1
Exhibit 10.19
SERIES E CONVERTIBLE PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
between
ASPECT MEDICAL SYSTEMS, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of December 17, 1998
2
TABLE OF CONTENTS
Page
1. Authorization and Sale of Shares and Warrants; Use of Proceeds;
Restricted Securities................................................. 1
1.01 Authorization................................................... 1
1.02 Sale of Shares and Warrants..................................... 1
1.03 Use of Proceeds................................................. 1
1.04 Restricted Securities........................................... 1
2. Closing............................................................... 2
3. Representations of the Company........................................ 2
3.01 Organization and Standing....................................... 2
3.02 Capitalization.................................................. 3
3.03 Subsidiaries.................................................... 4
3.04 Stockholder List and Agreements................................. 4
3.05 Issuance of Shares.............................................. 4
3.06 Authority for Agreements, Etc................................... 5
3.07 Governmental and Other Consents................................. 5
3.08 Litigation; Compliance with Law................................. 6
3.09 Taxes........................................................... 6
3.10 Financial Statements............................................ 7
3.11 Books and Records............................................... 7
3.12 Title to Properties, Leasehold Interests, Liens and Encumbrances 8
3.13 Compliance with Other Instruments............................... 8
3.14 Indebtedness to Affiliates...................................... 8
3.15 Contracts....................................................... .8
3.16 U.S. Real Property Holding Corporation.......................... 9
3.17 Insurance....................................................... 9
3.18 Patents, Trademarks, Etc........................................ 9
3.19 Proprietary Information of Third Parties........................ 10
3.20 Proprietary Information and Inventions Agreements............... 10
3.21 Key Employees................................................... 10
3.22 Brokers......................................................... 10
3.23 Disclosure...................................................... 10
3.24 Compliance with Environmental and Safety Laws................... 11
3.25 Year 2000 Compliance............................................ 13
4. Representations and Warranties of the Purchasers...................... 14
4.01 Investment...................................................... 14
4.02 Authority....................................................... 14
-i-
3
4.03 Experience...................................................... 14
4.04 Accredited Investor............................................. 15
4.05 Restricted Securities........................................... 15
4.06 Qualified Institutional Buyer................................... 15
5. Conditions to Obligations of the Purchasers at the Closing............ 15
5.01 Issuance of Shares and Warrants................................. 15
5.02 Accuracy of Representations and Warranties...................... 15
5.03 Performance..................................................... 15
5.04 All Proceedings to be Satisfactory.............................. 16
5.05 Compliance Certificate.......................................... 16
5.06 Consents; Filings............................................... 16
5.07 Opinion of Counsel.............................................. 16
5.08 Filing of Charter............................................... 16
5.09 Certificates and Documents...................................... 16
5.10 Voting Agreement................................................ 17
5.11 Co-Sale Agreement............................................... 17
5.12 Rights of First Refusal......................................... 17
5.13 Registration Rights Agreement................................... 17
5.14 Minimum Sales................................................... 18
5.15 Legal Fees...................................................... 18
5.16 No Adverse Changes.............................................. 18
6. Conditions to the Obligations of the Company.......................... 18
6.01 Accuracy of Representations and Warranties...................... 18
7. Covenants of the Company.............................................. 18
7.01 Inspection...................................................... 18
7.02 Financial Statements and Other Information...................... 19
7.03 Material Changes and Litigation................................. 20
7.04 Key Man Insurance............................................... 20
7.05 Other Insurance................................................. 20
7.06 Accounts and Records............................................ 20
7.07 Availability of Common Stock for Conversion..................... 21
7.08 Proprietary Information and Inventions Agreements............... 21
7.09 Non-Competition................................................. 21
7.10 Use of Proceeds................................................. 21
7.11 Prepayment of Taxes; Corporate Existence........................ 21
7.12 Special Covenants............................................... 22
7.13 Board of Directors.............................................. 24
7.14 Right of First Refusal.......................................... 25
7.15 Termination of Covenants........................................ 26
8. Waiver of Prior Preemptive Rights; Termination of Covenants........... 27
-ii-
4
9. Successors and Assigns................................................ 27
10. Transfers of Certain Rights........................................... 28
11. Confidentiality....................................................... 28
12. Survival of Representations and Warranties............................ 29
13. Notices............................................................... 29
14. Brokers............................................................... 29
15. Entire Agreement...................................................... 29
16. Amendments and Waivers................................................ 30
17. Consents.............................................................. 30
18. Counterparts.......................................................... 30
19. Headings.............................................................. 30
20. Severability.......................................................... 30
21. Governing Law......................................................... 30
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Stockholders List
INDEX TO EXHIBITS
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B Form of Warrant
EXHIBIT C Fourth Amended and Restated Right of First Refusal and
Co-Sale Agreement
EXHIBIT D Fourth Amended and Restated Registration Rights Agreement
EXHIBIT E Fourth Amended and Restated Voting Agreement
EXHIBIT F Non-Disclosure and Assignment of Inventions Agreement
EXHIBIT G Opinion of Xxxx and Xxxx LLP
-iii-
5
SERIES E CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Agreement dated as of December 17, 1998 is entered into by and among
Aspect Medical Systems, Inc., a Delaware corporation (the "Company"), and the
several purchasers listed on Schedule I hereto (individually a "Purchaser" and
collectively the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares and Warrants; Use of Proceeds;
Restricted Securities.
1.01 Authorization. The Company has, on or before the Closing (as
defined in Section 2 below), duly authorized the sale and issuance of (a) up to
1,760,000 shares (the "Preferred Shares") of its Series E Convertible Preferred
Stock, $.01 par value per share (the "Series E Preferred Stock"), having the
rights, restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation attached as Exhibit A hereto (the "Charter"), and
(b) warrants (the "Warrants") to purchase up to 193,600 shares (the "Warrant
Shares") of Common Stock, $.01 par value per share of the Company (the "Common
Stock"). The Company has, on or before the Closing, adopted and filed the
Charter with the Secretary of State of the State of Delaware.
1.02 Sale of Shares and Warrants. Subject to the terms and
conditions of this Agreement, at the Closing, the Company agrees to sell and
issue to each of the Purchasers, and each of the Purchasers acting severally and
not jointly agrees to purchase from the Company, for a purchase price of $10.00
per share, (a) the number of shares of Series E Preferred Stock set forth
opposite the name of such Purchaser on Schedule I hereto under the heading
"Preferred Shares to be Purchased" and (b) Warrants to purchase the number of
shares of Common Stock set forth opposite the name of such Purchaser on Schedule
I hereto under the heading "Shares of Common Stock Subject to Warrants". The
Warrants shall have an exercise price of $12.50 per share and shall be issued
upon such other terms and conditions as are set forth in the form of Warrant
attached hereto as Exhibit B.
1.03 Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares and Warrants primarily for research and development
and working capital, to purchase capital equipment and for sales and marketing
efforts.
1.04 Restricted Securities. The offer, issuance and sale of the
Preferred Shares hereunder has not been registered under the Securities Act of
1933 (as amended, the "Securities Act"). The Preferred Shares, the Warrants, the
shares of Common Stock issuable upon conversion of the Preferred Shares (the
"Conversion
6
Shares") and the Warrant Shares are "restricted securities" within the meaning
of Rule 144 under the Securities Act. The Purchasers do not have the protections
of Section 11 of the Securities Act in connection with the sale of the Preferred
Shares and Warrants hereunder or, after the date hereof, the issuance or sale of
the Conversion Shares or the Warrant Shares.
2. Closing. (a) The closing of the sale and purchase of the Preferred
Shares and the Warrants shall take place at the offices of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx at
10:00 a.m. on December __, 1998, or at such other time, date and location as are
agreeable to the Company and the Purchasers (the "Closing"). The date on which
the Closing occurs shall hereinafter be referred to as the "Closing Date."
(b) At the Closing (i) the Company shall deliver to each Purchaser
(a) a certificate evidencing the shares of Series E Preferred Stock purchased by
such Purchaser pursuant to Section 1.02 hereof, with such certificates
registered in the name of such Purchaser, (b) a Warrant purchased by such
Purchaser pursuant to Section 1.02 hereof exercisable for the number of Warrant
Shares set forth on Schedule I registered in the name of the Purchaser, and (ii)
each Purchaser shall deliver to the Company the dollar amount set forth opposite
such Purchaser"s name on Schedule I hereto under the heading "Aggregate Purchase
Price For Preferred Shares and Warrants," (i) in cash, (ii) by certified check
payable to the order of the Company, (iii) by wire transfer or (iv) any
combination of such methods.
(c) If at the Closing, any of the conditions specified in Section 5
have not been met, each of the Purchasers may elect to be relieved of any
obligations under this Agreement with respect to the Closing without waiving any
of the rights or remedies such Purchaser may have by reason of such failure to
meet such conditions.
3. Representations of the Company. Except as disclosed by the Company in
Schedule II hereto, the Company hereby represents and warrants to each of the
Purchasers as follows:
3.01 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it, to enter into and
perform this Agreement and any agreements contemplated by this Agreement and to
carry out the transactions and perform the obligations contemplated herein. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the failure to so qualify would have a
material adverse effect on the operations or financial condition of the Company.
The Company has
-2-
7
delivered to the Purchasers true and complete copies of its Charter and By-Laws,
each as amended to date.
