Exhibit 10.4
SCRIPTGEN PHARMACEUTICALS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 17th day of May 1996, by and among SCRIPTGEN
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") with its
principal place of business at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxxxxx 00000, and each of the entities and individuals severally
listed on the Schedule of Initial Purchasers attached hereto (collectively,
the "Initial Purchasers" and individually, an "Initial Purchaser"), such
other entities as become party to this Agreement pursuant to Section 10.1
hereto (collectively, the "Subsequent Purchasers," and individually, a
"Subsequent Purchaser," and together with the Initial Purchasers,
collectively the "Purchasers," and individually, a "Purchaser"), and for
purposes of Sections 7.12 and 8.3 only, Xxxxxx X. Xxxxxxx ("Bologna") and
Xxxxx Xxxxxxxx ("Xxxxxxxx").
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.
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
Initial Closing (as hereinafter defined) will have, authorized the sale and
issuance of 5,100,000 shares of its Series C Preferred Stock, par value $.01
per share (the "Series C Preferred Stock"), such class of stock having the
rights, restrictions, privileges and preferences as set forth in the Amended
and Restated Certificate of Incorporation of the Company (the "Certificate of
Incorporation") attached to this Agreement as Exhibit 1.1. The 2,942,521
shares of Series C Preferred Stock being sold to the Initial Purchasers
hereunder and any of the 2,157,479 shares of Series C Preferred Stock that
may be sold pursuant to Section 10.1 of this Agreement to one or more
Subsequent Purchasers are referred to herein as the "Series C Preferred
Shares" or the "Shares".
1.2. Initial Closing. 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 Initial Purchasers,
severally and not jointly, and each of the Initial Purchasers will purchase from
the Company at the Initial Closing (as defined below), the number of shares of
Series C Preferred Stock set forth opposite such Initial Purchaser's name on the
Schedule of Initial Purchasers attached hereto (the "Schedule of Initial
Purchasers") under the column labeled "Shares of Series C Preferred Stock," for
the aggregate purchase price set forth opposite such Initial Purchaser's name on
the Schedule of Initial Purchasers under the column labeled "Total Investment."
The closing of the purchase and sale of those Series C Preferred Shares to the
Initial Purchasers (the "Initial Closing"), including the delivery to the
Initial Purchasers by the
Company of the certificates evidencing all Series C Preferred Shares being
purchased, shall take place immediately following the execution and delivery of
this Agreement at the office of Xxxxxx, XxXxxxxxx & Fish, LLP, Xxx Xxxxxxxxxxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("NM&F's Offices") on May 17, 1996, or at
such other time and place as shall be mutually agreed upon by the parties (the
"Initial Closing Date").
1.3. Subsequent Closings. Subject to the terms and conditions hereof
and in reliance upon the representation and warranties and agreements contained
herein, the Company will issue and sell to each Subsequent Purchaser, severally
and not jointly, and each Subsequent Purchaser will purchase from the Company,
the number of shares of Series C Preferred Stock, (which in the aggregate shall
not exceed 2,057,479 shares of Series C Preferred Stock) set forth below each
Subsequent Purchaser's name on the counterpart of this Agreement executed by
such Subsequent Purchaser. The purchase and sale of Series C Preferred Stock to
the Subsequent Purchasers shall occur at one or more closings (each a
"Subsequent Closing," together with the Initial Closing, each a "Closing") to be
held at NM&F's Offices at a time and on a date to be agreed upon by the Company
and the Subsequent Purchasers participating in such Subsequent Closing (together
with the Initial Closing Date, each a "Closing Date").
1.4. Delivery. At each Closing, the Company shall deliver to each
Purchaser certificates in such denominations and registered on the books of the
Company in such names as such Purchaser requests, representing the number of
Series C Preferred Shares to be purchased by such Purchaser from the Company,
against payment at the Closing, in the case of the Initial Purchasers, of the
amount set forth opposite such Initial Purchaser's name in the column labeled
"Total Investment" on the Schedule of Initial Purchasers, and, in the case of
the Subsequent Purchasers, of an amount equal to the number of Series C
Preferred Shares to be purchased multiplied by $1.80. Payment for the Series C
Preferred Shares shall be made, at the option of the Purchaser, by check or wire
transfer, or any combination thereof, for any amount to be paid to the Company.
SECTION 2
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
(such Schedule of Exceptions to be updated prior to each Closing), the Company
hereby represents and warrants to each Purchaser as follows:
2.1. 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
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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.
2.2. Corporate Power. The Company has all requisite corporate power to
enter into this Agreement and each of the Exhibits hereto, and will have at each
Closing Date all requisite corporate power to sell the Series C Preferred Shares
and to carry out and perform its obligations under the terms of this Agreement.
2.3. 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.
