key management employees, properties or business which,
if determined adversely to the Company, would have a material adverse
effect upon the financial condition, operations, results of operations
or business of the Company.
5.6 Qualification Under State Securities Laws. All registrations,
qualifications, permits and approvals required under applicable state
securities laws for the lawful execution and delivery of this Agreement and
the offer, sale, issuance and delivery of the Preferred Shares, the grant
and issuance of the Warrants and the offer of the Conversion Stock and
Warrant Stock shall have been obtained.
5.7 Proceedings and Documents. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby
and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory
in form and substance to the Investor and its counsel.
5.8 Issuance of Shares in Exchange for Intellectual Property;
Reservation of Shares. The Company, pursuant to an agreement with ▇▇▇▇▇▇,
a copy of which has been previously delivered to the Investor, shall have
issued 5,000,000 shares of Common Stock to ▇▇▇▇▇▇ in exchange for ▇▇▇▇▇▇'▇
transfer to the Company of all of his right, title and interest in his
intellectual property related to the field of chemokines and chemokine
receptors, including, but not limited to, patent applications and
disclosure documents identified on Schedule B hereto and material related
to patent applications currently in preparation. Of such 5,000,000 shares,
2,000,000 shares shall be fully vested and the remaining 3,000,000 shall
vest (i.e., the Company's right to repurchase such shares at cost shall
lapse) ratably over the four-year period commencing on the date hereof in
accordance with the terms of a Vesting Agreement in the form of Exhibit 4
hereto. In addition to the shares issued to ▇▇▇▇▇▇, the Company shall have
caused the 143,750 shares of Common Stock previously purchased by employees
and/or consultants of the Company to become subject to a standard four-year
vesting arrangement, and 2,356,250 shares of Common Stock shall be
available for issuance to other key officers, employees and consultants
pursuant to option or benefit plans or other agreements established for the
benefit of officers, employees, consultants and directors of the Company.
5.9 Employment Agreement and Proprietary Information and Inventions
Agreement. The Company and ▇▇▇▇▇▇ shall have entered into an Employment
Agreement substantially in the form of Exhibit 5 hereto and a Proprietary
Information and Inventions Agreement substantially in the form of Exhibit 6
hereto.
5.10 Co-Sale Agreement. ▇▇▇▇▇▇ and all holders of at least 500,000
shares (appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the
Closing Dates) of the Company's capital stock shall have entered into a Co-
Sale Agreement with the Investor substantially in the form of Exhibit 7
hereto.
5.11 Research and License Agreement. R&D Systems and the Company
shall have entered into a Research Agreement substantially in the form of
Exhibit 8 hereto.
5.12 Directors. The Company shall have disclosed to the Investor in
writing the identity of and biographical data regarding each of the members
of its Board of Directors as of each Closing Date and each person currently
intended to be nominated for election as a director.
6. Affirmative Covenants. Subject to the provisions of Section 9 hereof,
the Company covenants and agrees that:
6.1 Corporate Existence. The Company will maintain its corporate
existence in good standing and comply with all applicable laws and
regulations of the United States or of any state or states thereof or of
any political subdivision thereof and of any governmental authority where
failure to so comply would have a material adverse impact on the Company or
its business or operations.
6.2 Books of Account and Reserves. The Company will keep books of
record and account in which full, true and correct entries are made of all
of its and their respective dealings, business and affairs, in accordance
with generally accepted accounting principles. The Company will employ
certified public accountants selected by the Board of Directors of the
Company who are "independent" within the meaning of the accounting regulations
of the Commission and have annual audits made by such independent public
accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as
will enable them to give such reports or opinions with respect to the
financial statements of the Company and its Subsidiaries as will satisfy the
requirements of the Commission in effect at such time with respect to
certificates and opinions of accountants.
