STANDSTILL AND CONFIDENTIALITY AGREEMENT
This Standstill and Confidentiality Agreement (this "Agreement") is
made and entered into this 16th day of March 1998, by and between Chrysalis
International Corporation, a Delaware corporation ("Chrysalis"), Panlabs
International Inc., a Washington corporation and a wholly owned subsidiary of
MDS Washington, Inc., a wholly owned subsidiary of MDS Inc. (the "Investor") and
MDS Inc., a corporation organized under the laws of Canada ("MDS").
WHEREAS, Chrysalis and the Investor propose to enter into that Note
and Warrant Purchase Agreement, dated the date hereof (the "Note and Warrant
Purchase Agreement"), which provides for, among other things, the issuance by
Chrysalis to the Investor of, (i) a US$5,000,000 subordinated promissory note
(the "Note") and (ii) a warrant (the "Warrant") to purchase 2,000,000 shares of
Common Stock, par value $0.01 per share, of Chrysalis (the "Common Stock");
WHEREAS, the parties desire to provide for certain agreements with
respect to the ownership and voting by the Investor of any Common Stock or any
securities of Chrysalis that are entitled to vote for the election of directors
of Chrysalis, in each case now or hereafter outstanding ("Voting Securities")
and any securities convertible into or exercisable or exchangeable for Voting
Securities ("Convertible Securities"); and
WHEREAS, the execution and delivery of this Agreement is in
consideration for the consummation of the transactions contemplated by the Note
and Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the agreements, rights,
obligations and covenants contained herein and other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged,
Chrysalis and the Investor hereby agree as follows:
SECTION 1. AGREEMENTS REGARDING VOTING AND SECURITIES
Investor, Chrysalis and MDS agree and MDS agrees to cause its Affiliates to
agree that during the Term of this Agreement:
1.1 ACQUISITION OF VOTING SECURITIES. Except as contemplated by this
Agreement and except as otherwise provided for, in writing, by a majority of the
Independent Directors (as defined below), no member of the MDS Group shall,
directly or indirectly, acquire Voting Securities or Convertible Securities
other than (i) the acquisition by Investor of the Warrant, (ii) the acquisition
of the Common Stock receivable upon exercise of the Warrant in accordance with
the terms and conditions of that certain Warrant Agreement, dated the date
hereof (the "Warrant Agreement") and (iii) the acquisition of Voting Securities
or Convertible Securities in accordance with Section 6.1 hereto (such Common
Stock, Voting Securities or Convertible Securities acquired by Investor upon
exercise of the Warrant or such Right of First Refusal under Section 6 hereto
being referred to as "Restricted Securities").
1.2 VOTING. The Investor shall take such action as may be required
so that all Restricted Securities at any time entitled to vote are voted:
(a) for the election of the slate of nominees for election to the
Board of Directors of Chrysalis selected by a majority of the members of
the Board of Directors of Chrysalis (the "Directors"); and
(b) on all other matters to be voted on by the holders of Voting
Securities, in accordance with the recommendation of a majority of the
Directors of Chrysalis that are not employed on a full-time basis by
Chrysalis (the "Independent Directors").
1.3 QUORUM. A representative or representatives of the MDS Group, as
holder of the Restricted Securities, shall be present, in person or by proxy, at
any meeting of stockholders of Chrysalis so that all Restricted Securities may
be counted for the purpose of determining the existence of a quorum at such
meeting.
1.4 VOTING TRUST OR ARRANGEMENT. No member of the MDS Group shall
deposit any Restricted Securities in a voting trust or subject any Restricted
Securities to any arrangement or agreement with respect to the voting of such
Restricted Securities.
1.5 PROXY SOLICITATIONS. No member of the MDS Group shall solicit
proxies or initiate, propose or become a "participant" in a "solicitation" (as
such terms are defined in Regulation 14A under the Securities Exchange Act of
1934 or any similar successor statute (the "Exchange Act")), in opposition to
any matter which has been recommended by a majority of the Directors or the
Independent Directors or in favor of any matter which has not been approved by a
majority of the Directors or the Independent Directors or seek to advise,
encourage or influence any individual, firm, corporation, partnership or other
entity (a "Person") with respect to the voting of Voting Securities in such
manner, or induce or attempt to induce any Person to initiate any stockholder
proposal; provided, however, that in the event (i) any matter is recommended by
a majority of the Independent Directors and such matter is opposed by a majority
of the Directors or (ii) any matter is not recommended by a majority of the
Independent Directors and such matter is favored by a majority of the Directors,
then such Voting Securities shall be voted in a manner consistent with the
majority of the Independent Directors.
