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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 9, 1996
PROTEIN POLYMER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19724 33-0311631
- ------------------------------------- ------------ ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification No.)
10655 Sorrento Valley Road, San Diego, California 92121
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 558-6064
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N/A
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(Former name or former address, if changed since last report)
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This Report consists of 69 pages.
The Exhibit Index appears on page 7.
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ITEM 5. OTHER EVENTS.
Extension of Ethicon Arrangement
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In September 1995, the Company entered into a licensing and development
agreement, and a supply agreement, with Ethicon, Inc., an affiliate of Johnson &
Johnson Company, with respect to its tissue adhesives and sealants program.
Under these agreements, Ethicon receives exclusive worldwide development,
marketing and distribution rights to products produced under the Company's
proprietary technology rights. In exchange, the Company receives research and
development payments and milestone payments, as well as potential manufacturing
and royalty payments. Currently, the product development efforts are behind the
schedule anticipated in the Ethicon agreements due to delays in meeting a
certain specific milestone. The original agreements provided that, if this
milestone was not met by a certain date, the agreements would automatically
terminate and all rights would revert back to the Company. On December 9, 1996,
this termination date was extended for approximately one year, until December
14, 1997, and to partially offset expenses, an additional payment to the Company
of $300,000 was made by Ethicon as part of the extension agreement. A copy of
the letter agreement evidencing the extension of the termination date and the
Registrant's press release with respect to this extension are appended as
exhibits to this Report.
Completion of Financing
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On January 6, 1997, the Registrant completed the sale of 1,904,000 shares
of its common stock, $.01 par value ("Common Stock"), to a group of accredited
------------
investors at a price of $2.50 per share. Aggregate gross proceeds to the
Company were $4,760,000.00. Expenses of the financing are currently estimated
at $200,000. The Securities Purchase Agreement (the "Purchase Agreement")
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pursuant to which these shares were sold, and the press release announcing this
financing, are appended as exhibits to this Report. Pursuant to the Purchase
Agreement, the Registrant has agreed to promptly file, and use its best efforts
to maintain the effectiveness of, a registration statement under the Securities
Act of 1933, as amended, to cover the resale of the shares purchased in this
financing. Such registration statement is expected to be filed not later than
January 13, 1997.
Investment Banker Engagement Letter
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On December 18, 1996, the Registrant entered into a financial advisory
services agreement with Hambrecht & Quist LLC ("H&Q"). In connection with that
---
agreement, and in lieu of a cash retainer, the Registrant granted H&Q a 60-day
option to acquire 800,000 shares of Common Stock at an exercise price of $2.75
per share.
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Extension of Public Warrants
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The Registrant has outstanding 1,667,500 public warrants (each, a "Public
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Warrant"), at an exercise price of $8.00 per share, under the Warrant Agreement,
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dated January 21, 1992, between the Registrant and Continental Stock Transfer &
Trust Company issued in connection with the Registrant's initial public offering
in January 1992. Each such warrant entitles the holder thereof to acquire one
share of Common Stock. The expiration date of the Public Warrants was recently
extended for one year, to January 21, 1998 (the "Warrant Extension"). A copy of
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the press release announcing the Warrant Extension is appended as an exhibit to
this Report.
MBF I, LLC Agreement.
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As of October 4, 1996, the Registrant entered into a letter agreement (the
"MBF Agreement") with MBF I, LLC ("MBF") pursuant to which MBF will advise the
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Company with respect to strategic business alternatives, general structuring of
financing or strategic transactions and negotiation of such financing or
strategic transactions. In consideration for such services, MBF will be
entitled to receive, in addition to reimbursement for any pre-approved
reasonable expenses incurred in furtherance of its responsibilities under the
MBF Agreement, warrants to purchase up to 750,000 shares of Common Stock and
consulting fees as more fully described below.
Initially, MBF was issued a warrant to purchase 50,000 shares of Common
Stock at an exercise price of $3.75 per share. MBF may be entitled to receive
additional warrants to purchase shares of Common Stock as follows:
1. If, prior to January 31, 1997, the Registrant raises at least $3
million in equity, MBF will be entitled to (i) receive a warrant to
purchase an additional 100,000 shares of Common Stock at an exercise
price of $6.00 per share, and (ii) receive a consulting fee of
$100,000 payable in quarterly installments of $25,000 commencing on
the first day of the Registrant's first fiscal quarter following the
closing of such transaction; in light of the completed financing
described above, the compensation described in this paragraph 1 has
now been earned.
2. If prior to January 31, 1998, the Registrant raises at least $5
million in equity (excluding the financing described in the
immediately preceding paragraph) at a price of not less than $4.00 per
share, MBF will be entitled to (i) receive a warrant to purchase and
additional 250,000 shares of Common Stock at an exercise price of
$6.00 per share, and (ii) receive a consulting fee of $200,000 payable
in quarterly installments of $25,000 commencing on the first day of
the Registrant's first fiscal quarter following the closing of such
transaction.
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3. If the average between the closing bid and ask price for the Common
Stock during any 21 consecutive trading days between October 4, 1996
and prior to July 31, 1998 is at least $8.00, MBF will be entitled to
receive a warrant to purchase an additional 100,000 shares of Common
Stock at an exercise price of $7.50 per share.
4. If the average between the closing bid and ask price for the Common
Stock during any 21 consecutive trading days between October 4, 1996
and prior to December 31, 1998 is at least $9.00, MBF will be entitled
to receive a warrant to purchase an additional 100,000 shares of
Common Stock at an exercise price of $7.50 per share.
5. If the average between the closing bid and ask price for the Common
Stock during any 21 consecutive trading days between October 4, 1996
and prior to June 30, 1999 is at least $10.00, MBF will be entitled to
receive a warrant to purchase an additional 150,000 shares of Common
Stock at an exercise price of $7.50 per share.
MBF is also entitled, not more than once each year, to demand registration
of the shares subject to any of the above warrants earned by MBF; such
registration to be at MBF's sole expense. MBF is also entitled to "piggyback"
registration of the shares subject to any of the above warrants earned by MBF on
any registration of Common Stock by the Registrant (subject to cutbacks on a pro
rata basis).
Copies of certain agreements relative to the MBF arrangement are appended
as exhibits to this Report.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
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Document Description Exhibit No.
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Letter Agreement dated December 9, 1996 between the 99.1
Registrant and Ethicon, Inc. with respect to an
extension of the License and Development Agreement
between them dated September 14, 1995
Registrant's Press Release dated December 10, 1996 with 99.2
respect to the extension of its License and Development
Agreement with Ethicon, Inc.
Securities Purchase Agreement dated as of January 6, 1997 99.3
among the Registrant and the investors named therein
relating to the purchase and sale of 1,904,000 shares of
the Registrant's Common Stock
Registrant's Press Release dated January 7, 1997 with 99.4
respect to the closing of a private placement of Common
Stock
Registrant's Press Release dated December 10, 1996 with 99.5
respect to the extension of the expiration date of the
Registrant's publicly traded warrants
Letter Agreement dated as of October 4, 1996 between the 99.6
Registrant and MBF I, LLC ("MBF") relating to the provision
of consulting and advisory services
Form of Warrant with respect to 50,000 warrants issued to 99.7
MBF, and to be used with respect to additional warrants
which may be issued to MBF
Registration Rights Agreement dated as of October 4, 1996 99.8
between the Registrant and MBF
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
January 7, 1997 PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ J. Thomas Parmeter
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J. Thomas Parmeter, Chairman
of the Board, President and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Sequentially
No. Document Description Numbered Page
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99.1 Letter Agreement dated December 9, 1996
between the Registrant and Ethicon, Inc.
with respect to an extension of the License
and Development Agreement between them
dated September 14, 1995
99.2 Registrant's Press Release dated December 10,
1996 with respect to the extension of its
License and Development Agreement with
Ethicon, Inc.
99.3 Securities Purchase Agreement dated as of
January 6, 1997 among the Registrant and the
investors named therein relating to the purchase
and sale of 1,904,000 shares of the
Registrant's Common Stock
99.4 Registrant's Press Release dated January 7,
1997 with respect to the closing of a private
placement of Common Stock
99.5 Registrant's Press Release dated December 10, 1996
with respect to the extension of the expiration
date of the Registrant's publicly traded warrants
99.6 Letter Agreement dated as of October 4, 1996
between the Registrant and MBF I, LLC ("MBF")
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relating to the provision of consulting and
advisory services
99.7 Form of Warrant with respect to 50,000 warrants
issued to MBF, and to be used with respect to
additional warrants which may be issued to MBF
99.8 Registration Rights Agreement dated as of October 4,
1996 between the Registrant and MBF
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December 9, 1996
Dr. J. Thomas Parmeter
Protein Polymer Technologies, Inc.
10655 Sorrento Valley Road
San Diego, California 92121
Re: Amendment to Agreement between Protein Polymer
Technologies, Inc. and Ethicon, Inc.
Dear Tom:
As you know, Ethicon, Inc. ("Ethicon") has extended the period for
CANDIDATE ACCEPTANCE under the Agreement dated September 14, 1995 between
Protein Polymer Technologies, Inc. ("PPTI") and Ethicon, as amended by letter
dated August 12, 1996, so that the term of the Agreement has been extended
until December 16, 1996. However, both Ethicon and PPTI believe that it would
be beneficial to extend the period for CANDIDATE ACCEPTANCE for an additional
twelve (12) months to allow further work on the adhesive and sealants
candidates.
1. Therefore, we propose that the Agreement between Ethicon and PPTI be
further amended as follows:
(a) On page 23, line 14, in Paragraph 4.04, after the insertion of the
additional language set forth in the August 12, 1996 letter and preceding
the last sentence of said Section 4.04, the following sentence shall be
inserted: "Before the expiration of the additional four (4) month extended
period for CANDIDATE ACCEPTANCE, ETHICON may extend the period of CANDIDATE
ACCEPTANCE for an additional twelve (12) months by notifying PPTI in
writing of its election to so extend and agreeing to pay PPTI Three Hundred
Thousand Dollars ($300,000.00). The Three Hundred Thousand Dollars
($300,000) shall be paid in four equal installments of Seventy Five
Thousand Dollars ($75,000) each, the first being due within two (2)
business days of the date of election, and subsequent installments due on
the first day of March, June, and September, 1997, provided that no
installment payments need be made after the date of CANDIDATE ACCEPTANCE."
(b) On page 33, line 21, in Paragraph 5.03, after the insert added by
the letter dated August 12, 1996 and before the phrase "should be
creditable", the following clause shall be inserted: "and 100% of the Three
Hundred Thousand Dollar ($300,000.00)
Exhibit 99.1
<PAGE>
payments specified in paragraph 4.04 for the additional twelve-month
extension or so much thereof as shall have actually been paid . . .".
(c) On page 53, line 12, in Paragraph 9.02, the following shall be
inserted: "provided, however, that during the twelve-month extension period
provided in Paragraph 4.04, ETHICON shall have no right to terminate this
Agreement under this Paragraph 9.02 (ii)."
2. This Amendment to the Agreement between PPTI and Ethicon shall be
effective December 9, 1996. If PPTI agrees to this Amendment, please indicate
by signing below.
