STOCK PURCHASE AGREEMENT
(SERIES B CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of the
15th day of November, 1993 by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the parties listed in Exhibit 1.1 to this
Agreement (hereinafter sometimes referred to individually as an "Investor" and
collectively as the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and the
Investors desire to purchase from the Company in the aggregate 2,000,000 shares
of the Company's Series B Convertible Preferred Stock (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, as well as the expression of intention by the parties hereto
to be legally bound by this, a written agreement, subject to the terms and
conditions hereof and in reliance upon the representations, warranties and
covenants contained herein, it is agreed as follows:
Section 1. PURCHASE OF SHARES.
1.1 PURCHASE AND SALE. The Company shall sell, and each
Investor shall purchase, the Shares in the number and for the consideration set
forth opposite such Investor's name on Exhibit 1.1 annexed hereto.
1.2 CLOSING. The closing ("Closing") of the purchase by the
Investors of the Shares shall be held at the offices of Xxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000 on November 15,
1993 commencing at 2:00 p.m., or at such other time, date or place as may be
mutually agreed upon (the "Closing Date").
1.3 DELIVERY OF CERTIFICATES. At Closing, the Company shall
deliver to each Investor a certificate or certificates evidencing the Shares to
be issued and delivered to each such Investor at Closing in accordance with
Exhibit 1.1 annexed hereto.
1.4 PAYMENT. The Investors shall pay the purchase price to be
paid at Closing by delivery to the Company at Closing of a check or checks or by
wire transfer in
immediately available funds in the amounts set forth on Exhibit 1.1 annexed
hereto.
Section 2. CONDITIONS TO THE OBLIGATIONS OF THE
INVESTORS AT CLOSING.
The obligation of each of the Investors to purchase and pay for the
Series B Convertible Preferred Stock to be purchased by such Investor at Closing
is subject to the satisfaction on or prior to the date of Closing of the
following conditions, any of which may be waived by such Investor:
2.1 OPINION OF COUNSEL TO THE COMPANY. The Investors shall have
received an opinion, dated the date of Closing, of Xxxxxxx Xxxxx Xxxxxxx &
Ingersoll, counsel for the Company, substantially in the form of Exhibit 2.1
hereto.
2.2 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
2.3 PERFORMANCE OF COVENANTS. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the date of Closing shall have been performed in a
manner reasonably satisfactory in all respects to the Investors and their
counsel.
2.4 AMENDED ARTICLES OF INCORPORATION. The Company's Articles
of Incorporation, as amended, shall have been duly amended substantially as set
forth on Exhibit 2.4(a) annexed hereto (the "Amended Articles"), and the Company
shall have filed with the Department of State of the Commonwealth of
Pennsylvania (the "Department") a Statement Affecting Class or Series of Shares
(the "Statement") establishing the Series B Convertible Preferred Stock in the
form of Exhibit 2.4(b) annexed hereto.
2.5 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the financial condition or
operations of the Company.
2.6 CONSENTS. All consents required to enable the Company to
observe and comply with all of its obligations
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under this Agreement and in connection with the transactions contemplated hereby
shall have been obtained and all "blue sky" filings necessary in connection with
the issuance and sale of the Shares shall have been made.
2.7 SHAREHOLDERS' AGREEMENT. The Investors and the Company
shall have entered into a Shareholders' Agreement, dated the date of Closing,
substantially in the form of Exhibit 2.7 hereto (the "Shareholders' Agreement").
2.8 CLOSING DOCUMENTS. The Company shall have delivered to the
Investors (a) an officer's certificate dated the date of Closing (i) stating
that the conditions in Sections 2.2 through 2.7 have been satisfied, and
(ii) attaching the Company's Articles of Incorporation, as amended, Bylaws, all
resolutions of the Board of Directors relating to the issuance and sale of the
Shares and a good standing certificate issued by the Commonwealth of
Pennsylvania, and (b) such certificates, other documents and instruments as the
Investors may reasonably request in connection with, and to effect, the
transactions contemplated by this Agreement.
2.9 PROCEEDINGS. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investors
and their counsel.
Section 3. CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AT CLOSING.
The obligation of the Company to issue and deliver the Series B
Convertible Preferred Stock to be purchased by each Investor at Closing is
subject to the satisfaction on or prior to the date of Closing of the following
conditions, any of which may be waived by the Company:
3.1 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Investors contained in this Agreement shall be true and
correct in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
3.2 DELIVERY OF CONSIDERATION. The Investors shall have
delivered, in accordance with Section 1.4, the consideration for the Shares set
forth opposite such Investor's name on Exhibit 1.1 attached hereto.
