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Exhibit 10.1
DISCOVERY PARTNERS INTERNATIONAL, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
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April 7, 2000
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock......................................................... 1
1.1 Sale and Issuance of Series E Preferred Stock............................... 1
1.2 Closing..................................................................... 1
1.3 Additional Closing(s)....................................................... 1
2. Representations and Warranties of the Company...................................... 2
2.1 Organization; Good Standing; Qualification.................................. 2
2.2 Authorization............................................................... 3
2.3 Valid Issuance of Preferred and Common Stock................................ 3
2.4 Governmental Consents....................................................... 3
2.5 Capitalization and Voting Rights............................................ 3
2.6 Subsidiaries................................................................ 4
2.7 Contracts and Other Commitments............................................. 4
2.8 Related-Party Transactions.................................................. 5
2.9 Registration Rights......................................................... 5
2.10 Permits..................................................................... 5
2.11 Compliance with Other Instruments........................................... 5
2.12 Litigation.................................................................. 5
2.13 Returns and Complaints...................................................... 6
2.14 Disclosure.................................................................. 6
2.15 Offering.................................................................... 6
2.16 Title to Property and Assets; Leases........................................ 6
2.17 Financial Statements........................................................ 6
2.18 Changes..................................................................... 7
2.19 Patents and Trademarks...................................................... 8
2.20 Manufacturing and Marketing Rights.......................................... 9
2.21 Employees; Employee Compensation; ERISA..................................... 9
2.22 Proprietary Information and Inventions Agreements........................... 9
2.23 Tax Returns, Payments, and Elections........................................ 10
2.24 Environmental and Safety Laws............................................... 10
2.25 Minute Books................................................................ 10
2.26 Real Property............................................................... 10
2.27 Compliance With Law......................................................... 10
2.28 Brokers..................................................................... 11
2.29 Insurance................................................................... 11
3. Representations and Warranties of the Investors.................................... 11
3.1 Authorization............................................................... 11
3.2 Purchase Entirely for Own Account........................................... 11
3.3 Reliance Upon Investor's Representations.................................... 11
3.4 Receipt of Information...................................................... 12
3.5 Investment Experience....................................................... 12
3.6 Accredited Investor......................................................... 12
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TABLE OF CONTENTS
Page
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3.7 Restricted Securities....................................................... 12
3.8 Further Limitations on Disposition.......................................... 12
3.9 Legends..................................................................... 13
4. California Corporate Securities Law................................................ 13
5. Conditions of Investor's Obligations at the Closing................................ 13
6. Conditions of the Company's Obligations at the Closing............................. 14
7. Covenants of the Company........................................................... 15
7.1 Approval of Certain Transactions............................................ 15
7.2 No Watering of Series E Preferred Stock..................................... 15
8. Miscellaneous...................................................................... 15
8.1 Entire Agreement............................................................ 15
8.2 Survival of Warranties...................................................... 15
8.3 Successors and Assigns...................................................... 16
8.4 Governing Law............................................................... 16
8.5 Counterparts................................................................ 16
8.6 Titles and Subtitles........................................................ 16
8.7 Notices..................................................................... 16
8.8 Finder's Fees............................................................... 16
8.9 Expenses.................................................................... 16
8.10 Attorneys' Fees............................................................. 16
8.11 Amendments and Waivers...................................................... 17
8.12 Severability................................................................ 17
8.13 Entire Agreement............................................................ 17
EXHIBIT A Restated Articles of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Amended and Restated Shareholders' Agreement
EXHIBIT D Schedule of Common Holders
EXHIBIT E Form of Legal Opinion
EXHIBIT F Amendment No. 2 to Voting Agreement
SCHEDULE OF EXCEPTIONS
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SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 7th day of April, 2000, by and between Discovery Partners
International, Inc., a California corporation (the "Company"), and the investors
listed on Schedule A hereto (each an "Investor" and collectively, the
"Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series E Preferred Stock.
(a) The Company shall authorize the issuance and sale to
Investors of an aggregate of up to 1,465,261 shares of the Company's Series E
Preferred Stock, having the rights, restrictions, privileges and preferences set
forth in the Restated Articles of Incorporation in the form attached hereto as
Exhibit A (the "Restated Articles") on or before the Closing (as defined below).
The Company shall adopt and file with the Secretary of State of California on or
before the Closing the Restated Articles.
(b) Subject to the terms and conditions of this Agreement,
each Investor agrees, severally and not jointly, to purchase at the Closing, and
the Company agrees to sell and issue to each Investor at the Closing, that
number of shares of the Company's Series E Preferred Stock set forth opposite
each Investor's name on Schedule A hereto for the purchase price set forth
thereon. The sale of the Series E Preferred Stock to each Investor shall
constitute a separate sale hereunder and the Company's agreement with each of
the Investors shall be a separate agreement.
1.2 Closing. The closing of the separate purchases and sales of
the Series E Preferred Stock shall take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP, San Diego, California, at 10:00 a.m., on April 7, 2000 or at
such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series E Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing, the Company shall deliver to each
Investor a certificate representing the Series E Preferred Stock that such
Investor is purchasing against payment of the purchase price therefor by check,
wire transfer to the account designated by the Company, short-term promissory
note in form and substance acceptable to the Company, cancellation of
indebtedness or any combination thereof. In the event that payment by an
Investor is made, in whole or in part, by cancellation of indebtedness, then
such Investor shall surrender to the Company for cancellation at the Closing any
evidence of such indebtedness or shall execute an instrument of cancellation in
form and substance acceptable to the Company.
1.3 Additional Closing(s).
(a) Conditions of Additional Closing(s). At a per share
purchase price of $8.00 per share and at any time from time to time on or before
April 14, 2000, the Company may, at one or more additional closings (each an
"Additional Closing"), without obtaining the
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signature, consent or permission of any of the Investors, offer and sell to
additional investors (each a "New Investor") up to that number of shares of the
Series E Preferred Stock of the Company (in no event to exceed 72,758 shares)
which is mutually agreed upon by the Company and the New Investor. A New
Investor may include persons or entities who are already Investors under this
Agreement.
(b) Amendments. The Company and the New Investors
purchasing Series E Preferred Stock at each Additional Closing will execute
counterpart signature pages to this Agreement, the Investors' Rights Agreement
(as defined below), the Shareholders' Agreement (as defined below) and the
Voting Agreement (as defined below) and such New Investors will, upon delivery
to the Company of such signature pages, become parties to, and bound by, this
Agreement, the Investors' Rights Agreement, the Shareholders' Agreement, and the
Voting Agreement each to the same extent as if they had been Investors at the
Closing. Immediately after each Additional Closing, Schedule A to this Agreement
will be amended to list the New Investors purchasing shares of Series E
Preferred Stock hereunder and the number of shares of Series E Preferred Stock
purchased by each New Investor under this Agreement at each such Additional
Closing. Any and all schedules or exhibits to the Investors' Rights Agreement,
the Shareholders' Agreement or the Voting Agreement that refer to the Investors
shall also be amended to reflect the New Investors. The Company will promptly
furnish to each Investor copies of the amendments to Schedule A and any other
schedule or exhibit referred to in this paragraph.
(c) Status of New Investors. Upon the completion of each
Additional Closing as provided in this Section 1.3, each New Investor will be
deemed to be an "Investor" for all purposes of this Agreement, the Investors'
Rights Agreement, the Shareholders' Agreement and the Voting Agreement.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on the
Schedule of Exceptions attached hereto, specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Amended and Restated Investors' Rights Agreement in substantially
the form attached hereto as Exhibit B (the "Investors' Rights Agreement"), the
Amended and Restated Shareholders' Agreement in substantially the form attached
hereto as Exhibit C (the "Shareholders' Agreement"), Amendment No. 2 to the
Voting Agreement in substantially the form attached hereto as Exhibit F (the
"Voting agreement"), and any other agreement to which the Company is a party the
execution and delivery of which is contemplated hereby (collectively, the
"Ancillary Agreements"), to issue and sell the Series E Preferred Stock and the
Common Stock issuable upon conversion thereof, and to carry out the provisions
of this Agreement and the Ancillary Agreements. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
prospects, properties or financial condition.
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2.2 Authorization. All corporate action on the part of the
Company, its officers, directors, and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Restated Articles,
and any Ancillary Agreement, the performance of all obligations of the Company
hereunder and thereunder at the Closing, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Series E Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion thereof has
been taken or will be taken prior to the Closing, and this Agreement and all
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities law.
2.3 Valid Issuance of Preferred and Common Stock. The Series E
Preferred Stock which is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights Agreement,
the Shareholders' Agreement, the Voting Agreement, and under applicable state
and federal securities laws. The Common Stock issuable upon conversion of the
Series E Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Articles, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights Agreement,
the Shareholders' Agreement, the Voting Agreement, and under applicable state
and federal securities laws.
2.4 Governmental Consents. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
Ancillary Agreements, the offer, sale or issuance of the Series E Preferred
Stock by the Company or the issuance of Common Stock upon conversion of the
Series E Preferred Stock.
2.5 Capitalization and Voting Rights. The authorized capital of
the Company consists, or will consist prior to the Closing, of:
(a) Preferred Stock. 9,033,333 shares of Preferred Stock
(the "Preferred Stock"), of which (a) 2,500,000 shares have been designated
Series A Preferred Stock, 2,000,000 of which are issued and outstanding, (b)
2,000,000 shares of which have been designated Series B Preferred Stock, all of
which are issued and outstanding, (c) 333,333 of which have been designated
Series C Preferred Stock, all of which are issued and outstanding, (d) 2,500,000
of which have been designated Series D Preferred Stock, 2,228,945 of which are
issued and outstanding, and (e) 1,700,000 of which have been designated Series E
Preferred stock, none of which are issued and outstanding, up to 1,465,261 of
which may be sold pursuant to this Agreement. The 6,562,278 outstanding shares
of Series A, B, C and D Preferred Stock are currently convertible into an
aggregate of no more than 6,624,206 shares of Common Stock.
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The rights, privileges and preferences of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock are as stated in the Restated Articles.
(b) Common Stock. 12,000,000 shares of common stock (the
"Common Stock"), of which 1,789,068 shares are issued and outstanding and are
owned by the persons and in the numbers specified in Exhibit D hereto. All such
issued and outstanding shares have been duly authorized and validly issued, and
are fully paid and non-assessable.
(c) The outstanding shares of Common Stock and Preferred
Stock have been issued in accordance with the registration or qualification
provisions of the Securities Act of 1933 and any applicable state securities
laws or pursuant to a valid exemption therefrom.
(d) Except for (A) the conversion privileges of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock, (B) the conversion privileges of the Series E Preferred Stock
to be issued pursuant to this Agreement, (C) warrants issued on September 10,
1996 to purchase 192,355 shares of Series A Preferred Stock, (D) warrants issued
as of November 5, 1996 to purchase 32,624 shares of Common Stock, (E) warrants
to purchase 33,051 shares of Series A Preferred Stock, (F) a warrant to purchase
150,000 shares of Common Stock, (G) warrants to purchase 48,904 shares of Common
Stock, (H) warrants to purchase 11,588 shares of Common Stock; (I) warrants to
purchase 234,739 shares of Series E Preferred Stock, (J) options to purchase
1,080,029 shares of Common Stock granted under the Company's 1995 Stock
Option/Stock Issuance Plan, and (K) the right of first offer provided in
paragraph 2.4 of the Investors' Rights Agreement, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. Other than the Voting Agreement, the Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities that
affects or relates to the voting or giving of written consents with respect to
any security or the voting by a director of the Company.
2.6 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 Contracts and Other Commitments. The Company does not have
any contract, agreement, lease, commitment or proposed transaction, written or
oral, absolute or contingent, other than (i) contracts for the purchase of
supplies and services that were entered into in the ordinary course of business
and that do not involve more than $50,000, and do not extend for more than one
(1) year beyond the date hereof, (ii) sales contracts entered into in the
ordinary course of business, and (iii) contracts terminable at will by the
Company on no more than thirty (30) days notice without cost or liability to the
Company and that do not involve any employment or consulting arrangement and are
not material to the conduct of the Company's business. For the purpose of this
paragraph, employment and consulting contracts and contracts with labor unions,
and license agreements and any other agreements relating to the acquisition or
disposition of the Company's technology, shall not be considered to be contracts
entered into in the ordinary course of business.
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2.8 Related-Party Transactions. No employee, officer, or director
of the Company or member of his or her immediate family thereof is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them. To the Company's knowledge, none of such
persons has 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 that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly-traded companies that may compete
with the Company. To the Company's knowledge, no officer or director or any
member of their immediate families or any corporation or business entity
controlled by him or her is, directly or indirectly, interested in any material
contract with the Company.
2.9 Registration Rights. Except as provided in the Investors'
Rights Agreement, the Company is not obligated to register under the Securities
Act any of its presently outstanding securities or any of its securities that
may subsequently be issued.
2.10 Permits. 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, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 Compliance with Other Instruments. The Company is not in
violation or default in any material respect of any provision of its Restated
Articles or Bylaws or in any material respect of any material provision of any
mortgage, indenture, agreement, instrument or contract to which it is a party or
by which it is bound or, to its knowledge, of any federal or state judgment,
order, writ, decree, statute, rule or regulation applicable to the Company. The
execution, delivery and performance by the Company of this Agreement and the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby will not result in any such violation or be in material
conflict with or constitute, with or without the passage of time or giving of
notice, either a material default under any such provision or an event that
results in the creation of any material lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement or the Ancillary Agreements or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the assets, business
properties, prospects or financial condition of the Company, taken as a whole,
or in any material change in the current equity ownership of the Company. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any of the Company's employees, their use in connection with the Company's
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business of any information or techniques allegedly proprietary to any of their
former employers, their obligations under any agreements with prior employers,
or negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to, or to the best
of its knowledge, named in any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit or
proceeding by the Company currently pending or that the Company currently
intends to initiate.
2.13 Returns and Complaints. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 Disclosure. The Company has provided each Investor with all
the information that such Investor has requested for deciding whether to
purchase the Series E Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement nor any other written statements or certificates made or
delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.15 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series E Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act. Neither the
Company nor any person authorized or employed by the Company as agent, broker or
otherwise in connection with the offering or sale of the Series E Preferred
Stock or any security of the Company similar to the Series E Preferred Stock has
offered the Series E Preferred Stock or any such similar security for sale to,
or solicited any offer to buy the Series E Preferred Stock or any such similar
security from, or otherwise approached or negotiated with respect thereto with,
any person or persons, and neither the Company nor any person acting on its
behalf has taken or will take any other action (including, without limitation,
any offer, issuance or sale of any security of the Company under circumstances
which might require the integration of such security with Series E Preferred
Stock under the Securities Act or the rules and regulations of the Securities
and Exchange Commission thereunder), in either case so as to subject the
offering, issuance or sale of the Series E Preferred Stock to the registration
provisions of the Securities Act.
2.16 Title to Property and Assets; Leases. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except (i) such encumbrances and liens which arise in the ordinary
course of business for obligations not past due to carriers, warehousemen,
laborers, materials men and the like, (ii) for liens for current taxes not yet
delinquent, (iii) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, or (iv) for minor defects in title,
none of which, individually or in the aggregate materially interferes with the
use of such property. With respect to the property and assets it leases, the
Company is in substantial compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.17 Financial Statements. The Company has delivered to each
Investor its audited financial statements (balance sheet and profit and loss
statement, statement of
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shareholders' equity and statement of changes in financial position, at December
31, 1999 and for the fiscal year then ended), certified by the Chief Financial
Officer of the Company (the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP"). The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 1999 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under GAAP to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
2.18 Changes. Since December 31, 1999, there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes that have not been, in the aggregate,
materially adverse;
(b) any change (individually or in the aggregate), except
in the ordinary course of business, in the contingent obligations of the Company
by way of guarantee, endorsement, indemnity, warranty or otherwise;
(c) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(d) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(e) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(f) any material change to a material contract or
arrangement by which the Company or any of its assets is bound or subject;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director, or shareholder;
(h) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
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(i) any resignation or termination of employment of any
key officer of the Company; and the Company does not know of the impending
resignation or termination of employment of any such officer;
(j) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
(k) any labor dispute involving the Company or any of its
employees;
(l) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(m) any extraordinary increase in the compensation of any
of the Company's employees, officers or directors;
(n) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(o) any other event or condition of any character which
might materially and adversely affect the business, properties, prospects or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted); or
(p) any agreement or commitment by the Company to do any
of the things described in this paragraph 2.18.
