EXHIBIT 10.2
TERMINATION, SALE AND SHAREHOLDER AGREEMENT
THIS TERMINATION, SALE AND SHAREHOLDER AGREEMENT (this
"Agreement") is entered into as of August 1, 1998 among THREE R ASSOCIATES,
INC., a California corporation (the "Company"), having an office at Warner
Center Plaza, 00000 Xxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx, 00000, XXXXX
X. XXXXX, residing at 0000 Xxxxxxxxx Xxxxxx, #000, Xxxxxx Xxxx, Xxxxxxxxxx
00000 ("Xxxxx") and CYTODYN OF NEW MEXICO, INC., a New Mexico Corporation
("CytoDyn"), having an office at 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx
Xxxx, Xxxxxxxxxx; and for purposes of Articles IV, V and VI 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.
WHEREAS, Xxxxx represents that he is the sole owner of all right,
title and interest in the inventions, processes and improvements described
and claimed in United States Patent No. 5,424,066 entitled METHOD FOR
INCREASING CD4+ CELL NUMBERS THROUGH THE USE OF MONOCLONAL ANTIBODIES
DIRECTED AGAINST SELF-REACTIVE, CD4 SPECIFIC CYTOTOXIC T-CELLS issued June
13, 1995 and United States Patent No. 5,651,970 entitled METHOD FOR
INHIBITING DISEASE ASSOCIATED WITH THE HUMAN IMMUNODEFICIENCY VIRUS THROUGH
THE USE OF MONOCLONAL ANTIBODIES DIRECTED AGAINST ANTI-SELF CYTOTOXIC
T-LYMPHOCYTES OR THEIR LYTICS, issued July 29, 1997
(the "Patents"), as well as corresponding foreign patent applications filed
thereon, together with any continuations, divisional or continuation-in-part
applications and all other applications relating in any way to the
subject matter described in the Patents and any letters patent related
thereto as well as any reissue and/or re-examined patents issuing thereon
(the "Patent Rights"), together with (i) all know-how, intellectual
property, technical expertise, inventions, information, improvements,
computer programs, algorithms, data, discoveries, ideas, and concepts,
whether or not patentable or copyrightable, including but not limited to
medical, clinical, chemical, pharmaceutical, pharmacological, topological,
toxicological or other scientific data (including without limitation
preclinical and clinical data, notes, reports, models and samples), unique
methods, processes, techniques, designs, formulae, configurations of any
kind, computer graphics, apparatus, products, devices, software,
specifications, drawings and all testing, assaying and analysis
methodologies in any manner pertaining or relating to, resulting from or
useful in connection with the Patents or Patent Rights (the "Know-How"),
(ii) all products that embody or make use of all or any part of the Patents
or Patent Rights or Know-how (the "Products"), (iii) all documents and
information in any form that have been originated by, are peculiarly within
the knowledge of or are proprietary to Xxxxx, in whole or in part, and are
subject to protection under recognized legal principles as trade secrets or
otherwise pertaining or relating to, resulting from or useful in connection
with the design,
-2-
manufacture, installation, sales, marketing, administration, use, repair or
operation of products, processes or services pertaining or relating to,
resulting from or useful in connection with the Patents or Patent Rights or
Know-how or Products (the " Trade Secrets") (such Patents, Patent Rights,
Know-how, Products and Trade Secrets are hereinafter collectively referred
to as the "Technology");
WHEREAS, pursuant to a Patent License Agreement effective as of
July 1, 1994 between Xxxxx and CytoDyn, Xxxxx granted CytoDyn an exclusive
license to use certain parts of the Technology (the "CytoDyn License
Agreement");
WHEREAS, CytoDyn and Xxxxx have agreed that it is in their best
interests that the CytoDyn License Agreement should be terminated in order
that Xxxxx may sell all rights in the Technology to the Company, provided
the Company provides consideration to CytoDyn for such termination;
WHEREAS, in connection with such termination CytoDyn will license
the Company exclusively to use the trademark Cytolin;
WHEREAS, CytoDyn has purported to enter into a Non-Exclusive
Manufacturing License Agreement with Vista Biologicals Corporation dated as
of August 14, 1995 and a Non-Exclusive License Agreement with Discount
Medical Pharmacy dated as of
-3-
June 8, 1995 (the "Sub License Agreements");
WHEREAS, CytoDyn represents and warrants it has given written
notice of termination of the Sub License Agreements in accordance with
their terms;
WHEREAS, subject to termination of the CytoDyn License Agreement,
Xxxxx represents and warrants he has the sole power and right to enter into
this Agreement and to assign all rights, title and interest in the
Technology;
WHEREAS, the Company desires to obtain the sole ownership of the
Technology throughout the world; and
WHEREAS, the Company, Xxxxx and the Majority Shareholders desire
to provide for certain future rights and obligations of each with respect
to the other in connection with the matters set forth above;