3.02 Capitalization. Effective immediately prior to the Closing, the
authorized capital stock of the Company will consist of (i) 17,030,000 shares of
Common Stock, $.01 par value per share (the "Common Stock"), of which 1,778,359
shares are issued and outstanding; and (ii) 22,363,224 shares of Preferred
Stock, $.01 par value per share (the "Preferred Stock"), of which (a) 406,898
shares have been designated Series A-1 Convertible Preferred Stock (the "Series
A-1 Preferred Stock"), 406,898 of which are issued and outstanding, (b) 406,898
shares have been designated Series A-2 Convertible Preferred Stock (the "Series
A-2 Preferred Stock"), none of which are issued and outstanding, (c) 3,800,428
shares have been designated Series B-1 Convertible Preferred Stock (the "Series
B-1 Preferred Stock"), 3,800,428 of which are issued and outstanding, (d)
3,800,428 shares have been designated Series B-2 Convertible Preferred Stock
(the "Series B-2 Preferred Stock"), none of which are issued and outstanding,
(e) 3,500,000 have been designated Series C Convertible Preferred Stock (the
"Series C Preferred Stock"), 3,439,949 of which shares are issued and
outstanding, (f) 3,500,000 have been designated Series C-2 Convertible Preferred
Stock (the "Series C-2 Preferred Stock"), none of which are issued and
outstanding, (g) 1,714,286 have been designated Series D Convertible Preferred
Stock (the "Series D Preferred Stock"), 1,666,234 of which are issued and
outstanding, (h) 1,714,286 have been designated Series D-2 Convertible Preferred
Stock (the "Series D-2 Preferred Stock"), none of which are issued and
outstanding, (i) 1,760,000 shares of Series E Preferred Stock, none of which are
issued and outstanding and (j) 1,760,000 shares of Series E-2 Convertible
Preferred Stock (the "Series E-2 Preferred Stock"), none of which are issued and
outstanding. All of the issued and outstanding shares of Common Stock, Series
A-1 Preferred Stock, Series A-2 Preferred Stock, Series B-1 Preferred Stock,
Series B-2 Preferred Stock, Series C Preferred Stock, Series C-2 Preferred
Stock, Series D Preferred Stock and Series D-2 Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. All of the
Series E Preferred Stock and Series E-2 Preferred Stock have been duly
authorized and when issued in accordance with the terms of this Agreement or the
Charter will be validly issued and fully paid and nonassessable. Except as set
forth in Schedule II hereto or as provided in this Agreement, (i) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any share of capital stock of the Company
is authorized or outstanding; (ii) there is not any commitment of the Company to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company; and (iii) the Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or to make any other distribution in respect thereof. Except as set
forth in the Third Amended and Restated Registration Rights Agreement dated as
of February 13, 1998 by and
-3-
8
among the Company and the several parties named in the signature pages thereto,
as amended (the "Old Registration Rights Agreement"), or as otherwise set forth
in Schedule II or as provided in this Agreement, no person or entity is entitled
to (i) any preemptive or similar right with respect to the issuance of any
capital stock of the Company, or (ii) any rights with respect to the
registration of any capital stock of the Company under the Securities Act of
1933, as amended (the "Securities Act"). All of the issued and outstanding
shares of Common Stock and Preferred Stock have been offered, issued and sold by
the Company in compliance with applicable federal and state securities laws. To
the best of the Company"s knowledge, no stockholder of the Company has granted
options or other rights to purchase any shares of Common Stock.
3.03 Subsidiaries. Except as otherwise set forth in Schedule II, the
Company has no subsidiaries and does not own or control, directly or indirectly,
any shares of capital stock of any other corporation, or any interest in any
partnership, joint venture or other non-corporate business enterprise.
3.04 Stockholder List and Agreements. Attached as Schedule III is a
true and complete list of the stockholders of the Company, showing the number of
shares of Common Stock or other securities of the Company held by each
stockholder as of the date of this Agreement. Except as set forth in the By-Laws
of the Company, as amended to date, the Third Amended and Restated Voting
Agreement dated as of February 13, 1998 by and among the Company and the several
parties named in the signature pages thereto, as amended (the "Old Voting
Agreement"), and the Third Amended and Restated Right of First Refusal and
Co-Sale Agreement dated as of February 13, 1998 by and among the Company and the
several parties named in the signature pages thereto, as amended (the "Old
Co-Sale Agreement"), or as otherwise set forth in Schedule II, there are no
agreements, written or oral, between the Company and any holder of its capital
stock, or, to the best knowledge of the Company, among any holders of its
capital stock, relating to the acquisition, disposition or voting of the capital
stock of the Company.
3.05 Issuance of Shares. The issuance, sale and delivery of the
Preferred Shares and the Warrants in accordance with this Agreement and the
issuance and delivery of the Series A-2 Preferred Stock, the Series B-2
Preferred Stock, the Series C-2 Preferred Stock, the Series D-2 Preferred Stock
and the Series E-2 Preferred Stock (collectively, the "Special Preferred
Stock"), the Warrant Shares and the Conversion Shares, have been duly authorized
and reserved for issuance, as the case may be, by all necessary corporate action
on the part of the Company, and the Preferred Shares and the Warrants when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, the Special Preferred Stock when issued in
accordance with the terms of Article Fourth, Paragraph B, Subparagraph 6 as set
forth in the Charter (a "Special Mandatory Conversion"), the Conversion Shares
when issued upon conversion of the Preferred
-4-
9
Stock, the Warrant Shares when issued upon exercise of the Warrants and the
shares of Common Stock when issued upon conversion of the Special Preferred
Stock, will be duly and validly issued, fully paid and non-assessable.
3.06 Authority for Agreements, Etc. The execution and delivery by
the Company of this Agreement; the Fourth Amended and Restated Right of First
Refusal and Co-Sale Agreement in the form attached as Exhibit C (the "Amended
and Restated Co-Sale Agreement"); the Fourth Amended and Restated Registration
Rights Agreement in the form attached as Exhibit D (the "Amended and Restated
Registration Rights Agreement"); the Fourth Amended and Restated Voting
Agreement in the form attached as Exhibit E (the "Amended and Restated Voting
Agreement") and the Warrants and the performance by the Company of its
obligations hereunder and thereunder have been duly authorized by all necessary
corporate action by the Company, its officers, directors and stockholders. This
Agreement, the Amended and Restated Co-Sale Agreement, the Amended and Restated
Registration Rights Agreement, and the Amended and Restated Voting Agreement and
the Warrants have been duly executed and delivered by the Company and constitute
the legal, valid and binding obligation of the Company, enforceable in
accordance with their terms. The execution of this Agreement, the Amended and
Restated Co-Sale Agreement, the Amended and Restated Registration Rights
Agreement, the Amended and Restated Voting Agreement and the Warrants by the
Company and the performance of its obligations hereunder and thereunder will not
violate any provision of law or any order of any court or other agency of
government, will not conflict with or result in any breach of, or constitute a
default under, any of the terms, conditions or provisions of its Charter or
By-Laws, each as amended to date, or any indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company and will not result in the creation or imposition of
any lien, charge, restriction, claim or encumbrance of any nature whatsoever
upon any of the properties or assets of the Company.
3.07 Governmental and Other Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any person or any governmental authority is or will be required for
the valid execution and delivery of this Agreement, the Amended and Restated
Co-Sale Agreement, the Amended and Restated Registration Rights Agreement, the
Amended and Restated Voting Agreement and the Warrants, the offer, issue, sale
and delivery by the Company of the Preferred Shares or the Warrants, or any
other transaction contemplated by this Agreement, except such consents or
waivers as shall have been obtained on or prior to the Closing or such filings
as shall have been made pursuant to state securities laws effective on and as of
the Closing (copies of which have been provided to the Purchasers). Based in
part on the representations made by each of the Purchasers in Section 4 of this
Agreement, the offer and sale of the Preferred
-5-
10
Shares and the Warrants to each of the Purchasers will be in compliance with
applicable Federal and state securities laws.
3.08 Litigation; Compliance with Law. There is no (i) action, suit,
claim, proceeding or investigation pending or, to the best of the Company"s
knowledge, threatened against or affecting the Company, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign; or
(ii) governmental inquiry pending or, to the best of the Company"s knowledge,
threatened against or affecting the Company (including without limitation any
inquiry as to the qualification of the Company to hold or receive any license or
permit); and to the best knowledge of the Company, there is no basis for any of
the foregoing. The Company is not in default with respect to any order, writ,
injunction or decree, known to or served upon the Company, of any court or of
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There is no
action or suit by the Company pending or threatened against others. The Company
has materially complied with all laws, rules, regulations and orders applicable
to its business, operations, properties, assets, products and services, and
except as otherwise set forth in Schedule II, the Company has all necessary
permits, licenses and other authorizations required to conduct its business as
conducted and as proposed to be conducted (including, without limitation, the
U.S. Food and Drug Administration and its foreign equivalents). There is no
existing law, rule, regulation or order, and the Company is not aware of any
proposed law, rule, regulation or order, whether Federal or state, which would
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in, conducting its business in any jurisdiction in which its is now
conducting business or in which it proposes to conduct business.
3.09 Taxes. The Company has filed or has obtained presently
effective extensions with respect to all Federal, state, county and local tax
returns which are required to be filed by it, such returns are true and correct
and the Company has paid all taxes shown to be due by such returns as well as
all other taxes, assessments and governmental charges which have become due or
payable. All such taxes with respect to which the Company has become obligated
pursuant to elections made by the Company in accordance with generally accepted
practice have been paid and adequate reserves have been established for all
taxes accrued but not yet payable. The Federal income tax returns of the Company
have never been audited by the Internal Revenue Service. No deficiency
assessment with respect to or proposed adjustment of the Company"s Federal,
state, county or local taxes is pending or, to the best of the Company"s
knowledge, threatened. There is no tax lien, whether imposed by any Federal,
state, county or local taxing authority, outstanding against the assets,
properties or business of the Company. Neither the Company nor its stockholders
has ever filed (a) an election pursuant to Section 1362 of the Internal
-6-
11
Revenue Service Code of 1986, as amended (the "Code"), that the Company be taxed
as an S Corporation or (b) consent pursuant to Section 341(f) of the Code,
relating to collapsible corporations.