6.3 Furnishing of Financial Statements and Information. The Company
will deliver to Investor:
(a) as soon as practicable, but in any event within 30 days
after the close of each month, unaudited balance sheets of the Company
as of the end of such month, together with the related statements of
operations for such month, setting forth the budgeted figures for such
month prepared and submitted in connection with the Company's annual
plan as required under Section 6.5 hereof and in comparative form
figures for the corresponding month of the previous fiscal year, all
in reasonable detail and certified by an authorized officer of the
Company, subject to year-end adjustments;
(b) as soon as practicable, but in any event within 90 days
after the end of each fiscal year, a balance sheet of the Company, as
of the end of such fiscal year, together with the related statements
of operations, stockholders' equity and cash flow for such fiscal
year, setting forth in comparative form figures for the previous
fiscal year, all in reasonable detail and duly certified independent
public accountants selected by the Board of Directors of the Company,
which accountants shall have given the Company an opinion, unqualified
as to the scope of the audit, regarding such statements;
(c) concurrently with the delivery of any financial statements
referred to in paragraphs (a) and (b) of this Section 6.3, current
schedules of Indebtedness for Borrowed Money and Senior Indebtedness
together with a certificate of the President and the principal
accounting officer of the Company to the effect that such schedules
are accurate and correct and that there exists no condition or event
which constitutes an event of default with respect to any indebtedness
of the Company, or, if any such condition or event exists, specifying
the nature and period of existence thereof and what action the Company
is taking or proposes to take with respect thereto;
(d) within 90 days after the end of each fiscal year, written
notice of the current Conversion Price and Warrant Exercise Price,
including a brief statement indicating any adjustments reasonably
anticipated;
(e) promptly after the submission thereof to the Company, copies
of all reports and recommendations submitted by independent public
accountants in connection with any annual or interim audit of the
accounts of the Company or any of its Subsidiaries made by such
accountants;
(f) promptly upon transmission thereof, copies of all reports,
proxy statements, registration statements and notifications filed by
it with the Commission pursuant to any act administered by the
Commission or furnished to stockholders of the Company or to any
national securities exchange;
(g) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of the
Company as is available to the Company and as from time to time the
Investor may reasonably request;
(h) promptly following the issuance of any Additional Shares of
Common Stock or of any Convertible Securities, or any options,
warrants or other rights to purchase Additional Shares of Common Stock
or Convertible Securities written notice of the amount of securities
so issued and the total consideration received therefor;
(i) at least 20 days prior to the earlier of the holding of any
meeting of the stockholders of the Company for the purpose of
approving such action, written notice of the terms and conditions of
such proposed merger, consolidation, plan of exchange, sale, transfer
or other disposition;
(j) within 15 days after the Company learns in writing of the
commencement or threatened commencement of any material suit, legal or
equitable, or of any claim or assertion that the Company or any of its
products infringes on the patent rights or other intellectual property
rights of any person or party, or of any material administrative,
arbitration or other proceeding against the Company, any of its
Subsidiaries or their respective businesses, assets or properties,
written notice of the nature and extent of such suit or proceeding;
Notwithstanding anything in this Section 6.3 to the contrary, so long as
the Investor has a representative on the Board of Directors of the Company,
the Company shall not be required to deliver to such Investor the items
contained in paragraphs (h) and (i) above.
The financial statements which the Company will deliver to the
Investor in accordance with provisions of Section 5.3 hereof shall fairly
present the financial condition and the results of operations, and as to
audited statements, changes in stockholder's equity and cash flow of the
Company as at the respective dates and for the periods referred to in such
financial statements, all in accordance with GAAP, subject in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in previously delivered audited balance
sheets); such financial statements will reflect the consistent application
of such accounting principles throughout the periods involved, except as
disclosed in the notes to such financial statements.
6.4 Inspection. The Company will permit the Investor and any
representatives of the Investor to visit and inspect at the Investor's
expense any of the properties of the Company, including its books and
records (and to make photocopies thereof or make extracts therefrom), and
to discuss its affairs, finances, and accounts with its officers, lawyers
and accountants, all to such reasonable extent and at such reasonable times
and intervals as such Investor may reasonably request. Except as otherwise
required by applicable laws or regulations, the Investor shall maintain,
and shall require its representatives to maintain, all information
confidential to the Company obtained pursuant to Section 6.3 hereof, this
Section 6.4 and Section 6.5 hereof on a confidential basis.
