-----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, DYBZACXis3K6qajKlbS3AMXzGQuQIq42k4tsfYZLqhMF3U/hlIhwmF9xLuUPRRvo uI4x4FnEbvQuc7gbW7zdQQ== 0000950142-99-000399.txt : 19990518 0000950142-99-000399.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950142-99-000399 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990517 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VIROPHARMA INC CENTRAL INDEX KEY: 0000946840 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232789550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-48239 FILM NUMBER: 99627643 BUSINESS ADDRESS: STREET 1: 405 EAGLEVIEW BLVD STREET 2: PO BOX 5000 CITY: EXTON STATE: PA ZIP: 19341 BUSINESS PHONE: 6104587300 MAIL ADDRESS: STREET 1: 76 GREAT VALLEY PARKWAY CITY: MALVERN STATE: PA ZIP: 19355 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SOROS GEORGE CENTRAL INDEX KEY: 0000900203 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE STREET 2: 33RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 212-262--6 MAIL ADDRESS: STREET 1: 888 SEVENTH AVE STREET 2: 33RD FLR CITY: NEW YORK STATE: NY ZIP: 10106 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 VIROPHARMA INCORPORATED (Name of Issuer) Common Stock, par value $.002 per share (Title of Class of Securities) 928241108 (CUSIP Number) Kenneth M. Socha, Esq. Perseus-Soros BioPharmaceutical Fund, L.P. The Army and Navy Club Building 1627 I Street, N.W., Suite 610 Washington D.C. 20006 Tel. No.: (202) 452-0101 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to Bruce A. Gutenplan, Esq. Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 May 5, 1999 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject to this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes.) Continued on the following page(s) Page 1 of 35 Pages Exhibit Index: Page 35 CUSIP No. 928241108 Page 2 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Perseus-Soros BioPharmaceutical Fund, LP 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF 2,895,000(1) SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING 2,895,000(1) PERSON WITH 10 SHARED DISPOSITIVE POWER 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* PN - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 3 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Perseus-Soros Partners, LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF 2,895,000(1) SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING 2,895,000(1) PERSON WITH 10 SHARED DISPOSITIVE POWER 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* OO - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 4 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Perseus BioTech Fund Partners, LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* OO - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 5 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON SFM Participation, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* PN - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 6 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON SFM AH, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* CO - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 7 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Kenneth M. Socha (in the capacity described herein) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* IN - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 8 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Frank H. Pearl (in the capacity described herein) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* IN - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 9 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON George Soros (in the capacity described herein) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* IA - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 10 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Soros Fund Management LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* OO; IA - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 11 of 35 Pages SCHEDULE 13D 1 NAME OF REPORTING PERSON Stanley F. Druckenmiller (in the capacity described herein) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States 7 SOLE VOTING POWER NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 2,895,000(1) OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 2,895,000(1) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,895,000(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.0% 14 TYPE OF REPORTING PERSON* IA - --------------- (1) Please see Item 4 for a description of the Common Stock Conversion Ratio (as defined herein). The number of shares beneficially owned by each of the Reporting Persons (as defined herein) assumes a Common Stock Conversion Ratio of 1 for 1. The Common Stock Conversion Ratio is subject to adjustment upon the occurrence of certain events. * SEE INSTRUCTIONS BEFORE FILLING OUT CUSIP No. 928241108 Page 12 of 35 Pages Item 1. Security and Issuer. This Statement on Schedule 13D relates to the Common Stock, par value $.002 (the "Common Stock"), of ViroPharma Incorporated, a Delaware corporation (the "Company"), whose principal executive office is located at 405 Eagleview Boulevard, Exton, Pennsylvania 19341. This statement on Schedule 13D is being filed by the Reporting Persons (as defined below) to report the acquisition by Perseus-Soros BioPharmaceutical Fund, L.P. of more than 5% of the outstanding shares of the Company, as a result of which each of the Reporting Persons may be deemed the beneficial owner of more than 5% of the outstanding shares of the Company. Item 2. Identity and Background. (a), (b), (c) and (f). This Statement on Schedule 13D is being filed on behalf of each of the following persons (collectively, the "Reporting Persons"): (i) Perseus-Soros BioPharmaceutical Fund, LP, a Delaware limited partnership (the "Purchaser"); (ii) Perseus-Soros Partners, LLC, a Delaware limited liability company ("Perseus-Soros Partners"); (iii) Perseus BioTech Fund Partners, LLC, a Delaware limited liability company ("Perseus Partners"); (iv) SFM Participation, L.P., a Delaware limited partnership ("SFM Participation"); (v) SFM AH, Inc., a Delaware corporation ("SFM AH"); CUSIP No. 928241108 Page 13 of 35 Pages (vi) Mr. Frank H. Pearl ("Mr. Pearl"); (vii) Mr. Kenneth M. Socha ("Mr. Socha"); (viii) Mr. George Soros ("Mr. Soros"); (viii) Soros Fund Management L.L.C., a Delaware limited liability company ("SFM LLC"); and (viii) Mr. Stanley F. Druckenmiller ("Mr. Druckenmiller"). The Purchaser was formed in order to engage in the acquiring, holding and disposing of investments in various companies. Perseus-Soros Partners is the general partner of the Purchaser and was formed to act as the general partner of the Purchaser. Perseus Partners and SFM Participation are the members of Perseus-Soros Partners. Perseus Partners was formed in order to engage in the acquiring, holding and disposing of investments in various companies. Messrs. Pearl and Socha are the members of Perseus Partners. Messrs. Pearl and Socha each have the ability to direct the investment and voting decisions of Perseus Partners and as such may be deemed to have investment and voting discretion with respect to securities beneficially owned by Perseus Partners through Perseus-Soros Partners. Accordingly, pursuant to the regulations promulgated under Section 13(d) of the Securities Exchange Act of 1934, Perseus-Soros Partners, Perseus Partners, Mr. Pearl and Mr. Socha each may be deemed a beneficial owner of the Common Stock held for the account of the Purchaser. SFM Participation was formed in order to engage in the acquiring, holding and disposing of investments in various companies. SFM AH is the general CUSIP No. 928241108 Page 14 of 35 Pages partner of SFM Participation. Mr. Soros is the sole shareholder of SFM AH. Mr. Soros has entered into an agreement dated as of January 1, 1997 with SFM LLC pursuant to which Mr. Soros has, among other things, agreed to use his best efforts to cause SFM AH, as the general partner of SFM Participation, to act at the direction of SFM LLC, which agreement to so act shall terminate upon the earlier of (a) the assignment to SFM LLC of the legal and beneficial ownership in SFM AH and (b) the assignment to SFM LLC of the general partnership interest in SFM Participation (the "SFM AH Contract"). Set forth on Annex A hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of SFM AH. Accordingly, pursuant to the regulations promulgated under Section 13(d) of the Securities Exchange Act of 1934, SFM Participation and SFM AH each may be deemed a beneficial owner of the Common Stock held for the account of the Purchaser. The business of SFM LLC is managed through a Management Committee (the "Management Committee") comprised of Mr. Soros, Mr. Druckenmiller and Mr. Gary Gladstein. The principal business of SFM LLC is to serve, pursuant to contract, as the principal investment manager to several foreign investment companies. Mr. Soros, as Chairman of SFM LLC, has the ability to direct the investment decisions of SFM LLC. Mr. Druckenmiller, as Lead Portfolio Manager of SFM LLC, has the ability to direct the investment decisions of SFM LLC. Set forth in Annex B hereto and incorporated by reference in response to this CUSIP No. 928241108 Page 15 of 35 Pages Item 2 and elsewhere in this Schedule 13D as applicable is a list of the Managing Directors of SFM LLC. The principal occupation of Mr. Soros, a United States citizen, is his direction of the activities of SFM LLC, which is carried out in his capacity as Chairman of SFM LLC at SFM LLC's principal office. The principal occupation of Mr. Druckenmiller, a United States citizen, is his position as Lead Portfolio Manager and a Member of the Management Committee of SFM LLC, which is carried out at SFM LLC's principal office. Pursuant to regulations promulgated under Section 13(d) of the Act, SFM LLC, pursuant to the provisions of the SFM AH Contract, Mr. Soros, in his capacity as Chairman of SFM LLC, and Mr. Druckenmiller, in his capacity as Lead Portfolio Manager of SFM LLC, each may be deemed a beneficial owner of the Common Stock held for the account of the Purchaser. The address of the principal business and principal offices of (i) the Purchaser, (ii) Perseus-Soros Partners, (iii) Perseus Partners, (iv) Mr. Pearl and (v) Mr. Socha is The Army and Navy Club Building, 1627 I Street, N.W., Suite 610, Washington D.C. 20006, the principal office of Perseus, L.L.C., a Delaware limited liability company ("Perseus"). The present principal occupation or employment of Mr. Pearl and Mr. Socha is as executive officers of Perseus and its related entities. Each of Mr. Pearl and Mr. Socha is a United States citizen. The address of the principal business and principal offices of (i) SFM Participation, (ii) SFM AH, (iii) Mr. Soros, (iv) SFM LLC and (v) Mr. Druckenmiller is 888 Seventh Avenue, 33rd Floor, New York, New York 10106. CUSIP No. 928241108 Page 16 of 35 Pages (d) and (e). Except as otherwise disclosed below, during the past five years, neither any Reporting Person nor, to the best knowledge of each Reporting Person, any individual otherwise identified in response to Item 2, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Information contained herein concerning SFM Participation, SFM AH, SFM LLC, Mr. Soros and Mr. Druckenmiller has been provided by SFM LLC. The Purchaser, Perseus-Soros Partners, Perseus Partners, Mr. Pearl and Mr. Socha assume no responsibility for such information. Information contained herein concerning the Perseus Partners, Mr. Pearl and Mr. Socha has been provided by each such Reporting Person. The Purchaser, Perseus-Soros Partners, SFM Participation, SFM AH, SFM LLC, Mr. Soros and Mr. Druckenmiller assume no responsibility for such information. Item 3. Source and Amount of Funds or Other Consideration. Pursuant to an Investment Agreement, dated as of May 5, 1999 (the "Investment Agreement"), between the Company and the Purchaser, the Company issued, and the Purchaser acquired from the Company, 2,300,000 shares of the Company's Series A Convertible Participating Preferred Stock, par value $.001 per CUSIP No. 928241108 Page 17 of 35 Pages share (the "Series A Preferred Stock"), and a warrant (the "Warrant" and, together with the Series A Preferred Stock, the "Securities") to purchase 595,000 shares of Common Stock for an aggregate purchase price of $14,260,000 (the "Purchase Price") and the source of which was capital contributions from the partners of the Purchaser. The Common Stock (or securities derivative thereof) held for the account of the Purchaser may be held through margin accounts maintained with brokers, which extend margin credit as and when required to open or carry positions in their margin accounts, subject to applicable federal margin regulations, stock exchange rules and such firms' credit policies. The positions which may be held in the margin accounts, including the Common Stock (or securities derivative thereof), are pledged as collateral security for the repayment of debit balances in the respective accounts. Item 4. Purpose of Transaction. Except as disclosed herein, the Reporting Persons have acquired the shares of Series A Preferred Stock and the Warrant for investment purposes. A copy of the Investment Agreement is attached hereto as Exhibit 1 and incorporated by reference herein, a copy of the Certificate of Designation for the Series A Preferred Stock (the "Series A Certificate") is attached hereto as Exhibit 2 and incorporated herein by reference and a copy of the Warrant is attached hereto as Exhibit 3 and incorporated herein by reference. Set forth below is a summary of the material terms of the Investment Agreement, Series A Certificate and the Warrant. CUSIP No. 928241108 Page 18 of 35 Pages The following summary is qualified in its entirety by reference to the Investment Agreement, the Series A Certificate and the Warrant. Terms of the Investment Agreement Registration Rights. Pursuant to the Investment Agreement, the Company granted the Purchaser certain demand registration rights as described more fully in the Investment Agreement in connection with shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock or exercise of the Warrant ("Registrable Securities"). The purpose of such registration rights is to facilitate the Purchaser's ability to dispose of its Registrable Securities in a public sale and the grant of such registration rights to the Purchaser under the Investment Agreement does not represent any present intention on behalf of the Purchaser to dispose of any Registrable Securities to be covered by such a registration statement, although such rights may be exercised in the future. Board Representation. Pursuant to the Investment Agreement, for so long as the Purchaser (and its affiliates) hold in the aggregate at least: (i) 10.0% of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to May 5, 1999), in each case, assuming that the Securities or other rights convertible into or exchangeable or exercisable for shares of the Common Stock have been converted, exchanged or exercised, the Company shall use its best efforts to ensure that the Company's Board of Directors shall consist of at least one director designated by the Purchaser (the "Purchaser Director"). Pursuant to the terms of the Investment Agreement, as soon CUSIP No. 928241108 Page 19 of 35 Pages as practicable after May 5, 1999, the Board of Directors of the Company shall appoint a Purchaser Director to the Board of Directors of the Company. Terms of the Series A Preferred Stock Dividends. The holders of the outstanding shares of Series A Preferred Stock shall be entitled to receive quarterly dividends, when, as and if declared by the Board of Directors out of funds legally available therefor. Each quarterly dividend shall be an amount per share (rounded to the nearest $.01) equal to 0.25 multiplied by the Dividend Amount (as defined below) and shall be payable on the last day of March, June, September and December in each year (each a "Dividend Payment Date") to the holders of record of Series A Preferred Stock at the close of business on the preceding business day, or such other dates as are fixed by the Board Directors within ten (10) days prior to the Dividend Payment Date (each a "Record Date"). Such dividends shall become payable beginning on the first Dividend Payment Date for which the Record Date is subsequent to the issue date. Dividends on each share of Series A Preferred Stock shall be cumulative and shall accrue on a day-to-day basis, whether or not earned, from and after the day immediately succeeding the date on which such share was issued, and shall be payable in cash (except upon conversion). Dividends payable for any partial dividend period shall be computed on the basis of actual days elapsed over a 365 day year. The Company, in its sole discretion, may elect not to pay such dividends in cash when due, in which case such dividends shall be automatically added to the Liquidation Value (as defined below) of the Series A Preferred Stock as of any such Dividend Payment Date and as a result shall no longer be considered due and payable. Each addition to the Liquidation Value in lieu of a CUSIP No. 928241108 Page 20 of 35 Pages cash dividend to the holders of the Series A Preferred Stock as provided in the preceding sentence shall constitute the full payment of such dividend. "Dividend Amount" means an amount per share of Series A Preferred Stock (rounded to the nearest $ .01) equal to $50 per $1,000 Liquidation Value of Series A Preferred Stock at all times after the issue date. "Liquidation Value" shall mean $6.20 per share of Series A Preferred Stock, subject to adjustment as provided in the Series A Certificate. Conversion. A Series A Preferred stockholder has the right to convert each share of Series A Preferred Stock, at the option of the holder, at any time after the issue date, into shares of Common Stock at the Common Stock Conversion Rate (as defined below). On May 5, 1999, the issue date, the Common Stock Conversion Rate was 1 for 1. The Common Stock Conversion Rate will be subject to adjustment if the Company elects not to pay dividends on the Series A Preferred Stock in cash when due, and such dividends are automatically added to the Liquidation Value of the Series A Preferred Stock. "Common Stock Conversion Rate" means, as of any date, a rate for each share of Series A Preferred Stock equal to (i) the Liquidation Value thereof plus all accrued and unpaid dividends thereon, divided by (ii) the Conversion Price (as defined below) in effect as of such date. "Conversion Price" means $6.20 per share of Series A Preferred Stock. The Conversion Price and the number of shares issuable upon conversion of the Series A Preferred Stock will be subject to adjustment upon the occurrence of certain events as set forth in the Series A Certificate. CUSIP No. 928241108 Page 21 of 35 Pages If, at any time after May 5, 2001, the second anniversary of the issue date, the average of the daily closing prices per share of Common Stock for 90 consecutive trading days is at least $15.50 (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the issue date), the Company, at its option, may elect to convert, all or any of the shares of Series A Preferred Stock into fully paid and nonassessable shares of Common Stock at the Common Stock Conversion Rate as of the date of conversion. Notwithstanding the foregoing, the Company shall not convert less than all outstanding shares of Series A Preferred Stock if shares of Series A Preferred Stock having an aggregate liquidation value of less than $5,000,000 would remain outstanding after giving effect to any such proposed optional conversion. Liquidation Preferences. In the event of (i) the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary; (ii) the sale, exchange or other conveyance (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Company other than to a wholly-owned subsidiary; and/or (iii) any consolidation or merger to which the Company is a party, other than a merger or consolidation in which the Company is the surviving or continuing corporation (collectively, each an "Extraordinary Event"), the Series A Preferred stockholders will be entitled to receive out of the assets of the Company available for distribution to stockholders, in preference to the holders of, and before any payment or distribution shall be made on, Junior Stock (as defined in the Series A Certificate), an amount (the "Liquidation Amount") equal to the greater CUSIP No. 928241108 Page 22 of 35 Pages of (i) the Liquidation Value per share plus all accrued and unpaid dividends thereon (whether or not declared) to the date fixed for the Extraordinary Event, or (ii) the amount that it would have received if immediately prior to the Extraordinary Event, the Series A Preferred Stock had been converted to Common Stock. Voting Rights. Approval by holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will be required for any action which (i) alters or changes the rights, preferences or privileges of the Series A Preferred Stock, (ii) creates or issues any new class of shares having, or reclassifies any junior class or series of shares to have, a preference over or parity with the Series A Preferred Stock, (iii) effects any redemption or repurchase of any capital stock or options of the Company (other than upon the repurchase by the Company of Common Stock or options issued to employees or others providing services to the Company up to an aggregate amount of $1 million), or (iv) declares or pays any dividends with respect to any class of stock junior to or on a parity with the Preferred Stock. Other than as set forth below or in the Series A Certificate, the shares of Series A Preferred Stock shall have no voting rights except as required by law. So long as the Series A Preferred Stock is outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at a special or annual meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock voting together as a single class with other shares entitled to vote thereon. With respect to any such vote, each share of Series A Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the CUSIP No. 928241108 Page 23 of 35 Pages number of votes that such holder would be entitled to cast had such holder converted its shares of Series A Preferred Stock into shares of Common Stock on the record date for determining the stockholders of the Company eligible to vote on any such matters. So long as at least 575,000 shares of Series A Preferred Stock (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the issue date) remain outstanding, the Company shall not, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of shares of Series A Preferred Stock representing at least a majority of the aggregate voting power of shares of the Series A Preferred Stock outstanding, voting as a separate class, author ize or issue any Senior Stock (as defined in the Series A Certificate) or Parity Stock (as defined in the Series A Certificate) or reclassify any Junior Stock as Parity Stock or Senior Stock or reclassify any Parity Stock as Senior Stock. The Company shall not, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of shares of Series A Preferred Stock representing at least a majority of the aggregate voting power of shares of Series A Preferred Stock then outstanding, voting as a separate class, amend, alter or repeal any of the provisions of the Company's Second Amended and Restated Certificate of Incorporation or the Series A Certificate, so as in any such case to materially adversely affect the preferences, special rights, powers or privileges of the shares of Series A Preferred Stock. CUSIP No. 928241108 Page 24 of 35 Pages Terms of the Warrant Exercise Rights. The Common Stock underlying the Warrant may be purchased at a price per share equal to $9.53 (the "Exercise Price"). The Exercise Price may be paid in cash or, at any time after a Change of Control (as defined in the Warrant), but prior to May 5, 2004, equivalent shares. The Exercise Price and the number of shares issuable upon exercise of the Warrant will be subject to adjustment upon the occurrence of certain events as set forth in the Warrant. Exercise Period. The Warrant is exercisable at any time, or from time to time, from the date of issuance, May 5, 1999, until May 5, 2004. Additional Disclosure The Reporting Persons may from time to time acquire additional shares of Common Stock in the open market or in privately negotiated transactions, subject to availability of Common