1.6 GROUP PARTICIPATION. No member of the MDS Group shall join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any other Person, for the purpose of acquiring, holding, voting or
disposing of Voting Securities or Convertible Securities.
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1.7 SOLICITATIONS OF OFFERS. No director or executive officer of any
member of the MDS Group shall, and no member of the MDS Group shall, permit any
of its other officers, employees or agents (including investment bankers) to,
induce or attempt to induce or give encouragement to any third Person, or enter
into any substantive discussions or negotiations with any third Person, in
furtherance of any tender offer or business combination transaction in which
shares of Voting Securities would be acquired; provided, however, that nothing
in this Section 1.7 shall, or shall be construed, directly or indirectly, to
limit any rights of the Investor to offer, sell or otherwise dispose of shares
of Restricted Securities pursuant to any transaction effected in accordance with
Section 1.8 hereof.
1.8 DISPOSITIONS. Except as otherwise permitted by this Agreement,
the Investor shall not, directly or indirectly, offer, sell, dispose of,
transfer or hypothecate shares of Restricted Securities other than as follows:
(a) in a sale or sales to any Person approved by a majority of the
Independent Directors; or
(b) in transactions in which Restricted Securities are not sold,
disposed of, or transferred to, any other person or group who or which
would immediately thereafter, to the knowledge of the Investor after
reasonable inquiry, Beneficially Own 5% or more of the Voting Securities or
Convertible Securities then outstanding.
1.9 LEGENDS, STOP TRANSFER ORDERS AND NOTICE. The Investor agrees:
(a) to the placement on the certificate or other instrument
representing Restricted Securities of the legend substantially in the
following form:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933 (the "Act") or under any applicable state law
and may not be transferred, sold or otherwise disposed of except in
compliance with such Act. The securities represented by this
certificate are subject to the provisions of an Agreement, dated March
16, 1998, among Chrysalis International Corporation, Panlabs
International, Inc. and MDS Inc., a copy of which is on file at the
office of the Secretary of Chrysalis International Corporation."
(b) to the entry of stop transfer orders with the transfer agent (or
agents) and the registrar (or registrars) of Chrysalis against the
transfer, other than in compliance with the requirements of this Agreement,
of legended securities of which the Investor from time to time is the
Beneficial Owner.
SECTION 2. CERTAIN DEFINITIONS
2.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
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(a) Affiliate. A Person shall be deemed to be a "Affiliate" of
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another Person in accordance with the term "affiliate" as defined in Rule
12b-2 under the Exchange Act.
(b) Beneficial Owner. A Person shall be deemed a "Beneficial Owner"
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of or to "Beneficially Own" any Voting Securities in accordance with the
term "beneficial ownership" as defined in Rule 13d-3 under the Exchange Act
as in effect on the date hereof, and shall also include Voting Securities
which such Person or any Affiliate of such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise.
(c) MDS Group. "MDS Group" shall mean MDS and its Affiliates
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(regardless of whether such person is an Affiliate on the date hereof),
both in their individual capacities and collectively. An individual shall
not be deemed to be an Affiliate for purposes of this definition if such
individual is the Beneficial Owner of less than 100,000 shares of Voting
Securities or Convertible Securities solely for investment purposes and is
not a member of a "group" which includes the MDS Group as defined by
Section 13(d) of the Exchange Act.