3.10 Financial Statements. The Company has furnished to each of the
Purchasers complete and correct copies of its audited balance sheet as of
December 31, 1997 (the "Balance Sheet") and the related statements of
operations, cash flows and stockholders" equity for the year ended December 31,
1997 and the unaudited consolidated balance sheet of the Company as of October
3, 1998 and the related unaudited statement of operations, cash flows and
stockholders" equity for the nine months ended October 3, 1998. All such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present (i) the financial
position of the Company as of December 31, 1997 and the results of its
operations and cash flows for the year ended December 31, 1997 and (ii) the
consolidated financial position of the Company and its subsidiaries as of
October 3, 1998 and the results of their operations and cash flows for the nine
months ended October 3, 1998. Except as set forth in Schedule II hereto, since
the date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security; (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business; (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business; (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any share of its capital stock or other security; (v) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, other
than liens of current real property taxes not yet due and payable; (vi) sold,
assigned or transferred any of its tangible assets except in the ordinary course
of business, or canceled any debt or claim; (vii) sold, assigned, transferred or
granted any exclusive license with respect to any patent, trademark, trade name,
service xxxx, copyright, trade secret or other intangible asset; (viii) suffered
any loss of property or waived any right of substantial value whether or not in
the ordinary course of business, (ix) made any change in officer compensation
except in the ordinary course of business and consistent with past practice; (x)
made any material change in the manner of business or operations of the Company;
(xi) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby; or (xii) entered into any commitment
(contingent or otherwise) to do any of the foregoing.
3.11 Books and Records. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its board of directors and committees thereof. The stock ledger
of
-7-
12
the Company is complete and reflects all issuances, transfers, repurchases and
cancellations of shares of capital stock of the Company.
3.12 Title to Properties, Leasehold Interests, Liens and
Encumbrances. The Company has good and marketable title to all the property and
assets recorded on the Balance Sheet or acquired by them since the date of the
Balance Sheet, free from all material mortgages, pledges, liens, security
interests, conditional sale agreements, charges, and other encumbrances except
liens for taxes not yet due or payable. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company"s knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company"s knowledge, by any other party thereto. The Company"s
possession of such property has not been disturbed and, to the best of the
Company"s knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
3.13 Compliance with Other Instruments. Except as otherwise set
forth in Schedule II, the Company is not in violation of any term of its Charter
or By-Laws, as amended to date. The Company is not in violation of any term of
mortgage, indenture, contract, agreement, instrument, judgment, decree, order,
statute, rule or regulation to which the Company is subject, which violation
would have a material adverse effect on the condition, financial or otherwise,
or operations of the Company.
3.14 Indebtedness to Affiliates. Except as otherwise set forth on
Schedule II, the Company has no outstanding indebtedness to any of its directors
or stockholders, or affiliates thereof, except for payment of accrued salary and
reimbursement of travel and other expenses incurred in the ordinary course of
business.
3.15..Contracts. Except for this Agreement, the Warrants, the
Amended and Restated Voting Agreement, the Amended and Restated Co-Sale
Agreement, the Amended and Restated Registration Rights Agreement, the Amended
and Restated Voting Agreement, and the Series D Convertible Preferred Stock
Purchase Agreement dated as of February 13, 1998, by and among the Company and
the parties named on Schedule I thereto, as amended (the "1998 Agreement"), or
as otherwise set forth on Schedule II, there are no material indentures, leases,
agreements or other instruments to which the Company is a party or by which it
or any of its properties is bound. All of the contracts and agreements of the
Company which are material to its business are valid, binding and in full force
and effect, and neither the Company nor, to its knowledge, any other party to
such contracts and
-8-
13
agreements is in default thereof. The Company is not a party to or otherwise
bound by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
prospects, financial condition, operating property or affairs of the Company.
3.16 U.S. Real Property Holding Corporation. The Company is not now
and has never been a "United States real property holding corporation," as such
term in defined in Section 897(c)(2) of the Code, and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its Federal
income tax returns which are required under Section 1.897(2)(h) of such
Regulations.
3.17 Insurance. The Company has liability, fire and casualty
insurance policies, with extended coverage, sufficient in amount to allow it to
replace any of its properties which might be damaged or destroyed, and is
otherwise insured against all risks usually insured against by companies of
similar size operating similar businesses.
3.18 Patents, Trademarks, Etc. Set forth in Schedule II is a list
and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names and copyrights, and all applications for such, which are owned by or
registered in the name of the Company or are in the process of being prepared or
of which the Company is a licensor or licensee or in which the Company has any
right, and in each case a brief description of the nature of such right. The
Company owns or possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, trade names, copyrights, formulae, trade secrets and know how
(collectively, "Intellectual Property") necessary or desirable to the conduct of
its business as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company"s knowledge, threatened, to the effect
that the operation of the Company infringes upon or conflicts with the asserted
rights of any other person under any Intellectual Property, and there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the best of the Company"s
knowledge, there is no basis for any such claim (whether or not pending or
threatened). To the best of the Company"s knowledge, all material technical
information developed by and belonging to the Company which has not been
patented has been kept confidential. The Company has not granted or assigned to
any other person or entity any right to manufacture, have manufactured, assemble
or sell the products or proposed products or to provide the services or proposed
services of the Company except as set forth in Schedule II.
-9-
14
3.19 Proprietary Information of Third Parties. Except as otherwise
set forth on Schedule II, to the best of the Company"s knowledge, no third party
has claimed or has reason to claim that any person employed by or affiliated
with the Company has (a) violated or may be violating any of the terms or
conditions of an employment, non-competition or non-disclosure agreement with
such third party, (b) disclosed, 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 or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company"s
knowledge, 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 former employer, and to the best of the Company"s knowledge,
no person employed by or affiliated with the Company has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company, and the Company has no reason to believe there will be any such
employment or violation. To the best of the Company"s knowledge, none of the
execution or delivery of this Agreement, or the carrying on of the business of
the Company as officers, employees or agents by any officer, director or key
employee of the Company, or the conduct or proposed conduct of the business of
the Company, will conflict with or result in a breach of the terms, conditions
or provisions of or constitute a default under any contract, covenant or
instrument under which any such person in obligated.
3.20 Proprietary Information and Inventions Agreements. The Company
and each person now employed by it with access to confidential information have
entered into a non-disclosure and assignment of inventions agreement in
substantially the form of Exhibit F hereto.
3.21 Key Employees. Xxxxxx X. Xxxxxxx and any other employees of the
Company determined by the board of directors of the Company to be key employees,
if any (the "Key Employees"), have signed agreements not to compete with the
Company during the term of their employment and for a period of two years after
termination of their employment. Such non-competition agreements contain
substantially the terms set forth in Section 5 of Exhibit F hereto.
3.22 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.23 Disclosure. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any other agreement, document, written statement or certificate
furnished
-10-
15
or to be furnished to the Purchasers through the Closing pursuant hereto or in
connection with the transactions contemplated hereby, taken as a whole, contains
any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. There is no
fact which the Company has not disclosed to the Purchasers and their counsel in
writing and of which the Company is aware which materially and adversely affects
or could materially and adversely affect the business, prospects, financial
condition, operation, property or affairs of the Company.
3.24 Compliance with Environmental and Safety Laws.
(a) Environmental Definitions. The following terms, as used
herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Environment" means any and all environmental media, including
without limitation ambient air, surface water, ground water, drinking water
supply, land surface or subsurface strata, and also means any indoor location.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws (including common or case law), regulations,
ordinances, rules, judgments, judicial decisions, orders, decrees, codes, plans,
injunctions, Environmental Permits, or governmental restrictions, relating to
the protection of human health or safety or the Environment or to emissions,
discharges or Releases of any Hazardous Substance into the Environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Substance or the
containment, removal or remediation thereof.
"Environmental Liabilities" means any and all liabilities
arising in connection with or in any way relating to the Company"s business,
whether vested or unvested, contingent or fixed, actual or potential, known or
unknown, which (i) arise under or relate to matters governed by Environmental
Laws or arise in connection with or relate to any matter disclosed or required
to be disclosed in Exhibit 3.24 and (ii) arise from or relate in any way to
actions occurring or conditions existing before the Closing Date.
"Environmental Permits" means any and all governmental
permits, licenses, concessions, grants, franchises, agreements, authorizations,
registrations or other governmental approvals issued or required under any
Environmental Laws.
-11-
16
"Hazardous Substance" means any and all pollutants and
contaminants, and any and all toxic, caustic, radioactive, biohazardous or
otherwise hazardous materials, substances or wastes that are regulated under any
Environmental Laws, and includes, without limitation, petroleum and its
derivatives and by-products, and any other hydrocarbons.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the Environment (including, without limitation, the abandonment
or discarding of barrels, containers and other closed receptacles containing any
Hazardous Substance).
(b) Environmental Representations and Warranties. Except as
expressly and fully disclosed on Exhibit 3.24:
(i) The Company has complied in all material respects
with all Environmental Laws.
(ii) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending,
or to the Company"s knowledge, threatened by any governmental or other entity
with respect to any (A) alleged violation by the Company of any Environmental
Law, or any liability thereunder, (B) alleged failure by the Company to have any
Environmental Permit required in connection with the conduct of the Company"s
business or (C) the use, generation, treatment, storage, recycling,
transportation or disposal or Release of any Hazardous Substance by the Company.
(iii) To the Company"s knowledge, (A) no urea
formaldehyde or polychlorinated biphenyls are or have been present at any
property owned or operated by the Company; (B) no asbestos or
asbestos-containing materials are or have been present at any property owned or
operated by the Company; (D) there are no and have been no underground storage
tanks or related piping for Hazardous Substances, active or abandoned, at any
property owned or operated by the Company; (E) no Hazardous Substance has been
Released at, on or under any property owned or operated by the Company and (F)
no Hazardous Substance has been Released or is present, at, on or under any
property owned or operated by the Company in a reportable or threshold planning
quantity, where such a quantity has been established by any Environmental Law
except in compliance with any Environmental Law.