Stock at prices deemed favorable, the Company's business or financial condition and other factors and conditions the Reporting Persons deem appropriate. Alternatively, the Reporting Persons may sell all or a portion of the Series A Preferred Stock, Warrant, or Common Stock issued upon exercise of the Warrant or conversion of the Series A Preferred Stock in privately negotiated transactions or in the open market pursuant to the exercise of certain registration rights granted pursuant to the Investment Agreement as described above, in each case subject to the factors and conditions referred to above and to the terms of the Investment Agreement, the Series A Preferred Stock and the Warrant, as the case may be. In addition, the Reporting Persons may formulate other purposes, plans or proposals regarding the Company or any of its securities to the extent deemed CUSIP No. 928241108 Page 25 of 35 Pages advisable in light of general investment and trading policies, market conditions or other factors. Except as described in the Investment Agreement, the Warrant or the Series A Certificate, and as otherwise set forth in this Schedule 13D, no Reporting Person or any individual otherwise identified in Item 2 has any present plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer or a material amount of assets of the Company or of any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to any of those enumerated above. CUSIP No. 928241108 Page 26 of 35 Pages Item 5. Interest in Securities of the Issuer. (a) As set forth above, on May 5, 1999, the Company issued to the Purchaser, and the Purchaser acquired, (i) 2,300,000 shares of the Series A Preferred Stock and (ii) the Warrant to purchase an aggregate of 595,000 shares of Common Stock, subject to adjustment under certain circumstances. Shares of Series A Preferred Stock are convertible into shares of Common Stock at any time. The Warrant is exercisable at any time until May 5, 2004. Accordingly, as of May 5, 1999, each of the Reporting Persons may be deemed to beneficially own an aggregate of 2,895,000 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 11,572,144 shares of Common Stock outstanding on April 1, 1999 as disclosed by the Company in its Proxy Statement filed with the Commission on April 6, 1999, represents approximately 20.0% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). As described in Item 4 above, the Common Stock Conversion Rate will be subject to adjustment if the Company elects not to pay dividends on the Series A Preferred Stock in cash when due, and such dividends are automatically added to the Liquidation Value of the Series A Preferred Stock. On May 5, 1999, the issue date, the Common Stock Conversion Rate was 1 for 1. (b) (i) Each of the Purchaser and Perseus-Soros Partners may be deemed to have sole power to direct the voting and disposition of the 2,895,000 shares of Common Stock beneficially owned by the Purchaser. CUSIP No. 928241108 Page 27 of 35 Pages (ii) By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, each of the Reporting Persons, other than the Purchaser and Perseus-Soros Partners, may be deemed to share the power to direct the voting and disposition of the 2,895,000 shares of Common Stock beneficially owned by the Purchaser. (c) Except as set forth above, no Reporting Person nor, to the best knowledge of each Reporting Person, any person identified in Item 2 hereof, beneficially owns any shares of Common Stock or has effected any transaction in shares of Common Stock during the preceding 60 days. (d) The partners of the Purchaser have the right to participate in the receipt of dividends from, or proceeds from the sale of, the Securities held for the account of the Purchaser in accordance with their ownership interests in the Purchaser. Paragraph (e) of Item 5 of Schedule 13D is not applicable to this filing. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to the Common Stock of the Issuer. Pursuant to Section 8 of the Investment Agreement, which is attached hereto as Exhibit 1 and incorporated herein by reference, the Company has granted the Purchaser, among other things, the right, on the terms and conditions set forth therein, to require the Company to register for sale to the public the shares of Common Stock issuable upon (i) exercise of the Warrant or (ii) the conversion of Series A Preferred Stock. CUSIP No. 928241108 Page 28 of 35 Pages From time to time, each of the Reporting Persons may lend portfolio securities to brokers, banks or other financial institutions. These loans typically obligate the borrower to return the securities, or an equal amount of securities of the same class, to the lender and typically provide that the borrower is entitled to exercise voting rights and to retain dividends during the term of the loan. From time to time, to the extent permitted by applicable laws, each of the Reporting Persons may borrow securities, including the Common Stock (or securities derivative thereof), for the purpose of effecting, and may effect, short sale transactions, and may purchase securities for the purpose of closing out short positions in such securities. Except as described elsewhere in this Schedule 13D and as set forth in the Investment Agreement, the Series A Certificate and the Warrant, copies of which are attached hereto as Exhibits 1, 2, and 3, respectively, and are incorporated herein by reference, to the best knowledge of the Reporting Persons, there exist no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Company, including but not limited to transfer or voting of any securities of the Company, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. CUSIP No. 928241108 Page 29 of 35 Pages Item 7. Material To Be Filed as Exhibits. 1. Investment Agreement, dated as of May 5, 1999 (the "Investment Agreement"), among the Company and Perseus-Soros BioPharmaceutical Fund, L.P., a Delaware limited partnership. 2. Certificate of Designation, dated May 5, 1999, governing ViroPharma Incorporated's Series A Convertible Participating Preferred Stock, par value $.001 per share. 3. Warrant, dated May 5, 1999, for 595,000 shares of Common Stock, par value $.002 per share, of ViroPharma Incorporated issued to Perseus-Soros BioPharmaceutical Fund, L.P. 4. Power of Attorney dated January 1, 1997, appointing Sean C. Warren and Michael C. Neus Attorney-In-Fact for George Soros. 5. Power of Attorney dated January 1, 1997, appointing Sean C. Warren and Michael C. Neus Attorney-In-Fact for Stanley F. Druckenmiller. 6. Joint Filing Agreement, dated May 17, 1999, among (i) Perseus-Soros BioPharmaceutical Fund, LP, (ii) Perseus-Soros Partners, LLC, (iii) Perseus BioTech Fund Partners, LLC, (iv) SFM Participation, L.P., (v) SFM AH, Inc., (vi) Frank H. Pearl, (vii) Kenneth M. Socha, (viii) George Soros, (ix) Soros Fund Management LLC and (x) Stanley F. Druckenmiller. CUSIP No. 928241108 Page 30 of 35 Pages SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: May 17, 1999 PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP By: Perseus-Soros Partners, LLC, General Partner By: SFM Participation, L.P., Member By: SFM AH, Inc., General Partner By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Vice President PERSEUS-SOROS PARTNERS, LLC By: SFM Participation, L.P., Member By: SFM AH, Inc., General Partner By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Vice President CUSIP No. 928241108 Page 31 of 35 Pages PERSEUS BIOTECH FUND PARTNERS, LLC By: /s/ KENNETH M. SOCHA -------------------- Name: Kenneth M. Socha MR. FRANK H. PEARL By: /s/ FRANK H. PEARL ------------------ Name: Frank H. Pearl MR. KENNETH M. SOCHA By: /s/ KENNETH M. SOCHA -------------------- Name: Kenneth M. Socha SFM PARTICIPATION, L.P. By: SFM AH, Inc., General Partner By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Vice President SFM AH, INC. By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Vice President MR. GEORGE SOROS By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Attorney-in-fact CUSIP No. 928241108 Page 32 of 35 Pages SOROS FUND MANAGEMENT LLC By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Assistant General Counsel MR. STANLEY F. DRUCKENMILLER By: /s/ MICHAEL C. NEUS ------------------- Name: Michael C. Neus Title: Attorney-in-fact CUSIP No. 928241108 Page 33 of 35 Pages ANNEX A Executive Officers of SFM AH, INC.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- -------------------- ---------------- Gary Gladstein Managing Director of SFM 888 Seventh Avenue President LLC 33rd Floor (United States) New York, NY 10106 Sean C. Warren Managing Director of SFM 888 Seventh Avenue Vice President LLC 33rd Floor and Secretary New York, NY 10106 (United States) Peter Streinger Chief Financial Officer of SFM 888 Seventh Avenue Treasurer LLC 33rd Floor (United States) New York, NY 10106 Michael C. Neus Assistant General Counsel of 888 Seventh Avenue Vice President SFM LLC 33rd Floor (United States) New York, NY 10106
To the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. CUSIP No. 928241108 Page 34 of 35 Pages ANNEX B The following is a list of all of the persons (other than Stanley Druckenmiller) who serve as Managing Directors of SFM LLC, as well as the number of shares of Common Stock (or securities derivative thereof), if any, held for the account of each: Scott K. H. Bessent Walter Burlock Brian J. Corvese L. Kevin Dann Gary Gladstein Ron Hiram David N. Kowitz Alexander C. McAree Paul McNulty Steven Okin Frank Sica Sean C. Warren Each of the above-listed persons is a United States citizen whose principal occupation is serving as Managing Director of SFM LLC, and each has a business address c/o Soros Fund Management L.L.C., 888 Seventh Avenue, 33rd Floor, New York, New York 10106. To the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. CUSIP No. 928241108 Page 35 of 35 Pages EXHIBIT INDEX Page No. 1. Investment Agreement, dated as of May 5, 1999 (the "Investment Agreement"), among the Company and Perseus- Soros BioPharmaceutical Fund, L.P., a Delaware limited partnership 2. Certificate of Designation, dated May 5, 1999, governing ViroPharma Incorporated's Series A Convertible Participating Preferred Stock, par value $.001 per share 3. Warrant, dated May 5, 1999, for 595,000 shares of Common Stock, par value $.002 per share, of ViroPharma Incorporated issued to Perseus-Soros BioPharmaceutical Fund, L.P. 4. Power of Attorney dated January 1, 1997, appointing Sean C. Warren and Michael C. Neus Attorney-In-Fact for George Soros. 5. Power of Attorney dated January 1, 1997, appointing Sean C. Warren and Michael C. Neus Attorney-In-Fact for Stanley F. Druckenmiller. 6. Joint Filing Agreement, dated May 17, 1999, among (i) Perseus-Soros BioPharmaceutical Fund, LP, (ii) Perseus-Soros Partners, LLC, (iii) Perseus BioTech Fund Partners, LLC, (iv) SFM Participation, L.P., (v) SFM AH, Inc., (vi) Frank H. Pearl, (vii) Kenneth M. Socha, (viii) George Soros, (ix) Soros Fund Management LLC and (x) Stanley F. Druckenmiller. EX-1 2 INVESTMENT AGREEMENT INVESTMENT AGREEMENT INVESTMENT AGREEMENT ("Agreement"), dated as of May 5, 1999, by and among ViroPharma Incorporated, a Delaware corporation (the "Company"), and Perseus-Soros BioPharmaceutical Fund, LP, a Delaware limited partnership (the "Purchaser"). WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser desires to purchase from the Company, (i) shares (the "Shares") of the Company's Series A Convertible Participating Preferred Stock, par value $.001 per share, having the terms and conditions set forth in a Certificate of Designation substantially in the form attached hereto as Exhibit A (the "Preferred Stock"), and (ii) warrants to purchase shares of Common Stock (the "Warrants") having the terms and conditions set forth in the form of Warrant certificate attached hereto as Exhibit B, in each case, upon the terms and subject to the conditions set forth herein and therein. The Warrants, together with the shares of Preferred Stock, are referred to herein as the "Securities." NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the Company and the Purchaser agree as follows: 1. DEFINITIONS. The terms defined in this Section 1 shall have the following meanings for all purposes of this Agreement: "1998 Form 10-K" has the meaning set forth in Section 3.1(a). "Act" means the Securities Act of 1933, as amended, or any superseding Federal statute, and the rules and regulations promulgated thereunder, all as the same shall be in effect at the time. References to a particular section of the Securities Act of 1933, as amended, shall include a reference to the comparable section, if any, of any such superseding Federal statute. An "Affiliate" of, or a person "affiliated" with, a specified Person, means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management, policies or investment decisions of a Person, whether through the ownership of voting securities, by contract, or otherwise. 2 "Annual Reports" means the Company's Annual Reports on Form 10-K for the years ended December 31, 1998 and 1997, each as filed with the SEC (including, in each case, all amendments thereto filed with the SEC prior to the date of this Agreement, all exhibits and schedules thereto and documents incorporated by reference therein, but excluding any amendments thereto made subsequent to the date hereof). "Benefit Plans" has the meaning set forth in Section 3.17. "Board of Directors" means the Board of Directors of the Company, as constituted from time to time. "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions are not required to be open in New York City. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person's capital stock. "Certificate of Designation" means the Certificate of the Powers Designations, Preferences and Rights of the Preferred Stock substantially in the form of Exhibit A hereto. "Certificate of Incorporation" means the Second Amended and Restated Certificate of Incorporation of the Company, as amended through the date hereof. "Closing" has the meaning set forth in Section 2.1. "Closing Date" has the meaning set forth in Section 2.1. "Code" means the Internal Revenue Code of 1986, as amended. "Common Stock" means a share of the Company's Common Stock, par value $.002 per share. "Company" has the meaning set forth in the preamble to this Agreement. "Encumbrance" means any mortgage, pledge, lien, security interest, restriction upon voting or transfer, claim or other encumbrance of any kind. 3 "Environmental Laws" means all Federal, state, local and foreign laws, principles of common law, regulations, codes and ordinances, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment, or health and safety, as in effect at the time. "ERISA" has the meaning set forth in Section 3.17. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any superseding Federal statute, and the rules and regulations promulgated thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include a reference to the comparable section, if any, of such superseding Federal statute. "FDA" means the United States Food and Drug Administration. "General Partner" means Perseus-Soros Partners, LLC, a Delaware limited liability company, the sole general partner of the Purchaser. "Governmental Authority" means the government of any nation or state, or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Intellectual Property" has the meaning set forth in Section 3.12. "Knowledge of the Company" means the actual knowledge of the executive officers of the Company without investigation. "Law" means any law, treaty, rule or regulation of a Governmental Authority or judgment, order, writ, injunction or determination of an arbitrator or a court or other Governmental Authority as in effect on the date hereof. "License Agreement" means the agreement by and between Sanofi, a corporation organized and existing under the laws of France ("Sanofi"), and the Company, dated as of December 22, 1995, and all amendments thereto. "Licenses" means any certificates, permits, licenses, franchises, consents, approvals, orders, authorizations and clearances from appropriate Governmental Authorities. 4 "Losses" has the meaning set forth in Section 7. "Material Adverse Effect" means a material adverse effect on the assets, results of operations, business, prospects or condition (financial or otherwise) of the Company. "Options" has the meaning set forth in Section 3.7. "Person" means any individual, firm, corporation, partnership, limited liability company or partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Preferred Stock" has the meaning set forth in the first recital of this Agreement. "Purchaser" has the meaning set forth in the preamble to this Agreement. "Purchaser Director" means the person serving as a member of the Board of Directors who has been designated by the Company in accordance with Section 5.3. "Quarterly Reports" means the Company's Quarterly Reports on Form 10-Q for the quarters ended September 30, 1998, June 30, 1998 and March 31, 1998, each as filed with the SEC. "Registrable Securities" means the shares of Common Stock issued or issuable upon conversion or exercise of the Securities. "Related Directors" means those members of the Board of Directors who are either employees of the Company or are associated with investors in the Company. "Representatives" means the officers and directors of the General Partner and the employees, counsel, accountants and other authorized representatives of the Purchaser, the General Partner or any Affiliates of either person. 5 "Research Agreement" means the agreement by and between Boehringer Ingelheim Pharmaceuticals, Inc., a Delaware corporation ("BI"), and the Company, dated as of July 23, 1996, and all amendments thereto. "Restricted Securities" means the Securities or shares of capital stock issued or issuable upon conversion or exercise of the Securities. "Rights" means any rights, title, interest or benefit of whatever kind and nature. "Rights Plan" means the Stockholders' Rights Plan, dated as of September 10, 1998, by and among the Company and StockTrans, Inc., as Rights Agent, as amended on May 5, 1999. "SEC" means the Securities and Exchange Commission. "SEC Documents" means the Annual Reports, the Quarterly Reports and all other documents filed by the Company with the SEC thereafter prior to the date hereof pursuant to Sections 13 or 15(d) of the Exchange Act (including all exhibits and schedules thereto and documents incorporated by reference therein), but shall not include any portion of any document which is not deemed to be filed under applicable SEC rules and regulations. "Securities" has the meaning set forth in the first recital of this Agreement. "Subsidiary" means, with respect to any Person, any corporation, limited or general partnership, joint venture, association, limited liability company or partnership, joint stock company, trust, unincorporated organization, or other entity analogous to any of the foregoing of which 50% or more of the equity ownership is, at the time, owned, directly or indirectly by such Person. "Tax" or "Taxes" has the meaning set forth in Section 3.14. "Transaction Documents" means (i) this Agreement (including the exhibits and schedules attached hereto) and (ii) the Warrants. "Transfer" means any sale, assignment, transfer or disposition by gift or otherwise, including without limitation, any distribution in liquidation or otherwise by a corporation or partnership or other Person. 6 "Warrants" has the meaning set forth in the first recital of this Agreement. 2. CLOSING. 2.1 Time and Place of the Closing. Subject to the terms and conditions of this Agreement, the closing of the sale and purchase of the Securities contemplated hereby (the "Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064, at 10:00 A.M., New York time, on the date hereof. The "Closing Date" shall be the date the Closing occurs. 2.2 Transactions at the Closing. At the Closing, subject to the terms and conditions of this Agreement, the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase, Preferred Stock and Warrants for an aggregate purchase price of $14,260,000 (the "Purchase Price") by wire transfer of immediately available funds to an account or accounts previously designated by the Company. At the Closing, the Company shall deliver to the Purchaser certificates representing such number of shares of Preferred Stock and Warrant certificates representing the number of Warrants as are set forth opposite the Purchaser's name on Schedule 2.2, each registered in the name of the Purchaser or its nominees, against payment by the Purchaser of the Purchase Price payable by the Purchaser in respect thereof. 2.3 Perseus-Soros Management, LLC Fee. At the Closing, subject to the terms and conditions of this Agreement, the Company shall pay to Perseus-Soros Management, LLC, a Delaware limited liability company ("Perseus- Soros Management"), a fee in an amount equal to $499,100, by wire transfer of immediately available funds to an account or accounts designated by Perseus-Soros Management. 2.4 Rights Plan. Prior to, or concurrently with, the Closing, the Company will adopt the amendment to the Rights Plan substantially in the form attached hereto as Exhibit C. 2.5 Opinion of Counsel. At the Closing, the Purchaser shall receive the favorable opinion of Morgan, Lewis & Bockius LLP, counsel to the Company, dated the Closing Date, substantially in the form of Annex A. 2.6 Secretary's Certificate. At the Closing, the Purchaser shall receive a certificate, dated the Closing Date and signed by the secretary or an 7 assistant secretary of the Company on behalf of the Company, certifying the correctness of attached copies of the Certificate of Incorporation (including amendments thereto), the By-laws (including amendments thereto), and resolutions of the Board of Directors approving the sale of the Securities to the Purchaser and the other transactions contemplated hereby. 2.7 Reservation of Stock. At the Closing, 3,195,000 shares of Common Stock shall have been duly authorized and reserved for issuance upon conversion or exercise of the Securities, as the case may be. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Purchaser that the following are true and correct as of the Closing Date: 3.1 Corporate Existence and Power. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Company's annual report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K"). The Company is duly qualified to transact business as a foreign corporation and is in good standing (if applicable) in each jurisdiction in which the conduct of its business or its ownership, leasing or operation of property requires such qualification, other than any failure to be so qualified or in good standing as would not singly or in the aggregate with all such other failures reasonably be expected to have a Material Adverse Effect. (b) True, correct and complete copies of the Certificate of Incorporation and the By-Laws as in effect on the date hereof have been provided by the Company to the Purchaser. 3.2 Power and Authority. The Company has the full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery and performance by the Company of this Agreement and each of the Transaction Documents and the consummation by the Company of the transactions contemplated hereby have been duly authorized and approved by the Board of Directors and no further corporate action on the part of the Company (other than the filing of the Certificate of Designation under the Delaware General Corporation Law) is necessary to authorize 8 the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby. The Board of Directors has duly adopted the Certificate of Designation. This Agreement has been duly executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 3.3 Subsidiaries. The Company has no Subsidiaries and does not otherwise own or control, directly or indirectly, any other person, corporation, association, or business entity. Except as described in the 1998 Form 10-K, the Company is not a participant in any joint venture, partnership, or similar arrangement. 3.4 Affiliate Transactions. Except as disclosed in the Company's Proxy Statement as filed with the SEC on April 6, 1999, the Company is not a party to any transaction or series of transactions or any contract with any officer, director, employee or Affiliate of the Company, in each case, the value of which is in excess of $60,000. 