6.5 Preparation and Approval of Budgets. At least one month prior to
the beginning of each fiscal year of the Company, the Company shall prepare
and submit to its Board of Directors, for its review and approval, an annual
plan for such year, which shall include monthly capital and operating expense
budgets, cash flow statements and profit and loss projections itemized in
such detail as the Board of Directors may reasonably request. Each annual
plan shall be modified as often as is necessary in the judgment of the Board
of Directors to reflect changes required as a result of operating results and
other events that occur, or may be reasonably expected to occur, during the
year covered by the annual plan, and copies of each such modification shall
be submitted to the Board of Directors. The Company will, simultaneously
with the submission thereof to the Board of Directors, deliver a copy of each
such annual plan and modification thereof to the Investor.
6.6 Payment of Taxes and Maintenance of Properties. The Company will:
(a) pay and discharge promptly, or cause to be paid and
discharged promptly when due and payable, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
upon any of its properties, as well as all material claims of any kind
(including claims for labor, material and supplies) which, if unpaid,
might by law become a lien or charge upon its property; provided,
however, that neither the Company nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set
aside on its books reserves (segregated to the extent required by
generally accepted accounting principles) deemed adequate by it with
respect thereto; and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time
to time make, or cause to be made, all repairs and renewals and
replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; the Company will
maintain or cause to be maintained back-up copies of all valuable
papers and software.
6.7 Insurance. The Company will obtain and maintain in force such
property damage, public liability, business interruption, worker's
compensation, indemnity bonds and other types of insurance as the Company's
executive officers, after consultation with an accredited insurance broker,
shall determine to be necessary or appropriate to protect the Company from
the insurable hazards or risks associated with the conduct of the Company's
business. The Company's executive officers shall periodically report to
the Board of Directors on the status of such insurance coverage. In
addition the Company will obtain and maintain in force life insurance on
the life of ▇▇▇▇▇▇, naming the Company as the primary beneficiary thereof,
in the amount of $1,000,000.
All insurance shall be maintained in at least such amounts and to
such extent as shall be determined to be reasonable by the Board of
Directors; and all such insurance shall be effected and maintained in force
under a policy or policies issued by insurers of recognized responsibility,
except that the Company may effect worker's compensation or similar insurance
in respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to
be maintained a system or systems of self-insurance which is in accord with
applicable laws.
6.8 Scientific Advisory Committee. The Company shall establish a
scientific advisory committee to which the Investor shall have the right to
designate one member. The Company shall reimburse such member for the
member's reasonable out-of-pocket expenses incurred with attending meetings
of the committee and shall pay such member the same compensation paid to
other non-employee members of the committee.
6.9 Directors' and Stockholders' Meetings. The holders of the
Preferred Shares shall have the right to elect one director of the Company
as set forth in the Amendment. In addition, the holders of the Preferred
Shares shall have the right to have two additional representatives
designated by it receive timely notice of and attend all meetings of the
Board of Directors of the Company.
The Company shall reimburse the reasonable out-of-pocket expenses
incurred by the director elected and one of the representatives designated
by the holders of Preferred Shares pursuant to the Amendment in connection
with the attending of meetings by their director designee or carrying out
any other duties by such director designee and representative that may be
specified by the Board of Directors or any committee thereof; shall pay
such director designee the same directors' fees paid to the other
non-employee directors of the Company and shall maintain as part of its
Certificate of Incorporation or Bylaws a provision for the indemnification
of its directors to the full extent permitted by law.
The Company agrees, as a general practice, to hold a meeting of
its Board of Directors at least once every three months, and during each
year to hold its annual meeting of stockholders on or approximately on the
date provided in its Bylaws.
6.10 Replacement of Certificates. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of the certificates representing any Securities, and, in the case of any
such loss, theft or destruction, upon delivery of a bond of indemnity
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of such certificates, the Company will issue new
certificates representing such Securities of like tenor, in lieu of such
lost, stolen, destroyed or mutilated certificates.
6.11 Application of Proceeds. Unless otherwise approved by the
Investor, the net proceeds received by the Company from the sale of the
Preferred Shares shall be used for working capital purposes. Pending use
of the proceeds in the business, they shall be deposited in a bank or banks
having deposits of $150,000,000 or more, invested in money market mutual
funds having assets of $500,000,000 or more, or invested in securities
issued or guaranteed by the United States Government.
6.12 Patents and Other Intangible Rights. The Company will apply for,
or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessperson operating in the industry
in which the Company is operating are desirable or necessary for the conduct
and protection of the business of the Company.
