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CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.800(b)(4),
200.83 and 240.24b-2
Exhibit 10.62
NEURALSTEM BIOPHARMACEUTICALS, LTD.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
APRIL 20, 2000
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1. AGREEMENT TO SELL AND PURCHASE......................................... 1
1.1 Authorization of Shares.......................................... 1
1.2 Sale and Purchase................................................ 1
2. CLOSING, DELIVERY AND PAYMENT.......................................... 2
2.1 Closing.......................................................... 2
2.2 Delivery......................................................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 2
3.1 Organization, Good Standing and Qualification.................... 2
3.2 Subsidiaries..................................................... 2
3.3 Capitalization; Voting Rights.................................... 2
3.4 Authorization; Binding Obligations............................... 3
3.5 Financial Statements............................................. 4
3.6 Liabilities...................................................... 4
3.7 Agreements; Action............................................... 4
3.8 Obligations to Related Parties................................... 5
3.9 Changes.......................................................... 5
3.10 Title to Properties and Assets; ▇▇▇▇▇, Etc....................... 6
3.11 Intellectual Property............................................ 7
3.12 Compliance with Other Instruments................................ 8
3.13 Litigation....................................................... 8
3.14 Tax Returns and Payments......................................... 8
3.15 Employees........................................................ 8
3.16 Obligations of Management........................................ 9
3.17 Registration Rights and Voting Rights............................ 9
3.18 Compliance with Laws; Permits.................................... 9
3.19 Environmental and Safety Laws.................................... 9
3.20 Offering Valid................................................... 10
3.21 Full Disclosure.................................................. 10
3.22 Minute Books..................................................... 10
3.23 Real Property Holding Corporation................................ 10
3.24 Insurance........................................................ 10
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................ 10
4.1 Requisite Power and Authority.................................... 10
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4.2 Investment Representations....................................... 11
4.3 Transfer Restrictions............................................ 12
5. CONDITIONS TO CLOSING.................................................. 12
5.1 Conditions to Purchaser's Obligations at the Closing............. 12
5.2 Conditions to Obligations of the Company......................... 13
6. MISCELLANEOUS.......................................................... 14
6.1 Governing Law.................................................... 14
6.2 Survival......................................................... 14
6.3 Successors and Assigns........................................... 14
6.4 Entire Agreement................................................. 14
6.5 Severability..................................................... 14
6.6 Amendment and Waiver............................................. 14
6.7 Delays or Omissions.............................................. 15
6.8 Notices.......................................................... 15
6.9 Expenses......................................................... 15
6.10 Attorneys' Fees.................................................. 15
6.11 Titles and Subtitles............................................. 15
6.12 Counterparts..................................................... 16
6.13 Broker's Fees.................................................... 16
6.14 Confidentiality.................................................. 16
6.15 Pronouns......................................................... 16
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NEURALSTEM BIOPHARMACEUTICALS, LTD.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
and entered into as of April 20, 2000, by and among NEURALSTEM
BIOPHARMACEUTICALS, LTD., a Maryland corporation (the "Company"), and GENE LOGIC
INC., a Delaware corporation ("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of [***] shares of its Series A Preferred Stock (the "Shares");
WHEREAS, Purchaser desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (a) the sale and issuance to
Purchaser of the Shares and (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Articles of Amendment of the Company, in the form
attached hereto as Exhibit A (the "Restated Charter").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined) the Company hereby agrees to issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, the Shares at a
purchase price of Seven Dollars and Sixty-Four Cents ($7.64) per Share.
*CONFIDENTIAL TREATMENT REQUESTED
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2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares under this
Agreement (the "Closing") shall take place at 9:00 a.m. on the date hereof, at
the offices of ▇▇▇▇▇▇ Godward LLP, Five Palo Alto Square, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇-▇▇▇▇ or at such other time or place as the Company and
Purchaser may mutually agree (such date is hereinafter referred to as the
"Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to Purchaser a certificate representing the number of
Shares to be purchased at the Closing by Purchaser, against payment of the
purchase price therefor by check, wire transfer made payable to the order of the
Company, cancellation of indebtedness or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the Company
to Purchaser at the Closing specifically identifying the relevant Section
hereof, the Company hereby represents and warrants to Purchaser as of the date
of this Agreement as set forth below.
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Investor Rights Agreement in the form attached hereto as
Exhibit B (the "Investor Rights Agreement") and the Co-Sale Agreement in the
form attached hereto as Exhibit C (the "Co-Sale Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Restated Charter and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 SUBSIDIARIES. The Company does not own or control any equity security
or other interest of any other corporation, limited partnership or other
business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, immediately prior to the
Closing, consists of (i) 10,000,000 shares of Common Stock, par value $.01 per
share, [***] shares of which are issued and outstanding, and (ii) 5,000,000
shares of Preferred Stock, par value $.01 per share, 1,047,588 shares of which
are designated Series A Preferred Stock, none of which is issued and
outstanding.
(b) Under the Company's Stock Option Plan (the "Plan"), (i) [***] shares
have been issued pursuant to restricted stock purchase agreements and/or the
exercise of
*CONFIDENTIAL TREATMENT REQUESTED
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outstanding options, (ii) options to purchase [***] shares have been granted and
are currently outstanding (as listed on Exhibit D), and (iii) [***] shares of
Common Stock remain available for future issuance to officers, directors,
employees and consultants of the Company.
(c) Pursuant to the warrants, promissory notes and agreements described on
Exhibit D hereto, an aggregate of [***] shares of Common Stock (the "Additional
Reserved Shares") are reserved for issuance upon the exercise of the rights
embodied in such warrants, notes and agreements.
(d) Other than the shares reserved for issuance under the Plan and the
Additional Reserved Shares and except as may be granted pursuant to this
Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
(e) All issued and outstanding shares of the Company's Common Stock and
Preferred Stock (i) have been duly authorized and validly issued to the persons
listed on Exhibit D hereto and are fully paid and nonassessable, and (ii) were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.
