Exhibit 10.1
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SCRIPTECH PHARMACEUTICALS, INC.
STOCK PURCHASE AGREEMENT
September 16, 1993
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SCRIPTECH PHARMACEUTICALS, INC.
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 16th day of September 1993, by and among
SCRIPTECH PHARMACEUTICALS, INC., a Delaware corporation (the "Company") with its
principal place of business at Xxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000, and each of the entities and individuals severally listed
on the Schedule of Purchasers attached hereto (collectively, the "Purchasers"
and individually, a "Purchaser").
WHEREAS, the Company desires to issue and sell, and the
Purchasers desire to purchase, certain securities of the Company, upon the terms
and conditions set forth herein; and
WHEREAS, included in such securities are securities to be
issued by the Company as a result of the extension to the Company by certain
Purchasers of $361,000 principal amount of bridge loans (the "Bridge Loans") in
July and August 1993.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and conditions herein contained, the parties hereto agree as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before
the Closing (as hereinafter defined) will have, authorized the sale and issuance
of 6,203,325 shares of its Series A Preferred Stock, par value $.01 per share
(the "Preferred Stock"), and 575,000 shares of its Common Stock, par value $.01
per share (the "Common Stock"), each such class of stock having the rights,
restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company (the "Certificate of Incorporation")
attached to this Agreement as Exhibit A. The 6,203,325 shares of Preferred Stock
being sold to the Purchasers hereunder, including the 361,000 shares of
Preferred Stock being issued to certain Purchasers in repayment of the principal
amount of the Bridge Loans and the 3,325 shares of Preferred Stock being issued
to such Purchasers in repayment of the interest accrued on the Bridge Loans, are
referred to herein collectively as the "Preferred Shares" and individually as a
"Preferred Share." The 575,000 shares of Common Stock being sold to certain
Purchasers hereunder, consisting of 350,000 shares being issued proportionately
to those Purchasers which extended Bridge Loans to the Company and 225,000
shares being issued to certain Purchasers or persons affiliated with Purchasers,
are referred to herein collectively as the "Common Shares" and individually as a
"Common Share." The Preferred Shares and Common Shares are referred
to herein collectively as the "Shares" and individually as a "Share."
1.2 Sale of the Shares. Subject to the terms and conditions
hereof and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to each of the Purchasers,
severally and not jointly, and each of the Purchasers will purchase from the
Company at the Closing, the number of shares of Preferred Stock and/or Common
Stock set forth opposite such Purchaser's name on the Schedule of Purchasers
attached hereto (the "Schedule of Purchasers") under the columns labelled
"Shares of Preferred Stock" and "Shares of Common Stock," respectively, at the
purchase price set forth opposite such Purchaser's name on the Schedule of
Purchasers under the column labelled "Total Investment."
SECTION 2
The Closing
2.1 Closing Date. The closing of the purchase and sale of the
Shares hereunder (the "Closing"), including the delivery to the Purchasers by
the Company of the certificates evidencing all Shares being purchased, shall
take place immediately following the execution and delivery of this Agreement at
the office of Fulbright & Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, or at such other time and place as shall be mutually agreed upon by
the parties (the "Closing Date").
2.2 Delivery. At the Closing, the Company shall deliver to
each Purchaser certificates in such denominations and registered on the books of
the Company in such names as are set forth in the Schedule of Purchasers
attached hereto, representing the number of Preferred Shares or Common Shares,
as the case may be, to be purchased by such Purchaser from the Company, against
payment at the Closing, of the amount set forth opposite such Purchaser's name
in the column labelled "Total Investment" on the Schedule of Purchasers. Payment
for the Shares shall be made by the cancellation of the Bridge Loan indebtedness
(both principal and accrued interest), if any, of the Company to such Purchaser,
as set forth under the column labelled "Bridge Loan Conversion" on the Schedule
of Purchasers and, at the option of the Purchaser, by check or wire transfer, or
any combination thereof, in the amount set forth under the column labelled "$
Payment" on the Schedule of Purchasers.
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SECTION 3
Representations and Warranties of
the Company
Except as provided herein or as set forth on the "Schedule of
Exceptions" delivered to each Purchaser prior to the execution hereof and
attached hereto, the Company hereby represents and warrants to each Purchaser as
follows:
3.1 Organization and Standing: Articles and By-Laws. The
Company is a corporation duly organized and validly existing and in good
standing under the laws of its state of organization and is qualified to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification, except where the failure to
so qualify would not have a material adverse effect upon the business,
operations or prospects of the Company. The Company has the requisite corporate
power to own properties owned by it and to conduct business as now being
conducted by it and as contemplated by it and possesses all governmental and
other permits, licenses and other authorizations to own its properties as now
owned and to conduct its business as now conducted. The Company has furnished
counsel to the Purchasers with true, correct and complete copies of its
Certificate of Incorporation, By-Laws and all amendments to each to date.
3.2 Corporate Power. The Company has all requisite corporate
power to enter into this Agreement and each of the Exhibits hereto, and will
have at the Closing Date all requisite corporate power to sell the Shares and to
carry out and perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has no subsidiaries and does not
own of record or beneficially any capital stock or equity interest or investment
in any corporation, association or business entity.
3.4 Capitalization. Immediately prior to the Closing, the
Company's authorized capital stock will consist of (a) 15,000,000 shares of
Common Stock, of which (i) 1,000 shares will be issued and outstanding
immediately prior to the Closing, (ii) 6,203,325 shares will be set aside for
issuance upon conversion of the Preferred Shares to be issued hereunder, (iii)
575,000 shares will be issued to the Purchasers or their affiliates at the
Closing, as provided in Section 1.1 hereof, (iv) 1,960,500 shares are set aside
for issuance upon exercise of stock options and other stock purchase rights,
heretofore or hereafter to be granted, listed on Schedule 3.4 hereto and (v)
1,239,500 shares are set aside for issuance upon exercise of other stock options
and purchase rights which may be granted to employees and consultants of the
Company, as approved by the Company's Board of Directors, and (b) 6,250,000
shares of Preferred Stock, none of which shares are issued and outstanding prior
to the Closing. All the aforesaid issued and outstanding shares of Common Stock
will have been duly authorized and validly issued, will be fully paid and
nonassessable, and will be owned of record and beneficially by the stockholders
of the Company and in the amounts set
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forth in the Schedule of Exceptions, and will have been offered, issued, sold
and delivered by the Company in compliance with applicable Federal and state
securities laws. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding on the
Company for the purchase or acquisition of, or with respect to any shares of its
capital stock, except as listed in Schedule 3.4 hereto. No stockholder has
granted options or other rights to purchase any shares of Common Stock from such
stockholder. Neither the offer, issuance or sale of the Shares nor the
consummation of any transaction contemplated hereby will result in a change in
the price or number of any securities of the Company outstanding at the Closing
under anti-dilution provisions contained in or affecting any such securities.
The Company holds no shares of its capital stock in its treasury.
3.5 Authorization. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and each of
the Exhibits hereto, and the consummation of the transactions contemplated
herein and therein, and for the authorization, issuance and delivery of the
Shares and the shares of Common Stock issuable upon conversion of the Preferred
Shares has been taken or will be taken prior to the Closing. This Agreement and
each of the Exhibits hereto is a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally and to
general equitable principles. The execution, delivery and performance by the
Company of this Agreement and each of the Exhibits hereto and compliance
herewith and therewith and the issuance and sale of the Shares and the issuance
of Common Stock upon conversion of the Preferred Shares will not (a) result in
any violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, the Company's Certificate of
Incorporation or By-Laws, as amended, any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Company is a party or by which it is bound or any provision of state
or Federal law to which the Company is subject, or (b) result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company pursuant to any such term or (c) result in the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to the Company's operations or any of its
assets or properties. The Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable; will be
free of any liens or encumbrances; and will have the rights, privileges and
preferences as set forth in the Certificate of Incorporation. The shares of
Common Stock issuable upon conversion of the Preferred Shares have been duly and
validly reserved and are not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be validly issued, fully paid and
nonassessable.
3.6 Financial Information. The unaudited financial statements
of the Company as of December 31, 1992, and the related notes thereto
(collectively, the "Financial Statements"), and the unaudited financial
statements of the Company as of
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June 30, 1993, including the balance sheet as of June 30, 1993 (the "Balance
Sheet"), all of which unaudited statements are attached as Exhibit B hereto,
present fairly the financial position and results of operations of the Company
at the dates and for the periods to which they relate, have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities of the Company required
to be recorded thereon in accordance with generally accepted accounting
principles as at the dates thereof.
3.7 Absence of Undisclosed Liabilities. Except for the Bridge
Loans, the Company has no material liabilities (fixed or contingent, including
without limitation any tax liabilities due or to become due) which are not fully
reflected or provided for on the Balance Sheet. The Company does not know of any
such material liability of any nature, direct or indirect, contingent or
otherwise, or in any amount not adequately reflected or reserved against in the
Balance Sheet.