(d) Term of this Agreement. "Term of this Agreement" for purposes
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of this Agreement shall mean a period commencing with the date of this
Agreement and ending on the first to occur of (i) an Event of Default
under Section 3.8 of the Note or (ii) the date that the Investor is no
longer the Beneficial Owner of any Restricted Securities.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CHRYSALIS
Chrysalis represents and warrants to the Investor as follows:
3.1 CORPORATE EXISTENCE, DUE AUTHORIZATION, AND EXECUTION OF
CHRYSALIS. Chrysalis is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full corporate power
and authority to execute and deliver this Agreement and each of the other
agreements contemplated hereby, to perform Chrysalis' obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
This Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action of
Chrysalis. This Agreement has been duly executed and delivered by Chrysalis and
constitutes a legal, valid and binding obligation of Chrysalis, enforceable
against Chrysalis in accordance with its terms except to the extent that such
enforceability may be limited by bankruptcy or similar laws affecting the rights
of creditors generally and by the availability of equitable remedies.
3.2 NO CONFLICTS. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby will not conflict with, or result
in any violation of or default under, any
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provision of the Third Amended and Restated Certificate of Incorporation or
Third Amended and Restated By-Laws of Chrysalis.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
AND MDS
4.1 CORPORATE EXISTENCE, DUE AUTHORIZATION, AND EXECUTION OF THE
INVESTOR. The Investor is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Washington, with full corporate
power and authority to execute and deliver this Agreement and each of the other
agreements contemplated hereby, to perform their obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
This Agreement and each of the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby will, at the
Closing, have been duly authorized by all necessary corporate action of the
Investor. This Agreement has been duly executed and delivered by the Investor
and constitutes a legal, valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms except to the
extent that such enforceability may be limited by bankruptcy or similar laws
affecting the rights of creditors generally and by the availability of equitable
remedies.
4.2 NO CONFLICTS. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby will not conflict with, or result
in any violation of or default under, any provision of the charter documents of
the Investor.
4.3 DUE AUTHORIZATION OF MDS. This Agreement constitutes a legal,
valid and binding obligation of MDS, enforceable against MDS in accordance with
its terms. MDS represents that it has full power and authority to enter into
this Agreement and the transactions contemplated hereby, and, to the extent
applicable, has taken all necessary corporate, partnership or other action with
respect to the execution and delivery of such agreements and has duly executed
and delivered this Agreement pursuant to all necessary corporate, partnership or
other action, which has been duly taken with respect to this Agreement.
SECTION 5. CONFIDENTIALITY
5.1 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by this Agreement, the Note and Warrant Purchase Agreement, the Note
and the Warrant, or otherwise agreed in writing, for the Term of this Agreement
and for five years thereafter, the Investor, MDS and Chrysalis and Affiliates of
Investor, MDS and Chrysalis shall keep confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in this
Agreement any information generally not known to the public that relates to the
drug development or contract research fields generally or to the business of
Chrysalis, MDS or the Investor and Affiliates of Chrysalis, MDS and Investor,
including, but not limited to, techniques and data, inventions, practices,
methods, knowledge, know-how, skill, experience, test data including
pharmacological, pharmacokinetic, toxicological, immunological and clinical test
data,
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analytical and quality control data, marketing, pricing, distribution,
costs, sales, patent or legal data or descriptions, compositions of matter,
compounds, assays and biological materials (collectively, "Information") and
other confidential and proprietary information and materials furnished to it by
the other party pursuant to this Agreement or any Information developed by the
Investor, MDS or Chrysalis or Affiliates of Investor, MDS and Chrysalis during
the course of any strategic alliance, joint venture or collaboration between the
Investor, MDS and Chrysalis or Affiliates of Investor, MDS and Chrysalis
(collectively, "Confidential Information"), except to the extent that it can be
established by the receiving party that such Confidential Information:
(a) was in the lawful knowledge and possession of, or was
independently developed by, the receiving party prior to the time it was
disclosed to, or learned by, the receiving party as evidenced by written
records kept in the ordinary course of business, or other documentary proof
of actual use by the receiving party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third party who had no obligation to
the disclosing party not to disclose such information to others.
5.2 AUTHORIZED DISCLOSURE. Chrysalis, MDS and the Investor may
disclose Confidential Information of the other party to the extent such
disclosure is reasonably necessary in filing or prosecuting patent, copyright
and trademark applications, prosecuting or defending litigation, complying with
applicable governmental regulations, obtaining regulatory approval, conducting
preclinical or clinical trials or marketing products; provided, however, that if
a party is required by law or regulation to make any such disclosure of the
other party's Confidential Information it shall, except where impracticable for
necessary disclosures, given reasonable advance notice to the other party of
such disclosure requirement and, except to the extent inappropriate in the case
of patent applications, shall use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. Nothing in
this Section 5 shall restrict any party from using for any purpose any
Information developed by it during the course of any strategic alliance, joint
venture or collaboration between Chrysalis, MDS and the Investor.