2.4. Capitalization. Immediately prior to the Initial Closing, the
Company's authorized capital stock will consist of (a) 30,000,000 shares of
Common Stock, $.01 par value ("Common Stock"), of which (i) 3,422,547 shares
will be issued and outstanding immediately prior to the Initial Closing, (ii)
6,403,325 shares have been reserved for issuance upon conversion of the
outstanding shares of the Company's Series A Preferred Stock, $.01 par value
(the "Series A Preferred Stock"), (iii) 153,000 shares are set aside for
issuance upon the exercise of warrants and other stock purchase rights for
Series A Preferred Stock and the conversion thereof into Common Stock, (iv)
6,579,086 shares have been reserved for issuance upon conversion of the
outstanding shares of the Company's Series B Preferred Stock, $.01 pay value
(the "Series B Preferred Stock," and together with the Series A Preferred Stock
and the Series C Preferred Stock, the "Preferred Stock"), (v) 2,942,521 shares
will be reserved for issuance upon conversion of those Series C Preferred Shares
to be issued to the Initial Purchasers hereunder, (vi) 100,000 shares are set
aside for issuance upon the exercise of warrants and other stock purchase rights
for Series C Preferred Stock and the conversion thereof into Common Stock, (vii)
2,057,479 shares will be reserved for issuance upon conversion of any shares of
Series C Preferred Stock sold to Subsequent Purchasers, (viii) 1,071,850 shares
are set aside for issuance upon exercise of stock options and other stock
purchase rights, heretofore or hereafter to be granted, (ix) 1,368,705 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 (x) 1,103,002 shares are held
by the Company in its treasury and (b) 21,500,000 shares of Preferred Stock, (1)
6,700,000 shares of which have been designated Series A Preferred Stock, of
which 6,403,325 shares are outstanding as of the Closing, (2) 9,700,000 shares
of which have been designated Series B Preferred Stock, of which 6,579,086
shares are outstanding as of the Closing, and (3) 5,100,000 shares of which have
been designated Series C Preferred Stock, of which 2,942,521 shares will be
outstanding after consummation of the transactions with the Initial Purchasers
contemplated hereby. All the aforesaid issued and outstanding shares of Series
A Preferred Stock, Series B Preferred Stock and Common Stock have been duly
authorized and validly issued, fully paid and are
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nonassessable, and owned of record and beneficially by the stockholders of the
Company and in the amounts set forth in the Schedule of Exceptions, and has been
offered, issued, sold and delivered by the Company in compliance with applicable
Federal and state securities laws. The Schedule of Exceptions sets forth a
complete and accurate list of all holders of the capital stock of the Company,
including options and warrants to purchase shares of the Company's capital
stock, and the class and number of shares, or shares issuable upon exercise, as
the case may be, held by each such holder. There are no outstanding preemptive,
conversion or other rights 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. No stockholder has granted the Company options or other
rights to purchase any shares of capital stock of the Company from such
stockholder. Neither the offer, issuance or sale of the Series C Preferred
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 Preferred Stock in its treasury.
2.5. 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 Series C
Preferred Shares and the shares of Common Stock issuable upon conversion of the
Series C Preferred Shares has been taken or will be taken prior to the Closing.
This Agreement and each of the Exhibits hereto are valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms. 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 Series C Preferred Shares and the
issuance of Common Stock upon conversion of the Series C 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, or any of its assets
is bound or (relying in part on the Purchaser's representations and warranties
as set forth in Section 4) 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 Series C Preferred Shares, when issued in compliance with the
provisions of this Agreement, will be duly authorized, 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
Series C 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 duly authorized, validly issued, fully aid and nonassessable.
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2.6. Financial Information. Attached hereto as Exhibits 2.6A and 2.6B,
respectively, are true copies of: (a) the audited balance sheet of the Company
as at December 31, 1994, together with audited statements of operations,
shareholders equity and cash flows of the Company for the year then ended
(collectively, the "Audited Financial Statements"); and (b) the unaudited
balance sheets of the Company as at December 31, 1995 and April 30, 1996
(collectively, the "Balance Sheet"), together with unaudited statements of
operations, shareholders' equity and cash flows of the Company for the 12-month
and the 4-month periods then ended, respectively (collectively, the "Unaudited
Financial Statements," and together with the Audited Financial Statements, the
"Financial Statements"). Each of the Financial Statements presents fairly the
financial position and results of operations of the Company at the dates and for
the periods to which they relate, in accordance with generally accepted
accounting principles consistently applied throughout and across the periods
involved (except as may otherwise be disclosed in the Financial Statements) and
show all liabilities of the Company required to be recorded thereon in
accordance with generally accepted accounting principles as at the dates
thereof, subject, in the case of the Unaudited Financial Statements, to normal
year-end adjustments.
Absence of Undisclosed Liabilities. 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.
2.7. Absence of Certain Changes. At all times since December 31, 1995
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.
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2.8. 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 Commonwealth of
Massachusetts and the State of Delaware and (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.
2.9. Outstanding Debt. Except 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
his, her or its relatives or affiliates, is indebted to the Company in an amount
in excess of $5,000 per person or entity.
