EXHIBIT 10.4
SUBSCRIPTION, SHARE RESTRICTIONS AND PROXY AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of October
23, 1998 between BRITISH LION MEDICAL, INC., a California corporation (the
"Company"), XXXXX X. XXXXX, residing at 0000 Xxxxxxxxx Xxxxxx, #000, Xxxxxx
Xxxx, Xxxxxxxxxx 00000 ("Xxxxx") and THREE R ASSOCIATES, INC., a California
corporation ("Three R"); and for purposes of Articles II, III and V of this
Agreement, Xxxx Xxxxxx, Ph.D., residing at 00000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxx 00000, Xxx X. Xxxxxxxx, Ph.D., residing at 00000 Xxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx, 00000 and Xxxxxx X. Xxxxxxxx, M.D., residing at
000 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Founders").
WHEREAS, Xxxxx desires to subscribe to the purchase of shares of
Company common stock;
WHEREAS, the Company is willing to issue shares of Company common
stock to Xxxxx only upon Xxxxx'x agreement to certain conditions;
WHEREAS, the Company and Three are agreeable to providing Xxxxx
certain anti-dilution protection; and
WHEREAS, Xxxxx is agreeable to granting the Founders a right of
first refusal to purchase his shares and a proxy;
NOW, THEREFORE, in consideration of and in reliance upon the
mutual representations, promises and agreements set forth above and herein,
the parties hereto agree as follows:
I. SUBSCRIPTION
A. Number of Shares of Common Stock and Consideration.
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Xxxxx hereby subscribes (the "Subscription") to the purchase of
300,000 shares of Company common stock for a consideration of $.001 per
share, or an aggregate consideration of $300.00 (the "Consideration").
B. Payment of Consideration.
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Xxxxx hereby agrees to pay the Consideration by check payable to
the order of the Company promptly upon approval by the Company's Board of
Directors of the Subscription.
C. Identification.
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Upon issuance pursuant to the Subscription the shares of Company
common stock shall be referred to as the Xxxxx Shares for purposes of this
Agreement.
D. Certificate.
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Xxxxx agrees any certificate that may be issued to him
representing the Xxxxx Shares will contain a legend in form satisfactory to
Company counsel providing notice of the restrictions and the proxy set
forth in this Agreement.
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E. Restricted Stock.
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Xxxxx understands that the Xxxxx Shares will be restricted
securities within the meaning of Rule 144 of the General Rules and
Regulations under the Securities Act of 1933 as amended (the "Act"), and
applicable state statutes. Xxxxx further understands that (i) an
appropriate restrictive legend (or legends) will be placed on the
certificates representing the Xxxxx Shares and that (ii) the stock transfer
records of Company will be noted to reflect such restrictions. Because the
Xxxxx Shares are "restricted" as defined under Rule 144, Xxxxx understands
that such Shares must be held for a minimum of one year following their
transfer to him. Thereafter, the Xxxxx Shares may be sold, and Xxxxx
agrees they will be sold, only in the amounts and the manner specified in
Rule 144 unless first registered under the Act and any applicable state
securities laws or unless the availability and an exemption from such
registration requirement is established to the satisfaction of the Company.
F. Dilution.
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The Company represents and warrants that the Company presently
contemplates issuing 300,000 shares of Company common stock prior to the
Company being merged into a publicly held company, and, accordingly, the
Xxxxx Shares represent 5% of all such shares. In further consideration of
the Subscription, the Company and Three R agree that should the Company
contemplate issuing common stock in excess of 300,000 shares, in
conjunction
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with such issuance the Company will issue to Xxxxx additional shares of
Company common stock, at no cost to Xxxxx, such that his ownership interest
will remain at 5% and not be diluted until the ownership interest of Three
R has been diluted to 55%. Thereafter, Xxxxx understands and agrees he
will have no protection against dilution and his ownership interest will be
diluted as the Company or a successor in interest issues additional shares
of common stock.