(f) The rights, preferences, privileges and restrictions of the Shares are
as stated in the Restated Charter. The Shares are convertible into Common Stock
on a one-for-one basis as of the date hereof. The Conversion Shares have been
duly and validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Restated Charter, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances other than liens and encumbrances created
by or imposed upon Purchaser; provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
(g) No stock plan, stock purchase, stock option or other agreement or
understanding between the Company and any holder of any equity securities or
rights to purchase equity securities provides for acceleration or other changes
in the vesting provisions or other terms of such agreement or understanding as
the result of any merger, consolidated sale of stock or assets, change in
control or any other transaction(s) by the Company.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Restated Charter has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions in
*CONFIDENTIAL TREATMENT REQUESTED
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Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.5 FINANCIAL STATEMENTS. The Company has made available to Purchaser its
unaudited balance sheet as at February 29, 2000 (the "Statement Date") and
unaudited statement of income and cash flows for the 11 months ended on the
Statement Date (collectively, the "Financial Statements"). The Financial
Statements, together with the notes thereto, are complete and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of the Statement Date; provided,
however, that the Financial Statements are subject to normal recurring year-end
audit adjustments (which are not expected to be material), and do not contain
all footnotes required under generally accepting accounting principles.
3.6 LIABILITIES. The Company has no material liabilities and, to the best
of its knowledge, knows of no material contingent liabilities not disclosed in
the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and agreements
between the Company and its employees with respect to the sale of the Company's
Common Stock, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
judgments, orders, writs or decrees to which the Company is a party or to its
knowledge by which it is bound which may involve (i) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $100,000 (other than
obligations of, or payments to, the Company arising from purchase or sale
agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products), or (iii) provisions restricting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights (other than indemnification obligations arising from
purchase, or sale or license agreements entered into in the ordinary course of
business).
(c) The Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course of business
or as disclosed in the Financial Statements) individually in excess of $100,000
or, in the case of indebtedness and/or liabilities individually less than
$100,000, in excess of $250,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than
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ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
(e) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company, or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up, of the
Company.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). None of the officers, directors or, to the best of
the Company's knowledge, key employees or stockholders of the Company or any
members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation which competes with the Company, other than passive
investments in publicly traded companies (representing less than 1% of such
company) which may compete with the Company. No officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
3.9 CHANGES. Since the Statement Date, there has not been to the Company's
knowledge:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Financial Statements, other
than changes in the ordinary course of business, none of which individually or
in the aggregate has had a material adverse effect on such assets, liabilities,
financial condition or operations of the Company;
(b) Any resignation or termination of any officer, key employee or group
of employees of the Company; and the Company, to the best of its knowledge, does
not
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know of the impending resignation or termination of employment of any such
officer, key employee or group of employees;
(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(f) Any direct or indirect loans made by the Company to any stockholder,
employee, officer or director of the Company, other than advances made in the
ordinary course of business;
(g) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other distribution of
the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed by
the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a party
or by which it is bound which materially and adversely affects the business,
assets, liabilities, financial condition, operations or prospects of the
Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition or operations of the Company;
or
(n) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (m) above.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other
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than (a) those resulting from taxes which have not yet become delinquent, (b)
minor liens and encumbrances which do not materially detract from the value of
the property subject thereto or materially impair the operations of the Company,
and (c) those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.11 INTELLECTUAL PROPERTY.
(a) To the best of its knowledge, the Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and as presently proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products.
(b) The Company has not received any communications alleging that the
Company has violated or, by conducting its business as presently proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity, nor
is the Company aware of any basis therefor.
(c) The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as presently proposed to be
conducted. Each former and current employee, officer and consultant of the
Company has executed a proprietary information and inventions agreement. No
former or current employee, officer or consultant of the Company has excluded
works or inventions made prior to his or her employment with the Company from
his or her assignment of inventions pursuant to such employee, officer or
consultant's proprietary information and inventions agreement. The Company does
not believe it is or will be necessary to utilize any inventions, trade secrets
or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
(d) Neither the execution nor delivery of this Agreement or the Related
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as presently proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated.
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3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or
default of any term of its Restated Charter or Bylaws, or of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order, writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Restated Charter, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties. To its knowledge, the Company has avoided
every condition, and has not performed any act, the occurrence of which would
result in the Company's loss of any right granted under any license,
distribution agreement or other agreement required to be disclosed on the
Schedule of Exceptions.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which would reasonably be
expected to result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or, to
the Company's knowledge, threatened or any basis therefor known by the Company
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.15 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. The Company is
not a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan,
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incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company's knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. No employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of employees.
3.16 OBLIGATIONS OF MANAGEMENT. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer or key employee is currently working
or, to the Company's knowledge, plans to work for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.
3.17 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as required pursuant to
the Investor Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to register (as defined in Section
1.1 of the Investor Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, no stockholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
3.18 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, or operations of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the Shares or the
Conversion Shares, except such as has been duly and validly obtained or filed,
or with respect to any filings that must be made after the Closing, as will be
filed in a timely manner. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
3.19 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and
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safety, and to its knowledge, no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.21 FULL DISCLOSURE. The Company has provided Purchaser with all
information requested by Purchaser in connection with their decision to purchase
the Shares. To the Company's knowledge, neither this Agreement, the exhibits
hereto, the Related Agreements nor any other document delivered by the Company
to Purchaser or their attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor, omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
3.22 MINUTE BOOKS. The minute books of the Company made available to
Purchaser contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
3.23 REAL PROPERTY HOLDING CORPORATION. The Company is not a real property
holding corporation within the meaning of Code Section 897(c)(2) and any
regulations promulgated thereunder.
3.24 INSURANCE. The Company has general commercial, product liability,
fire and casualty insurance policies with coverage customary for companies
similarly situated to the Company.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) as limited by
general principles of equity that restrict the availability of
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equitable remedies, and (c) to the extent that the enforceability of the
indemnification provisions of Section 2.9 of the Investor Rights Agreement may
be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment
indefinitely unless the Shares (or the Conversion Shares) are registered
pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that the Company has no present intention of registering
the Shares, the Conversion Shares or any shares of its Common Stock. Purchaser
also understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the Shares
or the Conversion Shares under the circumstances, in the amounts or at the times
Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares and the
Conversion Shares for Purchaser's own account for investment only, and not with
a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. ▇▇▇▇▇▇▇▇▇ has received and read the Financial
Statements and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company and has had the opportunity to review the Company's operations and
facilities. Purchaser has also had the opportunity to ask questions of and
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the Shares, and, if
issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in
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a private placement subject to the satisfaction of certain conditions,
including, among other things: the availability of certain current public
information about the Company, the resale occurring following the required
holding period under Rule 144 and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investor Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects as of the Closing Date with the same
force and effect as if they had been made as of the Closing Date, and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and issuance of the
Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which Purchaser and the Company are
subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement and the Related Agreements
(except for such as may be properly obtained subsequent to the Closing).
(d) FILING OF RESTATED CHARTER. The Restated Charter shall have been filed
with the Maryland State Department of Assessment and Taxation and shall continue
to be in full force and effect as of the Closing Date.