3.5 No Contravention, Conflict, Breach, Etc. The execution, delivery and performance of this Agreement and each Transaction Document to which it is a party by the Company and the consummation of the transactions contemplated hereby and thereby will not conflict with, contravene or result in a breach or violation of any of the terms and provisions of, or constitute a default under, or result in the creation or imposition of any Encumbrance upon any assets or properties of the Company or cause the Company to be required to redeem, repurchase or offer to repurchase any of their respective indebtedness under (i) the Certificate of Incorporation, the By-laws or other organizational document of the Company, (ii) any material Law of any Governmental Authority having jurisdiction over the Company or any of its assets, properties or operations or (iii) any indenture, mortgage, loan agreement, note or other agreement or instrument for borrowed money, any guarantee of any agreement or instrument for borrowed money or any material lease, permit, license or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the assets, properties or operations of the Company is subject. The consummation of the transactions contemplated by the Transaction Documents including, without limitation, the (i) acquisition by the Purchaser of the Securities pursuant hereto, (ii) conversion of the Preferred Stock into Common Stock as provided for in the Certificate of Designation and/or (iii) exercise of the Warrants, will not: 9 (a) result in any anti-dilution adjustment or change in conversion or exercise ratio or conversion or exercise price or similar adjustment with respect to any outstanding equity or debt securities of the Company; or (b) in the Company's belief, result in a change in control of the Company under the License Agreement or otherwise give Sanofi the right to discontinue or terminate the License Agreement. 3.6 Consents. No consent, approval, authorization, order, registration, filing or qualification of or with any (i) Governmental Authority, (ii) stock exchange on which the securities of the Company are traded or (iii) other Person (whether acting in an individual, fiduciary or other capacity) is required to be made or obtained by the Company for the execution, delivery and performance by the Company of this Agreement and each Transaction Document to which it is a party and the consummation of the transactions contemplated hereby and thereby, except such approvals as may be required under the Act and state securities laws in connection with the performance by the Company of its obligations under Section 8 hereof and except consents which are not material to the business or operations of the Company. Shareholder approval is not required to be obtained by the Company for the execution, delivery and performance by the Company of this Agreement and each Transaction Document to which it is a party and the consummation of the transactions contemplated hereby and thereby. 3.7 Capitalization. Schedule 3.7 sets forth, as of April 30, 1999, (i) the authorized Capital Stock of the Company, (ii) the issued and outstanding Capital Stock of the Company and (iii) in the aggregate, all outstanding options, warrants, conversion privileges or other rights to purchase or otherwise acquire any authorized but unissued or treasury shares of Capital Stock (collectively, "Options") of the Company. No shares of the Company's Preferred Stock, par value $.001 per share (the "Company Preferred Stock"), are issued and outstanding as of the date hereof. Since April 30, 1999, the Company has not issued any additional shares of Capital Stock (other than Common Stock issued upon exercise of outstanding Options). Schedule 3.7 sets forth the number of shares of Common Stock reserved for (i) issuance upon exercise of all outstanding Options, (ii) issuance upon conversion of the Preferred Stock and (iii) issuance upon exercise of the Warrants. Except as set forth in Schedule 3.7, no other shares of the Company's Capital Stock are reserved for future issuance. The shares of Preferred Stock and the shares of Common Stock issuable upon conversion of the shares of Preferred Stock, and the Warrants and the shares of Common Stock issuable upon exercise of the Warrants, when issued and paid for in compliance with the provisions of this Agreement, the Certificate of Designation, the Warrants and the Certificate of Incorporation, will be duly 10 authorized, validly issued, fully paid and nonassessable, will not have been issued in violation of the preemptive or similar rights of any Person. The issued and outstanding shares of Capital Stock of the Company are duly authorized, validly issued, fully paid and nonassessable, and were issued in compliance with the registration and qualification requirements of all applicable federal securities laws or an exemption therefrom. 3.8 SEC Documents. (a) The Company has made all filings required to be made with the SEC since November 19, 1996. (b) As of its filing date, each SEC Document filed pursuant to the Exchange Act (i) complied in all material respects with the applicable requirements of the Exchange Act and (ii) did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (c) Each final registration statement filed with the SEC, as amended or supplemented prior to the Closing Date, if applicable, pursuant to the Act, as of the date such statement or amendment became or will become effective (i) complied or will comply in all material respects with the applicable requirements of the Act and (ii) did not or will not contain any 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 (in the case of any prospectus, in light of the circumstances under which they were made). 3.9 Financial Statements. The audited financial statements and notes included in the SEC Documents comply in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, were prepared in accordance with generally accepted accounting principles consistently applied throughout the period involved except as noted therein, and fairly present in all material respects the financial condition, results of operations, cash flows and changes in stockholders' equity of the Company at the dates and for the periods presented. Since December 31, 1998, the Company has not incurred any material liabilities other than in the ordinary course of business of the Company, and there has been no change, and no development or event involving a prospective change, which has had or could reasonably be expected to have, a Material Adverse Effect. 11 3.10 No Existing Violation, Default, Etc. The Company is not in violation (i) of any provision of its Certificate of Incorporation, By-laws or other organizational documents or (ii) of any applicable Law or regulation, which violation has or would reasonably be expected to have a Material Adverse Effect. No breach, event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists under any indenture, mortgage, loan agreement, note or other agreement or instrument for borrowed money, any guarantee of any agreement or instrument for borrowed money or any lease, permit, license or other agreement to which the Company is a party or by which the Company is bound or to which any of the properties, assets or operations of the Company is subject, which breach, event of default, or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default, has or would reasonably be expected to have a Material Adverse Effect. 3.11 Licenses and Permits. The Company has such Licenses as are necessary to own, lease or operate its properties and to conduct its businesses in the manner described in the SEC Documents and as currently owned or leased and conducted and all such Licenses are valid and in full force and effect, except Licenses the failure of which to have or to be in full force and effect individually or in the aggregate has not had, and would not reasonably be expected to have, a Material Adverse Effect. The Company has not received any written notice that any violations are being or have been alleged in respect of any such License and no proceeding is pending or, to the Knowledge of the Company, threatened, to suspend, revoke or limit any such License the effect of which would reasonably be expected to have a Material Adverse Effect. The Company is in compliance with its respective obligations under such Licenses, with such exceptions as individually or in the aggregate have not had, and would not reasonably be expected to have, a Material Adverse Effect, and no event has occurred that allows, or after notice or lapse of time would allow, revocation, suspension, limitation or termination of such Licenses, except such events as have not had, or would not reasonably be expected to have, a Material Adverse Effect. 3.12 Intellectual Property. There are no patents, patent applications, and other patent rights (including any divisions, continuations, continua tions-in-part, substitutions, or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are modified or resubmitted) owned or licensed by the Company ("Intellectual Property") other than as disclosed in Schedule 3.12. Except as disclosed in Schedule 3.12: (i) the Company owns or possesses sufficient legal rights to all Intellectual Property and Related Intellectual Property (as defined below in this Section 3.12) necessary for its business as presently conducted without any conflict or infringement of rights of others; (ii) 12 other than the License Agreement, those agreements listed on Schedule 3.18 and those contracts, agreements, and instruments required to be filed as an exhibit to the 1998 Form 10-K, there are no material outstanding options, licenses, or agreements of any kind relating to the Intellectual Property nor is the Company bound by or a party to any material options, licenses, or agreements of any kind with respect to the intellectual property of any other person or entity; (iii) to the Knowledge of the Company, the Company has not infringed upon or otherwise violated the intellectual property rights of any third party; (iv) other than as previously disclosed to the Purchaser in writing, the Company has not received any claim, charge, demand, notice or other communication alleging that the Company has violated or, by conducting its business as proposed, would violate any intellectual property rights of any other person or entity; (v) other than as previously disclosed to the Purchaser in writing, the Company is unaware of any facts that would form a reasonable basis for an action or claim by others alleging infringement by the Company of Intellectual Property of others; and (vi) all of the Company's Intellectual Property is owned by the Company, free and clear of all liens and encumbrances and held in the Company's name. None of the execution or delivery of this Agreement or any Transaction Documents, or the carrying on of the Company's business by the employees of the Company, will conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument related to the Company's Intellectual Property. The Company has taken all action reasonably necessary and desirable to maintain and protect each item of Intellectual Property owned by the Company. Each employee, officer and director of the Company has executed an agreement regarding inventions and confidentiality substantially in the form or forms delivered to the Purchaser. The Company is unaware of uncited prior art that is more pertinent than the art already of record in the U.S. Patent and Trademark Office in connection with the patents and patent applications of the Company's Intellectual Property. As used in this Agreement, the term "Related Intellectual Property" means all intellectual property rights and other intangible property rights (other than standard license agreements and other related rights acquired by the Company or under which the Company is the licensee in connection with the Company's use of administrative, ministerial, accounting and financial office automation software and related products) including, without limitation, (i) trademarks, service marks, fictitious or assumed names, trade dress, trade names, brand names, Internet domain names, designs, logos, or corporate names, whether registered or unregistered, and all registrations and applications for registration thereof; (ii) copyrights, including all renewals and extensions thereof, copyright registrations and applications for registration thereof, and non-registered copyrights; (iii) trade secrets, concepts, ideas, designs, research, processes, procedures, techniques, methods, know-how, data, mask 13 works, discoveries, inventions, modifications, extensions, improvements, formulae and other proprietary rights (whether or not patentable or subject to copyright, mask work, or trade secret protection); and (iv) computer software programs, including, without limitation, all source code, object code, and documentation related thereto. 3.13 Environmental Matters. The Company and its operations and properties are and have been in compliance in all material respects with all applicable Environmental Laws, and to the Knowledge of the Company, no material expenditures are or will be required in order to comply with any applicable Environmental Laws. There is no civil, criminal or administrative judgment, action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter pending or, to the Knowledge of the Company, threatened against the Company pursuant to Environmental Laws which could reasonably be expected to result in a material fine, penalty or other obligation, cost or expense. There are no past or present events, conditions, circumstances, activities, practices, incidents, agreements, actions or plans which may prevent compliance by the Company with, or which have given rise to, or will give rise to, material liability to the Company under Environmental Laws. 3.14 Taxes. The Company has filed or caused to be filed, or has properly filed extensions for, all material Tax returns that are required to be filed and has paid or caused to be paid all material Taxes as shown on said returns and on all material assessments received by it to the extent that such Taxes have become due, except Taxes the validity or amount of which is being contested in good faith by appropriate proceedings and with respect to which adequate reserves, in accordance with generally accepted accounting principles, have been set aside. These returns are true and correct in all material respects. The Company has paid or caused to be paid, or have established reserves that the Company reasonably believes to be adequate in all material respects, for all Tax liabilities applicable to the Company for all fiscal years that have not been examined and reported on by the taxing authorities (or closed by applicable statutes). Schedule 3.14 sets forth the tax year through which United States Federal income tax returns of the Company have been examined and closed. For purposes of this Section 3.14, "Tax" or "Taxes" means any federal, state, county, local, foreign and other taxes (including, without limitation, income, profits, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy, production, transfer, withholding, employment, unemployment compensation, payroll and property taxes, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including deficiencies, interest, additions to tax or interest, and penalties with respect thereto, and including expenses associated with contesting any proposed adjustments related to any of the foregoing. 14 3.15 Litigation. Other than as disclosed in Schedule 3.15, there are no actions, suits, proceedings, or investigations pending or, to the Knowledge of the Company, threatened against the Company or its properties before any court or governmental agency (nor, other than as previously disclosed to the Purchaser in writing, to the Knowledge of the Company, is there any basis therefor). The foregoing includes, without limitation, any action, suit, proceeding, or investigation pending or currently threatened against the Company involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any, information or techniques allegedly proprietary to any of their former employers, their obligations under any agreements with prior employers, negotiations by the Company with potential backers of, or investors in, the Company or in connection with any investment agreement, rights agreement, stock purchase agreement, shareholder(s) agreement or similar agreement, arrangement or understanding entered into by the Company. The Company is not a party to, or to the Knowledge of the Company, named in any order, writ, injunction, judgment or decree of any court, government agency, or instrumentality. There is no action, suit or proceeding by the Company currently pending, or that the Company currently intends to initiate. 3.16 Labor Relations. No (i) grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or, to the Knowledge of the Company, threatened against the Company and (ii) strike, labor dispute, slowdown or stoppage has occurred within the past 36 months or is pending or, to the Knowledge of the Company, threatened against the Company. The Company is not a party to any collective bargaining agreement or contract and to the Knowledge of the Company, no union organizing activities are taking place that affect the employees of the Company. 3.17 Employee Benefits. (a) Except for the plans described in the SEC Documents filed with the SEC prior to the date of this Agreement and those listed in Schedule 3.17 (the "Benefit Plans"), there are no employee benefit plans or arrangements of any type (including, without limitation, plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended and the regulations thereunder ("ERISA") under which the Company has or in the future could have directly, or indirectly through a Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and (o) of the Code), any material liability with respect to any current or former employee of the Company or any Commonly Controlled Entity. No such Benefit Plan is a "multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)) or subject to Title IV of ERISA 15 and, during the previous six years, the Company has not contributed to, or had any obligation to contribute to, any such multiemployer plan or any plan subject to Title IV of ERISA. (b) With respect to each Benefit Plan: (i) such Benefit Plan has been maintained and administered at all times in material compliance with its terms and applicable law and regulation; (ii) no event has occurred and to the Knowledge of the Company, there exists no circumstance under which the Company could directly, or indirectly through a Commonly Controlled Entity, incur any material liability under ERISA, the Code or otherwise (other than routine claims for benefits); (iii) there are no actions, suits or claims (other than routine claims for benefits) pending or, to the Knowledge of the Company, threatened, with respect to any Benefit Plan or against the assets of any Benefit Plan with respect to which suits management of the Company reasonably believes the Company could incur any material liability; (iv) all contributions and premiums due and owing to any Benefit Plan have been made or paid on a timely basis and no "accumulated funding deficiency", as defined in Code Section 412, has been incurred, whether or not waived; and (v) if such Benefit Plan is intended to be qualified under Section 401(a) of the Code, such Benefit Plan has been determined to be so qualified and each trust created under such Benefit Plan has been determined to be exempt from tax under Section 501(a) of the Code and to the Knowledge of the Company, no event has occurred since the date of such determinations, including effective changes in laws or regulations or modifications to the Benefit Plans, that would adversely affect such qualification or tax exempt status. (c) The Company has no Postretirement Benefit Obligation (as defined in Statement of Financial Accounting Standards No. 106) in respect of post-retirement health and medical benefits for current and former employees of the Company. No condition exists that would prevent the Company from amending or terminating any plan providing health or medical benefits in respect of current or former employees of the Company. (d) No employee or former employee of the Company will become entitled to any bonus, retirement, severance, job security or similar benefit or enhanced such benefit (including acceleration of vesting or exercise of an incentive award, stock option or restricted security) as a result of the transactions contemplated hereby. (e) All persons classified by the Company as independent contractors satisfy the requirements of applicable law to be so classified 16 and the Company has no obligation to provide benefits to any such person under any Benefit Plan. 3.18 Contracts. Except as disclosed in Schedule 3.18, all contracts, agreements, and instruments required to be filed as an exhibit to the 1998 Form 10-K are legal, valid, binding, and in full force and effect, and, to the Knowledge of the Company, are enforceable by the Company in accordance with their respective terms, subject to (x) laws of general application relating to bankruptcy, insolvency and the relief of debtors, (y) rules of law governing specific performance, injunctive relief or other equitable remedies, and (z) actions or omissions of parties other than the Company; provided, however, that the Company has no Knowledge of any such actions or omissions. Except as disclosed in Schedule 3.18, other than (i) those contracts, agreements, and instruments filed as an exhibit to the 1998 Form 10- K and (ii) agreements relating exclusively to the Company's preclinical development activities, the Company has not granted to any Person rights, whether exclusive or nonexclusive, to develop, manufacture, assemble, distribute, market, or sell its (i) pleconaril, (ii) hepatitis C or (ii) respiratory syncytial virus products, and has not granted any rights that limit the Company's exclusive right to develop, manufacture, assemble, distribute, market, or sell such products. In connection with the License Agreement: (i) no violation, breach, event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists thereunder; (ii) through the date hereof, Sanofi has selected, with respect to each Product (as defined in the License Agreement) developed by the Company, the option set forth in Section 3.2(b) therein which provides that Sanofi has the right to use all information and data developed by the Company thereunder for applying for Registrations (as defined in the License Agreement) of the Products in the European Union, without joining the Company in the Development Work (as defined in the License Agreement) of the Products in the Territory (as defined in the License Agreement); and (iii) the License Agreement permits the Company to develop all therapeutic applications for diseases caused by picornaviruses which the Company is now developing, including but not limited to viral meningitis and viral respiratory illness. None of the compounds currently in development by the Company for treatment of hepatitis C are subject to any rights of BI under the Research Agreement. 3.19 No Material Adverse Change. Except as disclosed in Schedule 3.19, since December 31, 1998: (i) the Company has not incurred any material liability or obligation (indirect, direct or contingent), or entered into any material oral or written agreement or other transaction, that is not in the ordinary course of business or that would reasonably be expected to result in a Material 17 Adverse Effect; (ii) the Company has not sustained any loss or interference with its business or properties from fire, flood, windstorm, accident or other calamity (whether or not covered by insurance) that has had or that would reasonably be expected to have a Material Adverse Effect; (iii) there has been no material change in the indebtedness of the Company; (iv) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its Capital Stock; (v) the Company has not made (nor does it propose to make) (a) any material change in its accounting methods or practices, (b) any material change in the depreciation or amortization policies or rates adopted by it, in the case of both (a) and (b), except as may be required by law or applicable accounting standards or (c) in a manner inconsistent with the Company's past practice, any grant or award of stock-based compensation or material increase in compensation to any employee or material modification to any such grant or award or any Benefit Plan; and (vi) there has been no event causing a Material Adverse Effect, nor any development that would, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. 