3.8 Absence of Certain Changes. At all times since December
31, 1992 up to and including the Closing, there has not been any event or
condition of any character which has materially adversely affected the Company's
business, operations or financial condition, including but not limited to:
(a) any material adverse change in the condition, operating
results, assets, liabilities or business of the Company from that shown on the
Financial Statements;
(b) any damage, destruction or loss of any of the properties
or assets of the Company (whether or not covered by insurance) materially
adversely affecting the assets, properties, financial condition, operating
results, prospects, business or plans of the Company;
(c) any waiver by the Company of a valuable right or of a debt
owed to it;
(d) any material change or material amendments to a contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) any labor trouble.
3.9 Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with the States of Massachusetts and
Delaware and
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(except to the extent that the failure to file would not have a material adverse
effect on the condition or operations of the Company) with all other
jurisdictions where such filing is required by law; and the Company has paid, or
made adequate provision in the Financial Statements for the payment of, all
taxes, interest, penalties, assessments or deficiencies (i) shown to be due or
claimed to be due on or in respect of such tax returns and reports or (ii) on
the income, profits, property or business of the Company. The Company knows of
(i) no other tax returns or reports which are required to be filed which have
not been so filed and (ii) no unpaid assessment for additional taxes for any
fiscal period or any basis therefor. The Company's Federal income tax returns
have not been audited by the Internal Revenue Service.
3.10 Outstanding Debt. Except for the Bridge Loans and as
reflected on the Balance Sheet, the Company has no outstanding indebtedness for
borrowed money and is not a guarantor or otherwise contingently liable for any
indebtedness for borrowed money (including, without limitation, liability by way
of agreement, contingent or otherwise, to purchase, provide funds for payment,
supply funds or otherwise invest in any debtor or otherwise to insure any
creditor against loss). There exists no default under the provisions of any
instrument evidencing any such indebtedness or otherwise or of any agreement
relating thereto, including, without limitation, those included or referred to
in the Schedule of Exceptions and Balance Sheet. No officer, director or
stockholder of the Company or any of their relatives or affiliates, is indebted
to the Company in an amount in excess of $5,000 per person or entity.
3.11 Contracts; Insurance. Except as set forth in the
Financial Statements, the Company has no currently existing contract,
obligation, agreement, plan, arrangement, commitment or the like (written or
oral) of any material nature (involving more than $10,000 in any year or $50,000
over the life of such contract, obligation, agreement, plan, arrangement or
commitment, either individually or in the aggregate if such contracts,
obligations, agreements, plans, arrangements or commitments are of a similar
nature oR with the same party) including without limitation the following:
(a) Employment, bonus or consulting agreements, pension,
profit sharing, deferred compensation, stock bonus, retirement, stock option,
stock purchase, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among stockholders
and the Company;
(b) Loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a lien or security interest or
other encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment of performance by
any other person;
(c) Agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
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(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person
for the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and subcontractors;
(f) Any indenture, agreement, or other document (including
private placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements expressly limiting the freedom of the Company
to compete in any line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business,
assets or shares of the Company, agreements of merger or consolidation to which
the Company is a party or letters of intent with respect to the foregoing;
(j) Letters of intent or agreements with respect to the
acquisition of the business, assets or shares of any other business;
(k) Insurance policies;
(l) Assignments, licenses or other agreements with respect to
any intangible property (including, without limitation, any patent, trademark,
trade name, copyright, know-how, trade secret, proprietary right or confidential
information);
(m) Any other contract, instrument, commitment, plan,
agreement or arrangement, a copy of which would be required to be filed with the
Securities and Exchange Commission (the "Commission") as an exhibit to a
registration statement on Form S-1 if the Company were registering securities
under the Securities Act of 1933, as amended (the "Securities Act").
The Company has complied with all the material provisions of
all said contracts, obligations, agreements, plans, arrangements, and
commitments and there does not exist any event of default with respect to the
Company under any such agreement or any event which, after notice or lapse of
time or both, would constitute an event of default with respect to the Company
under such agreement. There is no action, suit, proceeding or investigation
pending or, to the best of the Company's knowledge and belief, threatened
against the Company before any court or before any governmental or
administrative agency for the renegotiation of or any other adjustment of any
such agreement.
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3.12 Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the best of the Company's
knowledge and belief, threatened any action, suit, proceeding or claim or, to
the best of the Company's knowledge, any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject or to which any officer, key
employee or principal stockholder of the Company is subject, and in which an
unfavorable outcome, ruling or finding in any such matter or for all such
matters taken as a whole might have a material adverse effect on the condition,
financial or otherwise, prospects or operations of the Company; and the Company
has no knowledge of any unasserted claim, the assertion of which is likely and
which, if asserted, will seek damages, an injunction or other legal, equitable,
monetary or nonmonetary relief, which claim individually or collectively with
other such unasserted claims if granted would have a material adverse effect on
the condition, financial or otherwise, business or operations of the Company.
(b) The Company has not admitted in writing its inability to
pay its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other similar law or
statute of the United States of America or any other jurisdiction.
3.13 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority, including the
Secretary of State of the State of Delaware, is required in connection with the
Company's valid execution, delivery or performance of this Agreement or any of
the Exhibits hereto, or the offer, sale or issuance of the Shares by the
Company, the conversion of the Preferred Shares, the issuance of Common Stock
upon conversion of the Preferred Shares or the consummation of any other
transaction contemplated on the part of the Company hereby or pursuant to any
such Exhibit, except for such filings as have been made prior to the Closing.
3.14 Title to Properties; Liens and Encumbrances; Leases. The
Company owns no real property. The Company has good and marketable title to and
a valid and indefeasible ownership interest in all the property and assets owned
by it, free from all mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges (collectively referred to herein as
"Liens").
Set forth on the Schedule of Exceptions is a correct and
complete list (including the amount of rents called for and a description of the
leased property) of all leases under which the Company is a lessee. The Company
enjoys peaceful and undisturbed possession under all such leases, all of such
leases are valid and subsisting and the Company is not in default under any of
such leases in any material respect.
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3.15 Business of the Company. There is no pending or, to the
best of the Company's knowledge and belief, threatened any claim or litigation
against or affecting the Company contesting its right to perform any of the
services presently conducted by or proposed to be conducted by the Company or to
produce, manufacture, sell or use any product, process, method, substance, part
or other material presently produced, manufactured, sold or used or planned to
be produced, manufactured, sold or used by the Company in connection with the
business and operations of the Company. The Company has no knowledge or belief
that (i) there exists, or there is pending or planned, any patent, invention,
device, application or principle, or any statute, rule, law, regulation,
standard or code which would materially adversely affect the condition,
financial or otherwise, operations or prospects of the Company; or (ii) there is
any other factor (other than fire, flood, accident, act of war or civil
commotion, or any other cause or event beyond the control of the Company) which
materially adversely affects the condition, financial or otherwise, business or
the operations of the Company.
3.16 Permits, Franchises, Licenses, Trademarks, Patents and
Other Rights. The Company has, or when required will have, all permits, licenses
and other similar authority necessary in any material respect for the conduct of
its business as now being conducted by it and as planned to be conducted by it,
and it is not in default under any of such permits, licenses or other similar
authority. The Company possesses all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, trade secrets,
information, proprietary rights and processes necessary to conduct its business
in any material respect as now being conducted and as planned to be conducted
without, to the best of the Company's knowledge and belief, conflict with or
infringement upon any valid rights of others, and has not received any notice of
infringement upon or conflict with the asserted rights of others.
There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any option, license or agreement of any kind with respect to the patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, trade secrets, information, proprietary rights and processes of any
other person or entity. No stockholder, director, officer or employee of the
Company has any interest in any such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, trade secrets,
information, proprietary rights and processes.
3.17 Issuance Taxes. All taxes imposed by law in connection
with the issuance, sale and delivery of the Shares shall have been fully paid,
and all laws imposing such taxes shall have been fully complied with in all
material respects, prior to the Closing Date.
3.18 Offering. Subject in part to the truth and accuracy of
the Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Shares and the issuance of Common Stock upon conversion of the
Preferred Shares as contemplated by this Agreement are exempt from the
registration requirements of
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the Securities Act and from the registration or qualification requirements of
the laws of any applicable state, and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemption.
3.19 Compliance with Other Instruments. The Company is not in
violation of any term of its Certificate of Incorporation or By-Laws, as
amended. The Company is not in violation of any term of any mortgage, indenture,
contract, agreement, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is subject and a violation of which would have a
material adverse effect on the condition, financial or otherwise, operations or
prospects of the Company.
3.20 Employees. To the best of the Company's knowledge and
belief, no employee or consultant of the Company, is, or is now expected to be,
in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, proprietary information and inventions
agreement or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or any Purchaser to any
liability to a third party. There is neither pending nor, to the best of the
Company's knowledge and belief, threatened any actions, suits, proceedings or
claims, or to its knowledge any basis therefor or threat thereof with respect to
any contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company does not have any collective bargaining agreement covering
any of its employees.
