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EXHIBIT 10.19
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS
DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH
THE COMMISSION]
DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement") is made as of the
22nd day of September, 1995 by and between BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation (the "Company"), on the one hand, and SANDOZ PHARMA LTD.
("Sandoz"), on the other hand. Sandoz is sometimes herein referred to as an
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Debentures.
1.1 Sale and Issuance of Debentures.
(a) Subject to the terms and conditions of this
Agreement, Investor agrees to purchase at each of the Initial Closing, the
Second Closing and the Third Closing (each of which Closings is defined in
Section 1.2 below) and the Company agrees to sell and issue to Investor at the
Initial Closing, the Second Closing and the Third Closing the Company's
Convertible Debentures in the form attached hereto as Exhibit A (the
"Debentures") in the face amount set forth opposite Investor's name on Schedule
A hereto for a purchase price equal to the face amount thereof. The Debentures
to be purchased at the Initial Closing are referred to as the "Initial Closing
Debentures"; the Debentures to be purchased at the Second Closing are referred
to as the "Second Closing Debentures"; and the Debentures to be purchased at the
Third Closing are referred to as the "Third Closing Debentures".
1.2 Closings. The purchase and sale of the Debentures shall
take place at the offices of Pillsbury Madison & Sutro, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other place as the Company and Investor
acquiring the Debentures sold at such time and place pursuant hereto mutually
agree upon (verbally or in writing). The purchase and sale of the Initial
Closing Debentures shall take place on September 29, 1995 (the "Initial
Closing"). The purchase and sale of the Second Closing Debentures shall take
place within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] (the "Second Closing"). The purchase and sale of the Third Closing
Debentures shall take place within [CONFIDENTIAL MATERIAL REDACTED and FILED
SEPARATELY WITH THE COMMISSION] (the "Third Closing"). At each of the Initial
Closing, the Second Closing and the Third Closing, the Company shall deliver to
Investor the Debentures which Investor is purchasing against delivery to the
Company of a bank check, bank wire or personal check in the amount of the
purchase price therefor payable to the Company's order. The Initial Closing, the
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Second Closing and the Third Closing are referred to collectively as the
"Closings."
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Investor that, except as set forth on the Schedule of
Exceptions furnished to Investor and specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company
consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 8,328,847 shares of preferred
stock (the "Preferred Stock"), 610,000 shares of which have been
designated Series A Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), 2,156,336 shares of which have been
designated Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), 2,204,167 shares of which have been
designated Series C Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), 1,900,010 shares of which have been
designated Series D Preferred Stock, par value $.01 per share (the
"Series D Preferred Stock") and 1,458,334 shares of which have been
designated Series E Preferred Stock, par value $.01 per share (the
"Series E Preferred Stock"). There are 610,000 shares of Series A
Preferred Stock, 2,156,336 shares of Series B Preferred Stock, 2,204,167
shares of Series C Preferred Stock, 1,900,010 shares of Series D
Preferred Stock and 1,458,334 shares of Series E Preferred Stock issued
and outstanding and, based upon the Company's records, such outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
are owned by the persons and in the numbers specified in the stockholder
list made available supplementally to Investor upon request. The rights,
preferences and privileges of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock are as stated in the Company's Restated
Certificate of Incorporation ("Restated Certificate").
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(ii) Common Stock. 12,000,000 shares of common stock
(the "Common Stock"), of which 1,316,599 shares are issued and
outstanding and, based upon the Company's records, are owned by the
persons, and in the numbers specified in the stockholder list provided
supplementally to Investor.
(iii) Agreements for Purchase of Shares. Except for
(a) the conversion privileges of the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock, (b) the right of first
offer of Investor provided in Section 8.4 hereof, (c) the right of first
offer provided for in Section 8.4 of the Series A Preferred Stock
Purchase Agreement dated as of May 5, 1988 between the Company and the
investors listed therein (the "Series A Agreement"), (d) the right of
first offer provided for in Section 8.4 of the Series B Preferred Stock
Purchase Agreement dated as of July 24, 1989 between the Company and the
investors listed therein (the "Series B Agreement"), (e) the right of
first offer provided for in Section 8.4 of the Series C Preferred Stock
Purchase Agreement dated as of June 7, 1990 between the Company and the
investors listed therein (the "Series C Agreement"), (f) the right of
first offer provided for in Section 8.4 of the Series D Preferred Stock
Purchase Agreement, dated as of October 30, 1991 between the Company and
the investors listed therein (and the supplemental signature pages
thereto)(the "Series D Agreement"), (g) the right of first offer
provided for in Section 8.4 of the Series E Preferred Stock Purchase
Agreement, dated as of November 25, 1992 between the Company and the
investors listed therein (and the supplemental signature pages thereto)
(the "Series E Agreement") and (h) options to purchase an aggregate of
795,924 shares of Common Stock granted pursuant to the Amended and
Restated 1989 Stock Plan of the Company (the "Plan"), there are no
outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
the Company of any shares of its capital stock.
2.3 Subsidiaries. Except for Biosite Diagnostics GmbH, its
wholly owned subsidiary, the Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, partnership
or other business entity.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Debentures being sold hereunder
and the Common
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Stock issuable upon conversion of the Debentures, to the extent that the
foregoing requires performance on or prior to each of the Closings, has been
taken or will be taken on or prior to each of the Closings, and this Agreement
constitutes a valid and legally binding obligation of the Company enforceable in
accordance with its terms.
2.5 Valid Issuance of Preferred and Common Stock.
(a) The Common Stock issuable upon conversion of
the Debentures purchased under this Agreement has been or will be on or prior to
the Initial Closing, duly and validly reserved for issuance and, upon issuance,
will be duly and validly issued, fully paid and nonassessable.
(b) The outstanding shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock are duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
compliance with federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, and any other post-sale filings pursuant to
applicable state securities laws, which filings will be effected prior to any
applicable deadlines.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
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2.8 Invention and Secrecy and Common Stock Purchase
Agreements. Each key employee of the Company has executed an Employee's
Invention and Proprietary Information Agreement in substantially the form made
available to Investor upon request. The Company, after reasonable investigation,
is not aware that any of its key employees are in violation thereof, and the
Company will use its best efforts to prevent any such violation. Each holder of
Common Stock of the Company has entered into a Common Stock Purchase Agreement
in substantially the form made available to Investor upon request.
2.9 Patents and Trademarks. The Company has sufficient title
and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, after due inquiry, conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated, which conflict, breach or default would be materially adverse to
the Company. It is not and it will not be necessary for the Company to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.10 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, as amended, or of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound or, to its knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company, which violation or default would be materially adverse to the Company.
The execution, delivery and performance of this
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Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a material default
under any such provision, instrument, judgment, order, writ, decree or contract
or an event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company, which violation, default, conflict or event
would be materially adverse to the Company.