3. This letter shall serve as written notice to PPTI of Ethicon's election
to extend the period of CANDIDATE ACCEPTANCE for an additional twelve (12)
months until December 16, 1997. Ethicon shall wire transfer to the account of
PPTI the sum of Seventy five Thousand Dollars ($75,000) on or before December
12, 1996.
Sincerely yours,
/s/ PATRICK J. O'NEILL
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Patrick J. O'Neill,
Vice President, Growth Technologies
and New Business Development for
Ethicon, Inc.
For Protein Polymer Technologies, Inc.
Agreed to and accepted
By: /s/ J. THOMAS PARMETER
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Name:
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Title: President
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<PAGE>
[LETTERHEAD OF PROTEIN POLYMER]
FOR IMMEDIATE RELEASE
CONTACT:
Gwen Como
Director, Investor Relations
(619) 558-6064
R&D COLLABORATION WITH ETHICON EXTENDED;
J&J TO INCREASE INVESTMENT IN PROTEIN POLYMER
SAN DIEGO, December 10, 1996 - Protein Polymer Technologies, Inc. (NASDAQ-PPTI),
today announced that the R&D phase of its collaboration with Ethicon, Inc., a
subsidiary of Johnson & Johnson, has been extended by mutual agreement until
December 16, 1997. In addition, Johnson & Johnson Development Corporation (JJDC)
will make a further equity investment in PPTI.
The collaboration is focused on jointly developing and commercializing tissue
adhesives and sealants for wound closure and related surgical applications.
Products targeted for development are based upon proprietary protein polymers
designed and genetically engineered by PPTI to meet Ethicon's performance and
biocompatibility standards for surgical wound closure and sealant products. PPTI
estimates that the applications targeted represent approximately 12 million
surgical procedures per year in the U.S.
Including R&D payments for this extension, Ethicon will have contributed $1.7
million to PPTI's product research and formulation efforts. In addition, Ethicon
will bear all costs of preclinical animal testing. After successful completion
of the product formulation milestone, Ethicon will fund development and
commercialization expenditures associated with the collaboration, including
clinical trials and regulatory filings.
The collaboration also provides for an additional series of payments to PPTI
based upon the successful achievement of certain regulatory and product
development milestones. If all of the milestones including final FDA product
approval are achieved, PPTI estimates it will have received approximately $11
million in license fees, R&D and milestone payments prior to product
commercialization. Upon commercialization, PPTI will receive royalty payments
on product sales, and has an option to manufacture all of the protein components
and some or all of the finished product. Ethicon has worldwide product marketing
rights.
JJDC is a Johnson & Johnson subsidiary that makes equity investments in
companies with which Johnson & Johnson affiliated companies have or may develop
collaborative relationships. JJDC previously has invested more than $3 million
in private placements of PPTI equity securities.
(CONTINUED)
Exhibit 99.2
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PPTI ANNOUNCES CONTINUATION OF COLLABORATION WITH ETHICON
PAGE 2.
"The continuation of our collaboration with Ethicon in combination with Johnson
& Johnson's equity investment optimizes the potential for technical and
commercial success in development of these unique surgical adhesives and
sealants, and their introduction into the $2.5 billion worldwide wound closure
market," said J. Thomas Parmeter, President and Chief Executive Officer of
Protein Polymer Technologies, Inc.
Protein Polymer Technologies, Inc. is a development stage biomaterials company
focused on tissue repair and drug delivery. In addition to surgical adhesives
and sealants, products being developed include bioactive coatings, surgical
adhesion barriers, tissue augmentation materials and drug delivery devices.
PPTI also markets a line of protein polymer-activated cell culture products
under the trade names of ProNectin(R) and SmartPlastic(TM).
Future events could differ materially from those presented in this press
release. As a result, the reader is cautioned not to rely solely on these
forward-looking statements. The reader is advised to refer to the Company's
10-KSB and other documents on file with the Security and Exchange Commission, as
well as the Company's Annual Report, copies of which are available from the
Company to determine risks associated with the above statements.
* * *
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CONFORMED COPY
____________________________________________________________________________
____________________________________________________________________________
PROTEIN POLYMER TECHNOLOGIES, INC.
___________________________________________
SECURITIES PURCHASE AGREEMENT
___________________________________________
Dated as of January 6, 1997
____________________________________________________________________________
____________________________________________________________________________
Exhibit 99.3
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<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
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<S> <C>
1. Definitions............................................... 1
2. Authorization of Securities............................... 3
3. Sale and Purchase of the Shares........................... 3
4. Register of Securities; Restrictions on Transfer
of Securities; Removal of Restrictions on Transfer
of Securities............................................. 4
4.1 Register of Securities.............................. 4
4.2 Restrictions on Transfer............................ 4
4.3 Removal of Transfer Restrictions.................... 7
5. Representations and Warranties by the Company............. 8
5.1 Organization, Standing, etc......................... 8
5.2 Qualification....................................... 8
5.3 Capital Stock....................................... 8
5.4 Corporate Acts and Proceedings...................... 9
5.5 Compliance with Other Instruments................... 9
5.6 Binding Obligations................................. 9
5.7 Securities Laws..................................... 10
5.8 Financial Statements................................ 10
5.9 Changes............................................. 10
5.10 Litigation.......................................... 10
5.11 Brokers or Finders.................................. 10
5.12 Disclosure.......................................... 10
6. Conditions of Parties' Obligations........................ 11
6.1 Conditions of Investors' Obligations
at the Closing...................................... 11
6.2 Conditions of Company's Obligations................. 12
7. Registration of Restricted Stock.......................... 12
7.1 Required Registration............................... 12
7.2 Registration Procedures............................. 12
7.3 Expenses............................................ 14
7.4 Indemnification..................................... 14
7.5 Reporting Requirements Under the
Exchange Act........................................ 17
7.6 Stockholder Information............................. 17
7.7 Delay of Registration............................... 18
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
8. Miscellaneous............................................. 18
8.1 Waivers and Amendments.............................. 18
8.2 Effect of Waiver or Amendment....................... 18
8.3 Rights of Holders Inter Se.......................... 18
8.4 Exculpation Among Investors and Holders............. 19
8.5 Notices............................................. 19
8.6 Severability........................................ 19
8.7 Parties in Interest................................. 20
8.8 Headings............................................ 20
8.9 Choice of Law....................................... 20
8.10 Expenses............................................ 20
8.11 Counterparts........................................ 20
8.12 Publicity........................................... 20
</TABLE>
ANNEXES
A - Schedule of Investors and Required Payment
B - Risk Factors
C - Schedule of Exceptions
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into
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as of January 6, 1997 among Protein Polymer Technologies, Inc., a Delaware
corporation (the "Company"), and the other Persons listed on Annex A hereto
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(sometimes referred to herein individually as "Investor" and sometimes
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collectively as "Investors").
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1. Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined in this Section 1
and those accounting terms used in this Agreement not defined in this Section 1
shall, except as otherwise provided for herein, be construed in accordance with
those generally accepted accounting principles employed by the Company,
consistently applied. If and so long as the Company has any Subsidiary, the
accounting terms defined in this Section 1 and those accounting terms appearing
in this Agreement but not defined in this Section 1 shall be determined on a
consolidated basis for the Company and each of its Subsidiaries, if any, and the
financial statements and other financial information to be furnished by the
Company pursuant to this Agreement shall be consolidated.
"1995 Annual Report" shall mean the Company's Report on Form
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10-KSB for the fiscal year ended December 31, 1995.
"Action" shall mean any action, suit, arbitration or other
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legal, administrative or other proceeding by or before any court, arbitrator or
Governmental Entity.
"Agreement" shall mean this Securities Purchase Agreement.
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"Balance Sheet" shall have the meaning assigned to it in
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Section 5.8 hereof.
"Balance Sheet Date" shall have the meaning assigned to it
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in Section 5.8 hereof.
"Board" shall mean the Board of Directors of the Company.
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"California Securities Law" shall mean the California
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Corporate Securities Law of 1968, as amended.
"Closing" and "Closing Date" shall have the meanings
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assigned to such terms in Section 3(b) hereof.
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
"Common Stock" shall mean the Company's common stock, par
------------
value $0.01 per share.
"Commission" shall mean the Securities and Exchange
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Commission.
"Equity Security" shall mean the Common Stock, or any
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security convertible into the Common Stock, or any security carrying any warrant
or right to subscribe to or purchase the Common Stock, or any such warrant or
right.
"Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended.
"Form 10-QSB" shall mean the Company's Report on Form 10-QSB
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for the quarterly period ended September 30, 1996.
"Governmental Entity" shall mean any federal, state, local
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or foreign governmental bureau, commission, board, agency or instrumentality.
"Holder" of any security shall mean the record or beneficial
------
owner of such security.
"Holders of a Majority of the Restricted Stock" shall mean,
---------------------------------------------
on a given date, the Person or Persons who are the Holders of greater than 50%
of the Restricted Stock.
"Investor" shall have the meaning assigned to it in the
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introductory paragraph of this Agreement.
"Material Effect" shall mean a material and adverse effect
---------------
on the business, assets, property or financial condition of the Company.
"Person" shall mean any natural person, corporation, trust,
------
association, company, partnership, limited liability company, joint venture and
other entity and any government, governmental agency, instrumentality or
political subdivision.
"Required Payment" shall mean, with respect to each
----------------
Investor, the number of Shares purchased by such Investor, multiplied by $2.50,
as set forth on Annex A hereto.
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"Restricted Stock" shall mean (a) the Shares, and (b) any
----------------
securities issued or issuable with respect to the Common Stock referred to in
clause (a) above by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger or consolidation or
reorganization; provided, however, that shares of Common Stock shall only be
treated as Restricted Stock if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect to such Common Stock are removed upon the consummation of such
sale.
"Rule 144" shall mean Rule 144 of the Commission under the
--------
Securities Act.
"Securities" shall have the meaning assigned to it in
----------
Section 2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
"Series D Preferred Stock" shall mean the Company's Series D
------------------------
10% Cumulative Convertible Preferred Stock.
"Shares" shall have the meaning assigned to such term in
------
Section 2 hereof.
"Subsidiary" shall mean any Person, at least 50% of the
-----------
outstanding voting stock of which is at the time owned or controlled directly or
indirectly by the Company or by one or more of such subsidiary entities or both,
where "voting stock" means any shares of stock having general voting power in
electing the board of directors.
"Suspension Period" shall have the meaning assigned to it in
-----------------
Section 7.1(b) hereof.
2. Authorization of Securities. The Company has authorized the
---------------------------
issue and sale of up to 2,000,000 shares (the "Shares") of its Common Stock for
------
sale to the Investors pursuant to this Agreement. The Shares are sometimes
referred to herein as the "Securities."
----------
3. Sale and Purchase of the Shares.
-------------------------------
(a) Upon the terms and subject to the condi tions herein contained,
the Company agrees to sell to each
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Investor, and each Investor severally agrees to purchase from the Company, at
the Closing on the Closing Date, the number of Shares set forth opposite its
name on Annex A hereto, and each Investor shall pay to the Company the Required
Payment.
