UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
VIROPHARMA INCORPORATED
(Name of Issuer)
Common Stock, par value $.002 per share
(Title of Class of Securities)
928241108
(CUSIP Number)
Kenneth M. Socha, Esq.
Perseus-Soros BioPharmaceutical Fund, L.P.
The Army and Navy Club Building
1627 I Street, N.W., Suite 610
Washington D.C. 20006
Tel. No.: (202) 452-0101
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
with a copy to
Bruce A. Gutenplan, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
May 5, 1999
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject to this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes.)
Continued on the following page(s)
Page 1 of 35 Pages
Exhibit Index: Page 35
<PAGE>
CUSIP No. 928241108 Page 2 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Perseus-Soros BioPharmaceutical Fund, LP
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 2,895,000(1)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,895,000(1)
PERSON
WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
PN
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 3 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Perseus-Soros Partners, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 2,895,000(1)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,895,000(1)
PERSON
WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
OO
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 4 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Perseus BioTech Fund Partners, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
OO
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 5 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
SFM Participation, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
PN
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 6 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
SFM AH, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
CO
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 7 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Kenneth M. Socha (in the capacity described herein)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
IN
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 8 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Frank H. Pearl (in the capacity described herein)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
IN
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 9 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
George Soros (in the capacity described herein)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
IA
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 10 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Soros Fund Management LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
OO; IA
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 11 of 35 Pages
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Stanley F. Druckenmiller (in the capacity described herein)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,895,000(1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,895,000(1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,895,000(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.0%
14 TYPE OF REPORTING PERSON*
IA
- ---------------
(1) Please see Item 4 for a description of the Common Stock Conversion
Ratio (as defined herein). The number of shares beneficially owned by
each of the Reporting Persons (as defined herein) assumes a Common
Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is
subject to adjustment upon the occurrence of certain events.
* SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
CUSIP No. 928241108 Page 12 of 35 Pages
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to the Common Stock,
par value $.002 (the "Common Stock"), of ViroPharma Incorporated, a Delaware
corporation (the "Company"), whose principal executive office is located at 405
Eagleview Boulevard, Exton, Pennsylvania 19341. This statement on Schedule 13D
is being filed by the Reporting Persons (as defined below) to report the
acquisition by Perseus-Soros BioPharmaceutical Fund, L.P. of more than 5% of the
outstanding shares of the Company, as a result of which each of the Reporting
Persons may be deemed the beneficial owner of more than 5% of the outstanding
shares of the Company.
Item 2. Identity and Background.
(a), (b), (c) and (f). This Statement on Schedule 13D is being
filed on behalf of each of the following persons (collectively, the "Reporting
Persons"):
(i) Perseus-Soros BioPharmaceutical Fund, LP, a Delaware
limited partnership (the "Purchaser");
(ii) Perseus-Soros Partners, LLC, a Delaware limited liability
company ("Perseus-Soros Partners");
(iii) Perseus BioTech Fund Partners, LLC, a Delaware limited
liability company ("Perseus Partners");
(iv) SFM Participation, L.P., a Delaware limited partnership
("SFM Participation");
(v) SFM AH, Inc., a Delaware corporation ("SFM AH");
<PAGE>
CUSIP No. 928241108 Page 13 of 35 Pages
(vi) Mr. Frank H. Pearl ("Mr. Pearl");
(vii) Mr. Kenneth M. Socha ("Mr. Socha");
(viii) Mr. George Soros ("Mr. Soros");
(viii) Soros Fund Management L.L.C., a Delaware limited
liability company ("SFM LLC"); and
(viii) Mr. Stanley F. Druckenmiller ("Mr. Druckenmiller").
The Purchaser was formed in order to engage in the acquiring,
holding and disposing of investments in various companies. Perseus-Soros
Partners is the general partner of the Purchaser and was formed to act as the
general partner of the Purchaser. Perseus Partners and SFM Participation are the
members of Perseus-Soros Partners.
Perseus Partners was formed in order to engage in the
acquiring, holding and disposing of investments in various companies. Messrs.
Pearl and Socha are the members of Perseus Partners. Messrs. Pearl and Socha
each have the ability to direct the investment and voting decisions of Perseus
Partners and as such may be deemed to have investment and voting discretion with
respect to securities beneficially owned by Perseus Partners through
Perseus-Soros Partners.
Accordingly, pursuant to the regulations promulgated under
Section 13(d) of the Securities Exchange Act of 1934, Perseus-Soros Partners,
Perseus Partners, Mr. Pearl and Mr. Socha each may be deemed a beneficial owner
of the Common Stock held for the account of the Purchaser.
SFM Participation was formed in order to engage in the
acquiring, holding and disposing of investments in various companies. SFM AH is
the general
<PAGE>
CUSIP No. 928241108 Page 14 of 35 Pages
partner of SFM Participation. Mr. Soros is the sole shareholder of SFM AH. Mr.
Soros has entered into an agreement dated as of January 1, 1997 with SFM LLC
pursuant to which Mr. Soros has, among other things, agreed to use his best
efforts to cause SFM AH, as the general partner of SFM Participation, to act at
the direction of SFM LLC, which agreement to so act shall terminate upon the
earlier of (a) the assignment to SFM LLC of the legal and beneficial ownership
in SFM AH and (b) the assignment to SFM LLC of the general partnership interest
in SFM Participation (the "SFM AH Contract"). Set forth on Annex A hereto and
incorporated by reference in response to this Item 2 and elsewhere in this
Schedule 13D as applicable is a list of executive officers of SFM AH.
Accordingly, pursuant to the regulations promulgated under
Section 13(d) of the Securities Exchange Act of 1934, SFM Participation and SFM
AH each may be deemed a beneficial owner of the Common Stock held for the
account of the Purchaser.
The business of SFM LLC is managed through a Management
Committee (the "Management Committee") comprised of Mr. Soros, Mr. Druckenmiller
and Mr. Gary Gladstein. The principal business of SFM LLC is to serve, pursuant
to contract, as the principal investment manager to several foreign investment
companies. Mr. Soros, as Chairman of SFM LLC, has the ability to direct the
investment decisions of SFM LLC. Mr. Druckenmiller, as Lead Portfolio Manager of
SFM LLC, has the ability to direct the investment decisions of SFM LLC. Set
forth in Annex B hereto and incorporated by reference in response to this
<PAGE>
CUSIP No. 928241108 Page 15 of 35 Pages
Item 2 and elsewhere in this Schedule 13D as applicable is a list of the
Managing Directors of SFM LLC.
The principal occupation of Mr. Soros, a United States
citizen, is his direction of the activities of SFM LLC, which is carried out in
his capacity as Chairman of SFM LLC at SFM LLC's principal office.
The principal occupation of Mr. Druckenmiller, a United States
citizen, is his position as Lead Portfolio Manager and a Member of the
Management Committee of SFM LLC, which is carried out at SFM LLC's principal
office.
Pursuant to regulations promulgated under Section 13(d) of the
Act, SFM LLC, pursuant to the provisions of the SFM AH Contract, Mr. Soros, in
his capacity as Chairman of SFM LLC, and Mr. Druckenmiller, in his capacity as
Lead Portfolio Manager of SFM LLC, each may be deemed a beneficial owner of the
Common Stock held for the account of the Purchaser.
The address of the principal business and principal offices of
(i) the Purchaser, (ii) Perseus-Soros Partners, (iii) Perseus Partners, (iv) Mr.
Pearl and (v) Mr. Socha is The Army and Navy Club Building, 1627 I Street, N.W.,
Suite 610, Washington D.C. 20006, the principal office of Perseus, L.L.C., a
Delaware limited liability company ("Perseus"). The present principal occupation
or employment of Mr. Pearl and Mr. Socha is as executive officers of Perseus and
its related entities. Each of Mr. Pearl and Mr. Socha is a United States
citizen.
The address of the principal business and principal offices of
(i) SFM Participation, (ii) SFM AH, (iii) Mr. Soros, (iv) SFM LLC and (v) Mr.
Druckenmiller is 888 Seventh Avenue, 33rd Floor, New York, New York 10106.
<PAGE>
CUSIP No. 928241108 Page 16 of 35 Pages
(d) and (e). Except as otherwise disclosed below, during the
past five years, neither any Reporting Person nor, to the best knowledge of each
Reporting Person, any individual otherwise identified in response to Item 2, has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Information contained herein concerning SFM Participation, SFM
AH, SFM LLC, Mr. Soros and Mr. Druckenmiller has been provided by SFM LLC. The
Purchaser, Perseus-Soros Partners, Perseus Partners, Mr. Pearl and Mr. Socha
assume no responsibility for such information. Information contained herein
concerning the Perseus Partners, Mr. Pearl and Mr. Socha has been provided by
each such Reporting Person. The Purchaser, Perseus-Soros Partners, SFM
Participation, SFM AH, SFM LLC, Mr. Soros and Mr. Druckenmiller assume no
responsibility for such information.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to an Investment Agreement, dated as of May 5, 1999
(the "Investment Agreement"), between the Company and the Purchaser, the Company
issued, and the Purchaser acquired from the Company, 2,300,000 shares of the
Company's Series A Convertible Participating Preferred Stock, par value $.001
per
<PAGE>
CUSIP No. 928241108 Page 17 of 35 Pages
share (the "Series A Preferred Stock"), and a warrant (the "Warrant" and,
together with the Series A Preferred Stock, the "Securities") to purchase
595,000 shares of Common Stock for an aggregate purchase price of $14,260,000
(the "Purchase Price") and the source of which was capital contributions from
the partners of the Purchaser.
The Common Stock (or securities derivative thereof) held for
the account of the Purchaser may be held through margin accounts maintained with
brokers, which extend margin credit as and when required to open or carry
positions in their margin accounts, subject to applicable federal margin
regulations, stock exchange rules and such firms' credit policies. The positions
which may be held in the margin accounts, including the Common Stock (or
securities derivative thereof), are pledged as collateral security for the
repayment of debit balances in the respective accounts.
Item 4. Purpose of Transaction.
Except as disclosed herein, the Reporting Persons have
acquired the shares of Series A Preferred Stock and the Warrant for investment
purposes.
A copy of the Investment Agreement is attached hereto as
Exhibit 1 and incorporated by reference herein, a copy of the Certificate of
Designation for the Series A Preferred Stock (the "Series A Certificate") is
attached hereto as Exhibit 2 and incorporated herein by reference and a copy of
the Warrant is attached hereto as Exhibit 3 and incorporated herein by
reference. Set forth below is a summary of the material terms of the Investment
Agreement, Series A Certificate and the Warrant.
<PAGE>
CUSIP No. 928241108 Page 18 of 35 Pages
The following summary is qualified in its entirety by reference to the
Investment Agreement, the Series A Certificate and the Warrant.
Terms of the Investment Agreement
Registration Rights. Pursuant to the Investment Agreement, the Company
granted the Purchaser certain demand registration rights as described more fully
in the Investment Agreement in connection with shares of Common Stock issued or
issuable upon conversion of the Series A Preferred Stock or exercise of the
Warrant ("Registrable Securities"). The purpose of such registration rights is
to facilitate the Purchaser's ability to dispose of its Registrable Securities
in a public sale and the grant of such registration rights to the Purchaser
under the Investment Agreement does not represent any present intention on
behalf of the Purchaser to dispose of any Registrable Securities to be covered
by such a registration statement, although such rights may be exercised in the
future.
Board Representation. Pursuant to the Investment Agreement, for so long
as the Purchaser (and its affiliates) hold in the aggregate at least: (i) 10.0%
of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock
(with appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected subsequent
to May 5, 1999), in each case, assuming that the Securities or other rights
convertible into or exchangeable or exercisable for shares of the Common Stock
have been converted, exchanged or exercised, the Company shall use its best
efforts to ensure that the Company's Board of Directors shall consist of at
least one director designated by the Purchaser (the "Purchaser Director").
Pursuant to the terms of the Investment Agreement, as soon
<PAGE>
CUSIP No. 928241108 Page 19 of 35 Pages
as practicable after May 5, 1999, the Board of Directors of the Company shall
appoint a Purchaser Director to the Board of Directors of the Company.
Terms of the Series A Preferred Stock
Dividends. The holders of the outstanding shares of Series A Preferred
Stock shall be entitled to receive quarterly dividends, when, as and if declared
by the Board of Directors out of funds legally available therefor. Each
quarterly dividend shall be an amount per share (rounded to the nearest $.01)
equal to 0.25 multiplied by the Dividend Amount (as defined below) and shall be
payable on the last day of March, June, September and December in each year
(each a "Dividend Payment Date") to the holders of record of Series A Preferred
Stock at the close of business on the preceding business day, or such other
dates as are fixed by the Board Directors within ten (10) days prior to the
Dividend Payment Date (each a "Record Date"). Such dividends shall become
payable beginning on the first Dividend Payment Date for which the Record Date
is subsequent to the issue date. Dividends on each share of Series A Preferred
Stock shall be cumulative and shall accrue on a day-to-day basis, whether or not
earned, from and after the day immediately succeeding the date on which such
share was issued, and shall be payable in cash (except upon conversion).
Dividends payable for any partial dividend period shall be computed on the basis
of actual days elapsed over a 365 day year. The Company, in its sole discretion,
may elect not to pay such dividends in cash when due, in which case such
dividends shall be automatically added to the Liquidation Value (as defined
below) of the Series A Preferred Stock as of any such Dividend Payment Date and
as a result shall no longer be considered due and payable. Each addition to the
Liquidation Value in lieu of a
<PAGE>
CUSIP No. 928241108 Page 20 of 35 Pages
cash dividend to the holders of the Series A Preferred Stock as provided in the
preceding sentence shall constitute the full payment of such dividend. "Dividend
Amount" means an amount per share of Series A Preferred Stock (rounded to the
nearest $ .01) equal to $50 per $1,000 Liquidation Value of Series A Preferred
Stock at all times after the issue date. "Liquidation Value" shall mean $6.20
per share of Series A Preferred Stock, subject to adjustment as provided in the
Series A Certificate.
Conversion. A Series A Preferred stockholder has the right to convert
each share of Series A Preferred Stock, at the option of the holder, at any time
after the issue date, into shares of Common Stock at the Common Stock Conversion
Rate (as defined below). On May 5, 1999, the issue date, the Common Stock
Conversion Rate was 1 for 1. The Common Stock Conversion Rate will be subject to
adjustment if the Company elects not to pay dividends on the Series A Preferred
Stock in cash when due, and such dividends are automatically added to the
Liquidation Value of the Series A Preferred Stock.
"Common Stock Conversion Rate" means, as of any date, a rate
for each share of Series A Preferred Stock equal to (i) the Liquidation Value
thereof plus all accrued and unpaid dividends thereon, divided by (ii) the
Conversion Price (as defined below) in effect as of such date. "Conversion
Price" means $6.20 per share of Series A Preferred Stock. The Conversion Price
and the number of shares issuable upon conversion of the Series A Preferred
Stock will be subject to adjustment upon the occurrence of certain events as set
forth in the Series A Certificate.
<PAGE>
CUSIP No. 928241108 Page 21 of 35 Pages
If, at any time after May 5, 2001, the second anniversary of
the issue date, the average of the daily closing prices per share of Common
Stock for 90 consecutive trading days is at least $15.50 (with appropriate
adjustment made for any stock dividend, split-up or subdivision or any
combination or reclassification made or effected subsequent to the issue date),
the Company, at its option, may elect to convert, all or any of the shares of
Series A Preferred Stock into fully paid and nonassessable shares of Common
Stock at the Common Stock Conversion Rate as of the date of conversion.
Notwithstanding the foregoing, the Company shall not convert less than all
outstanding shares of Series A Preferred Stock if shares of Series A Preferred
Stock having an aggregate liquidation value of less than $5,000,000 would remain
outstanding after giving effect to any such proposed optional conversion.
Liquidation Preferences. In the event of (i) the dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary; (ii)
the sale, exchange or other conveyance (for cash, shares of stock, securities or
other consideration) of all or substantially all the property and assets of the
Company other than to a wholly-owned subsidiary; and/or (iii) any consolidation
or merger to which the Company is a party, other than a merger or consolidation
in which the Company is the surviving or continuing corporation (collectively,
each an "Extraordinary Event"), the Series A Preferred stockholders will be
entitled to receive out of the assets of the Company available for distribution
to stockholders, in preference to the holders of, and before any payment or
distribution shall be made on, Junior Stock (as defined in the Series A
Certificate), an amount (the "Liquidation Amount") equal to the greater
<PAGE>
CUSIP No. 928241108 Page 22 of 35 Pages
of (i) the Liquidation Value per share plus all accrued and unpaid dividends
thereon (whether or not declared) to the date fixed for the Extraordinary Event,
or (ii) the amount that it would have received if immediately prior to the
Extraordinary Event, the Series A Preferred Stock had been converted to Common
Stock.
Voting Rights. Approval by holders of a majority of the outstanding
shares of Series A Preferred Stock, voting as a separate class, will be required
for any action which (i) alters or changes the rights, preferences or privileges
of the Series A Preferred Stock, (ii) creates or issues any new class of shares
having, or reclassifies any junior class or series of shares to have, a
preference over or parity with the Series A Preferred Stock, (iii) effects any
redemption or repurchase of any capital stock or options of the Company (other
than upon the repurchase by the Company of Common Stock or options issued to
employees or others providing services to the Company up to an aggregate amount
of $1 million), or (iv) declares or pays any dividends with respect to any class
of stock junior to or on a parity with the Preferred Stock.
Other than as set forth below or in the Series A Certificate,
the shares of Series A Preferred Stock shall have no voting rights except as
required by law. So long as the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders, on all
matters entitled to be voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote thereon. With respect to any
such vote, each share of Series A Preferred Stock shall entitle the holder
thereof to cast that number of votes per share as is equal to the
<PAGE>
CUSIP No. 928241108 Page 23 of 35 Pages
number of votes that such holder would be entitled to cast had such holder
converted its shares of Series A Preferred Stock into shares of Common Stock on
the record date for determining the stockholders of the Company eligible to vote
on any such matters.
So long as at least 575,000 shares of Series A Preferred Stock
(with appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected subsequent
to the issue date) remain outstanding, the Company shall not, without the
affirmative vote at a meeting or the written consent with or without a meeting
of the holders of shares of Series A Preferred Stock representing at least a
majority of the aggregate voting power of shares of the Series A Preferred Stock
outstanding, voting as a separate class, author ize or issue any Senior Stock
(as defined in the Series A Certificate) or Parity Stock (as defined in the
Series A Certificate) or reclassify any Junior Stock as Parity Stock or Senior
Stock or reclassify any Parity Stock as Senior Stock.
The Company shall not, without the affirmative vote at a
meeting or the written consent with or without a meeting of the holders of
shares of Series A Preferred Stock representing at least a majority of the
aggregate voting power of shares of Series A Preferred Stock then outstanding,
voting as a separate class, amend, alter or repeal any of the provisions of the
Company's Second Amended and Restated Certificate of Incorporation or the Series
A Certificate, so as in any such case to materially adversely affect the
preferences, special rights, powers or privileges of the shares of Series A
Preferred Stock.
