EXHIBIT 10.17
BOARD OBSERVER, RIGHT OF FIRST REFUSAL AND STANDSILL AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of October 10,
1997 by and between SENSUS DRUG DEVELOPMENT CORPORATION, a Delaware corporation
(the "Company"), and ROSS FINANCIAL CORPORATION, a Cayman Islands corporation
("Ross").
WHEREAS, the Company is offering 8,000,000 shares of its Series C Preferred
Stock (the "Shares") to Ross as set forth in certain agreements and instruments
separate from this Agreement; and
WHEREAS, the Company, to induce Ross to purchase the Shares and in
consideration of the standstill provisions contained herein, has offered Ross
the right to an observer on the Company's Board of Directors and certain rights
of first refusal as provided in this Agreement, and Ross desires to accept such
offer.
NOW, THEREFORE, in consideration of the foregoing recitals, Ross' purchase
of the Shares, and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. OBSERVER RIGHTS
1.1 OBSERVER RIGHTS. The Company shall allow one representative
designated by Ross to attend all meetings of the Company's Board of Directors in
a nonvoting capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the Company provides to its Board of Directors;
provided, however, that the Company reserves the right to exclude such
representative from access to any material or meeting or portion thereof if the
Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect highly
confidential proprietary information or for other similar reasons.
1.2 CONFIDENTIALITY OF RECORDS. Ross agrees to use, and to use all
commercially reasonable efforts to insure that its authorized representatives
use, the same degree of care as Ross uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that Ross may disclose such
proprietary or confidential information (i) to any partner, employee, subsidiary
or parent of Ross for the purpose of evaluating its investment in the Company as
long as such partner, employee, subsidiary or parent is advised of the
confidentiality provisions of this Section 1.2, (ii) as is required to be
disclosed by order of a court of competent jurisdiction, administrative agency
or governmental body, or by law, rule or regulation or (iii) with the prior
written consent of the Company, which shall not be unreasonably withheld, to any
bona fide prospective purchaser of its capital stock in the Company.
1
1.3 TERMINATION OF OBSERVER RIGHTS. All covenants of the Company
contained in Section 1 shall expire and terminate on the date on which Ross
holds fewer than fifty percent (50%) of the Shares.
SECTION 2. RIGHTS OF FIRST REFUSAL FOLLOWING INITIAL PUBLIC OFFERING.
2.1 SUBSEQUENT OFFERINGS. Following the effective date of the Company's
first underwritten public offering of its Common Stock, registered under the
Securities Act of 1933, as amended (the "Securities Act"), and so long as Ross
(with its affiliates) shall own not less than fifty percent (50%) of the Shares,
Ross shall have a right of first refusal to purchase its pro rata share of all
Equity Securities, as defined below, that the Company may, from time to time,
propose to sell and issue, other than the Equity Securities excluded by Section
2.6 hereof. Ross' pro rata share is equal to the ratio of (A) the number of
shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares) which Ross is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (B) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon the conversion of shares of
Preferred Stock or upon exercise of any outstanding warrants or options)
immediately prior to the issuance of the Equity Securities. The term "Equity
Securities" shall mean (i) any Common Stock, Preferred Stock or other equity
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other equity security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other equity security or (iv) any such warrant or
right.
2.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give Ross written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Ross shall have five (5) days from the giving of
such notice to agree to purchase its pro rata share of the Equity Securities for
the price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. Notwithstanding the foregoing, the Company shall
not be required to offer or sell such Equity Securities to Ross if such offer or
sale would cause the Company to be in violation of applicable federal securities
laws.
2.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If Ross fails to
exercise in full the rights of first refusal, the Company shall have one hundred
twenty (120) days thereafter to sell the Equity Securities in respect of which
Ross' rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to Ross pursuant to Section 2.2 hereof. If the Company
has not sold such Equity Securities within such one hundred twenty (120) day
period, the Company shall not thereafter issue or sell any Equity Securities
without first offering such securities to Ross in the manner provided above.