2.11 Agreements; Action.
(a) Except for the agreements explicitly contem-
plated hereby, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of, $100,000, other than liabilities or obligations of the
Company for compensation under employment agreements, (ii) the license of any
patent, copyright, trade secret or other proprietary right of the Company or
(iii) joint venture, partnership or other contract or arrangement involving the
sharing of profits or proprietary information or know how (other than
nondisclosure agreements), (iv) any contract or agreement limiting the Company's
right to engage in any business activity or compete with any person or entity,
or (v) any other material agreement.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $100,000 or
in excess of $200,000 in the aggregate, other than liabilities or obligations of
the Company for compensation under employment agreements, (iii) made any loans
or advances to any person, other than ordinary advances for travel expenses or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Certificate of Incorporation or Bylaws, which adversely affects in any
material respect its business as now conducted or as proposed to be conducted,
its properties or its financial condition.
(e) The Company has not engaged in the past three
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or into
any such corporation or corporations, (ii) with any corporation, partnership,
association or other
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business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company or a transaction or
series of related transactions in which more than 50 percent of the voting power
of the Company is disposed of, or (iii) regarding any other form of liquidation,
dissolution or winding up of the Company.
2.12 Disclosure. The Company believes it has fully provided
Investor with all the information which Investor has requested for deciding
whether to purchase the Debentures, and all information reasonably necessary to
enable Investor to make such decision. Neither this Agreement nor any other
statement or certificate made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.13 Registration Rights. Except as provided in Section 7 of
this Agreement, Section 7 of the Series A Agreement, Section 7 of the Series B
Agreement, Section 7 of the Series C Agreement, Section 7 of the Series D
Agreement and Section 7 of the Series E Agreement, the Company has not granted
or agreed to grant any registration rights, including piggy-back rights, to any
person or entity.
2.14 Corporate Documents. The Restated Certificate of
Incorporation and Bylaws of the Company are in the form previously made
available to Investor upon request.
2.15 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any material liens, claims or
encumbrances. All the Company's personal properties, whether owned or leased,
are in good operating condition, normal wear and tear excepted, and are adequate
and suitable for the purposes for which they are currently being used.
2.16 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as described in section 3(2)(A) or section 3(2)(B) of the
Employee Retirement Income Security Act of 1974.
2.17 Tax Returns and Payments. The Company has filed all tax
returns and reports as required by law in a timely fashion. These returns and
reports are true and correct in all material respects. The Company has paid all
taxes and other assessments due prior to the time penalties would accrue
thereon. The provision for taxes of the Company is adequate for taxes due or
accrued as of the date thereof.
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2.18 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.19 Minute Books. The minute books of the Company made
available to Investor upon request contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
2.20 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing.
2.21 Real Property Holding Company. The Company is not a
"United States real property holding corporation" (as that term is defined in
Treasury Regulation section 1.897-2(b)). Within 45 days after receipt of a
request from a foreign investor, the Company shall prepare and deliver to such
foreign investor the statement required under Treasury Regulation section
1.897-2(h)(1)(i) and either or both of the following documents: (i) an affidavit
in conformance with the requirements of Internal Revenue Code of 1986, as
amended ("IRC") section 1445(b)(3) or (ii) a notarized statement, executed by an
officer having actual knowledge of the facts, that the shares of Company stock
held by such foreign investor are of a class that is regularly traded on an
established securities market, within the meaning of IRC section 1445(b)(6). If
the Company is unable to provide either document described in (i) or (ii) above,
if requested, it shall promptly notify such foreign investor in writing of the
reasons for such inability. Finally, upon the request of a foreign investor and
without regard to whether either document described in (i) or (ii) above has
been requested, the Company shall cooperate fully with the efforts of such
foreign investor to obtain a "qualifying statement," within the meaning of IRC
section 1445(b)(4), or such other documents as would excuse a transferee of a
foreign investor's interest from withholding of income tax imposed pursuant to
IRC section 897(a).
2.22 Financial Statements. The Company has delivered to
Investor its audited financial statements (balance sheet and
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profit and loss statement) at and for the period from inception through December
31, 1994, and its unaudited interim financial statements at and for the period
from January 1, 1995 through March 31, 1995 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the period indicated and are consistent
with each other. The Financial Statements accurately set out and describe the
financial condition and operating results of the Company as of the date, and for
the period, indicated therein. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to March 31,
1995, and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
generally accepted accounting principles.
2.23 Voting Arrangements. Except as may be provided in Section
5.6 hereof, to the Company's knowledge there are no outstanding stockholder
agreements, voting trusts, proxies or other arrangements or understandings among
the stockholders of the Company relating to the voting of their respective
shares.
3. Representations, Warranties, Covenants and Agreements of Investor.
Investor hereby represents, warrants, covenants and agrees that:
3.1 Authorization. This Agreement constitutes its
valid and legally binding obligation.
3.2 Purchase Entirely for Own Account. This Agreement is made
with Investor in reliance upon Investor's representation to the Company, which
by Investor's execution of this Agreement Investor hereby confirms, that the
Debentures to be received by Investor and the Common Stock issuable upon
conversion thereof (the Debentures and the Common Stock issued upon conversion
thereof are referred to, collectively, as the "Securities") will be acquired for
investment for Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities. Investor represents
that it has full power and authority to enter into this Agreement.
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3.3 Disclosure of Information. Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Securities. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement.
3.4 Investment Experience. Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
solely for the purpose of acquiring the Securities.
3.5 Restricted Securities. Investor understands that the
Securities it is or will be purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
only in certain limited circumstances without registration under the Securities
Act of 1933, as amended (the "Securities Act"). In this connection Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(b) (i) Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, Investor shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, as currently in existence, except in
unusual circumstances.
(c) Notwithstanding the provisions of subsections (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is
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a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms of this Agreement to the
same extent as if he were an original Investor hereunder; provided, however,
that the provisions of Section 3.6(b) above shall apply if the Company or its
counsel are unable to determine if such transfer may be made in compliance with
federal and applicable state securities laws.
3.7 Legends. It is understood that the Securities may bear one
or all of the following legends:
(a) "The securities represented hereby have not been
registered under the United States Securities Act of 1933, and may not be sold,
transferred, assigned, pledged or hypothecated absent an effective registration
thereof under such act or compliance with Rule 144 promulgated under such act,
or unless the Company has received an opinion of counsel, satisfactory to the
Company and its counsel, that such registration is not required."
(b) Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations.
3.8 Accredited or Foreign Investor. Except as disclosed to the
Company in writing, Investor either (i) is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, of the SEC under the Securities Act, or
(ii) is neither (x) a national or resident of the United States, its
territories, possessions or any area subject to its jurisdiction, nor (y) a
corporation, partnership, trust or other entity created or organized in the
United States, its territories, possessions or any area subject to its
jurisdiction, nor (z) a corporation, partnership, trust or other entity, any of
the equity owners of which is described in clause (x) or (y) above and agrees
not to sell, hypothecate, pledge or otherwise dispose of any interest in the
Securities in the United States, its territories, possessions or any area
subject to its jurisdiction, or to any person who is a national thereof or
resident therein (including any estate of such person), or any corporation,
partnership or other entity created or organized therein, unless such securities
have been either registered under the Securities Act, or are exempt from the
registration requirements of the Securities Act, in the opinion of the Company's
counsel, and Investor has complied with any restrictions on transfer contained
in this Agreement.