(e) CORPORATE DOCUMENTS. The Company shall have delivered to Purchaser or
its counsel, copies of all corporate documents of the Company as Purchaser shall
reasonably request.
(f) RESERVATION OF CONVERSION SHARES. The Conversion Shares issuable upon
conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered to Purchaser
a Compliance Certificate, executed by the President of the Company, dated the
Closing Date, to the effect that the conditions specified in subsections (a),
(c), (d) and (f) of this Section 5.1 have been satisfied.
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(h) SECRETARY'S CERTIFICATE. Purchaser shall have received from the
Company's Secretary, a certificate having attached thereto (i) the Company's
Articles of Incorporation as in effect at the time of the Closing, (ii) the
Company's Bylaws as in effect at the time of the Closing, (iii) resolutions
approved by the Board of Directors authorizing the transactions contemplated
hereby, (iv) resolutions approved by the Company's stockholders authorizing the
filing of the Restated Charter, and (v) good standing certificates (including
tax good standing) with respect to the Company from the applicable
authority(ies) in Maryland and any other jurisdiction in which the Company is
qualified to do business, dated a recent date before the Closing.
(i) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by the parties thereto.
(j) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
parties thereto. The stock certificates representing the shares subject to the
Co-Sale Agreement shall have been delivered to the Secretary of the Company and
shall have had appropriate legends placed upon them to reflect the restrictions
on transfer set forth on the Co-Sale Agreement.
(k) LEGAL OPINION. Purchaser shall have received from legal counsel to the
Company an opinion addressed to them, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit E.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Purchaser and its counsel, and Purchaser
and its counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties in Section 4 made by Purchaser shall be true and correct in all
material respects at the date of the Closing, with the same force and effect as
if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by Purchaser on or before the Closing.
(c) FILING OF RESTATED CHARTER. The Restated Charter shall have been filed
with the Maryland State Department of Assessment and Taxation.
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(d) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by Purchaser.
(e) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
parties thereto
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement and the Related Agreements
(except for such as may be properly obtained subsequent to the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Maryland as such laws are applied to agreements between
Maryland residents entered into and performed entirely in Maryland.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by ▇▇▇▇▇▇▇▇▇ and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules hereto,
the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and holders of at least a majority of the Shares (treated
as if converted and including any Conversion Shares into which the Shares have
been converted that have not been sold to the public).
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(b) The obligations of the Company and the rights of the holders of the
Shares and the Conversion Shares under the Agreement may be waived only with the
written consent of the holders of at least a majority of the Shares (treated as
if converted and including any Conversion Shares into which the Shares have been
converted that have not been sold to the public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on Purchaser's part
of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Restated Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at its address set forth on the signature page hereof and to Purchaser at its
address set forth on the signature page hereof or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.9 EXPENSES. Each party shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement.
6.10 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
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6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.13 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.13 being untrue.
6.14 CONFIDENTIALITY. Each party hereto agrees that, except with the prior
written consent of the other party, it shall at all times keep confidential and
not divulge, furnish or make accessible to anyone any confidential information,
knowledge or data concerning or relating to the business or financial affairs of
the other parties to which such party has been or shall become privy by reason
of this Agreement or the Related Agreements, discussions or negotiations
relating to this Agreement or the Related Agreements, the performance of its
obligations hereunder or the ownership of the Shares purchased hereunder. The
provisions of this Section 6.14 shall be in addition to, and not in substitution
for, the provisions of any separate nondisclosure agreement executed by the
parties hereto.
6.15 PRONOUNS. All pronouns contained herein, and any variations thereof,
shall be deemed to refer to the masculine, feminine or neutral, singular or
plural, as to the identity of the parties hereto may require.
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SIGNATURE PAGE
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
NEURALSTEM BIOPHARMACEUTICALS, LTD. GENE LOGIC INC.
Signature: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ Signature: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------- ---------------------------
Print Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------- --------------------------
Title: President & CEO Title: Chief Financial Officer
------------------------------- -------------------------------
Address: 3335 Paint Branch Drive Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: I. ▇▇▇▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
17.
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LIST OF EXHIBITS
Articles of Amendment Exhibit A
Investor Rights Agreement Exhibit B
Co-Sale Agreement Exhibit C
List of Stockholders and Optionholders Exhibit D
Form of Legal Opinion Exhibit E
22
EXHIBIT A
NEURALSTEM PHARMACEUTICALS, LTD.
ARTICLES OF AMENDMENT
NEURALSTEM BIOPHARMACEUTICALS, LTD., a Maryland corporation having its
principal office in ▇▇▇▇▇▇▇▇▇▇ County, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Articles of Incorporation are hereby amended and restated
in their entirety to read as follows:
I.
The name of the corporation is NEURALSTEM BIOPHARMACEUTICALS, LTD. (the
"Corporation" or the "Company").
II.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Maryland.
III.
The address of the principal office of the Corporation within the State of
Maryland is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
IV.
The name and address of the registered agent of the Corporation in the
State of Maryland are:
The Corporation Trust Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
V.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Fifteen Million
(15,000,000) shares, Ten Million (10,000,000) shares of which shall be Common
Stock (the "Common Stock") and Five Million (5,000,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one cent ($.01) per share and the Common Stock shall have a par value
of one cent ($.01) per share.
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the
1.
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affirmative vote of the holders of a majority of the stock of the Corporation
(voting together on an as-if-converted basis).
C. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Articles of Amendment, to fix or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series prior or subsequent to the issue of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
D. One Million Forty-Seven Thousand Five Hundred Eighty-Eight (1,047,588)
of the authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock" (the "Series A Preferred").
E. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred are as follows:
1. DIVIDEND RIGHTS.
a. Subject to the rights of any series of Preferred Stock that may from
time to time come into existence, the Holders of Series A Preferred, in
preference to the holders of any other stock of the Company ("Junior Stock"),
shall be entitled to receive, when and as declared by the Board of Directors,
but only out of funds that are legally available therefor, cash dividends at the
rate of eight percent (8%) of the Original Issue Price (as defined below) per
annum on each outstanding share of Series A Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares). The "Original Issue Price" of the Series A Preferred shall be
Seven Dollars and Sixty-Four Cents ($7.64). Such dividends shall be payable only
when, as and if declared by the Board of Directors and shall be non-cumulative.
b. So long as any shares of Series A Preferred shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock of the Company be purchased, redeemed, or otherwise acquired for
value by the Company (except for acquisitions of Common Stock by the Company
pursuant to agreements which permit the Company to repurchase such shares upon
termination of services to the Company or in exercise of the Company's right of
first refusal upon a proposed transfer) until all dividends (set forth in
Section 1(a) above) on the Series A Preferred shall have been paid or declared
and set apart. In the event dividends are paid on any share of Common Stock, an
additional dividend shall be paid with respect to all outstanding shares of
Series A Preferred in an amount equal per share (on an as-if-converted to Common
Stock basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock in
exchange for
2.