To the best knowledge of the Company, after due inquiry, no
officer or other person designated by the Purchasers on Schedule A hereto as a
"key person" of the Company, has any present intention of terminating his
employment or consulting arrangement with the Company, and the Company has no
present intention of terminating such employment or consulting arrangement.
3.21 Employee Benefit Plan Obligations. The Company does not
have any collective bargaining, labor, profit sharing, pension, retirement,
stock option, incentive, benefit or other similar contract, plan or arrangement.
The Company does not sponsor, nor is it obligated to contribute to, any employee
benefit plan (as such term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")).
3.22 Environmental Matters; Hazardous Waste. There have been
no past and there are no existing violations of Federal, state or local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste (including, but not limited to, asbestos, polychlorinated
biphenyls and petroleum products), relating to the Company or any of its
businesses or operations or assets. No inspection or investigation by the
Environmental Protection Agency or OSHA, or any other federal, state or local
agency has resulted in a letter demanding cleanup of
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hazardous substances or waste, citation, complaint or notice of violation,
pursuant to any law, rule, regulation, ordinance, judgment, decree, order,
injunction or decision of any court or governmental authority in regard to the
Company or any of its businesses or operations or any of its assets and no such
citation, complaint, notice or demand letter is pending or, to the best of the
Company's knowledge and belief, threatened.
To the best of the Company's knowledge and belief, there is no
condition or state of affairs existing on or about any real property owned,
leased, operated or used by the Company or any real property previously owned,
leased, operated or used by the Company (but only to the extent that such
condition or state of affairs existed on the date the Company ceased to own,
lease, operate or use such real property or was attributable to the Company's
ownership, leasing, operation or use of such real property) that would now or in
the immediate future require a closure under the provisions of the Resource,
Conservation and Recovery Act, or remedial or other action under the provisions
of the Resource, Conservation and Recovery Act or the Comprehensive
Environmental Response, Compensation and Liability Act, or the regulations
promulgated under such Acts, or that would constitute a nuisance or violation of
any environmental legislation or regulation under the law of the state in which
such property is located.
3.23 Ability to Comply; Burdensome Restrictions. The Company
has the ability and is presently in a position, legally and otherwise, to comply
with the terms of and perform all its obligations under this Agreement and each
of the Exhibits hereto; and the Company has no present knowledge of or any
present reason to believe that the Company will not have such ability and be in
such a position for so long as any shares of Preferred Stock are outstanding.
The Company is not presently obligated under any contract or
agreement or subject to any charter or other corporate restriction which (i)
materially and adversely affects, or may, in the reasonable opinion of the
Company, be expected to materially and adversely affect, its business,
properties, assets or condition (financial or otherwise) or (ii) will legally or
contractually restrict or impair the ability of the Company to pay any dividends
on or make other distributions with respect to the Preferred Shares pursuant to
the provisions of the Certificate of Incorporation.
3.24 Material Relationships. To the best of the Company's
knowledge and belief, none of the officers, directors or "key persons" (as
designated on Schedule A hereto) of the Company, or their respective spouses, or
relatives, owns directly or indirectly, individually or collectively, a material
interest in any entity which is a competitor, customer or supplier of (or has
any existing contractual relationship with) the Company. For purposes of this
Section 3.24, there may be disregarded any purely passive economic interest
which arises solely from the ownership of less than a 2% equity interest in any
such entity.
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3.25 Registration Rights. Except as provided in this
Agreement, the Company is not under any obligation to register any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
3.26 Brokers' and Finders' Fees. The Company has retained no
broker or finder in connection with the transactions contemplated by this
Agreement and has no liability for any commission or compensation in the nature
of an agent's fee to any broker or finder or any other person.
3.27 Disclosure. This Agreement, the Schedule of Exceptions,
as well as any other document, certificate, schedule, financial, business or
other statement furnished to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated hereby, do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading in
light of the circumstances under which they were made. The Company has no
current knowledge of any fact or circumstance which materially adversely affects
or in the future reasonably can be expected to materially adversely affect the
condition, financial or otherwise, assets, business or operations of the Company
which has not been disclosed in writing to the Purchasers.
SECTION 4
Representations and Warranties of Purchasers
Each Purchaser, severally and not jointly, represents and
warrants with respect to such Purchaser to the Company as follows:
4.1 Experience. It has such knowledge and experience in
financing and business matters that it is capable of evaluating the merits and
risks of an investment in the Shares and of making an informed decision.
4.2 Investment. It is acquiring the Shares for investment for
its own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares and, if applicable, the
shares of Common Stock issuable upon conversion of the Preferred Shares have not
been registered under the Securities Act by reason of a specified exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of its investment intent as expressed herein.
4.3 Restrictions on Transfers. It understands and agrees as
follows:
(a) The certificates evidencing the Shares (and the Common
Stock issuable upon conversion of the Preferred Shares), and each certificate
issued in
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transfer of the foregoing, will bear the following legend (or substantially
similar legend):
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION
OR THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH DISPOSITION
WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS."
(b) It will not offer, sell, transfer of otherwise dispose of
any of the Shares or, if applicable, any Common Stock issuable upon conversion
of the Preferred Shares, unless (i) an effective registration under the
Securities Act covers the disposition of such securities or (ii) it has
delivered to the Company an opinion of counsel, reasonably satisfactory to the
Company, that such offer, sale, transfer or other disposition will not require
registration of such securities under the Securities Act or qualification under
any state securities laws.
Upon request of a holder of Shares (or Common Stock issued
upon conversion of Preferred Shares), the Company shall remove any such legend
from each certificate evidencing such Shares (or such Common Stock), or shall
issue to such holder a new certificate or certificates for such Shares (or such
Common Stock), which certificate or certificates shall be free of such transfer
legend, provided that with such request, the Company shall have received an
opinion of counsel, which opinion is reasonably satisfactory to the Company, to
the effect that such legend is no longer necessary or required (including,
without limitation, because of the availability of the exemption afforded by
Rule 144 promulgated under the Securities Act).
4.4 Rule 144. It acknowledges that the Shares and the shares
of Common Stock issuable upon conversion of the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. It has been advised or is aware of the
provisions of Rule 144, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, and
understands that such Rule may not become available for resale of the Shares.
4.5 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management and has
had the opportunity to review the Company's books, records and facilities.
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4.6 Authorization. If applicable, all corporate or partnership
action on the part of such Purchaser and its directors and stockholders or
partners necessary for the authorization, execution, delivery and performance by
such Purchaser of this Agreement and the Exhibits hereto and the consummation of
the transactions contemplated herein and therein, has been taken or will be
taken prior to the Closing. This Agreement and each of the Exhibits hereto to
which such Purchaser is a party is a valid and binding obligation of such
Purchaser, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally and to
general equitable principles. The execution, delivery and performance by such
Purchaser of this Agreement and each of the Exhibits hereto to which such
Purchaser is a party and compliance herewith and therewith will not result in
any violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, such Purchaser's Certificate of
Incorporation or By-Laws or Agreement of Limited Partnership, as applicable, or
any judgment, decree, order, rule or regulation to which such Purchaser is
bound.
SECTION 5
Conditions to Closing of Purchasers
The obligation of each Purchaser to purchase the Shares to be
purchased at the Closing is subject to the fulfillment to such Purchaser's
reasonable satisfaction on or prior to the Closing Date of each of the following
conditions:
5.1 Representations and Warranties Correct. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
respects.
5.3 Completion of Due Diligence. The Purchasers or their
representatives shall have completed their due diligence investigation including
but not limited to discussions with the Company's management concerning the
Company's business, management and financial affairs and inspection of the
Company's books, records and facilities.
5.4 Opinion of Company's Counsel and Accountants. The
Purchasers shall have received from Xxxxxxx, Xxxxx & Xxxxx, counsel to the
Company, an opinion addressed to the Purchasers, dated the Closing Date, and in
substantially the form attached as Exhibit C hereto.
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5.5 Legal Investment. At the time of the Closing, the purchase
of the Shares to be purchased by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
5.6 Compliance Certificate. The Company shall have delivered
to the Purchasers a certificate of the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement and such other matters as the Purchasers
may reasonably request.
5.7 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory in
substance and form to the Purchasers and their counsel.
5.8 Securities Law Compliance. All such actions and steps
necessary to assure compliance with applicable Federal and state securities
laws, including all authorizations, approvals or permits, if any, of any
governmental authority or regulatory body in any states where the Shares are
being sold that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement, the conversion of the Preferred Shares
into Common Stock and the issuance of such Common Stock upon such conversion
shall have been duly obtained and shall be effective at and as of the Closing.