(b) The closing of the sale to and purchase by the
Investors of the Shares (the "Closing") shall occur at the offices of Paul,
-------
Hastings, Janofsky & Walker LLP, 555 South Flower Street, Los Angeles,
California, at the hour of 10 o'clock A.M., California time, on January 6, 1997
or at such different time or day as the Investors and the Company shall agree
(the "Closing Date"). At the Closing (or within one week thereafter to allow for
------------
processing by the Company's transfer agent), the Company will deliver to each
Investor instruments or certificates evidencing the Securities being purchased
by it, each of which shall be registered in such Investor's name as stated on
Annex A hereto, against delivery to the Company of payment by cashier's check or
wire transfer in an amount equal to the Required Payment of such Investor.
4. Register of Securities; Restrictions on Transfer of Securities;
--------------------------------------- -----------------------
Removal of Restrictions on Transfer of Securities.
- -------------------------------------------------
4.1 Register of Securities. The Company or its duly appointed
----------------------
agent shall maintain a separate register for the Common Stock in which it shall
register the issue and sale of all the Shares. All transfers of the Securities
shall be recorded on the register maintained by the Company or its agent, and
the Company shall be entitled to regard the registered holder of the Securities
as the actual holder of the Securities so registered until the Company or its
agent is required to record a transfer of such Securities on its register.
Subject to Section 4.2(c) hereof, the Company or its agent shall be required to
record any such transfer when it receives the Security to be transferred duly
and properly endorsed by the registered holder thereof or by its attorney duly
authorized in writing.
4.2 Restrictions on Transfer.
------------------------
(a) Each Investor understands and agrees that the
Securities it will be acquiring have not been registered under the Securities
Act, and that accordingly they will not be fully transferable except as
permitted under various exemptions contained in the Securities Act, or upon
satisfaction of the registration and prospectus delivery requirements of the
Securities Act. Each Investor acknowledges that it must bear the economic risk
of its investment in the Securities for an indefinite period of time since they
have not been registered under the Securities Act
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<PAGE>
and therefore cannot be sold unless they are subsequently registered or an
exemption from registration is available.
(b) Each Investor hereby represents and warrants to the Company that:
(i) Such Investor is acquiring the Securities it has agreed to
purchase for investment purposes only, for its own account, and not as nominee
or agent for any other Person, and not with the view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act.
(ii) Such Investor knows of no public solicitation or
advertisement of an offer in connection with the Securities.
(iii) Such Investor has carefully reviewed this Agreement. Such
Investor has had, during the course of the transaction and prior to its purchase
of the Shares, the opportunity to ask questions of and receive answers from the
Company concerning the terms and conditions of the offering and to obtain
additional information (to the extent the Company possesses such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. Such
Investor has received all information that it has requested regarding the
Company and believes that such information is sufficient to make an informed
decision with respect to the purchase of the Shares. Without limiting the
generality of the foregoing, such Investor has received a copy of (A) the 1995
Annual Report, (B) the Form 10-QSB, and (C) the Risk Factors attached as Exhibit
B hereto, currently contemplated to be included in the registration statement
referred to in Section 7.1(a) hereof.
(iv) Such Investor is able to bear the economic risk of its
investment in the Shares and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of, and
protecting its interests with respect to, its investment in the Shares. Such
Investor is aware of the risk involved in its investment in the Shares and has
determined that such investment is suitable for it in light of its financial
circumstances and available investment opportunities.
(v) This Agreement, when executed and delivered by such Investor,
constitutes the legal, valid and binding obligation of such Investor and is
enforceable against such Investor in accordance with its terms.
-5-
<PAGE>
(vi) Such Investor is an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
(vii) Such Investor's jurisdiction of formation or incorporation
(if applicable) and principal place of business or its residency as set forth on
the signature page hereof or the annexes hereto by such Investor are accurate.
(viii) The purchase by such Investor of the Shares hereunder does
not violate or conflict with any law or regulation applicable to such Investor.
(ix) No Person engaged by such Investor has, or will have, any
right or claim against the Company for any commission, fee or other compensation
as a finder or broker, or in any similar capacity.
(c) Each Investor hereby further agrees with the Company as follows:
(i) Subject to Section 4.3 hereof, the instruments or certificates
evidencing the Securities it has agreed to purchase, and each instrument or
certificate issued in transfer thereof, will bear the following legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 and have been taken for investment
purposes only and not with a view to the distribution thereof, and,
except as stated in an agreement between the holder of this
certificate, or its predecessor in interest, and the issuer
corporation, such securities may not be sold or transferred unless
there is an effective registration statement under such Act covering
such securities or the issuer corporation receives an opinion, in form
and content reasonably satisfactory to the issuer corporation, of
counsel reasonably acceptable to the issuer corporation (which may be
counsel for the issuer corporation) stating that such sale or transfer
is exempt from the registration and prospectus delivery requirements
of such Act."
(ii) The instruments or certificates representing such Securities,
and each instrument or certificate issued in transfer thereof, will also bear
any legend required under any applicable state securities law.
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<PAGE>
(iii) Prior to any proposed sale, assignment, transfer or
pledge of any Securities by an Investor, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Investor shall give written notice to the Company of such Investor's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail and shall be accompanied at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall, and whose legal opinion shall, be reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Securities may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Commission to the effect that the transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, whereupon the
holder of such Securities shall be entitled to transfer such Securities in
accordance with the terms of the notice delivered by the holder to the Company.
The Company will not require such a legal opinion or "no action" letter in any
transaction in compliance with Rule 144, unless otherwise required by the
Company's independent transfer agent.
(iv) Such Investor consents to the Company's making a
notation on its records or giving instructions to any transfer agent of the
Common Stock in order to implement the restrictions on transfer of the
Securities mentioned in this subsection (c).
(d) Each Investor, or each Person executing this Agreement on
behalf of an Investor, further represents and warrants to the Company that such
Investor or other Person, as the case may be, has been duly authorized to, and
has, and as of the Closing will have, full power and authority (including
corporate, if applicable) to, execute and deliver this Agreement on behalf of
such Investor, and to make the representations and warranties to the Company in
this Section 4 on behalf of such Investor, and to perform the obligations of
such Investor under this Agreement.
4.3 Removal of Transfer Restrictions. Any legend endorsed on a
--------------------------------
certificate evidencing a Security pursuant to Section 4.2(c)(i) hereof and the
stop transfer instructions and record notations with respect to such Security
shall be removed and the Company shall issue a certificate without such legend
to the holder of such Security (a) upon the sale thereof if such Security and
such sale are registered under the Securities Act, (b) if such holder
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<PAGE>
provides the Company with an opinion, in form and content reasonably
satisfactory to the Company, of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) if such Security may be sold under Rule 144.
5. Representations and Warranties by the Company. In order to
---------------------------------------------
induce each Investor to enter into this Agreement and to purchase the Shares,
the Company hereby represents and warrants to each Investor that, except as set
forth on Annex C hereto:
5.1 Organization, Standing, etc. 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 presently conducted and as proposed to be conducted, to own
and hold its properties and assets, to enter into this Agreement, to issue the
Securities and to carry out the provisions hereof and thereof.
5.2 Qualification. The Company is duly qualified as a foreign
-------------
corporation and in good standing in the State of California. The Company is not
qualified to do business as a foreign corporation in any other jurisdiction and
such qualification is not required as of the date hereof, except where the
failure to be so qualified would not have a Material Effect.
5.3 Capital Stock.
-------------
(a) As of the Closing Date, the authorized capital stock of the
Company will consist of (i) 5,000,000 shares of preferred stock, par value $0.01
per share, 71,600 shares of which have been designated as Series D Preferred
Stock; and (ii) 25,000,000 shares of Common Stock; and the Company will have no
authority to issue any other capital stock. There are 49,187 shares of Series D
Preferred Stock issued and outstanding, and, as of the Closing, before giving
effect to the transactions contemplated by this Agreement, 7,208,228 shares of
Common Stock are issued and outstanding, and all such outstanding shares of
Series D Preferred Stock and Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
(b) Except as contemplated by this Agreement or as expressly provided
in Annex C to this Agreement, the Company has no outstanding subscription,
option, warrant, right of first refusal, preemptive right, call, contract,
demand, commitment, convertible security or
-8-
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other instrument, agreement or arrangement of any character or nature whatever
under which the Company is or may be obligated to issue Common Stock, preferred
stock or other Equity Security of any kind.
5.4 Corporate Acts and Proceedings. The Company has, and as of
------------------------------
the Closing will have, full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and the transactions
contemplated hereby. All corporate acts and proceedings required for the
authorization, execution and delivery of this Agreement and the offer, issuance
and delivery of the Securities and the performance of this Agreement have been
lawfully and validly taken or will have been so taken prior to the Closing.
5.5 Compliance with Other Instruments. The execution, delivery
---------------------------------
and performance by the Company of this Agreement (a) will not require from the
Board or stockholders of the Company any consent or approval that has not been
validly and lawfully obtained, (b) will not require the Company to obtain or
effect any authorization, consent, approval, license, exemption of or filing or
registration with any Person, except such as shall have been lawfully and
validly obtained prior to the Closing and such as may subsequently be required
pursuant to Section 7 hereof, (c) will not cause the Company to violate or
contravene, except where such violation or contravention would not have a
Material Effect, (i) any provision of law, (ii) any rule or regulation of any
Governmental Entity, (iii) any order, writ, judgment, injunction, decree,
determination or award binding upon the Company, or (iv) any provision of the
Certificate of Incorporation or Bylaws of the Company, (d) will not cause the
Company to violate or be in conflict with, result in a breach by the Company of
or constitute (with or without notice or lapse of time or both) a default by the
Company under, any material agreement, lease or instrument, commitment or
arrangement to which the Company is a party or by which the Company or any of
its properties, assets or rights are bound or affected, except where such
violation, conflict, breach or default would not have a Material Effect, and (e)
will not result in the creation or imposition of any lien.
5.6 Binding Obligations. This Agreement constitutes the legal,
-------------------
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally, and by general equitable principles.
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<PAGE>
5.7 Securities Laws. Subject to the accuracy of the representations
---------------
and warranties contained in Section 4.2, the offer, issue and sale of the Shares
are exempt from the registration and prospectus delivery requirements of the
Securities Act, and are exempt from qualification under the California
Securities Law and the state securities laws of the jurisdictions where the
Investors are resident.
5.8 Financial Statements. Included in the Form 10-QSB are the
--------------------
Company's unaudited balance sheet (the "Balance Sheet") as of September 30, 1996
-------------
(the "Balance Sheet Date"), and the unaudited statement of operations for the
------------------
nine-month period then ended. Included in the 1995 Annual Report are the
Company's audited balance sheets as of December 31, 1993, 1994 and 1995 and the
audited statements of operations, cash flow and shareholders' equity for the
period then ended, together with the related opinion of Ernst & Young LLP,
independent certified public accountants. The foregoing financial statements
(i) are in accordance with the books and records of the Company, (ii) present
fairly the financial condition of the Company at the Balance Sheet Date and the
results of operations and changes in financial position of the Company for the
periods therein specified, and (iii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods, except that the unaudited financial statements are
subject to year-end audit adjustments and do not contain footnotes or statements
of shareholders' equity and cash flow.
5.9 Changes. Since the Balance Sheet Date, except as
-------
disclosed in the Form 10-QSB, there has been no event which would have a
Material Effect, and the Company has been operated only in the ordinary course
of business, consistent with past practice.