2
2.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 2 shall terminate and be of no further force and
effect three (3) years from the date of the Company's first underwritten public
offering of its Common Stock, registered under the Securities Act.
2.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
Ross under this Section 2 may not be assigned or transferred except that such
rights are assignable by Ross to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with Ross.
2.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 2 shall have no application to any of the following Equity Securities:
A. shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by a majority of the Board
of Directors;
B. any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination, including without limitation, an acquisition whether pursuant to a
preexisting option or otherwise, of the stock or assets of a special purpose
corporation, research and development partnership or similar entity;
C. any Equity Securities that are issued by the Company as part of
an underwritten public offering;
D. shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
E. shares of Common Stock issued upon conversion of the Shares or
upon conversion or exercise of other convertible securities, options or warrants
of the Company; and
F. any Equity Securities issued pursuant to corporate partnering
transactions, off balance sheet financing transactions (such as "SWORD" or
Research & Development partnership transactions), commercial lending
transactions or lease financings;
provided, however, that if the aggregate number of Equity Securities issued
pursuant to Section 2.6(f) shall exceed, on a cumulative basis, ten percent
(10%) of the fully-diluted outstanding shares of the Company's capital stock
(calculated at the time of issuance), the provisions of Sections 2.1, 2.2 and
2.3 shall apply subject to the following conditions:
(1) if the Company proposes to issue Equity Securities in
conjunction with the equity securities of another entity ("Joint Equity
Securities"), Ross shall have the right to purchase its pro rata share of Joint
Equity Securities as defined in Section 4.1 above only to
3
the extent that such participation by Ross will not result in a loss of desired
accounting treatment for the Company; and
(2) if the Joint Equity Securities are issued as units, in
exercising its right of first refusal, Ross must purchase the full unit, even if
the component equity securities of such unit may be transferred separately.
SECTION 3. STANDSTILL
3.1 PURCHASE RESTRICTIONS. Ross agrees that from the date of this
Agreement, it will not, nor will it permit any of its affiliates to, acquire or
offer or propose to acquire any shares of Common Stock or any securities
convertible into, exchangeable for or exercisable for Common Stock (all such
securities, collectively referred to hereinafter as "Voting Securities") which,
when taken together with any Voting Securities then owned by Ross and its
affiliates (on an as-if-converted basis), would in the aggregate, exceed an
amount equal to forty-nine percent (49%) of the Company's then outstanding
Voting Securities, unless in any such case specifically approved in writing by
the Board of Directors of the Company.
3.2 EQUITABLE RELIEF. Ross acknowledges that in the event of any breach
by it of this Section 3, the Company would be irreparably and immediately
harmed and could not be made whole by monetary damages and agrees that the
Company, in addition to any other remedy to which it may be entitled, shall be
entitled to an injunction or injunctions to prevent breaches of this Section 3
and to compel specific performance of Section 3. Any requirements for the
securing or posting of any bond with respect to such remedy are hereby waived by
Ross.
SECTION 4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York without regard to the conflict of laws
rules thereof.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement and supersedes all of the prior agreements and
undertakings, both written and oral, among the parties, or any of them with
respect to the subject matter hereof.
4.4 SEVERABILITY. If any provision of this Agreement or the application
of any such provision or any portion thereof to any person or circumstance,
shall be held invalid, illegal, or unenforceable, to the extent permitted by
law, the remaining portion of such provision and the remaining provisions of
this Agreement shall not in any way be affected or impaired.
4.5 MODIFICATION AND WAIVER. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the same shall
be in writing and
4
duly executed by the parties, except that any of the terms or provisions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits of such waived terms or provisions. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provision hereof (whether or not similar).
4.6 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
4.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the date set forth in the first paragraph hereof.
SENSUS DRUG DEVELOPMENT CORPORATION ROSS FINANCIAL CORPORATION
_____________________________________ ______________________________
Joan A. Scarlett Kenneth E. Dart
President and Chief Executive Officer President
5