(iv) The Company has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to any
location which is (A) listed or proposed for listing on the National Priorities
List promulgated
-12-
17
pursuant to CERCLA or on any similar state list of sites requiring investigation
or clean-up or (B) the subject of federal, state or local enforcement actions or
other investigations which may lead to claims against the Purchaser for any
Environmental Liabilities including, without limitation, clean-up costs,
remedial work, damages to natural resources or for personal injury claims, and
claims under CERCLA.
(v) No oral or written notification of a Release of a
Hazardous Substance has been filed by or on behalf of the Company and no
property owned or operated by the Company is listed or, to the Company's
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring investigation
or clean-up.
(vi) To the Company's knowledge, no notice, lien or
other restriction relating to the presence of Hazardous Substances or otherwise
arising under any Environmental Law has been placed on any property or facility
owned or operated by the Company, and no governmental actions have been taken or
are in process that could subject any such property or facility to such a
notice, lien or other restriction. The Company is not required to place any
notice, lien or other restriction, relating to the presence of Hazardous
Substances, at any property used in connection with the operation of the
Company's business or in any deed to such property.
(vii) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or for the
Company, or which are in the Company's possession, in relation to any property
or facility now or previously owned or operated by the Company, which have not
been delivered to Purchaser at least ten (10) business days prior to the date
hereof.
(viii) The Company has applied for and received all
material Environmental Permits required in connection with the operation of its
business. Schedule 3.24 sets forth a list of all such Environmental Permits,
each of which is in full force and effect. No suspension or cancellation is
threatened and there is no basis for believing that any such Environmental
Permit will not be renewable upon expiration. Except as set forth in Schedule
3.24, each such Environmental Permit will continue to be in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect immediately prior to the Closing, and the consummation of the
transactions contemplated herein will not conflict with, result in a violation
or breach of or constitute a default under (or would result in a violation,
breach or default with the giving of notice or the passage of time or both) any
such Environmental Permit.
3.25 Year 2000 Compliance. Except as set forth on Schedule II, (1)
all of the Company's products and (2) any upgrades to its products under
development each will (i) record, store, process, calculate and present calendar
dates falling on or
-13-
18
after January 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner and with the same functionality, data
integrity and performance as such products record, store, process, calculate and
present calendar dates on or before December 31, 1999, or (ii) calculate any
information dependent on or relating to such dates (collectively "Year 2000
Compliant"). Except as set forth on Schedule II, all of the Company's material
products will lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000. All of the Company's
internal computer systems which are material to its business, including without
limitation, its accounting systems, are Year 2000 Compliant. The Company is not
aware of any third party, including, but not limited to, its customers and
vendors, whose failure to be Year 2000 Compliant would have a material adverse
effect on the Company. Furthermore, the Company is taking all reasonable steps,
including the creation of contingency plans where applicable, necessary to
remain Year 2000 Compliant.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company as follows (except
that the representations in Section 4.06 are made by the Purchasers specifically
named therein):
4.01 Investment. Each Purchaser is acquiring the Preferred Shares,
the Warrants, the Warrant Shares and the Conversion Shares for such Purchaser's
own account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof, and, except as contemplated by this
Agreement and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
4.02 Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.03 Experience. Each Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement, and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to each Purchaser any and all
written information requested including all items outlined in Schedule II and
have answered all inquiries to such Purchaser's satisfaction; such Purchaser has
sufficient business experience to evaluate the merits and risks of this
investment; such Purchaser has adequate net worth and means of providing for
current needs and personal contingencies to sustain a complete loss of
investment in the Company; and such Purchaser's overall commitment to
investments which are not readily marketable is not disproportionate to such
Purchaser's net worth.
-14-
19
4.04 Accredited Investor. Each Purchaser represents and warrants
that it is an Accredited Investor as defined in Rule 501 of Regulation D
promulgated under the Securities Act.
4.05 Restricted Securities. Each Purchaser understands and
acknowledges that the offer, issuance and sale of the Preferred Shares and the
Warrants by the Company hereunder have not been registered under the Securities
Act and that the Preferred Shares, the Warrants, the Warrant Shares and the
Conversion Shares are "restricted securities" within the meaning of Rule 144
under the Securities Act. Each Purchaser also understands and acknowledges that
such Purchasers do not have the protections of Section 11 of the Securities Act
in connection with the sale of the Preferred Shares and the Warrants hereunder
or, after the date hereof, the issuance or sale of the Warrant Shares or the
Conversion Shares.
4.06 Qualified Institutional Buyer.
(a) Benefit Capital Management Corporation represents and
warrants that it is a "Qualified Institutional Buyer" as defined in Rule 144A
promulgated under the Securities Act.
(b) Xxxxx Capital Partners represents and warrants that it is
a "Qualified Institutional Buyer" as defined in Rule 144A promulgated under the
Securities Act.
5. Conditions to Obligations of the Purchasers at the Closing. The
obligation of each of the Purchasers under this Agreement is subject to the
fulfillment, or the waiver by such Purchaser, of the following conditions on or
before the Closing:
5.01 Issuance of Shares and Warrants.
(a) The Company shall have duly issued and delivered
certificates representing the Preferred Shares to the Purchasers.
(b) The Company shall have duly issued and delivered the
Warrants to the Purchasers.
5.02 Accuracy of Representations and Warranties. Each representation
and warranty contained in Section 3 shall be true, complete and correct on and
as of the Closing Date with the same effect as though such representation and
warranty had been made on as of that date.
5.03 Performance. The Company shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
-15-
20
performed or complied with by the Company prior to or at the Closing and shall
have executed in satisfactory form all agreements required to be executed
hereunder prior to or at the Closing.
5.04 All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transaction
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their special counsel.
5.05 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate, executed by the President of the Company, dated as of
the Closing Date, certifying to the fulfillment of the conditions specified in
subsections 5.02, 5.03, and 5.04 of this Agreement.
5.06 Consents; Filings. All necessary consents shall have been
obtained and all necessary filings shall have been made to permit the
consummation of the transactions contemplated by this Agreement.
5.07 Opinion of Counsel. Each Purchaser shall have received an
opinion from Xxxx and Xxxx LLP, counsel for the Company, dated as of the Closing
Date, addressed to the Purchasers in substantially the form of Exhibit G hereto.
5.08 Filing of Charter. The Company's Charter in the form of Exhibit
A hereto shall have been filed with and accepted by the Secretary of State of
the State of Delaware prior to the Closing.
5.09 Certificates and Documents. The Company shall have delivered to
the special counsel to the Purchasers:
(i) The Restated Certificate of Incorporation of the
Company, as amended and restated, and in effect immediately prior to the
Closing, certified by the Secretary of State of the State of Delaware;
(ii) Certificates, as of the most recent practicable
date, as to (i) the corporate good standing of the Company, which shall be
issued by the Secretary of State of the State of Delaware and (ii) the
Company's qualification to conduct business as a foreign corporation in
the Commonwealth of Massachusetts, which shall be issued by the Secretary
of State of Commonwealth of Massachusetts;
(iii) By-Laws of the Company, as amended, certified by
its Secretary as of the Closing Date;
-16-
21
(iv) Resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the
Secretary of the Company, dated as of the Closing Date; and
(v) Such other documents as special counsel to the
Purchasers may have reasonably requested.
5.10 Voting Agreement.
(a) The Company and the Purchasers shall have executed the
Amended and Restated Voting Agreement; and
(b) The (i) holders of at least 85% of the outstanding shares
of the Company's Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock, voting together as a single
class, and (ii) holders of a majority of the outstanding shares of Common Stock
of the Company held by those who are a party to the Old Voting Agreement, shall
have authorized, in accordance with Section 6(a) of the Old Voting Agreement,
and shall have executed, the Amended and Restated Voting Agreement.
5.11 Co-Sale Agreement.
(a) The Company and the Purchasers shall have executed the
Amended and Restated Co-Sale Agreement; and
(b) The holders of at least 55% of the issued and outstanding
shares of the Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (including shares of Common Stock
into which any such shares may have been converted), voting together as a single
class, then held or deemed to be held by those who are a party to the Old
Co-Sale Agreement shall have authorized, in accordance with Section 11 of the
Old Co-Sale Agreement, and shall have executed the Amended and Restated Co-Sale
Agreement.
5.12 Rights of First Refusal. All preemptive rights, rights of
first refusal or other rights with respect to the issuance of the Preferred
Shares, Warrants, Warrant Shares or Conversion Shares, of any stockholders of
the Company, shall have been irrevocably waived in writing.
5.13 Registration Rights Agreement.
(a) The Company and the Purchasers shall have executed the
Amended and Restated Registration Rights Agreement; and
-17-
22
(b) The holders of at least 55% of the shares of Common Stock
issuable upon conversion of Preferred Stock held by those who are a party to the
Old Registration Rights Agreement shall have authorized, in accordance with
Sections 12 and 16(d) of the Old Registration Rights Agreement, and shall have
executed the Amended and Restated Registration Rights Agreement.
5.14 Minimum Sales. The Company shall have raised a minimum of
$15,000,000 from the sale of the Series E Preferred Stock and Warrants pursuant
to the Closing hereunder.
5.15 Legal Fees. The Company shall have paid the reasonable legal
fees and expenses of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP as special counsel to the
Purchasers in the transactions contemplated hereby, provided that the Company
shall not be obligated to pay any such fees and expenses in excess of $25,000,
assuming no extraordinary circumstances.