5.10 Litigation. There is no Action pending and, to the
----------
knowledge of the Company, there is no material Action threatened against the
Company or its properties, assets or business. To the Company's knowledge, the
Company is not in default with respect to any order, writ, judgment, injunction,
decree, determination or award of any court or of any Governmental Entity.
5.11 Brokers or Finders. The Company has not incurred, and
------------------
will not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
5.12 Disclosure. The representations and warranties of the
----------
Company contained herein, when read together
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<PAGE>
with the annexes hereto and the Form 10-QSB and the 1995 Annual Report, do not
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements therein not misleading.
6. Conditions of Parties' Obligations.
----------------------------------
6.1 Conditions of Investors' Obligations at the Closing. The
--------------------------------------- ------------
obligation of each Investor to purchase and pay for the Shares which it has
agreed to purchase on the Closing Date is subject to the fulfillment prior to or
on the Closing Date of the following conditions, any of which may be waived in
whole or in part by such Investor.
(a) No Errors, etc. The representations and warranties of the Company
--------------
under this Agreement shall be deemed to have been made again on the Closing Date
and shall then be true and correct in all material respects.
(b) Compliance with Agreement. The Company shall have performed
-------------------------
and complied with, in all material respects, all agreements and conditions
required by this Agreement to be performed or complied with by it on or before
the Closing Date.
(c) Certificate of the Company. The Company shall have delivered to
--------------------------
each Investor a certificate of the Company dated the Closing Date, executed by
its President, certifying the satisfaction of the conditions specified in
subsections (a), (b), (d) and (e) of this Section 6.1.
(d) Qualification. All authorizations, approvals or permits, if any,
-------------
of any governmental authority or regulatory body of the United States or of any
state that are required from the Company in connection with the lawful issuance
and sale of the Shares to the Investors pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing.
(e) Waiver of Rights. The holders of the Series D Preferred Stock
----------------
shall have waived their rights of first refusal with respect to the Shares.
(f) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors, and the Investors shall have received all such counterpart originals
and certified or other copies of such documents as they may reasonably request.
-11-
<PAGE>
6.2 Conditions of Company's Obligations. The Company's obligation to
-----------------------------------
issue and sell the Shares to the Investors on the Closing Date is subject to the
fulfillment prior to or at such date of (i) the conditions precedent specified
in paragraphs (d) and (e) of Section 6.1 hereof, and (ii) the representations
and warranties of the Investors under this Agreement being deemed to have been
made again on the Closing Date and being then true and correct.
7. Registration of Restricted Stock.
--------------------------------
7.1 Required Registration.
---------------------
(a) Within one week after the Closing Date, the Company shall prepare
and file a registration statement under the Securities Act, on a form selected
by the Company, covering the Shares and shall use its best efforts to cause such
registration statement to become effective as expeditiously as possible and to
remain effective until the earlier to occur of the date (i) the Restricted Stock
covered thereby has been sold, or (ii) by which all Restricted Stock covered
thereby may be sold under Rule 144.
(b) Following the effectiveness of a registration statement filed
pursuant to this section, the Company may, at any time, suspend the
effectiveness of such registration for up to 60 days, as appropriate (a
"Suspension Period"), by giving notice to the Holders of Restricted Stock, if
-----------------
the Company shall have determined that the Company may be required to disclose
any material corporate development which disclosure may have a material effect
on the Company. Notwithstanding the foregoing, no more than two Suspension
Periods (i.e., 120 days) may occur in immediate succession. The Company shall
use its best efforts to limit the duration and number of any Suspension Periods.
The Holders of Restricted Stock agree that, upon receipt of any notice from the
Company of a Suspension Period, the Holders of Restricted Stock shall forthwith
discontinue disposition of Restricted Stock covered by such registration
statement or prospectus until the Holders of Restricted Stock (i) are advised in
writing by the Company that the use of the applicable prospectus may be resumed,
(ii) have received copies of a supplemental or amended prospectus, if
applicable, and (iii) have received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference into
such prospectus.
7.2 Registration Procedures. When the Company effects the
-----------------------
registration of the Shares under the Securities Act pursuant to Section 7.1(a)
hereof, the Company will, at its expense, as expeditiously as possible:
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(a) In accordance with the Securities Act and the rules and
regulations of the Commission, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period described herein, and prepare and file with the Commission such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period and such registration statement and prospectus
accurate and complete for such period;
(b) Furnish to the Holders of securities participating in such
registration such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
Holders may reasonably request in order to facilitate the public offering of
such securities;
(c) Use its best efforts to register or qualify the securities covered
by such registration statement under such state securities or blue sky laws of
such juris dictions as such participating Holders may reasonably request within
twenty (20) days following the original filing of such registration statement,
except that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified;
(d) Notify the Holders participating in such registration, promptly
after it shall receive notice thereof, of the date and time when such
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(e) Notify such Holders promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(f) Prepare and file with the Commission, promptly upon the request of
any such Holders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such Holders, is required
under the Securities Act or the rules and regulations thereunder in connection
with the distribution of the Restricted Stock by such Holders;
(g) Prepare and promptly file with the Commission, and promptly notify
such Holders of the filing of,
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<PAGE>
such amendments or supplements to such registration statement or prospectus as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(h) In case any of such Holders is required to deliver a prospectus at
a time when the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare promptly
upon request such amendments or supplements to such registration statement and
such prospectus as may be necessary in order for such prospectus to comply with
the requirements of the Securities Act and such rules and regulations; and
(i) Advise such Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
7.3 Expenses. With respect to any registration effected
--------
pursuant to Section 7.1 hereof, all fees, costs and expenses of and incidental
to such registration and the public offering in connection therewith shall be
borne by the Company; provided, however, that the Holders of Restricted Stock
shall bear their own legal fees, if any, and their pro rata share of any
underwriting discounts or commissions.
7.4 Indemnification.
---------------
(a) The Company will indemnify and hold harmless each Holder of shares
of Restricted Stock which are included in a registration statement pursuant to
the provisions of Section 7 hereof and any underwriter (as defined in the
Securities Act) for such Holder, and any person who controls such Holder or such
underwriter within the meaning of the Securities Act, and any officer, director,
employee, agent, partner or affiliate of such Holder, from and against, and will
reimburse such Holder and each such underwriter, controlling person, officer,
director, employee, agent, partner and affiliate with respect to, any and all
claims, actions, demands, losses, damages, liabilities, costs and
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<PAGE>
expenses to which such Holder or any such underwriter or controlling person or
any such officer, director, employee, agent, partner or affiliate may become
subject under the Securities Act or otherwise, insofar as such claims, actions,
demands, losses, damages, liabilities, costs or expenses arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon 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;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, action, demand, loss, damage, liability, cost or
expense is caused by an untrue statement or alleged untrue statement or omission
or alleged omission so made in strict conformity with information furnished by
such Holder, such underwriter or such controlling person or such officer,
director, employee, agent, partner or affiliate in writing specifically for use
in the preparation thereof.
(b) Each Holder of shares of the Restricted Stock which are included
in a registration pursuant to the provisions of Section 7 hereof will indemnify
and hold harmless the Company, and any Person who controls the Company within
the meaning of the Securities Act, from and against, and will reimburse the
Company and such controlling Persons with respect to, any and all losses,
damages, liabilities, costs or expenses to which the Company or such controlling
Person may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or are caused by the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written information
furnished by such Holder specifically for use in the preparation thereof.
Notwithstanding the foregoing, the liability of any Holder of Restricted Stock
pursuant to this subsection (b) shall be limited to an amount equal to the per
share sale price (less any underwriting discount and commissions) multiplied by
the number of shares of Restricted Stock sold by such Holder pursuant to the
registration statement which gives rise to such obligation to indemnify (less
the aggregate amount of any damages which such Holder has otherwise been
required to pay
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<PAGE>
in respect of such losses, damages, liabilities, costs or expenses or any
substantially similar losses, damages, liabilities, costs or expenses arising
from the sale of such Restricted Stock).
(c) Promptly after receipt by a party indemnified pursuant to the
provisions of paragraph (a) or (b) of this Section 7.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 7.4 and shall not relieve the indemnifying party from liability under
this Section 7.4 unless such indemnifying party is prejudiced by such omission.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of such paragraph
(a) or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall be liable to an indemnified
party for any settlement of any action or claim without the consent of the
indemnifying party. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in subsection (a) or (b) of
this Section 7.4 is held by a court of competent jurisdiction to be unavailable
to a party to be indemnified with respect to any claims, actions, demands,
losses, damages, liabilities, costs or expenses referred to therein, then each
indemnifying party under any such subsection, in lieu of indemnifying such
indemnified party thereunder, hereby agrees to contribute to the amount paid or
payable by such indemnified party as a result of such claims, actions, demands,
losses, damages, liabilities, costs or expenses in such proportion as is
appropriate to reflect
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<PAGE>
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which resulted in such claims, actions, demands, losses, damages, liabilities,
costs or expenses, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder of Restricted Stock shall
be obligated to contribute pursuant to this subsection (d) shall be limited to
an amount equal to the per share sale price (less any underwriting discount and
commissions) multiplied by the number of shares of Restricted Stock sold by such
Holder pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which such
Holder has otherwise been required to pay in respect of such claim, action,
demand, loss, damage, liability, cost or expense or any substantially similar
claim, action, demand, loss, damage, liability, cost or expense arising from the
sale of such Restricted Stock). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution hereunder from any person who was not guilty
of such fraudulent misrepresentation.
7.5 Reporting Requirements Under the Exchange Act. The Company
---------------------------------------------
shall timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 of the Exchange Act. The Company
acknowledges and agrees that the purposes of the requirements contained in this
Section 7.5 are (a) to enable the Holders of Restricted Stock to comply with the
current public information requirement contained in paragraph (c) of Rule 144
should any such Holder ever wish to dispose of any of the Restricted Stock
without registration under the Securities Act in reliance upon Rule 144 (or any
other similar exemptive provision) and (b) to qualify the Company for the use of
registration statements on Form S-3.
7.6 Stockholder Information. The Company may require each
-----------------------
Holder of Restricted Stock to furnish the Company such information with respect
to such Holder and the distribution of its Restricted Stock as the Company may
from time to time reasonably request in writing as shall be required by law or
by the Commission in connection therewith.
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<PAGE>
7.7 Delay of Registration. The Holders of Restricted Stock shall not
---------------------
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 Agreement.
8. Miscellaneous.
-------------
8.1 Waivers and Amendments.
----------------------
(a) With the written consent of the Holders of a Majority of the
Restricted Stock then outstanding, the obligations of the Company and the rights
of the Holders of the Securities under this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely), and with the same
consent the Company, when authorized by resolution of its Board, may enter into
a supplementary agreement for the purpose of changing in any manner or
eliminating any of the provisions of this Agreement or of any supplemental
agreement or modifying in any manner the rights hereunder of the Holders of the
Securities and the Company; provided, however, that no such waiver or
supplemental agreement shall reduce the aforesaid proportion of Restricted
Stock, the Holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the Holders of all of the
Restricted Stock; and provided further that the obligation of the Company to
register the Restricted Stock, as set forth in Section 7.1 hereof, may not be
waived or amended without the written consent of all the Holders of the
Restricted Stock then outstanding.