2.19 Patents and Trademarks. The Company owns or possesses
sufficient legal rights to all patents, trademarks, servicemarks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted and to the best of its knowledge does not conflict with or infringe
any of the rights of others with respect to any of the foregoing. The Schedule
of Exceptions contains a complete list of patents and pending patent
applications of the Company. There are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, 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, proprietary rights and processes of any other person or
entity. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights, trade
secrets or other proprietary rights of any other person or entity. The Company
is not aware that any of it 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 the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement
or any Ancillary Agreement nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will
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conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument known to the
Company under which any of such employees is now obligated. The Company does not
believe it is or will be necessary to use any inventions of any of its employees
(or persons it currently intends to hire) made prior to their employment by the
Company.
2.20 Manufacturing and Marketing Rights. The Company has not
granted rights to manufacture, produce, assemble, license, market, or sell its
products to any other person and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble, distribute, market,
or sell its products.
2.21 Employees; Employee Compensation; ERISA.
(a) There is no strike, or labor dispute or union
organization activities pending or threatened between it and its employees. None
of the Company's employees belong to any union or collective bargaining unit.
The Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement
(each an "Employee Plan") which is subject to ERISA. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. Subject to
general principles related to wrongful termination of employees, the employment
of each officer and employee of the Company is terminable at the will of the
Company.
(b) Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Employee
Plan.
(c) With respect to the employees and former employees of
the Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(d) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
2.22 Proprietary Information and Inventions Agreements. Each
employee and officer of the Company, and each consultant of the Company having
access to the Company's proprietary information, has executed a Proprietary
Information and Inventions Agreement
9
13
substantially in the form or forms that have been delivered to counsel for the
Investors. The Company is not aware that any of its employees, officers or
consultants is in violation thereof.
2.23 Tax Returns, Payments, and Elections. The Company has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due, except those contested by it in good faith. The provision
for taxes of the Company as shown in the Financial Statements is adequate for
taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as an S corporation or a collapsible corporation pursuant to Section
341(f) of Section 1362(a) of the Code, nor has it made any other elections
pursuant to the Code (other than elections which relate solely to methods of
accounting, depreciation or amortization) which would have a material effect on
the business, properties, prospects or financial condition of the Company. The
Company has never had any tax deficiency proposed or assessed against it and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax or government charge. None of the Company's federal income
tax returns and none of its state income or franchise tax or sales or use tax
returns has ever been audited by governmental authorities. Since the date of the
Financial Statements, the Company has made adequate provisions on its books of
account for all taxes, assessments, and governmental charges with respect to its
business, properties and operations for such period. The Company has withheld or
collected from each payment made to each of its employees, the amount of all
taxes, including but not limited to federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
2.24 Environmental and Safety Laws. To its knowledge, the Company
is not in violation of any applicable statute, law, or regulation relating to
the environment or occupational health and 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.
2.25 Minute Books. The minute books of the Company, complete and
accurate copies of which have been provided to counsel for the Investors,
contain minutes of all meetings of directors and shareholders and all actions by
written consent without a meeting by the directors and shareholders since the
time of incorporation and reflect all actions by the directors (and any
committee of directors) and shareholders with respect to all transactions
referred to in such minutes accurately in all material respects.
2.26 Real Property. The Company owns no real property. The
Company is not a real property holding corporation within the meaning of
Internal Revenue Code Section 897(c)(2) and any regulations promulgated
thereunder.
2.27 Compliance With Law. The Company is not in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. The Company has (to its knowledge) complied with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services. The Company has all necessary permits, licenses
and other authorizations
10
14
required to conduct its business as conducted and as proposed to be conducted,
and the Company has been operating its business pursuant to and in compliance
with the terms of all such permits, licenses and other authorizations except
where any instance or instances of noncompliance do not, individually or in the
aggregate, have a material adverse effect on the Company's business, prospects,
financial condition, operations, property or affairs. There is no existing law,
rule, regulation or order which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business, and the Company after due inquiry is not aware of any
proposed law, rule, regulation or order which would prohibit or restrict the
Company from, or otherwise materially adversely affect the Company in,
conducting its business in any jurisdiction in which it is now conducting
business or in which it proposes to conduct business and which has been
published in the Federal Register or in any California analog thereof.
2.28 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement or any Ancillary Agreement.
2.29 Insurance. The Company maintains on its properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance is deemed by the
Company to be sufficient. The Company has not caused or permitted any assignment
or change in beneficiary since the date of the Financial Statements and has not
borrowed against any such policy.
3 .Representations and Warranties of the Investors. Each Investor hereby
represents and warrants and agrees that:
3.1 Authorization. Such Investor has full power and authority to
enter into this Agreement and the Ancillary Agreements, and each such Agreement
constitutes a valid and legally binding obligation of Investor.
3.2 Purchase Entirely for Own Account. The Series E Preferred
Stock and the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. Except for
the registration rights and restrictions on transfer set forth in the Investors'
Rights Agreement, such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.3 Reliance Upon Investor's Representations. Such Investor
understands that the Securities are not, and any Common Stock acquired on
conversion thereof at the time of issuance may not be, registered under the
Securities Act, on the ground that the sale provided for in this Agreement and
the issuance of securities hereunder is exempt from registration under the
11
15
Securities Act pursuant to section 4(2) thereof, and that the Company's reliance
on such exemption is predicated on such Investor's representations set forth
herein.
3.4 Receipt of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Such Investor has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Securities and the business, properties,
prospects and financial condition of the Company and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investors to
rely thereon.
3.5 Investment Experience. Such Investor is experienced in
evaluating and investing in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities.
3.6 Accredited Investor. Such Investor is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
3.7 Restricted Securities. Such Investor understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
such Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.8 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Securities (or the Common
Stock issuable upon the conversion thereof) unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section 3
and Section 7, provided and to the extent such sections are then applicable, and
the Investors' Rights Agreement, the Shareholders' Agreement, the Voting
Agreement and any applicable Ancillary Agreement and:
(a) 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
(b) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
12
16
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.
3.9 Legends. To the extent applicable, each certificate or other
document evidencing any of the Securities shall be endorsed with the legend set
forth below, and such Investor covenants that, except to the extent such
restrictions are waived by the Company, such Investor shall not transfer the
shares represented by any such certificate without complying with the
restrictions on transfer described in the legend endorsed on such certificate:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT
TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
Provided, that the Company shall remove such legend at such Investor's request
if and when such Investor is entitled to sell such securities without
restriction pursuant to Securities Act Rule 144(k).
4. California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at the Closing. The obligations
of each Investor under subsections 1.1(b) and 1.2 of this Agreement are subject
to the satisfaction on or before the Closing to each of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of such Closing.
13
17
(b) Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(c) Compliance Certificate. The President or the Chief
Financial Officer of the Company shall have delivered to each Investor at the
Closing a certificate certifying that the conditions specified in Subsections
5.1(a) and (b) have been fulfilled.
(d) California Qualification. The Commissioner of
Corporations of the State of California shall have issued a permit qualifying
the offer and sale of the Securities to the Investors pursuant to this
Agreement, or such offer and sale shall be exempt from such qualification under
the California Corporate Securities Law of 1968, as amended.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to counsel to the Investors, who shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
(f) Opinion of Company Counsel. Each Investor shall have
received from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company, an
opinion, dated the date of the Closing, in the form attached hereto as Exhibit
E.
(g) Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached hereto as Exhibit B.
(h) Shareholders' Agreement. The Company and each Investor
shall have entered into the Shareholders' Agreement in the form attached hereto
as Exhibit C.
(i) Voting Agreement. The Company and each Investor shall
have entered into the Voting Agreement in the form attached hereto as Exhibit F.
6. Conditions of the Company's Obligations at the Closing. The
obligations of the Company to be performed under this Agreement at the Closing
are subject to the satisfaction on or before the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(c) California Qualification. The Commissioner of
Corporations of the State of California shall have issued a permit qualifying
the offer and sale to the Investors of
14
18
the securities or such offer and sale shall be exempt from such qualification
under the California Corporate Securities Law of 1968, as amended.
(d) Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached hereto as Exhibit B.
(e) Shareholders' Agreement. The Company and each Investor
shall have entered into the Shareholders' Agreement in the form attached hereto
as Exhibit C.
(f) Voting Agreement. The Company and each Investor shall
have entered into the Voting Agreement in the form attached hereto as Exhibit F.
7. Covenants of the Company. The Company covenants and agrees that for
so long as an Investor holds at least 100,000 shares of Series E Preferred Stock
initially issued to such Investor pursuant to this Agreement, it will comply
with the following:
7.1 Approval of Certain Transactions. The Company shall not,
without the approval of its Board of Directors:
(a) incur indebtedness above the amount of $500,000 not
previously approved in the Company's budget;
(b) make capital expenditures in an amount exceeding
$500,000 not previously approved in the Company's budget;
(c) sell, lease, transfer, encumber or otherwise dispose
of assets with a fair market value in excess of $500,000 not previously approved
in the Company's budget;
(d) enter into any transaction with officers, directors or
affiliates of the Company, except reimbursement of expenses incurred in the
ordinary course of business; or
(e) increase the compensation of any executive officer by
more than ten percent (10%) in any given year.
7.2 No Watering of Series E Preferred Stock. The Company shall
not issue and sell any shares of Series E Preferred Stock for less than $8.00
per share.
8. Miscellaneous.
8.1 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement between the parties and no party shall
be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
8.2 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
15
19
8.3 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.7 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
express courier service or five days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address set forth on the signature page hereof, or
at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
8.8 Finder's Fees. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
8.9 Expenses. Irrespective of whether the Closing is effected,
the Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees and expenses of a single counsel for Pacific Venture Group II, L.P., not to
exceed $20,000.
8.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Investors'
Rights Agreement, the Shareholders' Agreement, the Voting Agreement or the
Restated Articles, the prevailing party shall be entitled
16
20
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
8.11 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement 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
more than 66 2/3% of the Common Stock (that has not been sold to the public)
issued or issuable upon conversion of the Series E Preferred Stock sold pursuant
to this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities, and
the Company.
8.12 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.13 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement between the parties with respect to
the subject matter hereof and no party shall be liable or bound to the other
party in any manner by any warranties, representations, or covenants with
respect to such subject matter except as specifically set forth herein or
therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DISCOVERY PARTNERS INTERNATIONAL, INC., a
California corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
INVESTORS: ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III. L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
General Partner, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
General Partner, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ VIII,
a California Limited Partnership
By: ▇▇▇▇▇▇▇▇ VIII Management, L.L.C.,
a Delaware Limited Liability
Company, its general partner
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
-----------------------------------------
General Partner
▇▇▇▇▇▇▇▇ ASSOCIATES FUND II,
a California Limited Partnership
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
-------------------------------------------------
General Partner
[SIGNATURE PAGE TO SERIES E PREFERRED STOCK PURCHASE AGREEMENT]
22
CROSSPOINT VENTURE PARTNERS LS-1997
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
PACIFIC VENTURE GROUP II, L.P.
By: PVG EQUITY PARTNERS II, LLC,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director
-------------------------------------------------
BAYSTAR CAPITAL, L.P.,
a Delaware limited partnership
By: BayStar Capital Management LLC,
its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
BAYSTAR INTERNATIONAL LTD,
a British Virgin Islands Corporation
By: BayStar International Management, LLC,
its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO SERIES E PREFERRED STOCK PURCHASE AGREEMENT]
23
SCHEDULE A
SCHEDULE OF INVESTORS
PRINCIPAL
AMOUNT OF TOTAL # OF
INVESTOR NAME AND ADDRESS NOTES + INTEREST CASH INVESTMENT SHARES
---------------- ----------- ----------- ---------
Enterprise Partners III, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ $ 1,901,112 $ 1,901,112 237,639
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Enterprise Partners III Associates, L.P. 151,040 151,040 18,880
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ VIII
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 1,949,552 1,949,552 243,694
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
▇▇▇▇▇▇▇▇ Associates Fund II
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 102,608 102,608 12,826
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
Crosspoint Venture Partners LS-1997
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ 2,012,712 2,012,712 251,589
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pacific Venture Group II, L. P
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 0 $ 3,000,000 3,000,000 375,000
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BayStar Capital, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇ 1,200,000 1,200,000 150,000
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BayStar International Ltd.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 0 800,000 800,000 100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 23,000 23,000 2,875
----------- ----------- ----------- ---------
Total: $ 6,117,024 $ 5,023,000 $11,140,024 1,392,503
Schedule A-1
24
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
Exhibit A-1
25
RESTATED ARTICLES OF INCORPORATION
OF DISCOVERY PARTNERS INTERNATIONAL, INC.,
a California Corporation
The undersigned ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ hereby certifies that:
ONE: He is the duly elected and acting Vice President and
Secretary of said corporation.
TWO: The Articles of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Discovery Partners International,
Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
A. Classes of Stock. 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 Twenty One Million Thirty-Three Thousand Three Hundred Thirty-Three
(21,033,333) shares. Twelve Million (12,000,000) shares shall be Common Stock
and Nine Million Thirty-Three Thousand Three Hundred Thirty-Three (9,033,333)
shares shall be Preferred Stock, of which Two Million Five Hundred Thousand
(2,500,000) shares shall be Series A Preferred Stock, Two Million (2,000,000)
shares shall be Series B Preferred Stock, Three Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (333,333) shares shall be Series C Preferred Stock,
Two Million Five Hundred Thousand (2,500,000) shares shall be Series D Preferred
Stock, and One Million Seven Hundred Thousand (1,700,000) shares shall be Series
E Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The
rights, preferences, restrictions and other matters relating to the Preferred
Stock are as follows:
1. Dividend Provisions.
(a) Subject to the rights of series of Preferred Stock
which may from time to time come into existence in accordance with Section 6
hereof, the holders of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend
26
(payable other than in Common Stock or other securities and rights convertible
into or entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock of this corporation) on the Common Stock of
this corporation, at the rate of $0.14 per share of Series A Preferred Stock per
annum, $0.21 per share of Series B Preferred Stock per annum, $0.42 per share of
Series C Preferred Stock per annum, $0.504 per share of Series D Preferred Stock
per annum, and $0.56 per share of Series E Preferred Stock per annum (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) ("Preferred Dividend Preference") payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative. No
cash dividends shall be declared or paid with respect to the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock unless at the same time a like proportionate
cash dividend for the same dividend period, ratably in proportion to the
respective annual dividend rates set forth in above, is declared and paid with
respect to the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock.
(b) After paying the full Preferred Dividend Preference in
any calendar year, whenever this corporation declares a further dividend in such
calendar year, the holders of Common Stock and the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall be entitled to receive dividends
ratably based upon the number of shares of Common Stock held by each (assuming
conversion of all of such Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock).
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of this corporation, either voluntary or involuntary, subject to the
rights of any additional series of Preferred Stock that may from time to time
come into existence in accordance with Section 6 hereof, the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (A) $2.00 for each outstanding share of Series A
Preferred Stock (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereinafter referred to
as the "Original Series A Issue Price"), (B) $3.00 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereinafter
referred to as the "Original Series B Issue Price"), (C) $6.00 for each
outstanding share of Series C Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereinafter referred to as the "Original Series C Issue
Price"), (D) $7.20 for each outstanding share of Series D Preferred Stock
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations and hereinafter referred to as the
"Original Series D Issue Price"), (E) $8.00 for each outstanding share of Series
E Preferred Stock (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereinafter referred to
as the "Original Series E Issue Price") and (F) an
2.
27
amount equal to declared but unpaid dividends on such share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, as applicable. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then, subject to the rights of any
additional series of Preferred Stock which may from time to time come into
existence, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock in proportion to the
aggregate liquidation preferences of the respective series, and ratably among
the holders of that series in proportion to the amount of such stock owned by
each such holder.
(b) After the distributions described in subsection (a)
above have been paid, and subject to the rights of any additional series of
Preferred Stock which may from time to time come into existence, the remaining
assets of the corporation available for distribution to shareholders shall be
distributed among the holders of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Common Stock pro rata based on the number of shares of Common Stock
held by each (assuming conversion of all such Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock).