2.10. Contracts; Insurance. 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;
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(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(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 of the Company's capital
stock;
(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); or
(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
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any court or before any governmental or administrative agency for the
renegotiation of or any other adjustment of any such agreement.
2.11. 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
to which its property is or may be subject or to which any officer, key
employee or principal stockholder of the Company is subject, and (i) 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, or
(ii) in which a third party seeks damages from the Company based on the
Company's previous use of name "ScripTech;" 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.
2.12. Consents. Subject in part to the truth and accuracy of the
representations set forth in Sections 3.8 and 3.9 of this Agreement, 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 Series C Preferred Shares by the Company, the issuance
of Common Stock upon the conversion of the Series C 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.
2.13. 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.
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
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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.
2.14. Business of the Company. There is no pending or, to the best of
the Company's knowledge and belief, threatened 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.
2.15. 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
the Company is not in default under any of such permits, licenses or other
similar authority. The Schedule of Exceptions includes a list of all patents
owned by or which are licensed to the Company. 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
with respect to such patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, information, proprietary
rights and processes has not received any notice of infringement upon or
conflict with the 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.
2.16. Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Series C Preferred 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.
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2.17. 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 Series C Preferred Shares and the issuance of Common Stock upon
conversion of the Series C Preferred Shares as contemplated by this Agreement
are exempt from the registration requirements of the Securities Act and from the
registration or qualification requirements of the laws of any applicable
jurisdiction, and neither the Company nor anyone acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
2.18. 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.
2.19. 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, neither Xxx nor
Green, nor any Ph.D. qualified employee nor any officer of the Company
(collectively, "key persons"), 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.
2.20. 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")).
2.21. 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,
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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
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.
2.22. 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 Series C 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 Series C Preferred Shares pursuant to
the provisions of the Certificate of Incorporation.
2.23. Material Relationships. Except for investments held by entities
affiliated with Xxxxx Xxxxxxxx or Xxxxxxxx, to the best of the Company's
knowledge and belief, none of the officers, directors or key persons 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 2.24, there may be
disregarded any purely passive
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economic interest which arises solely from the ownership of less than a 2%
equity interest in any such entity.
2.24. 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.
2.25. 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. The Company will indemnify any
Purchaser for any such commission or compensation for which such Purchaser may
be held liable.
2.26. Patents, Copyrights and Trademarks. The Company owns and
possesses or is licensed under all patents, patent applications, licenses,
trademarks, trade names, brand names, inventions and federally registered
copyrights necessary for the operation of its business as now conducted and as
proposed to be conducted, including without limitation, the United States
patents listed in the Schedule of Exceptions, in each case, the Company is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner, licensor of, or other claimant to any
patent, trademark, trade name, copyright or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business (as now
conducted and as proposed to be conducted), or otherwise; and there have been no
claims made, or, to best knowledge of the Company after due inquiry, threatened,
against the Company for the assertion of the invalidity, abuse, misuse or
unenforceability of any of its patent, trademark, copyright, trade secret or
other proprietary rights and there are no grounds for the same.
2.27. Proprietary Information of Third Parties. No third party has
claimed, has reason to claim or has requested information to suggest that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his employment, consulting,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party, or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present employees. To the best knowledge of the Company, after
due inquiry, no person employed by or affiliated with the Company has employed
or proposes to employ any trade secret or any information or documentation
proprietary to any other person in connection with the conduct of the Company's
business (as now conducted and as proposed to be conducted).
2.28. Untrue Statements and Omissions. This Section 2 does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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SECTION 3
Representations and Warranties of Purchasers
Part I Representations and Warranties of All Purchasers.
Each Purchaser, severally and not jointly, represents and warrants with
respect to such Purchaser to the Company as follows:
3.1. Experience. It (or, in the event any such Purchaser has been
formed for the specific purpose of acquiring the securities of the Company, each
of the equity owners of such Purchaser) 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 Series C Preferred Shares and of making an
informed decision. It (or, in the event any such Purchaser has been formed for
the specific purpose of acquiring the securities of the Company, each of the
equity owners of such Purchaser) is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act.
3.2. Investment. It is acquiring the Series C Preferred Shares, and
will be acquiring the shares of Common Stock issuable upon conversion of the
Series C 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 Series C Preferred Shares and the shares of Common Stock issuable upon
conversion of the Series C 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.
3.3. Restrictions on Transfers. It understands and agrees as follows:
(a) The certificates evidencing the Series C Preferred Shares (and the
Common Stock issuable upon conversion of the Series C Preferred Shares), and
each certificate issued in 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 THE SECURITIES LAWS OF ANY
OTHER JURISDICTION. 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
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QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
OTHER JURISDICTION."
(b) It will not offer, sell, transfer or otherwise dispose of any of the
Series C Preferred Shares or any Common Stock issuable upon conversion of the
Series C 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 the securities laws of any other jurisdiction.