<PAGE>
CUSIP No. 928241108 Page 24 of 35 Pages
Terms of the Warrant
Exercise Rights. The Common Stock underlying the Warrant may be
purchased at a price per share equal to $9.53 (the "Exercise Price"). The
Exercise Price may be paid in cash or, at any time after a Change of Control (as
defined in the Warrant), but prior to May 5, 2004, equivalent shares. The
Exercise Price and the number of shares issuable upon exercise of the Warrant
will be subject to adjustment upon the occurrence of certain events as set forth
in the Warrant.
Exercise Period. The Warrant is exercisable at any time, or from time
to time, from the date of issuance, May 5, 1999, until May 5, 2004.
Additional Disclosure
The Reporting Persons may from time to time acquire additional
shares of Common Stock in the open market or in privately negotiated
transactions, subject to availability of Common Stock at prices deemed
favorable, the Company's business or financial condition and other factors and
conditions the Reporting Persons deem appropriate. Alternatively, the Reporting
Persons may sell all or a portion of the Series A Preferred Stock, Warrant, or
Common Stock issued upon exercise of the Warrant or conversion of the Series A
Preferred Stock in privately negotiated transactions or in the open market
pursuant to the exercise of certain registration rights granted pursuant to the
Investment Agreement as described above, in each case subject to the factors and
conditions referred to above and to the terms of the Investment Agreement, the
Series A Preferred Stock and the Warrant, as the case may be. In addition, the
Reporting Persons may formulate other purposes, plans or proposals regarding the
Company or any of its securities to the extent deemed
<PAGE>
CUSIP No. 928241108 Page 25 of 35 Pages
advisable in light of general investment and trading policies, market conditions
or other factors.
Except as described in the Investment Agreement, the Warrant
or the Series A Certificate, and as otherwise set forth in this Schedule 13D, no
Reporting Person or any individual otherwise identified in Item 2 has any
present plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Company, or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer or a material amount
of assets of the Company or of any of its subsidiaries; (d) any change in the
present board of directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Company; (f) any other material change in the Company's
business or corporate structure; (g) changes in the Company's charter, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above.
<PAGE>
CUSIP No. 928241108 Page 26 of 35 Pages
Item 5. Interest in Securities of the Issuer.
(a) As set forth above, on May 5, 1999, the Company issued to
the Purchaser, and the Purchaser acquired, (i) 2,300,000 shares of the Series A
Preferred Stock and (ii) the Warrant to purchase an aggregate of 595,000 shares
of Common Stock, subject to adjustment under certain circumstances. Shares of
Series A Preferred Stock are convertible into shares of Common Stock at any
time. The Warrant is exercisable at any time until May 5, 2004.
Accordingly, as of May 5, 1999, each of the Reporting Persons
may be deemed to beneficially own an aggregate of 2,895,000 shares of Common
Stock which, based on calculations made in accordance with Rule 13d-3(d) and
there being 11,572,144 shares of Common Stock outstanding on April 1, 1999 as
disclosed by the Company in its Proxy Statement filed with the Commission on
April 6, 1999, represents approximately 20.0% of the outstanding shares of
Common Stock on a diluted basis in accordance with Rule 13d-3(d).
As described in Item 4 above, the Common Stock Conversion Rate
will be subject to adjustment if the Company elects not to pay dividends on the
Series A Preferred Stock in cash when due, and such dividends are automatically
added to the Liquidation Value of the Series A Preferred Stock. On May 5, 1999,
the issue date, the Common Stock Conversion Rate was 1 for 1.
(b) (i) Each of the Purchaser and Perseus-Soros Partners may
be deemed to have sole power to direct the voting and disposition of the
2,895,000 shares of Common Stock beneficially owned by the Purchaser.
<PAGE>
CUSIP No. 928241108 Page 27 of 35 Pages
(ii) By virtue of the relationships between and among
the Reporting Persons described in Item 2 of this Statement on Schedule 13D,
each of the Reporting Persons, other than the Purchaser and Perseus-Soros
Partners, may be deemed to share the power to direct the voting and disposition
of the 2,895,000 shares of Common Stock beneficially owned by the Purchaser.
(c) Except as set forth above, no Reporting Person nor, to the
best knowledge of each Reporting Person, any person identified in Item 2 hereof,
beneficially owns any shares of Common Stock or has effected any transaction in
shares of Common Stock during the preceding 60 days.
(d) The partners of the Purchaser have the right to
participate in the receipt of dividends from, or proceeds from the sale of, the
Securities held for the account of the Purchaser in accordance with their
ownership interests in the Purchaser.
Paragraph (e) of Item 5 of Schedule 13D is not applicable to
this filing.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to the Common
Stock of the Issuer.
Pursuant to Section 8 of the Investment Agreement, which is
attached hereto as Exhibit 1 and incorporated herein by reference, the Company
has granted the Purchaser, among other things, the right, on the terms and
conditions set forth therein, to require the Company to register for sale to the
public the shares of Common Stock issuable upon (i) exercise of the Warrant or
(ii) the conversion of Series A Preferred Stock.
<PAGE>
CUSIP No. 928241108 Page 28 of 35 Pages
From time to time, each of the Reporting Persons may lend
portfolio securities to brokers, banks or other financial institutions. These
loans typically obligate the borrower to return the securities, or an equal
amount of securities of the same class, to the lender and typically provide that
the borrower is entitled to exercise voting rights and to retain dividends
during the term of the loan. From time to time, to the extent permitted by
applicable laws, each of the Reporting Persons may borrow securities, including
the Common Stock (or securities derivative thereof), for the purpose of
effecting, and may effect, short sale transactions, and may purchase securities
for the purpose of closing out short positions in such securities.
Except as described elsewhere in this Schedule 13D and as set
forth in the Investment Agreement, the Series A Certificate and the Warrant,
copies of which are attached hereto as Exhibits 1, 2, and 3, respectively, and
are incorporated herein by reference, to the best knowledge of the Reporting
Persons, there exist no contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons named in Item 2 and between such persons
and any person with respect to any securities of the Company, including but not
limited to transfer or voting of any securities of the Company, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies.
<PAGE>
CUSIP No. 928241108 Page 29 of 35 Pages
Item 7. Material To Be Filed as Exhibits.
1. Investment Agreement, dated as of May 5, 1999 (the
"Investment Agreement"), among the Company and Perseus-Soros BioPharmaceutical
Fund, L.P., a Delaware limited partnership.
2. Certificate of Designation, dated May 5, 1999, governing
ViroPharma Incorporated's Series A Convertible Participating Preferred Stock,
par value $.001 per share.
3. Warrant, dated May 5, 1999, for 595,000 shares of Common
Stock, par value $.002 per share, of ViroPharma Incorporated issued to
Perseus-Soros BioPharmaceutical Fund, L.P.
4. Power of Attorney dated January 1, 1997, appointing Sean C.
Warren and Michael C. Neus Attorney-In-Fact for George Soros.
5. Power of Attorney dated January 1, 1997, appointing Sean C.
Warren and Michael C. Neus Attorney-In-Fact for Stanley F. Druckenmiller.
6. Joint Filing Agreement, dated May 17, 1999, among (i)
Perseus-Soros BioPharmaceutical Fund, LP, (ii) Perseus-Soros Partners, LLC,
(iii) Perseus BioTech Fund Partners, LLC, (iv) SFM Participation, L.P., (v) SFM
AH, Inc., (vi) Frank H. Pearl, (vii) Kenneth M. Socha, (viii) George Soros, (ix)
Soros Fund Management LLC and (x) Stanley F. Druckenmiller.
<PAGE>
CUSIP No. 928241108 Page 30 of 35 Pages
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: May 17, 1999
PERSEUS-SOROS BIOPHARMACEUTICAL FUND,
LP
By: Perseus-Soros Partners, LLC,
General Partner
By: SFM Participation, L.P.,
Member
By: SFM AH, Inc.,
General Partner
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Vice President
PERSEUS-SOROS PARTNERS, LLC
By: SFM Participation, L.P.,
Member
By: SFM AH, Inc.,
General Partner
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Vice President
<PAGE>
CUSIP No. 928241108 Page 31 of 35 Pages
PERSEUS BIOTECH FUND PARTNERS, LLC
By: /s/ KENNETH M. SOCHA
--------------------
Name: Kenneth M. Socha
MR. FRANK H. PEARL
By: /s/ FRANK H. PEARL
------------------
Name: Frank H. Pearl
MR. KENNETH M. SOCHA
By: /s/ KENNETH M. SOCHA
--------------------
Name: Kenneth M. Socha
SFM PARTICIPATION, L.P.
By: SFM AH, Inc.,
General Partner
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Vice President
SFM AH, INC.
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Vice President
MR. GEORGE SOROS
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Attorney-in-fact
<PAGE>
CUSIP No. 928241108 Page 32 of 35 Pages
SOROS FUND MANAGEMENT LLC
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Assistant General Counsel
MR. STANLEY F. DRUCKENMILLER
By: /s/ MICHAEL C. NEUS
-------------------
Name: Michael C. Neus
Title: Attorney-in-fact
<PAGE>
CUSIP No. 928241108 Page 33 of 35 Pages
ANNEX A
Executive Officers of SFM AH, INC.
<TABLE>
<CAPTION>
Name/Title/Citizenship Principal Occupation Business Address
- ---------------------- -------------------- ----------------
<S> <C> <C>
Gary Gladstein Managing Director of SFM 888 Seventh Avenue
President LLC 33rd Floor
(United States) New York, NY 10106
Sean C. Warren Managing Director of SFM 888 Seventh Avenue
Vice President LLC 33rd Floor
and Secretary New York, NY 10106
(United States)
Peter Streinger Chief Financial Officer of SFM 888 Seventh Avenue
Treasurer LLC 33rd Floor
(United States) New York, NY 10106
Michael C. Neus Assistant General Counsel of 888 Seventh Avenue
Vice President SFM LLC 33rd Floor
(United States) New York, NY 10106
</TABLE>
To the best of the Reporting Persons' knowledge:
(a) None of the above persons hold any Common Stock or
securities derivative thereof.
(b) None of the above persons has any contracts, arrangements,
understandings or relationships with respect to the Common Stock or securities
derivative thereof.
<PAGE>
CUSIP No. 928241108 Page 34 of 35 Pages
ANNEX B
The following is a list of all of the persons (other than
Stanley Druckenmiller) who serve as Managing Directors of SFM LLC, as well as
the number of shares of Common Stock (or securities derivative thereof), if any,
held for the account of each:
Scott K. H. Bessent
Walter Burlock
Brian J. Corvese
L. Kevin Dann
Gary Gladstein
Ron Hiram
David N. Kowitz
Alexander C. McAree
Paul McNulty
Steven Okin
Frank Sica
Sean C. Warren
Each of the above-listed persons is a United States citizen whose principal
occupation is serving as Managing Director of SFM LLC, and each has a business
address c/o Soros Fund Management L.L.C., 888 Seventh Avenue, 33rd Floor, New
York, New York 10106.
To the best of the Reporting Persons' knowledge:
(a) None of the above persons hold any Common Stock or
securities derivative thereof.
(b) None of the above persons has any contracts, arrangements,
understandings or relationships with respect to the Common Stock or securities
derivative thereof.
<PAGE>
CUSIP No. 928241108 Page 35 of 35 Pages
EXHIBIT INDEX
Page No.
1. Investment Agreement, dated as of May 5, 1999
(the "Investment Agreement"), among the
Company and Perseus- Soros BioPharmaceutical
Fund, L.P., a Delaware limited partnership
2. Certificate of Designation, dated May 5, 1999,
governing ViroPharma Incorporated's Series A
Convertible Participating Preferred Stock, par
value $.001 per share
3. Warrant, dated May 5, 1999, for 595,000 shares
of Common Stock, par value $.002 per share, of
ViroPharma Incorporated issued to
Perseus-Soros BioPharmaceutical Fund, L.P.
4. Power of Attorney dated January 1, 1997,
appointing Sean C. Warren and Michael C. Neus
Attorney-In-Fact for George Soros.
5. Power of Attorney dated January 1, 1997,
appointing Sean C. Warren and Michael C. Neus
Attorney-In-Fact for Stanley F. Druckenmiller.
6. Joint Filing Agreement, dated May 17, 1999,
among (i) Perseus-Soros BioPharmaceutical
Fund, LP, (ii) Perseus-Soros Partners,
LLC, (iii) Perseus BioTech Fund Partners,
LLC, (iv) SFM Participation, L.P., (v) SFM AH,
Inc., (vi) Frank H. Pearl, (vii) Kenneth M.
Socha, (viii) George Soros, (ix) Soros Fund
Management LLC and (x) Stanley F.
Druckenmiller.
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of May 5, 1999, by and
among ViroPharma Incorporated, a Delaware corporation (the "Company"), and
Perseus-Soros BioPharmaceutical Fund, LP, a Delaware limited partnership (the
"Purchaser").
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, (i) shares (the "Shares") of the
Company's Series A Convertible Participating Preferred Stock, par value $.001
per share, having the terms and conditions set forth in a Certificate of
Designation substantially in the form attached hereto as Exhibit A (the
"Preferred Stock"), and (ii) warrants to purchase shares of Common Stock (the
"Warrants") having the terms and conditions set forth in the form of Warrant
certificate attached hereto as Exhibit B, in each case, upon the terms and
subject to the conditions set forth herein and therein. The Warrants, together
with the shares of Preferred Stock, are referred to herein as the "Securities."
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Company and the Purchaser agree as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following meanings
for all purposes of this Agreement:
"1998 Form 10-K" has the meaning set forth in Section 3.1(a).
"Act" means the Securities Act of 1933, as amended, or any superseding
Federal statute, and the rules and regulations promulgated thereunder, all as
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any such superseding Federal statute.
An "Affiliate" of, or a person "affiliated" with, a specified Person,
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. The term "control" (including the terms "controlling," "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management, policies or
investment decisions of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
<PAGE>
2
"Annual Reports" means the Company's Annual Reports on Form 10-K for
the years ended December 31, 1998 and 1997, each as filed with the SEC
(including, in each case, all amendments thereto filed with the SEC prior to the
date of this Agreement, all exhibits and schedules thereto and documents
incorporated by reference therein, but excluding any amendments thereto made
subsequent to the date hereof).
"Benefit Plans" has the meaning set forth in Section 3.17.
"Board of Directors" means the Board of Directors of the Company, as
constituted from time to time.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in New York City.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock.
"Certificate of Designation" means the Certificate of the Powers
Designations, Preferences and Rights of the Preferred Stock substantially in the
form of Exhibit A hereto.
"Certificate of Incorporation" means the Second Amended and Restated
Certificate of Incorporation of the Company, as amended through the date hereof.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means a share of the Company's Common Stock, par value
$.002 per share.
"Company" has the meaning set forth in the preamble to this Agreement.
"Encumbrance" means any mortgage, pledge, lien, security interest,
restriction upon voting or transfer, claim or other encumbrance of any kind.
<PAGE>
3
"Environmental Laws" means all Federal, state, local and foreign laws,
principles of common law, regulations, codes and ordinances, as well as orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder relating to pollution, protection of the environment, or health and
safety, as in effect at the time.
"ERISA" has the meaning set forth in Section 3.17.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of such superseding
Federal statute.
"FDA" means the United States Food and Drug Administration.
"General Partner" means Perseus-Soros Partners, LLC, a Delaware limited
liability company, the sole general partner of the Purchaser.
"Governmental Authority" means the government of any nation or state,
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Intellectual Property" has the meaning set forth in Section 3.12.
"Knowledge of the Company" means the actual knowledge of the executive
officers of the Company without investigation.
"Law" means any law, treaty, rule or regulation of a Governmental
Authority or judgment, order, writ, injunction or determination of an arbitrator
or a court or other Governmental Authority as in effect on the date hereof.
"License Agreement" means the agreement by and between Sanofi, a
corporation organized and existing under the laws of France ("Sanofi"), and the
Company, dated as of December 22, 1995, and all amendments thereto.
"Licenses" means any certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
Governmental Authorities.
<PAGE>
4
"Losses" has the meaning set forth in Section 7.
"Material Adverse Effect" means a material adverse effect on the
assets, results of operations, business, prospects or condition (financial or
otherwise) of the Company.
"Options" has the meaning set forth in Section 3.7.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in the first recital of
this Agreement.
"Purchaser" has the meaning set forth in the preamble to this
Agreement.
"Purchaser Director" means the person serving as a member of the Board
of Directors who has been designated by the Company in accordance with Section
5.3.
"Quarterly Reports" means the Company's Quarterly Reports on Form 10-Q
for the quarters ended September 30, 1998, June 30, 1998 and March 31, 1998,
each as filed with the SEC.
"Registrable Securities" means the shares of Common Stock issued or
issuable upon conversion or exercise of the Securities.
"Related Directors" means those members of the Board of Directors who
are either employees of the Company or are associated with investors in the
Company.
"Representatives" means the officers and directors of the General
Partner and the employees, counsel, accountants and other authorized
representatives of the Purchaser, the General Partner or any Affiliates of
either person.
<PAGE>
5
"Research Agreement" means the agreement by and between Boehringer
Ingelheim Pharmaceuticals, Inc., a Delaware corporation ("BI"), and the Company,
dated as of July 23, 1996, and all amendments thereto.
"Restricted Securities" means the Securities or shares of capital stock
issued or issuable upon conversion or exercise of the Securities.
"Rights" means any rights, title, interest or benefit of whatever kind
and nature.
"Rights Plan" means the Stockholders' Rights Plan, dated as of
September 10, 1998, by and among the Company and StockTrans, Inc., as Rights
Agent, as amended on May 5, 1999.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means the Annual Reports, the Quarterly Reports and all
other documents filed by the Company with the SEC thereafter prior to the date
hereof pursuant to Sections 13 or 15(d) of the Exchange Act (including all
exhibits and schedules thereto and documents incorporated by reference therein),
but shall not include any portion of any document which is not deemed to be
filed under applicable SEC rules and regulations.
"Securities" has the meaning set forth in the first recital of this
Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, joint venture, association, limited liability
company or partnership, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which 50% or more of the
equity ownership is, at the time, owned, directly or indirectly by such Person.
"Tax" or "Taxes" has the meaning set forth in Section 3.14.
"Transaction Documents" means (i) this Agreement (including the
exhibits and schedules attached hereto) and (ii) the Warrants.
"Transfer" means any sale, assignment, transfer or disposition by gift
or otherwise, including without limitation, any distribution in liquidation or
otherwise by a corporation or partnership or other Person.
<PAGE>
6
"Warrants" has the meaning set forth in the first recital of this
Agreement.
2. CLOSING.
2.1 Time and Place of the Closing. Subject to the terms and
conditions of this Agreement, the closing of the sale and purchase of the
Securities contemplated hereby (the "Closing") shall take place at the offices
of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New
York, New York 10019-6064, at 10:00 A.M., New York time, on the date hereof. The
"Closing Date" shall be the date the Closing occurs.
