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EXHIBIT 10.11
[SIGNAL LETTERHEAD LOGO]
September 8, 1994
Oxford Bioscience Partners L.P.,
Oxford Bioscience Partners (Bermuda)
Limited Partnership, Oxford Bioscience
Partners (Adjunct) L.P.
650 Town Center Drive
Suite 810
Costa Mesa, CA 92626
Re: Management Rights
Ladies and Gentlemen:
This letter sets forth our agreement as to certain information rights
that Signal Pharmaceuticals, Inc. (the "Company") will provide to each of Oxford
Bioscience Partners L.P., Oxford Bioscience Partners (Bermuda) Limited
Partnership, Oxford Bioscience Partners (Adjunct) L.P. (collectively, the
"Purchasers") in consideration of the Purchasers' agreement to severally
purchase an aggregate of 1,428,572 shares of the Company's Series C Preferred
Stock with an aggregate purchase price of $2,000,000.80, pursuant to that
certain Series C Preferred Stock Purchase Agreement between the Company and each
of the Purchasers of even date herewith (the "Stock Purchase Agreement").
A. Financial Statements and Other Information. Except as otherwise set
forth below in this paragraph A and in addition to any other rights the
Purchasers may have to receive information, until the earlier of (i) the
effective date of the registration statement on Form 8-A for the registration of
securities of the Company pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or (ii) the consummation of
the Company's initial public offering, the public offering price of which is not
less than $12,500,000 in the aggregate, the Company will deliver to each of the
Purchasers, for so long as the Purchasers hold an aggregate of at least
thirty-three and one-third percent of the shares of the Company's Series C
Preferred Stock (or Common Stock issued upon conversion thereof) purchased by
such Purchasers pursuant to the Stock Purchase Agreement, the following
information.
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(i) As soon as available but in any event within 60 days after
the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash
flows of the Company and its subsidiaries for such quarterly period and
for the period from the beginning of the fiscal year to the end of such
month, and consolidated balance sheets of the Company and its
subsidiaries as of the end of such quarterly period, setting forth in
each case comparisons to the annual budget and to the corresponding
period in the preceding fiscal year, and all such statements will be
prepared in accordance with generally accepted accounting principles,
consistently applied (except for the absence of notes and subject to
normal year-end adjustments).
(ii) No later than thirty (30) days after the occurrence of such
actual events, notice of the occurrence of actual events that are
determined in good faith by the Company to be substantially materially
adverse to the Company and its subsidiaries taken as a whole, including
but not limited to, the filing of any material litigation against the
Company or its subsidiaries, substantially materially adverse regulatory
or legal developments, the commencement of voluntary or involuntary
bankruptcy proceedings, natural or other disasters, material changes in
management or directors, a change in the independent accounting firm
that acts as the Company's auditor as a result of a material dispute
between the Company and such accounting firm, and the termination of, or
material defaults under, material contracts. Such notice shall include a
statement letter from the President or Chief Financial Officer of the
Company specifying the nature of such substantially materially adverse
events.
(iii) Prior to the end of each fiscal year, an annual budget
(approved by the Board of Directors) prepared on a monthly, consolidated
basis
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for the Company and its subsidiaries for the succeeding fiscal year
(displaying detailed anticipated statements of operations and cash flows
and balance sheets), and promptly upon preparation thereof any other
significant budgets which the Company prepares and any revisions of such
annual or other budgets.
(iv) Promptly after transmission thereof, copies of all
financial statements, proxy statements, reports and any other written
communications which the company sends to its stockholders generally and
copies of all registration statements and all regular, special or
periodic reports which it files with the SEC or with any securities
exchange on which any of its securities are then listed pursuant to the
1934 Act, and, after such releases or statements have been publicly
disseminated, copies of all press releases and other statements made
available generally by the Company to the public.
(v) A notice specifying the terms of all sales of the issuer's
securities, promptly following the consummation thereof.
Each of the financial statements referred to in this paragraph A will be true
and correct in all material respects and will fairly present the Company's
consolidated financial position and results of operations as of the dates and
for the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the Company's
financial condition, operating results or business prospects). The Company's
obligation to provide to the Purchasers the materials described in clause (iv)
and (v) above will continue after the Company is subject to the reporting
requirements of the 1934 Act and until the Purchasers no longer hold an
aggregate of at least thirty-three and one-third of the shares of the Company's
Series C Preferred Stock (or Common Stock issued upon conversion thereof)
purchased by such Purchasers pursuant to the Stock Purchase Agreement.