Upon request of a holder of Series C Preferred Shares (or Common Stock
issued upon conversion of Series C Preferred Shares), the Company shall
remove any such legend from each certificate evidencing such Series C
Preferred Shares (or such Common Stock), or shall issue to such holder a new
certificate or certificates for such Series C Preferred 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).
3.4. Rule 144. It acknowledges that the Series C Preferred Shares and
the shares of Common Stock issuable upon conversion of the Series C Preferred
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 Series C Preferred Shares or the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock.
3.5. 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.
3.6. 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. 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
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a breach of any of the terms of, or constitute a default under, such Purchaser's
charter or By-Laws or Agreement of Limited Partnership, as applicable, or any
judgment, decree, order, rule or regulation to which such Purchaser is bound.
3.7. Brokers' and Finders' Fees. It, individually or with any person,
has retained no broker or finder in connection with the transactions
contemplated by the 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. It will indemnify the Company for any such commission or
compensation for which the Company may be held liable.
Part II. Special Representations and Warranties of Lombard Odier & Cie. and
Xxxxxxx Xxxx
Each of Lombard Odier & Cie. and Xxxxxxx Xxxx, severally and not jointly
with any other Purchaser, represents and warrants to the Company as follows:
3.8. The offer, sale and issuance of the Series C Preferred Shares
and the issuance of Common Stock upon conversion of the Series C Preferred
Shares as contemplated by this Agreement are exempt from the registration or
qualification requirements of the laws, rules or procedures of, of any entity
in or having jurisdiction over, the Switzerland Confederation, including the
Canton of Zurich, the Swiss Nationalbank and any stock exchange, and neither
Lombard Odier & Cie. nor Xxxxxxx Xxxx nor anyone acting on its or his behalf
will take any action hereafter that would cause the loss of such exemption.
3.9. No consent, approval, qualification, order or authorization of, or
filing with, any governmental authority in or having jurisdiction over the
Switzerland Confederation, including the Canton of Zurich and the Swiss
Nationalbank, 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 Series C Preferred Shares by the Company, the
issuance of Common Stock upon the conversion of the Series C 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 by the Company at the direction of Lombard Odier & Cie. and Xxxxxxx
Xxxx or their counsel prior to the Closing.
SECTION 4
Conditions to Closing of Purchasers
The obligation of each Purchaser to purchase the Series C Preferred Shares
to be purchased at a Closing is subject to the fulfillment to such Purchaser's
reasonable satisfaction on or prior to the relevant Closing Date of each of the
following conditions:
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4.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 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.
4.2. 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 material
respects.
4.3. 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.
4.4. Opinion of Company's Counsel and Accountants. The Purchasers
shall have received from Xxxxxx, XxXxxxxxx & Fish, LLP, counsel to the Company,
an opinion addressed to the Purchasers, dated the Closing Date, and in
substantially the form attached as Exhibit 4.4 hereto (appropriately updated for
each Subsequent Closing).
4.5. Legal Investment. At the time of the Closing, the purchase of the
Series C Preferred 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.
4.6. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the President or Vice President of the Company,
dated the Closing Date, certifying on behalf of the Company to the fulfillment
of the conditions specified in Sections 4.1 and 4.2 of this Agreement.
4.7. 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 reasonably satisfactory in
substance and form to the Purchasers and their counsel.
4.8. Securities Law Compliance. All such actions and steps necessary
to assure compliance with applicable Federal and the securities laws of any
other jurisdiction, including all authorizations, approvals or permits, if any,
of any governmental authority or regulatory body in any jurisdiction where the
Series C Preferred Shares are being sold, that are required in connection with
the lawful issuance and sale of the Series C Preferred Shares pursuant to this
Agreement, the conversion of the Series C 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.
4.9. Amended and Restated Stockholders' Agreement. The Company, the
Purchasers, each holder of the Company's Series A Preferred Stock and the
Company's Series B Preferred
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Stock, and Xxxxx X. Xxx ("Xxx") and Xxxxxxx X. Xxxxx ("Green") shall have
executed the Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement") in substantially the form attached hereto as Exhibit 4.9.
4.10. Key-Man Insurance Trust. The Company and CW Group (the
"Trustee") shall have executed and delivered an Amended and Restated Trust
Agreement substantially in the form of Exhibit 4.10A hereto (the "Amended Trust
Agreement"). Each of the Purchasers, Bologna and the Trustee shall have
executed and delivered an Amended and Restated Trust Option Agreement
substantially in the form of Exhibit 4.10B hereto.
SECTION 5
Conditions to Closing of Company
The Company's obligation to sell the Series C Preferred Shares to be
purchased at each Closing is subject to the fulfillment to its satisfaction on
or prior to the relevant Closing Date of each of the following conditions:
5.1. Representations. The representations made by each of the
Purchasers pursuant to Section 3 hereof shall be true and correct when made and
shall be true and correct on the relevant Closing Date.