II. XXXXX AGREEMENTS
A. Shares Restricted.
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Xxxxx agrees he will not transfer, assign, hypothecate or in any
way alienate, or otherwise create or suffer to exist any lien, claim or
encumbrance upon any of the Xxxxx Shares, or any right or interest therein,
whether voluntarily or by operation of law, or by gift or otherwise, except
pursuant to the terms of this Agreement. The Company agrees Xxxxx may
transfer the Xxxxx Shares to his daughter, Xxxxxxx X. Xxxxx, or by Xxxxx as
trustor to a trust or trusts for the benefit of his daughter, Xxxxxxx X.
Xxxxx. The effectiveness of any such transfer is expressly conditioned and
no such transfer may be made except upon the agreement of (i) Xxxxx'x
daughter, Xxxxxxx, as transferee, or (ii) the trustee and, if appropriate,
Xxxxx'x daughter, Xxxxxxx, as beneficiary of such trust, that the trustee
and she, as the case may be, agree to all the terms of this Agreement
governing the rights and obligations of the holder of the Xxxxx Shares.
Such agreement will be in a form subject to
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the sole discretion of the Company. In the event of any such transfer, the
terms of this Agreement governing the rights and obligations of the holder
of the Xxxxx Shares shall be deemed to mean such transferee. Any purported
transfer in violation of any provision of this Agreement shall be void ab
initio and ineffectual and shall not operate to transfer any interest in or
title to the Xxxxx Shares to the purported transferee, and shall give the
Founders, as hereafter defined, the right to purchase the Xxxxx Shares in
the manner and on the terms and conditions herein provided.
B. Right of First Refusal for a Voluntary Transfer.
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1. Except as permitted in the preceding section of this
Agreement, should Xxxxx propose to transfer the Xxxxx
Shares, or any interest therein in whole or in part (the
"Transfer Shares"), to any party other than the Founders,
then he agrees that not less than five business days (the
"Five Day First Right Period") prior to the proposed
transfer of the Transfer Shares, Xxxxx shall give written
notice of such proposed transfer (the "Transfer Notice") to
the Founders in the manner and at the addresses as set forth
in this Agreement. The Transfer Notice shall set forth the
Transfer Shares and, (i) in the case of a proposed private
transfer, the name of the proposed transferee (the "Proposed
Transferee"), the consideration agreed
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by the Proposed Transferee to be paid for the Transfer
Shares, and all other terms and conditions of the proposed
transfer, or, (ii) in the case of a proposed sale on a
public market pursuant to quoted market prices, such intent.
In the case of a proposed private transfer, Xxxxx may not
give the Transfer Notice until he has a signed offer (the
"Purchase Offer") from the Proposed Transferee setting forth
all the terms under which the Proposed Transferee is
agreeing to purchase the Transfer Shares and the Transfer
Notice will not be effective unless a copy of the Purchase
Offer is delivered with the Transfer Notice. Each Founder
shall then have the first right to purchase that portion of
the Transfer Shares represented by the proportion of (i) the
number of shares of the Company's common stock held by such
Founder (ii) to the aggregate number of shares of the
Company's common stock held by all Founders electing to
purchase the Transfer Shares. Any part of the Transfer
Shares not purchased by a Founder pursuant to this section
shall continue to be offered to the Founders on the formula
set forth above until all of the Transfer Shares have been
purchased or until no Founders are interested in purchasing
the remaining part, if any, of the Transfer Shares.
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2. If a Founder elects to purchase all or a part of the
Transfer Shares, such Founder shall, within the Five Day
First Right Period, in the manner and at the address as set
forth in this Agreement, give written notice (the "Election
Notice") to Xxxxx stating (i) his or her name, (ii) the
portion of the Transfer Shares to be purchased by him or
her, (iii) the purchase price of the Transfer Shares to be
paid by him or her, (iv) the method of payment of such
purchase price, and (v) all other terms and conditions
concerning such purchase.
3. If at the expiration of the Five Day First Right Period the
Founders shall have elected to purchase less than all of the
Transfer Shares, Xxxxx for a period of sixty days from the
expiration of the Five Day First Right Period may transfer
the remaining part of the Transfer Shares on the public
market, or as the case may be, to the Proposed Transferee
upon the terms stated in the Purchase Offer, except that the
effectiveness of such private transfer is expressly
conditioned and no such transfer may be made unless the
Proposed Transferee executes and becomes a party to the
terms of this Agreement governing the rights and obligations
of the holders of the Xxxxx Shares.