6.13 Rights to Purchase Additional Securities. If (A) the Company
should decide to issue and sell additional shares of any of its capital
stock or any of its warrants, securities convertible into capital stock or
other rights to subscribe for or to purchase any of its capital stock,
other than (a) shares of Common Stock sold in a Public Offering, (b) shares
of Common Stock issued or reserved for issuance to key officers, employees
and consultants pursuant to option or benefit plans adopted by the Company
or other agreements established for the benefit of officers, employees,
consultants and directors of the Company, and the grant of such options
themselves, provided that the aggregate number of shares thus awarded and
issued and issuable pursuant to the exercise of all such options shall not
be in excess of 2,356,250 (appropriately adjusted to reflect stock splits,
stock dividends, reorganizations, consolidations and similar changes
effected after the Closing Date), (c) shares of Common Stock issued upon
conversion of the Preferred Shares, (d) shares of Series A Preferred Stock
issued upon exercise of the Warrants and shares of Common Stock issuable
upon conversion thereof, and (e) shares of Common Stock issued to strategic
partners (all such capital stock, warrants, options and other rights, other
than securities referred to in (a), (b), (c), (d) and (e) above, being
hereinafter sometimes collectively referred to as "Additional Securities"),
and (B) at the time of such decision the Investor owns less than 30% of the
Company's Fully Paid Securities (as defined below) or would own less than
30% of the Company's Fully Paid Securities if the contemplated issuance and
sale were to close, then the Company shall first offer to sell to the
Investor, upon the same terms and conditions as the Company is proposing to
issue and sell such Additional Securities to others, the Investor's pro
rata share (as defined below) of such Additional Securities. Such offer
shall be made by written notice given to such Investor and specifying
therein the amount of the Additional Securities being offered, the purchase
price and other terms of such offer. The Investor shall have a period of
30 days from and after the date of receipt by it of such notice within
which to accept such offer. If the Investor elects to accept such offer in
whole or in part, the Investor shall so accept by written notice to the
Company given within such 30-day period. If the Investor fails to accept
such offer in whole or in part within such 30-day period, any of such
Additional Securities not purchased by the Investor pursuant to such offer
may be offered for sale to others by the Company for a period of 90 days
from the last day of such 30-day period, but only on the same terms and
conditions as set forth in the initial offer to such Purchaser, free and
clear of the restrictions imposed by this Section 6.13.
For purposes of the previous paragraph, the Investor's "pro rata
share" is the number of shares of Additional Securities (rounded to the
nearest whole share) as is equal to the product of (a)(i) the number of
shares of Common Stock issued, or issuable upon the exercise or conversion
of rights, options, warrants or Convertible Securities without the payment
of any additional cash consideration or with the payment of a nominal cash
consideration, as the case may be (collectively, "Fully Paid Securities"),
to such Investor immediately prior to the issuance of the Additional
Securities being offered divided by (ii) the total number of Fully Paid
Securities issued or issuable by the Company immediately prior to the
issuance of the Additional Securities, multiplied by (b) the entire offering
of Additional Securities.
6.14 Confidentiality Agreements. The Company will require each of its
officers, employees and consultants to enter into confidential agreements
with it in a form approved by its Board of Directors.
7. Negative Covenants. Subject to the provisions of Section 9 hereof,
the Company will be limited and restricted as follows:
7.1 Future Registration Rights. Except for any registration
expressly permitted by Section 8 hereof, the Company will not, without the
prior approval of the Investor, agree with the holders of any securities
issued or to be issued by the Company to register such securities under the
Securities Act nor will it grant any incidental registration rights which
are superior or preferred to those granted to the Investor by this Agreement.
7.2 Other Restrictions. The Company will not without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld:
(a) authorize or issue any shares of preferred stock or other
securities with preferences superior to those of the Series A
Preferred Stock issued to the Investor pursuant to this Agreement,
provided that preferences which are pro rata on a purchase price per
share basis with the Investor's Series A Preferred Stock shall not
constitute "superior" preferences; or
(b) enter into any agreement, grant any right or take any action
which would impair or dilute the rights of the Investor's subsidiary,
Research & Diagnostic Systems, Inc., under the Research and License
Agreement attached hereto as Exhibit 7.