5.9 Stockholders' Agreement. The Company, the Purchasers,
Xxxxxxx Xxxxx ("Green"), Xxxxx Xxx ("Xxx"), Xxxxxx XxXxxxx ("XxXxxxx") and each
person holding shares of Common Stock or options or rights to purchase shares of
Common Stock shall have executed and delivered to the Purchasers an agreement
(the "Stockholders' Agreement") in substantially the form attached hereto as
Exhibit D.
5.10 Employment Agreement. The Company shall have entered into
an Employment Agreement with XxXxxxx in substantially the form attached hereto
as Exhibit E.
5.11 Consulting Agreements. The Company shall have entered
into modifications to the Consulting Agreements with Green and Xxx, in
substantially the form attached hereto as Exhibits F and G, respectively.
5.12 Research Budget. The Company shall have received the
research plan and budget referred to in Section 2.1(B) of the Research and
License Agreement, dated as of October 1, 1992, between the University of
Massachusetts and the Company for the fiscal year ended June 30, 1994, in form
and substance satisfactory to and approved by the Purchasers.
5.13 HCV Extension. The Company shall have received an
agreement, in form and substance satisfactory to the Purchasers, pursuant to
which HealthCare Ventures III, L.P. and HealthCare Ventures IV, L.P.
(collectively, "HCV"),
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have extended the date upon which HCV will forebear from taking any action
against the Company from August 3, 1993 to September 22, 1993. In addition, the
Company shall have furnished the Purchasers with evidence satisfactory to the
Purchasers and their counsel that satisfactory arrangements have been made for
all indebtedness to HCV and any security interest granted to HCV to be
extinguished in its entirety.
5.14 HCV Certificate. The Purchasers shall have received from
HCV a certificate substantially in the form of Exhibit H hereto.
5.15 Key-Man Insurance Trust. The Company and CW Group (the
"Trustee") shall have executed and delivered a Trust Agreement substantially in
the form of Exhibit I hereto. Each of the Purchasers of Preferred Shares and the
Trustee shall have executed and delivered a Trust Option Agreement substantially
in the form of Exhibit J hereto.
5.16 Legal Fees. The Company shall have paid the legal fees
and the disbursements and office expenses of Fulbright & Xxxxxxxx L.L.P.,
counsel to the Purchasers, with respect to this Agreement and the transactions
contemplated hereby.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at
the Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 Representations. The representations made by each of the
Purchasers pursuant to Section 4 hereof shall be true and correct when made and
shall be true and correct on the Closing Date.
6.2 Legal Investment. At the time of the Closing, the
conditions set forth in Sections 5.8 and 5.9 shall have occurred and the
purchase of the Shares to be purchased by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which the Purchasers and the
Company are subject.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as any
Purchaser owns Shares, to take or refrain from taking any of the actions
specified in this Section 7, without the prior written consent of the
Purchasers' designees to the Board of Directors of the Company:
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I. Affirmative Covenants.
7.1 Basic Financial Information. The Company will furnish the
following reports to the Purchasers (or their representatives):
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as at the end of such fiscal year, and consolidated statements of income
and retained earnings and of statement of cash flows of the Company and its
subsidiaries, if any (collectively with the balance sheet, the "Investment
Financial Statements"), for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by independent public accountants of recognized
standing selected by and reporting to the Board of Directors of the Company and
approved by the Purchasers, and including a Company prepared comparison to
budget.
(b) As soon as practicable after the end of each month and
each of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within thirty (30) days thereafter,
consolidated Investment Financial Statements of the Company and its
subsidiaries, if any, for such period, prepared in accordance with generally
accepted accounting principles consistently applied, subject to changes
resulting from year-end audit adjustments, and setting forth in comparative form
the figures for the corresponding periods of the previous fiscal year, certified
by the principal financial or accounting officer of the Company.
(c) If the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act", which term shall include any successor federal statute), it may in lieu of
the financial information required pursuant to Sections 7.1(a) and (b) hereof
provide copies of its annual reports on Form 10-K and its quarterly reports on
Form 10-Q, respectively, or other then-equivalent report form.
(d) Immediately upon any officer of the Company obtaining
actual knowledge of the occurrence of any material violation or default by the
Company or any of its subsidiaries in the performance of (i) its agreements or
covenants contained herein, (ii) its material agreements or covenants contained
in any other agreement to which the Company or any of its subsidiaries is a
party or (iii) its agreements or covenants contained in the Certificate of
Incorporation or of the occurrence of any condition, event or act which, with or
without notice or lapse of time, or both, would constitute a material violation
or an event of default, a written notice specifying the nature and status
thereof and, what action the Company has taken, is taking and proposes to take
with respect thereto.
(e) Annually (but in any event not later than sixty (60) days
after the commencement of each fiscal year of the Company) the yearly budget and
operating
-17-
plan of the Company, in such manner and form reasonably acceptable to the
Purchasers and as approved by the Board of Directors of the Company, which plan
shall include a projection of income and projected Investment Financial
Statements as of the end of such fiscal year. Any material changes in such plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
(f) As soon as practicable after transmission or occurrence
and in any event within ten (10) days thereof, (i) copies of any reports or
communications delivered to any of the Company's securityholders (in their
capacity as such), any governmental entity (excluding ordinary permit
applications or similar types of correspondence and documentation in connection
therewith), any financial institution or member of the financial community
(other than correspondence and documents delivered to such financial
institutions or members in the ordinary course of business which do not
materially adversely impact on the Purchaser's investment in the Company) or to
any other individual or entity who may receive such information by law or
pursuant to a contract or other agreement with the Company (except in the
ordinary course of business), including any filings by the Company, or by any of
its officers or directors relating to the Company, with any securities exchange
or the Commission or the National Association of Securities Dealers, Inc., (ii)
notice of any event which has a material adverse effect on the Company's
business, prospects or condition, financial or otherwise, or on the ability of
the Company to perform its obligations under this Agreement, or under any other
agreement, or on the Purchasers' investment in the Shares or in the Common Stock
issuable upon conversion of the Preferred Shares, and (iii) notice of material
breach or failure to comply with any representation, warranty, covenant or
agreement of the Company contained herein, including the Exhibits hereto.
(g) Immediately upon any principal officer of the Company or
any other officer of the Company involved in its financial administration
obtaining knowledge of the occurrence of any (i) "reportable event", as such
term is defined in section 4043 of ERISA, other than any such event with respect
to which the statutory 30-day notice requirement has been waived by regulation,
or (ii) "prohibited transaction", as such term is defined in section 4975 of the
Code, in connection with any plan or any trust created thereunder, a written
notice specifying the nature thereof, what action the Company has taken, is
taking and proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect thereto.
(h) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries, if any, as the Purchasers
may from time to time reasonably request.
(i) The provisions of this Section 7.1 and Section 7.2 shall
not be in limitation of any rights which the Purchasers may have to inspect the
books and records of the Company and its subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts; and, in the event
that the Company is unable to
-18-
comply with the provisions of Section 7.1 or 7.2, the Board of Directors of the
Company shall, by resolution duly adopted, authorize and cause a firm of
independent public accountants of nationally recognized standing in the United
States to prepare promptly and furnish such information to the Purchasers at the
Company's expense.
7.2 Visitation. The Company will permit the Purchasers (or
representatives of the Purchasers) to visit and inspect any of the properties of
the Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's directors, officers, senior employees and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Subject to the provisions of Section 7.15
hereof, any expenses incurred by a Purchaser in connection with any such
visitation and inspection shall be borne by such Purchaser; provided, however,
in the event such visitation is necessitated by or is a result of a material
default hereunder or under the terms of a material contract or arrangement on
the part of the Company, all such expenses shall be borne by the Company.
7.3 Prompt Payment of Taxes, etc. The Company will promptly
pay and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company or any subsidiary;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have bonded or set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company will pay all such taxes, assessments, charges or levies, or otherwise
take any action which has the effect of preventing a foreclosure, forthwith upon
the commencement of proceedings to foreclose any lien which may have attached as
security therefor. The Company will promptly pay or cause to be paid when due
all other indebtedness incident to operations of the Company; provided, however,
that any such indebtedness need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have bonded or set aside on its books adequate reserves with
respect thereto; and provided, further, that the Company will pay all such
indebtedness on or prior to the time when failure to pay would materially
adversely affect the Company.
7.4 Maintenance of Properties and Leases. The Company will keep
its properties and those of its subsidiaries, if any, in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company and its subsidiaries, if any, will at all
times comply with each provision of all leases to which any of them is a party
or under which any of them occupies property if the breach of such lease would
have a material adverse effect on the condition, financial or otherwise,
prospects or operations of the Company.