3.9 Confidentiality. Investor hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use (except to
evaluate its investment in the Company) or disclose without the prior written
consent of the Company, any
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confidential information that is furnished to it by the Company in connection
with this Agreement, including (without limitation) all financial statements,
budgets and other information delivered or provided to Investor pursuant to
Section 8 hereof. This obligation of confidentiality shall not apply, however,
to any information (a) in the public domain through no unauthorized act or
failure to act by Investor, (b) lawfully disclosed to Investor by a third party
who possessed such information without any obligation of confidentiality or (c)
lawfully developed by Investor independent of any disclosure by the Company.
Investor further covenants that it shall return to the Company all tangible
materials containing such information upon reasonable request by the Company if
Investor is no longer a holder of shares of capital stock of the Company.
3.10 Removal of Legends; Further Covenants.
(a) Any legend endorsed on the Securities pursuant to
Section 3.7(a) hereof shall be removed (i) if the Securities issued upon
conversion thereof represented by such certificate shall have been effectively
registered under the Securities Act or otherwise lawfully sold in a public
transaction or in accordance with Rule 144, (ii) if such Securities may be
transferred in compliance with Rule 144(k) promulgated under the Securities Act,
or (iii) if the holder of such Securities shall have provided the Company with
an opinion of counsel, in form and substance acceptable to the Company and its
counsel and from attorneys reasonably acceptable to the Company and its counsel,
stating that a public sale, transfer or assignment of such Securities may be
made without registration.
(b) Any legend endorsed on the Securities pursuant to
Section 3.7(b) hereof shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if the holder of the
Securities provides the Company with an opinion of counsel, in form and
substance acceptable to the Company and its counsel and from attorneys
reasonably acceptable to the Company and its counsel, stating that such state
legend may be removed.
(c) Investor further covenants that Investor will not
transfer the Securities or any securities received in exchange therefor or on
conversion thereof, in violation of the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the rules of the Commission
promulgated thereunder, including rule 144 under the Securities Act. Further,
Investor agrees that, prior to the closing of the corporation's Initial Public
Offering (defined in Section 7.13 hereof), Investor will not transfer any of
such securities in a public offering without the Company's prior consent, even
if he is otherwise permitted to transfer them pursuant to Rule 144(k); provided
that the foregoing shall not affect Investor's rights under Section 7.
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4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTIONS 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Conditions of Investor's Obligations at Initial Closing and
Subsequent Closings. The obligations of Investor under Section 1.1 of this
Agreement are subject to the fulfillment on or before each of the Closings of
each of the following conditions, the waiver of which shall not be effective
against Investor if it does not consent in writing thereto. Notwithstanding
anything in the foregoing to the contrary, in the event the Second Closing or
Third Closing occurs subsequent to the Company's Initial Public Offering, then
the obligations of Investor under Section 1.1 of this Agreement are subject to
the fulfillment on or before the Second Closing or Third Closing, as the case
may be, of the conditions set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.5 and
5.10, the waiver of which shall not be effective against Investor who does not
consent in writing thereto.
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of each
of the Closings with the same effect as though such representations and
warranties had been made on and as of the date of each of the Closings.
5.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before each of the
Closings; provided that the obligations of Investor shall not be conditional
upon the issuance by the Company of the Debentures to the persons or entities
listed on Schedule A who have not performed or tendered the performance of their
obligations under this Agreement required to be performed on or prior to each of
the Closings except as provided in Section 5.7 hereof.
5.3 Compliance Certificate. The President of the Company shall
deliver to Investor at each of the Closings a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there has been no material adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since,
with respect to the Initial Closing the date of the Agreement, and with respect
to the Second Closing and Third Closing, since the date of the immediately
preceding closing.
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5.4 Qualifications. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and sale of
the Debentures and the underlying Common Stock to Investor pursuant to this
Agreement, or such offer and sale shall be exempt from such qualification under
the California Corporate Securities Law of 1968, as amended.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at each of the
Closings and all documents incident thereto shall be reasonably satisfactory in
form and substance to Investor, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Board of Directors. The Board of Directors at the Initial
Closing shall consist of eight duly elected members: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
5.7 Minimum Investment. Investor shall have purchased the
Initial Closing Debentures at the Initial Closing.
5.8 Opinion of Company Counsel. Investor shall have received
from Pillsbury Madison & Sutro, counsel for the Company, an opinion, dated as of
the Initial Closing, in form and substance satisfactory to Investor, to the
effect that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and the Company has the requisite corporate power and authority to own its
properties and to conduct its business in the manner presently conducted.
(b) The Company is qualified to do business as a
foreign corporation in the State of California.
(c) The Company has the requisite corporate power and
authority to execute, deliver and perform the Agreement. The Agreement has been
duly and validly authorized by the Company, duly executed and delivered by an
authorized officer of the Company and constitutes a legal, valid and binding
obligation of the Company.
(d) The capitalization of the Company is as follows:
(i) Preferred Stock. There are authorized
8,328,847 shares of Preferred Stock, $.01 par value per share, 610,000
shares of which have been designated Series A Preferred Stock, 2,156,336
shares of which have been designated Series B Preferred Stock, 2,204,167
shares of which have been designated Series C
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Preferred Stock, 1,900,010 shares of which have been designated Series
D Preferred Stock and 1,458,334 shares of which have been designated
Series E Preferred Stock. 610,000 shares of Series A Preferred Stock,
2,156,336 shares of Series B Preferred Stock, 2,204,167 shares of
Series C Preferred Stock, 1,900,010 shares of Series D Preferred Stock
and 1,458,334 shares of Series E Preferred Stock have been duly issued
and delivered, are validly outstanding, fully paid and nonassessable,
and have been approved by all requisite corporate action and, based in
part on the representations and warranties of the investors in such
securities, were issued in compliance with all applicable federal and
California securities laws. The rights, privileges and preferences of
the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock, the Series D Preferred Stock, the Series E Preferred
Stock are as stated in the Company's Restated Certificate. The shares
of Common Stock issuable upon the conversion of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock have been
duly and validly reserved for issuance and, when issued in accordance
with the Company's Restated Certificate, will be validly issued, fully
paid and nonassessable.
(ii) Common Stock. There are authorized
12,000,000 shares of Common Stock, of which 1,316,599 shares have been
duly issued and delivered and are validly outstanding, fully paid and
nonassessable.
(iii) Except for (A) the conversion privileges
of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock,
(B) the right of first offer of Investor provided for in Section 8.4 of
this Agreement, (C) the right of first offer provided for in Section
8.4 of the Series A Agreement, (D) the right of first offer provided in
Section 8.4 of the Series B Agreement, (E) the right of first offer
provided for in Section 8.4 of the Series C Agreement, (F) the right of
first offer provided for in Section 8.4 of the Series D Agreement, (G)
the right of first offer provided for in Section 8.4 of the Series E
Agreement and (H) options to purchase Common Stock of the Company
issued under the 1989 Stock Plan of the Company, there are no
preemptive rights or similar rights or, to the best of counsel's
knowledge, options, warrants, conversion privileges or other rights (or
agreements for any such rights) outstanding to purchase from or
otherwise obtain from the Company any shares of its capital stock.
