Exhibit No. 10.1
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of the 2nd day of
August, 2001 by and among Synaptic Pharmaceutical Corporation, a Delaware
corporation with its principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "Company"), and each of the purchasers named in EXHIBIT A attached hereto
(each, a "Purchaser" and, collectively, the "Purchasers").
WHEREAS, the Company has authorized the issuance of up to
11,056 shares of its Series B Senior Convertible Preferred Stock and up to
29,944 shares of its Series C Senior Convertible Preferred Stock, which shares
are, or will be upon issuance, convertible into authorized but unissued shares
of common stock, $.01 par value per share, of the Company; and
WHEREAS, the Company desires to issue and sell to the
Purchasers pursuant to this Agreement, and the Purchasers, severally, desire to
purchase from the Company the number of shares of each such series of
convertible preferred stock as is set forth opposite his or its respective name
in EXHIBIT A hereto;
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
1.1. "Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under direct or indirect common control with such
Person. For the purposes of this definition "control," when used with respect to
any specified Person, shall mean the power to direct the management and policies
of such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
1.2. "Common Stock" shall mean the common stock, $.01 par value per share,
of the Company.
1.3. "Disclosure Documents" means the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 2000, the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001, the Company's Proxy Statement for its
Annual Meeting of Stockholders on May 10, 2001 together in each case with any
documents incorporated by reference therein, and any disclosure schedule
delivered by the Company to the Purchasers simultaneously with the execution of
this Agreement.
1.4. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all of the rules and regulations promulgated thereunder.
1.5. "Initial Closing Date" shall mean August 3, 2001.
1.6. "Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association
or joint venture.
1.7. "SEC" shall mean the Securities and Exchange Commission.
1.8. "Second Closing Date" shall mean the date of the Second Closing.
1.9. "Securities Act" shall mean the Securities Act of 1933, as amended, and
all of the rules and regulations
promulgated thereunder.
1.10. "Shares" shall mean the shares of Series B Senior Convertible Preferred
Stock, and, if the Second Closing takes place, the shares of Series C
Convertible Preferred Stock issued pursuant to this Agreement.
1.11. "Warburg" shall refer to Warburg Pincus LLC and its Affiliates.
2. Authorization, Purchase and Sale of Shares.
2.1. Authorization of Preferred Stock. The Company has, or on or before the
Initial Closing Date will have, authorized and created a series of its preferred
stock consisting of 11,056 shares, par value $.01 per share, designated as its
"Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and a
series of its preferred stock consisting of 29,944 shares, par value $.01 per
share, designated as its "Series C Convertible Preferred Stock" (the "Series C
Preferred Stock"). The terms, limitations and relative rights and preferences of
the Series B Preferred Stock and the Series C Preferred Stock are set forth in a
Certificate of Designation, Number, Voting Powers, Preferences and Rights of the
Series B Convertible Preferred Stock and the Series C Convertible Preferred
Stock of the Company, which will have been filed on or before the Initial
Closing Date with the Secretary of State of the State of Delaware and a copy of
which is attached hereto as EXHIBIT B (the "Certificate of Designation").
2.2. Purchase and Sale. Subject to and upon the terms and conditions set forth
in this Agreement, the Company shall issue and sell to each Purchaser, and each
Purchaser, severally, shall purchase from the Company: (a) at the Initial
Closing, the total number of shares of Series B Preferred Stock set forth
opposite the name of such Purchaser under the heading "Number of Shares of
Series B Preferred to be Purchased" on EXHIBIT A hereto, at a purchase price of
$1,000 per share and (b) at the Second Closing, the total number of shares of
Series C Preferred Stock set forth opposite the name of such Purchaser under the
heading "Number of Shares of Series C Preferred to be Purchased" on EXHIBIT A
hereto, at a purchase price of $1,000 per share.
2.3. Additional Shares. At any time up to and including 5:00 PM Eastern Daylight
Time on August 7, 2001 (the "Cut-Off Date"), the Company may agree to sell to
one or more purchasers approved by the Board of Directors of the Company and
reasonably acceptable to Warburg (the "Additional Purchasers") up to the balance
of the authorized shares of Series B Preferred Stock and Series C Preferred
Stock (the "Additional Shares") in the same ratio between the two series and at
the same prices, as contemplated for the Purchasers initially named in this
Agreement. Such Agreement shall be evidenced by the execution by the Additional
Purchasers and the Company of counterpart signature pages to this Agreement and
a supplement to EXHIBIT A hereto, and upon such execution, the Additional
Purchasers shall be deemed "Purchasers" for all provisions of this Agreement and
the "Additional Shares" so sold shall be deemed "Shares" for all provisions of
this Agreement, except that the Additional Shares shall be sold only at the
Second Closing, following approval of the issuance of the Shares to be issued at
such Closing under this Agreement by the stockholders of the Company. If none
of, or less than all of, the Additional Shares are agreed to be purchased and
sold by the Cut-Off Date, then if the Second Closing occurs, at the Second
Closing, the Company shall sell to Warburg, and Warburg shall purchase, such
amount of Additional Shares as shall remain authorized and unsold, and the
Additional Shares so sold to Warburg shall be deemed "Shares" for all purposes
of this Agreement.
2.4. Closings.
(a) The initial closing (the "Initial Closing") shall take place at the offices
of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ on August 3,
2001. At the Initial Closing, the Company shall deliver to each Purchaser a
certificate for the number of shares of Series B Preferred Stock being purchased
by it at the Initial Closing as set forth on EXHIBIT A hereto, registered in the
name of such Purchaser, against payment to the Company of the purchase price
therefor set forth opposite the name of such Purchaser on EXHIBIT A hereto,
under the caption "Purchase Price" by wire transfer to the Company of
immediately available funds.
(b) The second closing (the "Second Closing") shall take place at the offices of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ on the day of
the stockholders' meeting of the Company approving the issuance of the Shares to
be issued at the Second Closing. At the Second Closing, the Company shall
deliver to each Purchaser a certificate for the number of Shares being purchased
by it at the Second Closing as set forth on EXHIBIT A hereto (as modified by
operation of the provisions of Section 2.3 hereof), against payment to the
Company of the purchase price therefor set forth opposite the name of such
Purchaser on EXHIBIT A hereto, under the caption "Purchase Price" by wire
transfer to the Company of immediately available funds. The Initial Closing and
the Second Closing are collectively referred to as the "Closings".