5.2. Legal Investment. At the time of the Closing, the conditions set
forth in Sections 4.8 and 4.9 shall have occurred and the purchase of the Series
C Preferred 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 6
Covenants of the Company
The Company hereby covenants and agrees, so long as any Purchaser owns at
least twenty-five percent (25%) of the Series C Preferred Shares purchased by it
pursuant to this Agreement and except as provided below, to take or refrain from
taking any of the actions specified in this Section 6, without the prior written
consent of the holders of 75% of the issued and outstanding Series C Preferred
Shares:
Part I. Affirmative Covenants.
6.1. Basic Financial Information. The Company will furnish the
following reports to the Purchasers (or their representatives):
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(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
nationally 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 6.1(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 no later than sixty (60) days after the
commencement of each fiscal year of the Company, the yearly budget and
operating 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.
-18-
(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 security holders (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 Series C
Preferred Shares or in the Common Stock issuable upon conversion of the
Series C 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 Internal Revenue Code of 1986, as amended (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 6.1 and Section 6.2 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 comply with the provisions of Section 6.1 or
6.2, 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.
6.2. 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
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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 6.15 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.
6.3. 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.
6.4. 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.
6.5. Insurance. The Company shall maintain adequate insurance, by
financially sound and reputable insurers, on its properties and assets and the
properties 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
-20-
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.
6.6. Key Person Life Insurance. The Company will cause to be
maintained, and shall contribute to the Trust created under the Amended Trust
Agreement an amount sufficient to pay all premiums in connection with, the
$1,000,000 term life insurance policies currently insuring the life of each of
Xxx and Green so long as any Series C Preferred Shares remain outstanding.
6.7. 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.
6.8. Independent Accountants. The Company will retain independent
public accountants of nationally 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.
6.9. Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries, if any, shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
6.10. 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
-21-
adverse effect upon the business or operations of the Company or such
subsidiary, as the case may be.
6.11. Availability of Common Stock for Conversion and Exercise; Certain
Stock Options.
(a) 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 Series C Preferred Stock.
(b) As soon as possible after the Initial Closing, the Company shall take all
action necessary to make available for issuance stock options to purchase shares
of Common Stock, to be granted or made to directors, officers, employees,
consultants and advisers of the Company upon such terms and conditions as may be
approved by resolution the Company's Board of Directors, and to issue such
options and shares of Common Stock from time to time in accordance with the
terms of such resolution; provided, that the maximum number of shares of Common
Stock that will be issued or available for issuance under this Section 6.11(b)
shall be 555,555 in the aggregate and, further provided, that such options shall
terminate no later than upon the close of an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale by the Company of shares of Common Stock. The
Purchasers agree to vote their Shares and take all other action necessary in
furtherance of the foregoing.
6.12. 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
Series C 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.
6.13. Proprietary Information and Inventions Agreement. The Company
will cause each person currently or hereafter employed 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
6.13.
6.14. Directors; Meetings of the Board of Directors; and Director's and
Officer's Insurance; Election of Director.
(a) 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
designees of the Series A Purchasers (as defined in the Stockholders'
Agreement), to the designee of each of the Purchasers and the Advent Series B
Purchasers (as defined in the Stockholders' Agreement) and the designee of Xxx
and Green, and shall permit, in addition to such directors, each Purchaser (or
its designee) and Green and Xxx (or their respective designee) to attend
meetings of the
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Board and committees thereof. In the event any such designee shall be unable to
attend a meeting of the Board, the Purchasers designating such designee 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 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 obtain and maintain, on
reasonable business terms, director's and officer's insurance for directors of
the Company providing coverage for each director of at least $1,000,000 per
occurrence, provided that such insurance can be obtained on commercially
reasonable terms as determined by the Board of Directors. The Purchasers
acknowledge that as of the date of the Initial Closing, the Company has not
obtained directors' and officers' insurance.
(b) The director nominee of the Purchasers shall be elected to the Board of
Directors of the Company.
6.15. Meetings of Stockholders. The Purchasers shall be entitled to
call for a stockholders' meeting upon five days notice to the Company.
6.16. 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.
6.17. 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 (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.
Part II. Restrictive Covenants.
6.18. 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 Series A Preferred Stock, the Series B Preferred Stock
and the Series C 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 restricted stock agreement with an
employee of, or consultant to the Company entered into by the Company and
approved by the Board of Directors of the Company, and (ii) the redemption of
any shares of Series C Preferred Stock.
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6.19. 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 Series C Preferred Stock with respect to the
payment of dividends or upon liquidation or other distribution of assets or with
a conversion price lower than that of the Series C Preferred Stock or terms more
favorable than those of the Series C 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 Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock into
Common Stock.
6.20. 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.
6.21. 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.
6.22. Transactions with Officers, Directors and Stockholders. The
Company will not furnish or sell services or products to or acquire or purchase
services 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 6.24, 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 6.24 shall not prohibit any Purchaser from providing any
consulting, legal, accounting, investment banking, managerial, investment
advisory and/or other services to the Company.
6.23. 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.