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. TERMINATION OF LICENSE AGREEMENT AND LICENSE OF TRADEMARK
A. Termination and License.
-----------------------
In consideration of payment of the Termination Consideration, as
hereafter defined, to CytoDyn by the Company,
-4-
CytoDyn and Xxxxx agree: the CytoDyn License Agreement hereby is
terminated, (ii) CytoDyn has no ownership right, right to use or any other
right in the Technology, and (iii) the Company is granted the exclusive
right to use the Trademark Cytolin (the "Trademark").
B. Sub License Agreements.
----------------------
CytoDyn represents, warrants and agrees it has given written
notice of termination of the Sub License Agreements in accordance
with their terms. Attached hereto as Exhibit "A" are such
written notices (the "Notices").
C. Representations, Warranties and Agreements of CytoDyn
-----------------------------------------------------
1. CytoDyn represents, warrants and agrees:
a. Except for the Sub License Agreements, it has granted
no sublicenses or other rights, directly or indirectly,
by contract, operation of law or otherwise to any of
the rights covered by the CytoDyn License Agreement or
the Trademark;
b. To its knowledge and other than Xxxxx and upon the
effective date of the Notices, there is no person, firm
or corporation having any right, title or interest in
the technology
-5-
covered by the CytoDyn License Agreement or any part
thereof or the Trademark;
c. It has the full power to enter into this Agreement; no
consent of any other party is necessary or appropriate
for the execution and performance of this Agreement;
and, upon the effective date of the Notices, its
performance in connection with this Agreement will not
violate any agreement with any third party;
d. It has not done or omitted any act which would impair
the technology covered by the CytoDyn License Agreement
or any part thereof or the Trademark or its ability to
effect the transactions contemplated by this Agreement.
e. The Notices are binding and enforceable according to
their terms against the Sub Licensees;
f. It agrees the Company and New Co, a company to be
formed and in which, following this Agreement, Three R
and Xxxxx will have ownership interests and with which
Three R will enter into a license agreement making
-6-
available the Technology and the services of Xxxxx and
with which Three R or an affiliated company will have
a management agreement ("New Co"), are third party
beneficiaries of the Exhibit A Agreements and New Co is
a third party beneficiary of this Agreement and CytoDyn
has no claim against such entities, their officers,
directors, employees, agents, representatives or
attorneys in connection with the termination of the
CytoDyn License Agreement or the Sub License Agreements
or the sale by Xxxxx to the Company and the Company's
license to New Co of all of Xxxxx'x right, title and
interest in the technology and the Trademark covered in
whole or in part by such Agreements.
II. SALE OF THE TECHNOLOGY
A. Assignment.
----------
In consideration of the Sale Consideration, as hereafter defined,
but subject to the conditions set forth in the following paragraph, Xxxxx
hereby transfers, sells and assigns his entire right, title and interest in
the Technology to the Company.
Notwithstanding the preceding paragraph and any other term of
this Agreement, the sale and assignment of the Technology
-7-
is expressly contingent upon and will not be effective until the later to
occur of: (i) New Co is formed, its Board of Directors and officers are
elected and shares of its common stock are authorized and issued as
contemplated by this Agreement; (ii) Western Center For Clinical Studies,
Inc. or an affiliated company has entered into a management contract with
New Co (the "Management Contract"); (iii) Three R has entered into an
irrevocable, exclusive and worldwide License Agreement (subject to the
terms of the Management Contract and this Agreement) of the Technology with
New Co; and (iv) New Co has been merged into a publicly held company or
subsidiary thereof (the "Merger") (the "Conditions").
B. Representations, Warranties and Agreements of Xxxxx.
---------------------------------------------------
Xxxxx represents and warrants to, and agrees with, the Company
that:
1. He is the sole owner of all right, title and interest in the
Technology.