If the Initial Closing does not occur on or before August 6,
2001, this Agreement shall automatically terminate and be of no further force
and effect; provided, however, that such termination shall not release any party
from liability for any breach of this Agreement by such party that occurs prior
to such termination. The obligations of the parties to effect the transactions
to be effected at the Second Closing shall terminate if the Second Closing does
not occur on or before December 31, 2001; provided, however, that such
termination shall not release any party from liability for any breach of this
Agreement by such party that occurs prior to such termination.
3. Representations and Warranties of the Company. Except as set forth in
the Disclosure Documents, the Company hereby represents and warrants to each of
the Purchasers as follows:
3.1. Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification, except
where the failure to so qualify would not have a material adverse effect upon
the Company. The Company has all requisite corporate power and authority to
carry on its business as now conducted. The Company has no subsidiaries.
3.2. Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of 25,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock, par value $.01 per share. As of the date of this Agreement,
there are no shares of Preferred Stock issued and outstanding. The number of
outstanding shares of Common Stock as of August 1, 2001 was 10,942,222 and the
total number of shares of Common Stock issuable pursuant to stock options
outstanding at August 1, 2001 was 1,544,593. Except for the issuance of shares
of Common Stock pursuant to the exercise of outstanding options granted pursuant
to the Company's option plans, including any such options granted after August
1, 2001, the Company has not issued any capital stock since August 1, 2001
except as described in or contemplated by the Disclosure Documents or this
Agreement. Except as set forth in or contemplated by the Disclosure Documents or
this Agreement, and except for the issuance of options to purchase shares of the
Company's Common Stock pursuant to the Company's option plans, there are no
existing options, warrants, calls, preemptive (or similar) rights, subscriptions
or other rights, agreements, arrangements or commitments of any character
obligating the Company to issue, transfer or sell, or cause to be issued,
transferred or sold, any shares of the capital stock of the Company or other
equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests, and
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its capital stock or other equity
interests.
(b) Prior to the Initial Closing Date, the Company will have filed the
Certificate of Designation with the Secretary of State of the State of Delaware
designating 11,056 shares of its preferred stock as Series B Preferred Stock and
29,944 shares of its preferred stock as Series C Preferred Stock and, after such
filing, the Company's authorized preferred stock will include such Series B
Preferred Stock and the Series C Preferred Stock.
3.3. Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization of the
Series B Preferred Stock and the Series C Preferred Stock and the filing of the
Certificate of Designation, the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein has been taken. When executed and delivered by the Company,
this Agreement shall constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, and except as may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles. The Company has
all requisite corporate power to enter into this Agreement and to carry out and
perform its obligations under the terms of this Agreement. The Board of
Directors of the Company has taken all action necessary to (a) render
inapplicable, as it relates to Warburg, the provisions of Section 203 of the
General Corporation Law of Delaware, and (b) waive the provisions of the Rights
Agreement, dated December 11, 1995, between the Company and ▇▇▇▇▇ ▇▇▇▇▇▇
Shareholder Services as Rights Agent (the "Rights Agreement"), as follows: (i)
effective as of the Initial Closing Date, so as to allow Warburg to beneficially
own, without causing Warburg to be an Acquiring Person (as defined in the Rights
Agreement), up to 17% of the Company's Common Stock calculated by dividing (x)
the number of shares of Common Stock then beneficially owned by Warburg
(assuming full conversion of the Series B Preferred Stock) by (y) the total
number of shares of Common Stock outstanding as of such date (calculated in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act (the "SEC Calculation Method")) and (ii)
effective as of the Second Closing Date, so as to allow Warburg to beneficially
own, without causing Warburg to be an Acquiring Person (as defined in the Rights
Agreement), up to 41% of the Company's Common Stock calculated by dividing (x)
the number of shares of Common Stock then beneficially owned by Warburg
(assuming full conversion of the Shares) by (y) the total number of shares of
Common Stock outstanding as of such date (calculated in accordance with the SEC
Calculation Method). At or prior to the Initial Closing, the Company will have
reserved for issuance the shares of Common Stock initially issuable upon
conversion of the Series B Preferred Stock and initially issuable upon
conversion of the Series C Preferred Stock.
3.4. Valid Issuance of the Shares. The Shares being purchased by the Purchasers
hereunder will, upon issuance pursuant to the terms hereof, be duly authorized
and validly issued, fully paid and non-assessable shares of Series B Preferred
Stock and Series C Preferred Stock, respectively, free of preemptive or similar
rights. Upon their issuance in accordance with the terms of the Series B
Preferred Stock and the Series C Preferred Stock, the shares of Common Stock
issued upon conversion of the Shares will be duly authorized, validly issued,
fully paid and non-assessable shares of Common Stock, free of all preemptive or
similar rights.
3.5. Financial Statements. The financial statements of the Company included in
the Disclosure Documents present fairly, in all material respects, the
consolidated financial condition of the Company, results of operations and cash
flows as of the dates and for the periods indicated. Such financial statements
are fairly presented, in all material respects, in accordance with generally
accepted accounting principles (except in the case of quarterly financial
statements for the absence of footnote disclosure and subject, in the case of
interim periods, to normal year-end adjustments which, individually, and in the
aggregate, will not be material). Since March 31, 2001, the Company has not
incurred any material liabilities or obligations, direct or contingent, other
than in the ordinary course of business, and there has been no material adverse
change (actual or, to the Company's knowledge, threatened) in the assets,
liabilities (contingent or other), affairs, operations or condition (financial
or other) of the Company, other than the continued incurrence of losses in the
ordinary course of business.
3.6. Absence of Litigation. Except as set forth in the Disclosure Documents,
there is no action, suit or proceeding or, to the Company's knowledge, any
investigation, pending, or to the Company's knowledge, threatened by or before
any governmental body against the Company in which an unfavorable outcome,
ruling or finding in any said matter, or for all such matters taken as a whole,
would reasonably be expected to have a material adverse effect on the Company.