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shares of any other Junior Stock, or (iii) any repurchase of any outstanding
securities of the Company that is approved by the Company's Board of Directors.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as required
by law, the Series A Preferred shall be voted equally with the shares of the
Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series A Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series A Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES A PREFERRED. For so long as at least 500,000
shares of Series A Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series A Preferred) remain
outstanding, in addition to any other vote or consent required herein, by law or
pursuant to the rights of any series of Preferred Stock that may from time to
time come into existence, the vote or written consent of the holders of at least
a majority of the outstanding Series A Preferred shall be necessary for
effecting or validating the following actions:
(i) Any increase or decrease in the authorized number of shares of
Series A Preferred;
(ii) Any redemption, repurchase, payment of dividends or other
distributions with respect to Junior Stock (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer); or
(iii) Any action that results in the payment or declaration of a
dividend on any shares of Common Stock or Preferred Stock.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock and subject to the rights of
any series of Preferred Stock that may from time to time come into existence,
the holders of Series A Preferred shall be entitled to be paid out of the assets
of the Company an amount per share of Series A Preferred equal to the Original
Issue Price plus all declared and unpaid dividends on the Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series A Preferred held
by them. If, upon any such liquidation, dissolution, or winding up, the assets
of the Company shall be insufficient to make payment in full to all holders of
Series A Preferred of the liquidation preference set forth in this Section 3(a),
then subject to the rights of any series of Preferred Stock that may from time
to time come into
3.
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existence, such assets shall be distributed among the holders of Series A
Preferred at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
b. After the payment of the full liquidation preference of the
Series A Preferred as set forth in Section 3(a) above and any other distribution
that may be required with respect to any series of Preferred Stock that may from
time to time come into existence, the remaining assets of the Company legally
available for distribution, if any, shall be distributed ratably to the holders
of the Common Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding any consolidation or merger effected exclusively to
change the domicile of the Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(a) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (b) below:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the Board of
Directors and the holders of at least a majority of the voting power of all then
outstanding shares of Series A Preferred.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely
4.
26
by virtue of a shareholder's status as an affiliate or former affiliate) shall
be to make an appropriate discount from the market value determined as above in
(A) (1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the Board of Directors and the holders of at least a
majority of the voting power of all then outstanding shares of such Series A
Preferred.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred shall have the following
rights with respect to the conversion of the Series A Preferred into shares of
Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred being converted.
b. SERIES A PREFERRED CONVERSION RATE. The conversion rate in effect
at any time for conversion of the Series A Preferred (the "Series A Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series A Preferred by the "Series A Preferred Conversion Price,"
calculated as provided in Section 4(c).
c. SERIES A PREFERRED CONVERSION PRICE. The conversion price for the
Series A Preferred shall initially be the Original Issue Price of the Series A
Preferred (the "Series A Preferred Conversion Price"). Such initial Series A
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series A Preferred Conversion Price
herein shall mean the Series A Preferred Conversion Price as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Series A Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series A Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series A
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series A Preferred being
converted and (ii) in cash (at the Common Stock's fair market value determined
by the Board of Directors as of the date of conversion) the value of any
fractional share of Common Stock otherwise issuable to any holder of Series A
Preferred. Such conversion shall be deemed to have been made at the close of
business on the date of such surrender of the certificates representing
5.
27
the shares of Series A Preferred to be converted, and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series A Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series A Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series A
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series A Preferred Conversion Price that is then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Series A Preferred Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series A Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series A Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series A
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
6.
28
h. REORGANIZATIONS, MERGERS OR CONSOLIDATIONS. If at any time or
from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock or the merger or consolidation of the Company
with or into another corporation or another entity or person (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 4), as a part of such capital
reorganization, provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion of the Series
A Preferred the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series A
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series A
Preferred, if the Series A Preferred is then convertible pursuant to this
Section 4, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series A
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the Series A Preferred Conversion Price at the time in effect,
and (ii) the type and amount, if any, of other property which at the time would
be received upon conversion of the Series A Preferred.
j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series A Preferred at
least ten (10) days prior to the record date specified therein (or such shorter
period approved by a majority of the outstanding Series A Preferred) a notice
specifying (A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
Acquisition,
7.
29
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
k. AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the outstanding shares of the Series A
Preferred, or (B) immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which (x) the per share price is at least $3.00 (as
adjusted for stock splits, dividends, recapitalizations and the like) and (y)
the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $7,500,000. Upon such automatic conversion,
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(d).
(ii) Upon the occurrence of either of the events specified
in Section 4(k)(i) above, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series A Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A Preferred, the holders of Series A Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series A Preferred. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A Preferred surrendered were convertible on the date on which such
automatic conversion occurred, and any declared and unpaid dividends shall be
paid in accordance with the provisions of Section 4(d).
l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
8.
30
m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
n. NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed electronic
mail or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
o. PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.
p. NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or take
any other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series A Preferred
against dilution or other impairment.
VI.
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall only be prospective
and shall not effect the rights under this Article VI in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its
9.
31
directors and of its stockholders or any class thereof, as the case may be, it
is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws, subject to any restrictions
which may be set forth in these Articles of Amendment.
B. The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws; provided, however, that the stockholders may change or repeal
any Bylaw adopted by the Board of Directors by the affirmative vote of the
percentage of holders of capital stock as provided therein; and, provided
further, that no amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement thus adopted
by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
SECOND: The amendment and restatement of the Articles of Incorporation
as hereinabove set forth have been duly advised by the board of directors and
approved by the stockholders of the Corporation;
THIRD: (a) The total number of shares of all classes of stock of the
Corporation heretofore authorized, and the number and par value of the shares
of each class are as follows: 10,000,000 shares of Common Stock with $.01
par value.
(b) The total number of shares of all classes of stock of the
Corporation as increased, and the number and par value of the shares of each
class, are as follows: Ten Million (10,000,000) shares of Common Stock with $.01
par value per share and Five Million (5,000,000) shares of Preferred Stock with
$.01 par value per share, of which One Million Forty-Seven Thousand Five Hundred
Eighty-Eight (1,047,588) shares have been designated Series A Preferred Stock.