8. Registration Rights.
8.1 Required Registration. If at any time after the earlier to occur
of October 1, 2002 or the six-month anniversary of the Company's initial
Public Offering, the Company shall receive a written request therefor from
the Investor, the Company shall prepare and file a registration statement
under the Securities Act covering the shares of Purchased Stock which are
the subject of such request and shall use its best efforts to cause such
registration statement to become effective. The Company shall be obligated
to prepare, file and cause to become effective only two registration
statements (other than on Form S-3 or any successor form promulgated by the
Commission ("Form S-3")) pursuant to this Section 8.1, and to pay the
expenses associated with such registration statements; notwithstanding the
foregoing, the Investor may require, pursuant to this Section 8.1, the
Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use
by the Company. In the event that the Investor determines for any reason
not to proceed with a registration at any time before a registration
statement has been declared effective by the Commission, and such registration
statement, if theretofore filed with the Commission, is withdrawn with
respect to the Purchased Stock covered thereby, and the Investor agrees to
bear its own expenses incurred in connection therewith and to reimburse the
Company for the expenses incurred by it attributable to the registration of
such Purchased Stock, then the Investor shall not be deemed to have exercised
its right to require the Company to register Purchased Stock pursuant to this
Section 8.1.
If, at the time any written request for registration is received by
the Company pursuant to this Section 8.1, the Company has determined to
proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for
cash of any of its securities by it or any of its security holders, such
written request shall be deemed to have been given pursuant to Section 8.2
hereof rather than this Section 8.1, and the rights of Investor covered by
such written request shall be governed by Section 8.2 hereof.
Without the written consent of the Investor, neither the Company nor
any other holder of securities of the Company may include securities in
such registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would interfere
with the successful marketing of the Purchased Stock or require the exclusion
of any portion of the Purchased Stock to be registered.
8.2 Incidental Registration. Each time the Company shall determine
to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer
and sale for cash of any of its securities by it or any of its security
holders (other than a registration statement on Form ▇-▇, ▇▇▇▇ ▇-▇ or any
other form that does not permit the inclusion of shares by its security
holders), the Company will give written notice of its determination to the
Investor. Upon the written request of the Investor given within 30 days
after receipt of any such notice from the Company, the Company will, except
as herein provided, cause all such shares of Purchased Stock requested by
Investor to be registered to be included in such registration statement,
all to the extent requisite to permit the sale or other disposition by the
Investor to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided, further, however, that if the
Company determines not to proceed with a registration after the registration
statement has been filed with the Commission and the Company's decision not to
proceed is primarily based upon the anticipated public offering price of the
securities to be sold by the Company, the Company shall promptly complete the
registration if the Investor wishes to proceed with a public offering of its
Purchased Stock and will bear all expenses in excess of $100,000 incurred by
the Company as the result of such registration after the Company has decided
not to proceed. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of
securities entitled to be included therein owned by each selling stockholder
or in such other proportions as shall mutually be agreed to by such selling
stockholders) but in no event shall the amount of securities of the selling
Holders included in the offering be reduced below 20% of the total amount of
securities included in such offering, unless such offering is the initial
public offering of the Company's securities, in which case the selling
stockholders may be excluded completely if the underwriters make the
determination described above and no other stockholder's securities are
included. For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
If any registration pursuant to this Section 8.2 shall be underwritten
in whole or in part, the Company may require that the Purchased Stock
requested for inclusion pursuant to this Section 8.2 be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If, in the good faith judgment of the
managing underwriter of such public offering, marketing factors require a
limitation of the number of shares of Purchased Stock to be included in
such public offering, the managing underwriter may limit the number of
shares of Purchased Stock to be so included; provided, however, that any
such limitation shall be pro rata based on the relation that the number of
shares of Purchased Stock requested for inclusion in such public offering
bear to the total number of shares of common stock (including shares of
Purchased Stock) requested for such inclusion by the Investor and by other
persons proposing to sell common stock pursuant to registration rights
granted them by the Company.