[cad 217]
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6.24. Certificate of Incorporation and By-Law Amendments;
Reclassification of Common Stock; Changes to Series C Preferred Stock. The
Company may not amend its Certificate of Incorporation or By-Laws so as to
affect adversely the Series C Preferred Stock. The Company may not
reclassify any shares of its Common Stock into shares having preference or
priority to dividends or assets which are superior to the preferences and
priorities of the Series C Preferred Stock. The Company may not make any
change to the rights, preferences or privileges of the Series C Preferred
Stock so as to affect adversely the Series C Preferred Stock.
6.25. 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 Series C 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.
6.26. 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 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 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;
(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 6.28 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, 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.
6.27. 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
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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
manner become responsible for the obligations of any other person, 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.
6.28. 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
6.1(e) hereof, for any such expenditure or commitment.
6.29. Employee Stock Purchase Arrangements. The Company will not issue
any of its capital stock to, or grant an option or right to subscribe for any of
its capital stock to, or purchase or acquire any of its capital stock from, any
employee, consultant, director or officer of the Company or a subsidiary
thereof, except as provided in Section 7.14 of the Series A Purchase Agreement
(as defined below) or 6.11(b) of this Agreement, without giving effect to any
amendment thereto.
PART III. Termination
6.30. Termination Event. The provisions of this Section 6 shall
terminate as to any Purchaser at such time as such Purchaser owns less than
twenty-five percent (25%) of the Series C Preferred Shares purchased by it
pursuant to this Agreement.
SECTION 7
Registration of Securities
7.1. Certain Definitions. As used in this Section 7, 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 Series C Preferred Shares, (ii)
shares of Common Stock issued or issuable pursuant to the conversion of the
Series B Preferred Stock (the "Series B Preferred Shares") issued pursuant to
the Series B Stock Purchase Agreement dated April 19, 1995 among the Company,
certain of the Purchasers and the other individuals named therein (the "Series B
Purchase Agreement"), (iii) shares of Common Stock issued or issuable pursuant
to the conversion of the Series A Preferred Stock (the "Series A Preferred
Shares") issued pursuant to the Stock Purchase Agreement dated September 16,
1993 among the Company, certain of the Purchasers and the other individuals
named therein (the "Series A Purchase Agreement"), and
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(iv) any Common Stock issued in respect of the securities issued pursuant to the
conversion of the Series A Preferred Shares, the Series B Preferred Shares and
the Series C 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 7.2, 7.3 and 7.5 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.
7.2. 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
(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
27
Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 7.2, (x) after the Company
has effected two such registrations pursuant to this Section 7.2(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) September 16, 1997, 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 7.2(b) below, other
securities of the Company which are held by officers, including the Chief
Executive Officer of the Company or such person acting in that capacity, or
directors of the Company, by Xxx and Green, 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 7.2 and
the Company shall include such information in the written notice referred to in
Section 7.2(a)(i) above. The right of any Holder to registration pursuant to
Section 7.2 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.
If Other Stockholders shall request inclusion in any registration pursuant
to Section 7.2, 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 7.2, 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
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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 7.2(b), then such registration shall not be deemed a
registration for purposes of Section 7.2(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.
7.3. 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
(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 7.3(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 7.3(a)(i). In such event the right of any Holder to registration
pursuant to Section 7.3 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
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other provision of this Section 7.3, 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
disapprove 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.
7.4. 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 holders, including the Company, of the securities so registered pro rata on
the basis of the number of their shares so registered.
7.5. 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
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).
7.6. 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:
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(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;
(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 than 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;
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(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, 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 7.2 or 7.3 hereof, the Company will enter
into any underwriting agreement reasonably necessary to effect the offer and
sale of Common Stock.
7.7. 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
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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 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 7.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party")
-33-
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 7.7, 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 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.
7.8. 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.
7.9. 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
hereunder to the holders of Series A Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares.
7.10. 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) 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) 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
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(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 it 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 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.
7.11. 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 7.2, 7.3 and 7.5 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 7.
7.12. Termination of Registration Rights Set Forth In Series A
Purchase Agreement and Series B Purchase Agreement. The Company, Bologna and
Xxxxxxxx, and such of the Purchasers as are party to the Series A Purchase
Agreement, constituting all of the parties to the Series A Purchase Agreement
and the holders of all of the securities issued pursuant thereto, hereby
amend the Series A Purchase Agreement by deleting therefrom Section 8 in its
entirety. Any and all registration rights granted by the Company to such
Purchasers, Bologna and Xxxxxxxx are as set forth in this Section 7. The
Company and such of the Purchasers as are party to the Series B Purchase
Agreement, constituting all of the parties to the Series B Purchase Agreement
and the holders of all of the securities issued pursuant thereto, hereby
amend the Series B Purchase Agreement by deleting therefrom Section 7 in its
entirety. Any and all registration rights granted by the Company to such
Purchasers are as set forth in this Section 7.