The foregoing includes, without limitation, any such action, suit, proceeding or
investigation that questions this Agreement or the right of the Company to
execute, deliver and perform under same.
3.7. Intellectual Property. Except as set forth in the Disclosure Documents (i)
the Company owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets,
trade names and know-how (collectively, "Intellectual Property") described or
referred to in the Disclosure Documents as owned or possessed by it or that are
necessary for the conduct of its business as now conducted or as proposed to be
conducted as described in the Disclosure Documents except where the failure to
currently own or possess would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company, and (ii) the Company, to its knowledge, is not infringing, nor has
received any notice of any asserted infringement by the Company of, any rights
of a third party with respect to any Intellectual Property that, individually or
in the aggregate, would have a material adverse effect on the financial
condition or business of the Company.
3.8. Disclosure Documents. The information contained or incorporated by
reference in the Disclosure Documents was true and correct in all material
respects as of the respective dates of the filing thereof with the SEC; and, as
of such respective dates, the Disclosure Documents did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
updated or superseded by any report subsequently filed by the Company with the
SEC.
3.9. Consents. All consents, approvals, orders and authorizations required on
the part of the Company in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein and therein, other than the (i) the filing of the
Certificate of Designation with the Secretary of State of the State of Delaware
and (ii) the approval by the stockholders of the Company, of the issuance of the
Shares to be issued at the Second Closing pursuant to the terms of this
Agreement, have been obtained and will be effective as of the Initial Closing
Date, other than such filings required to be made after each Closing under
applicable federal and state securities laws.
3.10. No Conflict. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated hereby will not conflict
with or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under (i) any
provision of the Certificate of Incorporation or By-laws of the Company or (ii)
any agreement or instrument, permit, franchise, license, judgment, order,
statute, law, ordinance, rule or regulations, applicable to the Company or its
properties or assets, except, in the case of clause (ii), as would not
individually or in the aggregate have a material adverse effect on the business
or financial condition of the Company.
3.11. Brokers or Finders. Other than with respect to Bear ▇▇▇▇▇▇▇ & Co., Inc.,
the fees of which will be borne by the Company, the Company has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
3.12. Nasdaq National Market. The Company's Common Stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or de-listing the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the SEC or the National Association of
Securities Dealers, Inc. is contemplating terminating such registration or
listing.
3.13. No Manipulation of Stock. The Company has not taken and will not take, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the transactions contemplated hereby or the sale or
resale of the shares of Common Stock.
3.14. Company not an "Investment Company". The Company has been advised of the
rules and requirements under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). The Company is not, and immediately after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
4. Representations and Warranties of Each Purchaser. Each Purchaser,
severally for itself and not jointly with the other Purchasers, represents and
warrants to the Company as follows:
4.1. Organization. Each Purchaser, if it is a legal entity, is duly and
validly existing under the jurisdiction of its organization.
4.2. Authorization. All action on the part of such Purchaser necessary for the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein has been taken. This
Agreement constitutes the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles. Such Purchaser
has all requisite power to enter into this Agreement and to carry out and
perform its obligations under the terms of this Agreement.
4.3. Purchase Entirely for Own Account, Etc. Such Purchaser is acquiring the
Shares for its own account, and not with a view to, or for sale in connection
with, any distribution of the Shares in violation of the Securities Act. Except
as contemplated by this Agreement, such Purchaser has no present agreement,
undertaking, arrangement, obligation or commitment providing for the disposition
of the Shares. Such Purchaser, if it is a legal entity, has not been organized,
reorganized or recapitalized specifically for the purpose of investing in the
Shares or any shares of Common Stock issuable upon conversion of the Shares.
4.4. Investor Status; Etc. Such Purchaser certifies and represents to the
Company that at the time such Purchaser acquires any of the Shares, such
Purchaser will be an "accredited investor" as defined in Rule 501 of Regulation
D promulgated under the Securities Act. Such Purchaser's financial condition is
such that it is able to bear the risk of holding the Shares for an indefinite
period of time and the risk of loss of its entire investment. Such Purchaser has
been afforded the opportunity to ask questions of and receive answers from the
management of the Company concerning this investment and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company.
4.5. Shares Not Registered. Such Purchaser understands that the Shares (and any
shares of Common Stock issuable upon conversion of the Shares) have not been
registered under the Securities Act, by reason of their issuance by the Company
in a transaction exempt from the registration requirements of the Securities
Act, and that the Shares (and any shares of Common Stock issuable upon
conversion of the Shares) must continue to be held by such Purchaser unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration. Such Purchaser understands that the exemptions
from registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
4.6. No Conflict. The execution and delivery of this Agreement by such Purchaser
and the consummation of the transactions contemplated hereby will not conflict
with or result in any violation of or default by such Purchaser (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the organizational documents of such
Purchaser or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to
such Purchaser or its respective properties or assets.
4.7. Brokers. Such Purchaser has not retained, utilized or been represented
by any broker or finder in connection with the transactions contemplated by this
Agreement.
4.8. Consents. All consents, approvals, orders and authorizations required
on the part of such Purchaser in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein have been obtained and will be effective as of the Closing
Date.
5. Covenants.
5.1. Board Nominees.
(a) The Company will use its best efforts to cause the Board of Directors to
nominate and recommend the election by the Company's stockholders and use its
best efforts to effect the election as directors of (a) two (2) individuals
designated by Warburg, for so long as Warburg owns beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) at least 75% of the shares of
Common Stock issued to Warburg pursuant to this Agreement (including as owned
and outstanding for this purpose shares of Common Stock issuable upon conversion
of the Shares) and (b) one (1) individual designated by Warburg, for so long as
Warburg owns beneficially (within the meaning of such Rule 13d-3) at least 25%
of the shares of Common Stock issued to Warburg pursuant to this Agreement
(including as owned and outstanding for this purpose shares of Common Stock
issuable upon conversion of the Shares). Any director elected by the holders of
the Series B Preferred Stock shall be deemed to be a director satisfying the
requirements of this Section 5.1. Any vacancy created by the death, disability,
retirement or removal of such individual shall be filled by an individual
similarly designated by Warburg and acceptable to the Company's Board of
Directors acting in good faith.
