-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D2UKC+69dMsgK5EED8gwc+ZcZ+fLX71njgCGYj4pE2Y4ABKi5ML+vwkDE7sezJtc TIlBGBULakPcENPRgW1hcg== 0000898430-97-000035.txt : 19970108 0000898430-97-000035.hdr.sgml : 19970108 ACCESSION NUMBER: 0000898430-97-000035 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961209 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970107 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROTEIN POLYMER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000858155 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330311631 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19724 FILM NUMBER: 97502106 BUSINESS ADDRESS: STREET 1: 10655 SORRENTO VALLEY RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195586064 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 9, 1996 PROTEIN POLYMER TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 0-19724 33-0311631 - ------------------------------------- ------------ ------------------ (State or other jurisdiction (Commission (IRS Employer of incorporation or organization) File Number) Identification No.) 10655 Sorrento Valley Road, San Diego, California 92121 - ------------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (619) 558-6064 --------------------- N/A --------------------------------------------------------------------- (Former name or former address, if changed since last report) ================================================================================ This Report consists of 69 pages. The Exhibit Index appears on page 7. ITEM 5. OTHER EVENTS. Extension of Ethicon Arrangement - -------------------------------- In September 1995, the Company entered into a licensing and development agreement, and a supply agreement, with Ethicon, Inc., an affiliate of Johnson & Johnson Company, with respect to its tissue adhesives and sealants program. Under these agreements, Ethicon receives exclusive worldwide development, marketing and distribution rights to products produced under the Company's proprietary technology rights. In exchange, the Company receives research and development payments and milestone payments, as well as potential manufacturing and royalty payments. Currently, the product development efforts are behind the schedule anticipated in the Ethicon agreements due to delays in meeting a certain specific milestone. The original agreements provided that, if this milestone was not met by a certain date, the agreements would automatically terminate and all rights would revert back to the Company. On December 9, 1996, this termination date was extended for approximately one year, until December 14, 1997, and to partially offset expenses, an additional payment to the Company of $300,000 was made by Ethicon as part of the extension agreement. A copy of the letter agreement evidencing the extension of the termination date and the Registrant's press release with respect to this extension are appended as exhibits to this Report. Completion of Financing - ----------------------- On January 6, 1997, the Registrant completed the sale of 1,904,000 shares of its common stock, $.01 par value ("Common Stock"), to a group of accredited ------------ investors at a price of $2.50 per share. Aggregate gross proceeds to the Company were $4,760,000.00. Expenses of the financing are currently estimated at $200,000. The Securities Purchase Agreement (the "Purchase Agreement") ------------------ pursuant to which these shares were sold, and the press release announcing this financing, are appended as exhibits to this Report. Pursuant to the Purchase Agreement, the Registrant has agreed to promptly file, and use its best efforts to maintain the effectiveness of, a registration statement under the Securities Act of 1933, as amended, to cover the resale of the shares purchased in this financing. Such registration statement is expected to be filed not later than January 13, 1997. Investment Banker Engagement Letter - ----------------------------------- On December 18, 1996, the Registrant entered into a financial advisory services agreement with Hambrecht & Quist LLC ("H&Q"). In connection with that --- agreement, and in lieu of a cash retainer, the Registrant granted H&Q a 60-day option to acquire 800,000 shares of Common Stock at an exercise price of $2.75 per share. -2- Extension of Public Warrants - ---------------------------- The Registrant has outstanding 1,667,500 public warrants (each, a "Public ------ Warrant"), at an exercise price of $8.00 per share, under the Warrant Agreement, - ------- dated January 21, 1992, between the Registrant and Continental Stock Transfer & Trust Company issued in connection with the Registrant's initial public offering in January 1992. Each such warrant entitles the holder thereof to acquire one share of Common Stock. The expiration date of the Public Warrants was recently extended for one year, to January 21, 1998 (the "Warrant Extension"). A copy of ----------------- the press release announcing the Warrant Extension is appended as an exhibit to this Report. MBF I, LLC Agreement. - -------------------- As of October 4, 1996, the Registrant entered into a letter agreement (the "MBF Agreement") with MBF I, LLC ("MBF") pursuant to which MBF will advise the ------------- --- Company with respect to strategic business alternatives, general structuring of financing or strategic transactions and negotiation of such financing or strategic transactions. In consideration for such services, MBF will be entitled to receive, in addition to reimbursement for any pre-approved reasonable expenses incurred in furtherance of its responsibilities under the MBF Agreement, warrants to purchase up to 750,000 shares of Common Stock and consulting fees as more fully described below. Initially, MBF was issued a warrant to purchase 50,000 shares of Common Stock at an exercise price of $3.75 per share. MBF may be entitled to receive additional warrants to purchase shares of Common Stock as follows: 1. If, prior to January 31, 1997, the Registrant raises at least $3 million in equity, MBF will be entitled to (i) receive a warrant to purchase an additional 100,000 shares of Common Stock at an exercise price of $6.00 per share, and (ii) receive a consulting fee of $100,000 payable in quarterly installments of $25,000 commencing on the first day of the Registrant's first fiscal quarter following the closing of such transaction; in light of the completed financing described above, the compensation described in this paragraph 1 has now been earned. 2. If prior to January 31, 1998, the Registrant raises at least $5 million in equity (excluding the financing described in the immediately preceding paragraph) at a price of not less than $4.00 per share, MBF will be entitled to (i) receive a warrant to purchase and additional 250,000 shares of Common Stock at an exercise price of $6.00 per share, and (ii) receive a consulting fee of $200,000 payable in quarterly installments of $25,000 commencing on the first day of the Registrant's first fiscal quarter following the closing of such transaction. -3- 3. If the average between the closing bid and ask price for the Common Stock during any 21 consecutive trading days between October 4, 1996 and prior to July 31, 1998 is at least $8.00, MBF will be entitled to receive a warrant to purchase an additional 100,000 shares of Common Stock at an exercise price of $7.50 per share. 4. If the average between the closing bid and ask price for the Common Stock during any 21 consecutive trading days between October 4, 1996 and prior to December 31, 1998 is at least $9.00, MBF will be entitled to receive a warrant to purchase an additional 100,000 shares of Common Stock at an exercise price of $7.50 per share. 5. If the average between the closing bid and ask price for the Common Stock during any 21 consecutive trading days between October 4, 1996 and prior to June 30, 1999 is at least $10.00, MBF will be entitled to receive a warrant to purchase an additional 150,000 shares of Common Stock at an exercise price of $7.50 per share. MBF is also entitled, not more than once each year, to demand registration of the shares subject to any of the above warrants earned by MBF; such registration to be at MBF's sole expense. MBF is also entitled to "piggyback" registration of the shares subject to any of the above warrants earned by MBF on any registration of Common Stock by the Registrant (subject to cutbacks on a pro rata basis). Copies of certain agreements relative to the MBF arrangement are appended as exhibits to this Report. -4- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits -------- Document Description Exhibit No. - -------------------- ----------- Letter Agreement dated December 9, 1996 between the 99.1 Registrant and Ethicon, Inc. with respect to an extension of the License and Development Agreement between them dated September 14, 1995 Registrant's Press Release dated December 10, 1996 with 99.2 respect to the extension of its License and Development Agreement with Ethicon, Inc. Securities Purchase Agreement dated as of January 6, 1997 99.3 among the Registrant and the investors named therein relating to the purchase and sale of 1,904,000 shares of the Registrant's Common Stock Registrant's Press Release dated January 7, 1997 with 99.4 respect to the closing of a private placement of Common Stock Registrant's Press Release dated December 10, 1996 with 99.5 respect to the extension of the expiration date of the Registrant's publicly traded warrants Letter Agreement dated as of October 4, 1996 between the 99.6 Registrant and MBF I, LLC ("MBF") relating to the provision of consulting and advisory services Form of Warrant with respect to 50,000 warrants issued to 99.7 MBF, and to be used with respect to additional warrants which may be issued to MBF Registration Rights Agreement dated as of October 4, 1996 99.8 between the Registrant and MBF -5- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. January 7, 1997 PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation By: /s/ J. Thomas Parmeter -------------------------------- J. Thomas Parmeter, Chairman of the Board, President and Chief Executive Officer -6- EXHIBIT INDEX Exhibit Sequentially No. Document Description Numbered Page ------- -------------------- ------------- 99.1 Letter Agreement dated December 9, 1996 between the Registrant and Ethicon, Inc. with respect to an extension of the License and Development Agreement between them dated September 14, 1995 99.2 Registrant's Press Release dated December 10, 1996 with respect to the extension of its License and Development Agreement with Ethicon, Inc. 99.3 Securities Purchase Agreement dated as of January 6, 1997 among the Registrant and the investors named therein relating to the purchase and sale of 1,904,000 shares of the Registrant's Common Stock 99.4 Registrant's Press Release dated January 7, 1997 with respect to the closing of a private placement of Common Stock 99.5 Registrant's Press Release dated December 10, 1996 with respect to the extension of the expiration date of the Registrant's publicly traded warrants 99.6 Letter Agreement dated as of October 4, 1996 between the Registrant and MBF I, LLC ("MBF") --- relating to the provision of consulting and advisory services 99.7 Form of Warrant with respect to 50,000 warrants issued to MBF, and to be used with respect to additional warrants which may be issued to MBF 99.8 Registration Rights Agreement dated as of October 4, 1996 between the Registrant and MBF EX-99.1 2 LETTER AGREEMENT DATED 12/09/96 December 9, 1996 Dr. J. Thomas Parmeter Protein Polymer Technologies, Inc. 10655 Sorrento Valley Road San Diego, California 92121 Re: Amendment to Agreement between Protein Polymer Technologies, Inc. and Ethicon, Inc. Dear Tom: As you know, Ethicon, Inc. ("Ethicon") has extended the period for CANDIDATE ACCEPTANCE under the Agreement dated September 14, 1995 between Protein Polymer Technologies, Inc. ("PPTI") and Ethicon, as amended by letter dated August 12, 1996, so that the term of the Agreement has been extended until December 16, 1996. However, both Ethicon and PPTI believe that it would be beneficial to extend the period for CANDIDATE ACCEPTANCE for an additional twelve (12) months to allow further work on the adhesive and sealants candidates. 1. Therefore, we propose that the Agreement between Ethicon and PPTI be further amended as follows: (a) On page 23, line 14, in Paragraph 4.04, after the insertion of the additional language set forth in the August 12, 1996 letter and preceding the last sentence of said Section 4.04, the following sentence shall be inserted: "Before the expiration of the additional four (4) month extended period for CANDIDATE ACCEPTANCE, ETHICON may extend the period of CANDIDATE ACCEPTANCE for an additional twelve (12) months by notifying PPTI in writing of its election to so extend and agreeing to pay PPTI Three Hundred Thousand Dollars ($300,000.00). The Three Hundred Thousand Dollars ($300,000) shall be paid in four equal installments of Seventy Five Thousand Dollars ($75,000) each, the first being due within two (2) business days of the date of election, and subsequent installments due on the first day of March, June, and September, 1997, provided that no installment payments need be made after the date of CANDIDATE ACCEPTANCE." (b) On page 33, line 21, in Paragraph 5.03, after the insert added by the letter dated August 12, 1996 and before the phrase "should be creditable", the following clause shall be inserted: "and 100% of the Three Hundred Thousand Dollar ($300,000.00) Exhibit 99.1 payments specified in paragraph 4.04 for the additional twelve-month extension or so much thereof as shall have actually been paid . . .". (c) On page 53, line 12, in Paragraph 9.02, the following shall be inserted: "provided, however, that during the twelve-month extension period provided in Paragraph 4.04, ETHICON shall have no right to terminate this Agreement under this Paragraph 9.02 (ii)." 2. This Amendment to the Agreement between PPTI and Ethicon shall be effective December 9, 1996. If PPTI agrees to this Amendment, please indicate by signing below. 