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If the Transfer Shares have not been transferred within such
sixty day period, the Transfer Shares shall again become
subject to all of the provisions of this Agreement and may
not thereafter be transferred except in the manner and on
the terms herein provided.
C. Right of First Refusal for an Involuntary Transfer.
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A purported involuntary transfer, transfer by operation of law or
any other transfer in whole or in part of the Xxxxx Shares or any right or
interest therein (other than pursuant to Sections II.A. and B. above) shall
give the Founders the first right to purchase such Shares in proportions
and in the manner and subject to the requirements set forth in Section II.B
above for thirty days from the date written notice is provided to the
Founders in the manner and at the addresses as set forth in this Agreement.
An involuntary transfer shall include, but not be limited to, purported
transfers by will, letters of administration, bankruptcy, receivership,
trust, conservatorship and any other form of transfer made by a party
acting by or on behalf of Xxxxx. The written notice required by this
Section shall be given by the party having the right, subject to this
Agreement, to effect a transfer of the Transfer Shares, shall be given by
such party immediately after confirmation by act of a court or other
authorized party of the right to act on behalf of Xxxxx and shall set forth
the same information required under Section II.B, except it is understood
that, depending on the
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event causing an involuntary transfer, there may be no Proposed Transferee
and there will be no Purchase Offer or terms and conditions of a proposed
transfer.
D. Purchase Price for a Transfer.
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1. The purchase price for transfers shall be (i) if there is a
public market for sale of shares of Company common stock,
the aggregate of the Transfer Shares multiplied by the
average of the closing bid and ask prices for the Company's
shares for the 20 trading days immediately preceding the
date of the Transfer Notice, in the case of a voluntary
transfer, or the event (such as the date of death,
bankruptcy, appointment of conservator or receiver) causing
an involuntary transfer, in the case of an involuntary
transfer, or (ii) if there is no such public market, the
price agreed to between the Proposed Transferee and Xxxxx in
the case of a voluntary transfer or the price agreed to
between the representative of Xxxxx and the Founders in the
case of an involuntary transfer, provided that if they are
unable to reach an agreement, their dispute shall be
resolved by arbitration in Los Angeles, California by the
American Arbitration Association with Xxxxx appointing an
arbitrator and the Founders appointing an arbitrator and
those two
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arbitrators selecting a third arbitrator who shall act as
chairman. The decision of the arbitration panel shall be
final and may be entered in a court of competent
jurisdiction. The losing party shall bear the fees of the
arbitrators.
2. The purchase price to be paid by each Founder will be his or
her pro rata portion determined by the formula set forth in
Section II.B. Notwithstanding the preceding sentence and
that the Proposed Transferee offered to purchase the
Transfer Shares in one payment, a Founder may elect to pay
his share of such purchase price in installments as provided
below. If part or all of the consideration to be paid for
the Transfer Shares by the Proposed Transferee is other than
cash, the total purchase price to the Founders shall be
deemed to be an amount equal to the aggregate of the cash
consideration, if any, plus the "cash fair market value" of
the noncash consideration. If Xxxxx and the Founders are
unable to agree on the "cash fair market value" of the
noncash consideration, their dispute shall be resolved by
arbitration as set forth above.
E. Payment of Purchase Price.
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1. The Founders may elect to pay the purchase price in the same
manner and upon the same terms as set forth in the Transfer
Notice (subject to the right of the Founders to pay cash for
the "cash fair market value" of the noncash consideration),
or in installments as provided in the next subsection.
2. If the purchase price for any Founder exceeds $50,000, such
Founder may elect to pay the purchase price in equal monthly
installments over a period of not exceeding one year,
together with interest at the rate of eight percent (8%) per
annum. For a cash purchase or an installment purchase, the
price or first installment of price, as the case may be,
must be made not later than thirty days after delivery of
the Election Notice. For an installment purchase, the
obligation shall be evidenced by a promissory note.
3. Upon payment of the purchase price, Allen shall execute and
deliver to the purchaser the certificates evidencing the
portion of the Transfer Shares purchased.