10.
32
IN WITNESS WHEREOF, NEURALSTEM BIOPHARMACEUTICALS, LTD., has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Assistant Secretary on April 6, 2000.
ATTEST NEURALSTEM BIOPHARMACEUTICALS, LTD.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ /s/ I. ▇▇▇▇▇▇▇ ▇▇▇▇, President
-------------------------- --------------------------------
▇▇▇▇ ▇. ▇▇▇▇ I. ▇▇▇▇▇▇▇ ▇▇▇▇, President
Assistant Secretary
The undersigned, President of NeuralStem Biopharmaceuticals, Ltd., who
executed on behalf of said Corporation, the foregoing Articles of Amendment, of
which this certificate is made a part, thereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, President
-------------------------------
I. ▇▇▇▇▇▇▇ ▇▇▇▇, President
11.
33
EXHIBIT B
NEURALSTEM BIOPHARMACEUTICALS, LTD.
INVESTOR RIGHTS AGREEMENT
APRIL 20, 2000
34
TABLE OF CONTENTS
PAGE
----
SECTION 1. GENERAL........................................................................................ 1
1.1 Definitions.................................................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER......................................................... 2
2.1 Restrictions on Transfer....................................................................... 2
2.2 Demand Registration............................................................................ 4
2.3 Piggyback Registrations........................................................................ 5
2.4 Form S-3 Registration.......................................................................... 6
2.5 Expenses of Registration....................................................................... 7
2.6 Obligations of the Company..................................................................... 8
2.7 Termination of Registration Rights............................................................. 9
2.8 Delay of Registration; Furnishing Information.................................................. 9
2.9 Indemnification................................................................................ 9
2.10 Assignment of Registration Rights.............................................................. 11
2.11 Amendment of Registration Rights............................................................... 12
2.12 Limitation on Subsequent Registration Rights................................................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information................................. 12
2.14 Rule 144 Reporting............................................................................. 13
SECTION 3. COVENANTS OF THE COMPANY....................................................................... 13
3.1 Basic Financial Information and Reporting...................................................... 13
3.2 Inspection Rights.............................................................................. 14
3.3 Confidentiality of Records..................................................................... 14
3.4 Reservation of Common Stock.................................................................... 14
3.5 Key Man Insurance.............................................................................. 14
3.6 Visitation Rights.............................................................................. 14
3.7 Proprietary Information and Inventions Agreement............................................... 15
3.8 Assignment of Right of First Refusal........................................................... 15
3.9 Termination of Covenants....................................................................... 15
SECTION 4. RIGHTS OF FIRST REFUSAL........................................................................ 15
4.1 Subsequent Offerings........................................................................... 15
4.2 Exercise of Rights............................................................................. 15
35
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
4.3 Issuance of Equity Securities to Other Persons................................................. 16
4.4 Termination and Waiver of Rights of First Refusal.............................................. 16
4.5 Transfer of Rights of First Refusal............................................................ 16
4.6 Excluded Securities............................................................................ 16
SECTION 5. MISCELLANEOUS.................................................................................. 17
5.1 Governing Law.................................................................................. 17
5.2 Survival....................................................................................... 17
5.3 Successors and Assigns......................................................................... 17
5.4 Entire Agreement............................................................................... 18
5.5 Severability................................................................................... 18
5.6 Amendment and Waiver........................................................................... 18
5.7 Delays or Omissions............................................................................ 18
5.8 Notices........................................................................................ 18
5.9 Attorneys' Fees................................................................................ 19
5.10 Titles and Subtitles........................................................................... 19
5.11 Counterparts................................................................................... 19
ii.
36
NEURALSTEM BIOPHARMACEUTICALS, LTD.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 20th day of April, 2000, by and among NEURALSTEM BIOPHARMACEUTICALS, LTD., a
Maryland corporation (the "Company"), and the investors listed on Exhibit A
hereto, referred to hereinafter as the "Investors" and each individually as an
"Investor."
RECITALS
WHEREAS, the Investors are purchasing shares of the Company's Series A
Preferred Stock (the "Series A Stock") pursuant to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
parties desire to enter into this Agreement in order to grant registration,
information rights and other rights to the Investors as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor or similar registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
37
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (b) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"Registrable Securities then outstanding" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
of a single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued
pursuant to the Purchase Agreement and held by the Investors listed on Exhibit A
hereto and their permitted assigns.
"Special Registration Statement" shall mean a registration
statement relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
2.
38
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder 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 (C) if reasonably requested by the Company, such Holder 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
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, or (D) to the
Holder's family member or trust for the benefit of an individual Holder;
provided that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
3.
39
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of 50% of the
Registrable Securities (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of at
least 50% of the Registrable Securities then outstanding or a lesser percentage
if the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $7,500,000 (a "Qualified Public Offering"), then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the registration
under the Securities Act of all Registrable Securities that the Holders request
to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
▇▇▇▇▇▇'s participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) March 31, 2004 or (b)
one hundred eighty (180) days following the effective date of the registration
statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
(iii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining a public offering, other
than pursuant to a Special Registration Statement; provided that the Company
makes reasonable good faith efforts to cause such registration statement to
become effective;
4.
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(iv) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make a public
offering, other than pursuant to a Special Registration Statement, within ninety
(90) days;
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than twice in any twelve (12) month
period; or
(vi) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other
5.
41
than a Holder) on a pro rata basis. No such reduction shall (i) reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, or (ii) reduce the amount of securities of
the selling Holders included in the registration below twenty-five percent (25%)
of the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders 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 person shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by
the Holders, or
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(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than one million dollars ($1,000,000), or
(iii) if within thirty (30) days of receipt of a
written request from any Holder or Holders pursuant to this Section 2.4, the
Company gives notice to such Holder or Holders of the Company's intention to
make a public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the
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43
number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to thirty (30) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement
of a material fact or omit to state a material fact required to be stated
8.
44
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(g) Use its reasonable efforts to furnish, on the date that
such Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 TERMINATION OF REGISTRATION RIGHTS. With respect to a given Holder,
all registration rights granted under this Section 2 shall terminate and be of
no further force and effect upon the earlier to occur of (i) five (5) years
after the date of the Company's Initial Offering, or (ii) the date upon which
all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners, former partners, members and former members) may be sold
under Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the
9.