5.3 SURVIVAL. This Section 5 shall survive the termination or
expiration of this Agreement for a period of five years.
5.4 SPECIFIC ENFORCEMENT. The parties acknowledge and agree that
Chrysalis, MDS or the Investor, as the case may be, would be irreparably damaged
in the event any of the provisions of this Section 5 of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that Chrysalis, MDS or the
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Investor, as the case may be, shall be entitled to an injunction or injunctions
to prevent breaches of this Section 5 of this Agreement and to specifically
enforce this Section 5 of this Agreement and the terms and provisions thereof in
any action instituted in any court of the United States or any state thereof
having subject matter jurisdiction, in addition to any other remedy to which
Chrysalis, MDS or the Investor or any Affiliates of Chrysalis, MDS or Investor,
as the case may be, may be entitled, at law or in equity.
SECTION 6. RIGHT OF FIRST REFUSAL.
6.1 RIGHT OF FIRST REFUSAL. (a) Registered Public Offerings. If
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Chrysalis issues and sells Common Stock in a registered public offering
(other than a registration on Form S-8 or any similar or successor form
thereto, relating to an employee or director stock option, stock purchase
or other benefit plan or on Form S-4 or any similar or successive form
thereto relating to any business combination) (a "Public Offering"), the
Investor shall have, at its option, either (i) the registration rights set
forth in Section 7 of this Agreement or (ii) the right to purchase the
Investor's pro rata share (or any part thereof) of the publicly-offered
Common Stock (the "Offered Common Stock") on the same terms as contained in
the registration statement relating to such Common Stock; provided, however
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the issuance of such shares of Common Stock to Investor as contemplated
hereby pursuant to this Section 6(a)(ii) may be effected by Chrysalis in
compliance with any applicable regulatory requirements, including, without
limitation, the rules and regulations under the federal or state securities
laws and promulgated by the National Association of Securities Dealers.
The Investor's pro rata share of the Offered Common Stock will be a
fraction of the Offered Common Stock, of which the number of shares of
Common Stock (or securities convertible into or exercisable for Common
Stock) held by the Investor on the date of the Chrysalis Notice (as defined
in Section 6.2) (the "Notice Date") shall be the numerator and the total
number of shares of Common Stock issued and outstanding on the Notice Date
shall be the denominator.
(b) Other Offerings. If, until such time as the Investor no longer
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Beneficially Owns any Restricted Securities, Chrysalis should come to a
written understanding with one or more potential investors, acceptable to
Chrysalis, to issue and sell, in a transaction not registered under the
Securities Act of 1933 (the "Securities Act") in reliance upon a claimed
exemption thereunder, any equity or debt securities including options,
warrants or other securities other than as set forth in Section 6.5
(collectively, "Securities"), it shall give the Investor the first right to
purchase all such privately offered Securities on the same terms as
Chrysalis is willing to sell such Securities to such potential investors.
6.2 NOTICE. Prior to any proposed sale or issuance by Chrysalis of
any Securities or Offered Common Stock, Chrysalis shall notify the Investor in
writing (the "Chrysalis Notice"), of its intention to sell and issue such
securities which Chrysalis Notice shall set forth the general terms under which
it proposes to make such sale. The Chrysalis Notice shall be signed by
Chrysalis and, in the case of privately offered Securities shall indicate the
potential investors' concurrence with the description of the terms. The
Investor shall have 10 business days after receipt of such notice to notify
Chrysalis in writing (the "Investor Notice") that it elects to
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purchase all of the Securities so offered or its pro rata share of the Offered
Common Stock, as the case may be, in each case on the terms set forth in the
Chrysalis Notice. In the case of a private offering of Securities, the Investor
shall purchase and Chrysalis shall sell the Securities within 30 days of the
date of the Chrysalis Notice.