3.20 Insurance. The Company has in full force and effect (i) product liability, (ii) fire and (iii) casualty insurance policies, in each case, with financially sound and responsible insurance companies, and with respect to clauses (ii) and (iii) above, with extended coverage, sufficient in amount (subject to reasonable deductions) in respect of its properties that might be damaged or destroyed. 3.21 Rights Plan. The Company has not adopted a stock holders rights plan, poison pill or similar arrangement other than the Rights Plan. The consummation of the transactions contemplated by the Transaction Documents (including, without limitation, the (i) acquisition by the Purchaser of the Securities pursuant hereto, (ii) conversion of the Preferred Stock into Common Stock as provided for in the Certificate of Designation and/or (iii) exercise of the Warrants) will not by itself cause any holder of a Right (as defined in the Rights Plan) to have the right to exercise any such Right in whole or in part. 3.22 Broker's Fees. Except for any fees payable to Perseus-Soros Management and as previously disclosed to the Purchaser in writing, 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 or any transaction contemplated hereby. 3.23 Investment Company. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 18 3.24 Exemption from Registration; Restrictions on Offer and Sale of Same or Similar Securities. Assuming the representations and warranties of the Purchaser set forth in Section 4.5 hereof are true and correct in all material respects, the offer and sale of the Securities made pursuant to this Agreement will be exempt from the registration requirements of the Act. Neither the Company nor any Person acting on its behalf has, in connection with the offering of the Securities engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 502(c) under the Act), (ii) any action involving a public offering within the meaning of Section 4(2) of the Act, or (iii) any action that would require the registration under the Act of the offering and sale of the Securities pursuant to this Agreement or that would violate applicable state securities or "blue sky" laws. The Company has not made and will not prior to the Closing make, directly or indirectly, any offer or sale of shares of its Capital Stock, or any Options, if as a result the offer and sale of the Securities contemplated hereby, or any of them, could fail to be entitled to exemption from the registration requirements of the Act. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Act. 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to the Company that the following are true and correct as of the Closing Date: 4.1 Existence and Power. The Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to conduct its business as currently conducted. 4.2 Power and Authority. The Purchaser has the full power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder. The execution, delivery and performance by the Purchaser of this Agreement and the other Transaction Documents and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized by the Purchaser. Each this Agreement and the other Transaction Documents has been duly executed and delivered by the Purchaser and each is a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms. 4.3 No Contravention, Conflict, Breach, Etc. The execution, delivery and performance of this Agreement and the other Transaction 19 Documents by the Purchaser and to which it is a party and the consummation of the transactions contemplated hereby and thereby will not conflict with, contravene or result in a breach or violation of any of the terms and provisions of, or constitute a default under, (i) the partnership agreement or other organizational documents of the Purchaser, (ii) any Law of any Governmental Authority having jurisdiction over the Purchaser, or (iii) any material agreement to which the Purchaser is a party. 4.4 Consents. No consent, approval, authorization, order, registration, filing, or qualification of or with any Governmental Authority or other Person (whether acting in an individual, fiduciary or other capacity) is required to be made or obtained by the Purchaser for the consummation of the transactions contemplated hereby and by the other Transaction Documents. 4.5 Acquisition for Own Account. The Securities to be acquired by the Purchaser pursuant to this Agreement and the shares of capital stock issuable under the exercise or conversion of the Securities are being and will be acquired by the Purchaser for its own account and with no intention of distributing or reselling the Securities in any transaction that would be in violation of the Act or the securities laws of any state, without prejudice, however, to the rights of the Purchaser at all times to sell or otherwise dispose of all or any part of the Securities and the shares of capital stock issuable under the exercise or conversion of the Securities under an effective registration statement under the Act, under an exemption from such registration available under the Act, and subject, nevertheless, to the disposition of the Purchaser's property being at all times within its control. The Purchaser (i) is an "accredited investor," as defined in Regulation D promulgated by the SEC under the Act, (ii) has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities and the shares of capital stock issuable under the exercise or conversion of the Securities, and (iii) can bear the economic risk of an investment in the Securities and the shares of capital stock issuable under the exercise or conversion of the Securities and can afford a complete loss of such investment. Neither the Purchaser nor any Affiliate of the Purchaser, including Perseus-Soros Management, has made any offer to any Person to sell or a solicitation of an offer to buy securities of the Company, nor has such party engaged in any form of general solicitation or general advertising in connection with the purchase of securities of the Company hereunder. Notwithstanding the foregoing, nothing contained in this Section 4.5 shall affect or be deemed to modify any representation or warranty made by the Company. 4.6 Hart-Scott-Rodino. The Purchaser is its own Ultimate Parent Entity. As calculated under Section 801.11 of the regulations promulgated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the 20 Purchaser has less than $10 million in each of Annual Net Sales and Total Assets. The capitalized terms in this Section 4.6 shall have the meanings ascribed to them in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 5. CERTAIN COVENANTS AND AGREEMENTS. 5.1 Publicity. From and after the date of this Agreement, except as required by law, regulation or stock exchange requirements, neither (i) the Company or any of its Affiliates nor (ii) the Purchaser or any of its Affiliates shall, without the written consent of the other, make any public announcement or issue any press release with respect to the transactions contemplated by this Agreement. In no event will either (i) the Company or any of its Affiliates or (ii) the Purchaser or any of its Affiliates make any public announcement or issue any press release with respect to the transactions contemplated by this Agreement without consulting with the other party, to the extent feasible, as to the content of such public announcement or press release. 5.2 Use of Proceeds. The proceeds from the sale of Securities shall be used by the Company for general corporate purposes. 5.3 Board of Directors. (a) So long as the Purchaser or its Affiliates hold, in the aggregate, at least: (i) 10.0% of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the Closing Date), in each case, assuming that the Securities or other rights convertible into or exchangeable or exercisable for shares of the Common Stock have been converted, exchanged or exercised, the Company shall use its best efforts to ensure that the Company's Board of Directors shall consist of at least one Purchaser Director. (b) In connection with the foregoing paragraph, the Purchaser shall be entitled to recommend two candidates to the Company to become members of the Board of Directors, one of whom the Company shall nominate and unanimously recommend to the stockholders to become a member of the Board of Directors (the "Purchaser Director"). A vacancy in the directorship held by the Purchaser Director shall be filled by the Board of Directors, who shall select one of two candidates recommend by the Purchaser. 21 (c) The Purchaser Director shall not be entitled to any compensation for his or her participation on the Company's Board of Directors other than reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such Purchaser Director in connection with the performance of his or her duties. Notwithstanding the foregoing sentence, the Purchaser Director shall be entitled to receive the same consideration paid to other Related Directors in their capacity as members of the Company's Board of Directors. 5.4 Purchaser Rights. From and after the Closing Date, so long as the Purchaser or its Affiliates hold, in the aggregate, at least: (i) 10.0% of the outstanding Common Stock; or (ii) 1.5 million shares of the Common Stock (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the Closing Date), in each case, assuming that the Securities or other rights convertible into or exchangeable or exercisable for shares of the Common Stock have been converted, exchanged or exercised (the "Consultation Period"): (a) The Purchaser shall be able to appoint a non-voting representative to attend meetings of the Board of Directors of the Company, to change the representative so appointed at any time and, upon the resignation or other vacancy of such representative for any reason, to reappoint such a representative. In addition, the Company shall provide the Purchaser with a copy of any materials to be distributed or discussed at such meetings at the same time as provided to members of the Board of Directors. (b) During the Consultation Period, the Purchaser shall be entitled, from time to time, to make proposals, recommendations and suggestions to the Company relating to the business and affairs of the Company. (c) During the Consultation Period, the Company shall permit the Purchaser at all reasonable times and at the Purchaser's expense, to discuss the Company's business and affairs with its officers and directors. (d) During the Consultation Period, the Company shall permit the Purchaser, at all reasonable times and at the Purchaser's expense, to examine such books, records, documents and other written information in the possession of the Company relating to its affairs as the Purchaser may reasonably request. (e) Anything in this Section 5.4 to the contrary notwithstanding, the rights granted to the Purchaser under this Section 5.4 22 shall be suspended during any period of time during which the Company's Board of Directors includes at least one Purchaser Director. 5.5 SEC Filings. From and after the date of this Agreement, the Company agrees that it will use commercially reasonable efforts to file with the SEC, within the time periods specified in the SEC's rules and regulations, (i) all quarterly and annual financial information required to be filed with the SEC on Forms 10-Q and 10-K, (ii) all current reports required to be filed with the SEC on Form 8-K and (iii) any other information required to be filed with the SEC. Further, the Company agrees that it will, for so long as the Purchaser or its Affiliates continues to hold any Securities, use its best efforts to qualify for use of Form S-3 under the Act. 5.6 Restrictions on Transfer; Legends. (a) The Purchaser agrees that it will not Transfer any of the Restricted Securities, except pursuant to an effective registration statement under the Act or an applicable exemption from registration under the Act. (b) So long as the Restricted Securities are not sold pursuant to an effective registration statement under the Act or pursuant to Rule 144 under the Act, the Restricted Securities shall be subject to a stop-transfer order and the certificates therefor shall bear the following legend by which each holder thereof shall be bound: "THE [WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE/SHARES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS." (c) The Company shall, upon the written request of the holder of the Restricted Securities and receipt by the Company of evidence, including an opinion of counsel to the Purchaser that is acceptable to the 23 Company, reasonably satisfactory to it that such legend may be removed, issue certificates for such Restricted Securities that do not bear the legend described in Section 5.6(b). 5.7 Preemptive Rights. After the date hereof, the Company shall give prior written notice to the Purchaser of the proposed private placement of any Capital Stock or other equity securities by the Company for cash, other than (i) issuances pursuant to the Company's equity compensation or stock option plans and (ii) issuances pursuant to the Rights Plan (each a "New Issuance") at a price below $6.20 per share (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the Closing Date). Such notice shall specify the number and class of securities to be issued, the rights, terms and privileges thereof and the price at which such securities will be issued. By written notice to the Company given within 15 Business Days of being notified of such New Issuance, the Purchaser shall be entitled to purchase all, but not less than all, of the Capital Stock or other securities contemplated by the New Issuance; provided, however, that the Purchaser shall not have any right to purchase securities pursuant to this Section 5.7 if, prior to a sale of securities to the Purchaser pursuant to this Section 5.7, such securities would be required to be registered under the Act; provided further that if the Purchaser does not timely notify the Company of its election to purchase all of the New Issuance on the terms specified in the foregoing notice, or unless the Company or the placement agent for the New Issuance reasonably believes that including the Purchaser in the group of investors for the New Issuance will materially adversely affect the Company's ability to consummate the New Issuance on the terms specified in such notice, then the Purchaser shall be permitted to invest in the New Issuance in such amount to be reasonably determined in good faith by the Company. The closing of any purchase pursuant to this Section 5.7 shall be held at the time and place of the closing of, and on the same terms and conditions as, the New Issuance, or at such other time and place as the parties to the transaction may agree. 5.8 Tax Reporting. The parties hereto agree and acknowledge that neither party hereto will take the position that the Securities issued pursuant to this Agreement are "Preferred Stock" under Section 305 of the Code and the parties agree to file all tax returns, reports, forms and other such documents ("Tax Returns") accordingly (the "Reporting Agreement"). The parties further agree that neither party shall take any position inconsistent with the Reporting Agreement upon examination of any Tax Return, in any refund claim, in any litigation or otherwise. 24 5.9 Board of Directors. As soon as practicable after the date hereof but no later than May 13, 1999, the Board of Directors shall have appointed a Purchaser Director to the Board of Directors to serve until the Company's 2001 annual meeting. 5.10 Indemnification Agreement. Concurrently with the appointment of the initial Purchaser Director, and thereafter with respect to future Purchaser Directors, the Company shall enter into an indemnification agreement with any Purchaser Directors, substantially similar in form and content to the indemnification agreements between the Company and any current directors. Such indemnification agreement shall provide that each Purchaser Director will be indemnified against all liabilities and expenses incurred in connection with his services to the Company to the fullest extent permitted by Delaware law. 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties, covenants and agreements contained herein shall survive the execution and delivery of this Agreement and the Closing hereunder. The foregoing notwithstanding, the Company's liability to the Purchaser for breaches of, or inaccuracies in, any of the Company's representations and warranties contained in Section 3 (other than Sections 3.2 (Power and Authority) and 3.7 (Capitalization)), shall expire 24 months following the Closing Date (unless the Purchaser shall have given notice to the Company claiming a breach thereof prior to such date) and there shall be no expiration of the time when a claim may be made by the Purchaser for breach of or any inaccuracy or misrepresentation in Sections 3.2 (Power and Authority), and 3.7 (Capitalization). All statements contained herein or in any certificate, exhibit, schedule or other writing delivered in connection with the transactions contemplated hereby shall be deemed representations and warranties of the respective parties making them. 7. INDEMNIFICATION. Except as otherwise provided in this Section 7, the Company agrees to indemnify, defend and hold harmless the Purchaser and its Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons to the fullest extent permitted by law from and against any and all claims, losses, liabilities, damages, deficiencies, judgements, assessments, fines, settlements, costs or expenses (including interest, penalties and reasonable fees, dis bursements and other charges of counsel) (collectively, "Losses") based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any 25 representation, warranty, covenant or agreement of the Company contained in this Agreement or any other Transaction Document. Notwithstanding anything to the contrary in this Section 7, the indemnification and contribution provisions of Section 8 shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. 8. REGISTRATION RIGHTS. The Company hereby agrees to provide registration rights with respect to the Registrable Securities as set forth below. 8.1 Securities Subject to this Agreement. (a) Registrable Securities. For the purposes of this Section 8, Registrable Securities will cease to be Registrable Securities when such Registrable Securities are sold and otherwise transferred pursuant to Rule 144 under the Act or a registration statement covering such Registrable Securities has been declared effective under the Act by the SEC and such Registrable Securities have been disposed of pursuant to such effective registration statement. (b) Holders of Registrable Securities. A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities, or holds a warrant to purchase, or a security convertible into or exercisable or exchangeable for, Registrable Securities whether or not such acquisition or conversion has actually been effected and disregarding any legal restrictions upon the exercise of such rights. If the Company receives conflicting instructions, notices or elections from two or more persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. Registrable Securities issuable upon exercise of an option or upon conversion of another security shall be deemed outstanding for the purposes of this Section 8. 8.2 Demand Registration. (a) Request for Demand Registration. At any time after the date hereof, the holders of 25.0% of the outstanding Registrable Securities (the "Stockholders") may make a written request (the "Demand Notice") for registration of Registrable Securities under the Act, and under the securities or blue sky laws of any jurisdiction designated by such holder or holders (a "Demand Registration"); provided, that the Company will not be required to effect more than 26 two Demand Registrations in the aggregate at the request of the holders of Registrable Securities pursuant to this Section 8.2(a); provided, further, that the Company shall not be required to effect more than one registration pursuant to this section in any six-month period. Notwithstanding the foregoing, the Company shall not be required to effect any Demand Registration unless the anticipated aggregate proceeds to the selling holders would equal or exceed $2,000,000. Upon a request for a Demand Registration, the Company shall use its best efforts to prepare and file with the SEC, as soon as practicable, a registration statement for an offering to be made on a continuous basis pursuant to Rule 415 of the Act (or any successor rule or similar provision then in effect) (a "Shelf Registration Statement") registering the resale from time to time by the Stockholders thereof of their Registrable Securities (the "Demand Shelf Registration"). Within fifteen (15) days after the receipt of the Demand Notice, the Company shall give written notice thereof to all holders holding Registrable Securities and include in such registration all Registrable Securities held by a holder thereof with respect to which the Company has received written requests for inclusion therein at least ten (10) days prior to the filing of the Demand Shelf Registration. No Person has been granted registration rights that are inconsistent with the rights to be granted to the Purchaser in this Agreement. Other than the Amended and Restated Investors' Rights Agreement, dated May 31, 1996 (the "Investors' Rights Agreement"), the Company has not entered into any agreement pursuant to which the Company has granted registration rights. Except those Persons having the right to piggy-back on a Demand Registration pursuant to the Investors' Rights Agreement and disclosed in Schedule 8.2, no Person has the right to piggy-back on a Demand Registration. To the extent any Person has the right to piggy-back on a Demand Registration, the Company shall use its best efforts to promptly obtain a waiver of any such rights. Unless holders of a majority of the Registrable Securities to be included in the Demand Registration consent in writing, no other Person (other than (i) any other holder of Registrable Securities and (ii) any Person disclosed in Schedule 8.2 who has the right to piggy-back on a Demand Registration pursuant to the Investors' Rights Agreement for which the Company has not obtained a waiver of such right after using its best efforts to promptly obtain such waiver), shall be permitted to offer securities under any such Demand Registration. (b) Effective Demand Registration. A registration shall not constitute a Demand Registration until it has become effective under the Act and remains effective until the earlier of the (i) completion of any offering of securities thereunder and (ii) expiration of the second anniversary (plus any Blackout Period, as defined below) from date on which it first became effective under the Act (unless withdrawn upon the written request of the holders). The Company shall use its best efforts to cause any registration statement filed pursuant to Section 8.2(a) to 27 be declared effective under the Act as soon as practicable (and shall promptly notify in writing the Stockholders once any such registration statement has been declared effective). (c) Blackout Periods. If the Demand Shelf Registration (or any Subsequent Shelf Registration, as defined below) is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof (including, without limitation, amend the registration statement concerned in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof), and such Demand Shelf Registration (or any Subsequent Shelf Registration) will be deemed not to have been effective during the period of such interference until the offering of Registrable Securities pursuant to such Shelf Registration Statement (or Subsequent Shelf Registration Statement) may legally resume (the "Blackout Period"). (d) Subsequent Shelf Registration. Notwithstanding the foregoing paragraph, if prior to the second anniversary (plus any Blackout Period) from the date the Demand Shelf Registration covering the Registrable Securities has been declared effective under the Act, the Company has failed to obtain the withdrawal of any stop order, injunction or other order suspending the effectiveness within 60 days of such cessation of effectiveness, the Company shall file an additional Shelf Registration covering the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective until the earlier of the (i) completion of any offering of securities thereunder; (ii) expiration of the second anniversary (plus any Blackout Period, as defined below) from date on which it first