3. This letter shall serve as written notice to PPTI of Ethicon's election to extend the period of CANDIDATE ACCEPTANCE for an additional twelve (12) months until December 16, 1997. Ethicon shall wire transfer to the account of PPTI the sum of Seventy five Thousand Dollars ($75,000) on or before December 12, 1996. Sincerely yours, /s/ PATRICK J. O'NEILL ------------------------------ Patrick J. O'Neill, Vice President, Growth Technologies and New Business Development for Ethicon, Inc. For Protein Polymer Technologies, Inc. Agreed to and accepted By: /s/ J. THOMAS PARMETER ----------------------------------- Name: ------------------------------ Title: President ----------------------------- EX-99.2 3 PRESS RELEASE DATED 12/10/96 [LETTERHEAD OF PROTEIN POLYMER] FOR IMMEDIATE RELEASE CONTACT: Gwen Como Director, Investor Relations (619) 558-6064 R&D COLLABORATION WITH ETHICON EXTENDED; J&J TO INCREASE INVESTMENT IN PROTEIN POLYMER SAN DIEGO, December 10, 1996 - Protein Polymer Technologies, Inc. (NASDAQ-PPTI), today announced that the R&D phase of its collaboration with Ethicon, Inc., a subsidiary of Johnson & Johnson, has been extended by mutual agreement until December 16, 1997. In addition, Johnson & Johnson Development Corporation (JJDC) will make a further equity investment in PPTI. The collaboration is focused on jointly developing and commercializing tissue adhesives and sealants for wound closure and related surgical applications. Products targeted for development are based upon proprietary protein polymers designed and genetically engineered by PPTI to meet Ethicon's performance and biocompatibility standards for surgical wound closure and sealant products. PPTI estimates that the applications targeted represent approximately 12 million surgical procedures per year in the U.S. Including R&D payments for this extension, Ethicon will have contributed $1.7 million to PPTI's product research and formulation efforts. In addition, Ethicon will bear all costs of preclinical animal testing. After successful completion of the product formulation milestone, Ethicon will fund development and commercialization expenditures associated with the collaboration, including clinical trials and regulatory filings. The collaboration also provides for an additional series of payments to PPTI based upon the successful achievement of certain regulatory and product development milestones. If all of the milestones including final FDA product approval are achieved, PPTI estimates it will have received approximately $11 million in license fees, R&D and milestone payments prior to product commercialization. Upon commercialization, PPTI will receive royalty payments on product sales, and has an option to manufacture all of the protein components and some or all of the finished product. Ethicon has worldwide product marketing rights. JJDC is a Johnson & Johnson subsidiary that makes equity investments in companies with which Johnson & Johnson affiliated companies have or may develop collaborative relationships. JJDC previously has invested more than $3 million in private placements of PPTI equity securities. (CONTINUED) Exhibit 99.2 PPTI ANNOUNCES CONTINUATION OF COLLABORATION WITH ETHICON PAGE 2. "The continuation of our collaboration with Ethicon in combination with Johnson & Johnson's equity investment optimizes the potential for technical and commercial success in development of these unique surgical adhesives and sealants, and their introduction into the $2.5 billion worldwide wound closure market," said J. Thomas Parmeter, President and Chief Executive Officer of Protein Polymer Technologies, Inc. Protein Polymer Technologies, Inc. is a development stage biomaterials company focused on tissue repair and drug delivery. In addition to surgical adhesives and sealants, products being developed include bioactive coatings, surgical adhesion barriers, tissue augmentation materials and drug delivery devices. PPTI also markets a line of protein polymer-activated cell culture products under the trade names of ProNectin(R) and SmartPlastic(TM). Future events could differ materially from those presented in this press release. As a result, the reader is cautioned not to rely solely on these forward-looking statements. The reader is advised to refer to the Company's 10-KSB and other documents on file with the Security and Exchange Commission, as well as the Company's Annual Report, copies of which are available from the Company to determine risks associated with the above statements. * * * EX-99.3 4 SECURITIES PURCHASE AGREEMENT DATED AS OF 01/06/97 CONFORMED COPY ____________________________________________________________________________ ____________________________________________________________________________ PROTEIN POLYMER TECHNOLOGIES, INC. ___________________________________________ SECURITIES PURCHASE AGREEMENT ___________________________________________ Dated as of January 6, 1997 ____________________________________________________________________________ ____________________________________________________________________________ Exhibit 99.3
TABLE OF CONTENTS Page ----------------- ---- 1. Definitions............................................... 1 2. Authorization of Securities............................... 3 3. Sale and Purchase of the Shares........................... 3 4. Register of Securities; Restrictions on Transfer of Securities; Removal of Restrictions on Transfer of Securities............................................. 4 4.1 Register of Securities.............................. 4 4.2 Restrictions on Transfer............................ 4 4.3 Removal of Transfer Restrictions.................... 7 5. Representations and Warranties by the Company............. 8 5.1 Organization, Standing, etc......................... 8 5.2 Qualification....................................... 8 5.3 Capital Stock....................................... 8 5.4 Corporate Acts and Proceedings...................... 9 5.5 Compliance with Other Instruments................... 9 5.6 Binding Obligations................................. 9 5.7 Securities Laws..................................... 10 5.8 Financial Statements................................ 10 5.9 Changes............................................. 10 5.10 Litigation.......................................... 10 5.11 Brokers or Finders.................................. 10 5.12 Disclosure.......................................... 10 6. Conditions of Parties' Obligations........................ 11 6.1 Conditions of Investors' Obligations at the Closing...................................... 11 6.2 Conditions of Company's Obligations................. 12 7. Registration of Restricted Stock.......................... 12 7.1 Required Registration............................... 12 7.2 Registration Procedures............................. 12 7.3 Expenses............................................ 14 7.4 Indemnification..................................... 14 7.5 Reporting Requirements Under the Exchange Act........................................ 17 7.6 Stockholder Information............................. 17 7.7 Delay of Registration............................... 18
-i-
Page ---- 8. Miscellaneous............................................. 18 8.1 Waivers and Amendments.............................. 18 8.2 Effect of Waiver or Amendment....................... 18 8.3 Rights of Holders Inter Se.......................... 18 8.4 Exculpation Among Investors and Holders............. 19 8.5 Notices............................................. 19 8.6 Severability........................................ 19 8.7 Parties in Interest................................. 20 8.8 Headings............................................ 20 8.9 Choice of Law....................................... 20 8.10 Expenses............................................ 20 8.11 Counterparts........................................ 20 8.12 Publicity........................................... 20
ANNEXES A - Schedule of Investors and Required Payment B - Risk Factors C - Schedule of Exceptions -ii- SECURITIES PURCHASE AGREEMENT ----------------------------- THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into --------- as of January 6, 1997 among Protein Polymer Technologies, Inc., a Delaware corporation (the "Company"), and the other Persons listed on Annex A hereto ------- (sometimes referred to herein individually as "Investor" and sometimes -------- collectively as "Investors"). --------- 1. Definitions. Unless the context otherwise requires, the terms ----------- defined in this Section 1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms herein defined. All accounting terms defined in this Section 1 and those accounting terms used in this Agreement not defined in this Section 1 shall, except as otherwise provided for herein, be construed in accordance with those generally accepted accounting principles employed by the Company, consistently applied. If and so long as the Company has any Subsidiary, the accounting terms defined in this Section 1 and those accounting terms appearing in this Agreement but not defined in this Section 1 shall be determined on a consolidated basis for the Company and each of its Subsidiaries, if any, and the financial statements and other financial information to be furnished by the Company pursuant to this Agreement shall be consolidated. "1995 Annual Report" shall mean the Company's Report on Form ------------------ 10-KSB for the fiscal year ended December 31, 1995. "Action" shall mean any action, suit, arbitration or other ------ legal, administrative or other proceeding by or before any court, arbitrator or Governmental Entity. "Agreement" shall mean this Securities Purchase Agreement. --------- "Balance Sheet" shall have the meaning assigned to it in ------------- Section 5.8 hereof. "Balance Sheet Date" shall have the meaning assigned to it ------------------ in Section 5.8 hereof. "Board" shall mean the Board of Directors of the Company. ----- "California Securities Law" shall mean the California ------------------------- Corporate Securities Law of 1968, as amended. "Closing" and "Closing Date" shall have the meanings ------- ------------ assigned to such terms in Section 3(b) hereof. "Code" shall mean the Internal Revenue Code of 1986, as ---- amended. "Common Stock" shall mean the Company's common stock, par ------------ value $0.01 per share. "Commission" shall mean the Securities and Exchange ---------- Commission. "Equity Security" shall mean the Common Stock, or any --------------- security convertible into the Common Stock, or any security carrying any warrant or right to subscribe to or purchase the Common Stock, or any such warrant or right. "Exchange Act" shall mean the Securities Exchange Act of ------------ 1934, as amended. "Form 10-QSB" shall mean the Company's Report on Form 10-QSB ----------- for the quarterly period ended September 30, 1996. "Governmental Entity" shall mean any federal, state, local ------------------- or foreign governmental bureau, commission, board, agency or instrumentality. "Holder" of any security shall mean the record or beneficial ------ owner of such security. "Holders of a Majority of the Restricted Stock" shall mean, --------------------------------------------- on a given date, the Person or Persons who are the Holders of greater than 50% of the Restricted Stock. "Investor" shall have the meaning assigned to it in the -------- introductory paragraph of this Agreement. "Material Effect" shall mean a material and adverse effect --------------- on the business, assets, property or financial condition of the Company. "Person" shall mean any natural person, corporation, trust, ------ association, company, partnership, limited liability company, joint venture and other entity and any government, governmental agency, instrumentality or political subdivision. "Required Payment" shall mean, with respect to each ---------------- Investor, the number of Shares purchased by such Investor, multiplied by $2.50, as set forth on Annex A hereto. -2- "Restricted Stock" shall mean (a) the Shares, and (b) any ---------------- securities issued or issuable with respect to the Common Stock referred to in clause (a) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger or consolidation or reorganization; provided, however, that shares of Common Stock shall only be treated as Restricted Stock if and so long as they have not been (i) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such Common Stock are removed upon the consummation of such sale. "Rule 144" shall mean Rule 144 of the Commission under the -------- Securities Act. "Securities" shall have the meaning assigned to it in ---------- Section 2 hereof. "Securities Act" shall mean the Securities Act of 1933, as -------------- amended. "Series D Preferred Stock" shall mean the Company's Series D ------------------------ 10% Cumulative Convertible Preferred Stock. "Shares" shall have the meaning assigned to such term in ------ Section 2 hereof. "Subsidiary" shall mean any Person, at least 50% of the ----------- outstanding voting stock of which is at the time owned or controlled directly or indirectly by the Company or by one or more of such subsidiary entities or both, where "voting stock" means any shares of stock having general voting power in electing the board of directors. "Suspension Period" shall have the meaning assigned to it in ----------------- Section 7.1(b) hereof. 2. Authorization of Securities. The Company has authorized the --------------------------- issue and sale of up to 2,000,000 shares (the "Shares") of its Common Stock for ------ sale to the Investors pursuant to this Agreement. The Shares are sometimes referred to herein as the "Securities." ---------- 3. Sale and Purchase of the Shares. ------------------------------- (a) Upon the terms and subject to the condi tions herein contained, the Company agrees to sell to each -3- Investor, and each Investor severally agrees to purchase from the Company, at the Closing on the Closing Date, the number of Shares set forth opposite its name on Annex A hereto, and each Investor shall pay to the Company the Required Payment. (b) The closing of the sale to and purchase by the Investors of the Shares (the "Closing") shall occur at the offices of Paul, ------- Hastings, Janofsky & Walker LLP, 555 South Flower Street, Los Angeles, California, at the hour of 10 o'clock A.M., California time, on January 6, 1997 or at such different time or day as the Investors and the Company shall agree (the "Closing Date"). At the Closing (or within one week thereafter to allow for ------------ processing by the Company's transfer agent), the Company will deliver to each Investor instruments or certificates evidencing the Securities being purchased by it, each of which shall be registered in such Investor's name as stated on Annex A hereto, against delivery to the Company of payment by cashier's check or wire transfer in an amount equal to the Required Payment of such Investor. 