8.3 Registration Procedures. If and whenever the Company is required
by the provisions of Section 8.1 or 8.2 hereof to effect the registration
of shares of Purchased Stock under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed three months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed two years;
(c) furnish to the Investor and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as such underwriters may reasonably request in
order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Investor may reasonably
request in writing within 30 days following the original filing of
such registration statement;
(e) notify the Investor, promptly after it shall receive notice
thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) notify the Investor promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of the Investor, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Purchased Stock
by such holder;
(h) prepare and promptly file with the Commission and promptly
notify the Investor of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which
any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
(i) advise the Investor, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which the Investor shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been furnished
with a copy thereof at least five business days prior to the filing
thereof, unless in the opinion of counsel for the Company the filing of
such amendment or supplement is reasonably necessary to protect the
Company from any liabilities under any applicable federal or state law
and such filing will not violate applicable law; and
(k) at the request of the Investor, furnish an opinion, dated as
of the closing date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any,
and to the Investor making such request, in form and substance as is
customarily given to underwriters in an underwritten public offering.
8.4 Expenses. With respect to each registration, including
registrations pursuant to Form S-3, requested pursuant to Section 8.1
hereof (except as otherwise provided in such Section with respect to
registrations voluntarily terminated at the request of the requesting
security holders) and with respect to each inclusion of shares of Purchased
Stock in a registration statement pursuant to Section 8.2 hereof (except as
otherwise provided in Section 8.2 with respect to registrations initiated
by the Company but with respect to which the Company has determined not to
proceed), the Company shall bear the following fees, costs and expenses:
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such
securities (if the Company and/or selling security holders are required to
bear such fees and disbursements), all internal Company expenses, all legal
fees and disbursements and other expenses of complying with state securities
or blue sky laws of any jurisdictions in which the securities to be offered
are to be registered or qualified, and the premiums and other costs of
policies of insurance against liability (if any) arising out of such public
offering. Fees and disbursements of counsel and accountants for the selling
security holders, underwriting discounts and commissions and transfer taxes
relating to the shares included in the offering by the selling security
holders, and any other expenses incurred by the selling security holders not
expressly included above, shall be borne by the selling security holders.
8.5 Indemnification. In the event that any Purchased Stock is
included in a registration statement under Section 8.1 or 8.2 hereof:
(a) The Company will indemnify and hold harmless the Investor,
its directors and officers, and any underwriter (as defined in the
Securities Act) for the Investor and each person, if any, who controls
the Investor or such underwriter within the meaning of the Securities
Act, from and against, and will reimburse the Investor and each such
underwriter and controlling person with respect to, any and all loss,
damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) The Investor will indemnify and hold harmless the Company,
its directors and officers, any controlling person and any underwriter
from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to,
any and all loss, damage, liability, cost or expense to which the
Company or any controlling person and/or any underwriter may become
subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity
with written information furnished by such holder specifically for use
in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 8.5 of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant to
the provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party, or if there is a conflict
of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed counsel in accordance with
the proviso of the preceding sentence, (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
9. Termination of Certain Covenants. The obligations of the Company and
rights of the Investor under Sections 6.8 and 6.9 hereof shall,
notwithstanding any provisions hereof apparently to the contrary, terminate
and shall be of no further force or effect from and after the date on which
the Company completes a Public Offering in a gross aggregate amount of at
least $10,000,000.
10. Miscellaneous.
10.1 Changes, Waivers, etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by
a statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
10.2 Payment of Fees and Expenses. The Company and the Investor will
each pay its own expenses incurred in connection with entering into this
Agreement. Payment of expenses related to disputes arising out of or related
to this Agreement shall be determined in accordance with Section 10.7 below.
10.3 Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered,
or mailed first-class postage prepaid, registered or certified mail,
(a) if to Investor, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President, with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., 1100 International
Centre, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
(b) if to the Company, c/o MMRI, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or
to such other address as the Company may specify by written notice to
the Investor, with a copy to J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇,
Phleger & ▇▇▇▇▇▇▇▇ LLP, Two Embarcadaro Place, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
10.4 Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution
and delivery of this Agreement, any investigation at any time made by the
Investor or on their behalf, and the sales and purchases of the Preferred
Shares and payment therefor. All statements contained in any certificate,
instrument or other writing delivered by or on behalf of the Company pursuant
hereto or in connection with or contemplation of the transactions herein
contemplated (other than legal opinions) shall constitute representations and
warranties by the Company hereunder.