became effective under the Act (unless withdrawn upon the written request of the holders); and (iii) date another Subsequent Shelf Registration covering the Registrable Securities has been declared effective under the Act. If the registration required under this Section 8 is deemed not to have been effected then the Company shall continue to be obligated to effect a registration statement pursuant to this Section 8. (e) Underwriting Procedures. If holders of a majority of the Registrable Securities included in the Demand Registration so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of a firm commitment underwritten offering and the managing underwriter or underwriters selected for such offering shall be a nationally recognized investment banking firm selected by the Company with the consent of such holders, which consent will not be unreasonably delayed or withheld (an "Approved Underwriter"). In such event, if the Approved Underwriter advises the Company in writing that in its opinion the aggregate amount of such securities requested to be included in such offering is sufficiently large to have a material adverse effect on the success of such offering, the Company shall include in such registration only the aggregate amount of securities that in the opinion of the Approved Underwriter may be sold without any such material adverse effect and shall first reduce (to zero, if necessary) the amount of securities sought to be included therein by the holders of Registrable Securities and, if such reduction is not sufficient, reduce, pro rata the amount of securities to be included by each holder who wishes to participate in the Demand Registration through the exercise of piggy-back registration rights as contemplated by Section 8.2(a). To the extent more than 10.0% of the Registrable Securities so requested to be registered are excluded from the offering, then the holders of such Registrable Securities shall have the right to one additional Demand Registration under this Section 8.2 with respect to such Registrable Securities. (f) Deferral of Registration. Notwithstanding the foregoing, if, at any time prior to the effective date of the registration statement with respect to a Demand Registration, the Company is: (i) pursuing an underwritten offering of shares of its Capital Stock for its own account, or engaged in or proposes to engage in (A) financing, (B) acquisition of the capital stock or substantially all the assets of any other person (other than in the ordinary course of business) or (C) any disposition of material assets (other than in the ordinary course of business), any tender offer or any merger, consolidation, corporate reorganization or restructuring or other similar transaction; and (ii) the Board of Directors, using good faith, determines that it would be seriously detrimental to the Company for a registration statement to be filed at such time, the Company may defer the filing of a registration statement with respect to any Demand Registration required by this Section 8.2 until a date not later than 90 days from the date of the Deferral Notice (as defined below) (the "Deferral Period"). If the Board of Directors of the Company makes such determination, the Company shall give written notice (the "Deferral Notice") of such determination to the holders of Registrable Securities; provided, that, the Company may exercise its right to delay a Demand Registration hereunder only once in any twelve-month period. The Company shall notify the holders of the expiration of the Deferral Period and shall cause the registration statement with respect to the Demand Registration to be filed on the fifth Business Day following the expiration of the Deferral Period (the "Withdrawal Period") (or, if registration on such date is not practicable, as promptly as possible thereafter) unless, prior to the expiration of the Withdrawal Period, the holders holding a majority of Registrable Securities to be included in any such Demand Registration, by written notice to the Company, withdraws the request made under this Section 8.2, in which case, such request shall 29 not count as one of the Demand Registrations permitted hereunder and the Company shall pay all Registration Expenses in connection with such registration. 8.3 Holdback Agreements. (a) Restrictions on Public Sale by Holders of Registrable Securities. To the extent not inconsistent with applicable law, the Purchaser agrees that in connection with a registered public offering of the Company's equity securities, it will not effect any public sale or distribution of any Registrable Securities or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, during the 10 Business Days prior to, and during the 30 days beginning on, the effective date of the Company's registration statement (except as part of such registration), if and to the extent reasonably requested by the Company in writing in the case of a non-underwritten public offering or to the extent reasonably requested by the Underwriter in writing in the case of an underwritten public offering. (b) Restrictions on Public Sale by the Company. The Company agrees not to effect any public sale or distribution of any of its equity securities, or any securities convertible into or exchangeable or exercisable for such equity securities (except pursuant to registrations on Forms S-4 or S-8 of the Act or any successor or other forms not available for registering equity securities for sale to the public) during the 10 Business Days prior to, and during the 30 day period beginning on the effective date of any registration statement in which the holders of Registrable Securities are participating. 8.4 Registration Procedures. (a) Obligations of the Company. Whenever registration of Registrable Securities has been requested pursuant to Section 8.2 of this Agreement, the Company shall use reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof, and in connection with any such request, the Company shall, as soon as reasonably practicable: (i) prepare and file with the SEC (in any event not later than forty-five (45) days after receipt of a request to file a registration statement with respect to Registrable Securities) a registration statement, and use its best efforts to cause such registration statement to become effective under the Act; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall (A) provide counsel selected by the holders of a majority of the Registrable Securities being registered in such registration ("Holders' Counsel") with an opportunity to participate in the preparation of such registration statement and each prospectus included therein (and each amendment or supplement thereto) to be filed with the SEC, which documents shall be subject to the review of Holders' Counsel, and (B) notify the Holders' Counsel and each seller of Registrable Securities of any stop order issued or threatened by the SEC and take all reasonable action required to prevent the entry of such stop order or to remove it if entered; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period which will terminate when all Registrable Securities covered by such registration statement have been sold (but not before the expiration of the ninety (90) day period referred to in Section 4(3) of the Act and Rule 174 thereunder, if applicable), and comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (iii) furnish to each seller of Registrable Securities, prior to filing a registration statement, copies of such registration statement as is proposed to be filed, and thereafter such number of copies of such regis tration statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (iv) use reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller of Registrable Securities requests, and to continue such qualification in effect in such jurisdiction for as long as is permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (A) qualify 31 generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 8.4(a)(iv), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction; (v) use reasonable efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers of Registrable Securities to consummate the disposition of such Registrable Securities; (vi) notify each seller of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and the Company shall promptly prepare a supplement or amendment to such prospectus and furnish to each seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus shall not contain 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 in light of the circumstances under which they were made; (vii) enter into and perform customary agreements (including an underwriting agreement in customary form with the Approved Underwriter, if any, selected as provided in Section 8.2) and take such other actions as are reasonably required in order to facilitate the disposition of such Registrable Securities; (viii) make available for inspection by any seller of Registrable Securities, any managing underwriter participating in any disposition pursuant to such registration statement, Holders' Counsel and any attorney, accountant or other agent retained by any such seller or any managing underwriter (each, an "Inspector" and collectively, the "Inspec tors"), during regular business hours and upon reasonable advance notice, all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") as shall be reasonably necessary to 32 enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such registration statement; (ix) if such sale is pursuant to an underwritten offering, obtain a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as Holders' Counsel or the managing underwriter reasonably requests; (x) furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as such seller may reasonably request and are customarily included in such opinions; (xi) otherwise use reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the registration statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the registration statement, in a manner which satisfies the provisions of Section 11(a) of the Act; (xii) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed (including NASDAQ), provided, that the applicable listing requirements are satisfied; (xiii) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"); and 33 (xiv) use reasonable efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby. (b) Notice to Discontinue. Each holder of Registrable Securities agrees that, upon receipt of any written notice from the Company of the happening of any event of the kind described in Section 8.4(a)(vi), such holder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Sec tion 8.4(a)(vi) and, if so directed by the Company, such holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement (including without limitation the period referred to in Section 8.4(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 8.4(a)(vi) to and including the date when the holder shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 8.4(a)(vi). 8.5 Registration Expenses. The Company shall pay all expenses (other than underwriting discounts and commissions) arising from or incident to the Company's performance of, or compliance with, Section 8 of this Agreement, including without limitation, (i) SEC, stock exchange, NASDAQ and NASD registration and filing fees, (ii) all fees and expenses incurred by Company in complying with securities or blue sky laws (including reasonable fees, charges and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, and (iv) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting and legal fees, charges and expenses incurred by the Company (including without limitation any expenses arising from any special audits incident to or required by any registration or qualification) in connection with any Demand Registration pursuant to the terms of this Agreement, regardless of whether such registration statement is declared effective. In connection with each registration hereunder, the Company shall reimburse the holders of Registrable Securities being registered in such registration for the reasonable fees, charges and disbursements of not more than one counsel chosen by the holders of a majority of Registrable Securities being registered in such registration in an amount not to exceed 34 $10,000. All of the expenses described in this Section 8.5 are referred to herein as "Registration Expenses." 8.6 Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify, to the fullest extent permitted by law, each holder of Registrable Securities, its officers, directors, partners, employees, advisors and agents and each Person who controls (within the meaning of the Act or the Exchange Act) such holder from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue, or alleged untrue, statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or a failure by such holder to deliver an updated prospectus that has been filed with the SEC. The Company shall also indemnify any underwriters of the Registrable Securities, their officers, directors and employees and each Person who controls such underwriters (within the meaning of the Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) Indemnification by Holders. In connection with any registration statement in which a holder of Registrable Securities is participating pursuant to Section 8.2 hereof, each such holder shall furnish to the Company in writing such information with respect to such holder as the Company may reasonably request in writing or as may be required by law for use in connection with any such registration statement or prospectus and each holder, by its participation in such registration, agrees to indemnify, to the extent permitted by law, the Company, any underwriter retained by the Company and their respective directors, officers, employees and each Person who controls the Company or such underwriter (within the meaning of the Act and the Exchange Act) to the same extent as the foregoing indemnity from the Company to the holders of Registrable Securities, but solely with respect to any such information furnished in writing by or on behalf of such holder. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder (the "Registration Rights Indemnified Party") agrees to give prompt written notice to the indemnifying party (the 35 "Registration Rights Indemnifying Party") after the receipt by the Registration Rights Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Registration Rights Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, that the failure so to notify the Registration Rights Indemnifying Party shall not relieve the Registration Rights Indemnifying Party of any liability that it may have to the Registration Rights Indemnified Party hereunder unless, and only to the extent that, such failure results in the Registration Rights Indemnifying Party's forfeiture of substantial rights or defenses. If notice of commencement of any such action is given to the Registration Rights Indemnifying Party as above provided, the Registration Rights Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Registration Rights Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Registration Rights Indemnified Party. The Registration Rights Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the Registration Rights Indemnified Party unless (i) the Registration Rights Indemnifying Party agrees to pay the same, (ii) the Registration Rights Indemnifying Party fails to assume the defense of such action with counsel satisfactory to the Registration Rights Indemnified Party in its reasonable judgment, (iii) the named parties to any such action (including any impleaded parties) have been advised by such counsel that either (A) representation of such Registration Rights Indemnified Party and the Registration Rights Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (B) there may be one or more legal defenses available to the Registration Rights Indemnified Party which are different from or additional to those available to the Registration Rights Indemnifying Party. No Registration Rights Indemnifying Party shall, without the prior written consent of each Registration Rights Indemnified Party, settle, compromise or consent to the entry of any judgment unless such settlement, compromise or consent includes an unconditional release of the Registration Rights Indemnified Party from all liability relating thereto. In either of such cases the Registration Rights Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Registration Rights Indemnified Party. No Registration Rights Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld, conditioned or delayed. (d) Contribution. If the indemnification provided for in this Section 8.6 from the Indemnifying Party is applicable by its terms but unavailable to a Registration Rights Indemnified Party hereunder in respect of any 36 losses, claims, damages, liabilities or expenses referred to therein, then the Indemnifying Party, in lieu of indemnifying such Registration Rights Indemnified Party, shall contribute to the amount paid or payable by such Registration Rights Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Registration Rights Indemnifying Party and Registration Rights Indemnified Party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative faults of such Registration Rights Indemnifying Party and Registration Rights Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Registration Rights Indemnifying Party or Registration Rights Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Sections 8.6(a), 8.6(b) and 8.6(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.6(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person. 8.7 Rule 144. The Company covenants that it shall file any reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder; and that it shall take such further action as each holder of Registrable Securities may reasonably request (including providing any information necessary to comply with Rules 144 under the Act), all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144 under the Act, as such rules may be amended from time to time, or (b) any similar rules or regulations hereafter adopted by the SEC. The Company shall, upon the request of any holder of Registrable Securities, deliver to such holder a written statement as to whether the Company has complied with such requirements. 37 9. MISCELLANEOUS. 9.1 Performance; Waiver. The provisions of this Agreement may be modified or amended, and waivers and consents to the performance and observance of the terms hereof may be given by written instrument executed and delivered by the Company and the holders of 662/3% of the Common Stock issued in connection with this Agreement (assuming that the Securities or other rights conver tible into or exchangeable or exercisable for shares of the Common Stock have been converted, exchanged or exercised). The failure at any time to require performance of any provision hereof shall in no way affect the full right to require such performance at any time thereafter (unless performance thereof has been waived in writing in accordance with the terms hereof for all purposes and at all times by the parties to whom the benefit of such performance is to be rendered). The waiver by any party to this Agreement of a breach of any provision hereof shall not be taken or held to be a waiver of any succeeding breach of such provision or of any other provision. 9.2 Binding Effect; Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws and the applicable provisions of this Agreement, the Purchaser may assign any of its rights under this Agreement (or any of the Transaction Documents) to any of its Affiliates, employees, members or partners other than the rights described in Sections 5.3 (Board of Directors) and 5.4 (Purchaser Rights) which may only be assigned to Perseus, LLC, Soros Fund Management LLC or, in each case, to one of their controlled investment funds. The Company may not assign any of its rights under this Agreement (or any of the Transaction Documents), except to a successor-in-interest to the Company, including as a result of a merger, acquisition or reorganization, without the written consent of the Purchaser. No Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement. 9.3 Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in Person at, mailed by registered or certified mail, return receipt requested, postage prepaid, or sent by a reputable overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof). 38 If to the Company: ViroPharma Incorporated 405 Eagleview Boulevard Exton, PA 19341 Telecopy: (610) 458-7380 Attention: Thomas F. Doyle, Esq. with a copies to: Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 Telecopy: (215) 963-5299 Attention: David R. King, Esq. If to the Purchaser: Perseus-Soros BioPharmaceutical Fund, LP c/o Perseus Capital, LLC The Army and Navy Club Building 1627 I Street, N.W., Suite 610 Washington D.C. 20006 Telecopy: (202) 463-6215 Attention: Christopher D. Earl, Ph.D. and Perseus Capital, LLC The Army and Navy Club Building 1627 I Street, N.W., Suite 610 Washington D.C. 20006 Telecopy: (202) 463-6215 Attention: Kenneth M. Socha, Esq. and Soros Fund Management, LLC 888 Seventh Avenue New York, New York 10106 Telecopy: (212) 262-6300 39 Attention: Michael C. Neus, Esq. and Soros Fund Management, LLC 888 Seventh Avenue New York, New York 10106 Telecopy: (212) 262-6300 Attention: Neal Moszkowski with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopy: (212) 757-3990 Attention: Bruce A. Gutenplan, Esq. or at such other address as a party hereto shall from time to time designate by written notice, in the manner provided herein, to the other parties hereto. Notice given in accordance with this Section 9.3 shall be deemed given and received as of the earlier of (i) actual receipt or (ii) first attempted delivery which is refused (as opposed to being returned for insufficient postage/fee, improper address or like cause). All references to days in this Agreement shall be deemed to refer to calendar days, unless otherwise specified. If any notice, filing, delivery or payment shall be required by the terms hereof to be made on a day that is not a Business Day, such notice, filing, delivery or payment shall be made on the immediately succeeding Business Day. 9.4 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the Company and the Purchaser directs that such court interpret and apply the remainder of this Agreement in the manner that it determines most closely effectuates their intent in entering into this Agreement, and in doing so particularly take into account the relative importance of the term, provision, covenant or restriction being held invalid, void or unenforceable. 9.5 Headings; Interpretation. The index and section headings herein are for convenience only and shall not affect the construction hereof. References to sections means sections of this Agreement unless the context otherwise requires. References to herein or hereof mean this Agreement. 40 9.6 Entire Agreement. This Agreement embodies the entire agreement between the parties relating to the subject matter hereof and supersedes any and all prior oral or written agreements, representations or warranties, contracts, understandings, correspondence, conversations, and memoranda, whether written or oral, between the Company and the Purchaser, or between or among any agents, representatives, parents, Subsidiaries, Affiliates, predecessors in interest or successors in interest, with respect to the subject matter hereof. 9.7 No Third Party Rights. Except for the indemnified parties, this Agreement is intended solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any Person (including, without limitation, any stockholder or debtholder of the Company) other than the parties hereto. 9.8 Remedies for Breach. The parties agree that in addition to any other rights or remedies which may be available at law or equity, the parties shall be entitled to seek specific performance of any post-Closing duty or obligation of any party hereto. All remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative. 9.