4. Register of Securities; Restrictions on Transfer of Securities; --------------------------------------- ----------------------- Removal of Restrictions on Transfer of Securities. - ------------------------------------------------- 4.1 Register of Securities. The Company or its duly appointed ---------------------- agent shall maintain a separate register for the Common Stock in which it shall register the issue and sale of all the Shares. All transfers of the Securities shall be recorded on the register maintained by the Company or its agent, and the Company shall be entitled to regard the registered holder of the Securities as the actual holder of the Securities so registered until the Company or its agent is required to record a transfer of such Securities on its register. Subject to Section 4.2(c) hereof, the Company or its agent shall be required to record any such transfer when it receives the Security to be transferred duly and properly endorsed by the registered holder thereof or by its attorney duly authorized in writing. 4.2 Restrictions on Transfer. ------------------------ (a) Each Investor understands and agrees that the Securities it will be acquiring have not been registered under the Securities Act, and that accordingly they will not be fully transferable except as permitted under various exemptions contained in the Securities Act, or upon satisfaction of the registration and prospectus delivery requirements of the Securities Act. Each Investor acknowledges that it must bear the economic risk of its investment in the Securities for an indefinite period of time since they have not been registered under the Securities Act -4- and therefore cannot be sold unless they are subsequently registered or an exemption from registration is available. (b) Each Investor hereby represents and warrants to the Company that: (i) Such Investor is acquiring the Securities it has agreed to purchase for investment purposes only, for its own account, and not as nominee or agent for any other Person, and not with the view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act. (ii) Such Investor knows of no public solicitation or advertisement of an offer in connection with the Securities. (iii) Such Investor has carefully reviewed this Agreement. Such Investor has had, during the course of the transaction and prior to its purchase of the Shares, the opportunity to ask questions of and receive answers from the Company concerning the terms and conditions of the offering and to obtain additional information (to the extent the Company possesses such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access. Such Investor has received all information that it has requested regarding the Company and believes that such information is sufficient to make an informed decision with respect to the purchase of the Shares. Without limiting the generality of the foregoing, such Investor has received a copy of (A) the 1995 Annual Report, (B) the Form 10-QSB, and (C) the Risk Factors attached as Exhibit B hereto, currently contemplated to be included in the registration statement referred to in Section 7.1(a) hereof. (iv) Such Investor is able to bear the economic risk of its investment in the Shares and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of, and protecting its interests with respect to, its investment in the Shares. Such Investor is aware of the risk involved in its investment in the Shares and has determined that such investment is suitable for it in light of its financial circumstances and available investment opportunities. (v) This Agreement, when executed and delivered by such Investor, constitutes the legal, valid and binding obligation of such Investor and is enforceable against such Investor in accordance with its terms. -5- (vi) Such Investor is an "accredited investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act. (vii) Such Investor's jurisdiction of formation or incorporation (if applicable) and principal place of business or its residency as set forth on the signature page hereof or the annexes hereto by such Investor are accurate. (viii) The purchase by such Investor of the Shares hereunder does not violate or conflict with any law or regulation applicable to such Investor. (ix) No Person engaged by such Investor has, or will have, any right or claim against the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity. (c) Each Investor hereby further agrees with the Company as follows: (i) Subject to Section 4.3 hereof, the instruments or certificates evidencing the Securities it has agreed to purchase, and each instrument or certificate issued in transfer thereof, will bear the following legend: "The securities evidenced by this certificate have not been registered under the Securities Act of 1933 and have been taken for investment purposes only and not with a view to the distribution thereof, and, except as stated in an agreement between the holder of this certificate, or its predecessor in interest, and the issuer corporation, such securities may not be sold or transferred unless there is an effective registration statement under such Act covering such securities or the issuer corporation receives an opinion, in form and content reasonably satisfactory to the issuer corporation, of counsel reasonably acceptable to the issuer corporation (which may be counsel for the issuer corporation) stating that such sale or transfer is exempt from the registration and prospectus delivery requirements of such Act." (ii) The instruments or certificates representing such Securities, and each instrument or certificate issued in transfer thereof, will also bear any legend required under any applicable state securities law. -6- (iii) Prior to any proposed sale, assignment, transfer or pledge of any Securities by an Investor, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Investor shall give written notice to the Company of such Investor's intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail and shall be accompanied at such holder's expense by either (i) an unqualified written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company addressed to the Company, to the effect that the proposed transfer of the Securities may be effected without registration under the Securities Act, or (ii) a "no action" letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Securities shall be entitled to transfer such Securities in accordance with the terms of the notice delivered by the holder to the Company. The Company will not require such a legal opinion or "no action" letter in any transaction in compliance with Rule 144, unless otherwise required by the Company's independent transfer agent. (iv) Such Investor consents to the Company's making a notation on its records or giving instructions to any transfer agent of the Common Stock in order to implement the restrictions on transfer of the Securities mentioned in this subsection (c). (d) Each Investor, or each Person executing this Agreement on behalf of an Investor, further represents and warrants to the Company that such Investor or other Person, as the case may be, has been duly authorized to, and has, and as of the Closing will have, full power and authority (including corporate, if applicable) to, execute and deliver this Agreement on behalf of such Investor, and to make the representations and warranties to the Company in this Section 4 on behalf of such Investor, and to perform the obligations of such Investor under this Agreement. 4.3 Removal of Transfer Restrictions. Any legend endorsed on a -------------------------------- certificate evidencing a Security pursuant to Section 4.2(c)(i) hereof and the stop transfer instructions and record notations with respect to such Security shall be removed and the Company shall issue a certificate without such legend to the holder of such Security (a) upon the sale thereof if such Security and such sale are registered under the Securities Act, (b) if such holder -7- provides the Company with an opinion, in form and content reasonably satisfactory to the Company, of counsel (which may be counsel for the Company) reasonably acceptable to the Company to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) if such Security may be sold under Rule 144. 5. Representations and Warranties by the Company. In order to --------------------------------------------- induce each Investor to enter into this Agreement and to purchase the Shares, the Company hereby represents and warrants to each Investor that, except as set forth on Annex C hereto: 5.1 Organization, Standing, etc. The Company is a corporation --------------------------- duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted, to own and hold its properties and assets, to enter into this Agreement, to issue the Securities and to carry out the provisions hereof and thereof. 5.2 Qualification. The Company is duly qualified as a foreign ------------- corporation and in good standing in the State of California. The Company is not qualified to do business as a foreign corporation in any other jurisdiction and such qualification is not required as of the date hereof, except where the failure to be so qualified would not have a Material Effect. 5.3 Capital Stock. ------------- (a) As of the Closing Date, the authorized capital stock of the Company will consist of (i) 5,000,000 shares of preferred stock, par value $0.01 per share, 71,600 shares of which have been designated as Series D Preferred Stock; and (ii) 25,000,000 shares of Common Stock; and the Company will have no authority to issue any other capital stock. There are 49,187 shares of Series D Preferred Stock issued and outstanding, and, as of the Closing, before giving effect to the transactions contemplated by this Agreement, 7,208,228 shares of Common Stock are issued and outstanding, and all such outstanding shares of Series D Preferred Stock and Common Stock are duly authorized, validly issued, fully paid and nonassessable. (b) Except as contemplated by this Agreement or as expressly provided in Annex C to this Agreement, the Company has no outstanding subscription, option, warrant, right of first refusal, preemptive right, call, contract, demand, commitment, convertible security or -8- other instrument, agreement or arrangement of any character or nature whatever under which the Company is or may be obligated to issue Common Stock, preferred stock or other Equity Security of any kind. 5.4 Corporate Acts and Proceedings. The Company has, and as of ------------------------------ the Closing will have, full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the transactions contemplated hereby. All corporate acts and proceedings required for the authorization, execution and delivery of this Agreement and the offer, issuance and delivery of the Securities and the performance of this Agreement have been lawfully and validly taken or will have been so taken prior to the Closing. 5.5 Compliance with Other Instruments. The execution, delivery --------------------------------- and performance by the Company of this Agreement (a) will not require from the Board or stockholders of the Company any consent or approval that has not been validly and lawfully obtained, (b) will not require the Company to obtain or effect any authorization, consent, approval, license, exemption of or filing or registration with any Person, except such as shall have been lawfully and validly obtained prior to the Closing and such as may subsequently be required pursuant to Section 7 hereof, (c) will not cause the Company to violate or contravene, except where such violation or contravention would not have a Material Effect, (i) any provision of law, (ii) any rule or regulation of any Governmental Entity, (iii) any order, writ, judgment, injunction, decree, determination or award binding upon the Company, or (iv) any provision of the Certificate of Incorporation or Bylaws of the Company, (d) will not cause the Company to violate or be in conflict with, result in a breach by the Company of or constitute (with or without notice or lapse of time or both) a default by the Company under, any material agreement, lease or instrument, commitment or arrangement to which the Company is a party or by which the Company or any of its properties, assets or rights are bound or affected, except where such violation, conflict, breach or default would not have a Material Effect, and (e) will not result in the creation or imposition of any lien. 5.6 Binding Obligations. This Agreement constitutes the legal, ------------------- valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally, and by general equitable principles. -9- 5.7 Securities Laws. Subject to the accuracy of the representations --------------- and warranties contained in Section 4.2, the offer, issue and sale of the Shares are exempt from the registration and prospectus delivery requirements of the Securities Act, and are exempt from qualification under the California Securities Law and the state securities laws of the jurisdictions where the Investors are resident. 5.8 Financial Statements. Included in the Form 10-QSB are the -------------------- Company's unaudited balance sheet (the "Balance Sheet") as of September 30, 1996 ------------- (the "Balance Sheet Date"), and the unaudited statement of operations for the ------------------ nine-month period then ended. Included in the 1995 Annual Report are the Company's audited balance sheets as of December 31, 1993, 1994 and 1995 and the audited statements of operations, cash flow and shareholders' equity for the period then ended, together with the related opinion of Ernst & Young LLP, independent certified public accountants. The foregoing financial statements (i) are in accordance with the books and records of the Company, (ii) present fairly the financial condition of the Company at the Balance Sheet Date and the results of operations and changes in financial position of the Company for the periods therein specified, and (iii) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior accounting periods, except that the unaudited financial statements are subject to year-end audit adjustments and do not contain footnotes or statements of shareholders' equity and cash flow. 5.9 Changes. Since the Balance Sheet Date, except as ------- disclosed in the Form 10-QSB, there has been no event which would have a Material Effect, and the Company has been operated only in the ordinary course of business, consistent with past practice. 