45
following statements, omissions or violations (collectively a "Violation") by
the Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such ▇▇▇▇▇▇, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such ▇▇▇▇▇▇, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such
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indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.9, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(a) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company
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written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned and
(ii) such transferee shall agree to be subject to all restrictions set forth in
this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Other than as
provided in Section 5.11, after the date of this Agreement, the Company shall
not, without the prior written consent of the Holders of at least a majority of
the Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights senior to those granted to the Holders
hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(i) such agreement shall apply only to the Company's
Initial Offering; and, for so long as such Holder beneficially owns at least one
percent (1%) of the Company's voting securities, any subsequent public offering;
and
(ii) all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Each Holder
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agrees that any transferee of any shares of Registrable Securities shall be
bound by this Section 2.13.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, the Company
will furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
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accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.
(d) So long as an Investor (with its affiliates) shall own not
less than one hundred thousand (100,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto).
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 KEY MAN INSURANCE. Subject to the approval of the Board of
Directors, the Company will use its best efforts to obtain and maintain in full
force and effect term life insurance in the amount of at least five million
dollars ($5,000,000) on the life of ▇▇▇▇ ▇. ▇▇▇▇ naming the Company as
beneficiary.
3.6 VISITATION RIGHTS. So long as Gene Logic Inc. or its successor or
assign ("Gene Logic") is a Major Investor, the Company shall allow one
representative designated by the Gene Logic to attend all meetings of the
Company's Board of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such representative copies of all notices,
minutes, consents and other materials, financial or otherwise, which the Company
provides to its Board of Directors; provided, however, that the Company reserves
the right to exclude such representative from access to any material or meeting
or portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonably necessary to preserve the attorney-client privilege, to
protect highly confidential proprietary information or for other similar
reasons.
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3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form approved by the Board of
Directors.
3.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion (as defined in Section 4.1) of the capital stock proposed to be
transferred.
3.9 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) upon (a) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.9(ii)(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity
15.
51
Securities to be purchased. Notwithstanding the foregoing, the Company shall not
be required to offer or sell such Equity Securities to any Major Investor who
would cause the Company to be in violation of applicable federal securities laws
by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Major Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Major Investors pursuant to Section 4.2 hereof.
If the Company has not sold such Equity Securities within ninety (90) days of
the notice provided pursuant to Section 4.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Investors in the manner provided above.
4.4 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL.
(a) The rights of first refusal established by this Section 4
shall not apply to, and shall terminate upon, the earlier of (i) effective date
of the registration statement pertaining to the Company's Initial Offering or
(ii) a Change in Control.
(b) In addition to, and not in lieu of, the provisions of
Section 4.4(a), with respect only to Gene Logic, the rights of first refusal
established by this Section 4 shall terminate as to Gene Logic upon the
expiration or, if earlier, the termination of the GeneExpress Product Access
Agreement between Gene Logic and the Company of even date herewith.
(c) The rights of first refusal established by this Section 4
may be amended, or any provision waived with the written consent of Major
Investors holding a majority of the Registrable Securities held by all Major
Investors, or as permitted by Section 5.6.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the Original Issue Date (as defined in the
Company's Certificates of Incorporation to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
16.
52
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement; provided that the rights
of first refusal established by this Section 4 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing or loan arrangement, or debt financing from a bank or similar financial
or lending institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(h) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (i) joint
ventures, manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that such strategic
transactions and the issuance of shares therein, has been approved by the Board
of Directors.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Maryland as applied to agreements among Maryland
residents entered into and to be performed entirely within Maryland.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the
17.
53
absolute owner and holder of such shares for all purposes, including the payment
of dividends or any redemption price.
5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
5.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
holders of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) For the purposes of determining the number of Holder or
Investors entitled to vote or exercise any rights hereunder, the Company shall
be entitled to rely solely on the list of record holders of its stock as
maintained by or on behalf of the Company.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed electronic mail or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on
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54
the signature pages hereof or Exhibit A hereto or at such other address as such
party may designate by ten (10) days advance written notice to the other parties
hereto.
5.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTOR:
NEURALSTEM GENE LOGIC INC.
BIOPHARMACEUTICALS, LTD.
By: /s/ I. ▇▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------------
Title: President and CEO Title: Chief Financial Officer
--------------------------- ----------------------------------
19.
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EXHIBIT A
SCHEDULE OF INVESTORS
NAME AND ADDRESS SHARES
GENE LOGIC INC. [***]
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
A-1
*CONFIDENTIAL TREATMENT REQUESTED
56
EXHIBIT C
NEURALSTEM BIOPHARMACEUTICALS, LTD.
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (the "Agreement") is made and entered into as of
this 20th day of April, 2000, by and among NEURALSTEM BIOPHARMACEUTICALS, LTD.,
a Maryland corporation (the "Company"), each of the persons and entities listed
on Exhibit A hereto (the "Investors"), and each of the persons listed on Exhibit
B hereto (each referred to herein as a "Founder" and collectively as the
"Founders").
RECITALS
WHEREAS, the Founders are the beneficial owners of an aggregate of
[***] shares of Common Stock of the Company;
WHEREAS, Investors are purchasing shares of the Company's Series A
Preferred Stock (the "Preferred Stock") pursuant to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
parties desire to enter into this Agreement in order to grant rights of co-sale
to each Investor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
1. DEFINITIONS.
(a) "Co-Sale Stock" shall mean shares of the Company's Common
Stock now owned or subsequently acquired by the Founders by gift, purchase,
dividend, option exercise or any other means whether or not such securities are
only registered in a Founder's name or beneficially or legally owned by such
Founder, including any interest of a spouse in any of the Co-Sale Stock, whether
that interest is asserted pursuant to marital property laws or otherwise. The
number of shares of Co-Sale Stock owned by the Founders as of the date hereof
are set forth on Exhibit B, which Exhibit may be amended from time to time by
the Company to reflect changes in the number of shares owned by the Founders,
but the failure to so amend shall have no effect on such Co-Sale Stock being
subject to this Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of the Company's
outstanding Preferred Stock or exercise of any option, warrant or other security
or right of any kind convertible into or exchangeable for Common Stock.
1.
*CONFIDENTIAL TREATMENT REQUESTED
57
(c) For the purpose of this Agreement, the term "Transfer"
shall include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by request, devise or descent, or other
transfer or disposition of any kind, including, but not limited to, transfers to
receivers, levying creditors, trustees or receivers in bankruptcy proceedings or
general assignees for the benefit of creditors, whether voluntary or by
operation of law, directly or indirectly, of any of the Co-Sale Stock.
