Stock Purchase Agreement

EXHIBIT 10.5


SERIES D PREFERRED STOCK PURCHASE AGREEMENT


This Series D Preferred Stock Purchase Agreement (the "Agreement") is entered into as of May 17, 2000 by and between 3-Dimensional Pharmaceuticals, Inc., a Delaware corporation, having its principal place of business at Eagleview Corporate Center, 665 Stockton Drive, Suite 104, Exton, Pennsylvania 19341 ("3-DP"), and Schering Berlin Venture Corporation, a Delaware corporation, having its principal place of business at 340 Changebridge Road, Montville, New Jersey 07058 ("Schering").


Background
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3-DP and Schering AG, a company organized and existing under the laws of the Federal Republic of Germany, having its principal place of business at 13342 Berlin, Germany ("Schering AG") have entered into a License and Research Agreement (the "License Agreement") dated as of the date hereof. In connection with the License Agreement, Schering AG has agreed to make the Stock Purchase (as defined below) through its affiliate, Schering. This Agreement sets forth the agreement of 3-DP and Schering with respect to the Stock Purchase. Certain defined terms used herein and not defined herein shall have the respective meanings given to such terms in the License Agreement.


Witnesseth:
----------


In consideration of the representations and covenants and obligations expressed herein, and intending to be legally bound, the parties agree as follows:


1. Definitions. As used in this Agreement, the following terms have the
----------- meanings specified or referred to in this Section 1.


"Business Day" means any day that is not a Saturday or Sunday or a day
------------ on which banks located in the City of New York, New York are authorized or required to be closed.


"Certificate of Incorporation" means the Restated Certificate, as amended
---------------------------- from time to time.


"Closing" shall have the meaning set forth in Section 3.
-------


"Closing Date" shall have the meaning set forth in Section 3.
------------


"Commission" means the U.S. Securities and Exchange Commission.
----------


"Common Stock" means the common stock, par value $.001 per share, of 3-DP.
------------


"Conversion Shares" means the shares of Common Stock issuable upon
----------------- conversion of the Series D Preferred Shares.


"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------


"IPO" means 3-DP's initial distribution of Common Stock for cash in a firm
--- commitment underwritten public offering to the general public pursuant to a registration statement filed with and declared effective by the Commission pursuant to the Securities Act.


"IPO Effective Date" means the date upon which the IPO Registration
------------------ Statement is declared effective by the Commission.


"IPO Registration Statement" means the registration statement filed by 3-DP
-------------------------- with the Commission to register the Common Stock to be sold in the IPO.


"Material Adverse Effect" shall have the meaning set forth in Section 4.1.
-----------------------


"NASDAQ" shall mean the National Association of Securities Dealers
------ Automated Quotations System.


"Preferential Registration Rights" shall have the meaning set forth in
-------------------------------- Section 6.3.1.


"Registrable Securities" means the Conversion Shares as adjusted for stock
---------------------- splits, stock dividends, combinations and others recapitalizations.


"Restated Certificate" shall have the meaning set forth in Section 2.1.
--------------------


"Securities" means the Series D Preferred Shares and the Conversion Shares.
----------


"Securities Act" means the Securities Act of 1933, as amended.
--------------


"Series D Preferred Shares" means the shares of Series D Preferred Stock
------------------------- issued and issuable pursuant to the terms of this Agreement and the Certificate of Incorporation.


"Series D Preferred Stock" means the Series D preferred stock, par value
------------------------ $.001 per share, of 3-DP.


"Stockholders' Agreement" means the Amended and Restated Stockholders'
----------------------- Agreement dated as of March 31, 2000 among 3-DP and certain stockholders of 3-DP.


"Stock Purchase" shall have the meaning set forth in Section 2.2.
--------------


2. Authorization and Purchases and Sales of Series D Preferred Stock.


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2.1 Authorization. The Series D Preferred Stock to be issued or issuable to
------------- Schering hereunder shall have the voting powers, dividend rights, liquidation rights, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, set forth in 3-DP's Seventh Restated Certificate of Incorporation in the form of Exhibit 2.1 attached hereto and incorporated herein (the "Restated ----------- Certificate").


2.2 Stock Purchase. Subject to the terms and conditions hereof, at the
-------------- Closing, (i) Schering will purchase from 3-DP and 3-DP will sell to Schering, 625,000 Series D Preferred Shares at a purchase price of $8.00 per share for an aggregate purchase price of $5,000,000 (the "Stock Purchase"), payable by Schering by wire transfer in immediately available funds to the account of 3-DP, and (ii) 3-DP will deliver or cause to be delivered to Schering a duly executed certificate representing the Series D Preferred Shares in proper form for transfer, with appropriate transfer stamps, if any, affixed.