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3.3 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the transactions contemplated by this Agreement or cause
such transactions to be rescinded.
3.4 CLOSING DOCUMENTS. The Investors shall have delivered to
the Company such certificates, other documents and instruments as the Company
may reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.
The Company represents and warrants to each Investor as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized and validly subsisting under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to carry on its business as currently conducted and as proposed to be conducted,
to own its properties, and to enter into and perform this Agreement. The
Company is not qualified as a foreign corporation in any jurisdiction and the
Company's conduct of its business or its ownership or leasing of property does
not make any such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the financial condition or
results of operations of the Company.
4.2 CAPITAL STOCK. The authorized capital stock, and the
outstanding capital stock, of the Company consists in each case solely of the
shares indicated on Exhibit 4.2(a) annexed hereto. All of the outstanding
shares have been duly authorized and are fully paid and non-assessable. An
accurate list of the Company's shareholders and their holdings is set forth in
Exhibit 4.2(b) annexed hereto. Except for the holders of Series A Convertible
Preferred Stock, no person or entity is entitled to preemptive or similar
statutory or contractual rights with respect to any securities of the Company.
Except as described on Exhibit 4.2(c) annexed hereto, there are no outstanding
warrants, options, convertible securities or other agreements or arrangements of
any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind owned
by it, and the Company is not obligated to issue any equity securities of any
kind, or to transfer any equity securities of any kind owned by it. Except as
listed on Exhibit 4.2(c) annexed
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hereto, the Company does not know of any voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among any of the security holders of the Company relating to the securities held
by them. The voting rights, designations, preferences, limitations and special
rights of the Shares, when issued, shall be as fully set forth in the Amended
Articles and the Statement. When issued, delivered and paid for pursuant to
this Agreement, the Shares will be validly issued, fully paid and
non-assessable.
4.3 SUBSIDIARIES. The Company does not own any shares of stock,
partnership interest, joint venture interest or any other security or interest
in any other corporation or other organization or entity.
4.4 CORPORATE PROCEEDINGS. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of the officers, directors and shareholders of the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms. The Shares, when issued pursuant hereto, will be
free and clear of all encumbrances and restrictions except for restrictions on
transfer imposed by applicable securities laws or by this Agreement. The
Company has reserved a sufficient number of shares of its Common Stock (as
hereinafter defined) for issuance upon the conversion of the Shares and such
shares of Common Stock, when issued in accordance with the terms of the Shares,
will be duly authorized, validly issued, fully paid, non-assessable and free and
clear of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws, by this Agreement or by the Shareholders'
Agreement.
4.5 LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Company or
any officer, director or key employee of the Company, threatened against or
affecting the Company, or against the assets or business of the Company, or
against any key employee, officer, director or shareholder of the Company in his
capacity as such person or relating to any of his activities with 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.
4.6 TAX MATTERS. The Company has duly and timely filed, or
caused to be filed, all Federal, state and local tax returns required to be
filed by it and has paid all taxes shown to be due and payable on such returns,
as well as all deficiencies and assessments, notice of which has been received
by it.
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4.7 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither the
execution, delivery or performance of this Agreement, nor the offer, issuance,
sale or delivery of the Shares to the Investors, nor the issuance of shares of
Common Stock upon conversion of the Shares, with or without the giving of notice
or passage of time, or both, will (i) violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company pursuant to, any provision of its Articles of
Incorporation, as amended, or Amended Articles, as the case may be, or By-laws
or any contract, law, rule, regulation, judgment, decree or other document or
instrument to which the Company is a party or by which it is bound or (ii) cause
the Company to lose the benefit of any right or privilege it presently enjoys,
except as contemplated by this Agreement.