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(e) The execution, delivery, performance and com-
pliance with the terms of this Agreement do not violate any provision of any
applicable federal, state law, rule or regulation or any provision of the
Company's Restated Certificate or Bylaws and do not conflict with or constitute
a material default under the provision of any judgment, writ, decree, order or
material agreement known by counsel by which the Company is a party or by which
it is bound, which violation, conflict or default would be materially adverse to
the Company.
(f) All consents, approvals, orders or authoriza-
tions of, and all qualifications, registrations, designations, declarations or
filings with, any federal or state governmental authority on the part of the
Company (other than by federal or state securities laws which are covered in
paragraph (h) below) required to be made prior to the Initial Closing in
connection with the consummation of the transactions contemplated by this
Agreement have been obtained, and are effective, as of the Initial Closing and
such counsel is not aware of any proceedings, or threat thereof, which question
the validity thereof.
(g) Based in part upon the representations of
Investor, the offer and sale of the Debentures pursuant to the terms of this
Agreement are exempt from the registration requirements of section 5 of the
Securities Act of 1933, as amended, by virtue of section 4(2) thereof and from
the qualification requirements of the California Corporate Securities Law of
1968, as amended, by virtue of section 25102(f) thereof. No opinion need be
expressed as to compliance with applicable antifraud statutes, rules and
regulations of any applicable law governing the issuance of securities.
(h) Such counsel is not aware, after making in- quiry
of the Company's chief executive officer (but without any other investigation),
that there is any action, proceeding or investigation pending against the
Company or any of its officers, directors or employees, or that any of the
foregoing has received any threat thereof, which questions the validity of the
Agreement, or which might result, either individually or in the aggregate, in
any material adverse change in the assets, condition, affairs or prospects of
the Company.
The opinion of counsel for the Company under this
Section 5.8 shall be subject to such matters as are set forth in the Schedule of
Exceptions to this Agreement.
5.9 Lawful Issuance. At each of the Closings, the purchase of
the Debentures by Investor shall be legally permitted by all laws and
regulations to which Investor and the Company are subject.
6. Conditions of the Company's Obligations at the Closing. The
obligations of the Company to Investor under this Agreement
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are subject to the fulfillment on or before each of the Closings
of each of the following conditions by Investor:
6.1 Representations and Warranties. The representations and
warranties of Investor contained in Section 3 hereof shall be true on and as of
each of the Closings with the same effect as though such representations and
warranties had been made on and as of each of the Closings.
6.2 Payment of Purchase Price. Investor shall have delivered
the purchase price specified in Section 1.3 at each of the Closings and Investor
shall collectively have acquired and paid for the Debentures at the Initial
Closing.
6.3 California Qualification. The Commissioner of Corporations
of the State of California shall have issued a permit qualifying the offer and
sale to Investor of the Debentures and Common Stock issuable upon the conversion
thereof or such offer and sale shall be exempt from such qualification under the
California Corporate Securities Law of 1968, as amended.
7. Registration Rights. The Company covenants and agrees as follows:
7.1 Definitions. For purposes of this Section 7:
(a) The terms "register," "registered" and "regis-
tration" refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Debentures and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Debentures, or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such person's
registration rights under this Section 7 are not assigned;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are exercisable or
convertible into, Registrable Securities; and
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 7.10 hereof.
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7.2 Company Registration.
(a) Commencing two years after the effective date of
the Company's first registered public offering of stock, if (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days after
mailing of such notice by the Company in accordance with Section 9.6, the
Company shall, subject to the provisions of Section 7.6, cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
(b) The Company is obligated to effect only two such
registrations pursuant to this Section 7.2 on behalf of the Holders of the
Debentures.
7.3 Obligations of the Company. Whenever required under
this Section 7 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall
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19
be reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offer-
ing, enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Furnish, at the request of any Holder request-
ing registration of Registrable Securities pursuant to this Section 7, on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 7, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
7.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 7
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of the Registrable Securities.
7.5 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 7.2 for each
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Holder (which right may be assigned as provided in Section 7.10), including
(without limitation) all registration, filing and qualification fees, printer's
and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities and
the fees and disbursements of counsel for the selling Holders.
7.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 7.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall the amount of
securities of the selling Holders, together with all other securities to be
registered pursuant to the exercise of registration rights, included in the
offering be reduced below 30% of the total amount of securities included in such
offering.
7.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 7.
7.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under this
Section 7:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
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of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 7.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, controlling person, or
underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter or controlling person, other Holder, officer, director, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 7.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
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settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 7.8(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 7.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 7.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 7.8.
(d) The obligations of the Company and Holders under
this Section 7.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 7, and otherwise.
7.9 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after 90
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under section 12 of the Exchange Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the
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offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
7.10 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 7 may be
assigned by a purchaser of Registrable Securities under this Agreement to a
transferee or assignee of an amount of such securities representing at least 50%
of the aggregate number of shares of Registrable Securities of such purchaser or
to a partner or retired partner of such purchaser; provided, that such
transferee or assignee is approved by the Board of Directors of the Company,
which approval shall not be unreasonably withheld, and that the Company is,
within a reasonable time after such approved transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the approved
transferee or assignee is restricted under the Securities Act.
7.11 "Market Stand-Off" Agreement. Investor hereby agrees that
it shall not, to the extent requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities during a reasonable and customary period of time as
agreed to by the Company and the underwriters (not to exceed 180 days) following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers
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shares (or securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such reasonable and
customary period.
7.12 Amendment of Registration Rights. Any provision of this
Section 7 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.13 Termination of Registration Rights. The Company's
obligations pursuant to this Section 7 shall terminate seven years from the date
of consummation of the Company's sale of its common stock in a bona fide, firm
commitment underwriting (the "Initial Public Offering") pursuant to a
registration statement on Form S-1 under the Securities Act which results in
gross offering proceeds to the Company of more than $7,500,000, the public
offering price of which was not less than $9.00 per share (adjusted to reflect
stock dividends, stock splits or recapitalizations).