SECTION 8
Right of First Offer
8.1. Right of First Offer Upon Issuance of New Securities.
(a) The Company hereby grants to the Purchasers the right of first offer
to purchase any or all "New Securities" (as hereinafter defined) on a
proportionate basis as defined in Section 8.1(b). For purposes of this
Section 8.1, "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
-35-
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, directors or officers of, or
consultants to, the Company as permitted by Section 7.14 of the Series A
Purchase Agreement or 6.11(b) of this Agreement, (ii) shares of capital stock
issued upon conversion of the Series A Preferred Shares, Series B Preferred
Shares or Series C Preferred Shares, (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 Company's Board of Directors, (iv) warrants issued in
connection with business transactions, including corporate partnerships,
approved by the Company's Board of Directors or securities issued pursuant to
such warrants and (v) the sale of Series C Preferred Shares pursuant to this
Agreement.
(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 the notice by giving
written notice to the Company and stating the quantity of New Securities to
be purchased. As used in this Section 8.1, 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 (as defined in the Series A Purchase Agreement), if any,
owned by such Purchaser and (ii) the total number of shares of Common Stock
into which the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and other convertible securities of the Company, if
any, held by such Purchaser (prior to such contemplated issuance) are
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 (as defined in the
Series A Purchase Agreement), if any, owned by all Purchasers and (ii) the
total number of shares of Common Stock into which the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and other
convertible securities of the Company held by all Purchasers (prior to such
contemplated issuance) are 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 fifteen (15) 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
-36-
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 8.1(b) to the contrary, as
used in this Section 8.1(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 of any Incomplete Purchaser and the total number of shares of
Common Stock into which the shares of such Incomplete Purchaser's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock or
other convertible securities, if any, are convertible.
(d) In the event the Purchasers fail to exercise the right of first
offer and right of over-allotment within said forty-five (45) 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 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 offer granted under this Section 8.1 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
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 $7.00 which results in net proceeds to the Company of not less
than $10,000,000.
8.2. Termination of Rights of First Offer. If in connection with an
offering of New Securities in which the Purchasers have the right, pursuant
to Section 8.1 above, to purchase their proportionate share of such New
Securities, any Purchaser declines to purchase such Purchaser's full
proportionate share of such New Securities, then such Purchaser's rights
pursuant to Section 8.1 shall terminate as to any subsequent offering of New
Securities.
8.3. Termination of Section 9.1 of the Series A Purchase Agreement
and Sections 8.1 and 8.2 of the Series B Purchase Agreement. The Company,
Bologna, Xxxxxxxx and such of the Purchasers as are party to the Series A
Purchase Agreement (together with Bologna and Xxxxxxxx, the "Series A
Purchasers"), constituting all of the parties to the Series A Purchase
Agreement, hereby amend the Series A Purchase Agreement by deleting therefrom
Section 9.1 in its entirety. The Company and such of the Purchasers as are
party to the Series B Purchase Agreement (the "Series B Purchasers"),
constituting all of the parties to the Series B Purchase Agreement, hereby
amend the Series B Purchase Agreement by deleting therefrom Sections 8.1
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and 8.2 in their entirety. Except as specifically set forth in Section 7.12
above and this Section 8.3, each of the Series A Purchase Agreement and the
Series B Purchase Agreement shall remain in full force and effect. In
addition, each Series A Purchaser and each Series B Purchaser hereby waives
any preemptive right it may have to purchase the Series C Preferred Shares to
be issued pursuant hereto.
SECTION 9
Confidentiality
9.1. Agreement to Hold in Confidence and Not Disclose Confidential
Information. Notwithstanding any other provision of this Agreement, and
except as otherwise provided in Section 9.2 below, each Purchaser shall hold
in confidence and not disclose to any other person or entity any Confidential
Information (as defined in subsection 9.3 below) of the Company without the
prior written consent of the Company.
9.2. Permitted Disclosure of Confidential Information.
Notwithstanding Section 9.1 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 Purchaser regularly sends investment reports and
updates to his, her or its 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 the Purchaser
Representative a copy of this Section 9 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.
9.3. 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 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
-38-
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).
9.4. 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 9
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.
9.5. Survival. The provisions of this Section 9 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.
9.6. Confidentiality of Indentity of Lombard Odier & Cie. The
Company will not use the name "Lombard Odier & Cie." in any of its public
communications without the prior written consent of Lombard Odier & Cie.
Notwithstanding the foregoing, the Company may, without Lombard Odier &
Cie.'s prior written consent, (a) refer to Lombard Odier & Cie. in its books,
records and internal communications to Directors, officers and employees of
the Company and to the Company's independent auditors and legal counsel, (b)
publicly identify "RYCO & Co." as a stockholder of the Company provided that
no other reference to the name "Lombard Odier & Cie." is made in conjunction
therewith, (c) refer to or publicly disclose the name "Lombard Odier & Cie."
when the Company has been advised by its counsel that it is legally compelled
to do so, whether by law, governmental order, subpoena, rule or regulation,
provided, that to the extent practicable prior to such disclosure (but in any
event promptly after such disclosure), the Company shall give notice to
Lombard Odier & Cie. of the Company's obligation to disclose such information
so that Lombard Odier & Cie. may seek confidential treatment, a protective
order or other appropriate remedy, and (d) make certain of the Company's
books, records and communications, including those books, records and
communications that have references to Lombard Odier & Cie., available to
persons who are obligated to keep such books, records and communications
confidential.