5.10 Litigation. There is no Action pending and, to the ---------- knowledge of the Company, there is no material Action threatened against the Company or its properties, assets or business. To the Company's knowledge, the Company is not in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or of any Governmental Entity. 5.11 Brokers or Finders. The Company has not incurred, and ------------------ will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. 5.12 Disclosure. The representations and warranties of the ---------- Company contained herein, when read together -10- with the annexes hereto and the Form 10-QSB and the 1995 Annual Report, do not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements therein not misleading. 6. Conditions of Parties' Obligations. ---------------------------------- 6.1 Conditions of Investors' Obligations at the Closing. The --------------------------------------- ------------ obligation of each Investor to purchase and pay for the Shares which it has agreed to purchase on the Closing Date is subject to the fulfillment prior to or on the Closing Date of the following conditions, any of which may be waived in whole or in part by such Investor. (a) No Errors, etc. The representations and warranties of the Company -------------- under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects. (b) Compliance with Agreement. The Company shall have performed ------------------------- and complied with, in all material respects, all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. (c) Certificate of the Company. The Company shall have delivered to -------------------------- each Investor a certificate of the Company dated the Closing Date, executed by its President, certifying the satisfaction of the conditions specified in subsections (a), (b), (d) and (e) of this Section 6.1. (d) Qualification. All authorizations, approvals or permits, if any, ------------- of any governmental authority or regulatory body of the United States or of any state that are required from the Company in connection with the lawful issuance and sale of the Shares to the Investors pursuant to this Agreement shall have been duly obtained and shall be effective on and as of the Closing. (e) Waiver of Rights. The holders of the Series D Preferred Stock ---------------- shall have waived their rights of first refusal with respect to the Shares. (f) Proceedings and Documents. All corporate and other proceedings in ------------------------- connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investors, and the Investors shall have received all such counterpart originals and certified or other copies of such documents as they may reasonably request. -11- 6.2 Conditions of Company's Obligations. The Company's obligation to ----------------------------------- issue and sell the Shares to the Investors on the Closing Date is subject to the fulfillment prior to or at such date of (i) the conditions precedent specified in paragraphs (d) and (e) of Section 6.1 hereof, and (ii) the representations and warranties of the Investors under this Agreement being deemed to have been made again on the Closing Date and being then true and correct. 7. Registration of Restricted Stock. -------------------------------- 7.1 Required Registration. --------------------- (a) Within one week after the Closing Date, the Company shall prepare and file a registration statement under the Securities Act, on a form selected by the Company, covering the Shares and shall use its best efforts to cause such registration statement to become effective as expeditiously as possible and to remain effective until the earlier to occur of the date (i) the Restricted Stock covered thereby has been sold, or (ii) by which all Restricted Stock covered thereby may be sold under Rule 144. (b) Following the effectiveness of a registration statement filed pursuant to this section, the Company may, at any time, suspend the effectiveness of such registration for up to 60 days, as appropriate (a "Suspension Period"), by giving notice to the Holders of Restricted Stock, if ----------------- the Company shall have determined that the Company may be required to disclose any material corporate development which disclosure may have a material effect on the Company. Notwithstanding the foregoing, no more than two Suspension Periods (i.e., 120 days) may occur in immediate succession. The Company shall use its best efforts to limit the duration and number of any Suspension Periods. The Holders of Restricted Stock agree that, upon receipt of any notice from the Company of a Suspension Period, the Holders of Restricted Stock shall forthwith discontinue disposition of Restricted Stock covered by such registration statement or prospectus until the Holders of Restricted Stock (i) are advised in writing by the Company that the use of the applicable prospectus may be resumed, (ii) have received copies of a supplemental or amended prospectus, if applicable, and (iii) have received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference into such prospectus. 7.2 Registration Procedures. When the Company effects the ----------------------- registration of the Shares under the Securities Act pursuant to Section 7.1(a) hereof, the Company will, at its expense, as expeditiously as possible: -12- (a) In accordance with the Securities Act and the rules and regulations of the Commission, prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period described herein, and prepare and file with the Commission such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for such period and such registration statement and prospectus accurate and complete for such period; (b) Furnish to the Holders of securities participating in such registration such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such Holders may reasonably request in order to facilitate the public offering of such securities; (c) Use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such juris dictions as such participating Holders may reasonably request within twenty (20) days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified; (d) Notify the Holders participating in such registration, promptly after it shall receive notice thereof, of the date and time when such registration statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (e) Notify such Holders promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information; (f) Prepare and file with the Commission, promptly upon the request of any such Holders, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such Holders, is required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Restricted Stock by such Holders; (g) Prepare and promptly file with the Commission, and promptly notify such Holders of the filing of, -13- such amendments or supplements to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (h) In case any of such Holders is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations of the Commission, prepare promptly upon request such amendments or supplements to such registration statement and such prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations; and (i) Advise such Holders, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. 7.3 Expenses. With respect to any registration effected -------- pursuant to Section 7.1 hereof, all fees, costs and expenses of and incidental to such registration and the public offering in connection therewith shall be borne by the Company; provided, however, that the Holders of Restricted Stock shall bear their own legal fees, if any, and their pro rata share of any underwriting discounts or commissions. 7.4 Indemnification. --------------- (a) The Company will indemnify and hold harmless each Holder of shares of Restricted Stock which are included in a registration statement pursuant to the provisions of Section 7 hereof and any underwriter (as defined in the Securities Act) for such Holder, and any person who controls such Holder or such underwriter within the meaning of the Securities Act, and any officer, director, employee, agent, partner or affiliate of such Holder, from and against, and will reimburse such Holder and each such underwriter, controlling person, officer, director, employee, agent, partner and affiliate with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and -14- expenses to which such Holder or any such underwriter or controlling person or any such officer, director, employee, agent, partner or affiliate may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense is caused by an untrue statement or alleged untrue statement or omission or alleged omission so made in strict conformity with information furnished by such Holder, such underwriter or such controlling person or such officer, director, employee, agent, partner or affiliate in writing specifically for use in the preparation thereof. (b) Each Holder of shares of the Restricted Stock which are included in a registration pursuant to the provisions of Section 7 hereof will indemnify and hold harmless the Company, and any Person who controls the Company within the meaning of the Securities Act, from and against, and will reimburse the Company and such controlling Persons with respect to, any and all losses, damages, liabilities, costs or expenses to which the Company or such controlling Person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or are caused by the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such Holder specifically for use in the preparation thereof. Notwithstanding the foregoing, the liability of any Holder of Restricted Stock pursuant to this subsection (b) shall be limited to an amount equal to the per share sale price (less any underwriting discount and commissions) multiplied by the number of shares of Restricted Stock sold by such Holder pursuant to the registration statement which gives rise to such obligation to indemnify (less the aggregate amount of any damages which such Holder has otherwise been required to pay -15- in respect of such losses, damages, liabilities, costs or expenses or any substantially similar losses, damages, liabilities, costs or expenses arising from the sale of such Restricted Stock). (c) Promptly after receipt by a party indemnified pursuant to the provisions of paragraph (a) or (b) of this Section 7.4 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of paragraph (a) or (b), notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7.4 and shall not relieve the indemnifying party from liability under this Section 7.4 unless such indemnifying party is prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of such paragraph (a) or (b) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in subsection (a) or (b) of this Section 7.4 is held by a court of competent jurisdiction to be unavailable to a party to be indemnified with respect to any claims, actions, demands, losses, damages, liabilities, costs or expenses referred to therein, then each indemnifying party under any such subsection, in lieu of indemnifying such indemnified party thereunder, hereby agrees to contribute to the amount paid or payable by such indemnified party as a result of such claims, actions, demands, losses, damages, liabilities, costs or expenses in such proportion as is appropriate to reflect -16- the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such claims, actions, demands, losses, damages, liabilities, costs or expenses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount any Holder of Restricted Stock shall be obligated to contribute pursuant to this subsection (d) shall be limited to an amount equal to the per share sale price (less any underwriting discount and commissions) multiplied by the number of shares of Restricted Stock sold by such Holder pursuant to the registration statement which gives rise to such obligation to contribute (less the aggregate amount of any damages which such Holder has otherwise been required to pay in respect of such claim, action, demand, loss, damage, liability, cost or expense or any substantially similar claim, action, demand, loss, damage, liability, cost or expense arising from the sale of such Restricted Stock). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution hereunder from any person who was not guilty of such fraudulent misrepresentation. 7.5 Reporting Requirements Under the Exchange Act. The Company --------------------------------------------- shall timely file such information, documents and reports as the Commission may require or prescribe under Section 13 of the Exchange Act. The Company acknowledges and agrees that the purposes of the requirements contained in this Section 7.5 are (a) to enable the Holders of Restricted Stock to comply with the current public information requirement contained in paragraph (c) of Rule 144 should any such Holder ever wish to dispose of any of the Restricted Stock without registration under the Securities Act in reliance upon Rule 144 (or any other similar exemptive provision) and (b) to qualify the Company for the use of registration statements on Form S-3. 7.6 Stockholder Information. The Company may require each ----------------------- Holder of Restricted Stock to furnish the Company such information with respect to such Holder and the distribution of its Restricted Stock as the Company may from time to time reasonably request in writing as shall be required by law or by the Commission in connection therewith. -17- 7.7 Delay of Registration. The Holders of Restricted Stock shall not --------------------- have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement. 