8. Covenants.
8.1 Delivery of Financial Statements. The Company shall
deliver to (i) an Investor who acquires at least $1,000,000 of the Debentures
("Major Investor") and (ii) each assignee of any Major Investor who acquires 50%
of such Major Investor's Debentures purchased hereunder:
(a) as soon as practicable, but in any event within
90 days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company as of the end of such year,
and a statement of cash flows for such year, such year-end financial reports to
be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company (the
Company will include, upon request, the Company's management letter for such
audited reports); and
-24-
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(b) (i) within 30 days of the end of each month, an
unaudited statement of operations, statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail; such
monthly statements shall also contain the foregoing information on a
year-to-date basis and shall also compare actual performance to budget;
and
(ii) At least annually, a comprehensive
operating budget for the next fiscal year forecasting the Company's
revenues, expenses and cash position, prepared on a monthly basis,
including balance sheets and sources and applications of funds
statements for such months and, as soon as prepared, any other budgets
or revised budgets prepared by the Company; and
(iii) such other information relating to the
financial condition, business, research, prospects or corporate affairs
of the Company as Investor or any such assignee of Investor may from
time to time request, provided, however, that the Company shall not be
obligated to provide information which it deems in good faith to be
proprietary; and
(c) with respect to the financial statements called
for in subsection (b)(i) of this Section 8.1, an instrument executed by the
Treasurer or the President of the Company and certifying that such financials
were prepared in accordance with internally consistent accounting methods
consistently applied with prior practice for earlier periods and fairly present
the financial condition of the Company and its results of operation for the
period specified, subject to year-end audit adjustment. For purposes of this
Section 8, a Major Investor includes affiliated investing entities of Investor.
8.2 Inspection. The Company shall permit Investor, at
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by Investor; provided, however, that the Company shall not be obligated pursuant
to this Section 8.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential or proprietary
information.
8.3 Termination of Covenants. The covenants set forth in
Sections 8.1, 8.2 and 8.5 shall terminate and be of no further force or effect
when the sale of securities pursuant to a registration statement filed by the
Company under the Securities Act in connection with the firm commitment
underwritten offering of its securities to the general public is consummated or
when the Company first becomes subject to the periodic reporting requirements of
Section 13(a) or 15(d) of the Exchange Act, whichever event shall first occur;
provided that the Company shall
-25-
26
furnish for a period of five years from the termination of such covenants to
each Major Investor copies of its reports on Forms 10-K and 10-Q within 10 days
after filing with the SEC.
8.4 Right of First Offer. Subject to the terms and conditions
specified in this Section 8.4, the Company hereby grants to Investor a right of
first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). Investor shall be entitled to apportion the right of first
offer hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares
of, or securities convertible into or exercisable for, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail ("Notice") to Investor stating (i) its bona fide intention to offer or
issue such Shares, (ii) the number of such Shares to be offered, and (iii) the
price, if any, for which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the
Notice, Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issuable (or issued and
held) upon conversion of the Debentures, then held, by Investor bears to the
total number of shares of outstanding Common Stock and Common Stock issuable
upon conversion of the Preferred Stock and the Debentures then outstanding.
(c) If all such Shares referred to in the Notice are
not elected to be obtained as provided in subsection 8.4(b) hereof, the Company
may, during the 60 day period following the expiration of the period provided in
subsection 8.4(b) hereof, offer the remaining unsubscribed Shares to any person
or persons at a price not less than that, and upon terms no more favorable to
the offeree than those, specified in the Notice. If the Company does not enter
into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within 60 days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to Investor in accordance herewith.
(d) The right of first offer granted in this Section
8.4 shall not be applicable (i) to the issuance or sale of shares of Common
Stock (or options therefor), to employees, directors, consultants or advisors of
the Company, provided each such person executes an agreement, in substantially
the form as approved by the Company's Board of Directors, (ii) shares offered in
the acquisition of another company, to strategic partners of
-26-
27
the Company or to companies with business relationships with the Company or in
connection with research and development partnerships sponsored by the Company,
(iii) to or after consummation of a bona fide, firmly underwritten public
offering of shares of the Company's Common Stock registered under the Securities
Act pursuant to a registration statement on Form S-1, which results in gross
proceeds to the Company of more than $7,500,000 at a price per share of at least
$9.00 (adjusted for any stock splits, stock dividends or other
recapitalizations), or (iv) in the event of an offering of Shares by the Company
to which the holders of a majority of the then outstanding Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock have waived their respective rights of first
offer provided for in Section 8.4 of the Series A Agreement, the Series B
Agreement, the Series C Agreement, the Series D Agreement and the Series E
Agreement, as the case may be.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations
and covenants of the Company contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closings and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of Investor.
9.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California except as it
regards choice of law.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
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28
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by 10 days' advance written notice to the other
parties.
9.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Investor agrees to indemnify and hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Investor or any of its officers, partners, employees or
representatives is responsible.
The Company agrees to indemnify and hold harmless
Investor from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
9.8 Expenses. Irrespective of whether the Initial Closing is
effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Restated Certificate, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
9.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the
Debentures purchased by Investor pursuant to this Agreement, except as specified
in Section 7.12 and Section 8.4(d), and any material amendment or waiver which
does not apply equally to all Major Investors shall not be effective unless it
has been consented to or approved in writing by a majority of the inequitably
affected Major Investors. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company; provided, however, that no condition set forth in Section 5 hereof
may be waived with respect to any Investor who does not consent thereto.
9.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of
-28-
29
this Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Title
------------------------------------
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTOR:
SANDOZ PHARMA LTD.
By /s/ D. Vasella /s/ ▇.▇. ▇▇▇▇▇▇
------------------------------------
Title D. Vasella CEO
------------------------------------
▇.▇. ▇▇▇▇▇▇ V.P.
------------------------------------
Address: Patents and Trademark Division
▇▇-▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
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SCHEDULE A
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURES
Principal Amount
of Convertible
Investors Debentures
First Closing:
Sandoz Pharma Ltd. $1,000,000
Second Closing:
Sandoz Pharma Ltd. [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE
COMMISSION]
Third Closing:
Sandoz Pharma Ltd. [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE
COMMISSION]
TOTAL $2,000,000
A-1
31
Exhibit A
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE
CONVERSION HEREOF MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE DEBENTURE OR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION,
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR
SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT.
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURE
$1,000,000 San Diego, California
September 29, 1995
BIOSITE DIAGNOSTICS INCORPORATED, a Delaware corporation (the
"Company"), the principal office of which is located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, for value received hereby promises to pay to SANDOZ
PHARMA LTD., or its registered assigns, the sum of One Million Dollars
($1,000,000), or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter. The
principal hereof and any unpaid accrued interest hereon, as set forth below,
shall be due and payable on the fifth anniversary of the date hereof (the
"Maturity Date") unless the Debenture shall be earlier redeemed or converted in
accordance with its terms.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. Debenture Purchase Agreement. This Debenture is issued pursuant to
the terms and conditions of the Debenture Purchase Agreement dated as of
September 22, 1995 between the Company and the investors listed in Schedule A
thereto (the "Agreement"). The Holder of this Debenture is subject to certain
restrictions set forth in the Agreement and shall be entitled to certain rights
and privileges set forth in the Agreement. This Debenture is the Debenture
referred to in the Agreement.
32
2. Definitions. As used in this Debenture, the following terms, unless
the context otherwise requires, have the following meanings:
2.1 "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Debenture,
2.2 "Holder, n when the context refers to a holder of this
Debenture shall mean any person who shall at the time be the registered
holder of this Debenture,
2.3 "Issue Date," shall mean the date hereof. Terms not
otherwise defined herein shall have the meanings given to them in the Agreement.