(c) A consolidation or merger of this corporation with or
into any other corporation or corporations in which the shareholders of this
corporation immediately prior to such consolidation or merger own less than
fifty percent (50%) of the voting power of the successor corporation or
corporations immediately after such consolidation or merger, or a sale,
conveyance or disposition of all or substantially all of the assets of this
corporation or the effectuation by the corporation of a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of the corporation is disposed of, shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2, unless, in each
such case, the value of the consideration to be received by the holders of
Series A Preferred Stock, the holders of Series B Preferred Stock, the holders
of Series C Preferred Stock, the holders of Series D Preferred Stock and the
holders of Series E Preferred Stock, without treating such transaction as a
liquidation, dissolution or winding up within the meaning of this Section 2,
exceeds $10.00 per share (subject to appropriate adjustments for stock splits,
stock dividends or combinations).
(d) Whenever a distribution provided for in subsections
(a) and (b) above or a transaction described in subsection (c) above shall be
payable in securities or property other than cash, the value of such
distribution or the consideration to be received in such transaction shall be
the fair market value of such securities or other property as determined in good
faith by the Board of Directors.
3. Redemption.
3.
28
(a) Subject to the rights of series of Preferred Stock
which may from time to time come into existence in accordance with Section 6
hereof, at any time after July 17, 2002, on the date within sixty (60) days (the
"Redemption Date") after the receipt by this corporation of a written request
from the holders of not less than a majority of the then outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock treated as a single class that all
or some of such holders' shares be redeemed ("Redemption Notice"), and
concurrently with surrender by such holders of the certificates representing
such shares, this corporation shall, to the extent it may lawfully do so, redeem
the shares specified in such request by paying in cash therefor (i) a sum equal
to $2.00 per share of Series A Preferred Stock (as adjusted for any stock
dividends, combinations, splits or recapitalizations with respect to such
shares) plus all declared but unpaid dividends on such shares (the "Series A
Redemption Price"), (ii) a sum equal to $3.00 per share of Series B Preferred
Stock (as adjusted for any stock dividends, combinations, splits or
recapitalizations with respect to such shares) plus all declared but unpaid
dividends on such shares (the "Series B Redemption Price"), (iii) a sum equal to
$6.00 per share of Series C Preferred Stock (as adjusted for any stock
dividends, combinations, splits or recapitalizations with respect to such
shares) plus all declared but unpaid dividends on such shares (the "Series C
Redemption Price"), (iv) a sum equal to $7.20 per share of Series D Preferred
Stock (as adjusted for any stock dividends, combinations, splits or
recapitalizations with respect to such shares) plus all declared but unpaid
dividends on such shares (the "Series D Redemption Price") and (v) a sum equal
to $8.00 per share of Series E Preferred Stock (as adjusted for any stock
dividends, combinations, splits or recapitalizations with respect to such
shares) plus all declared but unpaid dividends on such shares (the "Series E
Redemption Price"). Any redemption effected pursuant to this subsection 3(a)
shall be made on a pro rata basis among the holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock in proportion to the number of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and/or Series E Preferred Stock then held by such
holders.
(b) As used herein and in subsection (3)(c) below, the
term "Redemption Date" shall refer to each "Redemption Date" and the term
"Redemption Price" shall refer to each "Series A Redemption Price," "Series B
Redemption Price," "Series C Redemption Price," "Series D Redemption Price" and
"Series E Redemption Price." Subject to the rights of series of Preferred Stock
which may from time to time come into existence in accordance with Section 6
hereof, at least fifteen (15) but no more than thirty (30) days prior to each
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and/or Series E Preferred Stock to be redeemed, at the address last shown on the
records of this corporation for such holder, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to this
corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in subsection (3)(c), on or after the
Redemption Date, each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock
4.
29
and/or Series E Preferred Stock to be redeemed shall surrender to this
corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
designated for redemption in the Redemption Notice as holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, if the funds of
the corporation legally available for redemption of shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock on any Redemption Date are insufficient to
redeem the total number of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed based upon their
holdings of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock. The
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, at any time thereafter when additional funds of the
corporation are legally available for the redemption of shares of Preferred
Stock, such funds will immediately be used to redeem the balance of the shares
which the corporation has become obliged to redeem on any Redemption Date but
which it has not redeemed.
4. Conversion. The holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Subject to subsection 4(c), each
share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock plus all declared
but unpaid dividends on each share shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share and prior
to the close of business on any Redemption Date, if any, as may have been fixed
in any Redemption Notice with respect to such share, at the office of this
corporation or any transfer agent for the particular series of Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series A Issue
5.
30
Price, Original Series B Issue Price, Original Series C Issue Price, Original
Series D Issue Price or Original Series E Issue Price, as applicable, and all
declared but unpaid dividends on such share by the Conversion Price applicable
to such share, determined as hereinafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Conversion Price per
share for shares of Series A Preferred Stock shall be the Original Series A
Issue Price, the initial Conversion Price per share for shares of Series B
Preferred Stock shall be the Original Series B Issue Price, the initial
Conversion Price per share for shares of Series C Preferred Stock shall be the
Original Series C Issue Price, the initial Conversion Price per share for shares
of Series D Preferred Stock shall be the Original Series D Issue Price and the
initial Conversion Price per share for shares of Series E Preferred Stock shall
be the Original Series E Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be
subject to adjustment as set forth in subsection 4(d).
(b) Automatic Conversion. Each share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall automatically be converted into shares
of Common Stock at the Conversion Price at the time in effect for such shares
immediately upon the earlier of (i) except as provided below in subsection 4(c),
the corporation's sale of its Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement on Form S-1 under the
Securities Act of 1933, as amended (a "Firm Public Offering"), the public
offering price of which is not less than $10.00 per share (adjusted to reflect
subsequent combinations, stock splits, stock dividends, or other
recapitalizations) and $15,000,000 in the aggregate or (ii) the receipt (either
in connection with the corporation's sale of its Common Stock in a Firm Public
Offering, the public offering price of which is not less than $7.20 per share
(adjusted to reflect subsequent combinations, stock splits, stock dividends, or
other recapitalizations), or else not in connection with any public offering) of
the approval or consent to such conversion by at least sixty-seven percent (67%)
of the then-outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock voting together as a class. In the case of approvals or consents to
conversion in connection with the corporation's sale of its Common Stock in a
Firm Public Offering, the public offering price of which is less than $7.20 per
share (adjusted to reflect subsequent combinations, stock splits, stock
dividends, or other recapitalizations), (iii) each share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series E Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such shares immediately upon the
receipt of the approval or consent to such conversion by at least sixty-seven
percent (67%) of the then-outstanding shares of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series E Preferred Stock voting
together as a class, and (iv) each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such shares immediately upon the receipt of the
approval or consent to such conversion by at least eighty percent (80%) of the
then-outstanding shares of Series D Preferred Stock voting together as a
separate series. (Provided, however, that all conversions in connection with a
Firm Public Offering shall be subject to the last sentence of subsection 4(c).
6.
31
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
particular series of Preferred Stock, and shall give written notice to this
corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock upon conversion of the
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock. The
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) (A) If the corporation shall issue, after the
date upon which any shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock were first issued (the "Purchase Date" with respect to such series), any
Additional Stock (as defined below) without consideration or for a consideration
per share less than the applicable Conversion Price for such series in effect
immediately prior to the issuance of such Additional Stock, the applicable
Conversion Price for such series of Preferred Stock in effect immediately prior
to each such issuance shall forthwith (except as otherwise provided in this
clause (i)) be adjusted to a price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (including, without
limitation, the number of shares of Common Stock issuable upon the conversion of
the Preferred Stock) plus the number of shares of Common Stock that the
aggregate consideration received by the corporation for such issuance would
purchase at the Conversion Price existing immediately prior to such issuance of
Additional Stock; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (including, without
limitation, the number of shares of Common Stock issuable upon the conversion of
the Preferred Stock) plus the number of shares of such Additional Stock.
7.
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(B) No adjustment of the Conversion Price for
any series of Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward, whichever occurs first. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(C) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before,
on or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the corporation for any such
securities and related options or rights (excluding any cash received on account
of
8.
33
accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
applicable Conversion Price of the Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the applicable Conversion Price of the Preferred Stock, to the
extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
by this corporation after the applicable Purchase Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof,
(B) shares of Common Stock issued upon conversion of
Preferred Stock,
(C) shares of Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation at any time when the total number of shares of Common Stock so
issuable or issued (and not repurchased at cost by the corporation in
9.
34
connection with the termination of employment) does not exceed 2,450,000
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations),
(D) shares of Common Stock issued or issuable in
connection with licensing, joint venture, research/development, joint marketing,
collaboration or other such transactions, if in transactions with primarily
non-financing purposes,
(E) shares of Common Stock issued or issuable in
connection with a bona fide business acquisition by this corporation, whether by
merger, consolidation, acquisition of assets, purchase or exchange of stock or
otherwise, or
(F) shares of Common Stock issued or issuable (I) in
a public offering before or in connection with which all outstanding shares of
Preferred Stock will be converted to Common Stock or (II) upon exercise of
warrants or rights granted to underwriters in connection with such a public
offering.
(iii) In the event the corporation should at any time or
from time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of each series of the Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding
at any time after the applicable Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the
10.
35
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Preferred Stock shall thereafter be entitled to receive upon conversion of
the Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
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 the
Preferred Stock after the recapitalization (including adjustment of the
applicable Conversion Price then in effect and the number of shares purchasable
upon conversion of the Preferred Stock) to the end that the provisions of this
Section 4 shall be applicable after that event as nearly equivalent as may be
practicable.
(g) No Impairment. This corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Preferred Stock pursuant to this Section
4, this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the Conversion Price for such series of Preferred Stock at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of a
share of Preferred Stock.
11.
36
(i) Notices of Record Date. In the event of any taking by this
corporation 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 (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
corporation 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 Preferred Stock, 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 Preferred Stock; and 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 Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, this corporation 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
purposes, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
(a) General. Each holder of shares of Preferred Stock shall have
the right to one vote for each share of Common Stock into which such Preferred
Stock could then be converted, and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any shareholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
(b) The number of directors of this corporation shall be seven
(7). Notwithstanding subsection 5(a) above, the holders of Preferred Stock,
voting as a single class, shall be entitled to elect five (5) directors of the
corporation, and the holders of Common Stock, voting as a separate class, shall
be entitled to elect two (2) directors. At any meeting held for the purpose of
electing or nominating directors, the presence in person or by proxy of the
holders of
12.
37
a majority of the Preferred Stock then outstanding shall constitute a quorum of
the Preferred Stock for the election or nomination of directors to be elected or
nominated solely by the holders of Preferred Stock. At any meeting held for the
purpose of electing directors, the presence in person or by proxy of the holders
of a majority of the Common Stock then outstanding shall constitute a quorum of
the Common Stock for the election of directors to be elected solely by the
holders of Common Stock. A vacancy in any directorship elected by the holders of
Preferred Stock shall be filled only by vote of the holders of Preferred Stock
and any vacancy in any directorship elected by the holders of Common Stock shall
be filled only by vote of the holders of Common Stock.
6. Protective Provisions. So long as any shares of Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least sixty
percent (60%) of the then outstanding shares of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock voting together as a single class:
(a) sell, convey, or otherwise dispose of or encumber (other than
pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of; or
(b) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or Series E Preferred Stock; or increase (other
than by redemption or conversion) the total number of authorized shares of
Common Stock, Preferred Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock; or
(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security having a preference over, or being on a parity with, the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock with respect to voting,
dividends or upon liquidation; or
(d) increase the authorized number of directors of the
corporation.
In addition, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least eighty percent (80%) of the then outstanding shares of
Series D Preferred Stock, amend the articles of incorporation so as to,
adversely affecting the Series D Preferred Stock in a different manner than
other shares of Preferred Stock, do any of the things described in Section
903(a)(1) through 903(a)(7) of the California Corporations Code with respect to
either the Preferred Stock or the Series D Preferred Stock, all pursuant to and
within the meanings of Sections 903(a) and 903(b) of the California Corporation
Code as in effect on January 1, 1998.
13.
38
7. Status of Converted or Redeemed Stock. In the event any shares of
Preferred Stock shall be redeemed or converted pursuant to Section 3 or Section
4 hereof, the shares so converted or redeemed shall be cancelled and shall not
be issuable by the corporation. The Articles of Incorporation of this
corporation shall be appropriately amended to effect the corresponding reduction
in the corporation's authorized capital stock.
8. Repurchase of Shares. In connection with repurchases by this
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, granting this corporation rights of first refusal on stock
transfers or pursuant to stock purchase agreements with employees, consultants,
officers or directors providing for repurchase of shares at cost upon
termination of employment or services, Sections 502 and 503 of the California
General Corporation Law shall not apply in whole or in part with respect to such
repurchases.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up
of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall have
the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
Section 1. The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
Section 2. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) through
bylaw provisions, agreements with the agents, vote of shareholders or
disinterested directors, or otherwise in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject only to
applicable limits set forth in Section 204 of the California Corporations Code
with respect to actions for breach of duty to the corporation and its
shareholders.
14.
39
Section 3 Any repeal or modification of the foregoing provisions of this
Article IV by the shareholders of this corporation shall not adversely affect
any right or protection of a director of the corporation existing at the time of
such repeal or modification.
***
THREE: The foregoing amendment has been duly approved by the Board of
Directors.
FOUR: The foregoing amendment has been duly approved by the required
vote of shareholders in accordance with Sections 902 and 903 of the California
Corporations Code. The number of outstanding shares of the corporation is
2,000,000 shares of Series A Preferred Stock, 2,000,000 shares of Series B
Preferred Stock, 333,333 shares of Series C Preferred Stock, 2,228,945 shares of
Series D Preferred Stock and 1,789,068 shares of Common Stock. No shares of
Series E Preferred Stock are outstanding. The number of shares voting in favor
of the amendment equaled or exceeded the vote required. The percentage vote
required was (i) more than 50% of the outstanding shares of Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock voting together as a single class, (ii) more than 50% of the
outstanding shares of Common Stock voting as a separate class, and (iii) at
least 60% of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, voting together as a single class.
15.
40
IN WITNESS WHEREOF, the undersigned has executed this certificate on
April 4, 2000.
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Vice President and Secretary
The undersigned certifies under penalty of perjury that he has read the
foregoing Restated Articles of Incorporation and knows the contents thereof, and
that the statements therein are true.
Executed at San Diego, California, on April 4, 2000.
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
41
EXHIBIT B
amended and restated iNVESTORS' RIGHTS AGREEMENT
Exhibit B-1
42
DISCOVERY PARTNERS INTERNATIONAL, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
-----------
April 7, 2000
43
TABLE OF CONTENTS
Page
----
1. Registration Rights ............................................... 1
1.1 Definitions ................................................ 1
1.2 Request for Registration ................................... 3
1.3 BMS Request for Registration ............................... 4
1.4 RPR Request for Registration ............................... 6
1.5 Company Registration ....................................... 7
1.6 Obligations of the Company ................................. 7
1.7 Furnish Information ........................................ 8
1.8 Expenses of Demand Registration ............................ 8
1.9 Expenses of Company Registration ........................... 9
1.10 Underwriting Requirements .................................. 9
1.11 Delay of Registration ...................................... 10
1.12 Indemnification ............................................ 10
1.13 Reports Under Securities Exchange Act of 1934 .............. 12
1.14 Form S-3 Registration ...................................... 12
1.15 Assignment of Registration Rights .......................... 13
1.16 Limitations on Subsequent Registration Rights .............. 14
1.17 "Market Stand-Off" Agreement ............................... 14
1.18 Termination of Registration Rights ......................... 15
2. Covenants of the Company .......................................... 15
2.1 Delivery of Financial Statements ........................... 15
2.2 Inspection ................................................. 16
2.3 Termination of Information and Inspection Covenants ........ 16
2.4 Right of First Offer ....................................... 16
2.5 Indemnification ............................................ 18
2.6 Salaries of Officers ....................................... 18
3. Miscellaneous ..................................................... 18
3.1 Successors and Assigns ..................................... 18
3.2 Governing Law .............................................. 19
3.3 Counterparts ............................................... 19
3.4 Titles and Subtitles ....................................... 19
3.5 Notices .................................................... 19
3.6 Expenses ................................................... 19
3.7 Amendments and Waivers ..................................... 19
3.8 Severability ............................................... 20
3.9 Aggregation of Stock ....................................... 20
3.10 Entire Agreement; Amendment; Waiver ........................ 20
3.11 Representation ............................................. 20
Schedule A Schedule of Investors
44
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement")
is made as of the 7th day of April, 2000, by and between Discovery Partners
International. Inc. (formerly known as IRORI), a California corporation (the
"Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor".