6.3 FAILURE TO NOTIFY. In the case of a private offering of
Securities, if, within 10 business days after the Notice Date, the Investor does
not notify Chrysalis that it desires to purchase all of the Securities described
in the Chrysalis Notice upon the terms and conditions set forth in the Chrysalis
Notice, then Chrysalis may, during a period of 120 days following the end of
such 10-day period, sell and issue the Securities which the Investor does not
elect to purchase to the investors with whom the understanding had been reached
(or to the representative of such investors and other investors designated by
such representative) at a price and upon terms and conditions no more favorable
in any material respect to such investors as those set forth in the Chrysalis
Notice. In the event that Chrysalis has not sold such Securities to such
investors within said 120-day period, Chrysalis shall not thereafter issue or
sell any Securities without first offering such securities to the Investor in
the manner provided above.
6.4 PAYMENT. If the Investor gives Chrysalis notice that it
desires to purchase all of the Securities or up to a pro rata share of the
Offered Common Stock offered by Chrysalis, then payment for the Securities shall
be by check or wire transfer, against delivery of the securities at the
executive offices of Chrysalis at the time of the scheduled closing therefor.
Chrysalis shall take all such action (except registration under the Securities
Act) as may reasonably be required by any regulatory authority in connection
with the exercise by the Investor of the right to purchase Securities or Offered
Common Stock as set forth in this Section 6.
6.5 LIMITATION. The right of first refusal contained in this
Section 6 shall not apply to the issuance by Chrysalis of:
(a) shares of Common Stock issued to employees, officers, directors
and consultants pursuant to the exercise of stock options or as payment of
employee benefits;
(b) securities issued pursuant to the acquisition of another
corporation by Chrysalis by merger, purchase of all or substantially all of
the assets, or other reorganization; or
(c) securities issued in connection with any stock split, stock
dividend or recapitalization by Chrysalis.
SECTION 7. REGISTRATION RIGHTS. For purposes of this Section 7, the
term "Registrable Securities" means any of the shares of Common Stock issued in
exercise of the Warrant and any other shares of Common Stock related thereto by
way of stock dividend or stock split, any shares of Common Stock held by
Investor that were acquired pursuant to the exercise by the Investor of its
Right of First Refusal pursuant to Section 6 of this Agreement or in connection
with any recapitalization, merger, consolidation or reorganization; provided
that, as to any particular securities, such securities will cease to be
Registrable Securities when they have
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been sold pursuant to Rule 144 promulgated by the Securities and Exchange
Commission (the "SEC") or any similar rule then in force ("Rule 144").
7.1 PIGGYBACK REGISTRATION. (a) If at any time, and from time
to time, Chrysalis proposes to issue and sell Common Stock in a registered
public offering (other than a registration on Form S-8, or any similar or
successor form, relating to an employee or director stock option, stock
purchase or other benefit plan, or a registration on Form S-4 or any
similar or successor form relating to shares issuable in a merger,
consolidation, exchange offer, purchase of assets or any similar
transaction) ("Piggyback Registration"), Chrysalis shall:
(i) promptly give to each holder of Registrable Securities
written notice thereof (which written notice shall include a list of
the jurisdictions in which Chrysalis intends to attempt to qualify
such securities under or otherwise comply with the applicable blue sky
or other state securities laws); and
(ii) include in such registration (and any related qualification
under or other compliance with blue sky or other state securities
laws), and in any underwriting involved therein on the same terms and
conditions as the securities being issued thereunder, all the
Registrable Securities specified in a written request, made within 5
days after receipt of such written notice from Chrysalis by Investor;
provided that if such registration is a registration in which the
managing underwriter advises Chrysalis that marketing factors require
a limitation of the number of shares of Common Stock to be
underwritten in such registration (a "Cutback Registration"), then if
(Y) such registration is a primary registration, whether or not it
includes a secondary registration, on behalf of Chrysalis, Chrysalis
shall register in such registration (I) first, the shares of Common
Stock Chrysalis proposes to sell in such registration and (II) second,
shares of Common Stock held by Investor and any holders of Common
Stock who have the right to request inclusion of Common Stock held by
such holder in such registration (the "Electing Holders") on a pro
---
rata basis, based upon the number of shares of Common Stock Investor
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and any Electing Holders originally sought to include in such
registration; and (Z) if such registration is solely a secondary
registration on behalf of holders of Common Stock, Chrysalis shall
register in such registration (I) first, the shares of Common Stock,
if any, Chrysalis proposes to register in such registration as a
result of a holder exercising demand registration rights and (II)
second, the shares of Common Stock held by Investor and Electing
Holders on a pro rata basis based upon the number of shares of Common
Stock Investor and Electing Holders originally sought to include in
such registration; provided, further, that if such registration is a
Cutback Registration, Chrysalis shall use its best efforts to include
all shares of Registrable Securities specified in the holder's written
request, but such best efforts shall not include an obligation on the
part of Chrysalis to reduce the number of shares of Chrysalis or the
other Electing Holders included in such Cutback Registration beyond
that expressly provided for in this Section 7.1. Chrysalis and the
Investor shall cooperate in good faith with regard to any proposed
Cutback Registration. In the event of a Cutback Registration,
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Chrysalis and the Investor shall discuss in good faith alternatives
for the sale, disposal or transfer of the Voting Securities owned by
the Investor.