2.2 Transactions at the Closing. At the Closing, subject to
the terms and conditions of this Agreement, the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase, Preferred Stock and Warrants
for an aggregate purchase price of $14,260,000 (the "Purchase Price") by wire
transfer of immediately available funds to an account or accounts previously
designated by the Company. At the Closing, the Company shall deliver to the
Purchaser certificates representing such number of shares of Preferred Stock and
Warrant certificates representing the number of Warrants as are set forth
opposite the Purchaser's name on Schedule 2.2, each registered in the name of
the Purchaser or its nominees, against payment by the Purchaser of the Purchase
Price payable by the Purchaser in respect thereof.
2.3 Perseus-Soros Management, LLC Fee. At the Closing, subject
to the terms and conditions of this Agreement, the Company shall pay to
Perseus-Soros Management, LLC, a Delaware limited liability company ("Perseus-
Soros Management"), a fee in an amount equal to $499,100, by wire transfer of
immediately available funds to an account or accounts designated by
Perseus-Soros Management.
2.4 Rights Plan. Prior to, or concurrently with, the Closing,
the Company will adopt the amendment to the Rights Plan substantially in the
form attached hereto as Exhibit C.
2.5 Opinion of Counsel. At the Closing, the Purchaser shall
receive the favorable opinion of Morgan, Lewis & Bockius LLP, counsel to the
Company, dated the Closing Date, substantially in the form of Annex A.
2.6 Secretary's Certificate. At the Closing, the Purchaser
shall receive a certificate, dated the Closing Date and signed by the secretary
or an
<PAGE>
7
assistant secretary of the Company on behalf of the Company, certifying the
correctness of attached copies of the Certificate of Incorporation (including
amendments thereto), the By-laws (including amendments thereto), and resolutions
of the Board of Directors approving the sale of the Securities to the Purchaser
and the other transactions contemplated hereby.
2.7 Reservation of Stock. At the Closing, 3,195,000 shares of
Common Stock shall have been duly authorized and reserved for issuance upon
conversion or exercise of the Securities, as the case may be.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser that the
following are true and correct as of the Closing Date:
3.1 Corporate Existence and Power.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Company's annual
report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K").
The Company is duly qualified to transact business as a foreign corporation and
is in good standing (if applicable) in each jurisdiction in which the conduct of
its business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other failures reasonably be
expected to have a Material Adverse Effect.
(b) True, correct and complete copies of the
Certificate of Incorporation and the By-Laws as in effect on the date hereof
have been provided by the Company to the Purchaser.
3.2 Power and Authority. The Company has the full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. The execution, delivery and performance by the
Company of this Agreement and each of the Transaction Documents and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized and approved by the Board of Directors and no further corporate
action on the part of the Company (other than the filing of the Certificate of
Designation under the Delaware General Corporation Law) is necessary to
authorize
<PAGE>
8
the execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby. The Board
of Directors has duly adopted the Certificate of Designation. This Agreement has
been duly executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3.3 Subsidiaries. The Company has no Subsidiaries and does not
otherwise own or control, directly or indirectly, any other person, corporation,
association, or business entity. Except as described in the 1998 Form 10-K, the
Company is not a participant in any joint venture, partnership, or similar
arrangement.
3.4 Affiliate Transactions. Except as disclosed in the
Company's Proxy Statement as filed with the SEC on April 6, 1999, the Company is
not a party to any transaction or series of transactions or any contract with
any officer, director, employee or Affiliate of the Company, in each case, the
value of which is in excess of $60,000.
3.5 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of this Agreement and each Transaction Document to
which it is a party by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with, contravene or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under, or result in the creation or imposition of any Encumbrance upon
any assets or properties of the Company or cause the Company to be required to
redeem, repurchase or offer to repurchase any of their respective indebtedness
under (i) the Certificate of Incorporation, the By-laws or other organizational
document of the Company, (ii) any material Law of any Governmental Authority
having jurisdiction over the Company or any of its assets, properties or
operations or (iii) any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any material lease, permit, license or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the assets, properties or operations of the Company
is subject. The consummation of the transactions contemplated by the Transaction
Documents including, without limitation, the (i) acquisition by the Purchaser of
the Securities pursuant hereto, (ii) conversion of the Preferred Stock into
Common Stock as provided for in the Certificate of Designation and/or (iii)
exercise of the Warrants, will not:
<PAGE>
9
(a) result in any anti-dilution adjustment or change
in conversion or exercise ratio or conversion or exercise price or similar
adjustment with respect to any outstanding equity or debt securities of the
Company; or
(b) in the Company's belief, result in a change in
control of the Company under the License Agreement or otherwise give Sanofi the
right to discontinue or terminate the License Agreement.
3.6 Consents. No consent, approval, authorization, order,
registration, filing or qualification of or with any (i) Governmental Authority,
(ii) stock exchange on which the securities of the Company are traded or (iii)
other Person (whether acting in an individual, fiduciary or other capacity) is
required to be made or obtained by the Company for the execution, delivery and
performance by the Company of this Agreement and each Transaction Document to
which it is a party and the consummation of the transactions contemplated hereby
and thereby, except such approvals as may be required under the Act and state
securities laws in connection with the performance by the Company of its
obligations under Section 8 hereof and except consents which are not material to
the business or operations of the Company. Shareholder approval is not required
to be obtained by the Company for the execution, delivery and performance by the
Company of this Agreement and each Transaction Document to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
3.7 Capitalization. Schedule 3.7 sets forth, as of April 30,
1999, (i) the authorized Capital Stock of the Company, (ii) the issued and
outstanding Capital Stock of the Company and (iii) in the aggregate, all
outstanding options, warrants, conversion privileges or other rights to purchase
or otherwise acquire any authorized but unissued or treasury shares of Capital
Stock (collectively, "Options") of the Company. No shares of the Company's
Preferred Stock, par value $.001 per share (the "Company Preferred Stock"), are
issued and outstanding as of the date hereof. Since April 30, 1999, the Company
has not issued any additional shares of Capital Stock (other than Common Stock
issued upon exercise of outstanding Options). Schedule 3.7 sets forth the number
of shares of Common Stock reserved for (i) issuance upon exercise of all
outstanding Options, (ii) issuance upon conversion of the Preferred Stock and
(iii) issuance upon exercise of the Warrants. Except as set forth in Schedule
3.7, no other shares of the Company's Capital Stock are reserved for future
issuance. The shares of Preferred Stock and the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock, and the Warrants and the
shares of Common Stock issuable upon exercise of the Warrants, when issued and
paid for in compliance with the provisions of this Agreement, the Certificate of
Designation, the Warrants and the Certificate of Incorporation, will be duly
<PAGE>
10
authorized, validly issued, fully paid and nonassessable, will not have been
issued in violation of the preemptive or similar rights of any Person. The
issued and outstanding shares of Capital Stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with the registration and qualification requirements of all
applicable federal securities laws or an exemption therefrom.
3.8 SEC Documents.
(a) The Company has made all filings required to be
made with the SEC since November 19, 1996.
(b) As of its filing date, each SEC Document filed
pursuant to the Exchange Act (i) complied in all material respects with the
applicable requirements of the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) Each final registration statement filed with the
SEC, as amended or supplemented prior to the Closing Date, if applicable,
pursuant to the Act, as of the date such statement or amendment became or will
become effective (i) complied or will comply in all material respects with the
applicable requirements of the Act and (ii) did not or will not contain any
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
(in the case of any prospectus, in light of the circumstances under which they
were made).
3.9 Financial Statements. The audited financial statements and
notes included in the SEC Documents comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, were prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved except as noted
therein, and fairly present in all material respects the financial condition,
results of operations, cash flows and changes in stockholders' equity of the
Company at the dates and for the periods presented. Since December 31, 1998, the
Company has not incurred any material liabilities other than in the ordinary
course of business of the Company, and there has been no change, and no
development or event involving a prospective change, which has had or could
reasonably be expected to have, a Material Adverse Effect.
<PAGE>
11
3.10 No Existing Violation, Default, Etc. The Company is not
in violation (i) of any provision of its Certificate of Incorporation, By-laws
or other organizational documents or (ii) of any applicable Law or regulation,
which violation has or would reasonably be expected to have a Material Adverse
Effect. No breach, event of default or event that, but for the giving of notice
or the lapse of time or both, would constitute an event of default exists under
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, permit, license or other agreement to which the Company is a
party or by which the Company is bound or to which any of the properties, assets
or operations of the Company is subject, which breach, event of default, or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default, has or would reasonably be expected to have a
Material Adverse Effect.
3.11 Licenses and Permits. The Company has such Licenses as
are necessary to own, lease or operate its properties and to conduct its
businesses in the manner described in the SEC Documents and as currently owned
or leased and conducted and all such Licenses are valid and in full force and
effect, except Licenses the failure of which to have or to be in full force and
effect individually or in the aggregate has not had, and would not reasonably be
expected to have, a Material Adverse Effect. The Company has not received any
written notice that any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the Knowledge of the
Company, threatened, to suspend, revoke or limit any such License the effect of
which would reasonably be expected to have a Material Adverse Effect. The
Company is in compliance with its respective obligations under such Licenses,
with such exceptions as individually or in the aggregate have not had, and would
not reasonably be expected to have, a Material Adverse Effect, and no event has
occurred that allows, or after notice or lapse of time would allow, revocation,
suspension, limitation or termination of such Licenses, except such events as
have not had, or would not reasonably be expected to have, a Material Adverse
Effect.
3.12 Intellectual Property. There are no patents, patent
applications, and other patent rights (including any divisions, continuations,
continua tions-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are modified or resubmitted) owned or licensed by the Company
("Intellectual Property") other than as disclosed in Schedule 3.12. Except as
disclosed in Schedule 3.12: (i) the Company owns or possesses sufficient legal
rights to all Intellectual Property and Related Intellectual Property (as
defined below in this Section 3.12) necessary for its business as presently
conducted without any conflict or infringement of rights of others; (ii)
<PAGE>
12
other than the License Agreement, those agreements listed on Schedule 3.18 and
those contracts, agreements, and instruments required to be filed as an exhibit
to the 1998 Form 10-K, there are no material outstanding options, licenses, or
agreements of any kind relating to the Intellectual Property nor is the Company
bound by or a party to any material options, licenses, or agreements of any kind
with respect to the intellectual property of any other person or entity; (iii)
to the Knowledge of the Company, the Company has not infringed upon or otherwise
violated the intellectual property rights of any third party; (iv) other than as
previously disclosed to the Purchaser in writing, the Company has not received
any claim, charge, demand, notice or other communication alleging that the
Company has violated or, by conducting its business as proposed, would violate
any intellectual property rights of any other person or entity; (v) other than
as previously disclosed to the Purchaser in writing, the Company is unaware of
any facts that would form a reasonable basis for an action or claim by others
alleging infringement by the Company of Intellectual Property of others; and
(vi) all of the Company's Intellectual Property is owned by the Company, free
and clear of all liens and encumbrances and held in the Company's name. None of
the execution or delivery of this Agreement or any Transaction Documents, or the
carrying on of the Company's business by the employees of the Company, will
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument related to
the Company's Intellectual Property. The Company has taken all action reasonably
necessary and desirable to maintain and protect each item of Intellectual
Property owned by the Company. Each employee, officer and director of the
Company has executed an agreement regarding inventions and confidentiality
substantially in the form or forms delivered to the Purchaser. The Company is
unaware of uncited prior art that is more pertinent than the art already of
record in the U.S. Patent and Trademark Office in connection with the patents
and patent applications of the Company's Intellectual Property.
As used in this Agreement, the term "Related Intellectual Property"
means all intellectual property rights and other intangible property rights
(other than standard license agreements and other related rights acquired by the
Company or under which the Company is the licensee in connection with the
Company's use of administrative, ministerial, accounting and financial office
automation software and related products) including, without limitation, (i)
trademarks, service marks, fictitious or assumed names, trade dress, trade
names, brand names, Internet domain names, designs, logos, or corporate names,
whether registered or unregistered, and all registrations and applications for
registration thereof; (ii) copyrights, including all renewals and extensions
thereof, copyright registrations and applications for registration thereof, and
non-registered copyrights; (iii) trade secrets, concepts, ideas, designs,
research, processes, procedures, techniques, methods, know-how, data, mask
<PAGE>
13
works, discoveries, inventions, modifications, extensions, improvements,
formulae and other proprietary rights (whether or not patentable or subject to
copyright, mask work, or trade secret protection); and (iv) computer software
programs, including, without limitation, all source code, object code, and
documentation related thereto.
3.13 Environmental Matters. The Company and its operations and
properties are and have been in compliance in all material respects with all
applicable Environmental Laws, and to the Knowledge of the Company, no material
expenditures are or will be required in order to comply with any applicable
Environmental Laws. There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to the Knowledge of the Company,
threatened against the Company pursuant to Environmental Laws which could
reasonably be expected to result in a material fine, penalty or other
obligation, cost or expense. There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company with, or which have given rise to,
or will give rise to, material liability to the Company under Environmental
Laws.
3.14 Taxes. The Company has filed or caused to be filed, or
has properly filed extensions for, all material Tax returns that are required to
be filed and has paid or caused to be paid all material Taxes as shown on said
returns and on all material assessments received by it to the extent that such
Taxes have become due, except Taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves, in accordance with generally accepted accounting principles,
have been set aside. These returns are true and correct in all material
respects. The Company has paid or caused to be paid, or have established
reserves that the Company reasonably believes to be adequate in all material
respects, for all Tax liabilities applicable to the Company for all fiscal years
that have not been examined and reported on by the taxing authorities (or closed
by applicable statutes). Schedule 3.14 sets forth the tax year through which
United States Federal income tax returns of the Company have been examined and
closed. For purposes of this Section 3.14, "Tax" or "Taxes" means any federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
<PAGE>
14
3.15 Litigation. Other than as disclosed in Schedule 3.15,
there are no actions, suits, proceedings, or investigations pending or, to the
Knowledge of the Company, threatened against the Company or its properties
before any court or governmental agency (nor, other than as previously disclosed
to the Purchaser in writing, to the Knowledge of the Company, is there any basis
therefor). The foregoing includes, without limitation, any action, suit,
proceeding, or investigation pending or currently threatened against the Company
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any, information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, negotiations by the Company with potential
backers of, or investors in, the Company or in connection with any investment
agreement, rights agreement, stock purchase agreement, shareholder(s) agreement
or similar agreement, arrangement or understanding entered into by the Company.
The Company is not a party to, or to the Knowledge of the Company, named in any
order, writ, injunction, judgment or decree of any court, government agency, or
instrumentality. There is no action, suit or proceeding by the Company currently
pending, or that the Company currently intends to initiate.
3.16 Labor Relations. No (i) grievance or arbitration
proceeding arising out of or under collective bargaining agreements is pending
or, to the Knowledge of the Company, threatened against the Company and (ii)
strike, labor dispute, slowdown or stoppage has occurred within the past 36
months or is pending or, to the Knowledge of the Company, threatened against the
Company. The Company is not a party to any collective bargaining agreement or
contract and to the Knowledge of the Company, no union organizing activities are
taking place that affect the employees of the Company.
3.17 Employee Benefits.
(a) Except for the plans described in the SEC
Documents filed with the SEC prior to the date of this Agreement and those
listed in Schedule 3.17 (the "Benefit Plans"), there are no employee benefit
plans or arrangements of any type (including, without limitation, plans
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder ("ERISA") under which the
Company has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and
(o) of the Code), any material liability with respect to any current or former
employee of the Company or any Commonly Controlled Entity. No such Benefit Plan
is a "multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)) or
subject to Title IV of ERISA
<PAGE>
15
and, during the previous six years, the Company has not contributed to, or had
any obligation to contribute to, any such multiemployer plan or any plan subject
to Title IV of ERISA.
(b) With respect to each Benefit Plan: (i) such
Benefit Plan has been maintained and administered at all times in material
compliance with its terms and applicable law and regulation; (ii) no event has
occurred and to the Knowledge of the Company, there exists no circumstance under
which the Company could directly, or indirectly through a Commonly Controlled
Entity, incur any material liability under ERISA, the Code or otherwise (other
than routine claims for benefits); (iii) there are no actions, suits or claims
(other than routine claims for benefits) pending or, to the Knowledge of the
Company, threatened, with respect to any Benefit Plan or against the assets of
any Benefit Plan with respect to which suits management of the Company
reasonably believes the Company could incur any material liability; (iv) all
contributions and premiums due and owing to any Benefit Plan have been made or
paid on a timely basis and no "accumulated funding deficiency", as defined in
Code Section 412, has been incurred, whether or not waived; and (v) if such
Benefit Plan is intended to be qualified under Section 401(a) of the Code, such
Benefit Plan has been determined to be so qualified and each trust created under
such Benefit Plan has been determined to be exempt from tax under Section 501(a)
of the Code and to the Knowledge of the Company, no event has occurred since the
date of such determinations, including effective changes in laws or regulations
or modifications to the Benefit Plans, that would adversely affect such
qualification or tax exempt status.
(c) The Company has no Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of post-retirement health and medical benefits for current and former
employees of the Company. No condition exists that would prevent the Company
from amending or terminating any plan providing health or medical benefits in
respect of current or former employees of the Company.
(d) No employee or former employee of the Company
will become entitled to any bonus, retirement, severance, job security or
similar benefit or enhanced such benefit (including acceleration of vesting or
exercise of an incentive award, stock option or restricted security) as a result
of the transactions contemplated hereby.
(e) All persons classified by the Company as
independent contractors satisfy the requirements of applicable law to be so
classified
<PAGE>
16
and the Company has no obligation to provide benefits to any such person under
any Benefit Plan.
3.18 Contracts. Except as disclosed in Schedule 3.18, all
contracts, agreements, and instruments required to be filed as an exhibit to the
1998 Form 10-K are legal, valid, binding, and in full force and effect, and, to
the Knowledge of the Company, are enforceable by the Company in accordance with
their respective terms, subject to (x) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, (y) rules of law governing
specific performance, injunctive relief or other equitable remedies, and (z)
actions or omissions of parties other than the Company; provided, however, that
the Company has no Knowledge of any such actions or omissions. Except as
disclosed in Schedule 3.18, other than (i) those contracts, agreements, and
instruments filed as an exhibit to the 1998 Form 10- K and (ii) agreements
relating exclusively to the Company's preclinical development activities, the
Company has not granted to any Person rights, whether exclusive or nonexclusive,
to develop, manufacture, assemble, distribute, market, or sell its (i)
pleconaril, (ii) hepatitis C or (ii) respiratory syncytial virus products, and
has not granted any rights that limit the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell such products.