RECITALS
WHEREAS, the Company and certain of the Investors are parties to the
Series E Preferred Stock Purchase Agreement of even date herewith (the
"Preferred Stock Agreement");
WHEREAS, certain of the Investors are presently holders of the Company's
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock and pursuant thereto have entered into an Investors'
Rights Agreement with the Company dated October 19, 1995, as amended by
Amendment No. 1 dated November 5, 1996, Amendment No. 2 dated October 31, 1997,
Amendment No. 3 dated April 17, 1998, Amendment No. 4 dated June 1, 1998,
Amendment No. 5 dated June 15, 1998, Amendment No. 6 dated October 29, 1998 and
Amendment No. 7 dated January 19, 2000 (together, the "Original Rights
Agreement"); and
WHEREAS, in order to induce the Company to enter into the Preferred
Stock Agreement and to induce certain Investors to invest funds in the Company
pursuant to the Preferred Stock Agreement, all the Investors and the Company
wish to amend and restate the Original Rights Agreement so that this Agreement
will govern the rights of all the Investors to cause the Company to register
shares of the Company's common stock ("Common Stock") issuable to any Investors
upon conversion of their respective shares of the Company's preferred stock
("Preferred Stock"), and certain other matters as set forth in this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the 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.
(c) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.15 hereof.
45
(d) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(e) The terms "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(f) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock, (ii) the 130,000 shares of Common Stock held by
Enterprise Partners, III, L.P. and Enterprise Partners III, Associates, (iii)
the 150,000 shares of Common Stock issuable upon the exercise of that certain
Common Stock Purchase Warrant dated as of July 18, 1995 between the Company and
Enterprise Partners III, L.P.; provided, however that such shares of Common
Stock shall not be deemed Registrable Securities for purposes of calculating
either numerators or denominators under Sections 1.2, 1.14, 1.16 and 3.7 and
(iv) 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 Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or such
specified Common Stock, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned. Provided, further, however, that for the purposes of
Section 1.3 and other sections to the extent they refer to Section 1.3 (and for
interpretation of the definitions of "Registrable Securities then outstanding"
and "Holder" as used in or with reference to Section 1.3) only, the term
"Registrable Securities" means (i) the Common Stock issuable or issued upon
conversion of the Series D Preferred Stock initially issued to ▇▇▇▇▇▇▇-▇▇▇▇▇
Squibb Company ("BMS") and (ii) 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 Series D Preferred Stock initially issued
to BMS -- and excluding from this sentence's special definition, however, any
Registrable Securities no longer held by BMS. Provided, further, however, that
for the purposes of Section 1.4 and other sections to the extent they refer to
Section 1.4 (and for interpretation of the definitions of "Registrable
Securities then outstanding" and "Holder" as used in or with reference to
Section 1.4) only, the term "Registrable Securities" means additionally (i) the
Common Stock issuable or issued upon conversion of the Series D Preferred Stock
initially issued to ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇ International Holdings Inc. ("RPR") and
(ii) 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 Series D Preferred Stock initially issued to RPR -- and
excluding from this sentence's special definition, however, any Registrable
Securities no longer held either by RPR or by a company which is then in the
same corporate family as RPR.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the
2
46
number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of (i) December
31, 2001, or (ii) eleven (11) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from the Holders of
thirty percent (30%) of the Registrable Securities then outstanding that the
Company file a registration statement under the Act covering the registration of
at least forty percent (40%) of the Registrable Securities then outstanding (or
a lesser percent of the Registrable Securities if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$10,000,000,) then the Company shall:
(i) within ten (10) days of the receipt thereof,
give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any
event within 90 days of the receipt of such request, the registration under the
Act of all Registrable Securities which the Holders request to be registered,
subject to the limitations of subsection 1.2(b), within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("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 subsection 1.2(a) and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.6(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
approved for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however,
3
47
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. For purposes of the preceding sentence
concerning apportionment, for an Initiating Holder that is a holder of
Registrable Securities that is a partnership or corporation, the partners,
retired partners and shareholders of such Initiating Holder (and, in the case of
a partnership, any affiliated partnerships), or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
one of the foregoing persons shall be deemed to be a single "Initiating Holder,"
and any proportionate reduction with respect to such "Initiating Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals, including such "Initiating Holders" as defined
in this sentence.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the President 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 registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 90 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than twice in any 12-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the date
thirty 30 days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 1.5 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) 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 1.14 below.
1.3 BMS Request for Registration.
(a) If the Company shall receive at any time after
eleven months after the effective date of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from BMS that the Company file a registration
statement under the Act covering the registration of at least forty percent
(40%) of the Registrable Securities then outstanding (or a lesser percent of the
Registrable Securities if the anticipated aggregate offering
4
48
price, net of underwriting discounts and commissions, would exceed $10,000,000),
then the Company shall effect as soon as practicable, and in any event within 90
days of the receipt of such request, the registration under the Act of all
Registrable Securities which BMS requests to be registered, subject to the
limitations of subsection 1.3(b).
(b) If BMS intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to subsection 1.3(a).
The underwriter will be selected by the Company and shall be reasonably
acceptable to BMS. BMS shall (together with the Company as provided in
subsection 1.6(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters. Notwithstanding any other provision of this
Section 1.2A, if the underwriter advises BMS in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the number
of shares of Registrable Securities that may be included in the underwriting
shall be so limited; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to BMS a certificate signed by the President 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 registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 90 days after receipt
of the request of BMS; provided, however, that the Company may not utilize this
right more than twice in any 12-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.3:
(i) After the Company has effected one
registration pursuant to this Section 1.3 and such registration has been
declared or ordered effective; or
(ii) During the period starting with the date
thirty (30) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a registration subject to Section 1.5 hereof; provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective.
1.4 RPR Request for Registration.
(a) If the Company shall receive at any time after
eleven months after the effective date of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from RPR that the Company file a registration
statement under the Act covering the registration of at least forty percent
(40%) of the Registrable Securities then
5
49
outstanding (or a lesser percent of the Registrable Securities if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $10,000,000), then the Company shall effect as soon as
practicable, and in any event within 90 days of the receipt of such request, the
registration under the Act of all Registrable Securities which RPR requests to
be registered, subject to the limitations of subsection 1.4(b).
(b) If RPR intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to subsection 1.4(a).
The underwriter will be selected by the Company and shall be reasonably
acceptable to RPR. RPR shall (together with the Company as provided in
subsection 1.6(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters. Notwithstanding any other provision of this
Section 1.4, if the underwriter advises RPR in writing that marketing factors
require a limitation of the number of shares to be sold in the offering, then
the number of shares of Registrable Securities that may be included in the
underwriting shall be so limited; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
offering.
(c) Notwithstanding the foregoing, if the Company shall
furnish to RPR a certificate signed by the President 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 registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 90 days after receipt
of the request of RPR; provided, however, that the Company may not utilize this
right more than twice in any 12-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.4:
(i) After the Company has effected one
registration pursuant to this Section 1.4 and such registration has been
declared or ordered effective; or
(ii) During the period starting with the date
thirty (30) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a registration subject to Section 1.5 hereof; provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective.
1.5 Company Registration. Except with respect to the initial
public offering of the Company's securities for which no notice shall be
required and the provisions of this Section 1.5 shall not apply, if (but without
any obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration on any form which does not
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include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the first sentence of this Section and the
provisions of Section 1.10, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.6 Obligations of the Company. Whenever required under this
Section 1 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 its best 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 a period of up to the
earlier of one hundred twenty (120) days or until the distribution contemplated
in the Registration Statement has been completed.
(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 Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 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 best 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 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 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
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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.
(g) Cause all such Registrable Securities and
Registrable Common Stock registered pursuant hereto to be listed on each
securities exchange on which similar securities issued by the Company are then
listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities and Registrable Common Stock registered pursuant hereto
and a CUSIP number for all such Registrable Securities and Registrable Common
Stock, in each case not later than the effective date of such registration.
1.7 Furnish Information.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Sections 1.2, 1.3, 1.4 or 1.14 if, due to
the operation of subsection 1.7(a), 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 subsections 1.2(a), 1.3(a), 1.4(a)
or 1.14(b), whichever is applicable.
1.8 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2 or 1.3 or 1.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 or 1.3 or 1.4 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2 or 1.3 or 1.4; provided further, that if the
registration request is withdrawn, at the request of the Holders of a majority
of the Registrable Securities to be registered, within one week after the
Company advises such Holders of a delay pursuant to Section 1.2(c) or (d)(ii),
Section 1.3(c) or (d)(ii), or Section 1.4(c) or (d)(ii), then the Holders shall
not be required to pay any of such expenses and shall retain their rights
pursuant to Section 1.2 or 1.3 or 1.4. And provided further, with respect to the
main provision in the preceding sentence, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request and have withdrawn the request with reasonable
promptness
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following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2 or 1.3 or 1.4.
1.9 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.5 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.10 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock pursuant to
Section 1.5, the Company shall not be required under Section 1.5 to include any
of the Holders' securities in such underwriting unless they accept the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Company. If
the total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata (as nearly as practicable)
among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders);
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other shares of
securities (except the securities proposed to be sold by the Company in such
underwriting) are first entirely excluded from the underwriting but in no event
shall the amount of securities of the selling Holders included in the offering
be reduced below thirty percent (30%) of the total amount of securities included
in such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and 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 persons shall be deemed to be a single "selling shareholder", and
any pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined in
this sentence.
1.11 Delay of Registration. 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 1.
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1.12 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (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 Act, the 1934 Act, or any rule or regulation promulgated under
the Act, the 1934 Act; and the Company will pay to each such Holder, underwriter
or controlling person 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 subsection 1.12(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 any such Holder, underwriter or controlling person. To the
extent permitted by law, each selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, or the 1934 Act 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 expressly for use in connection with such registration; and each such
Holder will pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.12(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.12(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 subsection
1.12(b) exceed the gross proceeds from the offering received by such Holder.
(b) Promptly after receipt by an indemnified party under
this Section 1.12 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party
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under this Section 1.12, 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 (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate 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 prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.12, 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 1.12.
(c) If the indemnification provided for in this Section
1.12 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense 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 statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission 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.
(d) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(e) The obligations of the Company and Holders under
this Section 1.12 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.13 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective
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date of the first registration statement filed by the Company for the offering
of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.14 Form S-3 Registration. In case the Company shall receive
from the Holders of at least twenty percent (20%) of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3 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;
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 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 1.14: (1) if
Form S-3 is not available for such offering by the Holders; (2) 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 (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
shareholders for such Form
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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 60 days after receipt of the request of the Holder or
Holders under this Section 1.14; provided, however, that the Company shall not
utilize this right more than once in any twelve month period; (4) if the Company
has, within the twelve (12) month period preceding the date of such request,
already effected two registrations on Form S-3 for the Holders pursuant to this
Section 1.14; or (5) 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
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. All expenses incurred in connection with a
registration requested pursuant to Section 1.14, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.14 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2, 1.3 or 1.4.
1.15 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), or is a company which is at the time of such transfer in the
same corporate family as RPR and thereafter remains in the same corporate family
as RPR, provided: (a) the Company is, within a reasonable time after such
transfer, furnished with 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; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.17 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 1.
1.16 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or
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prospective holder of any securities of the Company (except those shares of
Series E Preferred Stock to be issued and sold in connection with the Purchase
Agreement) which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 or Section 1.5
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2. In addition, from and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the Registrable Securities then outstanding
(within the meaning of the proviso in Section 1.1(f)), enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder to include such securities in any
registration filed under Section 1.3 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of Registrable Securities of the Holders which is
included. In addition, from and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of a majority of the
Registrable Securities then outstanding (within the meaning of the applicable
proviso in Section 1.1(f)), enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to include such securities in any registration
filed under Section 1.4 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
reduce the amount of Registrable Securities of the Holders which is included in
any registration pursuant to Section 1.4 hereof.
1.17 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty
(180) days for the first such registration statement of the Company which covers
common stock (or other securities) to be sold on its behalf to the public in an
underwritten offering;
(b) Such agreement shall not exceed ninety (90) days for
any subsequent registration statement of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) All officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
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In order to enforce the foregoing covenants, the Company
may impose stop-transfer instructions with respect to the Registrable Securities
of each Holder (and the shares or securities of every other person subject to
the foregoing restrictions) until the end of such period.
1.18 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 1 after the earlier of (i) five (5) years following
the consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC and such Holder holds less than one
percent (1%) of the outstanding stock of the Company.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. A "Major Investor" means
an Investor who holds a minimum of 250,000 shares of the Company's Preferred
Stock (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations); and in the case of transfers within
RPR's corporate family as permitted by Section 1.15, then so long as RPR's
corporate family as a whole holds a minimum of 250,000 shares of the Company's
Preferred Stock (subject to such adjustment), the corporation within RPR's
corporate family which owns the most such shares shall be entitled to the rights
of a Major Investor. The Company shall deliver to each Major Investor:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles, and if requested by a Major Investor, audited and
certified by independent public accountants of nationally recognized standing
selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, schedule
as to the sources and application of funds for such fiscal quarter and an
unaudited balance sheet as of the end of such fiscal quarter;
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event by December
1 of each year, a budget and business plan for the next fiscal year, prepared on
a monthly basis, including balance sheets and sources and applications of funds
statements for such months and, as soon as
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prepared, any other budgets or revised budgets prepared by the Company. The
Company's Board of Directors shall approve each such annual budget by January 31
of the year for which such budget applies.
2.2 Inspection. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 Termination of Information and Inspection Covenants. Subject
to their earlier termination pursuant to the specific terms of each Section, the
covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate as to Major
Investors and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public in which all shares Preferred Stock are converted to Common
Stock is consummated or when the Company first becomes subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever
event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor a right of first offer with respect to future sales by the Company of
its Shares (as hereinafter defined). For purposes of this Section 2.4, Major
Investor includes any general partners and affiliates of a Major Investor. A
Major Investor shall be entitled to apportion the right of first offer hereby
granted it among itself and its partners and affiliates in such proportions as
it deems appropriate. Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock, the Company shall first make an offering of any such shares or
securities not purchased by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ pursuant to Section 4 of the Key
Employee Agreement dated April 17, 1998 (the "Employment Agreement") between
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Company (such shares or securities not so purchased
by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ are hereinafter referred to as the "Shares") to each Major
Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investor stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice,
the Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series E
Preferred Stock then held, by such Major Investor bears to the total number of
shares of Common Stock of the Company then outstanding (assuming full conversion
of all convertible securities) issued and
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held, or issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or
Series E Preferred Stock then held, by all the Major Investors. The Company
shall promptly, in writing, inform each Major Investor which purchases all the
shares available to it ("Fully-Exercising Major Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Major Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or
Series E Preferred Stock then held, by such Fully-Exercising Major Investor
bears to the total number of shares of Common Stock issued and held, or issuable
upon conversion of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and/or Series E Preferred
Stock then held, by all Fully-Exercising Major Investors who wish to purchase
some of the unsubscribed shares.
(c) If all Shares which Major Investors are entitled to
obtain pursuant to subsection 2.4(b) are not elected to be obtained as provided
in subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall
not be applicable (i) to the issuance and sale of the Series E Preferred Stock
pursuant to the Preferred Stock Agreement, (ii) to the issuance or sale of not
to exceed 2,450,000 shares of common stock (or options therefor) to employees,
consultants, directors or officers of the Company (and not repurchased at cost
by the Company in connection with the termination of employment or service
relationship) subsequent to the date of this Agreement, (iii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
common stock, registered under the Act pursuant to a registration statement on
Form S-1, (iv) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (v) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (vi) to the issuance of stock, warrants or other securities
or rights to persons or entities with which the Company has or is establishing
business relationships provided such issuances are for other than primarily
equity financing purposes and involve other strategic elements which may include
without limitation, a joint marketing agreement, a license agreement, or a
technology development agreement, or (vii) to the issuance and sale of bridge
loan notes and associated warrants in 1998 and December 1999.
(e) The right of first offer set forth in this Section
2.4 may not be assigned or transferred, except that (i) such right is assignable
by each Holder to any wholly owned
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61
subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Act, controlling, controlled by or under common control with, any
such Holder, and (ii) such right is assignable between and among any of the
Holders.