(b) If the registration of which Chrysalis gives notice is pursuant to
an effective registration statement under the Securities Act involving an
underwriting, Chrysalis shall so advise each holder as part of Chrysalis
Notice. In such event, the right of each such holder to registration
pursuant to this Section shall be conditioned upon such holder's
participation in such underwriting, the inclusion of the Registrable
Securities in the underwriting and such holder entering into an
underwriting agreement, containing customary terms and conditions in a form
reasonably acceptable to the holder and Chrysalis with the underwriter or
underwriters selected for such underwriting (the "Underwriters") by
Chrysalis, provided that if such underwriting agreement shall not be
acceptable to holder, Chrysalis may proceed with such registration without
registering the stock of holder in such registration.
7.2 INDEMNIFICATION. (a) In connection with any such Piggyback
Registration, Chrysalis agrees to indemnify to the full extent permitted by
law, the Investor, its officers and directors and each person who controls
the Investor (within the meaning of the Exchange Act and the Securities
Act) against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished to Chrysalis by the Investor or the Investor's agents
expressly for use therein or by the Investor's failure to deliver a copy of
the registration statement or prospectus or any amendments or supplements
thereto after Chrysalis has furnished the Investor with a sufficient number
of copies of the same.
(b) In connection with any such Piggyback Registration, the Investor
will furnish to Chrysalis such information relating to the Investor and the
Investor's ownership of the Registrable Securities as Chrysalis reasonably
requests for use in connection with any such registration statement or
prospectus and agrees to indemnify, to the extent permitted by law,
Chrysalis, its directors and officers and each person who controls
Chrysalis (within the meaning of the Exchange Act and the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact or any
omission or alleged omission of a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue
statement or omission is actually contained in any information so furnished
by the Investor or the Investor's agents to Chrysalis; provided, that the
Investor's obligation hereunder shall be limited to the gross amount of
proceeds received by the Investor pursuant to such registration statement.
(c) Any person entitled to indemnification hereunder agree that, upon
the service of a summons or other initial legal process upon it in any
action or suit instituted against it or upon its receipt of written
notification of the commencement of any investigation or
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inquiry of, or proceeding against it, in respect of which indemnity may be
sought on account of any indemnity agreement contained in such paragraphs,
it will promptly give written notice (a "Notice") of such service or
notification to the party or parties from whom indemnification may be
sought hereunder. No indemnification provided for herein shall be available
to any party who shall fail so to give the Notice if the party to whom such
Notice was not given was unaware of the action, suit, investigation,
inquiry or proceeding to which the Notice would have related and was
prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification
shall not relieve such indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or
otherwise than on account of such indemnity agreement. Any indemnifying
party shall be entitled at its own expense to participate in the defense of
any action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving
written notice (the "Notice of Defense") to the indemnified party, to
assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense
of the indemnifying party or parties, by counsel chosen by such
indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the
indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action,
suit, investigation, inquiry or proceeding or that there may be legal
defenses available to such indemnified party or parties different from or
in addition to those available to the indemnifying party or parties, then
counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be
necessary to protect the interests of the indemnified party or parties and
(ii) in any event, the indemnified party or parties shall be entitled, at
its or their own expense to have counsel chosen by such indemnified party
or parties participate in, but not conduct, the defense. It is understood
that the indemnifying parties shall not, in respect of the legal defenses
of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm (in addition to any local counsel)
for the Investor and each person, if any, who controls the Investor within
the meaning of Section 15 of the Act, and (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for Chrysalis,
its directors, its officers who sign the Registration Statement and each
person, if any, who controls Chrysalis within the meaning of Section 15 of
the Act. If, within a reasonable time after receipt of the Notice, an
indemnifying party gives a Notice of Defense and the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
party or parties, the indemnifying party or parties will not be liable
hereunder for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the
indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in
clause (i) of the proviso to the preceding sentence and (B) the
indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time
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after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with
the defense of the action, suit, investigation, inquiry or proceeding. The
indemnifying party or parties shall not be liable for any settlement of any
proceeding effected without its or their written consent, provided such
consent has not been unreasonably withheld.