2. He has at no time filed, or caused to be filed, applications
for patents, or obtained in his name or caused to be
obtained in the name of others, any patents in the United
States or elsewhere in respect of the Technology or any
technology similar thereto, other than the Patents. The
Company acknowledges that Xxxxx has filed a patent
application involving certain gaming technology
-8-
and a patent involving photographing the past has been
allowed in his name. The Company agrees such patent
application and patent are not part of the Technology, or
any technology similar thereto contemplated by this
Agreement.
3. The Technology does not infringe upon any other letters
patent heretofore issued in the United States or upon any
other applications for letters patent of which he has
notice.
4. Effective with the foregoing termination of the CytoDyn
License Agreement there is no person, firm or corporation
other than himself having any right, title or interest in
the Technology or any part thereof.
5. All of the statements, declarations and claims made in the
Patents are true and correct in all respects and he knows of
no prior art not disclosed in the Patents.
6. Effective with the foregoing termination of the CytoDyn
License Agreement there are no outstanding options, licenses
or agreements of any kind relating to the Technology or any
part thereof or to the manufacture, use or sale of any
products using the Technology.
-9-
7. Effective with the foregoing termination of the CytoDyn
License Agreement he has the full power to transfer, sell
and assign the Technology; no consent of any other party is
necessary or appropriate to the consummation of the
transactions contemplated to be performed by him under this
Agreement; and his performance under this Agreement will not
violate any agreement with any third party or any federal,
state or local law or regulation.
8. He has not done or omitted any act which would impair the
validity of the Technology or any part thereof or his
ability to effect the transactions contemplated by this
Agreement or the Consulting Agreement being entered into
between him and the Company as of the date of this Agreement
(the "Consulting Agreement").
9. The Sub License Agreements have been terminated and the Sub
Licensees thereunder have no rights with respect to the
Technology or any part thereof.
10. No information provided by him to the Company contains any
untrue statement of a material fact or omits to state a
material fact necessary to
-10-
make the statements therein in light of the circumstances
under which they were made not misleading.
C. Representations, Warranties and Agreements of the Company.
---------------------------------------------------------
The Company represents and warrants to, and agrees with, Xxxxx
that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite
corporate power and authority to carry on its business as
now being conducted.
2. Upon its organization New Co will be a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and will have
all requisite corporate power and authority to carry on its
business as contemplated by this Agreement.
3. The Company is, and upon its organization New Co will be,
duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business
conducted by it makes such qualification necessary.
-11-
4. The Company has the requisite corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on
the part of the Company. This Agreement constitutes the
valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
5. No consent of any other party is necessary or appropriate
for the execution and performance of this Agreement; and its
performance in connection with this Agreement will not
violate any agreement with any third party. Its performance
under this agreement will not violate any agreement with any
third party or any federal, state or local law or
regulation.
6. No information provided by it to Xxxxx contains any untrue
statement of a material fact or omits to state a material
fact necessary to make the statements therein in light of
the circumstances under which they were made not misleading.
-12-
D. Agreements of Xxxxx.
-------------------
Xxxxx agrees:
1. Following the execution of this Agreement, he will furnish
to the Company or to its nominees and patent attorneys, all
information and documents regarding the Technology.
2. He will assist the Company and cooperate with it in all
prosecutions of patent applications covering any part of the
Technology and he agrees to cooperate with the Company in
the defense and protection of all challenges to the
Technology and patents issued thereunder, provided the
Company pays all of the costs thereof, including but not
limited to, attorneys', engineering and drafting fees and
all other costs of a similar nature, that accrue after the
date of this Agreement.
3. He grants to the Company the right to file for patent
protection for the Technology, in his name, in all other
countries of the world, at the Company's sole cost and
expense.
4. He will deliver to the Company, immediately upon execution
of this Agreement, all research and development reports and
studies that have been completed or compiled as of the date
hereof, and
-13-
all other data and information in any form relating to the
Technology, and shall execute all papers, documents and
instruments necessary to enable the Company to cause to be
prepared, filed and prosecuted, at the Company's expense,
applications for letters patent within such countries of the
world as the Company shall, in its sole discretion,
determine is advisable.
5. After the date of this Agreement, all patents granted and
all know-how and trade secrets with respect to the
Technology or any improvements thereof developed by him or
in which he has or obtains any ownership interest or right
to acquire any ownership interest or control or right to
use, develop or acquire an interest in any form (under
license or otherwise) shall be the exclusive property of the
Company in accordance with the terms of the Consulting
Agreement. For purposes of this Agreement, "improvement"
shall include, but not be limited to, any method, process,
technology, device, finding, discovery, invention, addition,
modification, formulation or product within the scope of the
Technology that improves, modifies or changes the
performance, reliability, effectiveness, ease of use,
marketability, and/or maintenance of the Technology and its
components.