2.5 Indemnification. The Company shall take all actions
necessary to indemnify its directors to the maximum extent permitted by
applicable law, including, without limitation, amending the Company's Articles
of Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
2.6 Salaries of Officers. The Company's Board of Directors shall
approve the titles of officers and management of the Company and all salaries
and other compensation matters, including option grants, employee bonuses or
profit sharing plans, shall be reviewed and approved by the Company's Board of
Directors.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 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.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be sent to
the address/fax number indicated for such party on the signature page hereof
(provided that any party at any time may change its address/fax number for
notice by ten (10) days' advance written notice to the other parties), and shall
be deemed effectively given upon (i) personal delivery to the party to be
notified, (ii) the time of successful facsimile transmission to the party to be
notified, (iii) sending by reputable overnight delivery service or (iv) upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid.
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62
3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement 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
a majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then
outstanding (including common stock issued upon conversion thereof), voting
together as a class (or, in the case of the provisions of Section 1.3 for the
special benefit of the Series D Preferred Stock which was initially issued to
BMS and the provisions of other Sections to the extent they are with reference
to Section 1.3, only with the written consent of the Company, the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then
outstanding (including common stock issued upon conversion thereof), voting
together as a class, and the holders of a majority of the Common Stock issuable
or issued upon conversion of the Series D Preferred Stock which was initially
issued to BMS) (or, in the case of the provisions of Section 1.4 for the special
benefit of the Series D Preferred Stock which was initially issued to RPR and
the provisions of other Sections to the extent they are with reference to
Section 1.4, only with the written consent of the Company, the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then
outstanding (including common stock issued upon conversion thereof), voting
together as a class, and the holders of a majority of the Common Stock issuable
or issued upon conversion of the Series D Preferred Stock which was initially
issued to RPR) (or, in the case of any amendment or waiver which discriminates
particularly against all the Series D Preferred Stock, only with the written
consent of the Company, the holders of a majority of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock then outstanding (including common stock
issued upon conversion thereof), voting together as a class, and the holders of
a majority of the Series D Preferred Stock then outstanding (including common
stock issued or issuable upon conversion thereof)) (or, in the case of any
amendment or waiver which discriminates particularly against the Series E
Preferred Stock, only with the written consent of the Company, the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then
outstanding (including common stock issued upon conversion thereof), voting
together as a class, and the holders of not less than eighty percent (80%) of
the Common Stock issued or issuable upon conversion of the Series E Preferred
Stock. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series E
Preferred Stock then outstanding (and common stock issued upon conversion
thereof), each future holder of all such shares, and the Company.
3.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and
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63
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3.9 Aggregation of Stock. All shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock and any Common Stock issued upon conversion
thereof held or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement.
3.10 Entire Agreement; Amendment; Waiver. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
3.11 Representation. By executing this Agreement, Investor
acknowledges and agrees that ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ represents the Company
solely and that each Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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64
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DISCOVERY PARTNERS INTERNATIONAL, INC.
(formerly known as IRORI), a California
corporation
By:
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTORS:
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III,
L.P., Its General Partner
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III,
L.P., Its General Partner
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
65
▇▇▇▇▇▇▇▇ VIII
By:
---------------------------------
Its General Partner
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ASSOCIATES FUND II
By:
---------------------------------
Its General Partner
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
CROSSPOINT VENTURE PARTNERS-1996
By:
---------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
66
CROSSPOINT VENTURE PARTNERS LS-1997
By:
---------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
AGILENT TECHNOLOGIES, INC., f/k/a
Hewlett-Packard Company
By:
---------------------------------
Its:
---------------------------------
Address: Mail Stop 20 BQ
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Legal Counsel
▇▇▇▇▇▇▇-▇▇▇▇▇ SQUIBB COMPANY
By:
---------------------------------
Its:
---------------------------------
Address: ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇ & Province Line Road
Princeton, NJ 08543-4000
Attn: Vice President and Senior Counsel,
Pharmaceutical Research Institute and
Worldwide Strategic Business
Development
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
67
AVENTIS, f/k/a ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇
International Holdings, Inc.
By:
---------------------------------
Its:
---------------------------------
Address: ▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇, Investor Relations
PACIFIC VENTURE GROUP II, L.P.
By:
---------------------------------
Its:
---------------------------------
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BAYSTAR CAPITAL, L.P., a Delaware Limited
Partnership
By: BayStar Capital Management LLC,
---------------------------------
Its General Partner
By:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SERIES E PREFERRED STOCK PURCHASE AGREEMENT]
68
BAYSTAR INTERNATIONAL LTD., a British Virgin
Islands Corporation
By: BayStar International Management, LLC
---------------------------------
Its General Partner
By:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: c/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
69
EXHIBIT C
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
EXHIBIT C-1
70
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (the "Agreement") is
made as of April 7, 2000, by and among Discovery Partners International, Inc.
(formerly known as IRORI), a California corporation (the "Company"), the holders
of shares of the Company's Common Stock listed on Exhibit A (each of which is
herein referred to as a "Shareholder", which term includes his or her heirs,
executors, guardians, successors and assigns) and the investors listed on
Exhibit C hereto, each of which is herein referred to as an "Investor."
WHEREAS, the Company and certain of the Investors are parties to the
Series E Preferred Stock Purchase Agreement of even date herewith (the "Stock
Purchase Agreement").
WHEREAS, each of the Shareholders is the beneficial owner of the number
of shares of the Company's Common Stock listed on Exhibit A attached hereto (the
"Stock," which term for purposes of this Agreement also includes any additional
shares of Common Stock of the Company now owned or hereafter acquired by any
Shareholder).
WHEREAS, certain of the Investors are presently holders of the Company's
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock and in connection with the purchases of such shares
have entered into a Shareholders' Agreement dated as of October 19, 1995, as
amended October 19, 1995, October 31, 1997, June 1, 1998 and June 15, 1998
(together, the "Original Agreement").
WHEREAS, in order to induce the Company to enter into the Stock Purchase
Agreement and to induce certain Investors to invest funds in the Company
pursuant to the Stock Purchase Agreement, the Shareholders, all of the Investors
and the Company wish to amend and restate the Original Agreement so that this
Agreement will govern the rights of the parties with respect to the matters set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Restrictions on Transfer. Except as permitted by the terms of this
Agreement, a Shareholder may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of the
Stock, or any interest in such shares, now held by or hereafter acquired by such
Shareholder, whether voluntarily or involuntarily or by operation of law
(hereinafter collectively referred to as a "transfer").
2. Intentionally Omitted.
3. Intentionally Omitted.
4. Right of First Refusal.
71
(a) Notice to the Company and Investor.
(i) In the event any Shareholder (the "Transferring
Shareholder") desires to transfer any Stock other than as specifically provided
in Section 6 below, such Shareholder must deliver a notice in writing by
certified mail ("Notice") to the Company stating (A) his bona fide intention to
sell or transfer such shares, (B) the number of such shares to be sold or
transferred, (C) the price, if any, for which he proposes to sell or transfer
such shares, and (D) the name of the proposed purchaser or transferee.
(ii) In the event the proposed transfer is partially or
completely in exchange for assets other than cash, then such assets shall be
deemed to have a cash value in the amount determined by the Company's Board of
Directors in its sole good faith opinion, in which case such cash value
ascertained by the Board, when added to any cash to be exchanged and then
divided by the number of shares of Stock to be transferred, shall be deemed the
price per share set forth in the Notice. In the event of a gift, property
settlement or other transfer in which the proposed purchaser or transferee is
not paying the full price for the Stock, which transfer is not otherwise
exempted from the terms of Section 4 and 5 hereof, the price shall be deemed to
be the fair market value of the Stock as determined in good faith by the Board
of Directors.
(b) Company Right of First Refusal. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the Stock to
which the Notice refers at the price per share specified in the Notice. The
Company shall exercise the Company Option by written notice signed by an officer
of the Company and delivered or mailed to the Transferring Shareholder (the
"Company Settlement Notice"), which notice shall specify the time, place and
date for settlement of such purchase.
(c) Company Settlement. Within ten (10) days of receipt of the
Company Settlement Notice, the Transferring Shareholder must deliver to the
Company all certificates for the Stock being acquired by the Company which are
not already in the Company's custody, together with proper assignments in blank
of the Stock with signatures properly guaranteed and with such other documents
as may be required by the Company to provide reasonable assurance that each
necessary endorsement is genuine and effective, and the Company must thereupon
deliver to the Transferring Shareholder full cash payment for the Stock being
acquired, provided that if the terms of payment set forth in the Notice were
other than cash against delivery, the Company shall pay for said shares on the
same terms and conditions set forth in such Notice.
(d) Investor Right of First Refusal. In the event that the
Company does not exercise the Company Option as to all the shares to be sold or
transferred in accordance with Section 4 hereof, the Company shall not later
than thirty (30) days from the date of receipt of the Notice hereof give written
notice to the Investors of the Company's nonexercise (or partial exercise) of
the Company Option, which notice shall enclose the Notice and the details of the
Company's partial exercises (if any), and shall specify the procedures by which
each Investor may exercise the option to purchase not more than its Pro Rata
Share (as defined in Section 4(g) below) of the remaining shares of Stock (the
"Investor Option"). For thirty (30) calendar days following the expiration of
the Company Option, each Investor may exercise its Investor Option
-2-
72
at the same price and upon the same terms as set forth in the Notice. Any
Investor desiring to exercise its Investor Option shall deliver to the Company
and to the Transferring Shareholder a written notice of election to purchase the
shares with respect to which the Investor option is to be exercised. The Company
shall, within three (3) days after the end of such thirty (30) day period,
inform each Investor purchasing all of the shares available to it (a
"Fully-Exercising Investor") of any other Investor's failure to do likewise.
During the ten (10) day period commencing after receipt of such information,
each Fully-Exercising Investor shall be entitled to give written notice to the
Company and the Transferring Shareholder of its election (the "Investor
Over-Allotment Option") to purchase that portion of the shares for which
Investors were entitled to subscribe but which were not subscribed for by the
Investors equal to the proportion that the Pro Rata Share of such
Fully-Exercising Investor bears to the Pro Rata Shares of all of the
Fully-Exercising Investors who wish to purchase some of the unsubscribed shares,
or such other proportions as the Investors shall determine.
(e) Assignment of Investor Option. Each Investor may assign its
rights under this Section 4 to (i) any of its limited partners or shareholders,
(ii) any entity related to or affiliated with such Investor, or (iii) another
Investor; provided, however, that if payment is to be made in any manner other
than all cash against delivery of the Stock being sold, such assignee must be at
least as creditworthy as the Investor so assigning its rights.
(f) Investor Settlement. Promptly upon expiration of the
Investor Option and the Investor Over-Allotment Option, the Company shall
deliver a notice in writing to the Transferring Shareholder and each Investor
and/or assignee who elected to acquire a portion of the Stock subject to the
Investor Option (the "Investor Settlement Notice") setting forth the number of
shares of Stock to be sold to each Investor and/or assignee and the price
thereof. Within ten (10) days of receipt of the Investor Settlement Notice, the
Transferring Shareholder must deliver to the Company any certificates for the
Stock being acquired by the Investors and/or assignees which are not already in
the Company's custody, together with proper assignments in blank of the Stock
with signatures properly guaranteed and with such other documents as may be
required by the Company to provide reasonable assurance that each necessary
endorsement is genuine and effective. Within ten (10) days of receipt of the
Investor Settlement Notice, each Investor and/or assignee acquiring a portion of
the Stock must deliver to the Company (a) full cash payment for the portion of
the subject Stock being so acquired, provided that if the terms of payment set
forth in the Notice were other than cash against delivery, the Investors
electing to acquire a portion of the subject Stock and/or their assignees shall
pay for said shares on the same terms and conditions set forth in such Notice;
and, if applicable, (b) evidence satisfactory to the Company that such assignee
has become a party to this Agreement. The Company shall thereafter promptly
remit full payment for the Stock acquired hereby to the Transferring Shareholder
and deliver the new or assigned certificates to the Investors and/or assignees,
as appropriate. (g) Determination of Pro Rata Share. For purposes of this
Section 4, each Investor's "Pro Rata Share" is the ratio of (i) the total number
of shares of Common Stock and Preferred Stock of the Company held by such
Investor as of the date of the Notice (on an as-converted to Common Stock basis)
to (ii) the total aggregate shares of Common Stock and Preferred Stock of the
Company held by all Investors as of such date (on an as-converted to
-3-
73
Common Stock basis) that have elected to exercise the Investor Option that is
exercisable at the time such "Pro Rata Share" is determined.
5. Co-Sale Rights in Sales by a Shareholder.
(a) Co-Sale Notice. In the event that less than all of the
shares of Stock proposed to be transferred by a Transferring Shareholder are
acquired by the Company and/or Investors (or assignees) pursuant to the Company
Option and Investor Option set forth in Section 4 above (collectively, the
"Options"), the Company shall deliver, promptly upon expiration of the Options,
a notice in writing to each Investor (the "Co-Sale Notice") reiterating the
names of the prospective Transferee or Transferees, the number of shares of
Stock proposed to be transferred and not acquired pursuant to the Options, and
the price per share at which such shares are proposed to be transferred.
(b) Grant of Co-Sale Rights. Each Investor shall have the right,
exercisable upon written notice to such Transferring Shareholder within fifteen
(15) business days after receipt of the Transferring Shareholder's Co-Sale
Notice, to participate in the sale of the shares on the same terms and
conditions as those set forth in the Co-Sale Notice. To the extent one or more
of the Investors exercise such right of participation, the number of shares that
the Transferring Shareholder may sell in the transaction shall be
correspondingly reduced. The right of participation of each of the Investors
shall be subject to the terms and conditions set forth in this Section:
(i) Each Investor shall be deemed to own the number of
shares of Common Stock which such Investor actually holds plus the number of
shares of Common Stock which are issuable upon conversion of any shares of
Preferred Stock then held by such Investor.
(ii) Each Investor may sell all or any part of a number
of shares of Stock of the Company equal to the product obtained by multiplying
(A) the aggregate number of shares of Common Stock covered by the Co-Sale Notice
by (B) a fraction the numerator of which is the number of shares of Common Stock
and Preferred Stock of the Company at the time owned by the Investor and the
denominator of which is the combined number of shares of Common Stock and
Preferred Stock of the Company at the time owned by the Transferring Shareholder
and Investors.
(iii) To the extent an Investor elects not to sell the
full number of shares it is entitled to sell pursuant to Section 5(b)(ii) above,
the other Investors' rights to participate in the sale shall be increased pro
rata by a corresponding number of shares. (iv) Each Investor may effect its
participation in the sale by delivering to the Transferring Shareholder for
transfer to the purchase offeror one or more certificates, properly endorsed for
transfer, which represent:
A. the number of shares of Common Stock which
the party elects to sell pursuant to this Section 5(b); or
-4-
74
B. that number of shares of Preferred Stock
which is at such time convertible into the number of shares of Common Stock
which the party has elected to sell pursuant to this Section 5(b); provided,
however, that if the purchase offeror objects to the delivery of Preferred Stock
in lieu of Common Stock, the party may convert and deliver Common Stock as
provided in Section 5(b)(i) above.
(c) Payment of Proceeds. The stock certificates which the
Investors deliver to such Transferring Shareholder pursuant to Section 5(b)
shall be transferred by the Transferring Shareholder to the purchase offeror in
consummation of the sale of the Stock pursuant to the terms and conditions
specified in the Co-Sale Notice, and such Transferring Shareholder shall
promptly thereafter remit to each Investor that portion of the sale proceeds to
which the Investor is entitled by reason of its participation in such sale. To
the extent that the purchase offeror refuses to purchase shares from an Investor
exercising its right of co-sale hereunder, the Transferring Shareholder shall
not sell to such purchase offeror unless or until, simultaneous with such sale,
the Transferring Shareholder shall purchase shares from Investor.
(d) Non-exercise. The exercise or non-exercise of the rights of
the Investors hereunder to participate in one or more sales of Stock made by the
Shareholders shall not adversely affect their rights to participate in
subsequent Stock sales by the Shareholders.
(e) Transfer of Common Shares Upon Failure to Exercise Right of
Co-Sale. If none of the Investors elects to participate in the sale of the Stock
subject to the Co-Sale Notice, the Transferring Shareholder may, not later than
sixty (60) days following the Investors' receipt of the Co-Sale Notice, conclude
a transfer of not less than all of the Stock covered by the Co-Sale Notice on
terms and conditions not more favorable to the transferor than those described
in the Co-Sale Notice. Any proposed transfer on terms and conditions not more
favorable to the transferor than those described in the Co-Sale Notice, as well
as any subsequent proposed transfer of any Stock by the Transferring
Shareholder, shall again be subject to, and require compliance with, the
provisions of Sections 4 and 5 hereof.