3. Closing. The closing (the "Closing") of the Stock Purchase shall be held at
------- the offices of Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania, on May 17, 2000, or, if the conditions to the Closing set forth in Articles 9 and 10 shall not have been satisfied by such date, as soon as practicable after such conditions shall have been satisfied. The date on which the Closing shall occur is hereinafter referred to as the "Closing Date".


4. Representations and Warranties of 3-DP. 3-DP represents and warrants to
-------------------------------------- Schering as of the date hereof and as of the Closing Date as follows:


4.1 Organization and Standing. 3-DP has been duly incorporated and is
------------------------- validly existing as a corporation in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. 3-DP is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would be reasonably expected to have a material adverse effect on the business, operations, properties, assets, prospects or condition (financial or otherwise) of 3-DP (a "Material Adverse Effect").


4.2 Corporate Power; Authorization. 3-DP has all requisite legal and
------------------------------ corporate power and has taken all requisite corporate action to execute and deliver this Agreement, to sell and issue the Securities and to carry out and perform all of its obligations hereunder. This Agreement has been duly authorized, executed and delivered on behalf of 3-DP and constitutes the legal, valid and binding agreement of 3-DP, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally, (ii) as limited by equitable principles generally and (iii) rights to indemnification and contribution hereunder may be limited by applicable law. The consummation of the transactions contemplated herein and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, any license, any judgment, order or decree or statute, law, ordinance, rule or regulation applicable to 3-DP or its properties or assets, 3-DP's Certificate of Incorporation or 3-


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DP's bylaws except such terms or provisions as will have been waived prior to the Closing. In addition, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which 3-DP is a party or by which it is bound other than any such items that, individually or in the aggregate would not have a Material Adverse Effect and except such terms or provisions as will have been waived prior to the Closing .


4.3 Capitalization. As of the Closing Date, the authorized capital stock of
-------------- 3-DP is 97,994,126 shares, consisting of 6,926,461 shares of Series A-1 Preferred Stock, 4,333,990 shares of Series A-2 Preferred Stock, 10,304,264 shares of Series A-3 Preferred Stock, 4,000,000 shares of Series A-4 Preferred Stock, 9,572,248 shares of Series A-5 Preferred Stock, 1,000,000 shares of Series B Preferred Stock, 5,000,000 shares of Series C Preferred Stock, 625,000 shares of Series D Preferred Stock and 56,232,163 shares of Common Stock. As of the Closing Date, 6,686,986 shares of Series A-1 Preferred Stock were issued and outstanding, 4,333,990 shares of Series A-2 Preferred Stock were issued and outstanding, 10,304,264 shares of Series A-3 Preferred Stock were issued and outstanding, 4,000,000 shares of Series A-4 Preferred Stock were issued and outstanding, 9,572,248 shares of Series A-5 Preferred Stock were issued and outstanding, 1,000,000 shares of Series B Preferred Stock were issued and outstanding, 400,000 shares of Series C Preferred Stock were issued and outstanding, 625,000 shares of Series D Preferred Stock were issued and outstanding and 2,645,881 shares of Common Stock were issued and outstanding. Except as disclosed in Schedule 4.3 and except for the transactions expressly
------------ contemplated hereby, since March 31, 2000, 3-DP has not issued any shares of Common Stock or Series D Preferred Stock, granted any options or issued restricted stock (except for stock options granted and restricted stock issued under 3-DP's employee, consultant and director stock option plans), warrants, rights (including conversion or preemptive rights, except for stock purchased under 3-DP's stock purchase plans), or similar rights to any person or entity to purchase or acquire any rights with respect to any shares of capital stock of 3-DP. The outstanding shares of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock, Series A-5 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common Stock have been duly authorized and validly issued and are fully paid and nonassessable; and none of such outstanding shares was issued in violation of the preemptive rights, purchase option, call, right of first refusal or similar rights, if any, of any stockholder of 3-DP.


4.3.1.(a) Securities; Conversion Shares. 3-DP has full corporate power
----------------------------- and authority to sell the Securities on the terms and conditions contemplated herein, and when so sold against payment therefor as provided herein, the Securities will be validly authorized and issued, fully paid and nonassessable and will have the rights, preferences and privileges described in the Certificate of Incorporation and, assuming the accuracy of Schering's representations and warranties contained in Section 5.1 and 5.2, will be issued in compliance with all applicable federal and state securities laws. The issuance and delivery of the Securities is not subject to preemptive or any similar rights of any stockholders of 3-DP or any liens or


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encumbrances arising through 3-DP, except such preemptive or similar rights as will have been waived prior to the Closing hereunder; and when the Conversion Shares are issued in accordance with the Certificate of Incorporation, they will be validly issued and outstanding, fully paid and nonassessable and free of any liens or encumbrances arising through 3-DP or any of its affiliates and will be issued in compliance with all applicable federal and state securities laws.


4.3.1.(b) Subsidiaries. Except as set forth on Schedule 4.3.1.(b),
------------ ------------------ 3-DP does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity, and 3-DP is not a member of or participant in any partnership, joint venture or similar person.