4. Notwithstanding the provisions of this Agreement, any delay
in tender or acceptance of payment of the purchase price due
to reasonable delay in
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obtaining any requisite confirmation of such sale by a court
or necessary administrative approval shall not be deemed a
default and in such event, payment shall be made as soon as
practicable after obtaining such approval.
F. Proxy.
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In consideration of the Founders' work in structuring the
transaction with CytoDyn of New Mexico, Inc. and providing a means for his
obtaining necessary approvals and the opportunity to market and distribute
drugs derived from his inventions, Xxxxx hereby grants the Founders an
irrevocable proxy to vote or not to vote the Xxxxx Shares as they shall
deem in their sole discretion. Xxxxx agrees that (i) this proxy has been
granted in connection with the causing of the Company by the Founders
through their indirect ownership to issue the Xxxxx shares to Xxxxx and in
consideration of the performance by Xxxxx of services for the benefit of
the Company as contemplated by a letter agreement between the Company and
Three R dated as of October 24, 1998 (the "Consulting Agreement"); (ii)
this proxy is specifically intended to qualify as an irrevocable proxy as
contemplated by Sections 705(e)(2) and (4) of the California General
Corporation Code; and (iii) with respect to the latter such Section, the
parties specifically agree that they intend that for purposes only of such
Section the services to be performed by Xxxxx for the Company shall be
deemed those of an employee and shall be for the benefit of the Company.
The term
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of this proxy shall be for the longer period of (i) as long as the
Consulting Agreement remains in effect, or (ii) the time the Founders or
Three R or any of them, whichever is later, own any shares of the Company
or a survivor of the Company. The proxy granted hereby attaches to all the
Xxxxx Shares whether held by Xxxxx or a transferee of such shares as
contemplated by this Agreement.
G. Founders.
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The term "Founders" means Xxxx Xxxxxx, Ph.D., Xxx X. Xxxxxxxx,
Ph.D., and Xxxxxx X. Xxxxxxxx, M.D., and their successors and assigns.
Where the consent or action of the Founders is required or permitted in
this Agreement, the action of any two of the Founders or their
representatives shall be deemed the action of the Founders. The rights of
the Founders or of any of them hereunder to acquire the Transfer Shares may
be assigned by any of them to the Company.
III. NOTICES
A. Addresses.
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1. Any and all notices or other communications which a party
shall be required or may elect to provide another party or
a Founder pursuant to this Agreement shall be in writing
unless otherwise so provided. Any written notice or
communication shall be personally delivered, telecopied,
telexed, faxed or mailed certified mail, return
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receipt requested to the other party at the address set
forth in the heading to this Agreement or at such other
address as a party or Founder shall designate in accordance
with the provisions of this paragraph.
2. Delivery or service of any written notice or communication
shall be deemed completed (a) if personally delivered, upon
such delivery, (b) if telecopied, telexed or faxed, upon
acknowledgment thereof, or (c) if mailed, upon 72 hours
after deposit in the mail.
B. Failure to Give Notice.
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The failure to give appropriate written notice as required herein
shall in no way prevent the exercise of the rights of purchase provided
herein.
IV. OTHER RESTRICTIONS
A. Transferees as Parties.
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Under no circumstances shall any sale or other transfer of any
Transfer Shares be valid until the proposed transferee thereof shall have
executed and become a party to this Agreement and thereby shall have become
subject to all of the provisions hereof. Notwithstanding any other
provisions of this Agreement, no such sale or other transfer of any kind
shall in any event
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result in the inapplicability of the provisions hereof at any time to any
of the Xxxxx Shares.
B. Instructions to Xxxxx'x Fiduciary.
---------------------------------
Xxxxx agrees to insert in his will or living trust a direction
and authorization to his fiduciary to fulfill and comply with the
provisions hereof and to transfer the Xxxxx Shares in accordance herewith.
C. "Lock-Up".
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Xxxxx agrees not to offer, sell or contract to sell or otherwise
dispose of, directly or indirectly, or announce an offering of, any of the
Xxxxx Shares, including any hereafter acquired shares of Company common
stock (nor any securities convertible into, or exchangeable for, shares of
the Company's common stock) for a period of two years following the date of
this Agreement.