2. TRANSFERS BY A FOUNDER.
(a) If a Founder proposes to Transfer any shares of Co-Sale
Stock then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon
written notice to such Founder within fifteen (15) days after the Notice, to
participate in such Transfer of Co-Sale Stock on the same terms and conditions.
Such notice shall indicate the number of shares of Common Stock such Investor
wishes to sell under his or her right to participate. To the extent one or more
of the Investors exercise such right of participation in accordance with the
terms and conditions set forth below, the number of shares of Co-Sale Stock that
such Founder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of
shares equal to the product obtained by multiplying (i) the aggregate number of
shares of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by such Investor at the
time of the Transfer and the denominator of which is the total number of shares
of Common Stock owned by such Founder and the Investors at the time of the
Transfer. If not all of the Investors elect to sell their share of the Co-Sale
Stock proposed to be transferred within said fifteen (15) day period, then the
Founder shall promptly notify in writing the Investors who do so elect and shall
offer such Investors the additional right to participate in the sale of such
additional shares of Co-Sale Stock proposed to be transferred on the same
percentage basis as set forth above in this Section 2(c). The Investors shall
have five (5) days after receipt of such notice to notify the Founder of its
election to sell all or a portion thereof of the unsubscribed shares.
(d) Each Investor who elects to participate in the Transfer
pursuant to this Section 2 (a "Participant") shall effect its participation in
the Transfer by promptly delivering to such Founder for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent:
(i) the type and number of shares of Common Stock
which such Participant elects to sell; or
2.
58
(ii) that number of shares of Preferred Stock which
is at such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(d)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the
Participant delivers to such Founder pursuant to Section 2(d) shall be
transferred to the prospective purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Notice, and
the Founder shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Participant exercising its rights of co-sale hereunder,
such Founder shall not sell to such prospective purchaser or purchasers any
Co-Sale Stock unless and until, simultaneously with such sale, such Founder
shall purchase such shares or other securities from such Participant on the same
terms and conditions specified in the Notice.
(f) The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more Transfers of Co-Sale Stock
made by such Founder shall not adversely affect their rights to participate in
subsequent Transfers of Co-Sale Stock subject to this Section 2.
(g) If none of the Investors elect to participate in the sale
of the Co-Sale Stock subject to the Notice, such Founder may, not later than
sixty (60) days following delivery to the Company of the Notice, enter into an
agreement providing for the closing of the Transfer of the Co-Sale Stock covered
by the Notice within thirty (30) days of such agreement on terms and conditions
not more materially favorable to the transferor than those described in the
Notice. Any proposed transfer on terms and conditions materially more favorable
than those described in the Notice, as well as any subsequent proposed transfer
of any of the Co-Sale Stock by a Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by a Founder with the
procedures described in this Section 2.
3. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any transfer or transfers by a Founder which in
the aggregate, over the term of this Agreement, amount to no more than ten
percent (10%) of the shares of Co-Sale Stock held by a Founder as of the date
hereof (as adjusted for stock splits, dividends and the like), (ii) any transfer
to the ancestors, descendants or spouse or to trusts for the benefit of such
persons or the Founder, (iii) any transfer or transfers by a Founder to another
Founder (the "Transferee-Founder") so long as the Transferee-Founder is, at the
time of the transfer, employed by or acting as a consultant or director of the
Company, or (iv) any bona fide gift; provided that in the event of any transfer
made pursuant to one of the exemptions provided by clauses (ii), (iii) and (iv),
(A) the Founder shall inform the Investors of such transfer or gift prior to
effecting it and (B) the transferee or donee shall furnish the Investors with a
written agreement to be bound by and
3.
59
comply with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-Sale Stock
shall remain "Co-Sale Stock" hereunder, and such transferee or donee shall be
treated as the "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2
shall not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit
the right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
4. PROHIBITED TRANSFERS.
(a) In the event that a Founder should Transfer any Co-Sale
Stock in contravention of the co-sale rights of each Investor under this
Agreement (a "Prohibited Transfer"), each Investor, in addition to such other
remedies as may be available at law, in equity or hereunder, shall have the put
option provided below, and such Founder shall be bound by the applicable
provisions of such option.
(b) In the event of a Prohibited Transfer, each Investor shall
have the right to sell to such Founder the type and number of shares of Common
Stock equal to the number of shares each Investor would have been entitled to
transfer to the purchaser under Section 2(c) hereof had the Prohibited Transfer
been effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
sold to the Founder shall be equal to the price per share paid by the purchaser
to such Founder in such Prohibited Transfer. The Founder shall also reimburse
each Investor for any and all fees and expenses, including legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Investor's rights under Section 2.
(ii) Within ninety (90) days after the date on which
an Investor received notice of the Prohibited Transfer or otherwise became aware
of the Prohibited Transfer, such Investor shall, if exercising the option
created hereby, deliver to the Founder the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) Such Founder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this Section 4(b), pay the aggregate purchase price therefor and the amount
of reimbursable fees and expenses, as specified in Section 4(b)(i), in cash or
by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a
Founder to transfer Co-Sale Stock in violation of Section 2 hereof shall be
voidable at the option of a majority in interest of the Investors if a majority
in interest of the Investors do not elect to
4.
60
exercise the put option set forth in this Section 4, and the Company agrees it
will not effect such a transfer nor will it treat any alleged transferee as the
holder of such shares without the written consent of a majority in interest of
the Investors.
5. LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now
or hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE
COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Founders agree that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5(a) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. MISCELLANEOUS.
(a) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the
Investors' rights under this Agreement shall be subject to and conditioned upon,
and the Founders and the Company shall use their best efforts to assist each
Investor in, compliance with applicable laws.
(b) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Maryland as applied to agreements among
Maryland residents entered into and to be performed entirely within Maryland.
(c) AMENDMENT. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written consent
of (i) as to the Company, only the Company, (ii) as to the Investors, persons
holding more than a majority in interest of the Common Stock held by the
Investors and their assignees, pursuant to Section 6(d) hereof, and (iii) as to
the Founders, only the Founders; provided, that no consent of any Founder shall
be necessary for any amendment and/or restatement which includes additional
holders of Preferred Stock or other preferred stock of the Company as
"Investors" and parties hereto. Any amendment or waiver effected in accordance
with clauses (i), (ii), and (iii) of this Section 6(c) shall be binding upon
each Investor, its successors and assigns, the Company and the Founders.
(d) ASSIGNMENT OF RIGHTS. This Agreement constitutes the
entire agreement between the parties relative to the specific subject matter
hereof. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement.
5.