SECTION 10
Miscellaneous
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10.1. Additional Parties. Any other person or entity desiring to
purchase shares of Series C Preferred Stock hereunder may, with the written
consent of the Company and the Board of Directors of the Company, become a
party to this Agreement by executing a counterpart of this Agreement
indicating the number of shares of Series C Preferred Stock such entity
intends to purchase, whereby such entity agrees, subject to the terms and
conditions of this Agreement, to purchase such shares of Series C Preferred
Stock, and to be bound as a Subsequent Purchaser to all of the terms and
conditions of this Agreement, as this Agreement may be amended from time to
time in accordance with its terms, and thereafter such Subsequent Purchaser
shall have all the rights and obligations of a Subsequent Purchaser hereunder.
10.2. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed in all respects by the laws of The Commonwealth of Massachusetts.
10.3. Survival. The representations and warranties made herein shall
survive the Closing Date indefinitely, 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 hereto or hereafter made by them, or on their respective
behalf. Each of the covenants, agreements and indemnifications contained
herein shall survive indefinitely, unless otherwise expressly provided herein.
10.4. 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.
10.5. 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
Purchasers holding not less than 75% of the outstanding Series C Preferred
Shares held by Purchasers.
10.6. 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 Initial
Purchaser, at the address set forth for such Initial Purchaser on the
Schedule of Purchasers attached hereto or at such other address as such
Initial Purchaser shall have furnished to the Company in writing or (b) if to
any other holder of Series C Preferred Shares or any Common Stock issued upon
conversion of Series C 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
-40-
furnished to the Purchasers and each such other holder in writing, with a
copy to Xxxxxx, XxXxxxxxx & Fish, LLP, Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxxxxxxxxx Xxxxxxxxx, Esquire.
10.7. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to (i) any Purchaser or holder of any Series
C Preferred 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 Series C 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 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.
10.8. 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.
10.9. Expenses. Each of the Company and the Purchasers shall bear
its own expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby.
10.10. 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.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all material of which
together shall constitute one instrument.
10.12. Remedies. In the event of a breach of the representations and
warranties set forth in Section 2 above which has the effect of materially
and adversely affecting the Company's business, operations or financial
condition as represented in said Section 2, each Purchaser shall, in addition
to any other remedy available under applicable law, be entitled to rescind
such Purchaser's purchase of the Series C Preferred Shares hereunder.
10.13. Pronouns. Words of the neuter gender shall be deemed and
construed to include correlative words of the masculine and feminine genders
unless the context shall otherwise indicate.
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Rest of Page Intentionally Left Blank
-42-
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
--------------------------------
Xxxxxxx X. Xxxxxxxxxx, Vice President
PURCHASERS:
CW VENTURES II, L.P.
By: CW Partners III, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL IV L.P.
By: Accel IV Associates, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL INVESTORS '93 L.P.
By: /s/
--------------------------------
Title:
-----------------------------
General Partner
-00-
XXXXX XXXXX L.P.
By: Accel Japan Associates, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
XXXXXXX X. XXXXXXXXX PARTNERS
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
PROSPER PARTNERS
By: /s/
--------------------------------
Print Name:
-----------------------
Attorney-in-Fact
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P., its
General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
NEW ENTERPRISE ASSOCIATES 5
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
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VENROCK ASSOCIATES
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
VENROCK ASSOCIATES II, L.P.
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its General
Partner
By: Advent International Corporation, its General Partner
By: /s/
--------------------------------
Xxxxx X. Fisherman, Senior Investment
Manager
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its
General Partner
By: Advent International Corporation, its General
Partner
By: /s/
--------------------------------
Xxxxx X. Fisherman, Senior
Investment Manager
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation, its
General Partner
By: /s/
--------------------------------
Xxxxx X. Fisherman, Senior
Investment Manager
-45-
ADVENT PERFORMANCE MATERIALS LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its
General Partner
By: Advent International Corporation, its
General Partner
By: /s/
--------------------------------
Xxxxx X. Fisherman, Senior
Investment Manager
LOMBARD ODIER & CIE.
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
/s/
----------------------------------
Xxxxxxx Xxxx
For purposes of Section 7.12 and 8.3 only:
/s/
----------------------------------
Xxxxxx X. Xxxxxxx
/s/
----------------------------------
Xxxxx Xxxxxxxx
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SUBSEQUENT PURCHASER:
Name:
By:
--------------------------------
Title:
----------------------------
Address:
----------------------------
Shares of Series C Preferred Stock to be purchased
at Subsequent Closing:
-47-