3. Interest. Commencing on the Issue Date until all outstanding
principal and interest on this Debenture shall have been paid in full, redeemed
or converted in accordance with its terms, interest shall accrue at a rate equal
to the lesser of (i) 8% per annum or (ii) the highest rate permitted by law,
compounded annually, on the outstanding principal amount of this Debenture.
4. Prepayment. Upon 30 days' prior written notice to the Holder, the
Company may at any time prepay in whole or in part the principal amount, plus
accrued interest to date of payment, of this Debenture. Payments shall be
credited first to interest due, then to principal.
5. Payment. Subject to Sections 6 and 7 hereof, the entire amount of
principal and interest due hereunder shall be due and payable on the Maturity
Date. Payments of both principal and interest shall be made in readily available
U.S. funds and shall be made by first class mail, postage prepaid, to the
registered address of the Holder.
6. Conversion.
6.1 Automatic Conversion. The entire outstanding principal
amount of this Debenture and all accrued interest thereon to the date of
conversion shall be automatically converted (i) at the sole option of the
Company, into shares of Common Stock of the Company, at the public offering
price for such shares of Common Stock, upon the consummation of a firmly
underwritten public offering (the "Public Offering") pursuant to a registration
statement filed by the Company under the Securities Act of 1933, as amended (the
"Act"), with aggregate gross proceeds in excess of $7,500,000 and at a price of
not less than $9.00 per share of Common Stock (as adjusted to reflect subsequent
stock splits, stock dividends, combinations or similar events), or (ii) in the
event the Public Offering is not consummated on or before
-2-
33
December 31, 1996, at the sole option of the Company, into shares of a series of
the Company's Preferred Stock, at the initial issue price for such series, upon
the closing of the sale by the Company of shares of a series of Preferred Stock
to at least one institutional investor, venture capital fund or other
professional investor in a bona fide equity financing with no firm commercial,
marketing or research and development rights granted in connection with such
financing (the "Equity Financing").
6.2 Conversion Procedure.
a. Notice of Conversion Pursuant to Section 6.1. If
this Debenture is automatically converted, written notice shall be delivered to
the Holder of this Debenture at the address last shown on the records of the
Company for the Holder or given by the Holder to the Company for the purpose of
notice, or, if no such address as appears or is given, at the place where the
principal office of the Company is located, notifying the Holder of the
conversion to be effected, specifying that the conversion is pursuant to clause
(i) or clause (ii), as the case may be, of Section 6 and the applicable
conversion price, the principal amount of the Debenture to be converted, the
amount of accrued interest to be converted, the date on which such conversion
will occur and calling upon such Holder to surrender to the Company, in the
manner and at the place designated, the Debenture.
b. Mechanics and Effect of Conversion. No fractional
shares of Common Stock or Preferred Stock, as the case may be, shall be issued
upon conversion of this Debenture. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Debenture, the Company shall
pay to the Holder the amount of outstanding principal and any accrued interest
that is not so converted, such payment to be in the form as provided below. In
the event of any conversion of the Debenture pursuant to clause (i) of Section
6.1 above, such conversion shall be deemed to have been made immediately prior
to the consummation of such Public Offering and on and after such date the
Holder of this Debenture entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder of
such shares. In the event of any conversion of this Debenture pursuant to clause
(ii) of Section 6.1 above, such conversion shall be deemed to have been made
immediately prior to the closing of the Equity Financing and on and after such
date the Holder of this Debenture entitled to receive the shares of such series
of Preferred Stock issuable upon such conversion shall be treated for all
purposes as the record Holder of such shares and a purchaser of such shares
under the stock purchase agreement between the Company and the investors in such
series of Preferred Stock and shall be bound by the terms of such stock purchase
agreement. Upon conversion of this Debenture, the Company shall be forever
released from all its obligations and liabilities under this Debenture, except
that the Company shall be obligated to pay the Holder, within 10 days after the
date of such conversion, any interest accrued and unpaid or
-3-
34
unconverted to and including the date of such conversion, and no more.
c. Delivery of Stock Certificates. As promptly as practicable
after the conversion of this Debenture, the Company st its expense will issue
and deliver to the Holder of this Debenture a certificate or certificates for
the number of full shares of Common Stock or Preferred Stock, as the case may
be, issuable upon such conversion (bearing such legends as are required by the
Agreement and applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this
Debenture, including a check payable to the Holder for any cash amounts payable
for any fractional shares as described above.
7. Redemption.
7.1 Merger or Liquidation of the Company. In the event of any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such consolidation,
merger or reorganization or any transaction or series of related transactions by
the Company in which in excess of 50% of the Company's voting power is
transferred, or a sale of all or substantially all of the assets of the Company,
or any liquidation, dissolution or winding up of the Company, the Company shall,
at the option of the Holder, redeem the Debenture held by such Holder by paying
in cash therefor to such Holder a sum equal to the outstanding principal amount
(excluding any accrued interest added to such principal amount) of such
Debenture, together with any accrued and unpaid interest on such Debenture (the
"Redemption Price").
7.2 Notice of Merger. The Company shall give each Holder of
record of this Debenture written notice of any impending transaction described
in Section 7.1 above not later than 20 days prior to the closing of such
transaction. The notice shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 7, and the Company
shall thereafter give such Holders prompt notice of any material changes. The
transaction shall in no event take place earlier than 20 days after the Company
has given the notice provided for herein or earlier than 10 days after the
Company has given notice of any material changes provided for herein; provided,
however, that such periods may be shortened upon the written consent of the
Holders of at least one-half of the then outstanding principal amount of the
Debenture issued under the Agreement.
7.3 Redemption Procedures. Each Holder electing to redeem such
Holder's Debenture pursuant to this Section 7 shall surrender such Debenture to
the Company, at its principal office, and on the consummation of the transaction
described in Section
-4-
35
7.1 the Redemption Price of such Debentures shall be payable in readily
available funds to the order of the Holder of record of such Debenture and each
surrendered Debenture shall be canceled.
8. Acceleration. If the Company (i) becomes insolvent, commences an act
of bankruptcy, commences or becomes subject to any proceeding under the Federal
Bankruptcy Act or any other insolvency or debtor's relief law, or (ii) initiates
any liquidation, dissolution or winding up proceedings or (iii) shall be in
default, for a period of st least 30 days, with respect to one or more
obligations of the Company, which obligations provide for aggregate payments in
excess of $1,000,000, then the entire indebtedness evidenced hereby shall, at
the option of the Holders of at least one-half of the outstanding principal
amount of the Debenture issued under the Agreement, become due and payable
immediately.
9. Miscellaneous.
9.1 Assignment. Subject to the restrictions on transfer set
forth in the Agreement, the rights and obligations of the Company and the Holder
of this Debenture shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9.2 Waiver and Amendment. Any provision of this Debenture may
be amended, waived or modified upon the written consent of the Company and
Holders of at least one-half the outstanding face amount of the Debenture issued
under the Agreement.