6. Exempt Transfers.
(a) Permitted Transactions. Notwithstanding the foregoing, the
co-sale rights and rights of first refusal of the Investors shall not apply to
any transfer by gift to the ancestors, descendants, siblings or spouse of a
Shareholder or to trusts for the benefit of such persons or to any or all of the
partners of a Shareholder that is a general or limited partnership; provided
that the transferee shall furnish the Company and the Investors with a written
agreement to be bound by and comply with all provisions of this Agreement. Such
transferred Stock shall remain "Stock" hereunder, and such transferee shall be
treated as a "Shareholder" for the purposes of this Agreement.
(b) Company Repurchase. The provisions of Sections 4 and 5 of
this Agreement shall not apply to the sale of any Stock to the Company.
7. Stop Transfer Instrument. Any attempt by a Shareholder to transfer
Stock in violation of Sections 4 or 5 hereof, whether voluntary or involuntary,
shall be void and the
-5-
75
Company agrees it will not effect such a transfer nor will it treat any alleged
transferee as the Shareholder of such shares without the written consent of the
holders of a majority of the shares held by the Investors.
8. Special Provisions.
(a) Shareholder Rights. Until such time as the Company actually
exercises the Company Option and/or the Investors actually exercise the Investor
Option or the Investor Over-Allotment Option under this Agreement, each
Shareholder (or any successors in interest) shall have all the rights of a
shareholder (including voting and dividend rights) with respect to the Stock
subject, however, to the transfer restrictions of Section 1.
(b) Intentionally Omitted.
(c) Market Stand-off Agreement. Each Shareholder hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company, following the effective date
of an initial registration statement of the Company filed under the Act, it
shall not, to the extent requested by the Company and such underwriter, directly
or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(i) such agreement shall not exceed 180 days for the
first such registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(ii) such agreement shall not exceed 90 days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering.
In order to enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Stock of each
Shareholder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
(d) Future Investors. Upon the purchase by any Investor of
Preferred Stock under a stock purchase agreement, the Company, the Shareholders
and the Investors agree to amend this Agreement to make such Investor a party to
this Agreement (with respect to such shares of Preferred Stock purchased by such
Investor) with rights and obligations equal to and consistent with those of the
Investors under this Agreement, to the extent that such Investor is not already
entitled to such rights.
9. Termination. The right of first refusal and the co-sale rights of an
Investor under Sections 4 and 5 of this Agreement and the correlative
obligations of each Shareholder to such Investor with respect to its Stock shall
terminate at such time as such Investor shall no longer be the owner of any
shares of capital stock of the Company. Unless sooner terminated in
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76
accordance with the preceding sentence, the rights and obligations under
Sections 4 and 5 of this Agreement shall terminate upon the occurrence of any
one of the following events (each, a "Corporate Transaction"):
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company;
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) immediately prior to the closing of a bona fide firm
commitment underwritten public offering of the Company's Common Stock registered
under the Securities Act of 1933 on Form S-1 (or any successor form designated
by the Securities and Exchange Commission).
10. Miscellaneous Provisions.
(a) Notice. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement shall be in writing and shall
be effective upon personal delivery or upon deposit in the U.S. mail (or
equivalent independent service), postage prepaid and properly addressed to the
party to be notified as set forth below such party's signature or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto.
(b) 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 and interpreted in such manner as to be effective and valid
under applicable law.
(c) Waiver or Modification. Any waiver, amendment or
modification of this Agreement shall be effective only if evidenced by a written
instrument executed by (i) Shareholders holding a majority of the Stock subject
to this Agreement, (ii) the Company and (iii) Investors, or their assignees,
holding not less than a majority of the Common Stock issued or issuable upon
conversion of the Preferred Stock then held by the Investors (and, in the case
of any waiver, amendment or modification which discriminates particularly
against the Series D Preferred Stock, holding not less than a majority of the
Series D Preferred Stock then held by the Investors). Notwithstanding the
foregoing, additional holders of Common Stock of the Company may be made a party
to this Agreement by signing a counterpart signature page to this Agreement and
shall thereafter be included within the definition of "Shareholders."
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as applied in
contracts among California residents entered into and performed entirely within
California.
-7-
77
(e) Attorneys' Fees. In the event of any dispute involving the
terms hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute. (f) Further Assurances. Each party
agrees to act in accordance herewith and not to take any action which is
designed to avoid the intention hereof.
(g) Ownership. Each Shareholder represents and warrants that he
or she is the sole legal and beneficial owner of the shares of Common Stock
subject to this Agreement and that no other person has any interest (other than
a community property interest) in such shares.
(h) Successors and Assigns. 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.
(i) Aggregation of Stock. For the purposes of determining the
availability of any rights under this Agreement, the holdings of transferees and
assignees of an individual or a partnership who are spouses, ancestors, lineal
descendants or siblings of such individual or partners or retired partners of
such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Common Stock by gift, will or
intestate succession) shall be aggregated together with the individual or
partnership, as the case may be, for the purpose of exercising any rights or
taking any action under this Agreement.
(j) 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.
(k) Separate Counsel. Each Shareholder acknowledges and agrees
that such Shareholders have been provided the opportunity and encouraged to
consult with counsel of such Shareholders' own choosing with respect to this
Agreement and that ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ solely represents the interests
of the Company.
(l) Legend. Each certificate representing shares of Stock now or
hereafter owned by each Shareholder shall be endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN AGREEMENT AMONG THE SHAREHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
-8-
78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Discovery Partners International, Inc., a
California corporation (formerly known as IRORI)
By:
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SHAREHOLDERS:
------------------------------------
Dr. ▇▇▇▇▇▇▇ ▇▇▇▇
Address: Scripps Research Institute BCC405
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------
▇.▇. ▇▇▇▇▇▇▇
Address: Scripps Research Institute BCC405
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ 920
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P.,
Its General Partner
By:
---------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
79
INVESTORS:
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P.,
Its General Partner
By:
---------------------------
General Partner, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P.,
Its General Partner
By:
---------------------------
General Partner, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
80
▇▇▇▇▇▇▇▇ VIII, a California Limited Partnership
By: ▇▇▇▇▇▇▇▇ VIII Management, L.L.C., a
Delaware limited liability company, its
General Partner
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ASSOCIATES FUND II, a California
Limited Partnership
By:
---------------------------------
General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
CROSSPOINT VENTURE PARTNERS-1996
By:
---------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CROSSPOINT VENTURE PARTNERS LS-1997
By:
---------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
81
AGILENT TECHNOLOGIES, INC., f/k/a
Hewlett-Packard Company
By:
---------------------------------
Its:
---------------------------------
Address: Mail Stop 20 BQ
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Legal Counsel
▇▇▇▇▇▇▇-▇▇▇▇▇ SQUIBB COMPANY
By:
---------------------------------
Address: ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇ & Province Line Road
Princeton, NJ 08543-4000
Attn: Vice President and Senior Counsel,
Pharmaceutical Research Institute and
Worldwide Strategic Business
Development
AVENTIS, f/k/a ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇
International Holdings, Inc.
By:
---------------------------------
Address: ▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇, Investor Relations
PACIFIC VENTURE GROUP II, L.P.
By:
---------------------------------
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
82
BAYSTAR CAPITAL, LLP, a Delaware Limited
Partnership
By: BayStar Capital Management, LLC,
Its General Partner
By:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
BAYSTAR INTERNATIONAL LTD, a British Virgin
Islands Corporation
By: BayStar International Management, LLC,
Its General Partner
By:
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO SHAREHOLDERS' AGREEMENT]
83
EXHIBIT A
Shareholders
Number of Common
Shareholder Name Shares Owned
---------------- ------------
Dr. ▇▇▇▇▇▇▇ ▇▇▇▇ 300,000
▇. ▇. ▇▇▇▇▇▇▇▇ 300,000
Enterprise Partners III, L.P. 119,600
Enterprise Partners III, Associates 10,400
-------
TOTAL: 730,000
A-1
84
EXHIBIT B
Intentionally Omitted.
B-1
85
EXHIBIT C
Investors
Series A Investors
Enterprise Partners III, L.P.
Enterprise Partners III Associates, ▇.▇.
▇▇▇▇▇▇▇▇ VIII
▇▇▇▇▇▇▇▇ Associates Fund II
Series B Investors
Enterprise Partners III, L.P.
Enterprise Partners III Associates, ▇.▇.
▇▇▇▇▇▇▇▇ VIII
▇▇▇▇▇▇▇▇ Associates Fund II
Crosspoint Venture Partners-1996
Series C Investors
Agilent Technologies, Inc. (f/k/a/ Hewlett-Packard Company)
Series D Investors
▇▇▇▇▇▇▇-▇▇▇▇▇ Squibb Company
Crosspoint Venture Partners-1997
Aventis (f/k/a/ ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc.)
Enterprise Partners III, L.P.
Enterprise Partners III Associates, ▇.▇.
▇▇▇▇▇▇▇▇ VIII
▇▇▇▇▇▇▇▇ Associates Fund II
Series E Investors
Enterprise Partners III, L.P.
Enterprise Partners III Associates, ▇.▇.
▇▇▇▇▇▇▇▇ VIII
▇▇▇▇▇▇▇▇ Associates Fund II
Crosspoint Venture Partners LS-1997
Pacific Venture Group II, L.P.
BayStar Capital, L.P.
BayStar International Ltd.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
C-1
86
EXHIBIT D
Intentionally Omitted.
D-1
87
EXHIBIT E
Intentionally Omitted.
▇-▇
▇▇
▇▇▇▇▇▇▇ ▇
Intentionally Omitted.
F-1
89
EXHIBIT D
SCHEDULE OF COMMON HOLDERS
NAME SHARES
---- ------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 675
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 3,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,562
▇▇▇▇▇▇▇ ▇▇▇▇▇ 58,500
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,200
▇▇▇▇▇ ▇▇▇▇▇▇▇ 6,200
▇▇▇▇ ▇▇▇▇▇▇▇ 14,125
▇▇▇▇ ▇▇▇▇▇ 7,000
Enterprise Partners III Assoc. 10,400
Enterprise Partners III, L.P. 119,600
▇▇▇▇▇ ▇▇▇▇▇▇▇ 436
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 75,000
▇▇▇▇▇▇▇▇ ▇▇▇▇ 1,500
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 8,098
▇▇▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇ 1,093
▇▇▇▇▇ ▇▇▇-▇▇▇▇▇▇ 833
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 14,875
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 675
▇▇▇▇▇ ▇▇▇▇▇▇▇ 885
▇▇▇ ▇▇▇▇▇▇▇ 5,081
Rongshi Li 8,825
Wenbao Li 4,072
▇▇▇▇ ▇▇▇▇▇▇ 85,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 200
▇▇▇▇▇▇ ▇▇▇▇▇▇ 10,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 3,200
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 9,124
▇▇▇▇▇ ▇▇▇ 837
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 6,166
▇.▇. ▇▇▇▇▇▇▇▇ 300,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ 200
▇▇▇▇▇ ▇▇▇▇▇▇▇ 400
▇▇▇▇▇▇▇ ▇▇▇▇ 300,000
▇▇▇▇ ▇▇▇▇ 3,300
▇▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ 2,465
▇▇▇▇▇▇ ▇'▇▇▇▇ 3,380
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 45,225
▇▇▇▇▇▇ ▇▇▇▇▇▇ 400
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 600,000
Exhibit ▇-▇
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 2,500
▇▇▇▇▇ Prom 8,500
▇▇▇▇▇▇ Prom, Jr. 100
▇▇▇▇ ▇▇▇▇▇ 2,400
Yozo Satado 2,500
▇▇▇▇▇▇ ▇▇▇▇ 18,000
▇▇▇▇▇▇ ▇▇▇ 6,868
▇▇▇▇▇ ▇▇▇▇▇▇▇ 250
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 2,200
▇▇▇▇▇ ▇▇▇▇▇▇ 1,077
▇▇▇▇▇▇▇▇ ▇▇▇▇ 6,141
---------
Total: 1,789,068
=========
Exhibit D-2
91
EXHIBIT E
FORM OF LEGAL OPINION
Exhibit E-1
92
April 7, 2000
To the Investors Listed on the
Schedule of Investors to the
Discovery Partners International, Inc. Series E
Preferred Stock Purchase Agreement
dated April 7, 2000
Ladies and Gentlemen:
We have acted as counsel for Discovery Partners International, Inc. a
California corporation (the "Company"), in connection with the issuance and sale
of shares of its Series E Preferred Stock pursuant to the Discovery Partners
International, Inc. Series E Preferred Stock Purchase Agreement dated April 7,
2000 (the "Stock Purchase Agreement") among the Company and you. This opinion
letter is being rendered to you pursuant to Section 5(f) of the Stock Purchase
Agreement in connection with the Closing of the sale of the Series E Preferred
Stock. Capitalized terms not otherwise defined in this opinion letter have the
meanings given them in the Stock Purchase Agreement.
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Company pursuant to the Stock
Purchase Agreement and upon certificates and statements of government officials
and of officers of the Company. We have also examined originals or copies of
such corporate documents or records of the Company as we have considered
appropriate for the opinions expressed herein. We have assumed for the purposes
of this opinion letter the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of the documents submitted to us as originals,
the conformity to the original documents of all documents submitted to us as
certified, facsimile or photostatic copies, and the authenticity of the
originals of such copies.
In rendering this opinion letter we have also assumed: (A) that the
Stock Purchase Agreement, Amended and Restated Investors' Rights Agreement,
Amended and Restated Shareholders' Agreement and Amendment No. 2 to Voting
Agreement (collectively, the "Transaction Agreements") have been duly and
validly executed and delivered by you or on your behalf, that each of you has
the power to enter into and perform all your obligations thereunder, and that
the Transaction Agreements constitute valid, legal, binding and enforceable
obligations upon you; (B) that the representations and warranties made in the
Stock Purchase Agreement by you are true and correct; (C) that any wire
transfers, drafts or checks tendered by you will be honored; (D) that you have
filed any required state franchise, income or similar tax returns and have paid
any required state franchise, income or similar taxes; and (E) if you are a
small business investment company subject to the Small Business Investment Act
of 1958, as amended, that you have complied with the provisions of such Act and
the regulations promulgated thereunder (the "SBIA Laws").
93
April 7, 2000
Page 2
As used in this opinion letter, the expression "we are not aware" or the
phrase "to our knowledge," or any similar expression or phrase with respect to
our knowledge of matters of fact, means as to matters of fact that, based on the
actual knowledge of individual attorneys within the firm principally involved in
handling current matters for the Company (and not including any constructive or
imputed notice of any information), and after an examination of documents
referred to herein and after inquiries of certain officers of the Company, no
facts have been disclosed to us that have caused us to conclude that the
opinions expressed are factually incorrect; but beyond that we have made no
factual investigation for the purposes of rendering this opinion letter.
Specifically, but without limitation, we have not searched the dockets of any
courts and we have made no inquiries of securities holders or employees of the
Company, other than such officers.
This opinion letter relates solely to the laws of the State of
California and the federal law of the United States and we express no opinion
with respect to the effect or application of any other laws. Special rulings of
authorities administering such laws or opinions of other counsel have not been
sought or obtained.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set forth
below and except as set forth in the Stock Purchase Agreement or the Schedule of
Exceptions thereto, we are of the opinion that as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California, and the Company has
the requisite corporate power and authority to own its properties and to conduct
its business as, to our knowledge, it is presently conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform the Transaction Agreements. Each of the Transaction
Agreements has been duly and validly authorized by the Company, duly executed
and delivered by an authorized officer of the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable by you against the
Company in accordance with its terms.