(b) Upon the effectuation of each such waiver, consent or agreement of
amendment or modification, the Company shall promptly give written notice
thereof to the Holders of the Restricted Stock who have not previously consented
thereto in writing.
8.2 Effect of Waiver or Amendment. Each Investor acknowledges
-----------------------------
that by operation of Section 8.1 hereof the Holders of a Majority of the
Restricted Stock then outstanding will, subject to the limitations contained in
such Section 8.1, have the right and power to diminish or eliminate certain
rights of such Investor under this Agreement.
8.3 Rights of Holders Inter Se. Each Holder of Securities shall
--------------------------
have the absolute right to exercise or refrain from exercising any right or
rights which such Holder may have by reason of this Agreement or any Security,
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<PAGE>
including, without limitation, the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such Holder shall not incur any liability
to any other Holder or Holders of Securities with respect to exercising or
refraining from exercising any such right or rights.
8.4 Exculpation Among Investors and Holders. Each Investor
---------------------------------------
acknowledges that it is not relying upon any other Investor, or any officer,
director, employee, agent, partner or affiliate of any such other Investor, in
making its investment or decision to invest in the Company or in monitoring such
investment. Each Investor agrees that no Investor nor any controlling person,
officer, director, stockholder, partner, agent or employee of any Investor shall
be liable for any action heretofore or hereafter taken or omitted to be taken by
any of them relating to or in connection with the Company or the Securities, or
both.
8.5 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
given personally, by air courier (with signed acknowledgement of receipt) or by
facsimile transmission (with confirmation of transmission):
(a) If to any Holder of any of the Securities, addressed to such
Holder at its address (or to its telecopier number) shown on his or
its signature page hereto, or at such other address (or telecopier
number) as such Holder may specify by written notice to the Company,
or
(b) If to the Company, addressed to it at 10655 Sorrento Valley Road,
San Diego, California 92121 (or, if by telecopier, to (619) 558-6477)
or at such other address (or telecopier number) as the Company may
specify by written notice to the Investors,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
upon receipt.
8.6 Severability. Should any one or more of the provisions of
------------
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or
-19-
<PAGE>
provisions determined to be illegal or unenforceable and shall not be affected
thereby.
8.7 Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of the respective
successors of the parties hereto. This Agreement shall not run to the benefit
of or be enforceable by any Person other than a party to this Agreement and its
successors and permitted assigns.
8.8 Headings. The headings of the Sections and paragraphs of
--------
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.9 Choice of Law. Except where the issue for determination
-------------
is one of corporate law, in which case the Delaware General Corporation Law
shall govern, it is the intention of the parties that the internal substantive
laws, and not the laws of conflicts, of California should govern the
enforceability and validity of this Agreement, the construc tion of its terms
and the interpretation of the rights and duties of the parties.
8.10 Expenses. Each party to this Agreement shall bear its own
--------
costs and expenses incurred with the negotiation and execution of this Agreement
and the perfor mance of the transactions contemplated hereby.
8.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
8.12 Publicity. No party hereto shall originate any press
---------
release or other public announcement, written or oral, relating to this
Agreement, or to performance hereunder or the existence of any arrangement among
the parties hereto without the prior approval of the other parties hereto which
may be the subject of such press release or announcement, except to the extent
that such press release or announcement is reasonably concluded by a party to be
required by applicable law. The Investors acknowledge that the Company will be
required to file a copy of this Agreement, and the other agreements and
instruments contemplated hereby, with the Commission and to describe these
transactions in its public filings, including in the registration statement
contemplated
-20-
<PAGE>
by Section 7.1 (which registration statement shall also include the name of each
Investor). Subject to the foregoing, the Company will not use the name of any
Investor in a public announcement without such Investor's prior consent.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of the date first above written.
PROTEIN POLYMER TECHNOLOGIES, INC.
By: /s/ J. Thomas Parmeter
-------------------------------
J. Thomas Parmeter, President
INVESTORS:
THE ARIES TRUST
By: Paramount Capital Asset Management,
Inc., Its Investment Manager
By: /s/ Lindsay A. Rosenwald
--------------------------------
Lindsay A. Rosenwald, M.D.,
President
THE ARIES DOMESTIC FUND, L.P.
By: Paramount Capital Asset Management,
Inc., Its General Partner
By: /s/ Lindsay A. Rosenwald
--------------------------------
Lindsay A. Rosenwald, M.D.,
President
BIOTECHNOLOGY VALUE FUND, L.P.
By: BVF Partners L.P.
Its General Partner
By: BVF Inc., Its General Partner
By: /s/ Mark N. Lampert
--------------------------
Mark N. Lampert, President
-21-
<PAGE>
BIOTECHNOLOGY VALUE FUND, LTD.
By: /s/ Mark N. Lampert
---------------------------------
Mark N. Lampert, Director
BIOTECHNOLOGY VENTURE PARTNERS, L.P.
By: BVF Partners L.P.
Its General Partner
By: BVF Inc., Its General Partner
By: /s/ Mark N. Lampert
--------------------------
Mark N. Lampert, President
FOUR PARTNERS
By: /s/ Thomas A. Tisch
------------------------------
Thomas A. Tisch,
Managing General Partner
/s/ Edward M. Giles
-----------------------------------
EDWARD M. GILES IRA #3
INVESTMENT 10 L.L.C.
By: Grosvenor Multi-Strategy Fund, L.P.,
a Member
By: Grosvenor Capital Management, L.P.,
Its General Partner
By: Grosvenor Capital Management,
Inc., Its General Partner
By: /s/ Paul Meister
--------------------------
Paul Meister,
Vice President
JOHNSON & JOHNSON DEVELOPMENT CORPORATION
By: /s/ Brad H. Vale
--------------------------------------
Brad H. Vale, Vice President
-22-
<PAGE>
VERTICAL FUND ASSOCIATES, L.P.
By: Vertical Group, L.P.,
Its General Partner
By: /s/ John E. Runnells
--------------------------------
John E. Runnells,
General Partner
/s/ Anthony G. Viscogliosi
------------------------------------
ANTHONY G. VISCOGLIOSI
-23-
<PAGE>
ANNEX A
-------
SCHEDULE OF INVESTORS AND REQUIRED PAYMENT
<TABLE>
<CAPTION>
Number of Shares Required
Name and Address Being Purchased Payment
- ---------------- ---------------- --------
<S> <C> <C>
The Aries Trust 266,667 $666,667.50
c/o Paramount Capital Asset
Management, Inc.
787 Seventh Avenue
New York, NY 10019
Attention: Mr. David R. Walner
Aries Domestic Fund, L.P. 133,333 333,332.50
c/o Paramount Capital Asset
Management, Inc.
787 Seventh Avenue
New York, NY 10019
Attention: Mr. David R. Walner
Biotechnology Value 340,000 850,000.00
Fund, L.P.
c/o 333 West Wacker Drive
Suite 1600
Chicago, IL 60606
Attention: Ms. Elizabeth Bidwell
Biotechnology Value 70,000 175,000.00
Fund, Ltd.
c/o Butterfield Fund Managers
(Guernsey) Limited
P.O. Box 211, Butterfield House
The Grange, St. Peter Port
Guernsey GY1 3NQ
Channel Islands
Biotechnology Venture 240,000 600,000.00
Partners, L.P.
c/o 333 West Wacker Drive
Suite 1600
Chicago, IL 60606
Attention: Ms. Elizabeth Bidwell
Four Partners 300,000 750,000.00
667 Madison Avenue
New York, NY 10021
Attention: Mr. Barry L. Bloom
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Required
Name and Address Being Purchased Payment
- ---------------- ---------------- --------
<S> <C> <C>
Edward M. Giles IRA #3 20,000 $ 50,000.00
Fiduciary Trust Co.
c/o Mr. Ken Paulo
Two World Trade Center
New York, NY 10048-0772
Investment 10, L.L.C. 30,000 75,000.00
c/o 333 West Wacker Drive
Suite 1600
Chicago, IL 60606
Attention: Ms. Elizabeth Bidwell
Johnson & Johnson Development 400,000 1,000,000.00
Corporation
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Attention: Mr. Brad Vale
Vertical Fund Associates, L.P. 100,000 250,000.00
18 Bank Street
Summit, NJ 07901
Attention: Mr. John E. Runnells
Anthony G. Viscogliosi 4,000 10,000.00
310 East 46th, #1 ------------- -------------
New York, NY 10017
TOTAL 1,904,000 $4,760,000.00
============= =============
</TABLE>
A-2
<PAGE>
[LETTERHEAD OF PROTEIN POLYMER]
FOR IMMEDIATE RELEASE
CONTACTS:
Aron Stern
Vice President, Finance
Gwen Como
Director, Investor Relations
(619) 558-6064
PROTEIN POLYMER ANNOUNCES THE COMPLETION OF PRIVATE PLACEMENT OF
COMMON STOCK WITH J&J AND OTHER INVESTORS
J&J'S INVESTMENT RELATED TO PREVIOUSLY ANNOUNCED EXTENSION OF COLLABORATION
WITH ETHICON TO DEVELOP AND COMMERCIALIZE SURGICAL WOUND CLOSURE PRODUCTS
SAN DIEGO, January 7, 1997 -- Protein Polymer Technologies, Inc. (NASDAQ-
PPTI), today announced the completion of a $4,760,000 private placement of
1,904,000 shares of PPTI Common stock with Johnson & Johnson Development
Corporation (JJDC), and other institutional investors. The investors paid $2.50
per share of common stock. JJDC's equity investment was related to an earlier
announcement of an extension of the collaboration between Ethicon, Inc., a
subsidiary of Johnson & Johnson, and PPTI to jointly develop and commercialize
surgical tissue adhesives and sealants for wound closure and related surgical
applications.
The shares have not been registered under the Securities Act and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements; however the Company has agreed with
the investors to file a registration statement with the SEC later this month to
register any resales of the shares. Any offering relative to such resales will
be made only by means of a prospectus.
In an unrelated matter, the Company announced that it has retained the
investment banking firm of Hambrecht & Quist LLC as its financial advisor to aid
the Company in a review of its strategic operating and financial goals.
Protein Polymer Technologies, Inc. is a development stage biomaterials
company focused on tissue repair and drug delivery. In addition to tissue
adhesives and sealants, other products being developed include materials for
wound healing and tissue augmentation, surgical adhesion barriers, and drug
delivery devices. PPTI also markets a line of protein polymer-activated cell
culture products under the trade names of ProNectin/R/ and SmartPlastic/TM.
Exhibit 99.4
<PAGE>
[LETTERHEAD OF PROTEIN POLYMER]
FOR IMMEDIATE RELEASE
CONTACTS:
Gwen Como
Director, Investor Relations
(619) 558-6064
PROTEIN POLYMER EXTENDS PUBLIC WARRANT EXPIRATION DATE
SAN DIEGO, December 10, 1996 -- Protein Polymer Technologies, Inc.
(NASDAQ-PPTI), announced today an extension to the expiration date of its
publicly held Redeemable Warrants (NASDAQ - PPTIW)
With this extension, the Redeemable Warrants may be exercised at any time
prior to 5:30 p.m. (New York time) on January 21, 1998. The previous Expiration
Date was 5:30 p.m. (New York time) on January 21, 1997. Each Redeemable Warrant
represents the right to purchase one share of the Company's common stock at an
exercise price of $8.00 per share, subject to certain adjustments.