-14-
6. If he makes any further improvements in the Technology or in
the mode of using the Technology, or becomes the owner of
any such improvements, either through patents or otherwise
and whether or not patentable or copyrightable, he will
communicate all such improvements to the Company and give
the Company full information regarding the mode of using
them, and he agrees that all such improvements shall be the
sole and exclusive property of the Company in accordance
with the terms of the Consulting Agreement.
7. Each reproduction, modification and revision of the
Technology (including but not limited to translations
thereof) that is made by or for Xxxxx will immediately
become the property of the Company.
8. He will execute, and have his signature notarized for, all
deeds, bills of sale and such other instruments as the
Company may request to effect the transactions contemplated
by this Agreement, including any assignment of patents and
patent applications.
-15-
B. Agreements of the Company.
-------------------------
1. The Company agrees it will defend trademarks and tradenames
of CytoDyn that directly relate to the Technology, including
the Trademark, if the Company concludes in its sole
discretion that defense of such trademarks or tradenames is
in the Company's best interests and provided it has received
written notice from Xxxxx or CytoDyn of any challenge to or
misuse of such trademark or tradename. CytoDyn agrees to
cooperate with the Company in such defense and protection.
2. The Company agrees it will not register with the United
States Patent and Trademark Office any assignment effected
by this Agreement until not earlier than September 2001.
III. CONSIDERATION
A. Stock of New Co to be Issued to CytoDyn.
---------------------------------------
In consideration (the "Termination Consideration") of the
agreements of CytoDyn set forth in this Agreement the Company agrees to, or
to cause New Co to, sell, assign and transfer to CytoDyn simultaneously
with the satisfaction of the Conditions a number of shares of common stock
of New Co having a value of $.01 per share, such that after such transfer
Cytodyn will own 10% of the outstanding common stock of New Co (the
"CytoDyn Shares").
-16-
B. Consideration to be Paid to Xxxxx.
---------------------------------
In consideration (the "Sale Consideration") of the agreements of
Xxxxx set forth in this Agreement the Company agrees to pay Xxxxx an amount
at the rate of $90,000 a year commencing on the date New Co is merged into
a publicly held company, with such consideration being increased 5% on
August 1 of each succeeding year until the effective date of the
termination of the Consulting Agreement entered into as of this date
between the Company and Xxxxx, and with such consideration being paid on
the first day of each month and partial years being paid on a pro rata
basis.
C. Certificates.
------------
The Company agrees to, or to cause New Co to, execute stock
powers transferring the CytoDyn Shares to CytoDyn and to, or cause New Co
to, deliver to CytoDyn the certificates representing such Shares. CytoDyn
agrees such stock powers and any certificate that may be issued by New Co
representing such Shares will contain a legend in form satisfactory to the
issuing Company's counsel providing notice of the restrictions and the
proxies set forth in this Agreement.
D. Restricted Stock.
----------------
CytoDyn understands that its 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. CytoDyn further
-17-
understands that (i) an appropriate restrictive legend (or legends) will be
placed on the certificates representing its Shares and that (ii) the stock
transfer records of New Co will be noted to reflect such restrictions.
Because the CytoDyn Shares are "restricted" as defined under Rule 144,
CytoDyn understands that such Shares must be held for a minimum of one year
following their transfer to it. Thereafter, the CytoDyn Shares may be
sold, and CytoDyn 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.
E. Dilution.
--------
It is contemplated that upon consummation of the transactions set
forth in this Agreement, CytoDyn and the Company will own 10% and 85%,
respectively, of the outstanding common stock of New Co. The Company
agrees that should New Co contemplate issuing additional common stock, in
conjunction with such issuance the Company will cause New Co to issue to
CytoDyn additional shares of New Co common stock, at no cost to CytoDyn,
such that its respective ownership interest will remain at 10% and not be
diluted until the Company's interest has been diluted to 55%. Thereafter,
CytoDyn understands and agrees it will have no protection against dilution
and its respective ownership interest will be diluted as New Co or a
successor in interest issues additional shares of common stock.