5.16 No Adverse Changes. Prior to the Closing, there shall be no
present or anticipated material adverse change in the condition (financial or
otherwise), properties, proposed business operations, management, potential
competition of, or any matter affecting, the Company or its prospects.
All such documents shall be satisfactory in form and substance to the
Purchasers and their special counsel.
6. Conditions to the Obligations of the Company. The obligations of the
Company under Section 1.02 of this Agreement are subject to fulfillment, on or
before the Closing, of the following condition:
6.01 Accuracy of Representations and Warranties. Each representation
and warranty of the Purchasers contained in Section 4 shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representation and warranty had been made on and as of such date.
7. Covenants of the Company. The Company covenants and agrees with each of
the holders of shares of the Company's Preferred Stock (individually a
"Preferred Shareholder" and collectively the "Preferred Shareholders"), except
with respect to Sections 7.10 and 7.13(b), for which the Company covenants and
agrees solely with the Purchasers, that, subject to earlier termination as set
forth in Section 7.16 below, so long as any of the Preferred Shares or the
Conversion Shares are outstanding:
7.01 Inspection. The Company shall permit each Preferred Shareholder
holding at least 1.5% of the outstanding shares of Preferred Stock of the
Company on a fully diluted basis (a "1.5% Holder"), or any authorized
representative
-18-
23
thereof, to visit and inspect the properties of the Company, to examine and copy
its corporate and financial records, to discuss its business and finances with
officers, directors, Key Employees and accountants of the Company, during normal
business hours following reasonable notice and as often as may be reasonably
requested, and at any time to audit the Company at the expense of such Preferred
Shareholder.
7.02 Financial Statements and Other Information. The Company shall
prepare and deliver to each 1.5% Holder (i) within thirty (30) days after the
close of each month, unless otherwise agreed to by the holders of a majority of
the outstanding shares of Preferred Stock, unaudited income statements, balance
sheets and summaries of bookings and backlogs, (ii) within thirty (30) days
after the end of each of the first three fiscal quarters of each year, unless
otherwise agreed to by the holders of a majority of the outstanding shares of
Preferred Stock, quarterly unaudited financial statements (including income
statements, summaries, balance sheets, cash flow statements and summaries of
bookings and backlogs), including a comparison of such financial statements to
the Company's budget for such quarter; (iii) as soon as available, but in any
event during the fourth fiscal quarter of each new fiscal year, unless otherwise
agreed to by the holders of a majority of the outstanding shares of Preferred
Stock, an annual strategic and operation plan, and promptly after preparation,
any revisions to any forecasts contained therein. The Company shall deliver to
each 1.5% Holder within (90) days after the end of each fiscal year, unless
otherwise agreed to by the holders of a majority of the outstanding shares of
Preferred Stock, audited financial statements of the Company (which shall be
audited by a nationally recognized accounting firm which shall be approved
annually by a majority of the members of the board of directors), including a
comparison of such financial statements to the Company's budget for such year.
The Company shall prepare and deliver to each Preferred Shareholder holding less
than 1.5% of the outstanding shares of Preferred Stock who shall request in
writing the monthly and quarterly financial information described in clauses (i)
and (ii) of the first sentence of this Section 7.02 and the annual audited
financial statements. The financial statements to be delivered pursuant to this
Section 7.02 shall be prepared in accordance with generally accepted accounting
principles consistently applied, subject only, in the case of the audited
financial statements, to the matters described in the accountant's report
attached thereto and, in the case of the financial statements to be delivered
pursuant to clauses (i) and (ii) of the first sentence of this Section 7.02, to
the fact that they have been prepared for the internal use of management and may
not be in accordance with generally accepted accounting principles because of
the absence of footnotes normally contained therein and are subject to normal
year-end audit adjustments. The financial statements delivered pursuant to this
Section 7.02 shall be accompanied by a certificate signed by the then-acting
chief financial officer of the Company or person performing comparable functions
that such statements fairly present the financial condition and results of
operations for the periods covered thereby except as noted therein. In addition,
the Company will provide each 1.5% Holder other customary information and
materials, including without limitation
-19-
24
reports of adverse developments, copies of any management letters,
communications with stockholders or directors, press releases and registration
statements.
7.03 Material Changes and Litigation. The Company will promptly
notify the Preferred Shareholders of any material adverse change in the
business, properties, assets or condition, financial or otherwise, of the
Company and of any litigation or governmental proceeding or investigation
pending or, to the best knowledge of the Company, threatened against the
Company, or against any officer, director, Key Employee or principal stockholder
of the Company, which materially affects or which, if adversely determined,
would materially adversely affect its present or proposed business properties,
assets or condition taken as a whole.
7.04 Key Man Insurance. The Company shall have obtained a "Key Man"
life insurance policy, payable to the Company, in the amount of no less than
$1,500,000 on the life of Xxxxxx X. Xxxxxxx. The Company shall not cause or
permit any assignment or change in beneficiary and shall not borrow against such
policy.
7.05 Other Insurance. The Company will use its best efforts to keep
all its insurable properties properly insured against loss or damage by fire and
other risks; maintain public liability insurance against claims for personal
injury, death or property damage suffered by others upon or in or about any
premises occupied by it or arising from equipment owned by the Company and
leased to and located upon or in or about any premises occupied by any other
person; maintain all such worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it may be engaged
in business; and maintain such other insurance as is usually maintained by
persons engaged in the same or similar business as is the Company; provided,
however, that the Company shall not be required to maintain product liability
insurance if the board of directors determines that it is not in the best
interests of the Company to obtain such product liability insurance. All such
insurance shall be maintained against such risks and in at least such amounts as
such insurance is usually carried by persons engaged in the same or similar
businesses, and all insurance herein provided for shall be effected and
maintained in force under a policy or policies issued by insurers or recognized
responsibility, except that the Company may effect worker's compensation or
similar insurance in respect of operations in any state or other jurisdiction
either through an insurance fund operated by such state or other jurisdiction or
by causing to be maintained a system or systems of self-insurance which is in
accord with applicable laws.
7.06 Accounts and Records. The Company will keep true, complete and
accurate records and books of account in which true, complete and accurate
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.
-20-
25
7.07 Availability of Common Stock for Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, for the purpose of effecting the conversion of the
Preferred Stock and otherwise complying with the terms of this Agreement, such
number of its duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Preferred Stock from time to time outstanding or
otherwise to comply with the terms of this Agreement. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Preferred Stock or otherwise to comply with the
terms of this Agreement, the Company will forthwith take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes. The
Company will obtain any authorization, consent, approval or other action by or
make any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Stock.
7.08 Proprietary Information and Inventions Agreements. The Company
and each person hereafter employed by it or any subsidiary (which shall include
any person engaged as a consultant) with access to confidential information of
the Company will enter into a non-disclosure and assignment of inventions
agreement in substantially the form of Exhibit F hereto.
7.09 Non-Competition. The Company shall cause each of its Key
Employees hereafter employed by the Company promptly to execute a
non-competition agreement substantially in the form of Exhibit F hereto.
7.10 Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares primarily for research and development, working
capital, to purchase capital equipment necessary for its operations and for
sales and marketing efforts. The approximate percentage of the proceeds to be
used for each such use is as set forth on Schedule II, and may be amended if
approved by the Board of Directors of the Company.
7.11 Prepayment of Taxes; Corporate Existence. The Company will:
(a) pay and discharge promptly, or cause to be paid and
discharged promptly, when due and payable, all taxes, assessment and
governmental charges or levies imposed upon it or upon its income or upon any of
its property, real, personal and mixed, or upon any part thereof, as well as all
claims of any kind (including claims for labor, materials and supplies) which,
if unpaid might by law become a lien or charge upon its property; provided,
however, that the Company shall not be required to pay any tax, assessment,
charge, levy or claim if the amount, applicability or validity thereof currently
shall be contested in good faith by
-21-
26
appropriate proceedings and if the Company shall have set aside on its books
reserves (classified to the extent required by generally accepted accounting
principles) deemed by it adequate with respect thereto; and provided further,
that the Company shall have no obligation to make any payments under this
paragraph (a) with respect to property subject to leases pursuant to the terms
of which the lessees thereof have undertaken to make such payments;
(b) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and
franchises, provided, however, that nothing in this paragraph (b) shall (i)
prevent the abandonment or termination of the Company's authorization to do
business in any foreign state or jurisdiction if, in the opinion of the
Company's Board of Directors, such abandonment or termination is in the interest
of the Company and not disadvantageous in any material respect to the Preferred
Shareholders or (ii) require compliance with any law so long as the validity or
applicability thereof shall be contested in good faith; and
(c) maintain and keep, or cause to be maintained and kept, its
properties in good repair, or working order and condition, and from time to time
make, or cause to be made, all repairs, renewals and replacement which in the
opinion of the Company are necessary and proper so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times.
7.12 Special Covenants. The Corporation shall not, without the prior
approval of the holders of a majority of the Preferred Stock (or by such holders
as may be otherwise required in the Charter), given in writing or by vote at a
meeting, consenting or voting (as the case may be) together as a single class:
(a) amend, repeal or add any provision to the Charter or
By-Laws of the Company.
(b) authorize, create or issue any debt or equity securities,
except for: (i) shares of Common Stock (including without limitation stock
options exercisable for shares of Common Stock) which may be issued to
employees, directors, consultants, scientific advisors or other persons pursuant
to arrangements, contracts or plans as are recommended by management and
approved by the vote of a majority of the members of the Board of Directors
(which number of shares shall be appropriately adjusted for stock splits, stock
dividends, combinations, reorganizations, recapitalizations and other similar
events involving a change in the capital structure of the Company) (the
"Reserved Employee Shares"); (ii) indebtedness for borrowed money from a bank or
other institutional lender or indebtedness in connection with a capital
equipment leasing arrangement, other lease financing arrangement or for
operating capital purposes; in each case under this subsection (ii) approved by
a vote of a majority of the members of the board of
-22-
27
directors; and (iii) the Warrant Shares, the Conversion Shares and shares of
Common Stock issuable upon conversion of shares of Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series B-1 Preferred Stock, Series B-2 Preferred
Stock, Series C Preferred Stock, Series C-2 Preferred Stock, Series D Preferred
Stock and Series D-2 Preferred Stock.