7.3 REGISTRATION PROCEDURES. (a) In case of each registration,
qualification or compliance effected by Chrysalis subject to this Section
7, Chrysalis shall keep holder advised in writing as to the initiation of
each such registration, qualification and compliance and as to the
completion thereof. In addition, at its expense, Chrysalis shall:
(i) prepare and file with the SEC a registration statement with
respect to such Registrable Securities, and use reasonable efforts to
cause such registration statement to become effective; provided that
before filing a registration statement or prospectus or any amendments
or supplements thereto, Chrysalis will furnish to the counsel selected
by the Investor copies of all such documents proposed to be filed;
provided further that in the event that Chrysalis files a registration
statement on Form S-3 pursuant to Rule 415 of the Act, Chrysalis shall
use reasonable efforts to cause such registration statement to remain
effective for a reasonable period of time as determined by the
Independent Directors;
(ii) furnish to the Investor such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and
such other documents as the Investor may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by
the Investor;
(iii) furnish such number of prospectuses, including preliminary
prospectuses, and other documents incident thereto as holder may
reasonably request from time to time, which shall not be deemed a
Selling Expense (as defined in Section 7.3(c));
(iv) notify the Investor, at any time when a prospectus relating
thereto is required to be deliverable under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement or any document incorporated therein by
reference contains an untrue statement of a material fact or omits to
state any material fact necessary to make the statements therein not
misleading, and prepare a supplement or amendment to such prospectus
or any such document incorporated therein by reference so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading;
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(v) cause all such Registrable Securities to be listed on the
Nasdaq National Market;
(vi) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions of the United
States as holder may deem reasonable to enable it to consummate the
disposition in such jurisdiction of the Registrable Securities
(provided that Chrysalis will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section, or (ii) consent to general
service of process in any such jurisdiction); and
(vii) upon the sale of any Registrable Securities pursuant to
such registration statement, remove all restrictive legends from all
certificates or other instruments evidencing the Registrable
Securities.
(b) Chrysalis may require the Investor to furnish, and the Investor
shall furnish, to Chrysalis such information regarding the distribution of
such securities as Chrysalis may from time to time reasonably request in
writing. The Investor further agrees that, upon receipt of any notice from
Chrysalis of the happening of any event of the kind described in Section
7.3(a)(iv) hereof, the Investor will immediately discontinue disposition of
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated in Section 7.3(a)(iv)
hereof and, if so directed by Chrysalis, the Investor will deliver to
Chrysalis all copies, other than permanent file copies then in the
Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(c) Except as required by law, all expenses incurred by Chrysalis in
complying with this Section 7, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for Chrysalis, blue sky fees and expenses in
accordance with Section 7.2(a)(vi) hereof, including fees and disbursements
of counsel related to all blue sky matters, but excluding the compensation
of regular employees of Chrysalis which shall be paid in any event by
Chrysalis ("Registration Expenses") incurred in connection with any
registration, qualification or compliance pursuant to such Sections shall
be borne by Chrysalis. All underwriting discounts and selling commissions
and transfer taxes applicable to a sale ("Selling Expenses") incurred in
connection with any registration of Registrable Securities and the legal
fees of holder shall be born by holder.