9.3 Transfer of this Debenture or Securities Issuable on
Conversion Hereof. This Debenture and the securities issued on conversion hereof
are subject to restrictions on transfer set forth in the Agreement. Transfer of
this Debenture may be effected only by its surrender to the Company and either
its reissuance, or the issuance of a new Debenture, by the Company to the
transferee.
9.4 Treatment of Debenture. To the extent permitted by
generally accepted accounting principles, the Company will treat, account and
report the Debenture as debt and not equity for accounting purposes and with
respect to any returns filed with federal, state or local tax authorities.
9.5 Notices. Unless otherwise provided, any notice required or
permitted under this Debenture shall be given ln writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail, or
with an air courier, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by 10 days' advance written notice to
the other parties.
-5-
36
9.6 No Stockholder Rights. Nothing contained in this Debenture
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company.
9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, irrespective
of its choice of law principles.
9.8 Headings. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
9.9 Register. The Company shall cause to be kept st its
principal business office as maintained from time to time at San Diego (or at
the location within the United States of America at which Company shall from
time to time maintain a business office) a register. The register so maintained
by Company is referred to herein as the "Register" in which, pursuant to such
reasonable regulations as Company may from time to time prescribe, Company shall
provide for the registration of Debentures and for the transfer of registered
Debentures. Upon surrender for registration of transfer of the Debenture at the
principal office of the Company, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more registered
Debentures of any authorized denomination and of like aggregate principal
amount. Authorized denominations shall comprise U.S.$1,000 or any multiple
thereof. At the option of the Holder, registered Debentures may be exchanged for
other registered Debentures of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Debentures to be exchanged at
the principal business office of the Company. All Debentures issued upon any
registration of transfer or exchange of Debentures shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same benefits, as the
Debentures surrendered upon such registration of transfer or exchange. Every
Debenture presented or surrendered for registration of transfer or for exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer or exchange of the Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of the Debenture. The Company shall not be required (i) to register the
transfer of or exchange Debentures for a period of 15 days immediately preceding
the date notice is given identifying the Debentures called for redemption, or
(ii) to register the transfer of or exchange of any registered Debenture, or
portion
-6-
37
thereof, called for redemption. The registered Holder of a Debenture shall be
treated as its owner for all purposes.
IN WITNESS WHEREOF, Biosite Diagnostics Incorporated, has caused this
Debenture to be issued this _____ day of September, 1995.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name of Holder: SANDOZ PHARMA LTD.
------------------------
Address: Patents and Trademark Division
▇▇-▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
-7-
38
NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Debenture)
TO ___________________________:
The undersigned, the holder of the foregoing Debenture, hereby
surrenders such Debenture for conversion into shares of ________ [Preferred
Stock] or [Common Stock] of Biosite Diagnostics Incorporated to the extent of
$__________ unpaid principal amount of, and $__________ of accrued but unpaid
interest on, such Debenture, and requests that the certificates for such shares
be issued in the name of, and delivered to,___________________________________ ,
whose address is ___________________________________________ .
Dated:_______________
_______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Debenture)
________________________________
(Address)
-8-
39
Exhibit A
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE
CONVERSION HEREOF MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE DEBENTURE OR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION,
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR
SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT.
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURE
[CONFIDENTIAL MATERIAL REDACTED AND San Diego, California
FILED SEPARATELY WITH THE COMMISSION] _________, 199_
BIOSITE DIAGNOSTICS INCORPORATED, a Delaware corporation (the
"Company"), the principal office of which is located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, for value received hereby promises to pay to SANDOZ
PHARMA LTD., or its registered assigns, the sum of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], or such lesser amount as
shall then equal the outstanding principal amount hereof on the terms and
conditions set forth hereinafter. The principal hereof and any unpaid accrued
interest hereon, as set forth below, shall be due and payable on the fifth
anniversary of the date hereof (the "Maturity Date") unless the Debenture shall
be earlier redeemed or converted in accordance with its terms.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. Debenture Purchase Agreement. This Debenture is issued pursuant to
the terms and conditions of the Debenture Purchase Agreement dated as of
September 22, 1995 between the Company and the investors listed in Schedule A
thereto (the "Agreement"). The Holder of this Debenture is subject to certain
restrictions set forth in the Agreement and shall be entitled to certain rights
and privileges set forth in the Agreement. This Debenture is the Debenture
referred to in the Agreement.
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2. Definitions. As used in this Debenture, the following terms, unless
the context otherwise requires, have the following meanings:
2.1 "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Debenture,
2.2 "Holder, n when the context refers to a holder of this
Debenture shall mean any person who shall at the time be the registered
holder of this Debenture,
2.3 "Issue Date," shall mean the date hereof.
Terms not otherwise defined herein shall have the meanings given to them in the
Agreement.
3. Interest. Commencing on the Issue Date until all outstanding
principal and interest on this Debenture shall have been paid in full, redeemed
or converted in accordance with its terms, interest shall accrue at a rate equal
to the lesser of (i) 8% per annum or (ii) the highest rate permitted by law,
compounded annually, on the outstanding principal amount of this Debenture.
4. Prepayment. Upon 30 days' prior written notice to the Holder, the
Company may at any time prepay in whole or in part the principal amount, plus
accrued interest to date of payment, of this Debenture. Payments shall be
credited first to interest due, then to principal.
5. Payment. Subject to Sections 6 and 7 hereof, the entire amount of
principal and interest due hereunder shall be due and payable on the Maturity
Date. Payments of both principal and interest shall be made in readily available
U.S. funds and shall be made by first class mail, postage prepaid, to the
registered address of the Holder.
6. Conversion.
6.1 Automatic Conversion. The entire outstanding principal
amount of this Debenture and all accrued interest thereon to the date of
conversion shall be automatically converted (i) at the sole option of the
Company, into shares of Common Stock of the Company, at the public offering
price for such shares of Common Stock, or (ii) in the event the shares of Common
Stock of the Company are not publicly traded on or before December 31, 1996, at
the sole option of the Company, into shares of a series of the Company's
Preferred Stock, at the initial issue price for such series, upon the closing of
the sale by the Company of shares of a series of Preferred Stock to at least one
institutional investor, venture capital fund or other professional investor in a
bona fide equity financing with no firm commercial, marketing or
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research and development rights granted in connection with such financing (the
"Equity Financing").