-18-
IV. STOCKHOLDER AGREEMENT
A. Shares Restricted.
-----------------
CytoDyn agrees it 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 CytoDyn 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. 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 CytoDyn Shares to the purported transferee, and shall give the
Majority Shareholders, as hereafter defined, the right to purchase the
CytoDyn Shares in the manner and on the terms and conditions herein
provided.
B. Right of First Refusal for a Voluntary Transfer.
-----------------------------------------------
1. Should CytoDyn propose to transfer its Shares, or any
interest therein in whole or in part (the "Transfer
Shares"), to any party other than the Majority Shareholders,
then it agrees that not less than five business days (the
"Five Day First Right Period") prior to the proposed
transfer of the Transfer Shares, CytoDyn shall give written
notice of such proposed transfer (the "Transfer Notice") to
the Majority Shareholders in the manner and at the addresses
as set forth in this Agreement. The Transfer Notice shall
set forth
-19-
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 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, CytoDyn may not give the
Transfer Notice until it 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 Majority
Shareholder 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 Majority Shareholder (ii) to the aggregate
number of shares of the Company's common stock held by all
Majority Shareholders electing to purchase the Transfer
Shares. Any part of the Transfer Shares not purchased by a
Majority Shareholder pursuant to this section shall continue
to be offered to the Majority
-20-
Shareholders on the formula set forth above until all of the
Transfer Shares have been purchased or until no Majority
Shareholders are interested in purchasing the remaining
part, if any, of the Transfer Shares.
2. If a Majority Shareholder elects to purchase all or a part
of the Transfer Shares, such Majority Shareholder 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 CytoDyn 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
Majority Shareholders shall have elected to purchase less
than all of the Transfer Shares, CytoDyn 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
-21-
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
CytoDyn Shares. 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.
--------------------------------------------------
A purported involuntary transfer, transfer by operation of law or
any other transfer in whole or in part of the CytoDyn Shares or any right
or interest therein (other than pursuant to Section IV.B. above) shall give
the Majority Shareholders the first right to purchase such Shares in
proportions and in the manner and subject to the requirements set forth in
Section IV.B above for thirty days from the date written notice is provided
to the Majority Shareholders 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 bankruptcy, receivership, trust,
conservatorship and any other form of transfer made by a party acting by or
on behalf of CytoDyn. The written notice required by this Section shall be
-22-
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 CytoDyn and shall set forth the same information
required under Section IV.B, except it is understood that, depending on the
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.
-----------------------------
1. The purchase price for transfers shall be (i) if there is a
public market for sale of New Co shares of common stock, the
aggregate of the Transfer Shares multiplied by the average
of the closing bid and ask prices for New Co'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 bankruptcy, appointment of 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 CytoDyn in the case of a voluntary transfer or the price
agreed to between the representative of CytoDyn and the
Majority Shareholders in the case of an involuntary transfer
provided that if they
-23-
are unable to reach an agreement, their dispute shall be
resolved by arbitration in Los Angeles, California by the
American Arbitration Association with CytoDyn appointing an
arbitrator and the Majority Shareholders appointing an
arbitrator and those two 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 Majority Shareholder
will be his or her pro rata portion determined by the
formula set forth in Section III.B. Notwithstanding the
preceding sentence and that the Proposed Transferee offered
to purchase the Transfer Shares in one payment, a Majority
Shareholder 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 Majority Shareholders shall be deemed to be an
amount equal to the aggregate of the cash consideration, if
any, plus the "cash fair market
-24-
value" of the noncash consideration. If CytoDyn and the
Majority Shareholders 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.
-------------------------
1. The Majority Shareholders 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
Majority Shareholders 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 Majority Shareholder exceeds
$50,000, such Majority Shareholder 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.
-25-
3. Upon payment of the purchase price, CytoDyn 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 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.
-----
CytoDyn hereby grants the Company an irrevocable proxy to vote or
not to vote the CytoDyn Shares as the Company shall deem in its sole
discretion. CytoDyn agrees that (i) this proxy has been granted in
connection with the transfer by the Company of a portion of its shares in
New Co or the causing of New Co to issue such shares to CytoDyn and in
consideration of the performance by Xxxxx of services for the benefit of
the Company and New Co as contemplated by 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
-26-
that for purposes only of such Section the services to be performed by
Xxxxx shall be deemed those of an employee and shall be for the benefit of
the Company and New Co. The term 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 Company or the Majority Shareholders or any of them,
whichever is later, own any shares of New Co or a survivor of New Co. The
proxy granted hereby attaches to all the CytoDyn Shares whether held by
CytoDyn or a transferee of such shares as contemplated by this Agreement.