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto confirm that any facsimile copy of another party's executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof. 9.10 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of law. [SIGNATURE PAGE FOLLOWS] 41 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first set forth above. VIROPHARMA INCORPORATED By: /s/ Claude H. Nash -------------------------------- Name: Claude H. Nash, Ph.D. Title: President and Chief Executive Officer PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP By: Perseus-Soros Partners, LLC, General Partner By: Perseus Management, LLC, Member By: /s/ Frank H. Pearl --------------------------------- Name: Frank H. Pearl Title: President and Chairman [SIGNATURE PAGE TO INVESTMENT AGREEMENT] =============================================================================== INVESTMENT AGREEMENT AMONG VIROPHARMA INCORPORATED AND PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP ----------------------------------------------------- Dated May 5, 1999 ----------------------------------------------------- ================================================================================ TABLE OF CONTENTS Page 1. DEFINITIONS...........................................................1 2. CLOSING...............................................................6 2.1 Time and Place of the Closing..............................6 2.2 Transactions at the Closing................................6 2.3 Perseus-Soros Management, LLC Fee..........................6 2.4 Rights Plan................................................6 2.5 Opinion of Counsel.........................................6 2.6 Secretary's Certificate....................................6 2.7 Reservation of Stock.......................................7 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................7 3.1 Corporate Existence and Power..............................7 3.2 Power and Authority........................................7 3.3 Subsidiaries...............................................8 3.4 Affiliate Transactions.....................................8 3.5 No Contravention, Conflict, Breach, Etc....................8 3.6 Consents...................................................9 3.7 Capitalization.............................................9 3.8 SEC Documents.............................................10 3.9 Financial Statements......................................10 3.10 No Existing Violation, Default, Etc.......................11 3.11 Licenses and Permits......................................11 3.12 Intellectual Property.....................................11 3.13 Environmental Matters.....................................13 3.14 Taxes.....................................................13 3.15 Litigation................................................14 3.16 Labor Relations...........................................14 3.17 Employee Benefits.........................................14 3.18 Contracts.................................................16 3.19 No Material Adverse Change................................16 3.20 Insurance.................................................17 3.21 Rights Plan...............................................17 3.22 Broker's Fees.............................................17 3.23 Investment Company........................................17 3.24 Exemption from Registration; Restrictions on Offer and Sale of Same or Similar Securities....................18 i 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................18 4.1 Existence and Power.......................................18 4.2 Power and Authority.......................................18 4.3 No Contravention, Conflict, Breach, Etc...................18 4.4 Consents..................................................19 4.5 Acquisition for Own Account...............................19 4.6 Hart-Scott-Rodino.........................................19 5. CERTAIN COVENANTS AND AGREEMENTS.....................................20 5.1 Publicity.................................................20 5.2 Use of Proceeds...........................................20 5.3 Board of Directors........................................20 5.4 Purchaser Rights..........................................21 5.5 SEC Filings...............................................22 5.6 Restrictions on Transfer; Legends.........................22 5.7 Preemptive Rights.........................................23 5.8 Tax.......................................................23 5.9 Board of Directors........................................24 5.10 Indemnification Agreement.................................24 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................24 7. INDEMNIFICATION......................................................24 8. REGISTRATION RIGHTS..................................................25 8.1 Securities Subject to this Agreement......................25 8.2 Demand Registration.......................................25 8.3 Holdback Agreements.......................................29 8.4 Registration Procedures...................................29 8.5 Registration Expenses.....................................33 8.6 Indemnification; Contribution.............................34 8.7 Rule 144..................................................36 9. MISCELLANEOUS........................................................37 9.1 Performance; Waiver.......................................37 9.2 Binding Effect; Successors and Assigns....................37 9.3 Notices...................................................37 9.4 Severability..............................................39 9.5 Headings; Interpretation..................................39 9.6 Entire Agreement..........................................40 9.7 No Third Party Rights.....................................40 9.8 Remedies for Breach.......................................40 9.9 Counterparts..............................................40 9.10 Governing Law.............................................40 ii DISCLOSURE SCHEDULES, EXHIBITS AND ANNEXES SECTIONS OF DISCLOSURE SCHEDULE Schedule 2.2 Transactions at the Closing Schedule 3.7 Capitalization Schedule 3.12 Intellectual Property Schedule 3.14 Taxes Schedule 3.15 Litigation Schedule 3.17 Employee Benefits Schedule 3.18 Contracts Schedule 3.19 No Material Adverse Change Schedule 8.2 Demand Registration EXHIBITS Exhibit A Certificate of Designation Exhibit B Warrant Certificate Exhibit C Rights Plan Amendment ANNEXES Annex A Form of opinion of Morgan, Lewis & Bockius LLP iii EX-2 3 CERTIFICATE OF DESIGNATION VIROPHARMA INCORPORATED CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK, PAR VALUE $.001 PER SHARE Pursuant to Section 151 of the General Corporation Law of the State of Delaware The following resolution was duly adopted by the Board of Directors of ViroPharma Incorporated, a Delaware corporation (the "Company"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, on May 5, 1999, by the unanimous written consent of the Board of Directors: WHEREAS, the Board of Directors of the Company is authorized, subject to limitations prescribed by law and the provisions of the Certificate of Incorporation (as defined below) of the Company, to provide for the issuance of all or any of the shares of Preferred Stock, par value $.001 per share, in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the powers, designation, preferences and relative, participating, optional or other special rights of the shares of each such series and the qualifications or restrictions thereof; and WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of preferred stock and the number of shares constituting such series. NOW, THEREFORE, BE IT RESOLVED that, pursuant to the authority expressly granted to the Board of Directors of the Company by the Certificate of Incorporation of the Company, and pursuant to Section 151(g) of the General Corporation Law of the State of Delaware, there be created from the 5,000,000 shares of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the Company authorized to be issued pursuant to the Certificate of Incorporation, a series of Preferred Stock consisting of 2,300,000 shares of Series A Convertible Participating Preferred Stock (the "Series A Preferred Stock"), the voting powers, designations, preferences and relative, participating, optional or other special rights of which, and qualifications, limitations or restrictions thereof, shall be as follows: 1. Definitions. As used herein, the following terms shall have the following meanings: 1.1 "Affiliate" shall mean, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such first Person. For the purpose of this definition, "control" 2 shall mean, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. 1.2 "Board of Directors" shall mean the Board of Directors of the Company, as constituted from time to time. 1.3 "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banking institutions are not required to be open in New York City. 1.4 "Certificate of Incorporation" shall mean the Second Amended and Restated Certificate of Incorporation of the Company, as amended through the date hereof. 1.5 "Closing Price" of the Common Stock as of any day, means (i) the last reported sale price of such stock (regular way) or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the principal national securities exchange on which the Common Stock is listed or admitted to trading or (ii) if the Common Stock is not listed or admitted to trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and lowest reported asked quotation for the Common Stock, in either case reported on the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), or a similar service if NASDAQ is no longer reporting such information. 1.6 "Common Stock" shall mean the class of Common Stock, par value $.002 per share, of the Company or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or as a result of a subdivision or combination. 1.7 "Common Stock Conversion Rate" shall mean, as of any date, a rate for each share of Series A Preferred Stock equal to (i) the Liquidation Value thereof plus all accrued and unpaid dividends thereon pursuant to Section 2.2 herein, divided by (ii) the Conversion Price in effect as of such date. 1.8 "Conversion Price" shall mean $6.20 per share of Series A Preferred Stock, subject to adjustment as provided herein. 1.9 "Current Market Price" shall mean, with respect to each share of Common Stock as of any date, the average of the daily Closing Prices per share of Common Stock for the 30 consecutive Trading Days prior to such date; provided that, if on any such date the shares of Common Stock are not listed or 3 admitted for trading on any national securities exchange or quoted by NASDAQ or a similar service, the Current Market Price for a share of Common Stock shall be the fair market value of such share as determined in good faith by the Board of Directors of the Company. If the Board of Directors is unable to determine the fair market value, or if the holders of a majority in interest of the Series A Preferred Stock disagree with the Board's determination of fair market value by written notice delivered to the Company within five (5) Business Days after the Board's determination thereof is communicated in writing to such holders, which notice specifies a majority-in-interest of such holders' determination of fair market value, then the Company and a majority-in-interest of such holders shall select an Independent Financial Expert which shall determine such fair market value. If the Company and such holders are unable to agree upon an Independent Financial Expert within fifteen (15) days after the request by such holders, the Company, on the one hand, and such holders, on the other, shall each select an Independent Financial Expert within five (5) days following the expiration of such fifteen (15) day period, and these two Independent Financial Experts shall select a third Independent Financial Expert. The determination of fair market value by such Independent Financial Expert shall be final, binding and conclusive on the Company and all holders of the Series A Preferred Stock. All costs and fees of any Independent Financial Experts retained in accordance with the foregoing shall be borne by the Company. 1.10 "Dividend Amount" shall mean an amount per share of Series A Preferred Stock (rounded to the nearest $ .01) equal to $50 per $1,000 Liquidation Value of Series A Preferred Stock at all times after the Issue Date. 1.11 "Dividend Rate" shall mean 5.0% per annum beginning on the Issue Date of the Series A Preferred Stock. 1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1.13 "Independent Financial Expert" means an independent nationally recognized investment banking firm. 1.14 "Issue Date" shall mean the Closing Date (as defined in the Investment Agreement). 1.15 "Investment Agreement" shall mean the Investment Agreement, dated as of May 5, 1999, between the Company and Perseus-Soros BioPharmaceutical Fund, LP, a Delaware limited partnership, as amended from time to time. 1.16 "Junior Stock" shall mean the Common Stock and the shares of any other class or series of stock of the Company which, by the terms of the Certificate of Incorporation or of the instrument by which the Board of Directors, acting pursuant to authority granted in the Certificate of Incorporation, shall fix the relative rights, preferences and limitations thereof, shall be junior to the Series A Preferred Stock in respect of the right to receive dividends and to participate in any distribution of assets other than by way of dividends. 1.17 "Liquidation Value" shall mean $6.20 per share of Series A Preferred Stock, subject to adjustment as provided herein. 1.18 "Parity Stock" shall mean the shares of any other class or series of stock of the Company which, by the terms of the Certificate of Incorporation or of the instrument by which the Board of Directors, acting pursuant to authority granted in the Certificate of Incorporation, shall fix the relative rights, preferences and limitations thereof, shall, in the event that the stated dividends thereon are not paid in full, be entitled to share ratably with the Series A Preferred Stock in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and shall, in the event that the amounts payable thereon on liquidation are not paid in full, be entitled to share ratably with the Series A Preferred Stock in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full; provided, however, that the term "Parity Stock" shall be deemed to refer (i) in Section 2.3 hereof, to any stock which is Parity Stock in respect of the right to receive dividends and (ii) in Section 5 hereof, to any stock which is Parity Stock in respect of any distribution of assets other than by way of dividends. 1.19 "Person" shall mean any individual, firm, corporation, partnership, limited liability company or partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. 1.20 "Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by the Company or by any of its subsidiaries whether for cash, shares of capital stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including, without limitation, shares of capital stock, other securities or evidences of indebtedness of a subsidiary of the Company), or any combination thereof, effected while any of the shares of Series A Preferred Stock are outstanding, which purchase is subject to Section 13(e) of the Exchange Act or is made pursuant to an offer made available to all holders of Common Stock. 1.21 "Senior Stock" shall mean the shares of any class or series of stock of the Company which, by the terms of the Certificate of Incorporation or of the instrument by which the Board of Directors, acting pursuant to authority granted in the Certificate of Incorporation, shall fix the relative rights, preferences 4 and limitations thereof, shall be senior to the Series A Preferred Stock in respect of the right to receive dividends or to participate in any distribution of assets other than by way of dividends. 1.22 "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not so listed or admitted for trading on any national securities exchange, a day on which NASDAQ is open for the transaction of business. 2. Dividends. 2.1 The holders of the outstanding shares of Series A Preferred Stock shall be entitled to receive quarterly dividends, when, as and if declared by the Board of Directors out of funds legally available therefor. Each quarterly dividend shall be an amount per share (rounded to the nearest $.01) equal to 0.25 multiplied by the Dividend Amount and shall be payable on the last day of March, June, September and December in each year (each a "Dividend Payment Date") to the holders of record of Series A Preferred Stock at the close of business on the preceding Business Day, or such other dates as are fixed by the Board Directors within ten (10) days prior to the Dividend Payment Date (each a "Record Date"). Such dividends shall become payable beginning on the first Dividend Payment Date for which the Record Date is subsequent to the Issue Date. Dividends on each share of Series A Preferred Stock shall be cumulative and shall accrue on a day-to-day basis, whether or not earned, from and after the day immediately succeeding the date on which such share was issued, and shall be payable in cash (except upon conversion). Dividends payable for any partial dividend period shall be computed on the basis of actual days elapsed over a 365 day year. The Company, in its sole discretion, may elect not to pay such dividends in cash when due, in which case such dividends shall be automatically added to the Liquidation Value of the Series A Preferred Stock as of any such Dividend Payment Date and as a result shall no longer be considered due and payable. Each addition to the Liquidation Value in lieu of a cash dividend to the holders of the Series A Preferred Stock as provided in the preceding sentence shall constitute the full payment of such dividend. 2.2 In addition to the right to receive quarterly dividends pursuant to Section 2.1 above, each holder of a share of Series b Preferred Stock shall have the right, at any time after the Issue Date, if the Board of Directors of the Company shall declare a dividend or make any other distribution (including, without limitation, in cash or other property or assets), to holders of shares of Common Stock, to receive, out of funds legally available therefor, a dividend or distribution in an amount equal to the amount of such dividend or distribution receivable by a holder of the number of shares of Common Stock for which such share of Series A Preferred Stock is convertible on the record date for such dividend or distribution. Any such 6 amount shall be paid to the holders of shares of Series A Preferred Stock at the same time such dividend or distribution is made to holders of Common Stock. 2.3 Except as hereinafter provided in this Section 2.3, unless full cumulative dividends on the outstanding shares of Series A Preferred Stock that shall have accrued and become payable as of any date shall have been paid, or declared and funds shall have been set apart for payment thereof, no dividend or other distribution (payable other than in shares of Junior Stock) shall be paid to the holders of Junior Stock or Parity Stock. When dividends are not paid in full upon the shares of Series A Preferred Stock and any Parity Stock, all dividends declared upon shares of Series A Preferred Stock and all Parity Stock shall be declared pro rata so that the amount of dividends declared per share on Series A Preferred Stock and all such Parity Stock shall in all cases bear to each other the same ratio that accrued cumulative dividends per share on the shares of Series A Preferred Stock and all such Parity Stock bear to each other. 3. Conversion of Series A Preferred Stock. 3.1 Conversion at the Option of the Holder of Series A Preferred Stock. (a) Each holder of a share of Series A Preferred Stock shall have the right, at any time after the Issue Date, to convert such share into fully paid and nonassessable shares of Common Stock at the Common Stock Conversion Rate as of the date of conversion. (b) Any holder of shares of Series A Preferred Stock electing to convert such shares into Common Stock shall surrender the certificate or certificates for such shares at the offices of the Company (or at such other place in either New York City or Philadelphia as the Company may designate by written notice to the holders of shares of Series A Preferred Stock) during regular business hours, duly endorsed to the Company or in blank, or accompanied by instruments of transfer to the Company or in blank, in form reasonably satisfactory to the Company, and shall give written notice to the Company at such offices that such holder elects to convert such shares of Series A Preferred Stock. As soon as practicable (but in any event not later than five (5) Business Days) after any holder deposits certificates for shares of Series A Preferred Stock, accompanied by the written notice above prescribed, the Company shall issue and deliver at such office to the holder for whose account such shares were surrendered, or to his nominee, certificates representing the number of shares of Common Stock and the cash in lieu of fractional shares, if any, to which such holder is entitled upon such conversion. (c) Conversion shall be deemed to have been made as of the date that certificates for the shares of Series A Preferred Stock to be converted and the written notice are received by the Company and the Person entitled to receive 7 the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Common Stock on such date. The Corporation shall not be required to deliver certificates for shares of Common Stock while the stock transfer books for such stock or for Series A Preferred Stock are duly closed (but not for any period in excess of five days) for any purpose, but certificates for shares of Common Stock shall be issued and delivered as soon as practicable after the opening of such books. 3.2 Conversion at the Option of the Company. (a) If, at any time after the second anniversary of the Issue Date, the average of the daily Closing Prices per share of Common Stock for 90 consecutive Trading Days is at least 2.5 times $6.20 (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the Issue Date), the Company, at its option, may elect to convert, subject to the terms and provisions of this Section 3, all or any of the shares of Series A Preferred Stock into fully paid and nonassessable shares of Common Stock at the Common Stock Conversion Rate as of the date of conversion. Notwithstanding the foregoing, the Company shall not convert less than all outstanding shares of Series A Preferred Stock pursuant to this Section 3.2(a) if shares of Series A Preferred Stock having an aggregate liquidation value of less than $5,000,000 would remain outstanding after giving effect to any such proposed optional conversion. If fewer than all the outstanding shares of Series A Preferred Stock are to be converted as provided in this Section 3.2, the shares to be converted shall be determined pro rata among the holders of record thereof. (b) If the Company shall elect to exercise its rights under this Section 3.2, notice of such election shall be mailed, first-class postage prepaid, to the holders of record of the outstanding shares of Series A Preferred Stock, not less than 15 days nor more than 45 days prior to the conversion date, to each holder of record of the shares to be converted at such holder's address as the same appears on the stock register of the Company; provided, however, that no failure to mail such notice or any defect therein shall affect the validity of the proceeding for conversion of any shares of Series A Preferred Stock to be converted except as to the holder to whom the Company has failed to mail said notice or except as to the holder whose notice was defective. Each such notice shall state: (i) the conversion date (the "Conversion Date"); (ii) the total number of shares of Series A Preferred Stock to be converted and if less than all of the outstanding shares of Series A Preferred Stock are be converted, the number of shares to be converted by such holder; (iii) the Common Stock Conversion Rate; and (iv) the place or places where certificates for such shares are to be surrendered for certificates representing the number of shares of Common Stock and the cash in lieu of fractional shares, if any, to which such holder is entitled upon such conversion, which shall be the offices of the Company (or at such other place in New York City as the Company may designate). 