In connection with the License Agreement: (i) no violation,
breach, event of default or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default exists thereunder;
(ii) through the date hereof, Sanofi has selected, with respect to each Product
(as defined in the License Agreement) developed by the Company, the option set
forth in Section 3.2(b) therein which provides that Sanofi has the right to use
all information and data developed by the Company thereunder for applying for
Registrations (as defined in the License Agreement) of the Products in the
European Union, without joining the Company in the Development Work (as defined
in the License Agreement) of the Products in the Territory (as defined in the
License Agreement); and (iii) the License Agreement permits the Company to
develop all therapeutic applications for diseases caused by picornaviruses which
the Company is now developing, including but not limited to viral meningitis and
viral respiratory illness. None of the compounds currently in development by the
Company for treatment of hepatitis C are subject to any rights of BI under the
Research Agreement.
3.19 No Material Adverse Change. Except as disclosed in
Schedule 3.19, since December 31, 1998: (i) the Company has not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that would reasonably be expected to result
in a Material
<PAGE>
17
Adverse Effect; (ii) the Company has not sustained any loss or interference with
its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had or that would
reasonably be expected to have a Material Adverse Effect; (iii) there has been
no material change in the indebtedness of the Company; (iv) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its Capital Stock; (v) the Company has not made (nor does it
propose to make) (a) any material change in its accounting methods or practices,
(b) any material change in the depreciation or amortization policies or rates
adopted by it, in the case of both (a) and (b), except as may be required by law
or applicable accounting standards or (c) in a manner inconsistent with the
Company's past practice, any grant or award of stock-based compensation or
material increase in compensation to any employee or material modification to
any such grant or award or any Benefit Plan; and (vi) there has been no event
causing a Material Adverse Effect, nor any development that would, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
3.20 Insurance. The Company has in full force and effect (i)
product liability, (ii) fire and (iii) casualty insurance policies, in each
case, with financially sound and responsible insurance companies, and with
respect to clauses (ii) and (iii) above, with extended coverage, sufficient in
amount (subject to reasonable deductions) in respect of its properties that
might be damaged or destroyed.
3.21 Rights Plan. The Company has not adopted a stock holders
rights plan, poison pill or similar arrangement other than the Rights Plan. The
consummation of the transactions contemplated by the Transaction Documents
(including, without limitation, the (i) acquisition by the Purchaser of the
Securities pursuant hereto, (ii) conversion of the Preferred Stock into Common
Stock as provided for in the Certificate of Designation and/or (iii) exercise of
the Warrants) will not by itself cause any holder of a Right (as defined in the
Rights Plan) to have the right to exercise any such Right in whole or in part.
3.22 Broker's Fees. Except for any fees payable to
Perseus-Soros Management and as previously disclosed to the Purchaser in
writing, 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 or any transaction contemplated hereby.
3.23 Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
<PAGE>
18
3.24 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchaser set forth in Section 4.5 hereof are true and correct in all
material respects, the offer and sale of the Securities made pursuant to this
Agreement will be exempt from the registration requirements of the Act. Neither
the Company nor any Person acting on its behalf has, in connection with the
offering of the Securities engaged in (i) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Act, or (iii) any action that would require the
registration under the Act of the offering and sale of the Securities pursuant
to this Agreement or that would violate applicable state securities or "blue
sky" laws. The Company has not made and will not prior to the Closing make,
directly or indirectly, any offer or sale of shares of its Capital Stock, or any
Options, if as a result the offer and sale of the Securities contemplated
hereby, or any of them, could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company that the
following are true and correct as of the Closing Date:
4.1 Existence and Power. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to own, lease
and operate its properties and to conduct its business as currently conducted.
4.2 Power and Authority. The Purchaser has the full power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to perform its obligations hereunder. The execution, delivery and
performance by the Purchaser of this Agreement and the other Transaction
Documents and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by the Purchaser. Each this
Agreement and the other Transaction Documents has been duly executed and
delivered by the Purchaser and each is a valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms.
4.3 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of this Agreement and the other Transaction
<PAGE>
19
Documents by the Purchaser and to which it is a party and the consummation of
the transactions contemplated hereby and thereby will not conflict with,
contravene or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, (i) the partnership agreement or other
organizational documents of the Purchaser, (ii) any Law of any Governmental
Authority having jurisdiction over the Purchaser, or (iii) any material
agreement to which the Purchaser is a party.
4.4 Consents. No consent, approval, authorization, order,
registration, filing, or qualification of or with any Governmental Authority or
other Person (whether acting in an individual, fiduciary or other capacity) is
required to be made or obtained by the Purchaser for the consummation of the
transactions contemplated hereby and by the other Transaction Documents.
4.5 Acquisition for Own Account. The Securities to be acquired
by the Purchaser pursuant to this Agreement and the shares of capital stock
issuable under the exercise or conversion of the Securities are being and will
be acquired by the Purchaser for its own account and with no intention of
distributing or reselling the Securities in any transaction that would be in
violation of the Act or the securities laws of any state, without prejudice,
however, to the rights of the Purchaser at all times to sell or otherwise
dispose of all or any part of the Securities and the shares of capital stock
issuable under the exercise or conversion of the Securities under an effective
registration statement under the Act, under an exemption from such registration
available under the Act, and subject, nevertheless, to the disposition of the
Purchaser's property being at all times within its control. The Purchaser (i) is
an "accredited investor," as defined in Regulation D promulgated by the SEC
under the Act, (ii) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Securities and the shares of capital stock
issuable under the exercise or conversion of the Securities, and (iii) can bear
the economic risk of an investment in the Securities and the shares of capital
stock issuable under the exercise or conversion of the Securities and can afford
a complete loss of such investment. Neither the Purchaser nor any Affiliate of
the Purchaser, including Perseus-Soros Management, has made any offer to any
Person to sell or a solicitation of an offer to buy securities of the Company,
nor has such party engaged in any form of general solicitation or general
advertising in connection with the purchase of securities of the Company
hereunder. Notwithstanding the foregoing, nothing contained in this Section 4.5
shall affect or be deemed to modify any representation or warranty made by the
Company.
4.6 Hart-Scott-Rodino. The Purchaser is its own Ultimate
Parent Entity. As calculated under Section 801.11 of the regulations promulgated
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
<PAGE>
20
Purchaser has less than $10 million in each of Annual Net Sales and Total
Assets. The capitalized terms in this Section 4.6 shall have the meanings
ascribed to them in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
5. CERTAIN COVENANTS AND AGREEMENTS.
5.1 Publicity. From and after the date of this Agreement,
except as required by law, regulation or stock exchange requirements, neither
(i) the Company or any of its Affiliates nor (ii) the Purchaser or any of its
Affiliates shall, without the written consent of the other, make any public
announcement or issue any press release with respect to the transactions
contemplated by this Agreement. In no event will either (i) the Company or any
of its Affiliates or (ii) the Purchaser or any of its Affiliates make any public
announcement or issue any press release with respect to the transactions
contemplated by this Agreement without consulting with the other party, to the
extent feasible, as to the content of such public announcement or press release.
5.2 Use of Proceeds. The proceeds from the sale of Securities
shall be used by the Company for general corporate purposes.
5.3 Board of Directors.
(a) So long as the Purchaser or its Affiliates hold,
in the aggregate, at least: (i) 10.0% of the outstanding Common Stock; or (ii)
1.5 million shares of the Common Stock (with appropriate adjustment made for any
stock dividend, split-up or subdivision or any combination or reclassification
made or effected subsequent to the Closing Date), in each case, assuming that
the Securities or other rights convertible into or exchangeable or exercisable
for shares of the Common Stock have been converted, exchanged or exercised, the
Company shall use its best efforts to ensure that the Company's Board of
Directors shall consist of at least one Purchaser Director.
(b) In connection with the foregoing paragraph, the
Purchaser shall be entitled to recommend two candidates to the Company to become
members of the Board of Directors, one of whom the Company shall nominate and
unanimously recommend to the stockholders to become a member of the Board of
Directors (the "Purchaser Director"). A vacancy in the directorship held by the
Purchaser Director shall be filled by the Board of Directors, who shall select
one of two candidates recommend by the Purchaser.
<PAGE>
21
(c) The Purchaser Director shall not be entitled to
any compensation for his or her participation on the Company's Board of
Directors other than reimbursement for the reasonable out-of-pocket expenses, if
any, incurred by such Purchaser Director in connection with the performance of
his or her duties. Notwithstanding the foregoing sentence, the Purchaser
Director shall be entitled to receive the same consideration paid to other
Related Directors in their capacity as members of the Company's Board of
Directors.
5.4 Purchaser Rights. From and after the Closing Date, so long
as the Purchaser or its Affiliates hold, in the aggregate, at least: (i) 10.0%
of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock
(with appropriate adjustment made for any stock dividend, split-up or
subdivision or any combination or reclassification made or effected subsequent
to the Closing Date), in each case, assuming that the Securities or other rights
convertible into or exchangeable or exercisable for shares of the Common Stock
have been converted, exchanged or exercised (the "Consultation Period"):
(a) The Purchaser shall be able to appoint a
non-voting representative to attend meetings of the Board of Directors of the
Company, to change the representative so appointed at any time and, upon the
resignation or other vacancy of such representative for any reason, to reappoint
such a representative. In addition, the Company shall provide the Purchaser with
a copy of any materials to be distributed or discussed at such meetings at the
same time as provided to members of the Board of Directors.
(b) During the Consultation Period, the Purchaser
shall be entitled, from time to time, to make proposals, recommendations and
suggestions to the Company relating to the business and affairs of the Company.
(c) During the Consultation Period, the Company shall
permit the Purchaser at all reasonable times and at the Purchaser's expense, to
discuss the Company's business and affairs with its officers and directors.
(d) During the Consultation Period, the Company shall
permit the Purchaser, at all reasonable times and at the Purchaser's expense, to
examine such books, records, documents and other written information in the
possession of the Company relating to its affairs as the Purchaser may
reasonably request.
(e) Anything in this Section 5.4 to the contrary
notwithstanding, the rights granted to the Purchaser under this Section 5.4
<PAGE>
22
shall be suspended during any period of time during which the Company's Board of
Directors includes at least one Purchaser Director.
5.5 SEC Filings. From and after the date of this Agreement,
the Company agrees that it will use commercially reasonable efforts to file with
the SEC, within the time periods specified in the SEC's rules and regulations,
(i) all quarterly and annual financial information required to be filed with the
SEC on Forms 10-Q and 10-K, (ii) all current reports required to be filed with
the SEC on Form 8-K and (iii) any other information required to be filed with
the SEC. Further, the Company agrees that it will, for so long as the Purchaser
or its Affiliates continues to hold any Securities, use its best efforts to
qualify for use of Form S-3 under the Act.
5.6 Restrictions on Transfer; Legends.
(a) The Purchaser agrees that it will not Transfer
any of the Restricted Securities, except pursuant to an effective registration
statement under the Act or an applicable exemption from registration under the
Act.
(b) So long as the Restricted Securities are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Restricted Securities shall be subject to a
stop-transfer order and the certificates therefor shall bear the following
legend by which each holder thereof shall be bound:
"THE [WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE/SHARES
REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT
FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
(c) The Company shall, upon the written request of
the holder of the Restricted Securities and receipt by the Company of evidence,
including an opinion of counsel to the Purchaser that is acceptable to the
<PAGE>
23
Company, reasonably satisfactory to it that such legend may be removed, issue
certificates for such Restricted Securities that do not bear the legend
described in Section 5.6(b).
5.7 Preemptive Rights. After the date hereof, the Company
shall give prior written notice to the Purchaser of the proposed private
placement of any Capital Stock or other equity securities by the Company for
cash, other than (i) issuances pursuant to the Company's equity compensation or
stock option plans and (ii) issuances pursuant to the Rights Plan (each a "New
Issuance") at a price below $6.20 per share (with appropriate adjustment made
for any stock dividend, split-up or subdivision or any combination or
reclassification made or effected subsequent to the Closing Date). Such notice
shall specify the number and class of securities to be issued, the rights, terms
and privileges thereof and the price at which such securities will be issued. By
written notice to the Company given within 15 Business Days of being notified of
such New Issuance, the Purchaser shall be entitled to purchase all, but not less
than all, of the Capital Stock or other securities contemplated by the New
Issuance; provided, however, that the Purchaser shall not have any right to
purchase securities pursuant to this Section 5.7 if, prior to a sale of
securities to the Purchaser pursuant to this Section 5.7, such securities would
be required to be registered under the Act; provided further that if the
Purchaser does not timely notify the Company of its election to purchase all of
the New Issuance on the terms specified in the foregoing notice, or unless the
Company or the placement agent for the New Issuance reasonably believes that
including the Purchaser in the group of investors for the New Issuance will
materially adversely affect the Company's ability to consummate the New Issuance
on the terms specified in such notice, then the Purchaser shall be permitted to
invest in the New Issuance in such amount to be reasonably determined in good
faith by the Company.
The closing of any purchase pursuant to this Section 5.7 shall be held
at the time and place of the closing of, and on the same terms and conditions
as, the New Issuance, or at such other time and place as the parties to the
transaction may agree.
5.8 Tax Reporting. The parties hereto agree and acknowledge
that neither party hereto will take the position that the Securities issued
pursuant to this Agreement are "Preferred Stock" under Section 305 of the Code
and the parties agree to file all tax returns, reports, forms and other such
documents ("Tax Returns") accordingly (the "Reporting Agreement"). The parties
further agree that neither party shall take any position inconsistent with the
Reporting Agreement upon examination of any Tax Return, in any refund claim, in
any litigation or otherwise.
<PAGE>
24
5.9 Board of Directors. As soon as practicable after the date
hereof but no later than May 13, 1999, the Board of Directors shall have
appointed a Purchaser Director to the Board of Directors to serve until the
Company's 2001 annual meeting.
5.10 Indemnification Agreement. Concurrently with the
appointment of the initial Purchaser Director, and thereafter with respect to
future Purchaser Directors, the Company shall enter into an indemnification
agreement with any Purchaser Directors, substantially similar in form and
content to the indemnification agreements between the Company and any current
directors. Such indemnification agreement shall provide that each Purchaser
Director will be indemnified against all liabilities and expenses incurred in
connection with his services to the Company to the fullest extent permitted by
Delaware law.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties, covenants and agreements contained
herein shall survive the execution and delivery of this Agreement and the
Closing hereunder. The foregoing notwithstanding, the Company's liability to the
Purchaser for breaches of, or inaccuracies in, any of the Company's
representations and warranties contained in Section 3 (other than Sections 3.2
(Power and Authority) and 3.7 (Capitalization)), shall expire 24 months
following the Closing Date (unless the Purchaser shall have given notice to the
Company claiming a breach thereof prior to such date) and there shall be no
expiration of the time when a claim may be made by the Purchaser for breach of
or any inaccuracy or misrepresentation in Sections 3.2 (Power and Authority),
and 3.7 (Capitalization). All statements contained herein or in any certificate,
exhibit, schedule or other writing delivered in connection with the transactions
contemplated hereby shall be deemed representations and warranties of the
respective parties making them.
7. INDEMNIFICATION.
Except as otherwise provided in this Section 7, the Company agrees to
indemnify, defend and hold harmless the Purchaser and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners,
members and controlling persons to the fullest extent permitted by law from and
against any and all claims, losses, liabilities, damages, deficiencies,
judgements, assessments, fines, settlements, costs or expenses (including
interest, penalties and reasonable fees, dis bursements and other charges of
counsel) (collectively, "Losses") based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any
<PAGE>
25
representation, warranty, covenant or agreement of the Company contained in this
Agreement or any other Transaction Document.
Notwithstanding anything to the contrary in this Section 7, the
indemnification and contribution provisions of Section 8 shall govern any claim
made with respect to registration statements filed pursuant thereto or sales
made thereunder.
8. REGISTRATION RIGHTS.
The Company hereby agrees to provide registration rights with respect
to the Registrable Securities as set forth below.
8.1 Securities Subject to this Agreement.
(a) Registrable Securities. For the purposes of this
Section 8, Registrable Securities will cease to be Registrable Securities when
such Registrable Securities are sold and otherwise transferred pursuant to Rule
144 under the Act or a registration statement covering such Registrable
Securities has been declared effective under the Act by the SEC and such
Registrable Securities have been disposed of pursuant to such effective
registration statement.
(b) Holders of Registrable Securities. A Person is
deemed to be a holder of Registrable Securities whenever such Person owns of
record Registrable Securities, or holds a warrant to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting instructions, notices or elections from two or more
persons with respect to the same Registrable Securities, the Company may act
upon the basis of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable Securities issuable
upon exercise of an option or upon conversion of another security shall be
deemed outstanding for the purposes of this Section 8.
8.2 Demand Registration.
(a) Request for Demand Registration. At any time
after the date hereof, the holders of 25.0% of the outstanding Registrable
Securities (the "Stockholders") may make a written request (the "Demand Notice")
for registration of Registrable Securities under the Act, and under the
securities or blue sky laws of any jurisdiction designated by such holder or
holders (a "Demand Registration"); provided, that the Company will not be
required to effect more than
<PAGE>
26
two Demand Registrations in the aggregate at the request of the holders of
Registrable Securities pursuant to this Section 8.2(a); provided, further, that
the Company shall not be required to effect more than one registration pursuant
to this section in any six-month period. Notwithstanding the foregoing, the
Company shall not be required to effect any Demand Registration unless the
anticipated aggregate proceeds to the selling holders would equal or exceed
$2,000,000. Upon a request for a Demand Registration, the Company shall use its
best efforts to prepare and file with the SEC, as soon as practicable, a
registration statement for an offering to be made on a continuous basis pursuant
to Rule 415 of the Act (or any successor rule or similar provision then in
effect) (a "Shelf Registration Statement") registering the resale from time to
time by the Stockholders thereof of their Registrable Securities (the "Demand
Shelf Registration"). Within fifteen (15) days after the receipt of the Demand
Notice, the Company shall give written notice thereof to all holders holding
Registrable Securities and include in such registration all Registrable
Securities held by a holder thereof with respect to which the Company has
received written requests for inclusion therein at least ten (10) days prior to
the filing of the Demand Shelf Registration.
No Person has been granted registration rights that are inconsistent
with the rights to be granted to the Purchaser in this Agreement. Other than the
Amended and Restated Investors' Rights Agreement, dated May 31, 1996 (the
"Investors' Rights Agreement"), the Company has not entered into any agreement
pursuant to which the Company has granted registration rights. Except those
Persons having the right to piggy-back on a Demand Registration pursuant to the
Investors' Rights Agreement and disclosed in Schedule 8.2, no Person has the
right to piggy-back on a Demand Registration. To the extent any Person has the
right to piggy-back on a Demand Registration, the Company shall use its best
efforts to promptly obtain a waiver of any such rights. Unless holders of a
majority of the Registrable Securities to be included in the Demand Registration
consent in writing, no other Person (other than (i) any other holder of
Registrable Securities and (ii) any Person disclosed in Schedule 8.2 who has the
right to piggy-back on a Demand Registration pursuant to the Investors' Rights
Agreement for which the Company has not obtained a waiver of such right after
using its best efforts to promptly obtain such waiver), shall be permitted to
offer securities under any such Demand Registration.