8. Miscellaneous. ------------- 8.1 Waivers and Amendments. ---------------------- (a) With the written consent of the Holders of a Majority of the Restricted Stock then outstanding, the obligations of the Company and the rights of the Holders of the Securities under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and with the same consent the Company, when authorized by resolution of its Board, may enter into a supplementary agreement for the purpose of changing in any manner or eliminating any of the provisions of this Agreement or of any supplemental agreement or modifying in any manner the rights hereunder of the Holders of the Securities and the Company; provided, however, that no such waiver or supplemental agreement shall reduce the aforesaid proportion of Restricted Stock, the Holders of which are required to consent to any waiver or supplemental agreement, without the consent of the Holders of all of the Restricted Stock; and provided further that the obligation of the Company to register the Restricted Stock, as set forth in Section 7.1 hereof, may not be waived or amended without the written consent of all the Holders of the Restricted Stock then outstanding. (b) Upon the effectuation of each such waiver, consent or agreement of amendment or modification, the Company shall promptly give written notice thereof to the Holders of the Restricted Stock who have not previously consented thereto in writing. 8.2 Effect of Waiver or Amendment. Each Investor acknowledges ----------------------------- that by operation of Section 8.1 hereof the Holders of a Majority of the Restricted Stock then outstanding will, subject to the limitations contained in such Section 8.1, have the right and power to diminish or eliminate certain rights of such Investor under this Agreement. 8.3 Rights of Holders Inter Se. Each Holder of Securities shall -------------------------- have the absolute right to exercise or refrain from exercising any right or rights which such Holder may have by reason of this Agreement or any Security, -18- including, without limitation, the right to consent to the waiver of any obligation of the Company under this Agreement and to enter into an agreement with the Company for the purpose of modifying this Agreement or any agreement effecting any such modification, and such Holder shall not incur any liability to any other Holder or Holders of Securities with respect to exercising or refraining from exercising any such right or rights. 8.4 Exculpation Among Investors and Holders. Each Investor --------------------------------------- acknowledges that it is not relying upon any other Investor, or any officer, director, employee, agent, partner or affiliate of any such other Investor, in making its investment or decision to invest in the Company or in monitoring such investment. Each Investor agrees that no Investor nor any controlling person, officer, director, stockholder, partner, agent or employee of any Investor shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them relating to or in connection with the Company or the Securities, or both. 8.5 Notices. All notices, requests, consents and other ------- communications required or permitted hereunder shall be in writing and shall be given personally, by air courier (with signed acknowledgement of receipt) or by facsimile transmission (with confirmation of transmission): (a) If to any Holder of any of the Securities, addressed to such Holder at its address (or to its telecopier number) shown on his or its signature page hereto, or at such other address (or telecopier number) as such Holder may specify by written notice to the Company, or (b) If to the Company, addressed to it at 10655 Sorrento Valley Road, San Diego, California 92121 (or, if by telecopier, to (619) 558-6477) or at such other address (or telecopier number) as the Company may specify by written notice to the Investors, and each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given upon receipt. 8.6 Severability. Should any one or more of the provisions of ------------ this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, shall be given effect separately from the provision or -19- provisions determined to be illegal or unenforceable and shall not be affected thereby. 8.7 Parties in Interest. All the terms and provisions of this ------------------- Agreement shall be binding upon and inure to the benefit of the respective successors of the parties hereto. This Agreement shall not run to the benefit of or be enforceable by any Person other than a party to this Agreement and its successors and permitted assigns. 8.8 Headings. The headings of the Sections and paragraphs of -------- this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement. 8.9 Choice of Law. Except where the issue for determination ------------- is one of corporate law, in which case the Delaware General Corporation Law shall govern, it is the intention of the parties that the internal substantive laws, and not the laws of conflicts, of California should govern the enforceability and validity of this Agreement, the construc tion of its terms and the interpretation of the rights and duties of the parties. 8.10 Expenses. Each party to this Agreement shall bear its own -------- costs and expenses incurred with the negotiation and execution of this Agreement and the perfor mance of the transactions contemplated hereby. 8.11 Counterparts. This Agreement may be executed in any ------------ number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 8.12 Publicity. No party hereto shall originate any press --------- release or other public announcement, written or oral, relating to this Agreement, or to performance hereunder or the existence of any arrangement among the parties hereto without the prior approval of the other parties hereto which may be the subject of such press release or announcement, except to the extent that such press release or announcement is reasonably concluded by a party to be required by applicable law. The Investors acknowledge that the Company will be required to file a copy of this Agreement, and the other agreements and instruments contemplated hereby, with the Commission and to describe these transactions in its public filings, including in the registration statement contemplated -20- by Section 7.1 (which registration statement shall also include the name of each Investor). Subject to the foregoing, the Company will not use the name of any Investor in a public announcement without such Investor's prior consent. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed as of the date first above written. PROTEIN POLYMER TECHNOLOGIES, INC. By: /s/ J. Thomas Parmeter ------------------------------- J. Thomas Parmeter, President INVESTORS: THE ARIES TRUST By: Paramount Capital Asset Management, Inc., Its Investment Manager By: /s/ Lindsay A. Rosenwald -------------------------------- Lindsay A. Rosenwald, M.D., President THE ARIES DOMESTIC FUND, L.P. By: Paramount Capital Asset Management, Inc., Its General Partner By: /s/ Lindsay A. Rosenwald -------------------------------- Lindsay A. Rosenwald, M.D., President BIOTECHNOLOGY VALUE FUND, L.P. By: BVF Partners L.P. Its General Partner By: BVF Inc., Its General Partner By: /s/ Mark N. Lampert -------------------------- Mark N. Lampert, President -21- BIOTECHNOLOGY VALUE FUND, LTD. By: /s/ Mark N. Lampert --------------------------------- Mark N. Lampert, Director BIOTECHNOLOGY VENTURE PARTNERS, L.P. By: BVF Partners L.P. Its General Partner By: BVF Inc., Its General Partner By: /s/ Mark N. Lampert -------------------------- Mark N. Lampert, President FOUR PARTNERS By: /s/ Thomas A. Tisch ------------------------------ Thomas A. Tisch, Managing General Partner /s/ Edward M. Giles ----------------------------------- EDWARD M. GILES IRA #3 INVESTMENT 10 L.L.C. By: Grosvenor Multi-Strategy Fund, L.P., a Member By: Grosvenor Capital Management, L.P., Its General Partner By: Grosvenor Capital Management, Inc., Its General Partner By: /s/ Paul Meister -------------------------- Paul Meister, Vice President JOHNSON & JOHNSON DEVELOPMENT CORPORATION By: /s/ Brad H. Vale -------------------------------------- Brad H. Vale, Vice President -22- VERTICAL FUND ASSOCIATES, L.P. By: Vertical Group, L.P., Its General Partner By: /s/ John E. Runnells -------------------------------- John E. Runnells, General Partner /s/ Anthony G. Viscogliosi ------------------------------------ ANTHONY G. VISCOGLIOSI -23- ANNEX A ------- SCHEDULE OF INVESTORS AND REQUIRED PAYMENT
Number of Shares Required Name and Address Being Purchased Payment - ---------------- ---------------- -------- The Aries Trust 266,667 $666,667.50 c/o Paramount Capital Asset Management, Inc. 787 Seventh Avenue New York, NY 10019 Attention: Mr. David R. Walner Aries Domestic Fund, L.P. 133,333 333,332.50 c/o Paramount Capital Asset Management, Inc. 787 Seventh Avenue New York, NY 10019 Attention: Mr. David R. Walner Biotechnology Value 340,000 850,000.00 Fund, L.P. c/o 333 West Wacker Drive Suite 1600 Chicago, IL 60606 Attention: Ms. Elizabeth Bidwell Biotechnology Value 70,000 175,000.00 Fund, Ltd. c/o Butterfield Fund Managers (Guernsey) Limited P.O. Box 211, Butterfield House The Grange, St. Peter Port Guernsey GY1 3NQ Channel Islands Biotechnology Venture 240,000 600,000.00 Partners, L.P. c/o 333 West Wacker Drive Suite 1600 Chicago, IL 60606 Attention: Ms. Elizabeth Bidwell Four Partners 300,000 750,000.00 667 Madison Avenue New York, NY 10021 Attention: Mr. Barry L. Bloom
A-1
Number of Shares Required Name and Address Being Purchased Payment - ---------------- ---------------- -------- Edward M. Giles IRA #3 20,000 $ 50,000.00 Fiduciary Trust Co. c/o Mr. Ken Paulo Two World Trade Center New York, NY 10048-0772 Investment 10, L.L.C. 30,000 75,000.00 c/o 333 West Wacker Drive Suite 1600 Chicago, IL 60606 Attention: Ms. Elizabeth Bidwell Johnson & Johnson Development 400,000 1,000,000.00 Corporation One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: Mr. Brad Vale Vertical Fund Associates, L.P. 100,000 250,000.00 18 Bank Street Summit, NJ 07901 Attention: Mr. John E. Runnells Anthony G. Viscogliosi 4,000 10,000.00 310 East 46th, #1 ------------- ------------- New York, NY 10017 TOTAL 1,904,000 $4,760,000.00 ============= =============
A-2 EX-99.4 5 PRESS RELEASE DATED 01/07/97 [LETTERHEAD OF PROTEIN POLYMER] FOR IMMEDIATE RELEASE CONTACTS: Aron Stern Vice President, Finance Gwen Como Director, Investor Relations (619) 558-6064 PROTEIN POLYMER ANNOUNCES THE COMPLETION OF PRIVATE PLACEMENT OF COMMON STOCK WITH J&J AND OTHER INVESTORS J&J'S INVESTMENT RELATED TO PREVIOUSLY ANNOUNCED EXTENSION OF COLLABORATION WITH ETHICON TO DEVELOP AND COMMERCIALIZE SURGICAL WOUND CLOSURE PRODUCTS SAN DIEGO, January 7, 1997 -- Protein Polymer Technologies, Inc. (NASDAQ- PPTI), today announced the completion of a $4,760,000 private placement of 1,904,000 shares of PPTI Common stock with Johnson & Johnson Development Corporation (JJDC), and other institutional investors. The investors paid $2.50 per share of common stock. JJDC's equity investment was related to an earlier announcement of an extension of the collaboration between Ethicon, Inc., a subsidiary of Johnson & Johnson, and PPTI to jointly develop and commercialize surgical tissue adhesives and sealants for wound closure and related surgical applications. The shares have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements; however the Company has agreed with the investors to file a registration statement with the SEC later this month to register any resales of the shares. Any offering relative to such resales will be made only by means of a prospectus. In an unrelated matter, the Company announced that it has retained the investment banking firm of Hambrecht & Quist LLC as its financial advisor to aid the Company in a review of its strategic operating and financial goals. Protein Polymer Technologies, Inc. is a development stage biomaterials company focused on tissue repair and drug delivery. In addition to tissue adhesives and sealants, other products being developed include materials for wound healing and tissue augmentation, surgical adhesion barriers, and drug delivery devices. PPTI also markets a line of protein polymer-activated cell culture products under the trade names of ProNectin/R/ and SmartPlastic/TM. Exhibit 99.4 EX-99.5 6 PRESS RELEASE DATED 12/10/96 [LETTERHEAD OF PROTEIN POLYMER] FOR IMMEDIATE RELEASE CONTACTS: Gwen Como Director, Investor Relations (619) 558-6064 PROTEIN POLYMER EXTENDS PUBLIC WARRANT EXPIRATION DATE SAN DIEGO, December 10, 1996 -- Protein Polymer Technologies, Inc. (NASDAQ-PPTI), announced today an extension to the expiration date of its publicly held Redeemable Warrants (NASDAQ - PPTIW) With this extension, the Redeemable Warrants may be exercised at any time prior to 5:30 p.m. (New York time) on January 21, 1998. The previous Expiration Date was 5:30 p.m. (New York time) on January 21, 1997. Each Redeemable Warrant represents the right to purchase one share of the Company's common stock at an exercise price of $8.00 per share, subject to certain adjustments. Protein Polymer Technologies, Inc. is a development stage biomaterials company focused on tissue repair and drug delivery. PPTI's genetically engineered, protein-based biomaterials can be designed specifically for use as biocompatible implants directing the activities of mammalian cells. Products being developed include tissue adhesives and sealants, wound healing matrices, surgical adhesion barriers, and drug delivery devices. PPTI also markets a line of protein polymer-activated cell culture products under the trade names of ProNectin(R) and SmartPlastic(TM). * * * Exhibit 99.5 EX-99.6 7 LETTER AGREEMENT DATED 10/04/96 MBF I, LLC 8 East 83rd Street, 5-D New York, New York 10028 October 4, 1996 Protein Polymer Technologies, Inc. 10655 Sorrento Valley Road San Diego, California 92121 Attention: Mr. J. Thomas Parmeter President and Chief Executive Officer Ladies and Gentlemen: This letter (this "Agreement") sets forth the agreement between MBF I, --------- LLC, a California limited liability company ("MBF"), and Protein Polymer --- Technologies, Inc., a Delaware corporation (the "Company"). ------- 1. Introduction. Commencing on the date hereof (the "Effective Date"), ------------ -------------- MBF will use its best efforts to assist the Company in increasing value to the Company's security holders through expansion of the market, base, trading volume, coverage and price for the Company's common stock, $.01 par value (the "Stock"). Such services to be provided by MBF to the Company in connection with ----- this engagement, when and as reasonably requested or approved by the Company, may include, without limitation, the following: . Advise the Company with respect to strategic business alternatives. . Undertake due diligence examinations to enable MBF to familiarize itself with the business, financial condition, operations, asset values and prospects of the Company. . Advise the