3. The capitalization of the Company is as follows:
(a) Preferred Stock. The Company has 9,033,333 authorized shares
of Preferred Stock (the "Preferred Stock"), of which (i) 2,500,000 shares have
been designated Series A Preferred Stock, to our knowledge 2,000,000 shares of
which are currently issued and outstanding, (ii) 2,000,000 shares have been
designated Series B Preferred Stock, to our knowledge all of which are currently
issued and outstanding, (iii) 333,333 shares have been designated Series C
Preferred Stock, to our knowledge all of which are currently issued and
outstanding, (iv) 2,500,000 shares have been designated Series D Preferred
Stock, to our knowledge 2,228,945 shares of which are currently issued and
outstanding, and (v) 1,700,000 shares have been designated Series E Preferred
Stock and up to 1,465,261 of which may be purchased pursuant to the Stock
Purchase Agreement. Such 2,000,000 shares of outstanding Series A Preferred
Stock have been duly authorized and validly issued, are nonassessable and, to
94
April 7, 2000
Page 3
our knowledge, are fully paid. Such 2,000,000 shares of outstanding Series B
Preferred Stock have been duly authorized and validly issued, are nonassessable
and, to our knowledge, are fully paid. Such 333,333 shares of outstanding Series
C Preferred Stock have been duly authorized and validly issued, are
nonassessable and, to our knowledge, are fully paid. Such 2,228,945 shares of
outstanding Series D Preferred Stock have been duly authorized and validly
issued, are nonassessable and, to our knowledge, are fully paid. The shares of
Series E Preferred Stock to be purchased at the Closing have been duly
authorized and, upon purchase at the Closing pursuant to the terms of the Stock
Purchase Agreement, will be validly issued, nonassessable and fully paid. The
respective rights, privileges, restrictions and preferences of the Series A,
Series B, Series C, Series D and Series E Preferred Stock are as stated in the
Company's Restated Articles of Incorporation attached as Exhibit A to the Stock
Purchase Agreement.
(b) Common Stock. The Company has 12,000,000 authorized shares
of Common Stock (the "Common Stock"), to our knowledge 1,789,068 shares of which
are currently issued and outstanding. Such 1,789,068 shares of outstanding
Common Stock have been duly authorized and validly issued, are nonassessable,
and, to our knowledge, are fully paid.
(c) The Common Stock issuable upon conversion of the Series E
Preferred Stock to be purchased at the Closing has been duly and validly
reserved for issuance and, when and if issued upon such conversion in accordance
with the Company's Restated Articles of Incorporation, will be validly issued,
fully paid and nonassessable.
(d) There are no statutory preemptive rights nor, to our
knowledge, are there any options, warrants, conversion privileges or other
rights (or agreements for any such rights) outstanding to purchase or otherwise
obtain from the Company any of the Company's equity securities, except for (i)
the conversion privileges of the Series A, Series B, Series C and Series D
Preferred Stock, (ii) the conversion privileges of the Series E Preferred Stock,
(iii) warrants issued on September 10, 1996 to purchase 192,355 shares of Series
A Preferred Stock, (iv) warrants issued as of November 5, 1996 to purchase
32,624 shares of Common Stock, (v) warrants to purchase 33,051 shares of Series
A Preferred Stock, (vi) a warrant to purchase 150,000 shares of Common Stock,
(vii) warrants to purchase 48,904 shares of Common Stock, (viii) warrants to
purchase 11,588 shares of Common Stock, (ix) warrants to purchase 234,739 shares
of Series E Preferred Stock, (x) 1,080,029 options to purchase Common Stock
granted under the Company's 1995 Stock Option/Stock Issuance Plan, and (xi) the
right of first offer as set forth in Section 2.4 of the Amended and Restated
Investors' Rights Agreement.
4. Other than in connection with any securities laws (with respect to
which we direct you to paragraph 6 below), the Company's execution and delivery
of, and its performance and compliance as of the date hereof with the terms of,
the Transaction Agreements do not violate any provision of any federal or
California law, rule or regulation applicable to the Company or any provision of
the Company's Restated Articles of Incorporation or Bylaws and do not conflict
with or constitute a default under the provisions of any judgment, writ, decree
or order specifically identified in the Schedule of Exceptions or the material
provisions of any of the material agreements specifically identified in the
Schedule of Exceptions.
95
April 7, 2000
Page 4
5. Other than in connection with any securities laws (with respect to
which we direct you to paragraph 6 below) all consents, approvals, permits,
orders or authorizations of, and all qualifications by and registrations with,
any federal or California state governmental authority on the part of the
Company required in connection with the execution and delivery of the Stock
Purchase Agreement and consummation at the Closing of the transactions
contemplated by the Stock Purchase Agreement have been obtained, and are
effective, and we are not aware of any proceedings, or written threat of any
proceedings, that question the validity thereof.
6. Based in part upon the representations of you in the Stock Purchase
Agreement, the offer and sale of the Series E Preferred Stock to you pursuant to
the terms of the Stock Purchase Agreement are exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and from
the qualification requirements of the California Corporate Securities Law of
1968, as amended, and, under such securities laws as they presently exist, the
issuance of Common Stock to you upon conversion of the Series E Preferred Stock
would also be exempt from such registration and qualification requirements.
7. We are not aware that there is any action, proceeding or governmental
investigation pending, or overtly threatened in writing, against the Company
which questions the validity of the Transaction Agreements or the right of the
Company to enter into the Transaction Agreements.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(A) The legality, validity, binding nature and enforceability of the
Company's obligations under the Transaction Agreements may be subject to or
limited by (1) bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent transfer and other similar laws affecting the rights of creditors
generally; (2) general principles of equity (whether relief is sought in a
proceeding at law or in equity), including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and the discretion of
any court of competent jurisdiction in awarding specific performance or
injunctive relief and other equitable remedies; and (3) without limiting the
generality of the foregoing, (a) principles requiring the consideration of the
impracticability or impossibility of performance of the Company's obligations at
the time of the attempted enforcement of such obligations, and (b) the effect of
California court decisions and statutes which indicate that provisions of the
Transaction Agreements which permit any of you to take action or make
determinations may be subject to a requirement that such action be taken or such
determinations be made on a reasonable basis in good faith or that it be shown
that such action is reasonably necessary for your protection.
(B) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust statutes,
laws, rules and regulations.
(C) We express no opinion concerning the past, present or future fair
market value of any securities.
96
April 7, 2000
Page 5
(D) We express no opinion as to the enforceability under certain
circumstances of any provisions indemnifying a party against, or requiring
contributions toward, that party's liability for its own wrongful or negligent
acts, or where indemnification or contribution is contrary to public policy or
prohibited by law. In this regard, we advise you that in the opinion of the
Securities and Exchange Commission, indemnification of directors, officers and
controlling persons of an issuer against liabilities arising under the
Securities Act of 1933, as amended, is against public policy and is therefore
unenforceable.
(E) We express no opinion as to the enforceability under certain
circumstances of any provisions prohibiting waivers of any terms of the
Transaction Agreements other than in writing, or prohibiting oral modifications
thereof or modification by course of dealing. In addition, our opinions are
subject to the effect of judicial decisions which may permit the introduction of
extrinsic evidence to interpret the terms of written contracts.
(F) We express no opinion as to the effect of Section 1670.5 of the
California Civil Code or any other California law, federal law or equitable
principle which provides that a court may refuse to enforce, or may limit the
application of, a contract or any clause thereof which the court finds to have
been unconscionable at the time it was made or contrary to public policy.
(G) We express no opinion as to your compliance with any Federal or
state law relating to your legal or regulatory status or the nature of your
business.
(H) We express no opinion as to the compliance of the Company or the
sale of the Series E Preferred Stock to the Investors with the provisions of the
SBIA Laws, except to the extent that such compliance relates to the sale of
Series E Preferred Stock to Investors which are expressly identified in the
Stock Purchase Agreement as being small business investment companies.
(I) We express no opinion as to the effect of subsequent issuances of
securities of the Company, to the extent that notwithstanding its reservation of
shares the Company may issue so many shares of Common Stock that there are not
enough remaining authorized but unissued shares of Common Stock for the
conversion of the Series E Preferred Stock (or may issue securities which by
antidilution adjustment so reduce the Conversion Price (as such term is defined
in the Company's Restated Articles of Incorporation) of the Series E Preferred
Stock and/or other Company derivative securities that the outstanding shares of
the Series E Preferred Stock become convertible for more shares of Common Stock
than remain authorized but unissued).
(J) We express no opinion as to:
(1) The effect of Chapter Five, Chapter Thirteen and Chapter
Eighteen of Division One of the California Corporations Code or any other
California law, federal law or equitable principles restricting in certain
circumstances distributions by a corporation to its shareholders, relating to
dissenters' rights or relating to involuntary dissolution;
97
April 7, 2000
Page 6
(2) The enforceability under certain circumstances of provisions
expressly or by implication waiving broadly or vaguely stated rights, unknown
future rights, or defenses to obligations or rights granted by law, when such
waivers are against public policy or prohibited by law;
(3) The enforceability under certain circumstances of provisions
to the effect that rights or remedies are not exclusive, that every right or
remedy is cumulative and may be exercised in addition to or with any other right
or remedy, that election of a particular remedy or remedies does not preclude
recourse to one or more remedies, that rights or remedies may be exercised
without notice, or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy; and
(4) The effect of any California law, federal law or equitable
principles which limit the amount of attorneys' fees that can be recovered under
certain circumstances.
This opinion letter is rendered as of the date first written above
solely for your benefit in connection with the Stock Purchase Agreement and may
not be delivered to, quoted or relied upon by any person other than you, or for
any other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
98
April 7, 2000
Page 7
If you are a lawyer with us, this opinion letter is not addressed to you
(even if you are an Investor) and you are not entitled to rely on it.
Very truly yours,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
99
EXHIBIT F
AMENDMENT NO. 2 TO VOTING AGREEMENT
Exhibit F-1
100
AMENDMENT NO. 2 TO VOTING AGREEMENT
THIS AMENDMENT NO. 2 TO VOTING AGREEMENT ("Amendment") is made as of
April 7, 2000, by and among Discovery Partners International, Inc., a California
corporation and the successor-in-interest to IRORI (the "Company" ), Enterprise
Partners III, L.P., Enterprise Partners III Associates, L.P. (together,
"Enterprise"), ▇▇▇▇▇▇▇▇ VIII, ▇▇▇▇▇▇▇▇ Associates Fund II (together,
"▇▇▇▇▇▇▇▇"), Crosspoint Venture Partners-1996, Crosspoint Venture Partners
LS-1997 (together, "Crosspoint"), Agilent Technologies, Inc. (formerly
Hewlett-Packard Company) ("Agilent"), Pacific Venture Group II, L.P.
("Pacific"), BayStar Capital, L.P. and BayStar International Ltd. (together'
BayStar") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") with reference to the Voting
Agreement dated as of November 5, 1996 among the Company, Enterprise, ▇▇▇▇▇▇▇▇
and Crosspoint Venture Partners-1996 (as amended and restated by Amendment No. 1
to Voting Agreement dated October 31, 1997, the "Voting Agreement"). Enterprise,
▇▇▇▇▇▇▇▇, Crosspoint, Agilent and Pacific are collectively referred to herein as
the "Investors."
A. Enterprise, ▇▇▇▇▇▇▇▇, Crosspoint Venture Partners LS-1997, Pacific,
BayStar and Trubitt (together, the "Series E Investors") desire to purchase
shares of the Company's Series E Preferred Stock (the "Series E Shares"), and
the Company desires to sell such securities to the Series E Investors;
B. Pursuant to the Company's Restated Articles of Incorporation, as
amended, the holders of the Company's Preferred Stock ("Preferred Stock") are
entitled to elect five (5) directors of the Company (the "Preferred Directors");
and
C. This Amendment is entered into as an inducement to and in
consideration of that certain Series E Preferred Stock Purchase Agreement dated
as of the date hereof by and between the Company and the Series E Investors (the
"Series E Purchase Agreement").
NOW, THEREFORE, IT IS HEREBY AGREED THAT THE VOTING AGREEMENT IS AMENDED
AND RESTATED TO READ IN FULL AS FOLLOWS:
1. Agreement to Vote for Enterprise Nominee.
a. During the term of this Voting Agreement, each of the
Investors agrees to vote all of its shares of the Company's Series A Preferred
Stock ("Series A Shares"), Series B Preferred Stock ("Series B Shares"), Series
C Preferred Stock ("Series C Shares"), Series D Preferred Stock ("Series D
Shares") and Series E Shares now or hereafter owned by it to elect one (1)
nominee of Enterprise (the "Enterprise Nominee") as a Preferred Director.
b. Prior to each election of directors of the Company,
Enterprise shall designate the Enterprise Nominee in writing to the Company. The
Company shall promptly notify each of the Investors of Enterprise's choice of
such nominee. Any vacancy occurring
101
because of the death, resignation, removal or disqualification of the Enterprise
Nominee shall be filled according to this Section 1.
2. Agreement to Vote for ▇▇▇▇▇▇▇▇ Nominee.
a. During the term of this Voting Agreement, each of the
Investors agrees to vote all of its Series A Shares, Series B Shares, Series C
Shares, Series D Shares and Series E Shares now or hereafter owned by it to
elect one (1) nominee of ▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇ Nominee") as a Preferred
Director.
b. Prior to each election of directors of the Company, ▇▇▇▇▇▇▇▇
shall designate the ▇▇▇▇▇▇▇▇ Nominee in writing to the Company. The Company
shall promptly notify each of the Investors of ▇▇▇▇▇▇▇▇'▇ choice of such
nominee. Any vacancy occurring because of the death, resignation, removal or
disqualification of the ▇▇▇▇▇▇▇▇ Nominee shall be filled according to this
Section 2.
3. Agreement to Vote for Crosspoint Nominee.
a. During the term of this Voting Agreement, each of the
Investors agrees to vote all of its Series A Shares, Series B Shares, Series C
Shares, Series D Shares and Series E Shares now or hereafter owned by it to
elect one (1) nominee of Crosspoint (the "Crosspoint Nominee") as a Preferred
Director.
b. Prior to each election of directors of the Company,
Crosspoint shall designate the Crosspoint Nominee in writing to the Company. The
Company shall promptly notify each of the Investors of Crosspoint's choice of
such nominee. Any vacancy occurring because of the death, resignation, removal
or disqualification of the Crosspoint Nominee shall be filled according to this
Section 3.
4. Covenants of the Investors and the Company. The Company and the
Investors agree to use their reasonable best efforts to ensure that the rights
given to the Investors hereunder are effective and that the Investors shall
enjoy the benefits hereof. Such reasonable best efforts shall include, without
limitation, the use of the Company's and the Investors' reasonable best efforts
to cause the nomination of the Enterprise Nominee, the ▇▇▇▇▇▇▇▇ Nominee, and the
Crosspoint Nominee at each election of the Board of Directors. Neither the
Company nor any of the Investors shall, by any voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be performed
hereunder by the Company or the Investors, respectively, but shall at all times
in good faith assist in the carrying out of all of the provisions of this Voting
Agreement and shall use their reasonable best efforts to protect the rights of
the Investors hereunder against impairment.
5. Successors and Assigns.
a. The Investors' rights under this Agreement are not assignable
without the prior written consent of the Company and the holders of a majority
of the Preferred Stock then
2
102
held by the Investors (the "Majority Investors"), which consent may be withheld
for any reason whatsoever.
b. The burdens of this Voting Agreement shall be binding upon
the successors and assigns to whom the Investors transfer any of their
respective Series A Shares, Series B Shares, Series C Shares, Series D Shares
and/or Series E Shares. The Company shall not permit the transfer of any Series
A Shares, Series B Shares, Series C Shares, Series D Shares and/or Series E
Shares on its books or issue a new certificate representing any Series A Shares,
Series B Shares, Series C Shares, Series D Shares and/or Series E Shares unless
and until the person to whom such security is to be transferred shall have
executed a written agreement, reasonably satisfactory in form and substance to
the Majority Investors and the Company, pursuant to which such person becomes a
party to this Voting Agreement and agrees to be bound by all the burdens hereof
as if such person was an Investor hereunder.
c. The provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the Company.
6. Legends. Each certificate representing any Series A Shares, Series B
Shares, Series C Shares, Series D Shares or Series E Shares held by the
Investors shall be endorsed by the Company with the following legend:
THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT (A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER), AND BY ACCEPTING
ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
BURDENS OF SAID VOTING AGREEMENT.
7. Termination. This Voting Agreement shall terminate upon the earlier
of (i) the consummation of the Company's initial public offering on a firm
underwriting basis, (ii) the closing of a consolidation or merger of the Company
with or into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of or
(iii) as to each Investor, that date when such Investor (a) holds less than
750,000 Series B Shares and/or Series A Shares, (b) holds less than 100,000
Series C Shares or Series D Shares, and (c) holds less than 100,000 Series E
Shares.
8. Amendments and Waivers. Any term hereof may be amended and the
observance of any term hereof 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 Majority Investors or their successors and
permitted assigns. Any amendment or waiver so effected shall be binding upon the
Company and all of the Investors, their successors and assigns.
3
103
9. Severability. Whenever possible, each provision of this Voting
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Voting Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Voting Agreement.
10. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California, without regard to the conflict of
laws provisions thereof.
11. Notices. All notices, requests and other communications to the
Company or any of the Investors hereunder shall be in writing (including
telecopy or similar electronic transmissions), shall refer specifically to this
Voting Agreement and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission, overnight delivery with a nationally
recognized overnight delivery service or by registered or certified mail, return
receipt requested, postage prepaid, in each case to the respective address
specified below (or such other address as may be specified in writing to the
other parties hereto):
a. If to the Company, to:
DISCOVERY PARTNERS INTERNATIONAL, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
b. If to Enterprise, to:
ENTERPRISE PARTNERS
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Attention: General Partner
Fax No.: (____) ____-_____
c. If to ▇▇▇▇▇▇▇▇, to:
▇▇▇▇▇▇▇▇ ASSOCIATES
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Partner
Fax No.: (____) ____-_____
d. If to Crosspoint, to:
4
104
CROSSPOINT VENTURES PARTNERS
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Partner
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
e. If to Agilent, to:
AGILENT TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Director, Corporate Development
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
AGILENT TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
f. If to Pacific, to:
PACIFIC VENTURE GROUP
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: _______________
Fax No.: (____) ____-_____
g. If to BayStar, to:
BAYSTAR CAPITAL
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Principal
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
h. If to Trubitt, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇)-▇▇▇-▇▇▇▇
5
105
Any notice or communication given in conformity with this Section 11 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, one (1) day after deposit with a nationally
recognized overnight delivery service and three (3) days after mailing, if
mailed.
12. Equitable Remedies. The Company and the Investors acknowledge and
agree that the legal remedies available to the Investors in the event any party
violates the covenants and agreements made in this Voting Agreement would be
inadequate and that the Investors shall be entitled, without posting any bond or
other security, to temporary, preliminary, and permanent injunctive relief,
specific performance and other equitable remedies in the event of such a
violation, in addition to any other remedies which the Investors may have at law
or in equity.
13. Counterparts. This Voting Agreement may be executed in any number
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
6
106
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to
Voting Agreement as of the date first written above.
DISCOVERY PARTNERS, INC., a California corporation
By:
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P., Its General Partner
By:
--------------------------------------------
General Partner
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P., Its General Partner
By:
--------------------------------------------
General Partner
▇▇▇▇▇▇▇▇ VIII, a California Limited Partnership
By: ▇▇▇▇▇▇▇▇ VIII MANAGEMENT, L.L.C., a Delaware Limited Liability Company,
its General Partner
By:
--------------------------------------------
Title:
-----------------------------------------
▇▇▇▇▇▇▇▇ ASSOCIATES FUND II, a California Limited Partnership
7
107
By:
--------------------------------------------
General Partner
CROSSPOINT VENTURE PARTNERS-1996
By:
--------------------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
CROSSPOINT VENTURE PARTNERS LS-1997
By:
--------------------------------------------
▇▇▇ ▇▇▇▇▇▇, General Partner
AGILENT TECHNOLOGIES, INC. (f/k/a Hewlett-Packard Company)
By:
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, Vice President and General Manager, Chemical Analysis Group
PACIFIC VENTURE GROUP II, L.P.
By:
--------------------------------------------
Title:
-----------------------------------------
BAYSTAR CAPITAL, L.P., a Delaware limited partnership
By: BayStar Capital Management LLC,
Its General Partner
By:
--------------------------------------------
8
108
▇▇▇▇▇ ▇▇▇▇▇, Vice President
BAYSTAR INTERNATIONAL LTD., a British Virgin Islands Corporation
By: BayStar International Management, LLC,
Its General Partner
By:
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Vice President
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
9
109
SCHEDULE OF EXCEPTIONS
110
DISCOVERY PARTNERS INTERNATIONAL, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of
the Series E Preferred Stock Purchase Agreement dated April 7, 2000 (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Where the terms of a contract or other disclosure item
have been summarized or described in this Schedule of Exceptions, such summary
or description does not purport to be a complete statement of the material terms
of such contract or item. Any terms defined in the Agreement shall have the same
meaning when used in this Schedule of Exceptions as when used in the Agreement
unless the context otherwise requires.
SECTION 2.4 GOVERNMENT CONSENTS
Blue Sky filings may be required.
SECTION 2.6 SUBSIDIARIES
Discovery Partners International, Inc. (DPI) owns 100% of the equity of
IRORI Europe, Ltd., a subsidiary created in March 1997. IRORI Europe, Ltd. is
located in the United Kingdom, and is currently responsible for DPI's European
sales and marketing activities.
DPI owns 100% of the equity of Discovery Technologies, Ltd. (DTL),
located near Basel, Switzerland. DTL, acquired by DPI in 1999, provides High
Throughput Screening (HTS) services to pharmaceutical, agricultural and
biotechnology companies.
SECTION 2.7 CONTRACTS AND OTHER COMMITMENTS
Facility Leases
DPI currently leases 9,828 sq. ft. of research and development,
manufacturing, and administrative space in La Jolla, CA, under a lease which
extends through September 30, 2000. DPI subleases the space to a tenant who pays
DPI monthly rent in excess of DPI's monthly payment. DPI leases an additional
34,612 sq. ft. facility of research and development, manufacturing, and
administrative space, at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇, which DPI
occupies. This second lease extends through August 31, 2006. DPI currently pays
$50,187 per month in base rent, plus the building's monthly operating expenses.
111
IRORI Europe, Ltd. entered into a five year lease of 21,48 sq. ft. of
office space on December 22, 1997, at a rental rate of 15,000 British Pounds per
year. The office is located in Cheshire, England, just outside of Manchester.
DTL currently leases 1,330 square meters of office and laboratory space,
in Allschwil, Switzerland, at a rate of 9,421 Swiss Francs per month. The lease
terminates in 2008. The company recently exercised its option to expand the
leased space by an additional 650 square meters, beginning in June, 2000.
Financing
As of March 31, 2000, DPI had a total equipment lease/finance liability
of approximately $780,000 in the United States, and US$375,000 in Switzerland.
DTL has a 3 million Swiss Francs (US$ 1.8 million) line of credit with
▇▇▇▇▇▇ Kantonalbank.
DTL has a loan of 2.6 million Swiss Francs (US$ 1.6 million) from
Novartis, which is guaranteed by Discovery Partners International, Inc.
Technology License/Assignment
Hewlett-Packard Alliance Agreement. On October 31, 1997, DPI entered
into an agreement with Hewlett-Packard under which Hewlett-Packard received a
license to certain DPI technology for use in specified fields. The agreement
requires Hewlett-Packard to expend specified resources in developing and
promoting Hewlett-Packard products that incorporate DPI's technology. The
agreement also contains provisions regarding the co-development and marketing of
products in the areas of chemical synthesis and analysis.
Trega Biosciences, Inc. Sublicense Agreement. On May 1, 1998, DPI
entered into a non-exclusive sublicense agreement with Trega Biosciences, Inc.
under which the Company has certain rights to make, have made, use, import,
market, have marketed, sell and have sold products which embody the technology
contained in U.S. Patent 4,631,211 . The terms of the license require DPI to pay
Trega a license fee of *** in 1998 and *** in 1999, plus a royalty of 10% of net
sales of licensed products (subject to a minimum of *** per year and a maximum
of *** per year).
Ontogen Patents Assignment Agreement On December 17, 1998 DPI entered
into an agreement with Ontogen Corporation, under which Ontogen assigned to DPI
all rights, title and interest in U. S. Patent 5,770,455 and U. S. Patent
Application Serial Number 383,766 in exchange for *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
112
Product/Service Contracts
Bristol ▇▇▇▇▇ Squibb Strategic Alliance Agreement. On May 22, 1998, DPI
entered into a two year agreement to develop and deliver to BMS a NanoKan
system, designed to enable the low-cost synthesis of up to one million discrete
chemical compounds per year. BMS purchased *** million of DPI Series D Preferred
Stock, and agreed to pay *** million for the NanoKan system and 500,000
disposable nanokan reactors.
Aventis Strategic Alliance Agreement. On June 15, 1998, DPI entered into
a two year agreement to develop and deliver to Aventis (formerly Rhone Poulenc
▇▇▇▇▇) a NanoKan system, designed to enable the low-cost synthesis of up to one
million discrete chemical compounds per year. Aventis purchased *** million of
DPI Series D Preferred Stock, and agreed to pay *** million for the NanoKan
system and 1.5 million disposable nanokan reactors.
ChemRx Contracts
The ChemRx business unit has the following active chemistry services contracts:
Dupont Pharmaceuticals Company - 5/25/99; $ 336,000
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ - 7/26/99; 362,500
Monsanto ▇▇▇▇▇▇ - 7/29/99; 62,500
Pharmacia & Upjohn - 8/2/99; 493,200
Kirin Brewery Co Ltd - 8/2/99; 435,000
▇. ▇. ▇▇▇▇▇▇▇ Pharmaceutical Research - 9/15/99; 290,000
Rohm and ▇▇▇▇ Company - 9/17/99; 75,000
Dupont Crop Protection Products - 10/15/99; 300,000
AstraZeneca - 11/8/99; 40,000
Kirin Brewery Co Ltd - 12/6/99; 300,000
Dupont Pharmaceuticals Company - 12/10/99; 3,900,000
Abbot Laboratories- 12/16/99; 150,000
DGI BioTechnologies, LLC - 12/16/99 62,500
Hisamitsu Pharmaceutical Co., Inc. - 1/17/00 337,500
DTL Contracts
The DTL business unit has the following active screening services contracts:
Novartis Crop Protection, U.S. - 5/21/99; 1,080,000
MDL - 9/8/99; 168,000
Novartis Crop Protection, Switzerland - 12/23/99; 187,500
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
113
BiochemPharma - 11,1,99; 15,000
Japan Tobacco - 1/10/00; 271,659
Japan Tobacco - 1/10/00; 540,068
Japan Tobacco - 3/17/00; 3,000,000
Employment Agreements
DPI has employment agreements with the following individuals:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - 4/17/98 ▇▇▇▇▇ ▇▇▇▇▇▇ - 8/10/99 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -
8/10/99 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - 8/10/99
Directorship Agreements
DPI has directorship agreements with the following outside members of the board
of directors:
▇▇▇▇ ▇▇▇▇▇▇▇▇ - 3/1/96
▇▇▇▇▇▇ ▇▇▇▇▇ - 12/15/96
Scientific Advisory Board Agreements
DPI has agreements with the following members of its Scientific Advisory Board:
▇. ▇. ▇▇▇▇▇▇▇▇ - 4/27/95
▇▇▇▇▇ ▇▇▇▇▇ - 12/15/98
▇▇▇▇▇▇ ▇▇▇▇▇ - 10/1/98
▇▇▇▇▇ ▇▇▇▇▇▇▇ - 5/17/99
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ - 7/9/99
Consultants and Contractors. DPI utilizes the services of a wide variety
of consultants and contractors, related to research and development, marketing,
and administrative tasks. All such service providers have signed consulting
agreements which contain provisions: (1) prohibiting the disclosure of DPI
confidential information, (2) assigning to DPI all intellectual property
produced as a result of the consulting engagement, and (3) allowing DPI to
terminate without cause with 30 days notice.
Other. Reference is made to the Investors' Rights Agreement,
Shareholders' Agreement, Voting Agreement, and the various stock purchase
agreements, warrants, and options under which DPI securities have been issued or
are issuable.
See also Section 2.21 Employees; Employee Compensation.
SECTION 2.8 RELATED-PARTY TRANSACTIONS
114
DPI has an outstanding loan of $240,000 to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the
proceeds of which were used to exercise company stock options. The full-recourse
loan is interest-bearing and is secured by 600,000 shares of DPI Common Stock.
▇▇▇▇ ▇▇▇▇▇▇▇▇, a member of DPI's Board of Directors, is also a vice
president of Dupont Pharmaceuticals. Dupont Pharmaceuticals has purchased
product from DPI and has contracted with DPI several times for chemistry
services.
SECTION 2.17 FINANCIAL STATEMENTS
In March, 2000, DPI entered into a new equipment financing agreement
with GE Capital for a total of $747,151.
DPI has entered into standard indemnification provisions in several of
its agreements.
SECTION 2.18 CHANGES
(a) DPI issued a Promissory Note in the amount of $2,000,000 in March of
2000 payable to Crosspoint Venture Partners LS-1997. The Note accrues interest
equal to eight percent (8%) per annum. The Note plus accrued interest will be
converted into shares of Series E Preferred Stock on the Closing Date of this
transaction. In addition to the interest paid on the Note, warrants to purchase
76,931 shares of Series E Preferred Stock at a price of $5.00/share were granted
to the Note holder.
Revenues, costs and expenses subsequent to December 31, 1999 have been
consistent with management's expectation and have not adversely impacted the
Company.
SECTION 2.19 PATENTS AND TRADEMARKS
The Company has entered into a license agreement with Trega Biosciences,
Inc. under which the Company has certain rights to make, have made, use, import,
market, have marketed, sell and have sold products which embody the technology
contained in U.S. Patent 4,631,211.
On June 24, 1997, the U. S. Patent and Trademark Office allowed DPI's
trademark application on "ACCUTAG", subject to no opposition being filed within
30 days. Waters Technologies Corporation filed opposition within the 30 day
period, claiming prior use of the name. The issue is not yet resolved.
The Company acknowledges that future business plans may require
in-licensing various technologies critical to the success of those plans.
115
The Company has granted a license to Hewlett-Packard to certain DPI
technology, more fully described in Section 2.7 Contracts and Other Commitments.
The Company has been notified by the United States Patent Office that
some of the claims contained in patent applications 08/473,660, 08/480,147,
08/484,486 and 09/098,122 may interfere with one or more claims of other
patents, and that ex parte prosecution has been suspended. The Company believes
that the potential interference(s) may be with certain claims contained in
either: a) a pending patent application filed by Ontogen Corporation on methods
and apparatus for synthesizing labeled combinatorial chemical libraries, which
the Company has acquired from Ontogen in an agreement more fully described in
Section 2.7 Contracts and Other Commitments; or b) patent #5,641,634 issued to
W. Mandecki. All of the claims in the Mandecki patent #5,641,634 relate to the
performance of assays, and if upheld by the U. S. Patent Office, would have no
impact on DPI's business as now conducted or as proposed to be conducted.
116
CURRENT DPI PATENTS AND PATENT APPLICATIONS
SERIAL NO.(PATENT NO.) FILING DATE COUNTRY OR REGION
---------------------- ----------- -----------------
08/383,766 Allowed ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/428,662 5,741,462 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/473,660 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/480,147 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/480,196 5,925,562 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/484,486 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/480,438 5,770,455 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/484,504 5,751,629 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/538,387 5,874,214 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/567,746 6,025,129 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/633,410 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/669,252 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/711,426 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/709,435 6,017,496 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/723,423 5,961,923 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/743,984 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/857,800 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/826,253 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/901,229 5,972,639 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/912,998 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/945,053 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
08/958,254 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
09/010,951 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
09/051,022 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
09/098,122 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
09/261,781 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
09/479,119 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
59185/96 971117 Australia
2,216,645 ▇▇▇▇▇▇ ▇▇▇▇▇▇
96916437.5 971114 Europe
530562/96 ▇▇▇▇▇▇ ▇▇▇▇▇
97-707576 971025 Korea (Republic of)
EA-97-0257US ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
96934064.5 980501 EPO
97912649.7 990506 EPO
2,267,769 990331 Canada
117
SECTION 2.21 EMPLOYEES; EMPLOYEE COMPENSATION
DPI maintains a 401(k) Plan for the benefit of its employees. Currently,
the Company makes no employer contributions to the Plan.
DPI has a 1995 Stock Option/Stock Issuance Plan.
DPI has an executive management bonus plan under which members of
management can earn annual cash bonuses (target level of 50% of base salary for
the CEO, and 25% of base salary for vice presidents), based on the attainment of
objectives established at the commencement of each fiscal year.
On April 17, 1998, DPI entered into an employment agreement with
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. In return for ▇▇. ▇▇▇▇▇▇▇▇▇'▇ services as President and
Chief Executive Officer of DPI, the Company agreed to pay ▇▇. ▇▇▇▇▇▇▇▇▇ an
annual base salary of $350,000 and an annual bonus of up to 50% of base salary,
grant ▇▇. ▇▇▇▇▇▇▇▇▇ the option to purchase 600,000 shares of DPI common stock,
and provide certain benefits in the event of a termination, all more fully
defined in the employment agreement.