(b) Warburg hereby designates Messrs. ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ Hen as the
initial directors to be elected by the holders of the Series B Preferred Stock
to commence their term immediately upon the Initial Closing.
(c) Prior to the Initial Closing, the Bylaws of the Company shall have been
amended to provide for a Board of Directors consisting of nine members. Promptly
following the Initial Closing, Warburg and the Company shall agree upon and
designate a mutually acceptable candidate for election as such additional member
of the Board of Directors, whereupon the Company shall use its best efforts to
cause its Board of Directors to fill the vacancy on the Board created by its
expansion to nine members with the individual so designated, and thereafter to
use its best efforts to cause its Board of Directors to nominate and recommend
to the stockholders of the Company the election of such individual (or such
other individual as the Company and Warburg shall thereafter agree from time to
time) for so long as Warburg shall continue to be represented on the Board of
Directors by at least one member of the Board.
5.2. Covenant Pending Each Closing. Between the date of this Agreement and the
date of each Closing, the Company will promptly advise each Purchaser of any
action or event of which it becomes aware which has the effect of making
incorrect, in any material respect, any of the Company's representations or
warranties or which has the effect of rendering any of the Company's covenants
incapable of performance.
5.3. Best Efforts. The Company shall use its best efforts to (a) prepare and
file with the SEC, promptly after the date hereof, preliminary proxy materials
with respect to a meeting of the stockholders for the purpose of approving the
issuance of Shares to be issued at the Second Closing as contemplated by this
Agreement. Promptly after comments are received from the SEC with respect to the
preliminary proxy materials and after the furnishing by the Company of all
information required to be contained therein, the Company shall file with the
SEC the definitive proxy statement and (b) acting through its Board of
Directors, (i) call a special meeting of the holders of the Company's Common
Stock for the purpose of voting upon the approval of the issuance of Shares to
be issued at the Second Closing as contemplated by this Agreement and (ii)
include in the proxy statement the recommendation of its Board of Directors that
holders of the Company's Common Stock approve such issuance as contemplated by
this Agreement.
5.4. Subscription Right.
(a) If at any time after the date hereof and prior to the fifth anniversary of
the date hereof, or, if earlier, the date on which there shall no longer remain
outstanding at least 25% of the Shares (or if the Second Closing does not take
place, the shares of Series B Preferred Stock issued at the Initial Closing),
the Company proposes to issue equity securities of any kind (the term "equity
securities" shall include for these purposes any warrants, options or other
rights to acquire equity securities and debt securities convertible into equity
securities) of the Company, other than (i) shares of Common Stock issuable upon
conversion of the Series B Preferred Stock or the Series C Preferred Stock, (ii)
to the public in a firm commitment underwriting pursuant to a registration
statement filed under the Securities Act with anticipated gross proceeds to the
Company of at least $20 million, or (iii) issued in connection with bona fide
acquisitions, mergers, joint ventures or similar transactions, the terms of
which are approved by the Company's Board of Directors, or (iv) pursuant to any
stock option, stock purchase or similar plan or arrangement for the benefit of
the employees of the Company or its subsidiaries, adopted by the Board of
Directors, then, as to each Purchaser, the Company shall:
(i) give written notice to such Purchaser (no less than ten (10) days prior to
the closing of such issuance) setting forth in reasonable detail (A) the
designation and all of the terms and provisions of the securities proposed to be
issued (the "Proposed Securities"), including, where applicable, the voting
powers, preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and interest
rate and maturity; (B) the price and other terms of the proposed sale of such
securities; (C) the amount of such securities proposed to be issued; and (D)
such other information as such Purchaser may reasonably request in order to
evaluate the proposed issuance; and
(ii) offer to issue and sell to such Purchaser, on such terms as the Proposed
Securities are issued, upon full payment by such Purchaser, a portion of the
Proposed Securities equal to a percentage determined by dividing (A) the number
of shares of Common Stock issued or issuable upon conversion of the Shares then
held by such Purchaser, assuming conversion in full of the Shares, by (B) the
total number of shares of Common Stock then outstanding, including for purposes
of this calculation all shares of Common Stock issuable upon conversion or
exercise in full of any convertible or exercisable securities (other than
employee stock options) then outstanding (including shares of Common Stock
issuable upon conversion of convertible securities or issuable upon exercise of
outstanding warrants).
(b) Each Purchaser must exercise its purchase rights hereunder within ten (10)
days after receipt of such notice from the Company. To the extent that the
Company offers two or more securities in units, each Purchaser must purchase
such units as a whole and will not be given the opportunity to purchase only one
of the securities making up such unit. The closing of the exercise of such
subscription right shall take place simultaneously with the closing of the sale
of the Proposed Securities giving rise to such subscription right.
(c) Upon the expiration of the 10-day offering period described above, the
Company will be free to sell such Proposed Securities that the Purchasers have
not elected to purchase during the ninety (90) days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to such holders. Any Proposed Securities offered or sold by the Company
after such 90 day period must be reoffered to the Purchasers pursuant to this
Section 5.4.
(d) The election by any Purchaser not to exercise its subscription rights under
this Section 5.4 in any one instance shall not affect its right (other than in
respect of a reduction in its percentage holdings) as to any subsequent proposed
issuance. Any sale of such securities by the Company without first giving each
Purchaser the rights described in this Section 5.4 shall be void and of no force
and effect.
5.5. "Market Stand-off" Agreement. Each Purchaser agrees, severally and not
jointly, if requested by the Company and the managing underwriter of equity
securities of the Company, not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for any such shares
(such shares of Common Stock and other securities collectively, the
"Securities"), enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of the Securities, whether
any such aforementioned transaction is to be settled by delivery of the
Securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction,
swap, hedge or other arrangement, during the period commencing with the filing
of a registration statement containing a preliminary prospectus identifying such
managing underwriter and extending for a period not to exceed 180 days following
the closing of such underwritten offering, or in the case of a Rule 144A
transaction commencing upon the circulation to qualified institutional buyers of
a preliminary offering memorandum and extending for a period not to exceed 180
days following the consummation of the offering contemplated by such offering
memorandum, in each case without the prior written consent of such managing
underwriter, provided that all officers and directors of the Company and each
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
five percent (5%) or more of the Company's then outstanding Common Stock enter
into similar agreements.