G. Majority Shareholders.
---------------------
The term "Majority Shareholders" 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 Majority Shareholders is
required or permitted in this Agreement, the action of any two of the
Majority Shareholders or their representatives shall be deemed the action
of the Majority Shareholders. The rights of the Majority Shareholders or
of any of them hereunder to acquire the Transfer Shares may be assigned by
any of them to the Company.
V. NOTICES
A. Addresses.
---------
1. Any and all notices or other communications which a party
shall be required or may elect to provide another party or
a Majority Shareholder pursuant
-27-
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 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 Majority Shareholder
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.
----------------------
The failure to give appropriate written notice as required herein
shall in no way prevent the exercise of the rights of purchase provided
herein.
VI. OTHER RESTRICTIONS
A. Transferees as Parties.
----------------------
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
-28-
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 result in the inapplicability
of the provisions hereof at any time to any of the CytoDyn Shares.
B. CytoDyn agrees not to offer, sell or contract to sell or
otherwise dispose of, directly or indirectly, or announce an offering of,
any of the CytoDyn 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.
VII. GENERAL PROVISIONS
A. Merger Not A Termination.
------------------------
This Agreement will survive the merger of the Company or New Co.
B. Further Acts.
------------
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.
-29-
C. Binding on Successors.
---------------------
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.
------------
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.
-----------------------
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.
-----------------
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.
-30-
G. Captions.
--------
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.
-------------
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.
---------------
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.
-----------
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 each party to the
dispute appointing an arbitrator and those
-31-
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 CytoDyn and Xxxxx.
------------------------------------
CytoDyn and Xxxxx shall indemnify the Company, New Co and the
Majority Shareholders in respect of and hold the Company, New Co and the
Majority Shareholders harmless from and against all expenses, claims,
losses, damages and liability, however caused, arising from (i) any acts or
omissions of CytoDyn or Xxxxx in the course of performing work under, or
the transactions contemplated by, the CytoDyn License Agreement or this
Agreement or the acts or omissions of CytoDyn's or Xxxxx'x employees,
agents, subcontractors, suppliers or other third parties utilized in
connection with CytoDyn's or Xxxxx'x performance; (ii) any breach of any
CytoDyn or Xxxxx representation, warranty or agreement in this Agreement;
and (iii) any and all claims by third parties that CytoDyn or Xxxxx
misrepresented its or his authority or made any commitment not specifically
authorized under the CytoDyn License Agreement or this Agreement.
L. Indemnification by the Company.
------------------------------
The Company shall indemnify CytoDyn and Xxxxx in respect of and
hold CytoDyn and 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
-32-
the course of performing work under, or the transactions contemplated by,
this Agreement or the acts or omissions of the Company's employees,
agents, subcontractors, suppliers or other third parties utilized in
connection with the Company's performance; (ii) any breach of any Company
representation, warranty or 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.
The Company's sole financial obligation to CytoDyn and Xxxxx
under this Agreement shall be payment to them of the Termination
Consideration and the Sale Consideration, respectively. In no event shall
the Company or New Co be liable to CytoDyn or Xxxxx for any loss of profits
or incidental, indirect or consequential damages, however caused, whether
by the Company's, New Co's, or Xxxxx'x sole or concurrent negligence or
otherwise.
M. Agreements and Understandings of CytoDyn and Xxxxx.
--------------------------------------------------
Wherever in this Agreement representations, agreements or
understandings are made by CytoDyn and Xxxxx, they shall be deemed to be
joint and several.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day first above written.
-33-
THREE R ASSOCIATES, INC.,
a California corporation
By: /s/ XXXX XXXXXX By: /s/ XXXXX X. XXXXX
------------------------------ ------------------------------
Xxxxx X. Xxxxx
President
CytoDyn OF NEW MEXICO, INC.,
a New Mexico Corporation
By: /s/ XXXXX X. XXXXX
------------------------------
President
For purposes of Articles IV, V and VI of this Agreement
/s/ XXXX XXXXXX /s/ XXX X. XXXXXXXX /s/ XXXXXX X. XXXXXXXX
---------------------- --------------------- ----------------------
Xxxx Xxxxxx, Ph.D. Xxx X. Xxxxxxxx, Ph.D. Xxxxxx X. Xxxxxxxx, M.D.
-34-