7.5 Insurance. The Company shall maintain adequate insurance,
by financially sound and reputable insurers, on its properties and assets and
the properties
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and assets of its subsidiaries, if any, which are of an insurable character and
in such amounts and on such terms usually insured by corporations engaged in the
same or similar business and similarly situated, against loss or damage by fire,
explosion and other risks customarily insured against by such corporations which
amounts shall be sufficient to prevent the Company or any such subsidiary from
becoming a co-insurer and not in any event less than 100% of the insurable value
of the property and assets insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons, property and assets, including without
limitation insurance against claims for personal injury, death or property
damage occurring upon, in, about or in connection with the use of any of the
properties or assets of it or any subsidiary, and in such amounts and on such
terms usually insured by corporations engaged in the same or similar business
and similarly situated, which amounts shall be sufficient to prevent the Company
or any subsidiary from becoming a co-insurer; and the Company will maintain such
other insurance as may be required by law or other agreements to which the
Company is or shall become a party.
7.6 Key Person Life Insurance. The Company shall use its best
efforts to obtain, as soon as possible but in no event later than 30 days from
the Closing Date, with financially sound and reputable insurers acceptable to
the Purchasers, key person term life insurance on the life of each of Green and
Xxx, each in the amount of $1,000,000, and shall assign such $1,000,000 policies
to the Trust created under the Trust Agreement and cause each of them to be made
payable to the Trustee thereunder. The Company will cause to be maintained, and
shall contribute to the Trust an amount sufficient to pay all premiums in
connection with, such term life insurance so long as Preferred Shares remain
outstanding.
7.7 Accounts and Records. The Company will keep true records
and books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.8 Independent Accountants. The Company will retain
independent public accountants of recognized standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants, so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify the Purchasers and will request the
firm of independent public accountants whose services are terminated to deliver
to the Purchasers a letter of such firm setting forth the reasons for the
termination of their services. In the event of such termination, the Company
will promptly thereafter engage another accounting firm of similar quality. In
its notice to the Purchasers the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the
Company.
7.9 Compliance with Requirements of Governmental Authorities.
The Company and all its subsidiaries, if any, shall duly observe and conform in
all
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material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
7.10 Maintenance of Corporate Existence, etc. The Company
shall maintain and shall cause each subsidiary, if any, to maintain in full
force and effect (i) its corporate existence, rights and franchises and all
licenses, privileges and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and shall obtain and maintain any such right, franchise, license or privilege
deemed by the Company to be necessary on the date hereof or in the future to the
conduct of their business without any conflict with any business in or rights of
others to use such patents, processes, licenses, trademarks, trade names or
copyrights and (ii) its qualification to do business in each jurisdiction in
which the character of its properties (owned, leased or licensed) or the nature
of its business requires such qualification, except where the failure to so
qualify would not have a material adverse effect upon the business or operations
of the Company or such subsidiary, as the case may be.
7.11 Availability of Common Stock for Conversion and Exercise.
The Company will keep such number of shares of Common Stock unissued and
available for issuance in order to permit conversion of all the then outstanding
shares of Preferred Stock.
7.12 Notice of Record Dates. In the event of any taking by the
Company of a record of the holders of any class of securities (other than the
Preferred Stock) for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, the Company shall mail
to the Purchasers at least ten (10) days prior to such record date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
7.13 Proprietary Information and Inventions Agreement. The
Company will cause each person employed (now or hereafter) by it or any
subsidiary with access to confidential information to enter into a proprietary
information and inventions agreement in substantially the form attached hereto
as Exhibit K.
7.14 Stock Options and Other Stock Purchase Rights. As soon as
possible after the Closing, the Company shall take all action necessary (a) to
adopt a stock option/stock purchase plan under which shares of Common Stock
shall be available for issuance pursuant to incentive stock options,
non-qualified stock options and stock issuances heretofore or hereafter to be
granted or made to employees and consultants of the Company, upon such terms and
conditions as may be approved by the Company's Board of Directors, and (b) to
issue Common Stock and grant options for the purchase of Common Stock to those
persons listed on Schedule 3.4 hereto, in accordance with their respective
employment or consulting agreements with the Company (copies of which have been
provided to the Purchaser); provided that the maximum number of shares of Common
Stock that will be issued or available for issuance under both clause (a) and
clause (b) above shall be 3,200,000 in the aggregate.
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The Purchasers agree to vote their Shares and take all other action necessary in
furtherance of the foregoing.
7.15 Directors; Meetings of the Board of Directors; and
Director's and Officer's Insurance. The Board of Directors of the Company shall
initially consist of three members. The Company shall use its best efforts to
cause (i) two of such directors to be persons designated by the Purchasers,
which designees shall be Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxx, and (ii) one of such
directors to be the person serving as the Chief Executive Officer of the
Company. Until a full-time Chief Executive Officer is chosen, XxXxxxx shall
serve as this third director as long as he is employed as the President of the
Company. Upon notice from either (i) the majority in interest of the Purchasers
or (ii) the Purchasers' then-designees to the Board of Directors, the Board
shall be expanded to four members, the fourth member of which shall be
designated by the Purchasers. As soon as possible thereafter, the Board of
Directors will be expanded to five members, the fifth member of which shall be a
person designated jointly by Green and Xxx, with the advice of and subject to
the approval of Messrs. Xxxxxxxx and Xxxxxxxx (which approval shall not be
unreasonably withheld). The Company shall not give less than ten (10) business
days (72 hours in the case of special meetings) notice of each Board of
Directors' meeting to the representatives of the Purchasers on the Board of
Directors and to the Purchasers, Green and Xxx, and shall permit, in addition to
such directors, each Purchaser (or its designee) and Green and Xxx (or their
respective designees) to attend meetings of the Board and committees thereof. In
the event any person designated by the Purchasers to be a director of the
Company shall be unable to attend a meeting of the Board, the Purchasers or such
designated director shall in lieu thereof be entitled to designate a substitute
representative to attend and, to the extent permitted by applicable law, to vote
at such meeting. All reasonable travel and out-of-pocket expenses incurred by
the Purchasers (or their respective designees) and by the directors designated
by the Purchasers (or such directors' designees) in connection with attending
the meetings and any special meetings called by the Company will be paid by the
Company. The Company will purchase a reasonable amount of director's and
officer's insurance for directors of the Company, if available at reasonable
cost.
7.16 Meetings of Stockholders. The Purchasers shall be
entitled to call for a stockholders' meeting upon five days notice to the
Company.
7.17 Compliance with ERISA. The Company will file or caused to
be filed on a timely basis each and every return, report, statement, notice,
declaration and other document required by any governmental agency, federal,
state or local authority (including, without limitation, the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation and
the Commission) with respect to any plan maintained by the Company.
7.18 Environmental Matters. The Company agrees to comply in
all material respects with, and abide by, all federal, state and local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste
-22-
(including, but not limited to, asbestos, polychlorinated byphenyls and
petroleum products) in connection with or relating to the Company or any of its
businesses, operations or assets.
7.19 Scientific Advisory Board Addition.. As soon as
reasonably possible after the Closing, but in no event later than 30 days
thereafter, the Company shall offer to Dr. Xxxxxx Xxxxxxxxxx a position as a
member of the Company's Scientific Advisory Board.
II. Restrictive Covenants.
7.20 Dividends; Share Repurchases. The Company will not pay or
declare any cash dividend or distribution on any shares of capital stock of the
Company, other than the Preferred Stock, or apply any of the Company's assets to
the redemption, retirement, purchase or other acquisition, directly or
indirectly, through subsidiaries or otherwise, of any shares of Common Stock of
the Company, or any rights, options or warrants to purchase, or securities
convertible into, Common Stock of the Company except for (i) any repurchase of
shares by the Company pursuant to any stock option or agreement entered into by
the Company and approved in writing by the Purchasers' representatives on the
Board of Directors, and (ii) the redemption of any shares of Preferred Stock.
7.21 Sales of Securities. The Company will not (i) create or
issue any securities of the Company which have equity features and which rank on
a parity with or senior to the Preferred Stock upon payment of dividends or upon
liquidation or other distribution of assets or with a conversion price lower
than that of the Preferred Stock or terms more favorable than those of the
Preferred Stock or (ii) sell or issue any shares of Common Stock of the Company
for which the consideration is other than cash, except as contemplated herein
with respect to the conversion of the Preferred Stock into Common Stock.
7.22 Foreign Subsidiaries. Except in the ordinary course of
business, the Company will not directly or through any subsidiary create or
acquire any subsidiary or any interest in any corporation, partnership, limited
partnership, joint venture or similar entity located outside, or formed pursuant
to the laws of other than, the United States of America, its territorial
possessions or any political subdivision of any thereof.
7.23 Merger, Consolidation, Sale of Assets. The Company will
not merge, consolidate or dispose of all or substantially all its assets, except
a merger or consolidation pursuant to which the Company is the surviving
corporation. This section shall not in any way limit the ability of the Company
(i) to sell inventory or (ii) to sell other assets, each in the ordinary course
of business.