V. GENERAL PROVISIONS
A. Merger Not A Termination.
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This Agreement will survive a merger of the Company
B. Further Acts.
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Each party hereto agrees to perform all further acts and to
execute and deliver all further documents which may be reasonably necessary
to carry out the provisions of, and the transactions contemplated by, this
Agreement.
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C. Binding on Successors.
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Subject to the restrictions against transfer or assignment as
herein contained, the provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, the assigns, successors in interest,
personal representatives, estates, heirs and legatees of each of the
parties hereto.
D. Severability.
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If any provision, or portion thereof, of this Agreement is held
to be unenforceable or invalid by any court of competent jurisdiction, the
validity and enforceability of the remaining provisions, or portions
thereof, shall not be affected thereby.
E. Subject Matter Complete.
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This Agreement contains the entire understanding among the
parties hereto and merges all prior discussions between them. There are no
representations, agreements, arrangements or understandings, oral or
written, between or among the parties hereto relating to the subject matter
of this Agreement, which are not fully expressed herein.
F. Number and Gender.
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When the context in which the words are used in this Agreement
indicates that such is the intent, the words in the singular number shall
include the plural and vice versa, and the words in the masculine gender
shall include the feminine and neuter genders and vice versa.
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G. Captions.
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The underlined captions set forth herein are for convenience only
and shall not be deemed to affect in any way the provisions hereof.
H. Governing Law.
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This Agreement has been executed in, and shall be governed by,
the laws of the State of California without regard to the choice of law
provisions thereof.
I. Attorneys' Fees.
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In any action at law or in equity and in any arbitration
proceeding to enforce any of the provisions or rights under this Agreement,
the unsuccessful party to such litigation, as determined by the court or
arbitrator(s) in a final judgment or decree, shall pay the successful party
or parties all costs, expenses and reasonable attorneys' fees incurred by
the successful party or parties (including, without limitation, costs,
expenses and fees on any appeals), and if the successful party recovers
judgment in any such action or proceeding, such costs, expenses and
attorneys' fees shall be included as part of the judgment.
J. Arbitration.
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Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, shall be resolved in Los Angeles,
California, by the American Arbitration Association with
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each party to the dispute appointing an arbitrator and those arbitrators
appointing an additional arbitrator who shall act as chairman. The
decision of the arbitration panel shall be final and judgment upon the
award may be entered in any court having jurisdiction thereof. The losing
party or parties shall bear the fees of the arbitrators.
K. Indemnification by Xxxxx.
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Xxxxx shall indemnify the Company and the Founders in respect of
and hold the Company and the Founders harmless from and against all
expenses, claims, losses, damages and liability, however caused, arising
from (i) any acts or omissions of Xxxxx in the course of performing this
Agreement; (ii) any breach of any Xxxxx agreement in this Agreement; and
(iii) any and all claims by third parties that Xxxxx misrepresented his
authority or made any commitment not specifically authorized under this
Agreement.
L. Indemnification by the Company.
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The Company shall indemnify Xxxxx in respect of and hold Xxxxx
harmless from and against all expenses, claims, losses, damages and
liability, however caused, arising from (i) any acts or omissions of the
Company in the course of performing this Agreement; (ii) any breach of any
Company agreement in this Agreement; and (iii) any and all claims by third
parties that the Company misrepresented its authority or made any
commitment not specifically authorized under this Agreement.
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The Company's sole obligation to Xxxxx under this Agreement is to
issue the Xxxxx Shares. In no event shall the Company be liable to Xxxxx
for any loss of profits or incidental, indirect or consequential damages,
however caused, whether by the Company's or Xxxxx'x sole or concurrent
negligence or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day first above written.
BRITISH LION MEDICAL, INC.,
a California corporation
By:/s/ XXXX XXXXXX By: /s/ XXXXX X. XXXXX
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President Xxxxx X. Xxxxx
THREE R ASSOCIATES, INC.,
a California corporation
By:/s/ XXXX XXXXXX
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President
For purposes of Articles II, III and V of this Agreement
/s/ XXXX XXXXXX /s/ XXX X. XXXXXXXX /s/ XXXXXX X. XXXXXXXX
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Xxxx Xxxxxx, Ph.D. Xxx X. Xxxxxxxx, Ph.D. Xxxxxx X. Xxxxxxxx, Ph.D.