6.2 Conversion Procedure.
a. Notice of Conversion Pursuant to Section 6.1. If
this Debenture is automatically converted, written notice shall be delivered to
the Holder of this Debenture at the address last shown on the records of the
Company for the Holder or given by the Holder to the Company for the purpose of
notice, or, if no such address as appears or is given, at the place where the
principal office of the Company is located, notifying the Holder of the
conversion to be effected, specifying that the conversion is pursuant to clause
(i) or clause (ii), as the case may be, of Section 6 and the applicable
conversion price, the principal amount of the Debenture to be converted, the
amount of accrued interest to be converted, the date on which such conversion
will occur and calling upon such Holder to surrender to the Company, in the
manner and at the place designated, the Debenture.
b. Mechanics and Effect of Conversion. No fractional
shares of Common Stock or Preferred Stock, as the case may be, shall be issued
upon conversion of this Debenture. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Debenture, the Company shall
pay to the Holder the amount of outstanding principal and any accrued interest
that is not so converted, such payment to be in the form as provided below. In
the event of any conversion of this Debenture pursuant to clause (ii) of Section
6.1 above, such conversion shall be deemed to have been made immediately prior
to the closing of the Equity Financing and on and after such date the Holder of
this Debenture entitled to receive the shares of such series of Preferred Stock
issuable upon such conversion shall be treated for all purposes as the record
Holder of such shares and a purchaser of such shares under the stock purchase
agreement between the Company and the investors in such series of Preferred
Stock and shall be bound by the terms of such stock purchase agreement. Upon
conversion of this Debenture, the Company shall be forever released from all its
obligations and liabilities under this Debenture, except that the Company shall
be obligated to pay the Holder, within 10 days after the date of such
conversion, any interest accrued and unpaid or unconverted to and including the
date of such conversion, and no more.
c. Delivery of Stock Certificates. As promptly as practicable
after the conversion of this Debenture, the Company st its expense will issue
and deliver to the Holder of this Debenture a certificate or certificates for
the number of full shares of Common Stock or Preferred Stock, as the case may
be, issuable upon such conversion (bearing such legends as are required by the
Agreement and applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this
Debenture, including a check
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payable to the Holder for any cash amounts payable for any fractional shares as
described above.
7. Redemption.
7.1 Merger or Liquidation of the Company. In the event of any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such consolidation,
merger or reorganization or any transaction or series of related transactions by
the Company in which in excess of 50% of the Company's voting power is
transferred, or a sale of all or substantially all of the assets of the Company,
or any liquidation, dissolution or winding up of the Company, the Company shall,
at the option of the Holder, redeem the Debenture held by such Holder by paying
in cash therefor to such Holder a sum equal to the outstanding principal amount
(excluding any accrued interest added to such principal amount) of such
Debenture, together with any accrued and unpaid interest on such Debenture (the
"Redemption Price").
7.2 Notice of Merger. The Company shall give each Holder of
record of this Debenture written notice of any impending transaction described
in Section 7.1 above not later than 20 days prior to the closing of such
transaction. The notice shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 7, and the Company
shall thereafter give such Holders prompt notice of any material changes. The
transaction shall in no event take place earlier than 20 days after the Company
has given the notice provided for herein or earlier than 10 days after the
Company has given notice of any material changes provided for herein; provided,
however, that such periods may be shortened upon the written consent of the
Holders of at least one-half of the then outstanding principal amount of the
Debenture issued under the Agreement.
7.3 Redemption Procedures. Each Holder electing to redeem such
Holder's Debenture pursuant to this Section 7 shall surrender such Debenture to
the Company, at its principal office, and on the consummation of the transaction
described in Section 7.1 the Redemption Price of such Debentures shall be
payable in readily available funds to the order of the Holder of record of such
Debenture and each surrendered Debenture shall be canceled.
8. Acceleration. If the Company (i) becomes insolvent, commences an act
of bankruptcy, commences or becomes subject to any proceeding under the Federal
Bankruptcy Act or any other insolvency or debtor's relief law, or (ii) initiates
any liquidation, dissolution or winding up proceedings or (iii) shall be in
default, for a period of st least 30 days, with respect to one or more
obligations of the Company, which obligations provide for aggregate payments in
excess of $1,000,000, then the entire indebtedness evidenced hereby shall, at
the option of the Holders
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of at least one-half of the outstanding principal amount of the Debenture issued
under the Agreement, become due and payable immediately.
9. Miscellaneous.
9.1 Assignment. Subject to the restrictions on transfer set
forth in the Agreement, the rights and obligations of the Company and the Holder
of this Debenture shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9.2 Waiver and Amendment. Any provision of this Debenture may
be amended, waived or modified upon the written consent of the Company and
Holders of at least one-half the outstanding face amount of the Debenture issued
under the Agreement.
9.3 Transfer of this Debenture or Securities Issuable on
Conversion Hereof. This Debenture and the securities issued on conversion hereof
are subject to restrictions on transfer set forth in the Agreement. Transfer of
this Debenture may be effected only by its surrender to the Company and either
its reissuance, or the issuance of a new Debenture, by the Company to the
transferee.
9.4 Treatment of Debenture. To the extent permitted by
generally accepted accounting principles, the Company will treat, account and
report the Debenture as debt and not equity for accounting purposes and with
respect to any returns filed with federal, state or local tax authorities.
9.5 Notices. Unless otherwise provided, any notice required or
permitted under this Debenture shall be given ln writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail, or
with an air courier, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by 10 days' advance written notice to
the other parties.
9.6 No Stockholder Rights. Nothing contained in this Debenture
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company.
9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, irrespective
of its choice of law principles.
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9.8 Headings. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
9.9 Register. The Company shall cause to be kept st its
principal business office as maintained from time to time at San Diego (or at
the location within the United States of America at which Company shall from
time to time maintain a business office) a register. The register so maintained
by Company is referred to herein as the "Register" in which, pursuant to such
reasonable regulations as Company may from time to time prescribe, Company shall
provide for the registration of Debentures and for the transfer of registered
Debentures. Upon surrender for registration of transfer of the Debenture at the
principal office of the Company, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more registered
Debentures of any authorized denomination and of like aggregate principal
amount. Authorized denominations shall comprise U.S.$1,000 or any multiple
thereof. At the option of the Holder, registered Debentures may be exchanged for
other registered Debentures of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Debentures to be exchanged at
the principal business office of the Company. All Debentures issued upon any
registration of transfer or exchange of Debentures shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same benefits, as the
Debentures surrendered upon such registration of transfer or exchange. Every
Debenture presented or surrendered for registration of transfer or for exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer or exchange of the Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of the Debenture. The Company shall not be required (i) to register the
transfer of or exchange Debentures for a period of 15 days immediately preceding
the date notice is given identifying the Debentures called for redemption, or
(ii) to register the transfer of or exchange of any registered Debenture, or
portion
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thereof, called for redemption. The registered Holder of a Debenture shall be
treated as its owner for all purposes.
IN WITNESS WHEREOF, Biosite Diagnostics Incorporated, has caused this
Debenture to be issued this day of , 19 .
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BIOSITE DIAGNOSTICS INCORPORATED
By
--------------------------------
Name of Holder: SANDOZ PHARMA LTD.
------------------------------------------
Address: Patents and Trademark Division
▇▇-▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
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NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Debenture)
TO ___________________________:
The undersigned, the holder of the foregoing Debenture, hereby
surrenders such Debenture for conversion into shares of ________ [Preferred
Stock] or [Common Stock] of Biosite Diagnostics Incorporated to the extent of
$__________ unpaid principal amount of, and $__________ of accrued but unpaid
interest on, such Debenture, and requests that the certificates for such shares
be issued in the name of, and delivered to, __________________________________,
whose address is ___________________________________________.
Dated:_______________
__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Debenture)
__________________________________
(Address)
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