Company with respect to the general structuring of financing or strategic transactions. . Advise the Company with respect to negotiating financing or strategic transactions. . As compensation for services rendered hereunder, MBF will receive from the Company warrants to purchase up to 750,000 shares of Stock (the "Warrant Shares"), all as more fully set -------------- Exhibit 99.6 Protein Polymer Technologies, Inc. October 4, 1996 Page 2 forth herein. During the term of this Agreement, the Company shall provide reasonable assistance to MBF in its efforts as reasonably required in order for MBF to respond to due diligence requests by potential investor or third party collaborators. MBF recognizes the confidential nature of certain information to be furnished to it hereunder, and agrees to execute the confidentiality agreement in the form attached hereto as Exhibit A (the "Confidentiality --------------- Agreement"). - --------- 2. Warrants. --------- (a) On the Effective Date, MBF shall be issued warrants to purchase 50,000 Warrant Shares at an exercise price equal to the greater of (i) one hundred twenty percent (120%) of the average between the closing bid and ask price of the Stock on the Effective Date, or (ii) $3.75 per share. (b) MBF shall be issued warrants to purchase an additional 100,000 Warrant Shares if, prior to January 31, 1997, the Company closes an equity investment in the Company of at least $3 million. The exercise price of such warrants shall be $6.00 per share. (c) MBF shall be issued warrants to purchase an additional 250,000 Warrant Shares if, prior to January 31, 1998, the Company closes an equity investment in the Company of at least $5 million (excluding the financing described in subsection (b) above) at a price of not less than $4.00 per share of Stock (or common stock equivalent) (appropriately adjusted for stock splits, recapitalizations and the like). The exercise price of such warrants shall be $6.00 per share. (d) MBF shall be issued warrants to purchase an additional 100,000 Warrant Shares if the average between the closing bid and ask price for the Stock during any 21 consecutive trading days between the Effective Date and prior to July 31, 1998 is at least $8.00. The exercise price of such warrants shall be $7.50 per share. (e) MBF shall be issued warrants to purchase an additional 100,000 Warrant Shares if the average between the closing bid and ask price for the Stock during any 21 consecutive trading days between the Effective Date and prior to December 31, 1998 is at least $9.00. The exercise price of such warrants shall be $7.50 per share. Protein Polymer Technologies, Inc. October 4, 1996 Page 3 (f) MBF shall be issued warrants to purchase an additional 150,000 Warrant Shares if the average between the closing bid and ask price for the Stock during any 21 consecutive trading days between the Effective Date and prior to June 30, 1999 is at least $10.00. The exercise price of such warrants shall be $7.50 per share. (g) Warrants issued to MBF pursuant to subsections (a)-(f), above, shall be substantially in the form attached hereto as Exhibit B and shall have a term of five years from the dates on which such warrants are issued and the performance criteria therefor has been satisfied, and shall expire if not exercised by MBF prior to the expiration of such five-year term. The vesting or "earning" of each of the foregoing six warrants is not dependent upon earning or vesting any other warrant. Once earned, such warrants, the Warrant Shares and the rights associated therewith shall not be assignable by MBF without the Company's prior written consent, which will not be unreasonably withheld, but subject in all cases to compliance with applicable securities laws. 3. The Warrant Shares. The Warrant Shares shall be unregistered but ------------------ shall have all other rights and characteristics (including par value, voting rights and non-assessability) as the Stock at the time of exercise of warrants by MBF. Not more than once each year, MBF shall have the right to demand registration of the Warrant Shares at its sole expense; provided, however, that MBF shall also be entitled to "piggyback" registration of the Warrant Shares on any registration of Stock by the Company (subject to cutbacks on a pro rata basis). MBF and the Company shall enter into a Registration Rights Agreement substantially in the form of Exhibit C hereto with respect to such rights. 4. Consulting Fee. -------------- (a) As a consulting fee for services rendered hereunder, MBF shall be entitled to receive from the Company (i) payments aggregating $100,000 in the event of a closing of the transaction described in Section 2(b) above, plus (ii) payments aggregating $200,000 in the event of a closing of the transaction described in Section 2(c) above, in either of such cases within the time frames set forth in such sections. Such fees, if earned, shall be payable in quarterly installments of $25,000 in the aggregate commencing on the first day of the Company's first Protein Polymer Technologies, Inc. October 4, 1996 Page 4 fiscal quarter following the closing of such transaction. The Company's obligation to pay any fees earned pursuant to this Section 4 shall survive any termination of this Agreement. (b) In addition to the foregoing, in the event that Fisher introduces the Company to other business, licensing or financial opportunities, the Company, in its sole and absolute discretion, may consider additional compensation to Fisher, but shall not be obligated in any way whatsoever under this paragraph (b). 5. Expenses. The Company shall reimburse MBF for any pre-approved -------- reasonable expenses incurred in furtherance of his responsibilities hereunder. 6. Term and Termination. -------------------- (a) Unless earlier terminated, pursuant to subparagraph (b) below, this Agreement shall commence on the Effective Date and shall terminate on January 31, 1998 if the warrants described in Section 2(b) or (c) above have not been earned by such date. If such warrants described in Section 2(b) or (c) have been earned by January 31, 1998, this Agreement shall terminate on June 30, 1999. (b) Notwithstanding anything herein to the contrary, the Company may terminate this Agreement by written notice to MBF: (1) in the event that MBF or its affiliate, Mark B. Fisher, has (i) committed a material breach of the terms of this Agreement or any other material legal obligation to the Company and failed to cure such breach within thirty (30) days of written notice to MBF that such breach has occurred, (ii) failed to perform any of the material obligations under the Confidentiality Agreement, (iii) demonstrated gross negligence or willful misconduct in the execution of the services rendered hereunder, (iv) been convicted of or pleaded nolo contendere to a felony or other serious crime, (v) been sanctioned or - --------------- enjoined by any regulatory or quasi regulatory body or agency, including without limitation the Securities and Exchange Commission or the National Association of Securities Dealers, Inc., (vi) engaged in business practices which, in the opinion of the Board of Directors of the Company, as confirmed in Protein Polymer Technologies, Inc. October 4, 1996 Page 5 a duly adopted resolution, publicly disparage the Company, or (vii) misappropriated assets of the Company; or (2) upon the closing of a transaction, or series of related transactions, pursuant to which (i) the Company sells all or substantially all of its assets to an unaffiliated third party, or (ii) an unaffiliated third party or "group" acquires more than 90% of the outstanding voting stock of the Company; or (3) in the event that Mark B. Fisher ceases to own 75% of the outstanding equity interests of MBF. 7. Representations. As an inducement to each of the parties to enter --------------- into this Agreement, the Company represents to MBF, and MBF represents to the Company, that it is authorized to enter into this Agreement and that the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action, and that the execution, delivery and performance of this Agreement will not violate any agreement to which it is a party, or violate or conflict with any law, rule or regulation applicable to, or binding upon, it. The representations set forth herein shall survive any termination of this Agreement. 8. Costs of Enforcement. In the event of any dispute related to or -------------------- arising under this Agreement, the prevailing party shall be entitled to recover from the nonprevailing party its costs and expenses related to such dispute, including reasonable attorneys' fees. 9. Company's Absolute Right of Rejection. Notwithstanding anything ------------------------------------- herein to the contrary, the Company shall retain the right, in its sole and absolute discretion, for any reason or no reason, to reject any offer, proposal, bid, subscription or other arrangement related to any financing or arrangement contemplated hereby, whether or not MBF would earn any fee or receive any warrants as a result of the consummation of such financing or arrangement. Protein Polymer Technologies, Inc. October 4, 1996 Page 6 10. Miscellaneous. This Agreement shall be governed by the internal ------------- laws (and not the law of conflicts) of the State of California. This Agreement is personal in nature and may not be assigned by MBF. If the foregoing is consistent with your understanding, please execute the attached duplicate original of this letter and return it to my attention, whereupon this Agreement will become binding upon us. Very truly yours, MBF I, LLC, a California limited liability company By: /s/ Mark B. Fisher --------------------------------- Mark B. Fisher, President ACCEPTED AND AGREED TO: PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation By: /s/ J. Thomas Parmeter ------------------------------------- J. Thomas Parmeter, President and Chief Executive Officer Exhibits - -------- A - Form of Confidentiality Agreement B - Form of Warrant C - Form of Registration Rights Agreement EX-99.7 8 FORM OF WARRANT WARRANT TO PURCHASE SHARES OF COMMON STOCK OF PROTEIN POLYMER TECHNOLOGIES, INC. THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THESE WARRANTS NOR ANY INTEREST THEREIN MAY BE TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THAT ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. No. MBF 96__ Warrant to Purchase______Shares _____, 1996 of Common Stock, $.01 Par Value WARRANT TO PURCHASE COMMON STOCK of PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation Void after the date set forth in the first paragraph hereof This certifies that, for value received, MBF I, LLC, a California limited liability company, or registered assigns ("Holder") is entitled, subject to the terms set forth below, to purchase from Protein Polymer Technologies, Inc., a Delaware corporation (the "Company"), ______ shares of Common Stock, $.01 par value, of the Company (such class of stock being referred to herein as "Common Stock"), as constituted on _________________ (the "Issue Date"), upon surrender of this Warrant, at the principal office of the Company referred to below, with the subscription form attached hereto duly executed, and simultaneous payment therefor in the consideration specified in Section 1 hereof, at the price of $____ per share (the "Purchase Price"). This Warrant must be exercised, if at all, prior to the date of the fifth anniversary of the Issue Date. The shares of Common Stock issued or issuable upon exercise of this Warrant are sometimes referred to as the "Warrant Shares." The term "Warrants" as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein. 1. Exercise. This Warrant may be exercised at any time or from time to -------- time, on any business day, for all or part of the full number of shares of Common Stock during Exhibit 99.7 the period of time called for hereby, by surrendering it at the principal office of the Company, 10655 Sorrento Valley Road, First Floor, San Diego, California 92121, with the subscription form duly executed, together with payment for the Warrant Shares payable in cash, by check for same day funds and/or by delivery and cancellation of promissory notes evidencing indebtedness of the Company. No other form of consideration shall be acceptable for the exercise of this Warrant. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As soon as practicable on or after such date, and in any event within 10 days thereof, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares of Common Stock issuable upon such exercise. Upon any partial exercise, the Company will issue and deliver to Holder a new Warrant or Warrants with respect to the shares of Common Stock not so transferred. No fractional shares of Common Stock shall be issued upon exercise of a Warrant. In lieu of any fractional share to which Holder would be entitled upon exercise, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise. 2. Payment of Taxes. All shares of Common Stock issued upon the ---------------- exercise of a Warrant shall be duly authorized, validly issued and outstanding, fully paid and non-assessable. Holder shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof and any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered Holder of the Warrant surrendered in connection with the purchase of such shares, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due. 3. Transfer and Exchange. This Warrant and all rights hereunder are --------------------- transferable, in whole but not in part, only with the prior approval of the Company, which consent shall not be unreasonably withheld. If such a proposed transfer is so approved, this Warrant is transferable on the -2- books of the Company maintained for such purpose at its principal office referred to above by Holder in person or by duly authorized attorney, upon surrender of this Warrant properly endorsed and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable and that when this Warrant shall have been so endorsed, the Holder hereof may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered Holder hereof as the owner for all purposes. 