(c) merge or consolidate with, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) substantially all of its assets
(whether now owned or hereafter acquired) or permit any subsidiary to do any of
the foregoing, except for sales or other dispositions of assets in the ordinary
course of business except that (1) any wholly-owned subsidiary may merge into or
consolidate with or transfer assets to any other wholly-owned subsidiary, (2)
any wholly-owned subsidiary may merge into or transfer assets to the Company,
and (3) the Company may merge another entity into it or otherwise acquire such
entity so long as the Company is the surviving entity, the holders of voting
stock of the Company immediately prior to such merger are the holders of not
less than a majority of the Company immediately following such merger, such
merger or acquisition does not result in the violation of any of the provisions
of this Agreement and no such violation exists at the time of such merger or
acquisition;
(d) sell, transfer or license any intellectual property rights
of the Company, except in connection with clinical testing or in the ordinary
course of business;
(e) file a registration statement with the Securities and
Exchange Commission with respect to any securities (except with respect to a
registration statement filed in connection with a demand registration right),
provided that notwithstanding any other provision of this Section 7.12, it shall
not be considered a breach of this covenant if the holders of a majority of the
Preferred Stock (or by such holders as may be otherwise required in the
Charter), given in writing or by vote at a meeting, consenting or voting (as the
case may be) together as a single class, ratify such a filing after the filing
has been made;
(f) increase or decrease the authorized number of directors
constituting the Board of Directors;
(g) declare or pay any dividends, or purchase, redeem, retire,
or otherwise acquire for value any of its capital stock (or rights, options or
warrants to purchase such shares) now or hereafter outstanding, return any
capital to its stockholders as such, or make any distribution of assets to its
stockholders as such, or permit any subsidiary to do any of the foregoing,
provided, however, that nothing herein contained shall prevent the Company from:
-23-
28
(i) effecting a stock split (except for a reverse stock
split) or declaring or paying any dividends consisting of shares of any
class or series of capital stock to the holders of shares of such class or
series of capital stock, as the case may be;
(ii) complying with any specific provisions of the terms
of the Preferred Stock or the terms of this Agreement; or
(iii) repurchasing any stock at cost pursuant to
restricted stock agreements with employees, consultants, directors,
scientific advisors and others under restricted stock agreements
previously approved by the board of directors;
(h) create any subsidiary that is not a wholly-owned
subsidiary;
(i) reclassify any securities into shares having preferences
or priority equal to or superior to the Preferred Stock; or
(j) grant to any of its employees options to purchase Reserved
Employee Shares which shall become exercisable at a rate in excess of 25% per
annum from the date of such grant (unless such vesting schedule is approved by a
majority of the members of the board of directors).
The provisions of this Section 7.12 shall not apply to actions taken by the
Company to effect a Special Mandatory Conversion.
7.13 Board of Directors.
(a) The Company shall use its best efforts to ensure that
meetings of its board of directors are held at least four times each year and at
least once each quarter. The Company shall at all times maintain provisions in
its By-laws and/or Charter indemnifying all directors against liability to the
maximum extent permitted under the laws of the State of Delaware.
(b) For so long as the Purchasers hold at least 25% of the
Preferred Shares purchased by them hereunder (subject to adjustment for stock
splits, stock dividends, combinations, recapitalizations, reorganizations and
the like), the Purchasers shall have the right to designate one representative
to attend all meetings of the board of directors of the Company (including
telephonic meetings) and to receive (i) copies of all materials distributed to
the Board of Directors and (ii) copies of all written consents of directors in
lieu of meetings. Such right excludes the right to vote at such meetings or
execute such consents. The designated representative of the Purchasers shall
initially be designated by Artal Luxembourg S.A.
-24-
29
7.14 Right of First Refusal.
(a) The Company hereby grants to each of the Preferred
Shareholders a right of first refusal to purchase, on a pro rata basis, all or
any part of New Securities (as defined below) which the Company may, from time
to time, propose to sell and issue, subject to the terms and conditions set
forth below; provided however, that the right of first refusal set forth in this
Section 7.14 shall only be granted to Preferred Shareholders who have certified
to the Company upon request by the Company from time to time (and provided such
substantiation as the Company requests) that such person is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act.
Notwithstanding any other provision in this Agreement, the Company has no
obligations under this Section 7.14 to any that has not so certified to the
Company that such person is an accredited investor. A Preferred Shareholder's
pro rata share, for purposes of this Section 7.14, shall equal a fraction, the
numerator of which is the number of shares of Common Stock then held by such
Preferred Shareholder or issuable upon conversion or exercise of any shares of
Preferred Stock, convertible securities, options, rights or warrants then held
by such Preferred Shareholder, and the denominator of which is the total number
of shares of Common Stock then held by all Preferred Shareholders or issuable
upon conversion or exercise of then outstanding shares of Preferred Stock,
convertible securities, options, rights or warrants then held by all Preferred
Shareholders.
(b) "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 which are, or may
become, convertible into capital stock; provided, however, that the term "New
Securities" does not include (i) the Preferred Shares and Warrants issuable
under this Agreement, the Special Preferred Stock, the Warrant Shares, the
Conversion Shares, the shares of Common Stock issuable upon conversion of the
Special Preferred Stock or any other convertible securities or the shares of
Common Stock issuable upon conversion of such convertible securities outstanding
or committed for issuance on the date hereof as shown on Schedule III; (ii)
securities offered to the public pursuant to a registration statement filed by
the Company with the Securities and Exchange Commission for a public offering
and sale of securities of the Company (other than a registration statement on
Form S-8 or Form S-4, or their successors, or any registration statement
covering only securities proposed to be issued in exchange for securities or
assets of another corporation), in connection with a Qualified Public Offering
(as defined in Section 7.15); (iii) securities issued for the acquisition of
another corporation by the Company by merger, purchase of substantially all the
assets of such corporation or other reorganization resulting in the ownership by
the Company of not less than a majority of the voting power of such corporation;
(iv) the Reserved Employee Shares; or (v) securities issued as a result of any
stock split, stock dividend or reclassification of Common Stock, distributable
on a pro rata basis to all holders of Common Stock.
-25-
30
(c) In the event the Company intends to issue New Securities,
it shall give each Preferred Shareholder written notice of such intention,
describing the type of New Securities to be issued, the price thereof and the
general terms upon which the Company proposes to effect such issuance. Each
Preferred Shareholder shall have twenty (20) days from the date of receipt of
any such notice to agree to purchase all or part of such Preferred Shareholder's
pro rata share of such New Securities by giving written notice to the Company
stating the quantity of New Securities to be so purchased for the price and upon
the general terms and conditions specified in the Company's notice.
(d) In the event any Preferred Shareholder or Preferred
Shareholders fails to exercise the foregoing right of first refusal with respect
to any New Securities within such twenty (20)-day period, the Company may within
120 days thereafter sell any or all of such New Securities not agreed to be
purchased by the Preferred Shareholders to any third party or parties at a price
and upon general terms no more favorable than specified in the notice given to
each Preferred Shareholder pursuant to paragraph (c) above. In the event the
Company has not sold such New Securities within such 120-day period, the Company
shall not thereafter issue or sell any New Securities without first offering
such New Securities to the Preferred Shareholders in the manner provided above.
(e) For purposes of this Section 7.14, the term "Preferred
Shareholder" shall include the general partners, officers or other affiliates of
a Preferred Shareholder, and a Preferred Shareholder may apportion its pro rata
share among itself and such general partners, officers and other affiliates in
such proportions as it deems appropriate.
(f) Anything contained in this Section 7.14 to the contrary
notwithstanding, in the event that the Preferred Stock held by a Preferred
Shareholder or its successor or assign shall have been converted pursuant to the
Special Mandatory Conversion, then in such case, the rights pursuant to this
Section 7.14 as to any shares of Preferred Stock so converted shall terminate
immediately upon the occurrence of such conversion, and such Preferred
Shareholder's (or its successor's or assign's as the case may be) pro rata share
as determined under Section 7.14(a) shall be calculated without taking into
account the shares of Preferred Stock converted pursuant to the Special
Mandatory Conversion.
7.15 Termination of Covenants. The covenants of the Company
contained in Section 7.14 shall terminate upon the closing of a firm
underwritten public offering of shares of Common Stock of the Company which (i)
results in aggregate gross proceeds of at least $20,000,000, and (ii) is at a
price per share of at least $14.00, which number shall be appropriately adjusted
for stock splits, stock dividends, combinations, reorganizations,
recapitalizations and other similar events
-26-
31
involving a change in the capital structure of the Company (the "Qualified
Public Offering").
8. Waiver of Prior Preemptive Rights; Termination of Covenants.
(a) The Company and certain of the stockholders of the Company who
hold Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C Preferred
Stock and/or Series D Preferred Stock (the "Old Investors"), it being
acknowledged that such Old Investors collectively hold at least 51% of the
shares of Common Stock issued or issuable upon the conversion of the Preferred
Stock (as such term is defined in the 1998 Agreement), hereby agree that the
operation of Section 7.14 of the 1998 Agreement is hereby waived as it may apply
to the authorization, offer, issuance and sale by the Company of the Preferred
Shares, the Warrants, the Warrant Shares and the Conversion Shares, as
applicable.