6. Conditions Precedent.
6.1. Conditions to the Obligation of the Purchasers to Consummate each Closing.
The several obligations of each Purchaser to consummate the transactions to be
consummated at a Closing and to purchase and pay for the Shares being purchased
by it at such Closing pursuant to this Agreement are subject to the satisfaction
of the following conditions precedent:
(a) The representations and warranties contained herein of the Company shall be
true and correct on and as of the respective Closing Date with the same force
and effect as though made on and as of the respective Closing Date (it being
understood and agreed by each Purchaser that, in the case of any representation
and warranty of the Company contained herein (i) which is not hereinabove
qualified by application thereto of a materiality standard, such representation
and warranty need be true and correct only in all material respects in order to
satisfy as to such representation or warranty the condition precedent set forth
in the foregoing provisions of this Section 6.1 (a) or (ii) which is made as of
a specific date, such representation and warranty need be true and correct only
as of such specific date in order to satisfy as to such representation and
warranty the condition precedent set forth in the foregoing provisions of this
Section 6.1(a)).
(b) The Company shall have performed in all material respects all obligations
and conditions herein required to be performed or observed by the Company on or
prior to the respective Closing Date.
(c) Each Purchaser shall have received a certificate, dated the respective
Closing Date, signed by each of the President and the Chief Financial Officer of
the Company, certifying on behalf of the Company, that the conditions specified
in the foregoing Sections 6.1(a) and (b) have been fulfilled.
(d) The purchase of and payment for the Shares by each Purchaser shall not be
prohibited or enjoined by any law or governmental or court order or regulation.
(e) Each Purchaser shall have received from the Company's counsel, ▇▇▇▇▇
▇▇▇▇▇ L.L.P., an opinion substantially in the form of EXHIBIT C hereto
applicable to such Closing.
(f) The Certificate of Designation shall have been filed by the Company with the
Secretary of State of the State of Delaware.
6.2. Conditions to the Obligation of the Company to Consummate each Closing. The
obligation of the Company to consummate the transactions to be consummated at a
Closing and to issue and sell to each Purchaser the Shares to be purchased by it
at the respective Closing pursuant to this Agreement is subject to the
satisfaction of the following conditions precedent:
(a) The representations and warranties contained herein of such Purchaser shall
be true and correct on and as of the respective Closing Date with the same force
and effect as though made on and as of such Closing Date (it being understood
and agreed by the Company that, in the case of any representation and warranty
of such Purchaser contained herein which is not hereinabove qualified by
application thereto of a materiality standard, such representation and warranty
need be true and correct only in all material respects in order to satisfy as to
such representation or warranty the condition precedent set forth in the
foregoing provisions of this Section 6.2(a)).
(b) Such Purchaser shall have performed in all material respects all obligations
and conditions herein required to be performed or observed by such Purchaser on
or prior to the respective Closing Date.
(c) The sale of the Shares by the Company shall not be prohibited or
enjoined by any law or governmental or court order or regulation.
(d) The Certificate of Designation shall have been filed by the Company with the
Secretary of State of the State of Delaware.
Each Purchaser's obligations under this Section 6.2 shall be
several and independent from the obligations of each other Purchaser; and the
failure by any Purchaser to fulfill or comply with any of the conditions set
forth in this Section 6.2. shall not affect the obligations of the Company to
any other Purchaser to consummate the transactions contemplated by this
Agreement.
6.3. Conditions to the Obligation of Each Purchaser and the Company to
Consummate the Second Closing. The obligations of each Purchaser and the Company
to consummate the transactions to be consummated at the Second Closing shall be
subject to the additional condition precedent that the Company's stockholders
shall have approved the issuance of the Shares to be sold at the Second Closing
pursuant to the terms of this Agreement.
7. Registration of the Shares; Compliance with the Securities Act.
7.1. Securities Law Transfer Restrictions. No Purchaser shall sell, assign,
pledge, transfer or otherwise dispose or encumber any of the Shares being
purchased by it hereunder or any shares of Common Stock issuable upon conversion
of the Shares, except (i) pursuant to an effective registration statement under
the Securities Act or (ii) pursuant to an available exemption from registration
under the Securities Act and applicable state securities laws and, if requested
by the Company, upon delivery by such Purchaser of an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
is exempt from registration under the Securities Act and applicable state
securities laws. Any transfer or purported transfer of the Shares or underlying
shares of Common Stock in violation of this Section 7.1 shall be voidable by the
Company. The Company shall not register any transfer of the Shares or underlying
shares of Common Stock in violation of this Section 7.1. The Company may, and
may instruct any transfer agent for the Company, to place such stop transfer
orders as may be required on the transfer books of the Company in order to
ensure compliance with the provisions of this Section 7.1.
7.2. Legends. Each certificate representing any of the Shares, and each
certificate representing any shares of Common Stock issuable upon conversion of
the Shares, shall be endorsed with the legends set forth below, and each
Purchaser covenants that, except to the extent such restrictions are waived by
the Company, it shall not transfer the shares represented by any such
certificate without complying with the restrictions on transfer described in
this Agreement and the legends endorsed on such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT."