4. Certain Adjustments. ------------------- 4.1 Adjustment for Reorganization, Consolidation, Merger. In case of ------------------------------ --------------------- any reorganization of the Company (or any other corporation, the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the Issue Date, or in case, after such date, the Company (or any such other corporation) shall consolidate with or merge into another corporation (other than the merger of a wholly owned subsidiary into the Company) or convey all or substantially all its assets to another corporation, then and in each such case Holder, upon the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior thereto. 4.2 Adjustments for Dividends in Common Stock. If the Company at any ----------------------------------- ----- time or from time to time after the Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such -3- issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend; provided, however, that if such record date is fixed and such dividend is not fully paid on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this Section 4.2 as of the time of actual payment of such dividends. 4.3 Stock Split and Reverse Stock Split. If the Company at any time or ----------------------------------- from time to time after the Issue Date effects a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased and the number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately increased. If the Company at any time or from time to time after the Issue Date combines the outstanding shares of Common Stock into a smaller number of shares, the Purchase Price then in effect immediately before that combination shall be proportionately increased and the number of shares of Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately decreased. Each adjustment under this Section 4.3 shall become effective at the close of business on the date the subdivision or combination becomes effective. 4.4 Accountants' Certificate as to Adjustment. In each case of an ------------------------------ ---------- adjustment in the shares of Common Stock receivable on the exercise of the Warrants, the Company at its expense shall cause independent public accountants of recognized standing selected by the Company (who may be the independent public accountants then auditing the books of the Company) to compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment and showing the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to each holder of a Warrant at the time outstanding. 5. Loss or Mutilation. Upon receipt by the Company of evidence ------------------ satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of any Warrant and (in the case of loss, theft or destruction) of indemnity satisfactory to it (in the exercise of reasonable -4- discretion), and (in the case of mutilation) upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor. 6. Reservation of Common Stock. The Company shall at all times reserve --------------------------- and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrant, such number of its shares of Common Stock as shall from time to time be sufficient to effect exercise of the Warrant; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect such exercise, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 7. Notices of Record Date. In the event of (i) any taking by the ---------------------- Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation (other than a merger of a wholly owned subsidiary into the Company), or any transfer of all or substantially all of the assets of the Company to any other person or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder at least thirty (30) days prior to the record date specified therein, a notice specifying (1) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (3) the date, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up. -5- 8. Investment Representation and Restriction on Transfer. ----------------------------------------------------- 8.1 Securities Law Requirements. --------------------------- (a) By its acceptance of this Warrant, Holder hereby represents and warrants to the Company that this Warrant and the Warrant Shares will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting participations in or otherwise distributing the same. By acceptance of this Warrant, Holder further represents and warrants that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to any person, with respect to this Warrant or the Warrant Shares. (b) By its acceptance of this Warrant, Holder understands that this Warrant is not, and the Warrant Shares will not be, registered under the Securities Act of 1933, as amended (the "Act"), on the basis that the issuance of this Warrant and the Warrant Shares are exempt from registration under the Act pursuant to Section 4(2) thereof, and that the Company's reliance on such exemption is predicated on Holder's representations and warranties set forth herein. (c) By its acceptance of this Warrant, Holder understands that the Warrant and the Warrant Shares may not be sold, transferred, or otherwise disposed of without registration under the Act, or an exemption therefrom, and that in the absence of an effective registration statement covering the Warrant and the Warrant Shares or an available exemption from registration under the Act, the Warrant and the Warrant Shares must be held indefinitely. In particular, Holder is aware that the Warrant and the Warrant Shares may not be sold pursuant to Rule 144 promulgated under the Act unless all of the conditions of Rule 144 are satisfied. Among the conditions for use of Rule 144 are the availability of current information about the Company to the public, prescribed holding periods which will commence only upon Holder's payment for the securities being sold, manner of sale restrictions, volume limitations and certain other restrictions. By its acceptance of this Warrant, Holder represents and warrants that, in the absence of an effective registration statement covering the Warrant or the Warrant Shares, it will sell, transfer or otherwise dispose of the Warrant and the Warrant Shares only in a manner consistent -6- with its representations and warranties set forth herein and then only in accordance with the provisions of Section 8.1(d). (d) By its acceptance of this Warrant, Holder agrees that in no event will it transfer or dispose of any of the Warrants or the Warrant Shares other than pursuant to an effective registration statement under the Act, unless and until (i) Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the disposition, and (ii) if reasonably requested by the Company, at the expense of the Holder or transferee, it shall have furnished to the Company an opinion of counsel, reasonably satisfactory to the Company, to the effect that (A) such transfer may be made without registration under the Act and (B) such transfer or disposition will not cause the termination or the nonapplicability of any exemption to the registration and prospectus delivery requirements of the Act or to the qualification or registration requirements of the securities laws of any other jurisdiction on which the Company relied in issuing the Warrant or the Warrant Shares. 8.2 Legends; Stop Transfer. ---------------------- (a) All certificates evidencing the Warrant Shares shall bear a legend in substantially the following form: The securities represented by this certificate have not been registered under the Securities Act of 1933. These securities have been acquired for investment and not with a view to distribution and may not be offered for sale, sold, pledged or otherwise transferred in the absence of an effective registration statement for such securities under the Securities Act of 1933 or an opinion of counsel reasonably satisfactory in form and content to the issuer that such registration is not required under such Act. (b) The certificates evidencing the Warrant Shares shall also bear any legend required by any applicable state securities law. -7- (c) In addition, the Company shall make, or cause its transfer agent to make, a notation regarding the transfer restrictions of the Warrant and the Warrant Shares in its stock books, and the Warrant and the Warrant Shares shall be transferred on the books of the Company only if transferred or sold pursuant to an effective registration statement under the Act covering the same or pursuant to and in compliance with the provisions of Section 8.1(d). 9. Notices. All notices and other communications from the Company to ------- the Holder of this Warrant shall be mailed by first-class registered or certified mail, postage prepaid, to the address furnished to the Company by Holder. 10. Change; Waiver. Neither this Warrant nor any term hereof may be -------------- changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11. Headings. The headings in this Warrant are for purposes of -------- convenience in reference only, and shall not be deemed to constitute a part hereof. 12. Governing Law. This Warrant is delivered in California and shall ------------- be construed and enforced in accordance with and governed by the internal laws, and not the law of conflicts, of such State; provided however, that to the extent that an issue of determination is one of corporation law, then the Delaware General Corporation Law shall govern. PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation By ----------------------------------- J. Thomas Parmeter, President -8- SUBSCRIPTION FORM ----------------- (To be executed only upon exercise of Warrant) The undersigned, registered owner of this Warrant, irrevocably exercises this Warrant and purchases _________ of the number of shares of Common Stock, $.01 par value, of PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation, purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant. DATED:_______,199_ __________________________________ (Signature of Registered Owner) __________________________________ (Street Address) __________________________________ (City) (State) (Zip) -9- FORM OF ASSIGNMENT ------------------ FOR VALUE RECEIVED the undersigned, registered owner of this Warrant, hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock, $.01 par value, set forth below: Name of Assignee Address No. of Shares - ---------------- ------- ------------- and does hereby irrevocably constitute and appoint ________________ ____________________________________________ Attorney to make such transfer on the books of PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation, maintained for the purpose, with full power of substitution in the premises. DATED:_________________ ____________________________ (Signature) ____________________________ (Witness) -10- EX-99.8 9 REGISTRATION RIGHTS AGREEMENT DATED AS OF 10/04/96 REGISTRATION RIGHTS AGREEMENT ----------------------------- THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into --------- as of October 4, 1996, by and between PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and MBF I, LLC, a California limited ------- liability company (the "Investor"). -------- RECITAL ------- Pursuant to an engagement letter of even date herewith between the Company and the Investor, the Investor owns, and may acquire additional, warrants (collectively, the "Warrants") to acquire shares (the "Shares") of the -------- ------ Company's common stock, $0.01 par value per share (the "Common Stock") and the ------------ Company has agreed to register such Shares to the extent set forth herein. Therefore, the parties hereto hereby agree as follows: 1. Definitions. Unless the context otherwise requires, the terms ----------- defined in this Section 1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms herein defined. "Agreement" means this Registration Rights Agreement. --------- "Board" means the Board of Directors of the Company. ----- "Common Stock" has the meaning set forth in the Recital above. ------------ "Commission" means the Securities and Exchange Commission. ---------- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Investor" has the meaning assigned to it in the introductory -------- paragraph of this Agreement. "Person" includes any natural person, corporation, trust, association, ------ company, partnership, joint venture and other entity and any government, governmental agency, instrumentality or political subdivision. Exhibit 99.8 "Prospectus" means the prospectus included in any Registration ---------- Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. The terms "register," "registered" and "registration" refer to a -------- ---------- ------------ registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" means all reasonable expenses incurred by the --------------------- Company in complying with Section 2 hereof, including all registration and filing fees, listing fees for the Shares, printing expenses, fees and disbursements of counsel for the Company, and blue sky fees and expenses in all states. "Registrable Securities" means all Shares and any Common Stock issued ---------------------- or issuable in respect of the Shares pursuant to any stock split, stock dividend, recapitalization, or similar event; provided, however, that Registrable Securities shall cease to be Registerable Securities when they may be sold pursuant to Rule 144 under the Securities Act. "Registration Statement" means any registration statement of the ---------------------- Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 under the Securities Act, as such Rule may -------- be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission (excluding Rule 144A). -2- "Securities Act" means the Securities Act of 1933, as amended. -------------- "Shares" has the meaning set forth in the Recital above. ------ "Warrants" has the meaning set forth in the Recital above. -------- 2. Required Registration --------------------- (a) Registration. The Company shall, not more than once each ------------ calendar year, commencing 1997, and ending 2001, (each, as applicable, a "Filing Date"), prepare and file with the Commission a Registration Statement pursuant to Rule 415 (or any appropriate similar rule that may be adopted by the Commission) under the Securities Act covering the Registrable Securities (the "Registration"). The Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such holders from time to time. (b) Effectiveness. The Company shall use its best efforts to cause ------------- the Registration to become effective under the Securities Act as soon as practicable following the Filing Date. Subject to the requirements of the Securities Act including, without limitation, requirements relating to updating through post-effective amendments or otherwise, the Company shall use its best efforts to keep the Registration continuously effective until two months after the Registration is declared effective by the Commission. The Company shall use its best efforts to take such actions under the laws of various states as may be required to cause the resale of the Shares pursuant to the Registration to be lawful. (c) Suspension. Following the effectiveness of a Registration ---------- Statement filed pursuant to this section, the Company may, at any time, suspend the effectiveness of such Registration for up to 60 days, as appropriate (a "Suspension Period"), by giving notice to the Investor, if the Company shall have determined that the Company may be required to disclose any material corporate development which disclosure may have a material adverse effect on the Company. Notwithstanding the foregoing, no more than two Suspension Periods (i.e., 120 days) may occur in immediate succession. The period of any such suspension of the -3- registration statement shall be added to the period of time the Company agrees to keep the Registration Statement effective as provided in Section 2(b). The Company shall use its best efforts to limit the duration and number of any Suspension Periods. The Investor agrees that, upon receipt of any notice from the Company of a Suspension Period, the Investor shall forthwith discontinue disposition of shares covered by such Registration Statement or prospectus until the Investor (i) is advised in writing by the Company that the use of the applicable prospectus may be resumed, (ii) has received copies of a supplemental or amended prospectus, if applicable, and (iii) has received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference in such prospectus. 