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B. Inspection of Property. Until the earlier of (i) the effective date
of the registration statement on Form 8-A for the registration of securities of
the Company pursuant to Section 12(b) or 12(g) of the 1934 Act, or (ii) the
consummation of the Company's initial public offering, the public offering price
of which is not less than $12,500,000 in the aggregate, and for so long as the
Purchasers hold an aggregate of at least thirty-three and one-third percent of
the shares of the Company's Series C Preferred Stock (or Common Stock issued
upon conversion thereof) purchased by such Purchasers pursuant to the Stock
Purchase Agreement, the Company will permit the Purchaser, or any
representatives designated by the Purchaser (which representatives must be
reasonably acceptable to the Company), upon reasonable notice and during normal
business hours and such other times as the Purchaser may reasonably request, to
(i) visit and inspect any of the properties of the Company and its subsidiaries,
(ii) examine the corporate and financial records of the Company and its
subsidiaries and make copies thereof or extracts therefrom, (iii) discuss the
affairs, finances and accounts of the Company and its subsidiaries with the
directors, senior management and independent accountants of the Company and its
subsidiaries, and (iv) consult with and advise the management of the Company and
its subsidiaries as to their affairs, finances and accounts.
C. Board Visitation Rights. Until the earlier of (i) the effective date
of the registration statement on Form 8-A for the registration of securities of
the Company pursuant to Section 12(b) or 12(g) of the 1934 Act, or (ii) the
consummation of the Company's initial public offering, the public offering price
of which is not less than $12,500,000 in the aggregate, and for so long as
Purchasers hold an aggregate of at least sixty-six and two-thirds of the shares
of the Company's Series C Preferred Stock (or Common Stock issued upon
conversion thereof) purchased by such Purchasers pursuant to the Stock Purchase
Agreement, the Company shall invite a representative of the Purchasers to attend
all meetings of its Board of Directors in a nonvoting observer capacity and, in
this respect, shall give such representative copies of all notices, minutes,
consents, and other materials that it provides to its directors; provided,
however, that such representative shall agree to accept such information in
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confidence subject to the same restrictions required as to directors and with
respect to any information which the Company deems in good faith to be a trade
secret or similar confidential information, to enter into a confidentiality
agreement mutually acceptable to the Company and such representative which is
consistent with the Purchasers' ability to exercise its full legal rights as a
shareholder; and provided further, that the Company reserves the right to
withhold any information and to exclude such representative from any meeting or
portion thereof if access to such information or attendance at such meeting
could adversely affect the attorney-client privilege between the Company and its
counsel; and, provided further, that the Company reserves the right to schedule
such meetings around the availability of the members of the Board of Directors.
By countersigning below, each Purchaser hereby agrees that it and they
shall be limited to equitable remedies with respect to enforcement hereof and
the Company shall have no financial or monetary liability under this Letter
Agreement to such Purchaser in connection with a failure by the Company to
provide information to such Purchaser in a timely manner (or at all) pursuant to
section A(i)-(v) of this Letter Agreement. Each Purchaser further acknowledges
that any information provided by the Company to such Purchasers pursuant to this
Letter Agreement, or otherwise and designated as confidential, orally or in
writing, by the Company, is the confidential and proprietary information of the
Company. Each Purchaser hereby agrees (i) to hold such confidential and
proprietary information in confidence and to take all necessary precautions to
protect such confidential and proprietary information, including, without
limitation, all precautions such Purchaser employs with respect to its own
confidential materials; (ii) not to divulge such confidential and proprietary
information or any information derived therefrom to any third person other than
an employee that has a reasonable need to know; and (iii) not to make any use
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whatsoever at any time of such confidential and proprietary information except
to evaluate the status of such Purchaser's investment in the Company.
Very truly yours,
SIGNAL PHARMACEUTICALS, INC.
By: /s/ ALAN J. LEWIS
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Title: President
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ACCEPTED:
OXFORD BIOSCIENCE PARTNERS L.P.
By: OBP Management L.P.
Its: General Partner
By: /s/ EDMUND M. OLIVIER
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Edmund M. Olivier
Its: General Partner
OXFORD BIOSCIENCE PARTNERS (BERMUDA)
LIMITED PARTNERSHIP
By: OBP Management (Bermuda) Limited
Partnership
Its: General Partner
By: /s/ EDMUND M. OLIVIER
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Edmund M. Olivier
Its: General Partner
OXFORD BIOSCIENCE PARTNERS (ADJUNCT)
L.P.
By: OBP Management L.P.
Its: General Partner
By: /s/ EDMUND M. OLIVIER
-----------------------------------
Edmund M. Olivier
Its: General Partner