7.3. Registration Procedures and Other Matters. The Company shall:
(a) subject to receipt of necessary information from each Purchaser for
inclusion in such filing, prepare and file with the SEC, within 10 days after
the Second Closing Date, or, in case the Company's stockholders do not approve
sale of Shares at the Second Closing, 10 days following the stockholder meeting
at which such action was taken), or, if no such meeting is held prior to
December 31, 2001, within 10 days after such date, a registration statement (the
"Registration Statement") to enable the resale of the Common Stock issued or
issuable upon conversion of the Shares (the "Registrable Securities") by each
Purchaser, or the Holders (defined in Section 7.4 below), from time to time, in
compliance with the Securities Act;
(b) use its reasonable best efforts to cause the Registration Statement to
become effective within 60 days after the Registration Statement is filed by the
Company such efforts to include, without limiting the generality of the
foregoing, preparing and filing with the SEC in such 60-day period any financial
statements that are required to be filed prior to the effectiveness of such
Registration Statement;
(c) use its reasonable best efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
current, effective and free from any material misstatement or omission to state
a material fact for a period not exceeding, with respect to each Holder's
Registrable Securities, the earlier of (i) the second anniversary of the date of
the effectiveness of the Registration Statement, (ii) the date on which each
Holder may sell all Registrable Securities then held by such Holder without
restriction by the volume limitations of Rule 144(e) of the Securities Act, or
(iii) such time as all Registrable Securities purchased by such Holder have been
sold pursuant to a registration statement or are otherwise freely tradeable;
(d) furnish to each Holder with respect to the Registrable Securities registered
under the Registration Statement such number of copies of the Registration
Statement, Prospectuses and Preliminary Prospectuses in conformity with the
requirements of the Securities Act and such other documents as such Holder may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Registrable Securities by such Holder; provided, however,
that the obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to such Holder shall be subject to the receipt by the
Company of reasonable assurances from such Holder that such Holder will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such Prospectuses or Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky clearance in
states specified in writing by each Holder and use its reasonable best efforts
to maintain such blue sky qualifications during the period the Company is
required to maintain the effectiveness of the Registration Statement pursuant to
Section 7.3(c); provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraph (a) through
(f) of this Section 7.3 and the registration of the Registrable Securities
pursuant to the Registration Statement (provided that the Holders shall bear the
cost of all underwriting discounts and selling commissions and similar fees
applicable to the sale of Registrable Securities and all fees and expenses of
legal counsel for any Holder and all transfer taxes); and
(g) advise each Holder, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
Notwithstanding anything to the contrary herein, the
Registration Statement shall cover only the Registrable Securities. In no event
at any time before the Registration Statement becomes effective with respect to
the Registrable Securities shall the Company publicly announce or file any other
registration statement, other than registration statements on Form S-8, without
the prior written consent of a majority in interest of the Holders.
The Company understands that the Holders disclaim being
underwriters, but any Holder being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder; provided, however that
if the Company receives notification from the SEC that any Holder is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
7.4. Transfer of Registrable Securities; Suspension.
(a) Each Purchaser agrees that in case of any disposition of its shares of
Series B Preferred Stock or Series C Preferred Stock to a third party who agrees
to be bound, by the provisions of this Section 7 and makes the representations
to the Company contained in Section 4 hereof (in each case the "Transferee", and
together with the Purchasers, the "Holders"), such Purchaser will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding the Holders or their plans of distribution. The
Company agrees, in case of such sale or transfer (to the extent made in
accordance with Section 7.1), to promptly file one or more post-effective
amendments to the Registration Statement or a supplement to the related
Prospectus, naming each Transferee as a Selling Shareholder in accordance with
the provisions of the Securities Act.
(b) Except in the event that paragraph (c) below applies, the Company shall (i)
prepare and file from time to time with the SEC a post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that such Registration Statement will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and so that, as thereafter delivered to the purchasers of
Registrable Securities being sold thereunder, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; (ii) provide each
Holder copies of any documents filed pursuant to Section 7.4(b)(i); and (iii)
inform each Holder that the Company has complied with its obligations in Section
7.4(b)(i) (or that, if the Company has filed a post-effective amendment to the
Registration Statement which has not yet been declared effective, the Company
will notify each Holder to that effect, will use its reasonable best efforts to
secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify each Holder pursuant to Section 7.4(b)(i)
hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) of any event or circumstance which, upon the advice of its
counsel, necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (v) the Company determines in good faith that offers and sales
pursuant to the Registration Statement should not be made by reason of the
presence of material undisclosed circumstances or developments with respect to
which the disclosure that would be required in such a Registration Statement or
related Prospectus is premature, would have an adverse effect on the Company or
is otherwise inadvisable, then the Company shall deliver a certificate in
writing to each Holder (the "Suspension Notice") to the effect of the foregoing
and, upon receipt of such Suspension Notice, such Holder will refrain from
selling any Registrable Securities pursuant to the Registration Statement (a
"Suspension") until such Holder's receipt of copies of a supplemented or amended
Prospectus prepared and filed by the Company, or until it is advised in writing
by the Company that the current Prospectus may be used, and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable best efforts to cause the use of
the Prospectus so suspended to be resumed as soon as reasonably practicable
after the delivery of a Suspension Notice to each Holder. In addition to and
without limiting any other remedies (including, without limitation, at law or at
equity) available to such Holder, such Holder shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 7.4(c).
(d) Notwithstanding the foregoing paragraphs of this Section 7.4, no Holder
shall be prohibited from selling Registrable Securities under the Registration
Statement as a result of Suspensions on more than two occasions of not more than
45 days each in any twelve month period, unless, in the good faith judgment of
the Company's Board of Directors, upon the written opinion of counsel, the sale
of Registrable Securities under the Registration Statement in reliance on this
paragraph 7.4(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in liability to the Company.
(e) Provided that a Suspension is not then in effect, each Holder may sell
Registrable Securities under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such
Registrable Securities. Upon receipt of a request therefor, the Company will
provide an adequate number of current Prospectuses to such Holder and to supply
copies to any other parties requiring such Prospectuses. Each Holder agrees not
to take any action with respect to any distribution deemed to be made pursuant
to such Registration Statement that constitutes a violation of Regulation M
under the Exchange Act or any other applicable rule, regulation or law.
(f) Each Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the Registration Statement are not transferable on the books of the
Company unless the stock certificate submitted to the transfer agent evidencing
such Registrable Securities is accompanied by a certificate reasonably
satisfactory to the Company to the effect that (i) the Registrable Securities
have been sold in accordance with such registration statement and (ii) the
requirement of delivering a current prospectus has been satisfied.
(g) In the event of a sale of Registrable Securities by any Holder pursuant to
the Registration Statement, such Holder shall deliver to the Company's transfer
agent an appropriate notification of the sale, so that the shares of Common
Stock may be properly transferred.
7.5. Company Registration.
(a) If the Company shall determine to register any of its equity securities
either for its own account or for the account of other stockholders, other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each of the Holders a written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) if so requested by the Holders of at least 51% or more of the Registrable
Securities, include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by the Holders within fifteen (15) days after receipt of the written notice from
the Company described in clause (i) above, except as set forth in Section 7.5(b)
below. Such written request may specify all or a part of the Holders'
Registrable Securities. In the event any Holder requests inclusion in a
registration pursuant to this Section 7.5 in connection with a distribution of
Registrable Securities to its partners, the registration shall provide for the
resale by such partners, if requested by such Holder.