(b) Effective Demand Registration. A registration
shall not constitute a Demand Registration until it has become effective under
the Act and remains effective until the earlier of the (i) completion of any
offering of securities thereunder and (ii) expiration of the second anniversary
(plus any Blackout Period, as defined below) from date on which it first became
effective under the Act (unless withdrawn upon the written request of the
holders). The Company shall use its best efforts to cause any registration
statement filed pursuant to Section 8.2(a) to
<PAGE>
27
be declared effective under the Act as soon as practicable (and shall promptly
notify in writing the Stockholders once any such registration statement has been
declared effective).
(c) Blackout Periods. If the Demand Shelf
Registration (or any Subsequent Shelf Registration, as defined below) is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof (including, without limitation, amend the registration
statement concerned in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof), and such Demand Shelf
Registration (or any Subsequent Shelf Registration) will be deemed not to have
been effective during the period of such interference until the offering of
Registrable Securities pursuant to such Shelf Registration Statement (or
Subsequent Shelf Registration Statement) may legally resume (the "Blackout
Period").
(d) Subsequent Shelf Registration. Notwithstanding
the foregoing paragraph, if prior to the second anniversary (plus any Blackout
Period) from the date the Demand Shelf Registration covering the Registrable
Securities has been declared effective under the Act, the Company has failed to
obtain the withdrawal of any stop order, injunction or other order suspending
the effectiveness within 60 days of such cessation of effectiveness, the Company
shall file an additional Shelf Registration covering the Registrable Securities
(a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective until the earlier
of the (i) completion of any offering of securities thereunder; (ii) expiration
of the second anniversary (plus any Blackout Period, as defined below) from date
on which it first became effective under the Act (unless withdrawn upon the
written request of the holders); and (iii) date another Subsequent Shelf
Registration covering the Registrable Securities has been declared effective
under the Act. If the registration required under this Section 8 is deemed not
to have been effected then the Company shall continue to be obligated to effect
a registration statement pursuant to this Section 8.
(e) Underwriting Procedures. If holders of a majority
of the Registrable Securities included in the Demand Registration so elect, the
offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be a nationally
recognized investment banking firm selected by the Company with the consent of
such holders,
<PAGE>
which consent will not be unreasonably delayed or withheld (an "Approved
Underwriter"). In such event, if the Approved Underwriter advises the Company in
writing that in its opinion the aggregate amount of such securities requested to
be included in such offering is sufficiently large to have a material adverse
effect on the success of such offering, the Company shall include in such
registration only the aggregate amount of securities that in the opinion of the
Approved Underwriter may be sold without any such material adverse effect and
shall first reduce (to zero, if necessary) the amount of securities sought to be
included therein by the holders of Registrable Securities and, if such reduction
is not sufficient, reduce, pro rata the amount of securities to be included by
each holder who wishes to participate in the Demand Registration through the
exercise of piggy-back registration rights as contemplated by Section 8.2(a). To
the extent more than 10.0% of the Registrable Securities so requested to be
registered are excluded from the offering, then the holders of such Registrable
Securities shall have the right to one additional Demand Registration under this
Section 8.2 with respect to such Registrable Securities.
(f) Deferral of Registration. Notwithstanding the
foregoing, if, at any time prior to the effective date of the registration
statement with respect to a Demand Registration, the Company is: (i) pursuing an
underwritten offering of shares of its Capital Stock for its own account, or
engaged in or proposes to engage in (A) financing, (B) acquisition of the
capital stock or substantially all the assets of any other person (other than in
the ordinary course of business) or (C) any disposition of material assets
(other than in the ordinary course of business), any tender offer or any merger,
consolidation, corporate reorganization or restructuring or other similar
transaction; and (ii) the Board of Directors, using good faith, determines that
it would be seriously detrimental to the Company for a registration statement to
be filed at such time, the Company may defer the filing of a registration
statement with respect to any Demand Registration required by this Section 8.2
until a date not later than 90 days from the date of the Deferral Notice (as
defined below) (the "Deferral Period"). If the Board of Directors of the Company
makes such determination, the Company shall give written notice (the "Deferral
Notice") of such determination to the holders of Registrable Securities;
provided, that, the Company may exercise its right to delay a Demand
Registration hereunder only once in any twelve-month period. The Company shall
notify the holders of the expiration of the Deferral Period and shall cause the
registration statement with respect to the Demand Registration to be filed on
the fifth Business Day following the expiration of the Deferral Period (the
"Withdrawal Period") (or, if registration on such date is not practicable, as
promptly as possible thereafter) unless, prior to the expiration of the
Withdrawal Period, the holders holding a majority of Registrable Securities to
be included in any such Demand Registration, by written notice to the Company,
withdraws the request made under this Section 8.2, in which case, such request
shall
<PAGE>
29
not count as one of the Demand Registrations permitted hereunder and the Company
shall pay all Registration Expenses in connection with such registration.
8.3 Holdback Agreements.
(a) Restrictions on Public Sale by Holders of
Registrable Securities. To the extent not inconsistent with applicable law, the
Purchaser agrees that in connection with a registered public offering of the
Company's equity securities, it will not effect any public sale or distribution
of any Registrable Securities or of any securities convertible into or
exchangeable or exercisable for such Registrable Securities, including a sale
pursuant to Rule 144 under the Securities Act, during the 10 Business Days prior
to, and during the 30 days beginning on, the effective date of the Company's
registration statement (except as part of such registration), if and to the
extent reasonably requested by the Company in writing in the case of a
non-underwritten public offering or to the extent reasonably requested by the
Underwriter in writing in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company. The
Company agrees not to effect any public sale or distribution of any of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such equity securities (except pursuant to registrations on
Forms S-4 or S-8 of the Act or any successor or other forms not available for
registering equity securities for sale to the public) during the 10 Business
Days prior to, and during the 30 day period beginning on the effective date of
any registration statement in which the holders of Registrable Securities are
participating.
8.4 Registration Procedures.
(a) Obligations of the Company. Whenever registration
of Registrable Securities has been requested pursuant to Section 8.2 of this
Agreement, the Company shall use reasonable efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and in connection with any such request, the Company
shall, as soon as reasonably practicable:
(i) prepare and file with the SEC (in any
event not later than forty-five (45) days after receipt of a request to file a
registration statement with respect to Registrable Securities) a registration
statement, and use its best efforts to cause such registration statement to
become effective under the Act; provided, however, that before filing a
registration statement or
<PAGE>
prospectus or any amendments or supplements thereto, the Company shall (A)
provide counsel selected by the holders of a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") with an
opportunity to participate in the preparation of such registration statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (B) notify the Holders' Counsel and each seller of
Registrable Securities of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period which will terminate when all Registrable
Securities covered by such registration statement have been sold (but not before
the expiration of the ninety (90) day period referred to in Section 4(3) of the
Act and Rule 174 thereunder, if applicable), and comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable
Securities, prior to filing a registration statement, copies of such
registration statement as is proposed to be filed, and thereafter such number of
copies of such regis tration statement, each amendment and supplement thereto
(in each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller of Registrable Securities requests, and to
continue such qualification in effect in such jurisdiction for as long as is
permissible pursuant to the laws of such jurisdiction, or for as long as any
such seller requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things which may be
reasonably necessary or advisable to enable any such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided, however, that the Company shall not be required to (A) qualify
<PAGE>
31
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8.4(a)(iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(v) use reasonable efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers of Registrable Securities to consummate the disposition of
such Registrable Securities;
(vi) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, after delivery to the
purchasers of such Registrable Securities, such prospectus shall not contain 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
in light of the circumstances under which they were made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form with the
Approved Underwriter, if any, selected as provided in Section 8.2) and take such
other actions as are reasonably required in order to facilitate the disposition
of such Registrable Securities;
(viii) make available for inspection by any
seller of Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspec tors"), during
regular business hours and upon reasonable advance notice, all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
<PAGE>
32
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such registration statement;
(ix) if such sale is pursuant to an
underwritten offering, obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as Holders' Counsel or
the managing underwriter reasonably requests;
(x) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as such seller may reasonably request and are
customarily included in such opinions;
(xi) otherwise use reasonable efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the registration statement, an
earnings statement covering a period of twelve (12) months beginning after the
effective date of the registration statement, in a manner which satisfies the
provisions of Section 11(a) of the Act;
(xii) cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
the Company are then listed (including NASDAQ), provided, that the applicable
listing requirements are satisfied;
(xiii) cooperate with each seller of
Registrable Securities and each underwriter participating in the disposition of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
<PAGE>
33
(xiv) use reasonable efforts to take all
other steps necessary to effect the registration of the Registrable Securities
contemplated hereby.
(b) Notice to Discontinue. Each holder of Registrable
Securities agrees that, upon receipt of any written notice from the Company of
the happening of any event of the kind described in Section 8.4(a)(vi), such
holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Sec tion 8.4(a)(vi) and, if so directed by the
Company, such holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the prospectus covering such Registrable Securities which is current at the time
of receipt of such notice. If the Company shall give any such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective pursuant to this Agreement (including without limitation
the period referred to in Section 8.4(a)(ii)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 8.4(a)(vi) to and including the date when the holder shall have received
the copies of the supplemented or amended prospectus contemplated by and meeting
the requirements of Section 8.4(a)(vi).
8.5 Registration Expenses. The Company shall pay all expenses
(other than underwriting discounts and commissions) arising from or incident to
the Company's performance of, or compliance with, Section 8 of this Agreement,
including without limitation, (i) SEC, stock exchange, NASDAQ and NASD
registration and filing fees, (ii) all fees and expenses incurred by Company in
complying with securities or blue sky laws (including reasonable fees, charges
and disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery expenses,
and (iv) the fees, charges and disbursements of counsel to the Company and of
its independent public accountants and any other accounting and legal fees,
charges and expenses incurred by the Company (including without limitation any
expenses arising from any special audits incident to or required by any
registration or qualification) in connection with any Demand Registration
pursuant to the terms of this Agreement, regardless of whether such registration
statement is declared effective. In connection with each registration hereunder,
the Company shall reimburse the holders of Registrable Securities being
registered in such registration for the reasonable fees, charges and
disbursements of not more than one counsel chosen by the holders of a majority
of Registrable Securities being registered in such registration in an amount not
to exceed
<PAGE>
34
$10,000. All of the expenses described in this Section 8.5 are referred to
herein as "Registration Expenses."
8.6 Indemnification; Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify, to the fullest extent permitted by law, each holder of
Registrable Securities, its officers, directors, partners, employees, advisors
and agents and each Person who controls (within the meaning of the Act or the
Exchange Act) such holder from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue, or alleged untrue, statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or a failure by such holder to deliver an updated prospectus that has
been filed with the SEC. The Company shall also indemnify any underwriters of
the Registrable Securities, their officers, directors and employees and each
Person who controls such underwriters (within the meaning of the Act and the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) Indemnification by Holders. In connection with
any registration statement in which a holder of Registrable Securities is
participating pursuant to Section 8.2 hereof, each such holder shall furnish to
the Company in writing such information with respect to such holder as the
Company may reasonably request in writing or as may be required by law for use
in connection with any such registration statement or prospectus and each
holder, by its participation in such registration, agrees to indemnify, to the
extent permitted by law, the Company, any underwriter retained by the Company
and their respective directors, officers, employees and each Person who controls
the Company or such underwriter (within the meaning of the Act and the Exchange
Act) to the same extent as the foregoing indemnity from the Company to the
holders of Registrable Securities, but solely with respect to any such
information furnished in writing by or on behalf of such holder.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder (the "Registration Rights
Indemnified Party") agrees to give prompt written notice to the indemnifying
party (the
<PAGE>
35
"Registration Rights Indemnifying Party") after the receipt by the Registration
Rights Indemnified Party of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in writing for
which the Registration Rights Indemnified Party intends to claim indemnification
or contribution pursuant to this Agreement; provided, that the failure so to
notify the Registration Rights Indemnifying Party shall not relieve the
Registration Rights Indemnifying Party of any liability that it may have to the
Registration Rights Indemnified Party hereunder unless, and only to the extent
that, such failure results in the Registration Rights Indemnifying Party's
forfeiture of substantial rights or defenses. If notice of commencement of any
such action is given to the Registration Rights Indemnifying Party as above
provided, the Registration Rights Indemnifying Party shall be entitled to
participate in and, to the extent it may wish, jointly with any other
Registration Rights Indemnifying Party similarly notified, to assume the defense
of such action at its own expense, with counsel chosen by it and reasonably
satisfactory to such Registration Rights Indemnified Party. The Registration
Rights Indemnified Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by the
Registration Rights Indemnified Party unless (i) the Registration Rights
Indemnifying Party agrees to pay the same, (ii) the Registration Rights
Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Registration Rights Indemnified Party in its reasonable
judgment, (iii) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that either (A) representation of
such Registration Rights Indemnified Party and the Registration Rights
Indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there may be one or more legal defenses
available to the Registration Rights Indemnified Party which are different from
or additional to those available to the Registration Rights Indemnifying Party.
No Registration Rights Indemnifying Party shall, without the prior written
consent of each Registration Rights Indemnified Party, settle, compromise or
consent to the entry of any judgment unless such settlement, compromise or
consent includes an unconditional release of the Registration Rights Indemnified
Party from all liability relating thereto. In either of such cases the
Registration Rights Indemnifying Party shall not have the right to assume the
defense of such action on behalf of such Registration Rights Indemnified Party.
No Registration Rights Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
(d) Contribution. If the indemnification provided for
in this Section 8.6 from the Indemnifying Party is applicable by its terms but
unavailable to a Registration Rights Indemnified Party hereunder in respect of
any
<PAGE>
36
losses, claims, damages, liabilities or expenses referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Registration Rights Indemnified
Party, shall contribute to the amount paid or payable by such Registration
Rights Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Registration Rights Indemnifying Party and Registration
Rights Indemnified Party in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative faults of such Registration Rights
Indemnifying Party and Registration Rights Indemnified Party shall be determined
by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Registration Rights Indemnifying Party or Registration Rights
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Sections 8.6(a), 8.6(b) and 8.6(c), any legal or other
fees, charges or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person.
8.7 Rule 144. The Company covenants that it shall file any
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder; and that it shall take such further
action as each holder of Registrable Securities may reasonably request
(including providing any information necessary to comply with Rules 144 under
the Act), all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 under the Act, as such
rules may be amended from time to time, or (b) any similar rules or regulations
hereafter adopted by the SEC. The Company shall, upon the request of any holder
of Registrable Securities, deliver to such holder a written statement as to
whether the Company has complied with such requirements.
<PAGE>
37
9. MISCELLANEOUS.
9.1 Performance; Waiver. The provisions of this Agreement may
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and the holders of 662/3% of the Common Stock issued in
connection with this Agreement (assuming that the Securities or other rights
conver tible into or exchangeable or exercisable for shares of the Common Stock
have been converted, exchanged or exercised). The failure at any time to require
performance of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter (unless performance thereof has
been waived in writing in accordance with the terms hereof for all purposes and
at all times by the parties to whom the benefit of such performance is to be
rendered). The waiver by any party to this Agreement of a breach of any
provision hereof shall not be taken or held to be a waiver of any succeeding
breach of such provision or of any other provision.
9.2 Binding Effect; Successors and Assigns. This Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the parties hereto. Subject to applicable securities laws and the
applicable provisions of this Agreement, the Purchaser may assign any of its
rights under this Agreement (or any of the Transaction Documents) to any of its
Affiliates, employees, members or partners other than the rights described in
Sections 5.3 (Board of Directors) and 5.4 (Purchaser Rights) which may only be
assigned to Perseus, LLC, Soros Fund Management LLC or, in each case, to one of
their controlled investment funds. The Company may not assign any of its rights
under this Agreement (or any of the Transaction Documents), except to a
successor-in-interest to the Company, including as a result of a merger,
acquisition or reorganization, without the written consent of the Purchaser. No
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of this Agreement.
9.3 Notices. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
<PAGE>
38
If to the Company:
ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Telecopy: (610) 458-7380
Attention: Thomas F. Doyle, Esq.
with a copies to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Telecopy: (215) 963-5299
Attention: David R. King, Esq.
If to the Purchaser:
Perseus-Soros BioPharmaceutical Fund, LP
c/o Perseus Capital, LLC
The Army and Navy Club Building
1627 I Street, N.W., Suite 610
Washington D.C. 20006
Telecopy: (202) 463-6215
Attention: Christopher D. Earl, Ph.D.
and
Perseus Capital, LLC
The Army and Navy Club Building
1627 I Street, N.W., Suite 610
Washington D.C. 20006
Telecopy: (202) 463-6215
Attention: Kenneth M. Socha, Esq.
and
Soros Fund Management, LLC
888 Seventh Avenue
New York, New York 10106
Telecopy: (212) 262-6300
<PAGE>
39
Attention: Michael C. Neus, Esq.
and
Soros Fund Management, LLC
888 Seventh Avenue
New York, New York 10106
Telecopy: (212) 262-6300
Attention: Neal Moszkowski
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Bruce A. Gutenplan, Esq.
or at such other address as a party hereto shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
Notice given in accordance with this Section 9.3 shall be deemed given and
received as of the earlier of (i) actual receipt or (ii) first attempted
delivery which is refused (as opposed to being returned for insufficient
postage/fee, improper address or like cause). All references to days in this
Agreement shall be deemed to refer to calendar days, unless otherwise specified.
If any notice, filing, delivery or payment shall be required by the terms hereof
to be made on a day that is not a Business Day, such notice, filing, delivery or
payment shall be made on the immediately succeeding Business Day.
9.4 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the Company and the Purchaser directs that such
court interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
9.5 Headings; Interpretation. The index and section headings
herein are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
<PAGE>
40
9.6 Entire Agreement. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchaser, or
between or among any agents, representatives, parents, Subsidiaries, Affiliates,
predecessors in interest or successors in interest, with respect to the subject
matter hereof.
9.7 No Third Party Rights. Except for the indemnified parties,
this Agreement is intended solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debtholder of the
Company) other than the parties hereto.
9.8 Remedies for Breach. The parties agree that in addition to
any other rights or remedies which may be available at law or equity, the
parties shall be entitled to seek specific performance of any post-Closing duty
or obligation of any party hereto. All remedies, either under this Agreement or
by law or otherwise afforded to any of the parties, shall be cumulative and not
alternative.
9.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties hereto
confirm that any facsimile copy of another party's executed counterpart of this
Agreement (or its signature page thereof) will be deemed to be an executed
original thereof.
9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
41
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date first set forth above.
VIROPHARMA INCORPORATED
By: /s/ Claude H. Nash
--------------------------------
Name: Claude H. Nash, Ph.D.