Protein Polymer Technologies, Inc. is a development stage biomaterials
company focused on tissue repair and drug delivery. PPTI's genetically
engineered, protein-based biomaterials can be designed specifically for use as
biocompatible implants directing the activities of mammalian cells. Products
being developed include tissue adhesives and sealants, wound healing matrices,
surgical adhesion barriers, and drug delivery devices. PPTI also markets a line
of protein polymer-activated cell culture products under the trade names of
ProNectin(R) and SmartPlastic(TM).
* * *
Exhibit 99.5
<PAGE>
MBF I, LLC
8 East 83rd Street, 5-D
New York, New York 10028
October 4, 1996
Protein Polymer Technologies, Inc.
10655 Sorrento Valley Road
San Diego, California 92121
Attention: Mr. J. Thomas Parmeter
President and Chief Executive Officer
Ladies and Gentlemen:
This letter (this "Agreement") sets forth the agreement between MBF I,
---------
LLC, a California limited liability company ("MBF"), and Protein Polymer
---
Technologies, Inc., a Delaware corporation (the "Company").
-------
1. Introduction. Commencing on the date hereof (the "Effective Date"),
------------ --------------
MBF will use its best efforts to assist the Company in increasing value to the
Company's security holders through expansion of the market, base, trading
volume, coverage and price for the Company's common stock, $.01 par value (the
"Stock"). Such services to be provided by MBF to the Company in connection with
-----
this engagement, when and as reasonably requested or approved by the Company,
may include, without limitation, the following:
. Advise the Company with respect to strategic business alternatives.
. Undertake due diligence examinations to enable MBF to familiarize
itself with the business, financial condition, operations, asset
values and prospects of the Company.
. Advise the Company with respect to the general structuring of
financing or strategic transactions.
. Advise the Company with respect to negotiating financing or
strategic transactions.
. As compensation for services rendered hereunder, MBF will receive
from the Company warrants to purchase up to 750,000 shares of Stock
(the "Warrant Shares"), all as more fully set
--------------
Exhibit 99.6
<PAGE>
Protein Polymer Technologies, Inc.
October 4, 1996
Page 2
forth herein. During the term of this Agreement, the Company shall provide
reasonable assistance to MBF in its efforts as reasonably required in order for
MBF to respond to due diligence requests by potential investor or third party
collaborators. MBF recognizes the confidential nature of certain information to
be furnished to it hereunder, and agrees to execute the confidentiality
agreement in the form attached hereto as Exhibit A (the "Confidentiality
---------------
Agreement").
- ---------
2. Warrants.
---------
(a) On the Effective Date, MBF shall be issued warrants to purchase
50,000 Warrant Shares at an exercise price equal to the greater of (i) one
hundred twenty percent (120%) of the average between the closing bid and ask
price of the Stock on the Effective Date, or (ii) $3.75 per share.
(b) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if, prior to January 31, 1997, the Company closes an equity
investment in the Company of at least $3 million. The exercise price of such
warrants shall be $6.00 per share.
(c) MBF shall be issued warrants to purchase an additional 250,000
Warrant Shares if, prior to January 31, 1998, the Company closes an equity
investment in the Company of at least $5 million (excluding the financing
described in subsection (b) above) at a price of not less than $4.00 per share
of Stock (or common stock equivalent) (appropriately adjusted for stock splits,
recapitalizations and the like). The exercise price of such warrants shall be
$6.00 per share.
(d) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to July 31, 1998 is at least $8.00. The exercise price of such warrants
shall be $7.50 per share.
(e) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to December 31, 1998 is at least $9.00. The exercise price of such
warrants shall be $7.50 per share.
<PAGE>
Protein Polymer Technologies, Inc.
October 4, 1996
Page 3
(f) MBF shall be issued warrants to purchase an additional 150,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to June 30, 1999 is at least $10.00. The exercise price of such warrants
shall be $7.50 per share.
(g) Warrants issued to MBF pursuant to subsections (a)-(f), above,
shall be substantially in the form attached hereto as Exhibit B and shall have
a term of five years from the dates on which such warrants are issued and the
performance criteria therefor has been satisfied, and shall expire if not
exercised by MBF prior to the expiration of such five-year term. The vesting or
"earning" of each of the foregoing six warrants is not dependent upon earning or
vesting any other warrant. Once earned, such warrants, the Warrant Shares and
the rights associated therewith shall not be assignable by MBF without the
Company's prior written consent, which will not be unreasonably withheld, but
subject in all cases to compliance with applicable securities laws.
3. The Warrant Shares. The Warrant Shares shall be unregistered but
------------------
shall have all other rights and characteristics (including par value, voting
rights and non-assessability) as the Stock at the time of exercise of warrants
by MBF. Not more than once each year, MBF shall have the right to demand
registration of the Warrant Shares at its sole expense; provided, however, that
MBF shall also be entitled to "piggyback" registration of the Warrant Shares on
any registration of Stock by the Company (subject to cutbacks on a pro rata
basis). MBF and the Company shall enter into a Registration Rights Agreement
substantially in the form of Exhibit C hereto with respect to such rights.
4. Consulting Fee.
--------------
(a) As a consulting fee for services rendered hereunder, MBF shall be
entitled to receive from the Company (i) payments aggregating $100,000 in the
event of a closing of the transaction described in Section 2(b) above, plus (ii)
payments aggregating $200,000 in the event of a closing of the transaction
described in Section 2(c) above, in either of such cases within the time frames
set forth in such sections. Such fees, if earned, shall be payable in quarterly
installments of $25,000 in the aggregate commencing on the first day of the
Company's first
<PAGE>
Protein Polymer Technologies, Inc.
October 4, 1996
Page 4
fiscal quarter following the closing of such transaction. The Company's
obligation to pay any fees earned pursuant to this Section 4 shall survive any
termination of this Agreement.
(b) In addition to the foregoing, in the event that Fisher introduces
the Company to other business, licensing or financial opportunities, the
Company, in its sole and absolute discretion, may consider additional
compensation to Fisher, but shall not be obligated in any way whatsoever under
this paragraph (b).
5. Expenses. The Company shall reimburse MBF for any pre-approved
--------
reasonable expenses incurred in furtherance of his responsibilities hereunder.
6. Term and Termination.
--------------------
(a) Unless earlier terminated, pursuant to subparagraph (b) below,
this Agreement shall commence on the Effective Date and shall terminate on
January 31, 1998 if the warrants described in Section 2(b) or (c) above have not
been earned by such date. If such warrants described in Section 2(b) or (c) have
been earned by January 31, 1998, this Agreement shall terminate on June 30,
1999.
(b) Notwithstanding anything herein to the contrary, the Company may
terminate this Agreement by written notice to MBF:
(1) in the event that MBF or its affiliate, Mark B. Fisher, has
(i) committed a material breach of the terms of this Agreement or any other
material legal obligation to the Company and failed to cure such breach within
thirty (30) days of written notice to MBF that such breach has occurred, (ii)
failed to perform any of the material obligations under the Confidentiality
Agreement, (iii) demonstrated gross negligence or willful misconduct in the
execution of the services rendered hereunder, (iv) been convicted of or pleaded
nolo contendere to a felony or other serious crime, (v) been sanctioned or
- ---------------
enjoined by any regulatory or quasi regulatory body or agency, including without
limitation the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc., (vi) engaged in business practices which, in the
opinion of the Board of Directors of the Company, as confirmed in
<PAGE>
Protein Polymer Technologies, Inc.
October 4, 1996
Page 5
a duly adopted resolution, publicly disparage the Company, or (vii)
misappropriated assets of the Company; or
(2) upon the closing of a transaction, or series of related
transactions, pursuant to which (i) the Company sells all or substantially all
of its assets to an unaffiliated third party, or (ii) an unaffiliated third
party or "group" acquires more than 90% of the outstanding voting stock of the
Company; or
(3) in the event that Mark B. Fisher ceases to own 75% of the
outstanding equity interests of MBF.
7. Representations. As an inducement to each of the parties to enter
---------------
into this Agreement, the Company represents to MBF, and MBF represents to the
Company, that it is authorized to enter into this Agreement and that the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly authorized by all necessary
corporate action, and that the execution, delivery and performance of this
Agreement will not violate any agreement to which it is a party, or violate or
conflict with any law, rule or regulation applicable to, or binding upon, it.
The representations set forth herein shall survive any termination of this
Agreement.
8. Costs of Enforcement. In the event of any dispute related to or
--------------------
arising under this Agreement, the prevailing party shall be entitled to recover
from the nonprevailing party its costs and expenses related to such dispute,
including reasonable attorneys' fees.
9. Company's Absolute Right of Rejection. Notwithstanding anything
-------------------------------------
herein to the contrary, the Company shall retain the right, in its sole and
absolute discretion, for any reason or no reason, to reject any offer, proposal,
bid, subscription or other arrangement related to any financing or arrangement
contemplated hereby, whether or not MBF would earn any fee or receive any
warrants as a result of the consummation of such financing or arrangement.
<PAGE>
Protein Polymer Technologies, Inc.
October 4, 1996
Page 6
10. Miscellaneous. This Agreement shall be governed by the internal
-------------
laws (and not the law of conflicts) of the State of California. This Agreement
is personal in nature and may not be assigned by MBF.
If the foregoing is consistent with your understanding, please execute
the attached duplicate original of this letter and return it to my attention,
whereupon this Agreement will become binding upon us.
Very truly yours,
MBF I, LLC,
a California limited liability company
By: /s/ Mark B. Fisher
---------------------------------
Mark B. Fisher, President
ACCEPTED AND AGREED TO:
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ J. Thomas Parmeter
-------------------------------------
J. Thomas Parmeter, President
and Chief Executive Officer
Exhibits
- --------
A - Form of Confidentiality Agreement
B - Form of Warrant
C - Form of Registration Rights Agreement
<PAGE>
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
PROTEIN POLYMER TECHNOLOGIES, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST THEREIN MAY
BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER
THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
No. MBF 96__ Warrant to Purchase______Shares
_____, 1996 of Common Stock, $.01 Par Value
WARRANT TO PURCHASE COMMON STOCK
of
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
Void after the date set forth in the first paragraph hereof
This certifies that, for value received, MBF I, LLC, a California limited
liability company, or registered assigns ("Holder") is entitled, subject to the
terms set forth below, to purchase from Protein Polymer Technologies, Inc., a
Delaware corporation (the "Company"), ______ shares of Common Stock, $.01 par
value, of the Company (such class of stock being referred to herein as "Common
Stock"), as constituted on _________________ (the "Issue Date"), upon surrender
of this Warrant, at the principal office of the Company referred to below, with
the subscription form attached hereto duly executed, and simultaneous payment
therefor in the consideration specified in Section 1 hereof, at the price of
$____ per share (the "Purchase Price"). This Warrant must be exercised, if at
all, prior to the date of the fifth anniversary of the Issue Date. The shares of
Common Stock issued or issuable upon exercise of this Warrant are sometimes
referred to as the "Warrant Shares." The term "Warrants" as used herein shall
include this Warrant and any warrants delivered in substitution or exchange
therefor as provided herein.