61
This Agreement and the rights and obligations of the parties hereunder shall
inure to the benefit of, and be binding upon, their respective successors,
assigns and legal representatives.
(e) TERM. This Agreement shall continue in full force and
effect from the date hereof through the earliest of the following dates, on
which date it shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten
public offering of the Common Stock pursuant to a registration statement filed
with the Securities and Exchange Commission, and declared effective under the
Securities Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or
other disposition of all or substantially all of the Company's assets or the
Company's merger into or consolidation with any other corporation or other
entity, or any other corporate reorganization, in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the corporation or other entity surviving
such transaction, provided that this Section 6(e)(ii) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Company; or
(iii) the date as of which the parties hereto
terminate this Agreement by written consent of a majority in interest of the
Investors and a majority in interest of the Founders.
(f) OWNERSHIP. The Founders represent and warrant that each is
the sole legal and beneficial owner of those shares of Co-Sale Stock he or she
currently holds subject to the Agreement and that no other person has any
interest (other than a community property interest) in such shares.
(g) NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified, (ii) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the party to be notified at the address as set forth herein or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(h) SEVERABILITY. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(i) ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such
6.
62
prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
(j) ENTIRE AGREEMENT. This Agreement and the Exhibits hereto,
along with the Purchase Agreement and each of the Exhibits thereto, constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) ADDITIONAL INVESTORS. Notwithstanding anything to the
contrary contained herein, if the Company shall issue additional shares of its
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Preferred Stock may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed an "Investor" hereunder.
(l) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
63
The foregoing CO-SALE AGREEMENT is hereby executed as of the date first
above written.
COMPANY: INVESTOR:
NEURALSTEM BIOPHARMACEUTICALS, GENE LOGIC INC.
LTD.
By: /s/ I. ▇▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------ ---------------------------------
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------- -------------------------------
Title: President & CEO Title: Chief Financial Officer
--------------------------- ------------------------------
FOUNDERS:
[***]
*CONFIDENTIAL TREATMENT REQUESTED
64
EXHIBIT A
LIST OF INVESTORS
Gene Logic Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
1.
65
EXHIBIT B
CO-SALE STOCK OWNERSHIP
NAME AND ADDRESS OF FOUNDER CO-SALE STOCK
[***] [***]
2.
*CONFIDENTIAL TREATMENT REQUESTED
66
EXHIBIT D
NEURALSTEM BIOPHARMACEUTICALS, LTD.
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF ISSUED AND OUTSTANDING STOCK CERTIFICATES
[***]
-1-
*CONFIDENTIAL TREATMENT REQUESTED
67
SCHEDULE OF ISSUED AND OUTSTANDING STOCK CERTIFICATES
[***]
-2-
*CONFIDENTIAL TREATMENT REQUESTED
68
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK SUBSCRIPTIONS
[***]
-3-
*CONFIDENTIAL TREATMENT REQUESTED
69
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
SCHEDULE OF STOCK OPTIONS
AS OF MARCH 30, 2000
SCHEDULE OF UNEXERCISED INCENTIVE STOCK OPTIONS
[***]
-4-
*CONFIDENTIAL TREATMENT REQUESTED
70
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
SCHEDULE OF STOCK OPTIONS
AS OF MARCH 30, 2000
SCHEDULE OF UNEXERCISED NON-QUALIFIED STOCK OPTIONS
[***]
-5-
*CONFIDENTIAL TREATMENT REQUESTED
71
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK OPTIONS
TOTAL ISO OUTSTANDING: [***]
TOTAL NON-QUAL OUTSTANDING: [***]
TOTAL ISO AND NON-QUAL OUTSTANDING: [***]
-6-
*CONFIDENTIAL TREATMENT REQUESTED
72
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK RESERVED
[***]
-7-
*CONFIDENTIAL TREATMENT REQUESTED
73
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK WARRANTS
[***]
-8-
*CONFIDENTIAL TREATMENT REQUESTED
74
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SUMMARY
[***]
-9-
*CONFIDENTIAL TREATMENT REQUESTED
75
EXHIBIT E
FORM OF LEGAL OPINION
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Maryland.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted
and, to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any jurisdiction in the United
States.
3. The Agreements have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of
the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity under section 2.9 of the Investor
Rights Agreement may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
4. The Company's authorized capital stock consists of (a) _____ (_____)
shares of Common Stock, $__________ par value, of which _____ (_____)
shares are issued and outstanding, and (b) _____ (_____) shares of
Preferred Stock, $__________ par value, of which _____ (_____) shares
have been designated Series A Preferred Stock, without par value, of
which (excluding the Shares to be issued at Closing) no shares are
issued and outstanding. The outstanding shares of Common Stock and of
Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The rights, preferences and privileges of
the Series A Preferred Stock are as stated in the Certificate of
Determination of Preferences of Series A Preferred Stock. The shares
have been duly authorized, and upon issuance and delivery against
payment therefor in accordance with the terms of the Agreement, the
Shares will be validly issued, outstanding, fully paid and
nonassessable. The Shares of Common Stock issuable upon conversion of
the Shares have been duly authorized, and upon issuance and delivery
against payment therefor in accordance with the terms of the Shares,
will be validly issued, outstanding, fully paid and nonassessable. To
the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to
purchase any of the authorized but unissued capital stock of the
Company, other than the conversion privileges of the Series A Preferred
Stock, rights created in connection with the transactions contemplated
by the Agreements, _____ (______) shares reserved for issuance under
the Company's _____ Stock Option Plan, and up to an additional _____
(_____) shares of Common Stock that are reserved for issuance to key
employees and consultants of the Company.
5. The execution and delivery of the Agreements by the Company and the
issuance of the Shares pursuant thereto do not violate any provision of
the Company's Articles of Incorporation or Bylaws, and do not
constitute a material default under the provisions of
1
76
any material agreement known to us to which the Company is a party or
by which it is bound, and do not violate or contravene (a) any
governmental statute, rule or regulation applicable to the Company or
(b) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company and of which we are
aware, the violation or contravention of which would materially and
adversely affect the Company, its assets, financial condition or
operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before
any court or administrative agency that questions the validity of the
Agreements or might result, either individually or in the aggregate, in
any material adverse change in the assets, financial condition, or
operations of the Company
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by
the Company of the transactions contemplated by the Agreements, have
been made or obtained, except for the filing of a Form D pursuant to
Securities and Exchange Commission Regulation D and (c) (other Blue Sky
filings).
8. The offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933, as amended, subject to the
timely filing of a Form D pursuant to Securities and Exchange
Commission Regulation D.
2