Title: President and Chief Executive
Officer
PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP
By: Perseus-Soros Partners, LLC,
General Partner
By: Perseus Management, LLC,
Member
By: /s/ Frank H. Pearl
---------------------------------
Name: Frank H. Pearl
Title: President and Chairman
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
<PAGE>
===============================================================================
INVESTMENT AGREEMENT
AMONG
VIROPHARMA INCORPORATED
AND
PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP
-----------------------------------------------------
Dated May 5, 1999
-----------------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
2. CLOSING...............................................................6
2.1 Time and Place of the Closing..............................6
2.2 Transactions at the Closing................................6
2.3 Perseus-Soros Management, LLC Fee..........................6
2.4 Rights Plan................................................6
2.5 Opinion of Counsel.........................................6
2.6 Secretary's Certificate....................................6
2.7 Reservation of Stock.......................................7
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................7
3.1 Corporate Existence and Power..............................7
3.2 Power and Authority........................................7
3.3 Subsidiaries...............................................8
3.4 Affiliate Transactions.....................................8
3.5 No Contravention, Conflict, Breach, Etc....................8
3.6 Consents...................................................9
3.7 Capitalization.............................................9
3.8 SEC Documents.............................................10
3.9 Financial Statements......................................10
3.10 No Existing Violation, Default, Etc.......................11
3.11 Licenses and Permits......................................11
3.12 Intellectual Property.....................................11
3.13 Environmental Matters.....................................13
3.14 Taxes.....................................................13
3.15 Litigation................................................14
3.16 Labor Relations...........................................14
3.17 Employee Benefits.........................................14
3.18 Contracts.................................................16
3.19 No Material Adverse Change................................16
3.20 Insurance.................................................17
3.21 Rights Plan...............................................17
3.22 Broker's Fees.............................................17
3.23 Investment Company........................................17
3.24 Exemption from Registration; Restrictions on Offer
and Sale of Same or Similar Securities....................18
i
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................18
4.1 Existence and Power.......................................18
4.2 Power and Authority.......................................18
4.3 No Contravention, Conflict, Breach, Etc...................18
4.4 Consents..................................................19
4.5 Acquisition for Own Account...............................19
4.6 Hart-Scott-Rodino.........................................19
5. CERTAIN COVENANTS AND AGREEMENTS.....................................20
5.1 Publicity.................................................20
5.2 Use of Proceeds...........................................20
5.3 Board of Directors........................................20
5.4 Purchaser Rights..........................................21
5.5 SEC Filings...............................................22
5.6 Restrictions on Transfer; Legends.........................22
5.7 Preemptive Rights.........................................23
5.8 Tax.......................................................23
5.9 Board of Directors........................................24
5.10 Indemnification Agreement.................................24
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS............................................................24
7. INDEMNIFICATION......................................................24
8. REGISTRATION RIGHTS..................................................25
8.1 Securities Subject to this Agreement......................25
8.2 Demand Registration.......................................25
8.3 Holdback Agreements.......................................29
8.4 Registration Procedures...................................29
8.5 Registration Expenses.....................................33
8.6 Indemnification; Contribution.............................34
8.7 Rule 144..................................................36
9. MISCELLANEOUS........................................................37
9.1 Performance; Waiver.......................................37
9.2 Binding Effect; Successors and Assigns....................37
9.3 Notices...................................................37
9.4 Severability..............................................39
9.5 Headings; Interpretation..................................39
9.6 Entire Agreement..........................................40
9.7 No Third Party Rights.....................................40
9.8 Remedies for Breach.......................................40
9.9 Counterparts..............................................40
9.10 Governing Law.............................................40
ii
<PAGE>
DISCLOSURE SCHEDULES, EXHIBITS AND ANNEXES
SECTIONS OF DISCLOSURE SCHEDULE
Schedule 2.2 Transactions at the Closing
Schedule 3.7 Capitalization
Schedule 3.12 Intellectual Property
Schedule 3.14 Taxes
Schedule 3.15 Litigation
Schedule 3.17 Employee Benefits
Schedule 3.18 Contracts
Schedule 3.19 No Material Adverse Change
Schedule 8.2 Demand Registration
EXHIBITS
Exhibit A Certificate of Designation
Exhibit B Warrant Certificate
Exhibit C Rights Plan Amendment
ANNEXES
Annex A Form of opinion of Morgan, Lewis & Bockius LLP
iii
VIROPHARMA INCORPORATED
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK,
PAR VALUE $.001 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
ViroPharma Incorporated, a Delaware corporation (the "Company"), pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, on May 5, 1999, by the unanimous written consent of the Board of
Directors:
WHEREAS, the Board of Directors of the Company is authorized, subject
to limitations prescribed by law and the provisions of the Certificate of
Incorporation (as defined below) of the Company, to provide for the issuance of
all or any of the shares of Preferred Stock, par value $.001 per share, in one
or more series, and by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the powers, designation, preferences
and relative, participating, optional or other special rights of the shares of
each such series and the qualifications or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED that, pursuant to the authority
expressly granted to the Board of Directors of the Company by the Certificate of
Incorporation of the Company, and pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware, there be created from the 5,000,000
shares of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of
the Company authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock consisting of 2,300,000 shares of
Series A Convertible Participating Preferred Stock (the "Series A Preferred
Stock"), the voting powers, designations, preferences and relative,
participating, optional or other special rights of which, and qualifications,
limitations or restrictions thereof, shall be as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
1.1 "Affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such first Person. For the purpose of this
definition, "control"
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2
shall mean, as to any Person, the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
1.2 "Board of Directors" shall mean the Board of Directors of
the Company, as constituted from time to time.
1.3 "Business Day" shall mean any day that is not a Saturday,
a Sunday or a day on which banking institutions are not required to be open in
New York City.
1.4 "Certificate of Incorporation" shall mean the Second
Amended and Restated Certificate of Incorporation of the Company, as amended
through the date hereof.
1.5 "Closing Price" of the Common Stock as of any day, means
(i) the last reported sale price of such stock (regular way) or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
in either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or (ii) if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last reported sale price or, in case no such sale takes place on such day,
the average of the highest reported bid and lowest reported asked quotation for
the Common Stock, in either case reported on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), or a similar
service if NASDAQ is no longer reporting such information.
1.6 "Common Stock" shall mean the class of Common Stock, par
value $.002 per share, of the Company or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or as a result of a
subdivision or combination.
1.7 "Common Stock Conversion Rate" shall mean, as of any date,
a rate for each share of Series A Preferred Stock equal to (i) the Liquidation
Value thereof plus all accrued and unpaid dividends thereon pursuant to Section
2.2 herein, divided by (ii) the Conversion Price in effect as of such date.
1.8 "Conversion Price" shall mean $6.20 per share of Series A
Preferred Stock, subject to adjustment as provided herein.
1.9 "Current Market Price" shall mean, with respect to each
share of Common Stock as of any date, the average of the daily Closing Prices
per share of Common Stock for the 30 consecutive Trading Days prior to such
date; provided that, if on any such date the shares of Common Stock are not
listed or
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3
admitted for trading on any national securities exchange or quoted by NASDAQ or
a similar service, the Current Market Price for a share of Common Stock shall be
the fair market value of such share as determined in good faith by the Board of
Directors of the Company. If the Board of Directors is unable to determine the
fair market value, or if the holders of a majority in interest of the Series A
Preferred Stock disagree with the Board's determination of fair market value by
written notice delivered to the Company within five (5) Business Days after the
Board's determination thereof is communicated in writing to such holders, which
notice specifies a majority-in-interest of such holders' determination of fair
market value, then the Company and a majority-in-interest of such holders shall
select an Independent Financial Expert which shall determine such fair market
value. If the Company and such holders are unable to agree upon an Independent
Financial Expert within fifteen (15) days after the request by such holders, the
Company, on the one hand, and such holders, on the other, shall each select an
Independent Financial Expert within five (5) days following the expiration of
such fifteen (15) day period, and these two Independent Financial Experts shall
select a third Independent Financial Expert. The determination of fair market
value by such Independent Financial Expert shall be final, binding and
conclusive on the Company and all holders of the Series A Preferred Stock. All
costs and fees of any Independent Financial Experts retained in accordance with
the foregoing shall be borne by the Company.
1.10 "Dividend Amount" shall mean an amount per share of
Series A Preferred Stock (rounded to the nearest $ .01) equal to $50 per $1,000
Liquidation Value of Series A Preferred Stock at all times after the Issue Date.
1.11 "Dividend Rate" shall mean 5.0% per annum beginning on
the Issue Date of the Series A Preferred Stock.
1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.13 "Independent Financial Expert" means an independent
nationally recognized investment banking firm.
1.14 "Issue Date" shall mean the Closing Date (as defined in
the Investment Agreement).
1.15 "Investment Agreement" shall mean the Investment
Agreement, dated as of May 5, 1999, between the Company and Perseus-Soros
BioPharmaceutical Fund, LP, a Delaware limited partnership, as amended from time
to time.
1.16 "Junior Stock" shall mean the Common Stock and the shares
of any other class or series of stock of the Company which, by the terms of the
Certificate of Incorporation or of the instrument by which the Board of
Directors,
<PAGE>
acting pursuant to authority granted in the Certificate of Incorporation, shall
fix the relative rights, preferences and limitations thereof, shall be junior to
the Series A Preferred Stock in respect of the right to receive dividends and to
participate in any distribution of assets other than by way of dividends.
1.17 "Liquidation Value" shall mean $6.20 per share of Series
A Preferred Stock, subject to adjustment as provided herein.
1.18 "Parity Stock" shall mean the shares of any other class
or series of stock of the Company which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall, in the event that
the stated dividends thereon are not paid in full, be entitled to share ratably
with the Series A Preferred Stock in the payment of dividends, including
accumulations, if any, in accordance with the sums which would be payable on
such shares if all dividends were declared and paid in full, and shall, in the
event that the amounts payable thereon on liquidation are not paid in full, be
entitled to share ratably with the Series A Preferred Stock in any distribution
of assets other than by way of dividends in accordance with the sums which would
be payable in such distribution if all sums payable were discharged in full;
provided, however, that the term "Parity Stock" shall be deemed to refer (i) in
Section 2.3 hereof, to any stock which is Parity Stock in respect of the right
to receive dividends and (ii) in Section 5 hereof, to any stock which is Parity
Stock in respect of any distribution of assets other than by way of dividends.
1.19 "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, government (or
an agency or political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
1.20 "Pro Rata Repurchase" shall mean any purchase of shares
of Common Stock by the Company or by any of its subsidiaries whether for cash,
shares of capital stock of the Company, other securities of the Company,
evidences of indebtedness of the Company or any other Person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Company), or any
combination thereof, effected while any of the shares of Series A Preferred
Stock are outstanding, which purchase is subject to Section 13(e) of the
Exchange Act or is made pursuant to an offer made available to all holders of
Common Stock.
1.21 "Senior Stock" shall mean the shares of any class or
series of stock of the Company which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences
<PAGE>
4
and limitations thereof, shall be senior to the Series A Preferred Stock in
respect of the right to receive dividends or to participate in any distribution
of assets other than by way of dividends.
1.22 "Trading Day" shall mean, so long as the Common Stock is
listed or admitted to trading on a national securities exchange, a day on which
the principal national securities exchange on which the Common Stock is listed
is open for the transaction of business, or, if the Common Stock is not so
listed or admitted for trading on any national securities exchange, a day on
which NASDAQ is open for the transaction of business.
2. Dividends.
2.1 The holders of the outstanding shares of Series A
Preferred Stock shall be entitled to receive quarterly dividends, when, as and
if declared by the Board of Directors out of funds legally available therefor.
Each quarterly dividend shall be an amount per share (rounded to the nearest
$.01) equal to 0.25 multiplied by the Dividend Amount and shall be payable on
the last day of March, June, September and December in each year (each a
"Dividend Payment Date") to the holders of record of Series A Preferred Stock at
the close of business on the preceding Business Day, or such other dates as are
fixed by the Board Directors within ten (10) days prior to the Dividend Payment
Date (each a "Record Date"). Such dividends shall become payable beginning on
the first Dividend Payment Date for which the Record Date is subsequent to the
Issue Date. Dividends on each share of Series A Preferred Stock shall be
cumulative and shall accrue on a day-to-day basis, whether or not earned, from
and after the day immediately succeeding the date on which such share was
issued, and shall be payable in cash (except upon conversion). Dividends payable
for any partial dividend period shall be computed on the basis of actual days
elapsed over a 365 day year. The Company, in its sole discretion, may elect not
to pay such dividends in cash when due, in which case such dividends shall be
automatically added to the Liquidation Value of the Series A Preferred Stock as
of any such Dividend Payment Date and as a result shall no longer be considered
due and payable. Each addition to the Liquidation Value in lieu of a cash
dividend to the holders of the Series A Preferred Stock as provided in the
preceding sentence shall constitute the full payment of such dividend.
2.2 In addition to the right to receive quarterly dividends
pursuant to Section 2.1 above, each holder of a share of Series b Preferred
Stock shall have the right, at any time after the Issue Date, if the Board of
Directors of the Company shall declare a dividend or make any other distribution
(including, without limitation, in cash or other property or assets), to holders
of shares of Common Stock, to receive, out of funds legally available therefor,
a dividend or distribution in an amount equal to the amount of such dividend or
distribution receivable by a holder of the number of shares of Common Stock for
which such share of Series A Preferred Stock is convertible on the record date
for such dividend or distribution. Any such
<PAGE>
6
amount shall be paid to the holders of shares of Series A Preferred Stock at the
same time such dividend or distribution is made to holders of Common Stock.
2.3 Except as hereinafter provided in this Section 2.3, unless
full cumulative dividends on the outstanding shares of Series A Preferred Stock
that shall have accrued and become payable as of any date shall have been paid,
or declared and funds shall have been set apart for payment thereof, no dividend
or other distribution (payable other than in shares of Junior Stock) shall be
paid to the holders of Junior Stock or Parity Stock. When dividends are not paid
in full upon the shares of Series A Preferred Stock and any Parity Stock, all
dividends declared upon shares of Series A Preferred Stock and all Parity Stock
shall be declared pro rata so that the amount of dividends declared per share on
Series A Preferred Stock and all such Parity Stock shall in all cases bear to
each other the same ratio that accrued cumulative dividends per share on the
shares of Series A Preferred Stock and all such Parity Stock bear to each other.
3. Conversion of Series A Preferred Stock.
3.1 Conversion at the Option of the Holder of Series A
Preferred Stock.
(a) Each holder of a share of Series A Preferred
Stock shall have the right, at any time after the Issue Date, to convert such
share into fully paid and nonassessable shares of Common Stock at the Common
Stock Conversion Rate as of the date of conversion.
(b) Any holder of shares of Series A Preferred Stock
electing to convert such shares into Common Stock shall surrender the
certificate or certificates for such shares at the offices of the Company (or at
such other place in either New York City or Philadelphia as the Company may
designate by written notice to the holders of shares of Series A Preferred
Stock) during regular business hours, duly endorsed to the Company or in blank,
or accompanied by instruments of transfer to the Company or in blank, in form
reasonably satisfactory to the Company, and shall give written notice to the
Company at such offices that such holder elects to convert such shares of Series
A Preferred Stock. As soon as practicable (but in any event not later than five
(5) Business Days) after any holder deposits certificates for shares of Series A
Preferred Stock, accompanied by the written notice above prescribed, the Company
shall issue and deliver at such office to the holder for whose account such
shares were surrendered, or to his nominee, certificates representing the number
of shares of Common Stock and the cash in lieu of fractional shares, if any, to
which such holder is entitled upon such conversion.
(c) Conversion shall be deemed to have been made as
of the date that certificates for the shares of Series A Preferred Stock to be
converted and the written notice are received by the Company and the Person
entitled to receive
<PAGE>
7
the Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such Common Stock on such date. The Corporation shall
not be required to deliver certificates for shares of Common Stock while the
stock transfer books for such stock or for Series A Preferred Stock are duly
closed (but not for any period in excess of five days) for any purpose, but
certificates for shares of Common Stock shall be issued and delivered as soon as
practicable after the opening of such books.
3.2 Conversion at the Option of the Company.
(a) If, at any time after the second anniversary of
the Issue Date, the average of the daily Closing Prices per share of Common
Stock for 90 consecutive Trading Days is at least 2.5 times $6.20 (with
appropriate adjustment made for any stock dividend, split-up or subdivision or
any combination or reclassification made or effected subsequent to the Issue
Date), the Company, at its option, may elect to convert, subject to the terms
and provisions of this Section 3, all or any of the shares of Series A Preferred
Stock into fully paid and nonassessable shares of Common Stock at the Common
Stock Conversion Rate as of the date of conversion. Notwithstanding the
foregoing, the Company shall not convert less than all outstanding shares of
Series A Preferred Stock pursuant to this Section 3.2(a) if shares of Series A
Preferred Stock having an aggregate liquidation value of less than $5,000,000
would remain outstanding after giving effect to any such proposed optional
conversion. If fewer than all the outstanding shares of Series A Preferred Stock
are to be converted as provided in this Section 3.2, the shares to be converted
shall be determined pro rata among the holders of record thereof.
(b) If the Company shall elect to exercise its rights
under this Section 3.2, notice of such election shall be mailed, first-class
postage prepaid, to the holders of record of the outstanding shares of Series A
Preferred Stock, not less than 15 days nor more than 45 days prior to the
conversion date, to each holder of record of the shares to be converted at such
holder's address as the same appears on the stock register of the Company;
provided, however, that no failure to mail such notice or any defect therein
shall affect the validity of the proceeding for conversion of any shares of
Series A Preferred Stock to be converted except as to the holder to whom the
Company has failed to mail said notice or except as to the holder whose notice
was defective. Each such notice shall state: (i) the conversion date (the
"Conversion Date"); (ii) the total number of shares of Series A Preferred Stock
to be converted and if less than all of the outstanding shares of Series A
Preferred Stock are be converted, the number of shares to be converted by such
holder; (iii) the Common Stock Conversion Rate; and (iv) the place or places
where certificates for such shares are to be surrendered for certificates
representing the number of shares of Common Stock and the cash in lieu of
fractional shares, if any, to which such holder is entitled upon such
conversion, which shall be the offices of the Company (or at such other place in
New York City as the Company may designate).
<PAGE>
8
(c) On the Conversion Date, upon surrender in
accordance with said notice of any shares of Series A Preferred Stock (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), the Company shall deliver to
the holder of such shares of Series A Preferred Stock so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such shares of Series A
Preferred Stock have been converted in accordance with the provisions of this
Section 3.2. If fewer than all the shares represented by any such certificate
are converted, a new certificate shall be issued representing the unconverted
shares without cost to the holder of record thereof. For purposes of the
foregoing, such conversion shall be deemed to have been made at the close of
business on the Conversion Date and the Person entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such Common Stock on such date.
3.3 No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Series A Preferred
Stock. Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series A Preferred
Stock, the Company shall, subject to Section 3.4(c), make a cash payment
(calculated to the nearest $.01) equal to such fraction multiplied by the
Closing Price of the Common Stock on the last Trading Day prior to the date of
conversion.