4.4 Compliance with Other Instruments. The execution, delivery and
--------------------------------- performance of this Agreement and of the transactions contemplated hereby will not result in a breach of any of the terms or provisions of, or constitute a default under, any license, any judgment, order or decree or statute, law, ordinance, rule or regulation applicable to 3-DP or its properties or assets, 3-DP's Certificate of Incorporation or 3-DP's bylaws except such terms or provisions as will have been waived prior to the Closing. In addition, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which 3-DP is a party or by which it is bound other than any such items that, individually or in the aggregate would not have a Material Adverse Effect and except such terms or provisions as will have been waived prior to the Closing .


4.5 Governmental Consents. Except as set forth in Schedule 4.5, no consent,
--------------------- ------------ approval, license, permit, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of 3-DP in connection with 3-DP's valid execution, delivery and performance of this Agreement. The filings under state securities laws, if any, will be effected by 3-DP at its cost within the applicable stipulated statutory period.


4.6 Financial Statements. Attached hereto as Schedule 4.6 are year-end
-------------------- ------------ audited financial statements of 3-DP for the fiscal year ended December 31, 1998 and year-end unaudited financial statements of 3-DP for the fiscal year ended December 31, 1999 (the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated therein, except as may be indicated therein or in the notes thereto, and fairly present the financial condition of 3-DP as of the respective dates thereof and the results of its operations and statements of cash flows for the periods then ended, subject, in the case of unaudited financial statements, to normal year-end adjustments. Except as reflected in the Financial Statements, 3-DP has no liabilities or obligations of any nature, whether absolute, contingent or accrued, unasserted or otherwise, that would have a Material Adverse Effect.


4.7 Absence of Certain Changes. Except as set forth in Schedule 4.7, since
-------------------------- ------------ December 31, 1999, there has been no:


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4.7.1 change in the business, operations, properties, assets, prospects or condition (financial or otherwise) of 3-DP, except changes in the ordinary course of business that have not, individually or in the aggregate, resulted in and are not reasonably expected to result in a Material Adverse Effect;


4.7.2 damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties or financial condition of 3-DP;


4.7.3 waiver or compromise by 3-DP of a material right or of a material debt owed to it;


4.7.4 satisfaction or discharge of any lien, claim or encumbrance by 3-DP, except in the ordinary course of business and which is not material to the business, properties or financial condition of 3-DP;


4.7.5 material change to a material contract or arrangement by which 3-DP or any of its assets is bound or subject;


4.7.6 sale, assignment or transfer to a third party of any material patents, trademarks, copyrights, trade secrets or other intangible assets for compensation which is less than fair value;


4.7.7 mortgage, pledge, transfer of a security interest in, or lien, created by 3-DP, with respect to any of its material properties or assets, except liens for taxes not yet due or payable; or


4.7.8 declaration, setting aside or payment or other distribution in respect of any of 3-DP's capital stock.


4.8 Contracts. 3-DP is not, and has no actual knowledge that any other
--------- party is, in default under or in respect of any contract, commitment or agreement to which 3-DP is a party or by which any of its assets or properties are bound, the result of which default would be reasonably expected to have a Material Adverse Effect. No party to any contract, commitment or agreement would be authorized or permitted to terminate its obligations thereunder by reason of the execution and delivery of this Agreement or any of the transactions contemplated herein, except with respect to such terms and conditions thereof as shall have been waived prior to the Closing.


4.9 Compliance. 3-DP has complied with, and is not in default under or in
---------- violation of, its Certificate of Incorporation, bylaws or any law, statute, ordinance, rule or regulation or other governmental restriction, order, judgment or decree directly applicable to 3-DP, except where the failure to comply or any such default or violation would not be reasonably expected to have a Material Adverse Effect. 3-DP has not received notice of any possible or actual violation of any applicable law, statute, ordinance, rule, regulation or other governmental restriction, order,


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judgment or decree the result of which violation would be reasonably expected to have a Material Adverse Effect.


4.10 Litigation. Except as set forth in Schedule 4.10, there is no action,
---------- ------------- suit, proceeding or investigation pending or, to 3-DP's knowledge, currently threatened against 3-DP which questions the validity of this Agreement or the right of 3-DP to enter into this Agreement or to consummate the transactions contemplated hereby. There is no action, suit, proceeding or investigation pending or, to 3-DP's knowledge, currently threatened against 3-DP, which individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would be reasonably expected to have a Material Adverse Effect.


4.11 Permits. 3-DP has complied with, and is not in default in any respect
------- under, all governmental franchises, permits, licenses, and any similar authority necessary for the conduct of its business as now being conducted by it, except where the failure to so comply or such default would not be reasonably expected to have a Material Adverse Effect.


4.12 Taxes. 3-DP has filed all federal, state and other tax returns which
----- are required to be filed and has heretofore paid all taxes which have become due and payable, except ...