10.5 Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed
or not, and, in particular, shall inure to the benefit of and be enforceable
by the holder or holders at the time of any of the Purchased Stock.
10.6 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
10.7 Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement or
the agreements referenced herein, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding, such dispute cannot be resolved, such dispute shall be
settled by binding arbitration. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be a retired state or federal judge or an attorney who has
practiced in substantive areas similar to the issues under dispute for at
least 10 years. If the parties cannot agree on an arbitrator within 20
days, any party may request that the chief judge of the District Court for
Hennepin County, Minnesota, select an arbitrator. Arbitration will be
conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the America Arbitration Association, unless such rules
are inconsistent with the provisions of this Agreement, but without
submission of the dispute to such Association. Limited civil discovery
shall be permitted for the production of documents and taking of depositions.
Unresolved discovery disputes may be brought to the attention of the
arbitrator who may dispose of such dispute. The arbitrator shall have the
authority to award any remedy or relief that a court of this state could
order or grant; provided, however, that punitive of exemplary damages shall
not be awarded. The arbitrator may award to the prevailing party, if any, as
determined by the arbitrator, all of its costs and fees, including the
arbitrator's fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.
10.8 Choice of Law. It is the intention of the parties that the laws
of the State of Minnesota (other than its law with respect to conflicts of
law) shall govern the validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties.
10.9 Counterparts. This Agreement may be executed concurrently in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHEMOCENTRYX, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
TECHNE CORPORATION
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
Schedule A
The following table sets forth the amount, price per share and timing
of the Investor's right and obligation to purchase the Preferred Shares.
The timing shall be the later to occur of the specified date or attainment
of the specified milestone.
Dollar Price
Amount Per Share* Series Date Milestone
------ ---------- ------ --------- ---------
$50,000 $1.00 A-1 9/3/97 (3)
$950,000 $1.00 A-1 10/1/97(est.) (4)
$1,000,000 $1.00 A-1 1/1/98(2) (5)
$1,000,000 $1.00 A-1 7/1/98(2) (6)
$1,000,000 $1.00(1) A-2 1/1/99(2) (7)
$1,000,000 $1.00(1) A-3 7/1/99(2) (8)
(1)The price per share for these investments shall be $1.00 per share*
unless an independent third party, within ninety (90) days of 1/1/99 and
7/1/99, respectively, has made an equivalent share purchase or has made a
binding commitment for an equivalent share purchase, in which case the
price per share shall be the same as that of the independent third party
and provided, however, that if such price per share is increased to more
than $2.00 per share, the Investor shall have the right but not the
obligation to effect such purchase. In the event the independent third
party is acquiring consideration in addition to equity securities, an
allocation shall be made for purposes of determining equivalence to the
price to Investor.
(2)Or later as requested by the Company upon completion of the
applicable milestone, subject to (reasonable limit to be defined).
(3)Signing of Letter of Intent for the transaction depicted in this
Agreement which occurred on September 3, 1997.
(4)Execution of this Agreement and the Research and License Agreement
required by Section 5.10 hereof.
(5)Completion of the Company's detailed budget, research and staffing
plan for 1998.
(6)Progress against the Company's 1998 budget, research and staffing
plan reasonably satisfactory to the Investor.
(7)Completion of the Company's detailed budget, research and staffing
plan for 1999.
(8)Progress against the Company's budget, research and staffing plan
for 1999 reasonably satisfactory to the Investor.
*Appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the date
hereof.
The Investor shall be issued at the time of each closing** Warrants in
the form attached hereto as Exhibit 2 to purchase a number of shares of the
applicable series of Series A Preferred Stock of the Company equal to one-
third of the number of Series A Preferred Stock purchased by the Investor
at such closing. Each Warrant shall expire five years from the date of
issuance. Warrants shall become exercisable one year after the date of
issuance and be exercisable during a four year period at the following
prices:
Year of Exercisability Price
---------------------- -----
First $2.00
Second $3.00
Third $4.00
Fourth $5.00
** Such closing shall not include any closing that occurs pursuant to
Investor's election to participate in a future financing under its
right of first refusal.