3.4 The Common Stock Conversion Rate shall be adjusted from
time to time as follows:
(a) If the Company shall, at any time or from time to
time while any shares of the Series A Preferred Stock are outstanding, (i) pay a
dividend on its Common Stock in shares of its capital stock, (ii) combine its
outstanding shares of Common Stock into a smaller number of shares, (iii)
subdivide its outstanding shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Company, then the Common Stock Conversion Rate in effect immediately before
such action shall be adjusted so that the holders of the Series A Preferred
Stock, upon conversion of shares thereof immediately following such action,
shall be entitled to receive the kind and amount of shares of capital stock of
the Company which they would have owned or been entitled to receive upon or by
reason of such event if such shares of Series A Preferred Stock had been
converted immediately before the record date or effective date for such action.
(b) If the Company or any subsidiary thereof shall,
at any time or from time to time while any of the Series A Preferred Stock is
outstanding, make a Pro Rata Repurchase, the Common Stock Conversion Rate shall
be adjusted by multiplying the Common Stock Conversion Rate in effect
immediately prior to such action by a fraction (which in no event shall be less
than one (1)), the
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9
numerator of which shall be the product of (i) the number of shares of Common
Stock outstanding immediately before such Pro Rata Repurchase minus the number
of shares of Common Stock repurchased in such Pro Rata Repurchase and (ii) the
Current Market Price of the Common Stock as of the day immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repur chase, and the denominator of which shall be (i) the product of (x) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Current Market Price of the Common Stock as of the day
immediately preceding the first public announcement by the Company of the intent
to effect such Pro Rata Repurchase minus (ii) the aggregate purchase price of
the Pro Rata Repurchase (provided that such denominator shall never be less than
$.01).
(c) All calculations under this Section 3.4 shall be
made to the nearest $.01 (with $.005 being rounded upward), one-hundredth of a
share (with .005 being rounded upward) or, in the case of a conversion rate, one
ten- thousandth (with .00005 being rounded upward). Notwithstanding any other
provision of this Section 3.4, the Company shall not be required to make any
adjustment of the Common Stock Conversion Rate unless such adjustment would
require an increase or decrease of at least 0.05% of such rate. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase or decrease of at
least 0.05% in such rate. Any adjustments under this Section 3.4 shall be made
successively whenever an event requiring such an adjustment occurs.
(d) Whenever an adjustment in the Common Stock
Conversion Rate is required, the Company shall promptly cause to be mailed (but
in any event not later than five (5) days after the date of the event giving
rise to such adjustment) first-class postage prepaid, to the holders of record
of the outstanding shares of Series A Preferred Stock, notice of such adjustment
and a certificate of a firm of independent public accountants of recognized
national standing selected by the Board of Directors (who shall be appointed at
the Company's expense and who may be the independent public accountants
regularly employed by the Company) setting forth the adjusted Common Stock
Conversion Rate in effect as of such date determined as provided herein. Such
notice and certificate shall set forth in reasonable detail such facts as shall
be necessary to show the reason for and the manner of computing such adjustment.
(e) In the event that at any time as a result of an
adjustment made pursuant to this Section 3.4, the holder of any share of Series
A Preferred Stock thereafter surrendered for conversion shall become entitled to
receive any shares of stock of the Company other than shares of Common Stock,
the conversion rate of such other shares so receivable upon conversion of any
such share of Series A Preferred Stock shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect
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10
to Common Stock contained in subparagraphs (a) through (d) and (f) of this
Section 3.4, and the provisions of this Section 3 with respect to the Common
Stock shall apply on like or similar terms to any such other shares and the
determination of the Board of Directors as to any such adjustment shall be
conclusive.
(f) No adjustment shall be made pursuant to this
Section if the effect thereof would be to reduce the Conversion Price below the
par value of the Common Stock.
3.5 The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued stock, for the
purpose of effecting the conversion of the shares of Series A Preferred Stock,
such number of its duly authorized shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of Series
A Preferred Stock into such Common Stock at any time (assuming that, at the time
of the computation of such number of shares, all such Common Stock would be held
by a single holder). The Company shall from time to time, in accordance with the
laws of the State of Delaware, use its best efforts to cause the authorized
amount of Common Stock to be increased if the aggregate of the authorized amount
of the Common Stock remaining unissued and the issued shares of such Common
Stock in its treasury (other than any shares of such Common Stock reserved for
issuance in any other connection) shall not be sufficient to permit the
conversion of the shares of Series A Preferred Stock into the Common Stock. The
Company covenants that any shares of Common Stock issued upon conversions of the
Series A Preferred Stock shall be validly issued, fully paid and nonassessable.
3.6 If any shares of Common Stock which would be issuable upon
conversion of shares of Series A Preferred Stock hereunder require registration
with or approval of any governmental authority before such shares may be issued
upon conversion, the Company will in good faith and as expeditiously as possible
cause such shares to be duly registered or approved, as the case may be.
3.7 The Company shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of shares of Series A Preferred Stock pursuant hereto. The
Company shall not, however, be required to pay any tax which is payable in
respect of any transfer involved in the issue or delivery of Common Stock in a
name other than that in which the shares of Series A Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
such tax, or has established, to the satisfaction of the Company, that such tax
has been paid.
3.8 For purposes of this Section 3, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company or any subsidiary.
The
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11
Company shall not pay a dividend or make any distribution on shares of Common
Stock held in the treasury of the Company.
3.9 If any action or transaction would require adjustment of
the Common Stock Conversion Rate pursuant to more than one paragraph of this
Section 3, only one adjustment shall be made and each such adjustment shall be
the amount of adjustment that has the highest absolute value.
3.10 From and after the date a share of Series A Preferred
Stock is converted pursuant to Sections 3.1 or 3.2, dividends on such shares of
Series A Preferred Stock shall cease to accrue, and said shares shall no longer
be deemed to be outstanding and all rights of the holders thereof as a holder of
Series A Preferred Stock (except the right to receive from the Company the
Common Stock) shall cease except as otherwise provided herein and in the
Investment Agreement.
3.11 In case:
(a) of a consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required; or
(b) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(c) of the sale, exchange or other conveyance (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Company except to a
wholly-owned subsidiary; or
(d) of any Pro Rata Repurchase;
then, in each case, the Company shall cause to be mailed, first-class postage
prepaid, to the holders of record of the outstanding shares of Series A
Preferred Stock, not less than 20 days nor more than 60 days prior to the
applicable record date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of any distribution or grant of
rights or warrants triggering an adjustment to the Conversion Price pursuant to
this Section 3, or, if a record is not to be taken, the date as of which the
holders of record of Common Stock entitled to such distribution, rights or
warrants are to be determined, or (y) the date on which any reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or
Pro Rata Repurchase is expected to become effective, if known, and the date as
of which it is expected that holders of Common Stock of record shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
such reclassi fication, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding up or Pro Rata Repurchase, if known. Failure to give the
notice specified hereunder
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12
shall have no effect on the status or effectiveness of the action to which the
required notice relates.
4. Voting. The shares of Series A Preferred Stock shall have no voting
rights except as required by law or as set forth below:
(a) So long as the Series A Preferred Stock is
outstanding, each share of Series A Preferred Stock shall entitle the holder
thereof to vote, in person or by proxy, at a special or annual meeting of
stockholders, on all matters entitled to be voted on by holders of Common Stock
voting together as a single class with other shares entitled to vote thereon.
With respect to any such vote, each share of Series A Preferred Stock shall
entitle the holder thereof to cast that number of votes per share as is equal to
the number of votes that such holder would be entitled to cast had such holder
converted its shares of Series A Preferred Stock into shares of Common Stock on
the record date for determining the stockholders of the Company eligible to vote
on any such matters.
(b) So long as at least 575,000 shares of Series A
Preferred Stock (with appropriate adjustment made for any stock dividend,
split-up or subdivision or any combination or reclassification made or effected
subsequent to the Issue Date) remain outstanding, the Company shall not, without
the affirmative vote at a meeting or the written consent with or without a
meeting of the holders of shares of Series A Preferred Stock representing at
least a majority of the aggregate voting power of shares of the Series A
Preferred Stock outstanding, voting as a separate class, authorize or issue any
Senior Stock or Parity Stock or reclassify any Junior Stock as Parity Stock or
Senior Stock or reclassify any Parity Stock as Senior Stock.
(c) The Company shall not, without the affirmative
vote at a meeting or the written consent with or without a meeting of the
holders of shares of Series A Preferred Stock representing at least a majority
of the aggregate voting power of shares of Series A Preferred Stock then
outstanding, voting as a separate class, amend, alter or repeal any of the
provisions of the Certificate of Incor poration or this Certificate of
Designation, so as in any such case to materially adversely affect the
preferences, special rights, powers or privileges of the shares of Series A
Preferred Stock.
(d) In addition to the foregoing, the holders of the
Series A Preferred Stock shall have such other voting, consent and approval
rights as are specified in the Investment Agreement.
5. Liquidation Rights. For the purposes of this Section 5, an
"Extraordinary Event" shall mean: (i) the dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary; (ii) the sale, exchange or
other conveyance (for cash, shares of stock, securities or other consideration)
of all or substantially all the property and assets of the Company other than to
a wholly-owned
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13
subsidiary; and/or (iii) any consolidation or merger to which the Company is a
party, other than a merger or consolidation in which the Company is the
surviving or continuing corporation.
5.1 Upon an Extraordinary Event, the holders of the shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
Company available for distribution to stockholders, in preference to the holders
of, and before any payment or distribution shall be made on, Junior Stock, an
amount (the "Liquidation Amount") equal to the greater of (i) the Liquidation
Value per share plus all accrued and unpaid dividends thereon (whether or not
declared) to the date fixed for the Extraordinary Event, or (ii) the amount that
it would have received if immediately prior to the Extraordinary Event, the
Series A Preferred Stock had been converted to Common Stock.
5.2 After the payment to the holders of the shares of Series A
Preferred Stock of full preferential amounts provided for in this Section 5, the
holders of Series A Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Company.
5.3 In the event the assets of the Company available for
distribution to the holders of shares of Series A Preferred Stock upon an
Extraordinary Event shall be insufficient to pay in full all amounts to which
such holders are entitled pursuant to Section 5.1, then the holders of all
shares of Series A Preferred Stock shall share ratably in such distribution of
assets in accordance with the amount that would be payable on such distribution
if the amounts to which the holders of outstanding shares of Series A Preferred
Stock are entitled were paid in full.
6. Other Provisions.
6.1 Shares of Series A Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Delaware law, have the
status of authorized but unissued shares of Preferred Stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of Preferred Stock of the Company be designated or redesignated and
issued or reissued, as the case may be, as part of any series of Preferred Stock
of the Company, except that any issuance or reissuance of shares of Series A
Preferred Stock must be in compliance with this certificate of designation.
6.2 The Company shall be entitled to recognize the exclusive
right of a Person registered on its records as the holder of shares of Series A
Preferred Stock, and such record holder shall be deemed the holder of such
shares for all purposes.
<PAGE>
14
6.3 Any registered holder of Series A Preferred Stock shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Certificate of Designations and to enforce specifically the terms and
provisions of this Certificate of Designations in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which such holder may be entitled at law or in equity.
6.4 If any payment shall be required by the terms hereof to be
made on a day that is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
6.5 All notice periods referred to herein shall commence on
the date of the mailing of the applicable notice.
<PAGE>
15
IN WITNESS WHEREOF, VIROPHARMA INCORPORATED has caused this
certificate to be duly executed and attested as of the day and year first above
written.
VIROPHARMA INCORPORATED
By: /s/ Vincent J. Milano
---------------------------------------
Name: Vincent J. Milano
Title: Vice President and Chief Financial
Officer
Dated: May 5, 1999
[SEAL]
ATTEST: _________________
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT
FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
----------------------------------------------
VIROPHARMA INCORPORATED
COMMON STOCK PURCHASE WARRANT
-----------------------------------------------
This certifies that, for good and valuable consideration, ViroPharma
Incorporated, a Delaware corporation (the "Company"), grants to Perseus-Soros
BioPharmaceutical Fund, LP, a Delaware limited partnership, and its successors
and assigns (the "Warrantholder"), the right to subscribe for and purchase from
the Company an aggregate of 595,000 validly issued, fully paid and nonassessable
shares (the "Warrant Shares") of the Company's Common Stock, par value $.002 per
share (the "Common Stock"), at a price per share equal to $9.53, as adjusted
from time to time in accordance with the provisions of Section 6 (the "Exercise
Price"), at any time prior to 5:00 p.m., New York City time, on May 5, 2004 (the
"Expiration Date"), subject to the terms, conditions and adjustments herein set
forth.
This Warrant is being issued in connection with the issue and sale by
the Company of shares of its Series A Convertible Participating Preferred Stock,
par value $.001 per share, pursuant to the terms of an Investment Agreement,
dated as of May 5, 1999 (the "Investment Agreement"), among the Company and the
Warrantholder, and is subject to the terms thereof. This Warrant is the
"Warrant" referred to in the Investment Agreement, and the Warrantholder is
entitled to the rights and subject to the obligations contained in the
Investment Agreement.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Investment Agreement.
<PAGE>
2
1. Exercise of Warrants.
1.1 Exercise of Warrant. This Warrant may be exercised, in
whole or in part, at any time or from time to time prior to the Expiration Date,
by surrendering to the Company at its principal office, or such other location
mutually agreed upon, this Warrant, with an Exercise Form (as defined herein)
duly executed by the Warrantholder and accompanied by payment of the Exercise
Price for the number of shares of Warrant Shares specified in such Exercise
Form.
1.2 Cashless Exercise. At any time after a Change of Control
(as defined herein) but prior to the Expiration Date, in lieu of the payment of
the Exercise Price, the Warrantholder shall have the right (but not the
obligation) to require the Company to convert this Warrant, in whole or in part,
into shares of Warrant Shares (the "Conversion Right") as provided for in this
Section 1.2. Upon exercise of the Conversion Right, the Company shall deliver to
the Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Warrant Shares equal to the quotient obtained by
dividing (x) the value of the Warrant or portion thereof being exercised at the
time the Conversion Right is exercised (determined by subtracting (a) the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right for the number of shares for which the Warrant is being
exercised from (b) the aggregate Market Price (as defined herein) of the shares
of Warrant Shares issuable upon exercise of the Warrant for the number of shares
for which the Warrant is being exercised immediately prior to the exercise of
the Conversion Right) by (y) the Market Price of one share of Common Stock
immediately prior to the exercise of the Conversion Right. The Conversion Right
may be exercised at any time after a Change of Control but prior to the
Expiration Date by surrendering to the Company at its principal office, or such
other location mutually agreed upon, this Warrant, with an Exercise Form duly
executed by the Warrantholder and indicating that the Warrantholder wishes to
exercise the Conversion Right and specifying the total number of shares of
Warrant Shares for which the Warrant is being exercised.
1.3 Delivery of Warrant Shares; Effectiveness of Exercise.
(a) Delivery of Warrant Shares. A stock certificate
or certificates for the Warrant Shares specified in the Exercise Form along with
a check for the amount of cash to be paid in lieu of fractional shares, if any,
shall be delivered to the Warrantholder within 5 Business Days after the
Exercise Date; provided, however, that if the Conversion Right is exercised in
accordance with Section 1.2 and a determination by the Board of Directors or an
Independent Financial Expert is required to determine the Market Price of the
Common Stock, such delivery shall be made promptly, but in no event more than 5
Business Days, after such determination is made. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the stock
certificate or certificates and cash in lieu of fractional shares, if any,
deliver to the Warrantholder a new
<PAGE>
3
Warrant evidencing the rights to purchase the remaining Warrant Shares, which
new Warrant shall in all other respects be identical with this Warrant.
(b) Effectiveness of Exercise. The exercise of this
Warrant shall be deemed to have been effective immediately prior to the close of
business on the Business Day on which this Warrant is exercised in accordance
with Section 1.1 or 1.2 (the "Exercise Date"). The Person in whose name any
certificate for shares of Common Stock shall be issuable upon such exercise
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date.
2. Restrictive Legends.
2.1 Warrants. Except as otherwise permitted by this Sec tion
2, each Warrant (and each Warrant issued in substitution for any Warrant pursu
ant to Section 4) shall be stamped or otherwise imprinted with a legend in
substan tially the following form:
"THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS VIROPHARMA
INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT FROM ANY
REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS."
2.2 Warrant Shares. Except as otherwise permitted by this
Section 2, each stock certificate for Warrant Shares issued upon the exercise of
any Warrant and each stock certificate issued upon the direct or indirect
transfer of any such Warrant Shares shall be stamped or otherwise imprinted with
a legend in substantially the following form:
" THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT
FROM ANY
<PAGE>
4
REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS."
2.3 Removal of Legends. Notwithstanding the foregoing, the
Warrantholder may require the Company to issue a Warrant or a stock certificate
for Warrant Shares, in each case without a legend, if either (i) such Warrant or
such Warrant Shares, as the case may be, have been registered for resale under
the Securities Act and sold pursuant to such registration or (ii) if reasonably
requested in writing by the Company, the Warrantholder has delivered to the
Company an opinion of legal counsel (from a firm reasonably satisfactory to the
Company) which opinion shall be addressed to the Company and be reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
such registration is not required with respect to such Warrant or such Warrant
Shares, as the case may be.
3. Reservation and Registration of Shares, Etc. The Company covenants
and agrees as follows:
(a) All Warrant Shares that are issued upon the
exercise of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to the
issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(b) During the period within which this Warrant may
be exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Loss or Destruction of Warrant.
Subject to the terms and conditions hereof, upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or destruction, of
such bond or indemnification as the Company may reasonably require, and, in the
case of mutilation, upon surrender and cancellation of this Warrant, the Company
will execute and deliver a new Warrant of like tenor.
5. Ownership of Warrant.
The Company may deem and treat the Person in whose name this Warrant is
registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
<PAGE>
5
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise
of this Warrant and the Exercise Price shall be subject to adjustment as
follows:
(a) Stock Dividends, Subdivision, Combination or
Reclassification of Common Stock. If at any time after the date of the issuance
of this Warrant the Company shall (i) pay a dividend on its Common Stock in
shares of its capital stock, (ii) combine its outstanding shares of Common Stock
into a smaller number of shares, (iii) subdivide its outstanding shares of
Common Stock or (iv) issue by reclassification of its shares of Common Stock any
shares of capital stock of the Company, then, on the record date for such
dividend or the effective date of such subdivision or split-up, combination or
reclassification, as the case may be, the number and kind of shares to be
delivered upon exercise of this Warrant will be adjusted so that the
Warrantholder will be entitled to receive the number and kind of shares of
capital stock that such Warrantholder would have owned or been entitled to
receive upon or by reason of such event had this Warrant been exercised
immediately prior thereto, and the Exercise Price will be adjusted as provided
below in paragraph (g).