7.24 Transactions with Officers, Directors and Stockholders.
The Company will not furnish or sell services or products to or acquire or
purchase services
-23-
or products from any corporation, partnership, proprietorship, association,
joint venture or other person or entity in which any officer, director, or 5%
stockholder of the Company, or any affiliate (as such term is defined in Rule
405 under the Securities Act) of any such officer, director, or 5% stockholder
has a material interest or enter into any material contract or arrangement
(excluding employment or option agreements with an employee approved by the
Board of Directors of the Company) with any such officer, director, 5%
stockholder or affiliate which is less than an arms-length transaction or which
transaction has or reasonably can be expected to have a material adverse effect
on the Company. For purposes of this Section 7.24, there may be disregarded any
interest which arises solely from the ownership of less than a 2% equity
interest in a corporation whose voting securities are regularly traded in any
national securities exchange or in the over-the-counter market. The provisions
of this Section 7.24 shall not prohibit any Purchaser from providing any
consulting, legal, accounting, investment banking, managerial, investment
advisory and/or other services to the Company.
7.25 Investments, Loans, Guarantees, Joint Ventures and
Subsidiaries. The Company will not, (i) directly or through any subsidiary
create or acquire any interest in any partnership, limited partnership, joint
venture or similar entity and will not create or acquire any interest in any
subsidiaries of which it does not own all the capital stock or (ii) make any
investments in or loans or advances to or endorse, guarantee or become surety
for the obligations of any person, corporation or other entity except that the
Company may endorse checks for collection or deposit in the ordinary course of
business.
7.26 Certificate of Incorporation and By-Law Amendments. The
Company may not amend its Certificate of Incorporation or By-Laws so as to
affect adversely the Preferred Stock.
7.27 Impairment of Dividends. The Company may not enter into
any contract or agreement which by its terms restricts the Company's ability to
pay dividends on the Preferred Stock or which may otherwise restrict the
Company's ability to comply with and perform the terms of this Agreement or any
of the Exhibits hereto.
7.28 Compliance with ERISA. The Company will not:
(i) engage in any transaction in connection with which the
Company or any of its subsidiaries could be, to the knowledge of the Company,
subject to either a civil penalty assessed pursuant to section 502(i) of ERISA
or a tax imposed by section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), based on existing regulations or published interpretations
in effect from time to time;
(ii) terminate any plan in a manner, or take any other action,
including withdrawal from any plan that is a multiemployer plan, which could
result in any material liability of the Company or any of its subsidiaries to
the Pension Benefit Guaranty Corporation or to such plan;
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(iii) fail to make full payment when due of all amounts which,
under the provisions of any plan, the Company or any of its subsidiaries is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency, whether or not waived, with respect to any plan; or
(iv) permit the current value of all vested accrued benefits
under all plans which are subject to Title IV of ERISA to exceed the current
value of the assets of such plans allocable to such vested accrued benefits.
As used in this Section 7.28, the term "accumulated funding deficiency" has the
meaning specified in section 302 of ERISA and section 412 of the Code, the term
"accrued benefit" has the meaning specified in section 3 of ERISA and the term
"current value" has the meaning specified in section 4062(b)(1)(A) of ERISA and
the term "multiemployer plan" has the meaning specified in section 4001(a)(3) of
ERISA.
7.29 Borrowings. Neither the Company nor any of its
subsidiaries will incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any indebtedness for borrowed money, or any
other indebtedness evidenced by, or liability evidenced by notes, bonds,
debentures or similar obligations or either directly or indirectly guarantee,
endorse or become surety for, or otherwise in any way become responsible for the
obligations of any other person (collectively, the "Indebtedness"), other than
indebtedness with respect to trade and operating obligations and other normal
accruals in the ordinary course of business (which the Company covenants will be
paid in accordance with customary trade practice) or with respect to which it is
contesting in good faith the amount or validity thereof by appropriate
proceedings, and then only to the extent it has set aside on its books adequate
reserves therefor.
7.30 Capital Expenditures; Commitments. The Company shall not,
and shall cause each of its subsidiaries, if any, not to, (i) incur capital
expenditures or make commitments for capital expenditures, services or product
development in excess of the greater of $100,000 or 110% of the amount budgeted
in the yearly budget and operating plan of the Company referred to in Section
7.1(e) hereof, for any such expenditure or commitment.
7.31 Employee Stock Purchase Arrangements. The Company will
not issue any of its capital stock, or grant an option or right to subscribe
for, purchase or acquire any of its capital stock, to any employee, consultant,
director or officer of the Company or a subsidiary thereof, except as provided
in Section 7.14 hereof.
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SECTION 8
Registration of Securities
8.1 Certain Definitions. As used in this Section 8, the
following terms shall have the following respective meanings:
"Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Preferred Shares and (ii)
any Common Stock issued in respect of the securities issued pursuant to the
conversion of the Preferred Shares, upon any stock split, stock dividend,
recapitalization or similar event.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 8.2, 8.3 and 8.5 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders (as
hereinafter defined) and other security holders for a "due diligence"
examination of the Company, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of securities and all fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of counsel included in Registration Expenses).
"Holder" shall mean any holder of Registrable Securities which
have not been sold to the public.
8.2 Requested Registration.
(a) Request for Registration. If the Company shall receive
from the Holders of at least fifty percent (50%) or more of the then-outstanding
Registrable Securities, at any time or times, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
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(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued
under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request given
within thirty (30) days after receipt of such written notice
from the Company; provided that the Company shall not be
obligated to effect, or to take any action to effect, any such
registration pursuant to this Section 8.2, (x) after the
Company has effected two such registrations pursuant to this
Section 8.2(a) and such registrations have been declared or
ordered effective by the Commission and the sale of such
Registrable Securities shall have closed or (y) prior to the
earlier to occur of (i) the fourth anniversary of the Closing
and (ii) three months after the closing of an initial
registered public offering of the Company's securities.
Subject to the foregoing limitation, the Company shall file a
registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after
receipt of the request or requests of the Holders.
The Company may include in the registration statement filed
pursuant to the request of the Holders, subject to the provisions of Section
8.2(b) below, other securities of the Company which are held by officers or
directors of the Company, by Xxx, Green or XxXxxxx, or by other persons who, by
virtue of agreements with the Company, are entitled to include their securities
in any such registration (all the foregoing, except the Holders, collectively
referred to herein as the "Other Stockholders"), but the Company shall have no
right to include any of its securities in any such registration.
(b) Underwriting. If the Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 8.2 and the Company shall include such information in the written notice
referred to in Section 8.2(a)(i) above. The right of any Holder to registration
pursuant to Section 8.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Holders and such Holder with respect to such participation and inclusion) to
the extent provided herein. A Holder may elect to include in such underwriting
all or a part of the Registrable Securities held by such Holder.
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If Other Stockholders shall request inclusion in any
registration pursuant to Section 8.2, the Holders shall offer to include the
securities of such Other Stockholders in the underwriting and may condition such
offer on their acceptance together with the Holders so participating of the
further applicable provisions of this Agreement. The Company shall (together
with all Holders and Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters selected for
such underwriting by a majority in interest of the Holders and reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
8.2, if the underwriters advise the Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the Holders
shall so advise all Other Stockholders whose securities would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated in the following manner. The securities of the Company held
by Other Stockholders (other than Registrable Securities) shall be excluded from
such registration and underwriting to the extent required by such limitation and
if a limitation of the number of shares is still required, the number of shares
of Registrable Securities that may be included in the registration shall be
allocated among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. In the event that the number
of shares of Registrable Securities of any Holder to be included in any
registration is reduced below 50% of the shares requested to be included in such
registration as a result of allocations pursuant to this Section 8.2(b), then
such registration shall not be deemed a registration for purposes of Section
8.2(a)(ii). If any Holder of Registrable Securities or Other Stockholder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Holders. The securities
so withdrawn shall also be withdrawn from registration.
8.3 Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests made by
any Holder within thirty (30) days after receipt of the
written notice from the Company described in clause (i) above,
except as set forth in Section 8.3(b) below. Such written
request may specify all or a part of a Holder's Registrable
Securities to be included in such registration.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.3(a)(i). In such event the right of any Holder to
registration pursuant to Section 8.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected by the Company, which
underwriters shall be reasonably acceptable to a majority in interest of the
participating Holders. Notwithstanding any other provision of this Section 8.3,
if the underwriter advises the Company in writing that marketing factors require
a limitation on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner. The
securities of the Company held by Other Stockholders (other than Registrable
Securities) shall be excluded from such registration and underwriting to the
extent required by such limitation, and if a limitation on the number of shares
is still required, the number of shares of Registrable Securities that may be
included in the registration shall be allocated among all such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities which each Holder had requested to be included in such registration
at the time of filing and which have not already been included in the
registration statement; provided, however, that, except with respect to the
initial public offering of the Company's securities, the number of shares of
Registrable Securities included in the registration shall not constitute less
than 30% of the total securities included in the offering. If any Holder of
Registrable Securities or any Other Stockholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
8.4 Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Agreement. All Selling Expenses
shall be borne by the
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holders, including the Company, of the securities so registered pro rata on the
basis of the number of their shares so registered.