7.4 ADDITIONAL REGISTRATION RIGHTS. From and after the date
hereof, Chrysalis will not, and will not permit any of its subsidiaries to:
(a) grant to any Person any right to have any securities of Chrysalis
registered under the Securities Act in so far as such rights would be
superior to those rights granted to the Investor hereunder this Agreement;
and
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(b) take any other action which would prevent or preclude Chrysalis
from complying with the registration priorities granted to the Investor
hereunder Section 7 of this Agreement.
7.5 FURTHER INFORMATION. If Registrable Securities owned by a
holder are included in any registration, Investor shall furnish Chrysalis
such information regarding itself and the distribution proposed by Investor
as Chrysalis may reasonably request and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
SECTION 8. MISCELLANEOUS
8.1 SPECIFIC ENFORCEMENT. The parties acknowledge and agree that
Chrysalis, MDS and the Investor would be irreparably damaged in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
Chrysalis, MDS and the Investor shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to specifically enforce
this Agreement and the terms and provisions thereof in any action instituted in
any court of the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which Chrysalis, MDS and the
Investor may be entitled, at law or in equity.
8.2 MODIFICATION; WAIVER. This Agreement may be modified in any
manner and at any time by written instrument executed by the parties hereto.
Any of the terms, covenants, and conditions of this Agreement may be waived at
any time by the party entitled to the benefit of such term, covenant or
condition.
8.3 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed effectively
given upon (a) personal delivery to the person to be notified; (b) seven days
after deposit with a domestic Post Office, by registered mail, postage prepaid
and addressed to the person to be notified at the address indicated for such
person below, or at such other address as such person may designate by advance
written notice to the other party; (c) confirmed transmission by electronic
facsimile to the fax number specified for such person below or such other number
as such person may designate by advance written notice to the other party; (d)
two business days after sent by certified or registered mail (first class
postage pre-paid); and (e) next day for delivery by guaranteed overnight
delivery which delivery is confirmed:
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(a) if to Chrysalis to:
Chrysalis International Corporation
▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
North Point
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Investor to:
Panlabs International Inc.
c/o MDS Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: Vice-President - Legal Affairs
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Beach & ▇▇▇▇▇▇, LLP
The Granite Building
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
8.4 PARTIES IN INTEREST; ASSIGNMENT. This Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests and obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto; provided, however, that the Investor may assign or
transfer its rights, interests and obligations hereunder this Agreement, the
Note and the Warrant to an
15
Affiliate of MDS so long as any such Affiliate also becomes a signatory to and
is thereby bound by the terms and conditions of this Agreement, the Note and the
Warrant. In the event that the Investor does assign or transfer its rights,
interests and obligations hereunder this Agreement, the Note and the Warrant to
an Affiliate, the Investor will continue to be bound by the terms and conditions
of Section 1, Section 5 and Section 8.1 of this Agreement. Nothing in this
Agreement, whether expressed or implied, shall be construed to give any Person
other than the parties hereto any legal or equitable right, remedy or claim
under or in respect of this Agreement.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall constitute one and the same instrument.
8.6 HEADINGS. The article and section headings of this Agreement are
for convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware applicable to
contracts made and to be performed therein.
8.8 SUPERSEDE PRIOR CONFIDENTIALITY AGREEMENT. This Agreement
(including the documents referred to herein) constitutes the entire agreement
with respect to the keeping and maintaining of confidentiality of the
Information and the Confidential Information between the parties, and this
Agreement shall supersede and replace the certain Confidentiality Agreement,
dated as of __________ entered into by and between Chrysalis and Investor and
any other prior understandings, agreements, or representations by or among the
parties, written or oral, to the extent they have related in any way to the
keeping or maintaining the confidentiality of the Information and the
Confidential Information.
8.9 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to
exercise or the delay in exercising by either party of any right, remedy, power
or privilege under this Agreement, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, power or privilege under this
Agreement shall not preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CHRYSALIS INTERNATIONAL
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:Senior Vice President and
Chief Financial Officer
PANLABS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:Director & Assistant Secretary
MDS Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:Vice President Legal Affairs
& Corporate Secretary
17