(b) Extraordinary Distributions. If at any time after
the date of issuance of this Warrant the Company shall distribute to all holders
of its Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation and the Common Stock is not changed or exchanged) cash, evidences of
indebtedness, securities or other assets (excluding (i) ordinary course cash
dividends to the extent such dividends do not exceed the Company's retained
earnings and (ii) dividends payable in shares of capital stock for which
adjustment is made under Section 6.1(a)) or rights, options or warrants to
subscribe for or purchase securities of the Company, then in each such case the
number of shares of Common Stock to be delivered to such Warrantholder upon
exercise of this Warrant shall be increased so that the Warrantholder thereafter
shall be entitled to receive the number of shares of Common Stock determined by
multiplying the number of shares such Warrantholder would have been entitled to
receive immediately before such record date by a fraction, the denominator of
which shall be the Market Price per share of Common Stock on such record date
minus the then fair market value (as reasonably determined by the Board of
Directors of the Company in good faith) of the portion of the cash, evidences of
indebtedness, securities or other assets so distributed or of such rights or
warrants applicable to one share of Common Stock (provided that such denominator
shall in no event be less than $.01) and the numerator of which shall be the
Market
<PAGE>
6
Price per share of the Common Stock, and the Exercise Price shall be adjusted as
provided below in paragraph (g).
(c) Pro Rata Repurchases. If at any time after the
date of issuance of this Warrant, the Company or any subsidiary thereof shall
make a Pro Rata Repurchase, then the number of shares of Common Stock to be
delivered to such Warrantholder upon exercise of this Warrant shall be increased
so that the Warrantholder thereafter shall be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock such Warrantholder would have been entitled to receive immediately before
such Pro Rata Repurchase by a fraction (which in no event shall be less than
one) the denominator of which shall be (i) the product of (x) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
and (y) the Market Price of the Common Stock as of the day immediately preceding
the first public announcement by the Company of the intent to effect such Pro
Rata Repurchase minus (ii) the aggregate purchase price of the Pro Rata
Repurchase (provided that such denominator shall never be less than $.01), and
the numerator of which shall be the product of (i) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase minus the
number of shares of Common Stock repurchased in such Pro Rata Repurchase and
(ii) the Market Price of the Common Stock as of the day immediately preceding
the first public announcement by the Company of the intent to effect such Pro
Rata Repurchase.
(d) Reorganization, etc. If at any time after the
date of issuance of this Warrant any consolidation of the Company with or merger
of the Company with or into any other Person (other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock) or any sale, lease or other transfer of all or
substantially all of the assets of the Company to any other person (each, a
"Reorganization Event"), shall be effected in such a way that the holders of
Common Stock shall be entitled to receive cash, stock, other securities or
assets (whether such cash, stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in exchange for
Common Stock, then, upon exercise of this Warrant the Warrantholder shall have
the right to receive the kind and amount of cash, stock, other securities or
assets receivable upon such Reorganization Event by a holder of the number of
shares of Common Stock that such Warrantholder would have been entitled to
receive upon exercise of this Warrant had this Warrant been exercised
immediately before such Reorganization Event, subject to adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 6.1. The Company shall not enter into any of the transactions
referred to in this Section 6.1(d) unless effective provision shall be made so
as to give effect to the provisions set forth in this Section 6.1(d).
<PAGE>
7
(e) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock that
would otherwise be issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment (calculated to the nearest $.01) in respect of
such fractional interest in an amount equal to that fractional interest of the
then Market Price per share of Common Stock.
(f) Carryover. Notwithstanding any other provision of
this Section 6.1, no adjustment shall be made to the number of shares of Common
Stock to be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than .05% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment that together with any
adjustments so carried forward shall amount to .05% or more of the number of
shares to be so delivered.
(g) Exercise Price Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrant is adjusted as
provided pursuant to this Section 6.1, the Exercise Price per share payable upon
the exercise of this Warrant shall be adjusted by multiplying such Exercise
Price immedi ately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter;
provided, however, that the Exercise Price for each Warrant Share shall in no
event be less than the par value of such Warrant Share.
(h) Multiple Adjustments. If any action or
transaction would require adjustment of the number of shares of Common Stock to
be delivered to the Warrantholder upon exercise of this Warrant pursuant to more
than one paragraph of this Section 6.1, only one adjustment shall be made and
each such adjustment shall be the amount of adjustment that has the highest
absolute value.
6.2 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage prepaid,
to the Warrantholder, notice of such adjustment or adjustments and a certificate
of a firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company (who shall be appointed at the
Company's expense and who may be the independent public accountants regularly
employed by the Company) setting forth the number of Warrant Shares and the
Exercise Price of such Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
<PAGE>
8
7. Amendments. Any provision of this Warrant may be amended and the
observance thereof waived only with the written consent of the Company and the
Warrantholder.
8. Notices of Corporate Action. So long as this Warrant has not been
exercised in full, in the event of:
(a) of a consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required; or
(b) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(c) of the sale, exchange or other conveyance (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Company except to a
wholly-owned subsidiary; or
(d) of any Pro Rata Repurchase;
then, in each case, the Company shall cause to be mailed, first-class postage
prepaid, to the Warrantholder, not less than 20 days nor more than 60 days prior
to the applicable record date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of any distribution or
grant of rights or warrants triggering an adjustment to pursuant to Section 6.1,
or, if a record is not to be taken, the date as of which the holders of record
of Common Stock entitled to such distribution, rights or warrants are to be
determined, or (y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata
Repurchase is expected to become effective, if known, and the date as of which
it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding up or Pro Rata Repurchase, if known. Failure to give the
notice specified hereunder shall have no effect on the status or effectiveness
of the action to which the required notice relates.
9. Registration Rights. The Warrantholder shall be entitled to
registration rights with respect to this Warrant or the Warrant Shares issuable
upon exercise of this Warrant as set forth in the Investment Agreement.
10. Definitions.
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
<PAGE>
9
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in New York City.
"Change of Control" means (i) the direct or indirect sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to any Person or group of Persons acting in concert as a partnership or
other group within the meaning of Rule 13d-5 under the Exchange Act (a "Group of
Persons"), or (ii) the merger or consolidation of the Company with or into
another corporation with the effect that the then existing stockholders of the
Company hold less than 50% of the combined voting power of the then outstanding
securities of the surviving corporation of such merger or the corporation
resulting from such consolidation ordinarily (and apart from rights accruing
under special circumstances, including the happening of a contingency) having
the right to vote in the election of directors.
"Closing Date" has the meaning specified in the Investment Agreement.
"Closing Price" of the Common Stock as of any day, means (i) the last
reported sale price of such stock (regular way) or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, in either
case as reported on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or (ii) if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and lowest reported asked quotation for the
Common Stock, in either case reported on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), or a similar service if
NASDAQ is no longer reporting such information.
"Common Stock" has the meaning specified on the cover of this Warrant.
"Company" has the meaning specified on the cover of this Warrant.
"Exercise Form" means an Exercise Form in the form annexed hereto as
Exhibit A.
"Expiration Date" has the meaning specified on the cover of this
Warrant.
"Exercise Price" has the meaning specified on the cover of this
Warrant.
"Independent Financial Expert" means an independent nationally
recognized investment banking firm.
<PAGE>
10
"Market Price" means, with respect to each share of Common Stock as of
any date, the average of the daily Closing Prices per share of Common Stock for
the 30 consecutive Trading Days prior to such date; provided that, if on any
such date the shares of Common Stock are not listed or admitted for trading on
any national securities exchange or quoted by NASDAQ or a similar service, the
Market Price for a share of Common Stock shall be the fair market value of such
share as determined in good faith by the Board of Directors of the Company. If
the Board of Directors is unable to determine the fair market value, or if the
holders of a majority in interest of the Warrants disagree with the Board's
determination of fair market value by written notice delivered to the Company
within five (5) Business Days after the Board's determination thereof is
communicated in writing to such holders, which notice specifies a
majority-in-interest of such holders' determination of fair market value, then
the Company and a majority-in-interest of such holders shall select an
Independent Financial Expert which shall determine such fair market value. If
the Company and such holders are unable to agree upon an Independent Financial
Expert within fifteen (15) days after the request by such holders, the Company,
on the one hand, and such holders, on the other, shall each select an
Independent Financial Expert within five (5) days following the expiration of
such fifteen (15) day period, and these two Independent Financial Experts shall
select a third Independent Financial Expert. The determination of fair market
value by such Independent Financial Expert shall be final, binding and
conclusive on the Company and the Warrantholder. All costs and fees of any
Independent Financial Experts retained in accordance with the foregoing shall be
borne by the Company.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Price Floor" has the meaning specified on the cover of this Warrant.
"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Company or by any of its subsidiaries whether for cash, shares of capital
stock of the Company, other securities of the Company, evidences of indebtedness
of the Company or any other Person or any other property (including, without
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Company), or any combination thereof, which
purchase is subject to Section 13(e) of the Securities Exchange Act of 1934, as
amended, or is made pursuant to an offer made available to all holders of Common
Stock.
"Securities Act" has the meaning specified on the cover of this
Warrant.
<PAGE>
11
"Warrantholder" has the meaning specified on the cover of this Warrant.
"Warrant Shares" has the meaning specified on the cover of this
Warrant.
11. Miscellaneous.
11.1 Entire Agreement. This Warrant together with the
Investment Agreement constitute the entire agreement between the Company and the
Warrantholder with respect to this Warrant.
11.2 Binding Effect; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective successors and assigns. Nothing in this Warrant, expressed or
implied, is intended to or shall confer on any person other than the Company and
the Warrantholder, or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
11.3 Section and Other Headings. The section and other
headings contained in this Warrant are for reference purposes only and shall not
be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
11.4 Notices. All notices or other communications given or
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company:
ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Telecopy: (610) 458-7380
Attention: Thomas F. Doyle, Esq.
with a copies to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Telecopy: (215) 963-5299
Attention: David R. King, Esq.
<PAGE>
12
If to the Warrantholder:
Perseus-Soros BioPharmaceutical Fund, LP
c/o Perseus Capital, LLC
the Army and Navy Club Building
1627 I Street, N.W., Suite 610
Washington D.C. 20006
Telecopy: (202) 463-6215
Attention: Christopher D. Earl, Ph.D.
and
Perseus Capital, LLC
the Army and Navy Club Building
1627 I Street, N.W., Suite 610
Washington D.C. 20006
Telecopy: (202) 463-6215
Attention: Kenneth M. Socha, Esq.
and
Soros Fund Management, LLC
888 Seventh Avenue
New York, New York 10106
Telecopy: (212) 262-6300
Attention: Michael C. Neus, Esq.
and
Soros Fund Management, LLC
888 Seventh Avenue
New York, New York 10106
Telecopy: (212) 262-6300
Attention: Neal Moszkowski
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Bruce A. Gutenplan, Esq.
or at such other address as a party hereto shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
Notice given in
<PAGE>
13
accordance with this Section shall be deemed given and received as of the
earlier of (i) actual receipt or (ii) first attempted delivery which is refused
(as opposed to being returned for insufficient postage/fee, improper address or
like cause). All references to days in this Agreement shall be deemed to refer
to calendar days, unless otherwise specified. If any notice, filing, delivery or
payment shall be required by the terms hereof to be made on a day that is not a
Business Day, such notice, filing, delivery or payment shall be made on the
immediately succeeding Business Day.
11.5 No Dilution or Impairment. The Company will not, by
amendment of its certificate or articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will, at all times, in good
faith, assist in the carrying out of all such terms. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of stock receivable on the exercise of this Warrant above the amount
payable therefor on such exercise, (ii) will, at all times, reserve and keep
available the maximum number of its authorized shares of Common Stock, free from
all preemptive rights therein, which will be sufficient to permit the full
exercise of this Warrant and (iii) will take all such action as may be necessary
or appropriate in order that all shares of Common Stock as may be issued
pursuant to the exercise of this Warrant will, upon issuance, be duly and
validly issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof.
11.6 Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the Warrantholder hereof for any issue or transfer tax, or other
incidental expense, in respect of the issuance or delivery of such certificates
or the securities represented thereby, all of which taxes and expenses shall be
paid by the Company; provided, however, that the Warrantholder shall be required
to pay any and all taxes that may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Warrantholder as reflected upon the books of the Company.
11.7 Severability. Any term or provision of this Warrant which
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
11.8 Certain Remedies. The Warrantholder shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this
Warrant and to enforce specifically the terms and provisions of this Warrant in
any court of the
<PAGE>
14
United States or any court of any state having jurisdiction, this being in
addition to any other remedy to which the Warrantholder may be entitled at law
or in equity.
11.9 No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be deemed to confer upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
11.10 Governing Law. The Company and, by acceptance of this
Warrant, the Warrantholder each hereby acknowledge and agree that the Warrant
granted hereby shall be governed by, and construed in accordance with, the
internal laws of the State of New York.
<PAGE>
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
VIROPHARMA INCORPORATED
By: /s/ Claude H. Nash
----------------------------------------
Name: Claude H. Nash, Ph.D.
Title: President and Chief Executive Officer
Dated: May 5, 1999
AGREED AND ACKNOWLEDGED:
PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP
By: Perseus-Soros Partners, LLC,
General Partner
By: Perseus Management, LLC,
Member
By: /s/ Frank H. Pearl
----------------------------
Name: Frank H. Pearl
Title: President and Chairman:
Dated: May 5, 1999
[COMMON STOCK PURCHASE WARRANT SIGNATURE PAGE]
<PAGE>
16
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ of the Warrant Shares and
[herewith tenders payment for such Warrant Shares to the order of ViroPharma
Incorporated in the amount of $__________] [hereby exercises its Conversion
Right] in accordance with the terms of this Warrant. The undersigned requests
that a certifi cate for [such Warrant Shares] [that number of Warrant Shares to
which the undersigned is entitled as calculated pursuant to Section 1.2] be
registered in the name of the undersigned and that such certificates be
delivered to the undersigned's address below.
Dated:__________________________
Signature____________________________
----------------------------
(Print Name)
----------------------------
(Street Address)
----------------------------
(City) (State) (Zip Code)
EXHIBIT 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, GEORGE SOROS, hereby make,
constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting
individually, as my agent and attorney-in-fact for the purpose of executing in
my name, (a) in my personal capacity or (b) in my capacity as Chairman of,
member of or in other capacities with Soros Fund Management LLC, all documents,
certificates, instruments, statements, filings and agreements ("documents") to
be filed with or delivered to any foreign or domestic governmental or regulatory
body or required or requested by any other person or entity pursuant to any
legal or regulatory requirement relating to the acquisition, ownership,
management or disposition of securities or other investments, and any other
documents relating or ancillary thereto, including but not limited to, all
documents relating to filings with the United States Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934 (the "Act") and the rules and regulations promulgated
thereunder, including: (1) all documents relating to the beneficial ownership of
securities required to be filed with the SEC pursuant to Section 13(d) or
Section 16(a) of the Act including, without limitation: (a) any acquisition
statements on Schedule 13D or Schedule 13G and any amendments thereto, (b) any
joint filing agreements pursuant to Rule 13d-1(f) and (c) any initial statements
of, or statements of changes in, beneficial ownership of securities on Form 3,
Form 4 or Form 5 and (2) any information statements on Form 13F required to be
filed with the SEC pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing
are hereby ratified and confirmed.
This power of attorney shall be valid from the date hereof until
revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day
of January, 1997.
/s/ George Soros
----------------------
GEORGE SOROS
EXHIBIT 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, STANLEY F. DRUCKENMILLER,
hereby make, constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS,
acting individually, as my agent and attorney-in-fact for the purpose of
executing in my name, (a) in my personal capacity or (b) in my capacity as Lead
Portfolio Manager of, member of or in other capacities with Soros Fund
Management LLC, all documents, certificates, instruments, statements, filings
and agreements ("documents") to be filed with or delivered to any foreign or
domestic governmental or regulatory body or required or requested by any other
person or entity pursuant to any legal or regulatory requirement relating to the
acquisition, ownership, management or disposition of securities or other
investments, and any other documents relating or ancillary thereto, including
but not limited to, all documents relating to filings with the United States
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and
regulations promulgated thereunder, including: (1) all documents relating to the
beneficial ownership of securities required to be filed with the SEC pursuant to
Section 13(d) or Section 16(a) of the Act including, without limitation: (a) any
acquisition statements on Schedule 13D or Schedule 13G and any amendments
thereto, (b) any joint filing agreements pursuant to Rule 13d-1(f) and (c) any
initial statements of, or statements of changes in, beneficial ownership of
securities on Form 3, Form 4 or Form 5 and (2) any information statements on
Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing
are hereby ratified and confirmed.
This power of attorney shall be valid from the date hereof until
revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day
of January, 1997.
/s/ Stanley F. Druckenmiller
--------------------------------
STANLEY F. DRUCKENMILLER
EXHIBIT 6
JOINT FILING AGREEMENT
Each of the undersigned hereby acknowledges and agrees, in compliance
with the provisions of Rule 13d-1(k)(1) promulgated under the Securities
Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement
is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will
be filed with the Securities and Exchange Commission jointly on behalf of the
undersigned.
This Agreement may be executed in one or more counterparts.
PERSEUS-SOROS BIOPHARMACEUTICAL FUND,
LP
By: Perseus-Soros Partners, LLC,
General Partner
By: SFM Participation, LP,
Member
By: SFM AH, Inc.,
General Partner
By: /S/ MICHAEL C. NEUS
-------------------------------
Name: Michael C. Neus
Title: Vice President
PERSEUS-SOROS PARTNERS, LLC
By: SFM Participation, L.P.,
Member
By: SFM AH, Inc.,
General Partner
By: /S/ MICHAEL C. NEUS
--------------------------------
Name: Michael C. Neus
Title: Vice President
<PAGE>
CUSIP No. 928241108 Page 2 of 3
PERSEUS BIOTECH FUND PARTNERS, LLC
By: /S/ KENNETH M. SOCHA
---------------------------------
Name: Kenneth M. Socha
Title: Member
MR. FRANK H. PEARL
By: /S/ FRANK H. PEARL
-------------------------------
Name: Frank H. Pearl
MR. KENNETH M. SOCHA
By: /S/ KENNETH M. SOCHA
--------------------------------
Name: Kenneth M. Socha
SFM PARTICIPATION, L.P.
By: SFM AH, Inc.,
General Partner
By: /S/ MICHAEL C. NEUS
--------------------------------
Name: Michael C. Neus
Title: Vice President
SFM AH, INC.
By: /S/ MICHAEL C. NEUS
---------------------------------
Name: Michael C. Neus
Title: Vice President
MR. GEORGE SOROS
By: /S/ MICHAEL C. NEUS
----------------------------------
Name: Michael C. Neus
Title: Attorney-in-fact
<PAGE>
CUSIP No. 928241108 Page 3 of 3
SOROS FUND MANAGEMENT LLC
By: /S/ MICHAEL C. NEUS
------------------------------------
Name: Michael C. Neus
Title: Assistant General Counsel
MR. STANLEY F. DRUCKENMILLER
By: /S/ MICHAEL C. NEUS
-----------------------------------
Name: Michael C. Neus
Title: Attorney-in-fact