3. Expenses of Registration. All Registration Expenses shall be borne ------------------------ by the Investor; Registration Expenses shall include, and in no event will the Company be obligated to pay, expenses and fees of counsel for the Investor, stock transfer taxes or underwriters' discounts or commissions relating to Registrable Securities. 4. Incidental Registration. ----------------------- (a) Each time the Company shall determine to file a registration statement under the Securities Act (other than pursuant to Section 2 hereof and other than on Form S-4, S-8 or a registration statement on Form S-l covering solely an employee benefit plan) in connection with the proposed offer and sale for money of any of its securities either for its own account or on behalf of any other security holder, the Company agrees to give promptly written notice of its determination to the Investor. Upon the written request of the Investor given within thirty (30) days after the receipt of such written notice from the Company, the Company agrees to cause all such Registrable Securities, of which the Investor has so requested registration thereof, to be included in such registration statement and registered under the Securities Act, all to the extent requisite to permit the sale or other disposition by the Investor of the Registrable Securities to be so registered. (b) If the registration of which the Company gives written notice pursuant to Section 4(a) is for a public offering involving an underwriting, the Company -4- agrees to so advise the Investor as a part of its written notice. In such event the right of the Investor to registration pursuant to this Section 4 shall be conditioned upon the Investor's participation in such underwriting and the inclusion of the Investor's Registrable Securities in the underwriting to the extent provided herein. The Investor proposing to distribute its Registrable Securities through such underwriting agrees to enter into (together with the Company and the other holders distributing their securities through such underwriting) an underwriting agreement with the underwriter or underwriters selected for such underwriting by the Company, provided that such underwriting agreement is in customary form and is reasonably acceptable to the Investor requesting to be included in such registration. (c) Notwithstanding any other provision of this Section 4, if the managing underwriter of an underwritten distribution advises the Company and the Investor participating in such registration in writing that in its good faith judgment the number of shares of Registrable Securities and the other securities requested to be registered exceeds the number of shares of Registrable Securities and other securities which can be sold in such offering, then (i) the number of shares of Registrable Securities and other securities so requested to be included in the offering shall be reduced to that number of shares which in the good faith judgment of the managing underwriter can be sold in such offering, and (ii) such reduced number of shares shall be allocated among the Investor and the holders of other securities in proportion, as nearly as practicable, to the respective number of shares of Registrable Securities held by the Investor and other securities held by the other holders at the time of filing the registration statement. All Registrable Securities and other securities which are excluded from the underwriting by reason of the underwriter's marketing limitation and all other Registrable Securities not originally requested to be so included shall not be included in such registration and shall be withheld from the market by the holders thereof for a period, not to exceed one hundred eighty (180) days, which the managing underwriter reasonably determines is necessary to effect the underwritten public offering. -5- (d) The Investor shall bear and pay (or reimburse the Company for) the expenses incurred for inclusion of the Registrable Securities in a registration under this Section 4 (including underwriters' discounts or commissions), but only to the extent such expenses would not otherwise have been incurred by the Company. 5. Obligations of the Company. To effect the registration of the -------------------------- Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the Commission such amendments and supplements to a Registration Statement with respect to the Registrable Securities and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement. (b) Furnish to the Investor such numbers of copies of a Prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as it may reasonably request in order to facilitate the disposition of Registrable Securities owned by the Investor. (c) Use its best efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Investor, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (d) Notify the Investor of Registrable Securities covered by such Registration Statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. -6- 6. Indemnification. ---------------- (a) The Company will, and does hereby undertake to, indemnify and hold harmless the Investor, each of the Investor's officers, directors, partners and agents, and each Person controlling such Investor, with respect to any registration, qualification, or compliance effected pursuant to this Agreement, against all claims, losses, damages, and liabilities (or actions in respect thereto) to which they may become subject under the Securities Act, the Exchange Act, or other federal or state law arising out of or based on (i) any untrue statements of a material fact contained in any prospectus, offering circular, or other similar document (including any related Registration Statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any violation or alleged violation by the Company of any federal, state or common law rule or regulation applicable to the Company in connection with any such registration, qualification, or compliance, and will reimburse the Investor, and each such director, officer, partner, agent and controlling person, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action; provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense, arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by an instrument duly executed by the Investor and stated to be specifically for use therein. (b) The Investor will, if Registrable Securities held by or issuable to the Investor are included in such registration, qualification, or compliance, indemnify the Company, each of its directors, and each officer who signs a Registration Statement in connection therewith, and each person controlling the Company, against all claims, losses, damages, and liabilities (or actions in respect thereof) arising out of or based on any untrue statement of a material fact contained in any such Registration Statement, prospectus, offering circular, or other document, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, and each -7- such director, officer, partner, and controlling person, for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement or omission was made in such Registration Statement, prospectus, offering circular, or other document, in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by the Investor and stated to be specifically for use therein. In no event will the Investor be required to enter into any agreement or undertaking in connection with any registration under this Agreement providing for any indemnification or contribution obligations on the part of the Investor greater than the Investor's obligations under this Agreement. (c) Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide such indemnification (the "Indemnifying Party") of any claim as to which indemnification may be sought promptly after such Indemnified Party has actual knowledge thereof, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be subject to approval by the Indemnified Party (whose approval shall not be unreasonably withheld) and the Indemnified Party may participate in such defense at the Indemnifying Party's expense if representation of such Indemnified Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6, except to the extent that such failure to give notice shall materially adversely affect the Indemnifying Party in the defense of any such claim or any such litigation. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff therein, to such Indemnified Party, of a release from all liability in respect to such claim or litigation. -8- 7. Information by Investor. The Investor shall furnish to the ----------------------- Company such information regarding the Investor and the distribution proposed by the Investor as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification, or compliance referred to in this Agreement. 8. Delay of Registration. The Investor shall not have any right to --------------------- obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement. 9. Rule 144 Reporting. With a view to making available to the ------------------ Investor the benefits of certain rules and regulations of the Commission which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144, as long as Registrable Securities are outstanding; (b) File with the Commission, in a timely manner, all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) So long as the Investor owns any Registrable Securities, furnish to the Investor forthwith upon request a copy of the most recent annual or quarterly report of the Company and such other reports and documents as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing it to sell any such securities without registration. 10. Miscellaneous. ------------- 10.1 Waivers and Amendments. This Agreement or any provision hereof ---------------------- may be amended, waived, discharged or terminated only by a statement in writing signed by the Company and the Investor. No waiver by any party of the breach of any term or provision contained in this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. -9- 10.2 Notices. All notices, requests, consents and other ------- communications required or permitted hereunder shall be in writing and shall be delivered, or mailed first class prepaid, registered or certified mail, (a) If to the Investor, at 8 East 83rd Street, 5-D, New York, New York 10028, Attention: Mr. Mark B. Fisher, or at such other address as the Investor may specify by written notice to the Company, or (b) If to the Company, at 10655 Sorrento Valley Road, San Diego, California 92121, Attention: Mr. J. Thomas Parmeter, or at such other address as the Company may specify by written notice to the Investor, (c) Each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given when delivered, if delivered personally, or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. 10.3 Severability. Should any one or more of the provisions of this ------------ Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby. 10.4 Parties in Interest. All the terms and provisions of this ------------------- Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, whether so expressed or not. Subject to the immediately preceding sentence, this Agreement shall not run to the benefit of or be enforceable by any Person other than a party to this Agreement and its successors and assigns. 10.5 Headings. The headings of the sections, subsections and -------- paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement. -10- 10.6 Choice of Law. It is the intention of the parties that the internal ------------- substantive laws, and not the laws of conflicts, of the State of California should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties. 10.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 10.8 Priority. Notwithstanding anything to the contrary in this -------- Agreement, all registration rights pursuant to this Agreement are subject to the existing and prior registration rights of the holders of the Company's Series D Preferred Stock under that certain Amended and Restated Registration Rights Agreement entered into as of September 14, 1995 by and among the Company and the holders of the Company's Series D Preferred Stock, a copy of which has been delivered to MBF. -11- [REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE] IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed personally or by a duly authorized representative thereof as of the day and year first above written. PROTEIN POLYMER TECHNOLOGIES, INC. a Delaware corporation By: /s/ J. THOMAS PARMETER --------------------------------- J. Thomas Parmeter, President and Chief Executive Officer MBF I, LLC, a California limited liability company By: /s/ MARK B. FISHER --------------------------------- Mark B. Fisher, President -12- -----END PRIVACY-ENHANCED MESSAGE-----