8.5 Registration on Form S-2 or Form S-3. The Company shall
use its best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in accordance
with the provisions of the Exchange Act following the effective date of the
first registration of any securities of the Company on Form S-1 or Form S-18 or
any comparable or successor form or forms. After the Company has qualified for
the use of either Form S-2 or Form S-3 or both, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of not less
than 20% of the then outstanding Registrable Securities, having a value of not
less than $500,000, shall have unlimited rights to request from time to time
registrations on Form S-2 or Form S-3 (such requests shall be in writing, shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders and
shall be at the Company's sole expense).
8.6 Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder, advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of six
months or until the Holder or Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such six-month period shall be extended, if necessary, to keep
the registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis; and provided further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y) and (z)
above to be contained in periodic reports filed pursuant to Section 13 or 15(d)
of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of
securities covered by such registration statement;
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(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing, and at the request
of any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchaser of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities to be listed
on each securities exchange, if any, on which similar securities issued by the
Company are then listed;
(f) Provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration;
(g) Make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney or accountant retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers and directors to supply all information reasonably requested by any
such seller, underwriter, attorney or accountant in connection with such
registration statement; provided, however, that such seller, underwriter,
attorney or accountant shall agree to hold in confidence and trust all
information so provided;
(h) Furnish to each selling Holder a signed counterpart,
addressed to the selling Holder, of
(i) an opinion of counsel for the Company, dated
the effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and
reported on the Company's financial statements included
in the registration statement, to the extent permitted
by the standards of the AICPA or other relevant
authorities,
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covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities;
(i) Furnish to each selling Holder a copy of all
documents filed with and all correspondence from or to the Commission in
connection with any such offering other than non-substantive cover letters and
the like;
(j) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(k) In connection with any underwritten offering
pursuant to a registration statement filed pursuant to Section 8.2 or 8.3
hereof, the Company will enter into any underwriting agreement reasonably
necessary to effect the offer and sale of Common Stock.
8.7 Indemnification.
(a) The Company will indemnify each Holder, each of its
respective officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, and their respective counsel against all
claims, losses, damages and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on 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, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its respective officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses as are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or
-32-
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein.
(b) Each Holder, officer, director and Other Stockholder
will, if securities held by him or it are included in the securities as to which
such registration, qualification or compliance is being effected (collectively,
an "Including Stockholder"), indemnify the Company, each of its directors and
officers (in their capacity as such) and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Holder and
Including Stockholder and each of their officers, directors and partners, and
each person controlling such Holder or Including Stockholder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or 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, and will reimburse the Company and such
Holders, Including Stockholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Including Stockholder and stated to
be specifically for use therein; provided, however, that the obligations of such
Holders and Including Stockholders hereunder shall be limited to an amount equal
to the net proceeds to each such Holder or Including Stockholder of securities
sold under such registration statement, prospectus, offering circular or other
document as contemplated herein.
(c) Each party entitled to indemnification under this
Section 8.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
8.7, unless such failure to notify shall prove to have been prejudicial to the
Indemnifying Party's ability to defend such an action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which
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does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
8.8 Information by Holder. Each Holder of Registrable
Securities and each other holder of securities included in any registration,
shall furnish to the Company such information regarding such Holder or other
holder and the distribution proposed by such Holder or other holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
8.9 Limitations on Registration of Issues of Securities. From
and after the date of this Agreement, the Company shall not enter into any
agreement with any holder or prospective holder of any securities of the Company
giving such holder or prospective holder a right (i) to require the Company to
initiate any registration of any securities of the Company or (ii) to require
the Company, upon any registration of any of its securities, to include, among
the securities which the Company is then registering, securities owned by such
holder; which right is superior to the rights given to the holders of Preferred
Shares hereunder.
8.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable Securities to the public without registration, the
Company shall agree to:
(a) Use its best efforts to make and keep public
information available as those terms are understood and defined in Rule 144
under the Securities Act, at all times from and after ninety (90) days following
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(c) So long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the First
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the
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Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
8.11 Transfer or Assignment of Registration Rights. The rights
to cause the Company to register securities granted to the Purchasers and
holders of Registrable Securities under Sections 8.2, 8.3 and 8.5 may be
transferred or assigned by a holder to a transferee or assignee of any
Registrable Securities, provided that the Company is given written notice at the
time of or within a reasonable time after said transfer or assignment, stating
the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned, and provided further that the transferee or assignee of such rights
assumes the obligations of such Holder under this Section 8.
SECTION 9
Right of First Refusal
9.1 Right of First Refusal Upon Issuance of New Securities.
(a) The Company hereby grants to the Purchasers (which term, for purposes of
this Section 9.1 only, shall mean the Purchasers of the Preferred Shares) the
right of first refusal to purchase any or all "New Securities" (as hereinafter
defined) on a proportionate basis as defined in Section 9.1(b). For purposes of
this Section 9.1, "New Securities" shall mean any capital stock of the Company
whether now authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock and any borrowings, direct or indirect, from
financial institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment endorsed by any type of debt
instrument, but only to the extent such borrowings contain any equity features,
but "New Securities" shall not include (i) securities issued to employees of, or
consultants to, the Company pursuant to Section 7.14, (ii) shares of capital
stock issued upon conversion of the Preferred Stock, (iii) securities issued as
part of the purchase price in connection with the closing of an acquisition by
the Company of all or substantially all the assets or stock of another entity or
person, approved by the Purchasers' designees to the Company's Board of
Directors and (iv) warrants issued in connection with business transactions,
including corporate partnerships, approved by the Purchasers' designees to the
Company's Board of Directors or securities issued pursuant to such warrants.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have thirty
(30) days from the date such notice is given to agree to purchase any or all of
the New Securities up to such Purchaser's proportionate share, for the price and
upon the general terms specified in
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the notice by giving written notice to the Company and stating the quantity of
New Securities to be purchased. As used in this Section 9.1, and except as
otherwise provided, the term "proportionate share" shall mean, with respect to
each Purchaser who is entitled to receive the particular offer, the total number
of New Securities proposed to be issued, multiplied by a fraction, the numerator
of which shall be the sum of (i) the total number of shares of Common Stock
owned by such Purchaser (prior to such contemplated issuance), but excluding the
Common Shares, if any, owned by such Purchaser and (ii) the total number of
shares of Common Stock into which the shares of Preferred Stock or other
convertible securities, if any, held by such Purchaser (prior to such
contemplated issuance) is convertible, and the denominator of which shall be the
sum of (i) the total number of shares of Common Stock owned by all Purchasers
(prior to such contemplated issuance), but excluding the Common Shares, if any,
owned by all Purchasers and (ii) the total number of shares of Common Stock into
which the Preferred Shares or other convertible securities held by all
Purchasers (prior to such contemplated issuance) is convertible.
(c) Each Purchaser shall have a right of over-allotment such
that if any Purchaser fails to exercise such Purchaser's right hereunder to
purchase such Purchaser's full proportionate share of the New Securities
proposed to be issued (the "Incomplete Purchasers"), the Purchasers purchasing
their full respective proportionate share of such New Securities (the "Complete
Purchasers") may purchase the portion of such New Securities which has not been
purchased by the Incomplete Purchasers as hereinafter provided. The Complete
Purchasers shall have ten (10) days from the date notice is given by the Company
to the Complete Purchasers that such Incomplete Purchasers have rejected or
failed to accept their right to purchase their proportionate share of New
Securities, to agree to purchase up to such Complete Purchaser's proportionate
share of such New Securities not purchased by the Incomplete Purchasers.
Notwithstanding anything in Section 9.1(b) to the contrary, as used in this
Section 9.1(c) with respect to the Complete Purchasers only, each Complete
Purchaser's "proportionate share" shall be calculated by excluding from the
denominator of the fraction the total number of shares of Common Stock of any
Incomplete Purchaser and the total number of shares of Common Stock into which
the shares of such Incomplete Purchaser's Preferred Stock or other convertible
securities, if any, are convertible.
(d) In the event the Purchasers fail to exercise the right of
first refusal and right of over-allotment within said forty (40) day period for
the full amount of New Securities proposed to be issued, the Company shall have
sixty (60) days thereafter to sell or enter into an agreement (pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
sixty (60) days from the date of said agreement) to sell the New Securities
respecting which the Purchasers' options were not exercised, at a price and upon
general terms no more favorable to the purchasers thereof than specified in the
Company's notice to the Purchasers. In the event the Company has not sold within
said 60-day period or entered into an agreement to sell the New Securities
within said 60-day period (or sold and issued New Securities in accordance with
the foregoing within sixty (60) days from the date of said
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agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Purchasers in the manner provided
above.