8 (c) On the Conversion Date, upon surrender in accordance with said notice of any shares of Series A Preferred Stock (properly endorsed or assigned for transfer, if the Board of Directors of the Company shall so require and the notice shall so state), the Company shall deliver to the holder of such shares of Series A Preferred Stock so surrendered a certificate or certificates representing the number of fully paid and non-assessable shares of Common Stock into which such shares of Series A Preferred Stock have been converted in accordance with the provisions of this Section 3.2. If fewer than all the shares represented by any such certificate are converted, a new certificate shall be issued representing the unconverted shares without cost to the holder of record thereof. For purposes of the foregoing, such conversion shall be deemed to have been made at the close of business on the Conversion Date and the Person entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Common Stock on such date. 3.3 No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of Series A Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of Series A Preferred Stock, the Company shall, subject to Section 3.4(c), make a cash payment (calculated to the nearest $.01) equal to such fraction multiplied by the Closing Price of the Common Stock on the last Trading Day prior to the date of conversion. 3.4 The Common Stock Conversion Rate shall be adjusted from time to time as follows: (a) If the Company shall, at any time or from time to time while any shares of the Series A Preferred Stock are outstanding, (i) pay a dividend on its Common Stock in shares of its capital stock, (ii) combine its outstanding shares of Common Stock into a smaller number of shares, (iii) subdivide its outstanding shares of Common Stock or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, then the Common Stock Conversion Rate in effect immediately before such action shall be adjusted so that the holders of the Series A Preferred Stock, upon conversion of shares thereof immediately following such action, shall be entitled to receive the kind and amount of shares of capital stock of the Company which they would have owned or been entitled to receive upon or by reason of such event if such shares of Series A Preferred Stock had been converted immediately before the record date or effective date for such action. (b) If the Company or any subsidiary thereof shall, at any time or from time to time while any of the Series A Preferred Stock is outstanding, make a Pro Rata Repurchase, the Common Stock Conversion Rate shall be adjusted by multiplying the Common Stock Conversion Rate in effect immediately prior to such action by a fraction (which in no event shall be less than one (1)), the 9 numerator of which shall be the product of (i) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase minus the number of shares of Common Stock repurchased in such Pro Rata Repurchase and (ii) the Current Market Price of the Common Stock as of the day immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repur chase, and the denominator of which shall be (i) the product of (x) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Current Market Price of the Common Stock as of the day immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repurchase minus (ii) the aggregate purchase price of the Pro Rata Repurchase (provided that such denominator shall never be less than $.01). (c) All calculations under this Section 3.4 shall be made to the nearest $.01 (with $.005 being rounded upward), one-hundredth of a share (with .005 being rounded upward) or, in the case of a conversion rate, one ten- thousandth (with .00005 being rounded upward). Notwithstanding any other provision of this Section 3.4, the Company shall not be required to make any adjustment of the Common Stock Conversion Rate unless such adjustment would require an increase or decrease of at least 0.05% of such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 0.05% in such rate. Any adjustments under this Section 3.4 shall be made successively whenever an event requiring such an adjustment occurs. (d) Whenever an adjustment in the Common Stock Conversion Rate is required, the Company shall promptly cause to be mailed (but in any event not later than five (5) days after the date of the event giving rise to such adjustment) first-class postage prepaid, to the holders of record of the outstanding shares of Series A Preferred Stock, notice of such adjustment and a certificate of a firm of independent public accountants of recognized national standing selected by the Board of Directors (who shall be appointed at the Company's expense and who may be the independent public accountants regularly employed by the Company) setting forth the adjusted Common Stock Conversion Rate in effect as of such date determined as provided herein. Such notice and certificate shall set forth in reasonable detail such facts as shall be necessary to show the reason for and the manner of computing such adjustment. (e) In the event that at any time as a result of an adjustment made pursuant to this Section 3.4, the holder of any share of Series A Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of stock of the Company other than shares of Common Stock, the conversion rate of such other shares so receivable upon conversion of any such share of Series A Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect 10 to Common Stock contained in subparagraphs (a) through (d) and (f) of this Section 3.4, and the provisions of this Section 3 with respect to the Common Stock shall apply on like or similar terms to any such other shares and the determination of the Board of Directors as to any such adjustment shall be conclusive. (f) No adjustment shall be made pursuant to this Section if the effect thereof would be to reduce the Conversion Price below the par value of the Common Stock. 3.5 The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued stock, for the purpose of effecting the conversion of the shares of Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock into such Common Stock at any time (assuming that, at the time of the computation of such number of shares, all such Common Stock would be held by a single holder). The Company shall from time to time, in accordance with the laws of the State of Delaware, use its best efforts to cause the authorized amount of Common Stock to be increased if the aggregate of the authorized amount of the Common Stock remaining unissued and the issued shares of such Common Stock in its treasury (other than any shares of such Common Stock reserved for issuance in any other connection) shall not be sufficient to permit the conversion of the shares of Series A Preferred Stock into the Common Stock. The Company covenants that any shares of Common Stock issued upon conversions of the Series A Preferred Stock shall be validly issued, fully paid and nonassessable. 3.6 If any shares of Common Stock which would be issuable upon conversion of shares of Series A Preferred Stock hereunder require registration with or approval of any governmental authority before such shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible cause such shares to be duly registered or approved, as the case may be. 3.7 The Company shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of Series A Preferred Stock pursuant hereto. The Company shall not, however, be required to pay any tax which is payable in respect of any transfer involved in the issue or delivery of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of such tax, or has established, to the satisfaction of the Company, that such tax has been paid. 3.8 For purposes of this Section 3, the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Company or any subsidiary. The 11 Company shall not pay a dividend or make any distribution on shares of Common Stock held in the treasury of the Company. 3.9 If any action or transaction would require adjustment of the Common Stock Conversion Rate pursuant to more than one paragraph of this Section 3, only one adjustment shall be made and each such adjustment shall be the amount of adjustment that has the highest absolute value. 3.10 From and after the date a share of Series A Preferred Stock is converted pursuant to Sections 3.1 or 3.2, dividends on such shares of Series A Preferred Stock shall cease to accrue, and said shares shall no longer be deemed to be outstanding and all rights of the holders thereof as a holder of Series A Preferred Stock (except the right to receive from the Company the Common Stock) shall cease except as otherwise provided herein and in the Investment Agreement. 3.11 In case: (a) of a consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required; or (b) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (c) of the sale, exchange or other conveyance (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Company except to a wholly-owned subsidiary; or (d) of any Pro Rata Repurchase; then, in each case, the Company shall cause to be mailed, first-class postage prepaid, to the holders of record of the outstanding shares of Series A Preferred Stock, not less than 20 days nor more than 60 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of any distribution or grant of rights or warrants triggering an adjustment to the Conversion Price pursuant to this Section 3, or, if a record is not to be taken, the date as of which the holders of record of Common Stock entitled to such distribution, rights or warrants are to be determined, or (y) the date on which any reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata Repurchase is expected to become effective, if known, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassi fication, consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata Repurchase, if known. Failure to give the notice specified hereunder 12 shall have no effect on the status or effectiveness of the action to which the required notice relates. 4. Voting. The shares of Series A Preferred Stock shall have no voting rights except as required by law or as set forth below: (a) So long as the Series A Preferred Stock is outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at a special or annual meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock voting together as a single class with other shares entitled to vote thereon. With respect to any such vote, each share of Series A Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series A Preferred Stock into shares of Common Stock on the record date for determining the stockholders of the Company eligible to vote on any such matters. (b) So long as at least 575,000 shares of Series A Preferred Stock (with appropriate adjustment made for any stock dividend, split-up or subdivision or any combination or reclassification made or effected subsequent to the Issue Date) remain outstanding, the Company shall not, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of shares of Series A Preferred Stock representing at least a majority of the aggregate voting power of shares of the Series A Preferred Stock outstanding, voting as a separate class, authorize or issue any Senior Stock or Parity Stock or reclassify any Junior Stock as Parity Stock or Senior Stock or reclassify any Parity Stock as Senior Stock. (c) The Company shall not, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of shares of Series A Preferred Stock representing at least a majority of the aggregate voting power of shares of Series A Preferred Stock then outstanding, voting as a separate class, amend, alter or repeal any of the provisions of the Certificate of Incor poration or this Certificate of Designation, so as in any such case to materially adversely affect the preferences, special rights, powers or privileges of the shares of Series A Preferred Stock. (d) In addition to the foregoing, the holders of the Series A Preferred Stock shall have such other voting, consent and approval rights as are specified in the Investment Agreement. 5. Liquidation Rights. For the purposes of this Section 5, an "Extraordinary Event" shall mean: (i) the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary; (ii) the sale, exchange or other conveyance (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Company other than to a wholly-owned 13 subsidiary; and/or (iii) any consolidation or merger to which the Company is a party, other than a merger or consolidation in which the Company is the surviving or continuing corporation. 5.1 Upon an Extraordinary Event, the holders of the shares of Series A Preferred Stock shall be entitled to receive out of the assets of the Company available for distribution to stockholders, in preference to the holders of, and before any payment or distribution shall be made on, Junior Stock, an amount (the "Liquidation Amount") equal to the greater of (i) the Liquidation Value per share plus all accrued and unpaid dividends thereon (whether or not declared) to the date fixed for the Extraordinary Event, or (ii) the amount that it would have received if immediately prior to the Extraordinary Event, the Series A Preferred Stock had been converted to Common Stock. 5.2 After the payment to the holders of the shares of Series A Preferred Stock of full preferential amounts provided for in this Section 5, the holders of Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company. 5.3 In the event the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock upon an Extraordinary Event shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 5.1, then the holders of all shares of Series A Preferred Stock shall share ratably in such distribution of assets in accordance with the amount that would be payable on such distribution if the amounts to which the holders of outstanding shares of Series A Preferred Stock are entitled were paid in full. 6. Other Provisions. 6.1 Shares of Series A Preferred Stock issued and reacquired will, upon compliance with the applicable requirements of Delaware law, have the status of authorized but unissued shares of Preferred Stock of the Company undesignated as to series and may with any and all other authorized but unissued shares of Preferred Stock of the Company be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock of the Company, except that any issuance or reissuance of shares of Series A Preferred Stock must be in compliance with this certificate of designation. 6.2 The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the holder of shares of Series A Preferred Stock, and such record holder shall be deemed the holder of such shares for all purposes. 14 6.3 Any registered holder of Series A Preferred Stock shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Certificate of Designations and to enforce specifically the terms and provisions of this Certificate of Designations in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. 6.4 If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day. 6.5 All notice periods referred to herein shall commence on the date of the mailing of the applicable notice. 15 IN WITNESS WHEREOF, VIROPHARMA INCORPORATED has caused this certificate to be duly executed and attested as of the day and year first above written. VIROPHARMA INCORPORATED By: /s/ Vincent J. Milano --------------------------------------- Name: Vincent J. Milano Title: Vice President and Chief Financial Officer Dated: May 5, 1999 [SEAL] ATTEST: _________________ EX-3 4 WARRANT THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. ---------------------------------------------- VIROPHARMA INCORPORATED COMMON STOCK PURCHASE WARRANT ----------------------------------------------- This certifies that, for good and valuable consideration, ViroPharma Incorporated, a Delaware corporation (the "Company"), grants to Perseus-Soros BioPharmaceutical Fund, LP, a Delaware limited partnership, and its successors and assigns (the "Warrantholder"), the right to subscribe for and purchase from the Company an aggregate of 595,000 validly issued, fully paid and nonassessable shares (the "Warrant Shares") of the Company's Common Stock, par value $.002 per share (the "Common Stock"), at a price per share equal to $9.53, as adjusted from time to time in accordance with the provisions of Section 6 (the "Exercise Price"), at any time prior to 5:00 p.m., New York City time, on May 5, 2004 (the "Expiration Date"), subject to the terms, conditions and adjustments herein set forth. This Warrant is being issued in connection with the issue and sale by the Company of shares of its Series A Convertible Participating Preferred Stock, par value $.001 per share, pursuant to the terms of an Investment Agreement, dated as of May 5, 1999 (the "Investment Agreement"), among the Company and the Warrantholder, and is subject to the terms thereof. This Warrant is the "Warrant" referred to in the Investment Agreement, and the Warrantholder is entitled to the rights and subject to the obligations contained in the Investment Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Investment Agreement. 2 1. Exercise of Warrants. 1.1 Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time or from time to time prior to the Expiration Date, by surrendering to the Company at its principal office, or such other location mutually agreed upon, this Warrant, with an Exercise Form (as defined herein) duly executed by the Warrantholder and accompanied by payment of the Exercise Price for the number of shares of Warrant Shares specified in such Exercise Form. 1.2 Cashless Exercise. At any time after a Change of Control (as defined herein) but prior to the Expiration Date, in lieu of the payment of the Exercise Price, the Warrantholder shall have the right (but not the obligation) to require the Company to convert this Warrant, in whole or in part, into shares of Warrant Shares (the "Conversion Right") as provided for in this Section 1.2. Upon exercise of the Conversion Right, the Company shall deliver to the Warrantholder (without payment by the Warrantholder of any of the Exercise Price) that number of shares of Warrant Shares equal to the quotient obtained by dividing (x) the value of the Warrant or portion thereof being exercised at the time the Conversion Right is exercised (determined by subtracting (a) the aggregate Exercise Price in effect immediately prior to the exercise of the Conversion Right for the number of shares for which the Warrant is being exercised from (b) the aggregate Market Price (as defined herein) of the shares of Warrant Shares issuable upon exercise of the Warrant for the number of shares for which the Warrant is being exercised immediately prior to the exercise of the Conversion Right) by (y) the Market Price of one share of Common Stock immediately prior to the exercise of the Conversion Right. The Conversion Right may be exercised at any time after a Change of Control but prior to the Expiration Date by surrendering to the Company at its principal office, or such other location mutually agreed upon, this Warrant, with an Exercise Form duly executed by the Warrantholder and indicating that the Warrantholder wishes to exercise the Conversion Right and specifying the total number of shares of Warrant Shares for which the Warrant is being exercised. 1.3 Delivery of Warrant Shares; Effectiveness of Exercise. (a) Delivery of Warrant Shares. A stock certificate or certificates for the Warrant Shares specified in the Exercise Form along with a check for the amount of cash to be paid in lieu of fractional shares, if any, shall be delivered to the Warrantholder within 5 Business Days after the Exercise Date; provided, however, that if the Conversion Right is exercised in accordance with Section 1.2 and a determination by the Board of Directors or an Independent Financial Expert is required to determine the Market Price of the Common Stock, such delivery shall be made promptly, but in no event more than 5 Business Days, after such determination is made. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the stock certificate or certificates and cash in lieu of fractional shares, if any, deliver to the Warrantholder a new 3 Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant. (b) Effectiveness of Exercise. The exercise of this Warrant shall be deemed to have been effective immediately prior to the close of business on the Business Day on which this Warrant is exercised in accordance with Section 1.1 or 1.2 (the "Exercise Date"). The Person in whose name any certificate for shares of Common Stock shall be issuable upon such exercise shall be deemed to be the record holder of such shares of Common Stock for all purposes on the Exercise Date. 2. Restrictive Legends. 2.1 Warrants. Except as otherwise permitted by this Sec tion 2, each Warrant (and each Warrant issued in substitution for any Warrant pursu ant to Section 4) shall be stamped or otherwise imprinted with a legend in substan tially the following form: "THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT FROM ANY REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 2.2 Warrant Shares. Except as otherwise permitted by this Section 2, each stock certificate for Warrant Shares issued upon the exercise of any Warrant and each stock certificate issued upon the direct or indirect transfer of any such Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form: " THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS VIROPHARMA INCORPORATED RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT SUCH OFFER, SALE, PLEDGE OR TRANSFER IS EXEMPT FROM ANY 4 REGISTRATION OR PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 2.3 Removal of Legends. Notwithstanding the foregoing, the Warrantholder may require the Company to issue a Warrant or a stock certificate for Warrant Shares, in each case without a legend, if either (i) such Warrant or such Warrant Shares, as the case may be, have been registered for resale under the Securities Act and sold pursuant to such registration or (ii) if reasonably requested in writing by the Company, the Warrantholder has delivered to the Company an opinion of legal counsel (from a firm reasonably satisfactory to the Company) which opinion shall be addressed to the Company and be reasonably satisfactory in form and substance to the Company's counsel, to the effect that such registration is not required with respect to such Warrant or such Warrant Shares, as the case may be. 3. Reservation and Registration of Shares, Etc. The Company covenants and agrees as follows: (a) All Warrant Shares that are issued upon the exercise of this Warrant will, upon issuance, be validly issued, fully paid and nonassessable, not subject to any preemptive rights, and free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issuance thereof, other than taxes in respect of any transfer occurring contemporaneously with such issue. (b) During the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved, and keep available free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Loss or Destruction of Warrant. Subject to the terms and conditions hereof, upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of such bond or indemnification as the Company may reasonably require, and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor. 5. Ownership of Warrant. The Company may deem and treat the Person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all 5 purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer. 6. Certain Adjustments. 