(b) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 7.5(a)(i). In such event, the right of each of the Holders to
registration pursuant to this Section 7.5 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall (together
with the Company and the other stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this Section
7.5, if the representative determines that marketing factors require a
limitation on the number of shares to be underwritten, the representative may
limit the number of Registrable Securities to be included in the registration
and underwriting. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The securities of the Company held by officers,
directors and other stockholders of the Company (other than Registrable
Securities and other than securities held by holders who by contractual right
demanded such registration ("Demanding Holders")) shall be excluded from such
registration and underwriting to the extent required by such limitation, and, if
a limitation on the number of shares is still required, the number of shares
that may be included in the registration and underwriting by each of the Holders
and Demanding Holders shall be reduced, on a pro rata basis (based on the number
of shares held by such Holder), by such minimum number of shares as is necessary
to comply with such limitation. If any of the Holders or any officer, director
or other stockholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
7.6. Indemnification.
(a) For the purpose of this Section 7.6:
(i) the term "Selling Stockholder" shall include each Holder and any
Affiliate of such Holder;
(ii) the term "Registration Statement" shall include the Prospectus in the form
first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed
as part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required, exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in Section 7.1; and
(iii) the term "untrue statement" shall include any untrue statement or alleged
untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company agrees to indemnify and hold harmless each Selling Stockholder
and its officers, directors or partners and each underwriter of Registrable
Securities, if any, and each person who controls any such underwriter from and
against any losses, claims, damages or liabilities to which such Person may
become subject (under the Securities Act or otherwise) and each person who
controls any such underwriter, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any untrue statement of a material fact contained in the
Registration Statement as amended at the time of effectiveness or any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any failure by the Company to fulfill
any undertaking included in the Registration Statement as amended at the time of
effectiveness, and the Company will reimburse such Selling Stockholder for any
reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, or
preparing to defend any such action, proceeding or claim, provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an untrue
statement made in such Registration Statement or any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Stockholder specifically for use
in preparation of the Registration Statement or the failure of such Selling
Stockholder to comply with its covenants and agreements contained in Section 7.4
hereof respecting sale of the Registrable Securities or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Selling Stockholder prior to the pertinent sale or sales by
the Selling Stockholder. The Company shall reimburse each Selling Stockholder
for the amounts provided for herein on demand as such expenses are incurred.
(c) Each Selling Stockholder, severally, agrees to indemnify and hold harmless
the Company (and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Section 7.4 hereof respecting the sale of the Registrable
Securities, or (ii) any untrue statement of a material fact contained in the
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
untrue statement or omission was made in reliance upon and in conformity with
written information furnished by or on behalf of any Selling Stockholder
specifically for use in preparation of the Registration Statement, and each
Selling Stockholder, severally, will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided that obligation of each Selling
Stockholder to indemnify the Company shall be limited to the net amount received
by such Selling Stockholder from the sale of its Registrable Securities, except
in the event of fraud by such Selling Stockholder.
(d) Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.6, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
person will not relieve it from any liability which it may have to any
indemnified person under this Section 7.6 (except to the extent that such
omission materially and adversely affects the indemnifying person's ability to
defend such action) or from any liability otherwise than under this Section 7.6.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld. No indemnifying person
shall, without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.
(e) If the indemnification provided for in this Section 7.6 is unavailable to or
insufficient to hold harmless an indemnified person under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified person
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and any Purchaser, as well as any other
Selling Shareholders under such registration statement on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information supplied by the
Company on the one hand or any Purchaser or other Selling Shareholder on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation (even if the
Purchasers and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Selling Stockholder shall be required to contribute any
amount in excess of the amount by which the net amount received by such Selling
Stockholder from the sale of the Registrable Securities to which such loss
relates exceeds the amount of any damages which such Selling Stockholder has
otherwise been required to pay by reason of such untrue statement (except in the
event of fraud by such Selling Stockholder). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Selling Stockholder's obligations in this
subsection to contribute shall be in proportion to the respective sale of
Registrable Securities of such Selling Stockholder to which such loss relates
and shall not be joint with any other Selling Shareholders.
(f) The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 7.6, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 7.6 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act. The parties
are advised that federal or state public policy as interpreted by the courts in
certain jurisdictions may be contrary to certain of the provisions of this
Section 7.6, and the parties hereto hereby expressly waive and relinquish any
right or ability to assert such public policy as a defense to a claim under this
Section 7.6 and further agree not to attempt to assert any such defense.
7.7. Termination of Conditions and Obligations. The conditions precedent imposed
by this Section 7 upon the transferability of the Registrable Securities shall
cease and terminate as to any particular number of the Registrable Securities
when such Registrable Securities shall have been effectively registered under
the Securities Act and sold or otherwise disposed of in accordance with the
intended method of disposition set forth in the Registration Statement covering
such Registrable Securities or at such time as an opinion of counsel reasonably
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.
7.8. Information Available. So long as the Registration Statement is effective
covering the resale of Registrable Securities owned by the each Holder, the
Company will furnish to each Holder, upon the reasonable request of such Holder,
an adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and upon the reasonable request of any Purchaser,
the President or the Chief Financial Officer of the Company (or an appropriate
designee thereof) will meet with such Purchaser or a representative thereof at
the Company's headquarters to discuss all information relevant for disclosure in
the Registration Statement covering the Registrable Securities and will
otherwise cooperate with any Holder's conducting an investigation for the
purpose of reducing or eliminating such Holder exposure to liability under the
Securities Act, including the reasonable production of information at the
Company's headquarters; provided, that the Company shall not be required to
disclose any confidential information to any holder or meet at its headquarters
with any Purchaser until and unless such Holder or Purchaser shall have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company with the Company with respect thereto.