(e) The right of first refusal granted under this Section 9.1
shall expire upon, and shall not be applicable to, the first sale of Common
Stock of the Company to the public in an underwritten public offering, effected
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act covering the offer
and sale of Common Stock for the account of the Company to the public at a
public offering price of at least $5.00 and with net proceeds to the Company of
not less than $7,500,000.
SECTION 10
Confidentiality
10.1 Agreement To Hold in Confidence and Not Disclose
Confidential Information. Notwithstanding any other provision of this Agreement,
and except as otherwise provided in Section 10.2 below, each Purchaser shall
hold in confidence and not disclose to any other person or entity any
Confidential Information (as defined in subsection 10.3 below) of the Company
without the prior written consent of the Company.
10.2 Permitted Disclosure of Confidential Information.
Notwithstanding Section 10.1 above, a Purchaser may disclose Confidential
Information to a Purchaser Representative, the term "Purchaser Representative"
being defined to mean an affiliate of such Purchaser, or any partner, officer,
employee, advisor, legal counsel, consultant or other agent or representative of
or to such Purchaser or such affiliate. The Company hereby acknowledges that the
Purchasers regularly send investment reports and updates to their respective
partners, which reports and updates contain information concerning the
investments made by such Purchaser. Prior to or simultaneously with any such
disclosure to a Purchaser Representative, a Purchaser shall use its good faith
efforts to give to the Purchaser Representative a copy of this Section 10 under
cover of a letter or memo addressed to the Purchaser Representative, or
otherwise indicate to the Purchaser Representative that the information being
disclosed is confidential and subject to restrictions.
10.3 Definition of "Confidential Information". The term
"Confidential Information" means any information of the Company in any medium or
media marked "confidential" or indicated to be confidential in writing or orally
at the time of disclosure, or which a Purchaser or Purchaser Representative knew
to be confidential, and shall include, without limitation, (i) technical,
engineering and other scientific information that has been created, discovered
or developed for, or assigned or entrusted to, the Company which relates to its
products, processes, operations and/or technologies; (ii) inventions,
improvements, materials, articles, equipment, processes, designs and techniques,
whether or not patented or patentable, and expressions
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protected or protectable by copyright, made or conceived or reduced to practice
or learned by the Company, or by any person for or on behalf of it, which relate
to the business of the Company; (iii) personal privacy data concerning any
employees, consultants or other service providers or testing or survey subjects
of the Company; (iv) financial records, business plans, customer lists and other
books and records of the Company; provided, however, notwithstanding the
foregoing, Confidential Information shall not include information which: (a) was
in a Purchaser's or Purchaser Representative's possession or knowledge or was
known to the public or in published literature prior to the Company's disclosure
or making available of such Confidential Information to such Purchaser, or (b)
subsequent to the time of the Company's disclosure or making available of such
Confidential Information to a Purchaser, becomes known to the public or finds
its way into the published literature through no fault of any Purchaser or
Purchaser Representative, or (c) is lawfully acquired by a Purchaser from a
third party who is not under a confidentiality agreement with the Company with
respect to such information (and who is not a Purchaser, a Purchaser
Representative or an affiliate of any thereof).
10.4 Injunctive Relief. The parties acknowledge and agree
that, without limiting any other rights and remedies they may have, the Company
shall be entitled to immediate injunctive and other equitable relief to prevent
or remedy a breach of any of the provisions of this Section 10 relating to
protection of Confidential Information of the Company, and to obtain the
enforcement of such provisions, and, if any such injunctive or other equitable
relief is sought, the Purchasers will not raise as a defense that there is an
adequate remedy at law.
10.5 Survival. The provisions of this Section 10 relating to
protection of Confidential Information of the Company shall survive, with
respect to each Purchaser, the termination of such Purchaser's interest in the
Company under this Agreement and shall survive the termination of this
Agreement.
SECTION 11
Miscellaneous
11.1 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed in all respects by the laws of the State of New York.
11.2 Survival. The representations and warranties made herein
shall survive the Closing Date for a period of two years, except in the case of
representations and warranties (i) relating to taxes and governmental
assessments and to broker's fees, which shall survive for the applicable statute
of limitations, and (ii) which were knowingly untrue or incorrect when made,
which shall survive forever, and all such representations and warranties and all
covenants and agreements made herein shall be deemed to be material and to have
been relied upon by the parties hereto, notwithstanding any investigation
heretofore or hereafter made by them, or on their
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respective behalf. Each of the covenants, agreements and indemnifications
contained herein shall survive indefinitely, unless otherwise expressly provided
herein. No claim for recovery of indemnifiable damages may be asserted based
upon a representation or warranty after it has been extinguished; provided, that
any specific claim asserted in writing within the applicable period shall not
thereafter be barred.
11.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto; provided, however, that any successor, assignee or other
such transferee shall assume the obligations of such assignor or transferor
hereunder; and provided, further, that the Company may not assign its rights
hereunder.
11.4 Entire Agreement; Amendment. This Agreement (including
the Schedules and Exhibits hereto) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the Purchasers holding not less
than 66 2/3% of the outstanding Shares.
11.5 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, return receipt requested, or delivered either
by hand or by messenger, or sent by overnight courier, addressed (a) if to a
Purchaser, at the address set forth for such Purchaser on the Schedule of
Purchasers attached hereto or at such other address as such Purchaser shall have
furnished to the Company in writing, with a copy to Fulbright & Xxxxxxxx L.L.P.,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 Attention: Xxxxxxx X. Xxxxxxxx,
Esq., or (b) if to any other holder of Shares or any Common Stock issued upon
conversion of Preferred Shares at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder thereof
who has so furnished an address to the Company, or (c) if to the Company, at its
address set forth at the beginning of this Agreement, or at such other address
as the Company shall have furnished to the Purchasers and each such other holder
in writing, with a copy to Xxxxxxx, Xxxxx & Xxxxx, Xxx Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, III, Esq.
11.6 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to (i) any Purchaser or holder of any Shares,
upon any breach or default of the Company under this Agreement or (ii) the
Company, upon any breach or default of a Purchaser or holder of any Shares under
this Agreement, shall impair any such right, power or remedy of such holder or
the Company nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore
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or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder or the Company of any breach or default
under this Agreement, or any waiver on the part of any holder or the Company of
any provisions or conditions of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder or the Company, shall be cumulative and not alternative.
11.7 Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.8 Expenses. The Company shall bear its own expenses and
legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, and the Company will pay, at the Closing, the
legal fees, and the disbursements and office expenses, including secretarial
charges, of Fulbright & Xxxxxxxx L.L.P., counsel to the Purchasers, with respect
to this Agreement and the transactions contemplated hereby.
11.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
11.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date above written.
SCRIPTECH PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
------------------------------------------
PURCHASERS:
CW VENTURES II, L.P.
By: /s/
------------------------------------------
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ACCEL IV L.P.
By: Accel IV Associates L.P., its General
Partner
By: /s/
------------------------------------------
ACCEL JAPAN L.P.
By: Accel IV Associates L.P., its General
Partner
By: /s/
------------------------------------------
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.
By: /s/
------------------------------------------
Xxxxx Xxxxxxxx, General Partner
NEW ENTERPRISE ASSOCIATES 5
By: /s/
------------------------------------------
VENROCK ASSOCIATES
By: /s/
------------------------------------------
/s/
---------------------------------------------
Xxxxx Xxxxxxxx
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SCHEDULE OF PURCHASERS
Bridge
Name of and Address Shares of Shares of Loan Total
of Purchasers Preferred Stock Common Stock Conversion $ Payment Investment
--------------- --------------- ------------ ---------- --------- ----------
CW Ventures II, L.P. 1,601,289 124,585 $129,789.00 $1,477,729.25 $1,607,518.25
c/o CW Group, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxx
Atlas Venture Fund II, L.P. 1,300,971 159,072 113,471.00 1,195,453.60 1,308,924.60
c/o Atlas Venture
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxx
Accel IV L.P. 1,012,327 35,679 37,126.60 976,983.93 1,014,110.53
Xxx Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
Accel Japan L.P. 88,028 3,102 3,228.40 84,955.12 88,183.52
Xxx Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
New Enterprise Associates 5 1,100,355 38,781 40,355.00 1,061,939.05 1,102,294.05
c/o New Enterprise Associates
0000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Xx.
Venrock Associates 1,100,355 38,781 40,355.00 1,061,939.05 1,102,294.05
00 Xxxxxxxxxxx Xxxxx,
Xxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Xxxxx Xxxxxxxx --- 125,000 --- 6,250.00 6,250.00
c/o CW Group, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
[Other Purchaser Bd. --- 50,000 --- 2,500.00 2,500.00
Designee -- to be allocated
at later date]
--------- ------- ----------- ------------- -------------
Total 6,203,325 575,000 $364,325.00 $5,867,750.00 $6,232,075.00
========= ======= =========== ============= =============
(Assumes 9/16 closing)
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Schedule A
List of "Key Persons"
Xxxxxxx Xxxxx
Xxxxx Xxx
Xxxxx Xxxxxx