1. Exercise. This Warrant may be exercised at any time or from time to
--------
time, on any business day, for all or part of the full number of shares of
Common Stock during
Exhibit 99.7
<PAGE>
the period of time called for hereby, by surrendering it at the principal office
of the Company, 10655 Sorrento Valley Road, First Floor, San Diego, California
92121, with the subscription form duly executed, together with payment for the
Warrant Shares payable in cash, by check for same day funds and/or by delivery
and cancellation of promissory notes evidencing indebtedness of the Company. No
other form of consideration shall be acceptable for the exercise of this
Warrant. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date. As soon as
practicable on or after such date, and in any event within 10 days thereof, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of shares of Common Stock
issuable upon such exercise. Upon any partial exercise, the Company will issue
and deliver to Holder a new Warrant or Warrants with respect to the shares of
Common Stock not so transferred. No fractional shares of Common Stock shall be
issued upon exercise of a Warrant. In lieu of any fractional share to which
Holder would be entitled upon exercise, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise.
2. Payment of Taxes. All shares of Common Stock issued upon the
----------------
exercise of a Warrant shall be duly authorized, validly issued and outstanding,
fully paid and non-assessable. Holder shall pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery thereof and any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for shares of Common Stock in any name other than that
of the registered Holder of the Warrant surrendered in connection with the
purchase of such shares, and in such case the Company shall not be required to
issue or deliver any stock certificate until such tax or other charge has been
paid or it has been established to the Company's satisfaction that no tax or
other charge is due.
3. Transfer and Exchange. This Warrant and all rights hereunder are
---------------------
transferable, in whole but not in part, only with the prior approval of the
Company, which consent shall not be unreasonably withheld. If such a proposed
transfer is so approved, this Warrant is transferable on the
-2-
<PAGE>
books of the Company maintained for such purpose at its principal office
referred to above by Holder in person or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable and that
when this Warrant shall have been so endorsed, the Holder hereof may be treated
by the Company and all other persons dealing with this Warrant as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding; but until such transfer on such books,
the Company may treat the registered Holder hereof as the owner for all
purposes.
4. Certain Adjustments.
-------------------
4.1 Adjustment for Reorganization, Consolidation, Merger. In case of
------------------------------ ---------------------
any reorganization of the Company (or any other corporation, the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
after the Issue Date, or in case, after such date, the Company (or any such
other corporation) shall consolidate with or merge into another corporation
(other than the merger of a wholly owned subsidiary into the Company) or convey
all or substantially all its assets to another corporation, then and in each
such case Holder, upon the exercise hereof as provided in Section 1 at any time
after the consummation of such reorganization, consolidation, merger or
conveyance, shall be entitled to receive, in lieu of the stock receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto.
4.2 Adjustments for Dividends in Common Stock. If the Company at any
----------------------------------- -----
time or from time to time after the Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend
payable in additional shares of Common Stock, then and in each such event the
Purchase Price then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Purchase Price then in effect by a fraction (1)
the numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such
-3-
<PAGE>
issuance or the close of business on such record date, and (2) the denominator
of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend; provided, however, that if such record date is
fixed and such dividend is not fully paid on the date fixed therefor, the
Purchase Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Purchase Price shall be adjusted pursuant to
this Section 4.2 as of the time of actual payment of such dividends.
4.3 Stock Split and Reverse Stock Split. If the Company at any time or
-----------------------------------
from time to time after the Issue Date effects a subdivision of the outstanding
Common Stock, the Purchase Price then in effect immediately before that
subdivision shall be proportionately decreased and the number of shares of
Common Stock theretofore receivable upon the exercise of this Warrant shall be
proportionately increased. If the Company at any time or from time to time after
the Issue Date combines the outstanding shares of Common Stock into a smaller
number of shares, the Purchase Price then in effect immediately before that
combination shall be proportionately increased and the number of shares of
Common Stock theretofore receivable upon the exercise of this Warrant shall be
proportionately decreased. Each adjustment under this Section 4.3 shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
4.4 Accountants' Certificate as to Adjustment. In each case of an
------------------------------ ----------
adjustment in the shares of Common Stock receivable on the exercise of the
Warrants, the Company at its expense shall cause independent public accountants
of recognized standing selected by the Company (who may be the independent
public accountants then auditing the books of the Company) to compute such
adjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment and showing the facts upon which such
adjustment is based. The Company will forthwith mail a copy of each such
certificate to each holder of a Warrant at the time outstanding.
5. Loss or Mutilation. Upon receipt by the Company of evidence
------------------
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of any Warrant and (in the
case of loss, theft or destruction) of indemnity satisfactory to it (in the
exercise of reasonable
-4-
<PAGE>
discretion), and (in the case of mutilation) upon surrender and cancellation
thereof, the Company will execute and deliver in lieu thereof a new Warrant of
like tenor.
6. Reservation of Common Stock. The Company shall at all times reserve
---------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the exercise of the Warrant, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
exercise of the Warrant; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect such exercise,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
7. Notices of Record Date. In the event of (i) any taking by the
----------------------
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other corporation (other
than a merger of a wholly owned subsidiary into the Company), or any transfer of
all or substantially all of the assets of the Company to any other person or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to the Holder at least thirty (30) days prior to the
record date specified therein, a notice specifying (1) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (3) the date, if
any, that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
-5-
<PAGE>
8. Investment Representation and Restriction on Transfer.
-----------------------------------------------------
8.1 Securities Law Requirements.
---------------------------
(a) By its acceptance of this Warrant, Holder hereby represents and
warrants to the Company that this Warrant and the Warrant Shares will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting participations in or otherwise
distributing the same. By acceptance of this Warrant, Holder further represents
and warrants that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to any
person, with respect to this Warrant or the Warrant Shares.
(b) By its acceptance of this Warrant, Holder understands that this
Warrant is not, and the Warrant Shares will not be, registered under the
Securities Act of 1933, as amended (the "Act"), on the basis that the issuance
of this Warrant and the Warrant Shares are exempt from registration under the
Act pursuant to Section 4(2) thereof, and that the Company's reliance on such
exemption is predicated on Holder's representations and warranties set forth
herein.
(c) By its acceptance of this Warrant, Holder understands that the
Warrant and the Warrant Shares may not be sold, transferred, or otherwise
disposed of without registration under the Act, or an exemption therefrom, and
that in the absence of an effective registration statement covering the Warrant
and the Warrant Shares or an available exemption from registration under the
Act, the Warrant and the Warrant Shares must be held indefinitely. In
particular, Holder is aware that the Warrant and the Warrant Shares may not be
sold pursuant to Rule 144 promulgated under the Act unless all of the conditions
of Rule 144 are satisfied. Among the conditions for use of Rule 144 are the
availability of current information about the Company to the public, prescribed
holding periods which will commence only upon Holder's payment for the
securities being sold, manner of sale restrictions, volume limitations and
certain other restrictions. By its acceptance of this Warrant, Holder represents
and warrants that, in the absence of an effective registration statement
covering the Warrant or the Warrant Shares, it will sell, transfer or otherwise
dispose of the Warrant and the Warrant Shares only in a manner consistent
-6-
<PAGE>
with its representations and warranties set forth herein and then only in
accordance with the provisions of Section 8.1(d).
(d) By its acceptance of this Warrant, Holder agrees that in no event
will it transfer or dispose of any of the Warrants or the Warrant Shares other
than pursuant to an effective registration statement under the Act, unless and
until (i) Holder shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the disposition, and (ii) if reasonably requested by the Company, at
the expense of the Holder or transferee, it shall have furnished to the Company
an opinion of counsel, reasonably satisfactory to the Company, to the effect
that (A) such transfer may be made without registration under the Act and (B)
such transfer or disposition will not cause the termination or the
nonapplicability of any exemption to the registration and prospectus delivery
requirements of the Act or to the qualification or registration requirements of
the securities laws of any other jurisdiction on which the Company relied in
issuing the Warrant or the Warrant Shares.
8.2 Legends; Stop Transfer.
----------------------
(a) All certificates evidencing the Warrant Shares shall
bear a legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933. These securities
have been acquired for investment and not with a view to
distribution and may not be offered for sale, sold, pledged or
otherwise transferred in the absence of an effective
registration statement for such securities under the Securities
Act of 1933 or an opinion of counsel reasonably satisfactory in
form and content to the issuer that such registration is not
required under such Act.
(b) The certificates evidencing the Warrant Shares shall also bear any
legend required by any applicable state securities law.
-7-
<PAGE>
(c) In addition, the Company shall make, or cause its transfer agent
to make, a notation regarding the transfer restrictions of the Warrant and the
Warrant Shares in its stock books, and the Warrant and the Warrant Shares shall
be transferred on the books of the Company only if transferred or sold pursuant
to an effective registration statement under the Act covering the same or
pursuant to and in compliance with the provisions of Section 8.1(d).
9. Notices. All notices and other communications from the Company to
-------
the Holder of this Warrant shall be mailed by first-class registered or
certified mail, postage prepaid, to the address furnished to the Company by
Holder.
10. Change; Waiver. Neither this Warrant nor any term hereof may be
--------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Headings. The headings in this Warrant are for purposes of
--------
convenience in reference only, and shall not be deemed to constitute a part
hereof.
12. Governing Law. This Warrant is delivered in California and shall
-------------
be construed and enforced in accordance with and governed by the internal laws,
and not the law of conflicts, of such State; provided however, that to the
extent that an issue of determination is one of corporation law, then the
Delaware General Corporation Law shall govern.
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By
-----------------------------------
J. Thomas Parmeter, President
-8-
<PAGE>
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
The undersigned, registered owner of this Warrant, irrevocably exercises
this Warrant and purchases _________ of the number of shares of Common Stock,
$.01 par value, of PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation,
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant.
DATED:_______,199_
__________________________________
(Signature of Registered Owner)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip)
-9-
<PAGE>
FORM OF ASSIGNMENT
------------------
FOR VALUE RECEIVED the undersigned, registered owner of this Warrant,
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock, $.01 par value, set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________________
____________________________________________ Attorney to make such transfer on
the books of PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation,
maintained for the purpose, with full power of substitution in the premises.
DATED:_________________
____________________________
(Signature)
____________________________
(Witness)
-10-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
---------
as of October 4, 1996, by and between PROTEIN POLYMER TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), and MBF I, LLC, a California limited
-------
liability company (the "Investor").
--------
RECITAL
-------
Pursuant to an engagement letter of even date herewith between the
Company and the Investor, the Investor owns, and may acquire additional,
warrants (collectively, the "Warrants") to acquire shares (the "Shares") of the
-------- ------
Company's common stock, $0.01 par value per share (the "Common Stock") and the
------------
Company has agreed to register such Shares to the extent set forth herein.
Therefore, the parties hereto hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined.
"Agreement" means this Registration Rights Agreement.
---------
"Board" means the Board of Directors of the Company.
-----
"Common Stock" has the meaning set forth in the Recital above.
------------
"Commission" means the Securities and Exchange Commission.
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Investor" has the meaning assigned to it in the introductory
--------
paragraph of this Agreement.