(b) In addition, the Company and certain Old Investors, it being
acknowledged that collectively such Old Investors hold at least 51% of the
shares of Common Stock issued or issuable upon conversion of the Preferred Stock
(as defined in the 1998 Agreement) hereby agree that (x) the 1998 Agreement be
amended by deleting Section 7 in its entirety and that Section 7 shall be of no
further force and effect, and (y) Section 7 of the 1998 Agreement shall be
superseded by Section 7 of this Agreement.
(c) In addition, the Company and certain Old Investors, it being
acknowledged that collectively such Old Investors hold at least 51% of the
shares of Common Stock issued or issuable upon conversion of the Preferred Stock
(as such term is defined in the Series C Convertible Preferred Stock Purchase
Agreement dated as of February 26, 1997 (the "1997 Agreement")) hereby agree
that (x) the 1997 Agreement be amended by deleting Section 7 in its entirety and
that Section 7 shall be of no further force and effect, and (y) Section 7 of the
1997 Agreement shall be superseded by Section 7 of this Agreement.
(d) In addition, the Company and certain Old Investors, it being
acknowledged that collectively such Old Investors hold at least 51% of the
shares of Common stock issued or issuable upon conversion of the Preferred Stock
(as such term is defined in the Preferred Stock Purchase and Exchange Agreement
dated as of November 2, 1995, as amended (the "1995 Agreement") hereby agree
that (x) the 1995 Agreement be amended by deleting Section 7 in its entirety and
that Section 7 shall be of no further force and effect, and (y) Section 7 of the
1995 Agreement shall be superseded by Section 7 of this Agreement.
9. Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto.
-27-
32
10. Transfers of Certain Rights.
(a) The rights granted to a Preferred Shareholder under Section 7
may be transferred by such Preferred Shareholder to a Preferred Shareholder, to
any affiliate of the transferor or to any person or entity acquiring at least
(i) 25,000 shares of Preferred Stock or an equivalent number of shares of Common
Stock issuable upon conversion of such shares of Preferred Stock or (ii)
Warrants to purchase 25,000 shares of Common Stock or an equivalent number of
Warrant Shares; provided, however, that the Company is given written notice by
the transferee at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which such rights are
being assigned. Notwithstanding anything to the contrary in this Agreement, the
Company acknowledges and agrees that Artal Luxembourg S.A. may transfer the
Preferred Shares and Warrants acquired by it hereunder to QuestMark Partners,
L.P. and/or any of its affiliates ("QuestMark") without restriction (other than
compliance with applicable securities laws), and that subsequent to such
transfer, QuestMark shall be deemed a Purchaser for all purposes under this
Agreement. At the time of the transfer, QuestMark shall deliver to the Company a
written instrument by which it agrees to be bound by the obligations imposed
under this Agreement, to the same extent as if it were a Purchaser hereunder.
(b) A transferee to whom rights are transferred pursuant to this
Section 10 may not again transfer such rights to any other person or entity,
other than as provided in paragraph (a) above.
(c) Notwithstanding anything to the contrary herein, any Preferred
Shareholder which is a partnership or corporation may transfer rights granted to
such Preferred Shareholder under Section 7 to any partner or stockholder thereof
to whom Preferred Shares or Warrants are transferred pursuant to and in
accordance with the Amended and Restated Registration Rights Agreement, provided
that in addition to any transfer requirements set forth in the Amended and
Restated Registration Rights Agreement, such Preferred Shareholder delivers to
the Company a written instrument containing a representation that the transfer
is exempt from registration under the Securities Act, and provided further that
if such Preferred Shareholder is a publicly-traded corporation then any
stockholder transferee must hold at least 10% of the outstanding voting
securities of such Preferred Shareholder. In the event of such transfer, such
transferee partner or stockholder shall be deemed a Preferred Shareholder for
purposes of this Section 10 and may again transfer such rights to any other
person or entity which acquires shares of Preferred Stock or Warrants from such
partner or stockholder, in accordance with, and subject to, the provisions of
this Section 10.
11. Confidentiality. Each Purchaser agrees to keep confidential and not to
disclose or divulge any confidential, proprietary or secret information which
such
-28-
33
Purchaser may obtain from the Company pursuant to financial statements, reports
and other materials submitted by the Company to such purchaser pursuant to this
Agreement, or pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information becomes known, to
the public.
12. Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
13. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company: 0 Xxxxxx Xxxxx, Xxxxxx XX 00000, Attention:
President, or at such other address or addresses as may have been furnished in
writing by the Company to the Preferred Shareholders, with a copy to Xxxx and
Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, Attention: Xxxxx X.
Xxxxxx, Esq.
If to a Purchaser: at the address set forth opposite such
Purchaser's name on Schedule I hereto, respectively, or at such other address or
addresses as may have been furnished to the Company in writing by such
Purchaser, with a copy to Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, High Street Tower,
000 Xxxx Xxxxxx, Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxx, Esq.
If to a Preferred Shareholder other than a Purchaser, at such
address or addresses as may have been furnished to the Company in writing by
such Preferred Shareholder.
14. Brokers. The Company and each Purchaser (i) represents and warrants to
the other parties hereto that no finder or broker has been retained in
connection with the transactions contemplated by this Agreement, and (ii) will
indemnify and save the other parties harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finders' fees or
commissions, or consulting fees in connection with the transactions contemplated
by this Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
15. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
-29-
34
16. Amendments and Waivers.
(a) Except as otherwise expressly set forth in this Agreement, the
terms of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the
holders of at least 55% of the outstanding Preferred Shares, provided that (i)
no condition set forth in Section 5 may be waived with respect to any Purchaser
who does not consent thereto; (ii) any provision of Sections 7, 10, 12, 13, 15,
18, 19, 20 and 21 may be waived or amended only by the written consent of
holders of a majority of the outstanding shares of Common Stock issued or
issuable upon conversion of the Preferred Stock and (iii) Section 7.15 may be
waived or amended only by the written consent of holders 80% of the outstanding
shares of Common Stock issued or issuable upon conversion of the Preferred
Stock.
(b) Any amendment or waiver effected in accordance with this Section
16 shall be binding upon each holder of Preferred Stock or shares of Common
Stock issued upon conversion of such shares of Preferred Stock, and each future
holder of all such securities and the Company. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
17. Consents. The Purchasers hereby consent to the transactions
contemplated by this Agreement to the extent that such consent is required by
the terms of the Company's Charter or the instruments delivered under this
Agreement.
18. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19. Headings. The headings of the sections, subsections, and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
20. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-30-
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
ASPECT MEDICAL SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxx
President
ARTAL LUXEMBOURG S.A.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Director
BENEFIT CAPITAL MANAGEMENT
CORPORATION, as Investment Manager of
the Prudential Insurance Company of America
By: /s/ Xxx XxXxxxx
---------------------------------------
Name: Xxx XxXxxxx
Title: Sr. VP and CFO
HLM/CB FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxx Xx.
---------------------------------------
Name: Xxxxx X. Xxxxxxx Xx.
Title: General Partner
[Series E Purchase Agreement]
36
XXXXX CAPITAL PARTNERS
By: /s/
---------------------------------------
Name:
Title:
US DEVELOPMENT CAPITAL INVESTMENT
COMPANY
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Corporate Secretary
NEW VENTURE PARTNERS IV, LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: General Partner
CITIVENTURE 96 PARTNERSHIP, L.P.
By: Chancellor LGT Asset Management, Inc.
as investment advisor
By: /s/
---------------------------------------
Name:
Title:
[Series E Purchase Agreement]
37
JULIET CHALLENGER, INC.
By: /s/ Xxxxxx X. XxXxxxxxx
---------------------------------------
Name: Xxxxxx X. XxXxxxxxx
Title: Vice President
ORCHID & CO., nominee for
X. Xxxx Price Threshold Fund III, L.P.
By: X. Xxxx Price Threshold Fund Associates,
Inc.
General Partner
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
LANDMARK VENTURE CAPITAL
PARTNERS, LIMITED PARTNERSHIP
By:
---------------------------------------
Name:
Title:
/s/ Xxxxx Xxxxx
-------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxxx Xxxxxx
/s/ X. X. Xxxxxxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx, Xxxxx Xxxxxxxx Xxxxxxx and
X. X. Xxxxxxxxxxxx, Trustees of the Xxxxx X.
Xxxxxxx Trust U/A dated 11/18/85
[Series E Purchase Agreement]
38
NEW VENTURE PARTNERS III, LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: General Partner
LANDMARK VENTURE CAPITL
PARTNERS, LIMITED PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: General Partner
[Series E Purchase Agreement]
39
VENHILL LIMITED PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name:
Title: General Partner
CHANCELLOR LGT PRIVATE CAPITAL
PARTNERS III, L.P.
By: CPCP Associates, L.P., its general
partner
By: Chancellor LGT Venture Partners, Inc.,
its general partner
By: /s/
---------------------------------------
Name:
Title:
/s/ Xxxxx X. Xxxxx
-------------------------------------------
Xxxxx X. Xxxxx
HIGHLAND CAPITAL PARTNERS II,
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership, its General
Partner
By: /s/ X. Xxxxxxxxx
---------------------------------------
Name: X. Xxxxxxxxx
Title: G.P.
[Series E Purchase Agreement]
40
XXXXXXX RIVER PARTNERSHIP VII,
LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
---------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
Title: General Partner
POLARIS VENTURE PARTNERS, L.P.
By: Polaris Venture Management Co., LLC
Its General Partner
By: /s/ Xxxxxxxx XxXxxxx
---------------------------------------
Member
/s/ X. X. Xxxxxx
/s/ X. X. Xxxxxxxxxxxx
-------------------------------------------
X. X. Xxxxxxxxxxxx and Xxxxxx X. Xxxxxx,
Trustees U/A/T dated 8/28/68 for Xxxxxx
Xxxxxxxx Xxxxxxx
/s/ X. X. Xxxxxx
/s/ X.X. Xxxxxxxxxxxx
-------------------------------------------
X. X. Xxxxxxxxxxxx and Xxxxxx X. Xxxxxx,
Trustees U/A/T dated 8/28/68 for Xxxxx X.