7.9. Delay of Registration. The Holders shall have no right to take any action
to restrain, enjoin or otherwise delay any registration pursuant to this Section
7 as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
8. Miscellaneous Provisions.
8.1. Public Statements or Releases. No Purchaser shall make, issue, or release
any announcement, whether to the public generally, or to any of its suppliers or
customers, with respect to this Agreement or the transactions provided for
herein, or make any statement or acknowledgment of the existence of, or reveal
the status of, this Agreement or the transactions provided for herein, without
the prior consent of the other parties, which shall not be unreasonably withheld
or delayed, provided that nothing in this Section 8.1 shall prevent any of the
parties hereto from making such public announcements as it may consider
necessary in order to satisfy its legal obligations, but to the extent not
inconsistent with such obligations, it shall provide the other parties with an
opportunity to review and comment on any proposed public announcement before it
is made.
8.2. Further Assurances. Each party agrees to cooperate fully with the other
party and to execute such further instruments, documents and agreements and to
give such further written assurances, as may be reasonably requested by the
other party to better evidence and reflect the transactions described herein and
contemplated hereby, and to carry into effect the intents and purposes of this
Agreement.
8.3. Rights Cumulative. Each and all of the various rights, powers and remedies
of the parties shall be considered to be cumulative with and in addition to any
other rights, powers and remedies which such parties may have at law or in
equity in the event of the breach of any of the terms of this Agreement. The
exercise or partial exercise of any right, power or remedy shall neither
constitute the exclusive election thereof nor the waiver of any other right,
power or remedy available to such party.
8.4. Pronouns. All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
8.5. Notices.
(a) Any notices, reports or other correspondence (hereinafter collectively
referred to as "correspondence") required or permitted to be given hereunder
shall be sent by postage prepaid first class mail, courier or fax or delivered
by hand to the party to whom such correspondence is required or permitted to be
given hereunder. The date of giving any notice shall be the date of its actual
receipt.
(b) All correspondence to the Company shall be addressed as follows:
Synaptic Pharmaceutical Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Facsilimile:
(c) All correspondence to any Purchaser shall be sent to such Purchaser at
the address set forth in EXHIBIT A.
(d) Any Person may change the address to which correspondence to it is to
be addressed by notification as provided for herein.
8.6. Captions. The captions and paragraph headings of this Agreement are
solely for the convenience of reference and shall not affect its interpretation.
8.7. Severability. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
8.8. Governing Law; Injunctive Relief.
(a) This Agreement shall be governed by and construed in accordance with the
internal and substantive laws of Delaware and without regard to any conflicts of
laws concepts which would apply the substantive law of some other jurisdiction.
(b) Each of the parties hereto acknowledges and agrees that damages will not be
an adequate remedy for any material breach or violation of this Agreement if
such material breach or violation would cause immediate and irreparable harm (an
"Irreparable Breach"). Accordingly, in the event of a threatened or ongoing
Irreparable Breach, each party hereto shall be entitled to seek, in any state or
federal court in Delaware, equitable relief of a kind appropriate in light of
the nature of the ongoing or threatened Irreparable Breach, which relief may
include, without limitation, specific performance or injunctive relief;
provided, however, that if the party bringing such action is unsuccessful in
obtaining the relief sought, the moving party shall pay the non-moving party's
reasonable costs, including attorney's fees, incurred in connection with
defending such action. Such remedies shall not be the parties' exclusive
remedies, but shall be in addition to all other remedies provided in this
Agreement.
8.9. Waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or be construed as, a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.
8.10. Expenses. The Company shall pay the reasonable fees and expenses of
Warburg incurred in connection with its due diligence related to its investment
in the Shares and in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other instruments and agreements entered into
pursuant to this Agreement, and any amendments to the same, up to an aggregate
amount of $250,000, said payment to be made no later than 30 days after a ▇▇▇▇
for such fees and expenses has been sent by Warburg to the Company.
8.11. Assignment. The rights and obligations of the parties hereto shall inure
to the benefit of and shall be binding upon the authorized successors and
permitted assigns of each party. None of the parties may assign its rights or
obligations under this Agreement or designate another person (i) to perform all
or part of its obligations under this Agreement or (ii) to have all or part of
its rights and benefits under this Agreement, in each case without the prior
written consent of the other party, provided, that Warburg shall have the right
to assign and transfer all or a portion of its rights and obligations under this
Agreement to one or more of its Affiliates. In the event of any assignment in
accordance with the terms of this Agreement, the assignee shall specifically
assume and be bound by the provisions of the Agreement by executing and agreeing
to an assumption agreement reasonably acceptable to the Company.
8.12. Survival. The respective representations and warranties given by the
parties hereto shall survive the Closings and the consummation of the
transactions contemplated herein for a period of one year, without regard to any
investigation made by any party. The other covenants and agreements contained
herein shall survive for the period specified therein, or if not specified, for
a period of two years.
8.13. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument
8.14. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto respecting the subject matter hereof and supersedes all prior
agreements, negotiations, understandings, representations and statements
respecting the subject matter hereof, whether written or oral. No modification,
alteration, waiver or change in any of the terms of this Agreement shall be
valid or binding upon the parties hereto unless made in writing and duly
executed by the Company and Purchasers beneficially holding in the aggregate at
least a majority, on an as converted to Common Stock-basis, of the Shares issued
pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the day and year first above written.
Synaptic Pharamaceutical Corporation
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman, President and CEO
WARBURG PINCUS LLC
By: WARBURG, ▇▇▇▇▇▇ & CO.,
General Partner
By: /s/▇▇▇▇▇▇▇▇ ▇▇▇▇
----------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Partner
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
- - - - - - - -
Additional Purchasers (if any)
EXHIBIT A
---------
PURCHASERS
No. of Shares No. of Shares Purchase Purchase
of Series B of Series C Price Price
Preferred Preferred C Payable at Payable at
Purchaser Stock to be Stock to be Initial Second
Name and Address Purchased Purchased Closing Closing
---------------------- ---------- ------------ --------- ----------
Warburg Pincus LLC 9,398 25,452 $9,398,000 $25,452,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ 40 110 $40,000 $110,000
College of Physicians
and Surgeons
Columbia University
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇-▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
- - - - - - - -
ADDITIONAL PURCHASERS (if any)
EXHIBIT B
---------
CERTIFICATE OF DESIGNATION OF
THE SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK
EXHIBIT C
---------
FORM OF ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. OPINION