"Person" includes any natural person, corporation, trust, association,
------
company, partnership, joint venture and other entity and any government,
governmental agency, instrumentality or political subdivision.
Exhibit 99.8
<PAGE>
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" means all reasonable expenses incurred by the
---------------------
Company in complying with Section 2 hereof, including all registration and
filing fees, listing fees for the Shares, printing expenses, fees and
disbursements of counsel for the Company, and blue sky fees and expenses in all
states.
"Registrable Securities" means all Shares and any Common Stock issued
----------------------
or issuable in respect of the Shares pursuant to any stock split, stock
dividend, recapitalization, or similar event; provided, however, that
Registrable Securities shall cease to be Registerable Securities when they may
be sold pursuant to Rule 144 under the Securities Act.
"Registration Statement" means any registration statement of the
----------------------
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all materials incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may
--------
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission (excluding Rule 144A).
-2-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shares" has the meaning set forth in the Recital above.
------
"Warrants" has the meaning set forth in the Recital above.
--------
2. Required Registration
---------------------
(a) Registration. The Company shall, not more than once each
------------
calendar year, commencing 1997, and ending 2001, (each, as applicable, a "Filing
Date"), prepare and file with the Commission a Registration Statement pursuant
to Rule 415 (or any appropriate similar rule that may be adopted by the
Commission) under the Securities Act covering the Registrable Securities (the
"Registration"). The Registration shall be on Form S-3 or another appropriate
form permitting registration of such Registrable Securities for resale by such
holders from time to time.
(b) Effectiveness. The Company shall use its best efforts to cause
-------------
the Registration to become effective under the Securities Act as soon as
practicable following the Filing Date. Subject to the requirements of the
Securities Act including, without limitation, requirements relating to updating
through post-effective amendments or otherwise, the Company shall use its best
efforts to keep the Registration continuously effective until two months after
the Registration is declared effective by the Commission. The Company shall use
its best efforts to take such actions under the laws of various states as may be
required to cause the resale of the Shares pursuant to the Registration to be
lawful.
(c) Suspension. Following the effectiveness of a Registration
----------
Statement filed pursuant to this section, the Company may, at any time, suspend
the effectiveness of such Registration for up to 60 days, as appropriate (a
"Suspension Period"), by giving notice to the Investor, if the Company shall
have determined that the Company may be required to disclose any material
corporate development which disclosure may have a material adverse effect on the
Company. Notwithstanding the foregoing, no more than two Suspension Periods
(i.e., 120 days) may occur in immediate succession. The period of any such
suspension of the
-3-
<PAGE>
registration statement shall be added to the period of time the Company agrees
to keep the Registration Statement effective as provided in Section 2(b). The
Company shall use its best efforts to limit the duration and number of any
Suspension Periods. The Investor agrees that, upon receipt of any notice from
the Company of a Suspension Period, the Investor shall forthwith discontinue
disposition of shares covered by such Registration Statement or prospectus until
the Investor (i) is advised in writing by the Company that the use of the
applicable prospectus may be resumed, (ii) has received copies of a supplemental
or amended prospectus, if applicable, and (iii) has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
3. Expenses of Registration. All Registration Expenses shall be borne
------------------------
by the Investor; Registration Expenses shall include, and in no event will the
Company be obligated to pay, expenses and fees of counsel for the Investor,
stock transfer taxes or underwriters' discounts or commissions relating to
Registrable Securities.
4. Incidental Registration.
-----------------------
(a) Each time the Company shall determine to file a registration
statement under the Securities Act (other than pursuant to Section 2 hereof and
other than on Form S-4, S-8 or a registration statement on Form S-l covering
solely an employee benefit plan) in connection with the proposed offer and sale
for money of any of its securities either for its own account or on behalf of
any other security holder, the Company agrees to give promptly written notice of
its determination to the Investor. Upon the written request of the Investor
given within thirty (30) days after the receipt of such written notice from the
Company, the Company agrees to cause all such Registrable Securities, of which
the Investor has so requested registration thereof, to be included in such
registration statement and registered under the Securities Act, all to the
extent requisite to permit the sale or other disposition by the Investor of the
Registrable Securities to be so registered.
(b) If the registration of which the Company gives written notice
pursuant to Section 4(a) is for a public offering involving an underwriting, the
Company
-4-
<PAGE>
agrees to so advise the Investor as a part of its written notice. In such event
the right of the Investor to registration pursuant to this Section 4 shall be
conditioned upon the Investor's participation in such underwriting and the
inclusion of the Investor's Registrable Securities in the underwriting to the
extent provided herein. The Investor proposing to distribute its Registrable
Securities through such underwriting agrees to enter into (together with the
Company and the other holders distributing their securities through such
underwriting) an underwriting agreement with the underwriter or underwriters
selected for such underwriting by the Company, provided that such underwriting
agreement is in customary form and is reasonably acceptable to the Investor
requesting to be included in such registration.
(c) Notwithstanding any other provision of this Section 4, if the
managing underwriter of an underwritten distribution advises the Company and the
Investor participating in such registration in writing that in its good faith
judgment the number of shares of Registrable Securities and the other securities
requested to be registered exceeds the number of shares of Registrable
Securities and other securities which can be sold in such offering, then (i) the
number of shares of Registrable Securities and other securities so requested to
be included in the offering shall be reduced to that number of shares which in
the good faith judgment of the managing underwriter can be sold in such
offering, and (ii) such reduced number of shares shall be allocated among the
Investor and the holders of other securities in proportion, as nearly as
practicable, to the respective number of shares of Registrable Securities held
by the Investor and other securities held by the other holders at the time of
filing the registration statement. All Registrable Securities and other
securities which are excluded from the underwriting by reason of the
underwriter's marketing limitation and all other Registrable Securities not
originally requested to be so included shall not be included in such
registration and shall be withheld from the market by the holders thereof for a
period, not to exceed one hundred eighty (180) days, which the managing
underwriter reasonably determines is necessary to effect the underwritten public
offering.
-5-
<PAGE>
(d) The Investor shall bear and pay (or reimburse the Company for)
the expenses incurred for inclusion of the Registrable Securities in a
registration under this Section 4 (including underwriters' discounts or
commissions), but only to the extent such expenses would not otherwise have been
incurred by the Company.
5. Obligations of the Company. To effect the registration of the
--------------------------
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the Commission such amendments and
supplements to a Registration Statement with respect to the Registrable
Securities 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.
(b) Furnish to the Investor such numbers of copies of a Prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as it may reasonably request in order
to facilitate the disposition of Registrable Securities owned by the Investor.
(c) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Investor,
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.
(d) Notify the Investor 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.
-6-
<PAGE>
6. Indemnification.
----------------
(a) The Company will, and does hereby undertake to, indemnify and
hold harmless the Investor, each of the Investor's officers, directors, partners
and agents, and each Person controlling such Investor, with respect to any
registration, qualification, or compliance effected pursuant to this Agreement,
against all claims, losses, damages, and liabilities (or actions in respect
thereto) to which they may become subject under the Securities Act, the Exchange
Act, or other federal or state law arising out of or based on (i) any untrue
statements of a material fact contained in any prospectus, offering circular, or
other similar document (including any related Registration Statement,
notification, or the like) incident to any such registration, qualification, or
compliance, or based on any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) any violation or alleged violation by the Company of any federal, state
or common law rule or regulation applicable to the Company in connection with
any such registration, qualification, or compliance, and will reimburse the
Investor, and each such director, officer, partner, agent and controlling
person, for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability, or
action; provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense, arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by the Investor and
stated to be specifically for use therein.
(b) The Investor will, if Registrable Securities held by or issuable
to the Investor are included in such registration, qualification, or compliance,
indemnify the Company, each of its directors, and each officer who signs a
Registration Statement in connection therewith, and each person controlling the
Company, against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement of a material
fact contained in any such Registration Statement, prospectus, offering
circular, or other document, or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, and each
-7-
<PAGE>
such director, officer, partner, and controlling person, for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement or omission was made in such
Registration Statement, prospectus, offering circular, or other document, in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by the Investor and stated to be
specifically for use therein. In no event will the Investor be required to enter
into any agreement or undertaking in connection with any registration under this
Agreement providing for any indemnification or contribution obligations on the
part of the Investor greater than the Investor's obligations under this
Agreement.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide such
indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified 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; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
-8-
<PAGE>
7. Information by Investor. The Investor shall furnish to the
-----------------------
Company such information regarding the Investor and the distribution proposed by
the Investor as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification, or compliance
referred to in this Agreement.
8. Delay of Registration. The Investor shall not 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 Agreement.
9. Rule 144 Reporting. With a view to making available to the
------------------
Investor the benefits of certain rules and regulations of the Commission which
may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, as long as Registrable Securities are
outstanding;
(b) File with the Commission, in a timely manner, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) So long as the Investor owns any Registrable Securities, furnish
to the Investor forthwith upon request a copy of the most recent annual or
quarterly report of the Company and such other reports and documents as the
Investor may reasonably request in availing itself of any rule or regulation of
the Commission allowing it to sell any such securities without registration.
10. Miscellaneous.
-------------
10.1 Waivers and Amendments. This Agreement or any provision hereof
----------------------
may be amended, waived, discharged or terminated only by a statement in writing
signed by the Company and the Investor. No waiver by any party of the breach of
any term or provision contained in this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
-9-
<PAGE>
10.2 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class prepaid, registered or certified mail,
(a) If to the Investor, at 8 East 83rd Street, 5-D, New York, New York
10028, Attention: Mr. Mark B. Fisher, or at such other address as the Investor
may specify by written notice to the Company, or
(b) If to the Company, at 10655 Sorrento Valley Road, San Diego,
California 92121, Attention: Mr. J. Thomas Parmeter, or at such other address as
the Company may specify by written notice to the Investor,
(c) Each such notice, request, consent and other communication shall
for all purposes of the Agreement be treated as being effective or having been
given when delivered, if delivered personally, or, if sent by mail, at the
earlier of its actual receipt or three (3) days after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
10.3 Severability. Should any one or more of the provisions of this
------------
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
10.4 Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not. Subject to the immediately preceding sentence, this Agreement
shall not run to the benefit of or be enforceable by any Person other than a
party to this Agreement and its successors and assigns.
10.5 Headings. The headings of the sections, subsections and
--------
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement.
-10-
<PAGE>
10.6 Choice of Law. It is the intention of the parties that the internal
-------------
substantive laws, and not the laws of conflicts, of the State of California
should govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
10.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
10.8 Priority. Notwithstanding anything to the contrary in this
--------
Agreement, all registration rights pursuant to this Agreement are subject to the
existing and prior registration rights of the holders of the Company's Series D
Preferred Stock under that certain Amended and Restated Registration Rights
Agreement entered into as of September 14, 1995 by and among the Company and the
holders of the Company's Series D Preferred Stock, a copy of which has been
delivered to MBF.
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<PAGE>
[REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed personally or by a duly authorized representative thereof as of the
day and year first above written.
PROTEIN POLYMER TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ J. THOMAS PARMETER
---------------------------------
J. Thomas Parmeter, President
and Chief Executive Officer
MBF I, LLC,
a California limited liability company
By: /s/ MARK B. FISHER
---------------------------------
Mark B. Fisher, President
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