Xxxxxxx, Xx.
/s/ X. X. Xxxxxx
/s/ X. X. Xxxxxxxxxxxx
-------------------------------------------
X. X. Xxxxxxxxxxxx and Xxxxxx X. Xxxxxx,
Trustees U/A/T dated 8/28/68 for Juliet Xxx
Xxxxxxx
/s/ X. X. Xxxxxx
/s/ X. X. Xxxxxxxxxxxx
-------------------------------------------
X. X. Xxxxxxxxxxxx and Xxxxxx X. Xxxxxx,
Trustees U/A/T dated 8/28/68 for Xxxxxxx
Xxxxxxx Xxxxxxx
[Series E Purchase Agreement]
41
/s/ Xxxx Xx Xxxxxx
-------------------------------------------
Xxxx Xx Xxxxxx
/s/ Xxxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxxx X. Xxxxxxx
ONE LIBERTY FUND III, L.P.
By: One Liberty Partners III, L.P.,
Its General Partner
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------------------
Xxxxx X. Xxxxx, Xx.
General Partner
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxx
-------------------------------------------
Xxxxx X. Xxxxxx
GENSTAR INVESTMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
/s/ Xxxxxxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxxxxxx X. Xxxxxxxx
/s/ Xxxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxxx X. Xxxxx
/s/ X. X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx and/or Xxxxx Xxxxx Xxxxx
Trustees or Successor Trustees under The
Xxxxx Trust U/A/D 10/05/88
[Series E Purchase Agreement]
42
POLARIS VENTURE PARTNERS
FOUNDERS' FUND, L.P.
By: Polaris Venture Management Co., LLC
Its General Partner
By: /s/ Xxxxxxxx XxXxxxx
---------------------------------------
Member
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
[Series E Purchase Agreement]
43
The undersigned holders of shares of Series A-1 Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock, by
signing below, shall become parties to the Agreement solely with respect to the
provisions of (i) Sections 7, 8(a), 10, 13, 15, 16, 18, 19, 20 and 21; (ii)
Section 8(b) solely with respect to the holders of Series D Preferred Stock;
(iii) Section 8(c) solely with respect to the holders of Series C Preferred
Stock; and (iv) Section 8(d) solely with respect to the holders of Series A-1
Preferred Stock and Series B-1 Preferred Stock.
ABS EMPLOYEE VENTURE FUND
LIMITED PARTNERSHIP
By: /s/ Xxxxxxxx-Xxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxxx-Xxxx X. Xxxxxxx
Title: VP of Alex. Xxxxx Investments Inc.
GP of the Partnership
SECOND CENTURY GROWTH DEFERRED
COMPENSATION PLAN: Xxxxx Xxxxxxx, Inc.
By: /s/ Xxxxx Xxxxxxx Inc.
---------------------------------------
Name: Authorized Signatory
Title:
THE XXXX XXXXXXXXX SCHOOL
ENDOWMENT FUND
By: /s/
---------------------------------------
Name:
Title:
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
[Series E Purchase Agreement]
44
/s/ Xxxxxxx Xxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxx
GILDE INTERNATIONAL B.V.
By: One Liberty Partners III, L.P.,
its Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------------------
Title: Xxxxx X. Xxxxx, Xx.
General Partner
XXXXXXXX ASSOCIATES
XXXXXXXX ASSOCIATES FUND,
A CALIFORNIA LIMITED PARTNERSHIP By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Signatory
XXXXXXXX MEDICAL PARTNERS,
A CALIFORNIA PARTNERSHIP XXXXXXXX MEDICAL PARTNERS
BY: XXXXXXXX VI, INVESTMENT By: /s/ Xxxxxx X. Xxxxxx
PARTNERS ---------------------------------------
A CALIFORNIA LIMITED PARTNERSHIP, Name: Xxxxxx X.Xxxxxx
Its General Partner Title: Authorized Signatory
BY: XXXXXXXX VI MANAGEMENT
PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP XXXXXXXX VI
General Partner of Xxxxxxxx VI
Investment Partners By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
XXXXXXXX VI INVESTMENT PARTNERS, Title: Authorized Signatory
A CALIFORNIA LIMITED PARTNERSHIP
BY: XXXXXXXX VI MANAGEMENT
PARTNERS, A CALIFORNIA LIMITED
PARTNERSHIP, Its General Partner
[Series E Purchase Agreement]
45
MERRILL, PICKARD, XXXXXXXX &
EYRE IV, LIMITED PARTNERSHIP
By: MPAE IV Management Co., L.P.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Partner
NEW ENTERPRISE ASSOCIATES IV,
LIMITED PARTNERSHIP
By: New Enterprise Associates IV, Limited
Partnership
By: NEA Partners IV, Limited Partnership
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
General Partner
HLM PARTNERS VII, L.P.
By: /s/ Xxxxx X. Xxxxxxx Xx.
---------------------------------------
Name: Xxxxx X. Xxxxxxx Xx.
Title: General Partner
XXXXXX HILL VENTURES, A CALIFORNIA
LIMITED PARTNERSHIP
By: /s/ G. Xxxxxxx Xxxxx, Xx.
---------------------------------------
Name: G. Xxxxxxx Xxxxx, Xx.
Title: Managing Director
of the General Partner
[Series E Purchase Agreement]
46
TOW PARTNERS, A CALIFORNIA LIMITED
PARTNERSHIP
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: General Partner
/s/ Xxxxxxx X. Xxxxxxx, Xx.
-------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx., Trustee of the
Younger Living Trust
/s/ Xxxx X. Xxxxxx
-------------------------------------------
Xxxx X. and Xxxxxx X. Xxxxxx, Trustees of
the Wythes Living Trust
/s/ G. Xxxxxxx Xxxxx
-------------------------------------------
G. Xxxxxxx Xxxxx
/s/Xxxxxxx X. Xxxxxxx Under Power of Attorney
-------------------------------------------
Xxxxxx X. Xxxxxxx
/s/Xxxxxxx X. Xxxxxxx Under Power of Attorney
-------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxx Xxxx
-------------------------------------------
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxxxx Xxxxxxx
-------------------------------------------
Xxxxxxxx and Xxxx Xxxxxxx
[Series E Purchase Agreement]
47
H&D INVESTMENTS II
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Partner
/s/ X. Xxxxxxxxxxxx Eagle
-------------------------------------------
X. Xxxxxxxxxxxx Eagle
-------------------------------------------
Xxxxx X. Xxxx
/s/ J. Xxxx Xxxxxxxxx
-------------------------------------------
J. Xxxx Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
THE XXXX CARDIOVASCULAR
RESEARCH FOUNDATION
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
/s/ Xxxx X. Xxxxxx
-------------------------------------------
Xxxx X. Xxxxxx
[Series E Purchase Agreement]
48
ZED INTERNATIONAL, INC.
By:
---------------------------------------
Name:
Title:
BAYVIEW INVESTORS, LTD.
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: Authorized Signatory
INTERSTOCK ANSTALT
By: /s/
---------------------------------------
Authorized Signatory
SVE STAR VENTURE ENTERPRISES NO. V,
A GERMAN CIVIL LAW PARTNERSHIP
(WITH LIMITATION OF LIABILITY)
By: SVM Star Ventures Management
gesellschaft mbH Nr. C
By: /s/
---------------------------------------
Authorized Signatory
[Series E Purchase Agreement]
49
SVM STAR VENTURES
MANAGEMENTGESELLSCHAFT MBH NR.
3 & CO. BETEILIGUNGS KG
By: SVM Star Ventures Management
gesellschaft mbH Nr. C
By: /s/
---------------------------------------
Authorized Signatory
/s/ Xxxxxxx Xxxxxx /s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxxxx and Xxxxx Xxxxxx
AENEAS VENTURE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
CATALYST VENTURES, LIMITED
PARTNERSHIP
By: New Enterprise Associates IV, Limited
Partnership
By: NEA Partners IV, Limited Partnership
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
[Series E Purchase Agreement]
50
XXXXX FARGO BANK, TRUSTEE SHV
M/P/T FBO XXXXX X. XXXXXXXX
By: /s/ Xxxxx X. Xxxxxx /s/ X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Trust Officer
XXXXX FARGO BANK, TRUSTEE SHV
M/P/T FBO XXXXX XXXX
By: /s/ Xxxxx X. Xxxxxx /s/ X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Trust Officer
/s/ Xxxxxxx X. Xxxxxxx, Xx.
-------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
THE XXXXXXX RESEARCH FOUNDATION
By: /s/ Xxxxxxxx Xxxxxxx
---------------------------------------
Name:
Title:
FISHERS ISLAND PARTNERS
By: /s/
---------------------------------------
Name: For Fishers Island Partners
Title:
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
-------------------------------------------
Ziad and Xxxx Xxxxxxx
[Series E Purchase Agreement]
51
/s/ Xxxxxx Xxxxxx as Custodian for
Xxxxxxx Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx as Custodian for Xxxxxxx
Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxx, M.D.
-------------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxx Xxx Young
-------------------------------------------
NEW VENTURE PARTNERS III, LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: General Partner
Xxxx Xxx Xxxxx
/s/ Xxxxxx Xxxxxxx M.D.
-------------------------------------------
Xxxxxx Xxxxxxx
-------------------------------------------
Xxxx X. Rohrbasser
-------------------------------------------
Xxxxxxxx Xxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxx
-------------------------------------------
Xxxxxx X. Xxxx
[Series E Purchase Agreement]
52
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
[Series E Purchase Agreement]