6.1 The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment as follows: (a) Stock Dividends, Subdivision, Combination or Reclassification of Common Stock. If at any time after the date of the issuance of this Warrant the Company shall (i) pay a dividend on its Common Stock in shares of its capital stock, (ii) combine its outstanding shares of Common Stock into a smaller number of shares, (iii) subdivide its outstanding shares of Common Stock or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, then, on the record date for such dividend or the effective date of such subdivision or split-up, combination or reclassification, as the case may be, the number and kind of shares to be delivered upon exercise of this Warrant will be adjusted so that the Warrantholder will be entitled to receive the number and kind of shares of capital stock that such Warrantholder would have owned or been entitled to receive upon or by reason of such event had this Warrant been exercised immediately prior thereto, and the Exercise Price will be adjusted as provided below in paragraph (g). (b) Extraordinary Distributions. If at any time after the date of issuance of this Warrant the Company shall distribute to all holders of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation and the Common Stock is not changed or exchanged) cash, evidences of indebtedness, securities or other assets (excluding (i) ordinary course cash dividends to the extent such dividends do not exceed the Company's retained earnings and (ii) dividends payable in shares of capital stock for which adjustment is made under Section 6.1(a)) or rights, options or warrants to subscribe for or purchase securities of the Company, then in each such case the number of shares of Common Stock to be delivered to such Warrantholder upon exercise of this Warrant shall be increased so that the Warrantholder thereafter shall be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares such Warrantholder would have been entitled to receive immediately before such record date by a fraction, the denominator of which shall be the Market Price per share of Common Stock on such record date minus the then fair market value (as reasonably determined by the Board of Directors of the Company in good faith) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of Common Stock (provided that such denominator shall in no event be less than $.01) and the numerator of which shall be the Market 6 Price per share of the Common Stock, and the Exercise Price shall be adjusted as provided below in paragraph (g). (c) Pro Rata Repurchases. If at any time after the date of issuance of this Warrant, the Company or any subsidiary thereof shall make a Pro Rata Repurchase, then the number of shares of Common Stock to be delivered to such Warrantholder upon exercise of this Warrant shall be increased so that the Warrantholder thereafter shall be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares of Common Stock such Warrantholder would have been entitled to receive immediately before such Pro Rata Repurchase by a fraction (which in no event shall be less than one) the denominator of which shall be (i) the product of (x) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Market Price of the Common Stock as of the day immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repurchase minus (ii) the aggregate purchase price of the Pro Rata Repurchase (provided that such denominator shall never be less than $.01), and the numerator of which shall be the product of (i) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase minus the number of shares of Common Stock repurchased in such Pro Rata Repurchase and (ii) the Market Price of the Common Stock as of the day immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repurchase. (d) Reorganization, etc. If at any time after the date of issuance of this Warrant any consolidation of the Company with or merger of the Company with or into any other Person (other than a merger or consolidation in which the Company is the surviving or continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock) or any sale, lease or other transfer of all or substantially all of the assets of the Company to any other person (each, a "Reorganization Event"), shall be effected in such a way that the holders of Common Stock shall be entitled to receive cash, stock, other securities or assets (whether such cash, stock, other securities or assets are issued or distributed by the Company or another Person) with respect to or in exchange for Common Stock, then, upon exercise of this Warrant the Warrantholder shall have the right to receive the kind and amount of cash, stock, other securities or assets receivable upon such Reorganization Event by a holder of the number of shares of Common Stock that such Warrantholder would have been entitled to receive upon exercise of this Warrant had this Warrant been exercised immediately before such Reorganization Event, subject to adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6.1. The Company shall not enter into any of the transactions referred to in this Section 6.1(d) unless effective provision shall be made so as to give effect to the provisions set forth in this Section 6.1(d). 7 (e) Fractional Shares. No fractional shares of Common Stock or scrip shall be issued to any Warrantholder in connection with the exercise of this Warrant. Instead of any fractional shares of Common Stock that would otherwise be issuable to such Warrantholder, the Company will pay to such Warrantholder a cash adjustment (calculated to the nearest $.01) in respect of such fractional interest in an amount equal to that fractional interest of the then Market Price per share of Common Stock. (f) Carryover. Notwithstanding any other provision of this Section 6.1, no adjustment shall be made to the number of shares of Common Stock to be delivered to the Warrantholder (or to the Exercise Price) if such adjustment represents less than .05% of the number of shares to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment that together with any adjustments so carried forward shall amount to .05% or more of the number of shares to be so delivered. (g) Exercise Price Adjustment. Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant is adjusted as provided pursuant to this Section 6.1, the Exercise Price per share payable upon the exercise of this Warrant shall be adjusted by multiplying such Exercise Price immedi ately prior to such adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Warrant Shares purchasable immediately thereafter; provided, however, that the Exercise Price for each Warrant Share shall in no event be less than the par value of such Warrant Share. (h) Multiple Adjustments. If any action or transaction would require adjustment of the number of shares of Common Stock to be delivered to the Warrantholder upon exercise of this Warrant pursuant to more than one paragraph of this Section 6.1, only one adjustment shall be made and each such adjustment shall be the amount of adjustment that has the highest absolute value. 6.2 Notice of Adjustment. Whenever the number of Warrant Shares or the Exercise Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first class mail, postage prepaid, to the Warrantholder, notice of such adjustment or adjustments and a certificate of a firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company (who shall be appointed at the Company's expense and who may be the independent public accountants regularly employed by the Company) setting forth the number of Warrant Shares and the Exercise Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 8 7. Amendments. Any provision of this Warrant may be amended and the observance thereof waived only with the written consent of the Company and the Warrantholder. 8. Notices of Corporate Action. So long as this Warrant has not been exercised in full, in the event of: (a) of a consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required; or (b) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (c) of the sale, exchange or other conveyance (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Company except to a wholly-owned subsidiary; or (d) of any Pro Rata Repurchase; then, in each case, the Company shall cause to be mailed, first-class postage prepaid, to the Warrantholder, not less than 20 days nor more than 60 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of any distribution or grant of rights or warrants triggering an adjustment to pursuant to Section 6.1, or, if a record is not to be taken, the date as of which the holders of record of Common Stock entitled to such distribution, rights or warrants are to be determined, or (y) the date on which any reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata Repurchase is expected to become effective, if known, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata Repurchase, if known. Failure to give the notice specified hereunder shall have no effect on the status or effectiveness of the action to which the required notice relates. 9. Registration Rights. The Warrantholder shall be entitled to registration rights with respect to this Warrant or the Warrant Shares issuable upon exercise of this Warrant as set forth in the Investment Agreement. 10. Definitions. As used herein, unless the context otherwise requires, the following terms have the following meanings: 9 "Business Day" means any day that is not a Saturday, a Sunday or a day on which banking institutions are not required to be open in New York City. "Change of Control" means (i) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of the assets of the Company to any Person or group of Persons acting in concert as a partnership or other group within the meaning of Rule 13d-5 under the Exchange Act (a "Group of Persons"), or (ii) the merger or consolidation of the Company with or into another corporation with the effect that the then existing stockholders of the Company hold less than 50% of the combined voting power of the then outstanding securities of the surviving corporation of such merger or the corporation resulting from such consolidation ordinarily (and apart from rights accruing under special circumstances, including the happening of a contingency) having the right to vote in the election of directors. "Closing Date" has the meaning specified in the Investment Agreement. "Closing Price" of the Common Stock as of any day, means (i) the last reported sale price of such stock (regular way) or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the principal national securities exchange on which the Common Stock is listed or admitted to trading or (ii) if the Common Stock is not listed or admitted to trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and lowest reported asked quotation for the Common Stock, in either case reported on the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), or a similar service if NASDAQ is no longer reporting such information. "Common Stock" has the meaning specified on the cover of this Warrant. "Company" has the meaning specified on the cover of this Warrant. "Exercise Form" means an Exercise Form in the form annexed hereto as Exhibit A. "Expiration Date" has the meaning specified on the cover of this Warrant. "Exercise Price" has the meaning specified on the cover of this Warrant. "Independent Financial Expert" means an independent nationally recognized investment banking firm. 10 "Market Price" means, with respect to each share of Common Stock as of any date, the average of the daily Closing Prices per share of Common Stock for the 30 consecutive Trading Days prior to such date; provided that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted by NASDAQ or a similar service, the Market Price for a share of Common Stock shall be the fair market value of such share as determined in good faith by the Board of Directors of the Company. If the Board of Directors is unable to determine the fair market value, or if the holders of a majority in interest of the Warrants disagree with the Board's determination of fair market value by written notice delivered to the Company within five (5) Business Days after the Board's determination thereof is communicated in writing to such holders, which notice specifies a majority-in-interest of such holders' determination of fair market value, then the Company and a majority-in-interest of such holders shall select an Independent Financial Expert which shall determine such fair market value. If the Company and such holders are unable to agree upon an Independent Financial Expert within fifteen (15) days after the request by such holders, the Company, on the one hand, and such holders, on the other, shall each select an Independent Financial Expert within five (5) days following the expiration of such fifteen (15) day period, and these two Independent Financial Experts shall select a third Independent Financial Expert. The determination of fair market value by such Independent Financial Expert shall be final, binding and conclusive on the Company and the Warrantholder. All costs and fees of any Independent Financial Experts retained in accordance with the foregoing shall be borne by the Company. "Person" means any individual, firm, corporation, partnership, limited liability company or partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Price Floor" has the meaning specified on the cover of this Warrant. "Pro Rata Repurchase" means any purchase of shares of Common Stock by the Company or by any of its subsidiaries whether for cash, shares of capital stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including, without limitation, shares of capital stock, other securities or evidences of indebtedness of a subsidiary of the Company), or any combination thereof, which purchase is subject to Section 13(e) of the Securities Exchange Act of 1934, as amended, or is made pursuant to an offer made available to all holders of Common Stock. "Securities Act" has the meaning specified on the cover of this Warrant. 11 "Warrantholder" has the meaning specified on the cover of this Warrant. "Warrant Shares" has the meaning specified on the cover of this Warrant. 11. Miscellaneous. 11.1 Entire Agreement. This Warrant together with the Investment Agreement constitute the entire agreement between the Company and the Warrantholder with respect to this Warrant. 11.2 Binding Effect; Benefits. This Warrant shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Company and the Warrantholder, or their respective successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant. 11.3 Section and Other Headings. The section and other headings contained in this Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to affect the meaning or interpretation of this Warrant. 11.4 Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in Person at, mailed by registered or certified mail, return receipt requested, postage prepaid, or sent by a reputable overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof). If to the Company: ViroPharma Incorporated 405 Eagleview Boulevard Exton, PA 19341 Telecopy: (610) 458-7380 Attention: Thomas F. Doyle, Esq. with a copies to: Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 Telecopy: (215) 963-5299 Attention: David R. King, Esq. 12 If to the Warrantholder: Perseus-Soros BioPharmaceutical Fund, LP c/o Perseus Capital, LLC the Army and Navy Club Building 1627 I Street, N.W., Suite 610 Washington D.C. 20006 Telecopy: (202) 463-6215 Attention: Christopher D. Earl, Ph.D. and Perseus Capital, LLC the Army and Navy Club Building 1627 I Street, N.W., Suite 610 Washington D.C. 20006 Telecopy: (202) 463-6215 Attention: Kenneth M. Socha, Esq. and Soros Fund Management, LLC 888 Seventh Avenue New York, New York 10106 Telecopy: (212) 262-6300 Attention: Michael C. Neus, Esq. and Soros Fund Management, LLC 888 Seventh Avenue New York, New York 10106 Telecopy: (212) 262-6300 Attention: Neal Moszkowski with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopy: (212) 757-3990 Attention: Bruce A. Gutenplan, Esq. or at such other address as a party hereto shall from time to time designate by written notice, in the manner provided herein, to the other parties hereto. Notice given in 13 accordance with this Section shall be deemed given and received as of the earlier of (i) actual receipt or (ii) first attempted delivery which is refused (as opposed to being returned for insufficient postage/fee, improper address or like cause). All references to days in this Agreement shall be deemed to refer to calendar days, unless otherwise specified. If any notice, filing, delivery or payment shall be required by the terms hereof to be made on a day that is not a Business Day, such notice, filing, delivery or payment shall be made on the immediately succeeding Business Day. 11.5 No Dilution or Impairment. The Company will not, by amendment of its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will, at all times, in good faith, assist in the carrying out of all such terms. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefor on such exercise, (ii) will, at all times, reserve and keep available the maximum number of its authorized shares of Common Stock, free from all preemptive rights therein, which will be sufficient to permit the full exercise of this Warrant and (iii) will take all such action as may be necessary or appropriate in order that all shares of Common Stock as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. 11.6 Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Warrantholder hereof for any issue or transfer tax, or other incidental expense, in respect of the issuance or delivery of such certificates or the securities represented thereby, all of which taxes and expenses shall be paid by the Company; provided, however, that the Warrantholder shall be required to pay any and all taxes that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Warrantholder as reflected upon the books of the Company. 11.7 Severability. Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction. 11.8 Certain Remedies. The Warrantholder shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Warrant and to enforce specifically the terms and provisions of this Warrant in any court of the 14 United States or any court of any state having jurisdiction, this being in addition to any other remedy to which the Warrantholder may be entitled at law or in equity. 11.9 No Rights or Liabilities as Stockholder. Nothing contained in this Warrant shall be deemed to confer upon the Warrantholder any rights as a stockholder of the Company or as imposing any liabilities on the Warrantholder to purchase any securities whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise. 11.10 Governing Law. The Company and, by acceptance of this Warrant, the Warrantholder each hereby acknowledge and agree that the Warrant granted hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York. 15 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. VIROPHARMA INCORPORATED By: /s/ Claude H. Nash ---------------------------------------- Name: Claude H. Nash, Ph.D. Title: President and Chief Executive Officer Dated: May 5, 1999 AGREED AND ACKNOWLEDGED: PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP By: Perseus-Soros Partners, LLC, General Partner By: Perseus Management, LLC, Member By: /s/ Frank H. Pearl ---------------------------- Name: Frank H. Pearl Title: President and Chairman: Dated: May 5, 1999 [COMMON STOCK PURCHASE WARRANT SIGNATURE PAGE] 16 EXERCISE FORM (To be executed upon exercise of this Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase __________ of the Warrant Shares and [herewith tenders payment for such Warrant Shares to the order of ViroPharma Incorporated in the amount of $__________] [hereby exercises its Conversion Right] in accordance with the terms of this Warrant. The undersigned requests that a certifi cate for [such Warrant Shares] [that number of Warrant Shares to which the undersigned is entitled as calculated pursuant to Section 1.2] be registered in the name of the undersigned and that such certificates be delivered to the undersigned's address below. Dated:__________________________ Signature____________________________ ---------------------------- (Print Name) ---------------------------- (Street Address) ---------------------------- (City) (State) (Zip Code) EX-4 5 POWER OF ATTORNEY FOR GEORGE SOROS EXHIBIT 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, GEORGE SOROS, hereby make, constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting individually, as my agent and attorney-in-fact for the purpose of executing in my name, (a) in my personal capacity or (b) in my capacity as Chairman of, member of or in other capacities with Soros Fund Management LLC, all documents, certificates, instruments, statements, filings and agreements ("documents") to be filed with or delivered to any foreign or domestic governmental or regulatory body or required or requested by any other person or entity pursuant to any legal or regulatory requirement relating to the acquisition, ownership, management or disposition of securities or other investments, and any other documents relating or ancillary thereto, including but not limited to, all documents relating to filings with the United States Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and regulations promulgated thereunder, including: (1) all documents relating to the beneficial ownership of securities required to be filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act including, without limitation: (a) any acquisition statements on Schedule 13D or Schedule 13G and any amendments thereto, (b) any joint filing agreements pursuant to Rule 13d-1(f) and (c) any initial statements of, or statements of changes in, beneficial ownership of securities on Form 3, Form 4 or Form 5 and (2) any information statements on Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act. All past acts of the attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed. This power of attorney shall be valid from the date hereof until revoked by me. IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of January, 1997. /s/ George Soros ---------------------- GEORGE SOROS EX-5 6 POWER OF ATTORNEY FOR STANLEY F. DRUCKENMILLER EXHIBIT 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, STANLEY F. DRUCKENMILLER, hereby make, constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting individually, as my agent and attorney-in-fact for the purpose of executing in my name, (a) in my personal capacity or (b) in my capacity as Lead Portfolio Manager of, member of or in other capacities with Soros Fund Management LLC, all documents, certificates, instruments, statements, filings and agreements ("documents") to be filed with or delivered to any foreign or domestic governmental or regulatory body or required or requested by any other person or entity pursuant to any legal or regulatory requirement relating to the acquisition, ownership, management or disposition of securities or other investments, and any other documents relating or ancillary thereto, including but not limited to, all documents relating to filings with the United States Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and regulations promulgated thereunder, including: (1) all documents relating to the beneficial ownership of securities required to be filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act including, without limitation: (a) any acquisition statements on Schedule 13D or Schedule 13G and any amendments thereto, (b) any joint filing agreements pursuant to Rule 13d-1(f) and (c) any initial statements of, or statements of changes in, beneficial ownership of securities on Form 3, Form 4 or Form 5 and (2) any information statements on Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act. All past acts of the attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed. This power of attorney shall be valid from the date hereof until revoked by me. IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of January, 1997. /s/ Stanley F. Druckenmiller -------------------------------- STANLEY F. DRUCKENMILLER EX-6 7 JOINT FILING AGREEMENT EXHIBIT 6 JOINT FILING AGREEMENT Each of the undersigned hereby acknowledges and agrees, in compliance with the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned. This Agreement may be executed in one or more counterparts. PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP By: Perseus-Soros Partners, LLC, General Partner By: SFM Participation, LP, Member By: SFM AH, Inc., General Partner By: /S/ MICHAEL C. NEUS ------------------------------- Name: Michael C. Neus Title: Vice President PERSEUS-SOROS PARTNERS, LLC By: SFM Participation, L.P., Member By: SFM AH, Inc., General Partner By: /S/ MICHAEL C. NEUS -------------------------------- Name: Michael C. Neus Title: Vice President CUSIP No. 928241108 Page 2 of 3 PERSEUS BIOTECH FUND PARTNERS, LLC By: /S/ KENNETH M. SOCHA --------------------------------- Name: Kenneth M. Socha Title: Member MR. FRANK H. PEARL By: /S/ FRANK H. PEARL ------------------------------- Name: Frank H. Pearl MR. KENNETH M. SOCHA By: /S/ KENNETH M. SOCHA -------------------------------- Name: Kenneth M. Socha SFM PARTICIPATION, L.P. By: SFM AH, Inc., General Partner By: /S/ MICHAEL C. NEUS -------------------------------- Name: Michael C. Neus Title: Vice President SFM AH, INC. By: /S/ MICHAEL C. NEUS --------------------------------- Name: Michael C. Neus Title: Vice President MR. GEORGE SOROS By: /S/ MICHAEL C. NEUS ---------------------------------- Name: Michael C. Neus Title: Attorney-in-fact CUSIP No. 928241108 Page 3 of 3 SOROS FUND MANAGEMENT LLC By: /S/ MICHAEL C. NEUS ------------------------------------ Name: Michael C. Neus Title: Assistant General Counsel MR. STANLEY F. DRUCKENMILLER By: /S/ MICHAEL C. NEUS ----------------------------------- Name: Michael C. Neus Title: Attorney-in-fact -----END PRIVACY-ENHANCED MESSAGE-----