4.8 GOVERNMENTAL CONSENTS; OFFERING OF SHARES. Except as set
forth on Exhibit 4.8(a) annexed hereto, no consent, authorization, approval,
permit or order of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery and
performance of this Agreement or the offer, issuance, sale or delivery of the
Shares. Neither the Company nor any agent acting on its behalf has, directly or
indirectly, sold or offered for sale, or solicited any offers to buy, any
securities, or otherwise approached or negotiated with any person or persons, so
as to subject the offer or sale of the Shares to the Investors to the provisions
of Section 5 of the Securities Act, and the Company agrees that neither it nor
any agent acting on its behalf will take any action that would subject the offer
or sale of the Shares to those provisions. Except as set forth on Exhibit
4.8(b) hereto, neither the Company nor anyone acting on its behalf has directly
or indirectly offered the Series B Convertible Preferred Stock or any part
thereof or any similar security of the Company (or any other securities
convertible or exchangeable for the Series B Convertible Preferred Stock or any
similar security), for sale to, or solicited any offer to buy the same from,
anyone other than the Investors. Assuming the accuracy of the representations
and warranties of the Investors made herein, the offer, sale and issuance of the
Series B Convertible Preferred Stock and the Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock do not and will not
require registration under the Securities Act.
4.9 PRIOR ISSUANCE OF SECURITIES. All securities of the Company
heretofore sold and issued by it were sold and issued in compliance with all
applicable federal and state securities laws.
4.10 ENCUMBRANCES. The Company owns, or has a valid leasehold
interest in, or valid license for, all of its
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property and assets, real, personal or fixed, tangible or intangible, subject
to no mortgages, liens, security interests, pledges, charges or other
encumbrances of any kind.
4.11 BUSINESS PLAN. The Company has previously presented and
delivered to the Investors the Business Plan, which Business Plan has been
material to the Investors in their decision to enter into this Agreement and to
purchase the Series B Preferred Stock hereunder. The description of the
business, operations (as presently conducted and as proposed to be conducted),
properties and assets of the Company contained in the Business Plan, as well as
all other factual statements contained therein, are true, correct and do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading as of the date of such description or statement. The financial
projections and other estimates contained in the Business Plan are based on the
best estimates of the Company derived from reasonable expectations at the time
such projections and estimates were made. Neither the projections nor the
assumptions on which the projections are based have been prepared, reviewed or
approved by the Company's counsel or accountants. The projections are subject
to change inasmuch as all material events and circumstances cannot be predicted
and unanticipated events and circumstances are likely to occur. Accordingly, it
is likely that there will be differences between the projected results and the
Company's actual results. These differences may be material. Therefore, no
representation or warranty as to the accuracy of these projections can be or is
being made by the Company or any of their principals or affiliates and no
assurance can be given that the projected results will actually be achieved.
4.12 COMPLIANCE. The Company has complied with its Articles of
Incorporation, as amended, or Amended Articles, as the case may be, and its
Bylaws, and has complied in all material respects with all federal, state, local
and foreign laws, ordinances, regulations and orders applicable to its business
or the ownership of its assets and all decrees, orders or judgments of any court
of competent jurisdiction. The Company has all federal, state, local and
foreign governmental licenses and permits material to and necessary in the
conduct of its business; such licenses and permits are in full force and effect,
no violations have been recorded in respect of any such licenses or permits, and
no proceeding is pending or threatened to revoke or limit any thereof.
4.13 INSURANCE. All policies of liability, property, casualty,
workmen's compensation, health and other forms of insurance held by the
Company are, to the best of the Company's knowledge, valid and enforceable
policies and are
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outstanding and duly in force and all premiums with respect thereto are paid
to date. The amounts of coverage under such policies of insurance for the
assets and properties of the Company are adequate against risks usually
insured against by persons operating similar businesses and operating similar
properties. The Company does not carry professional liability or directors
and officers liability insurance.
4.14 RELATED TRANSACTIONS. Except as contemplated by this
Agreement and as set forth on Exhibit 4.14 hereof, no current or former
shareholder, director, officer or employee of the Company (other than the
Investors) nor any "associate" (as defined in the rules and regulations
promulgated under the Exchange Act) of any such person, is presently, directly
or indirectly through his or its affiliation with any other person or entity, a
party to any transaction with the Company providing for the furnishing of
services (other than employment of such individuals by the Company) by or to, or
rental of real or personal property from or to, or otherwise requiring cash
payments to or by, any such person in excess of $15,000. For purposes of this
Agreement, a transaction of the type described in this Section 4.14 is sometimes
herein referred to as a "Related Transaction".
4.15 REGISTRATION RIGHTS. Except as contemplated by this
Agreement or as described in Exhibit 4.15 hereof, no person has any right to
cause the Company to effect the registration under the Securities Act of any
shares of Common Stock or any other securities (including debt securities) of
the Company.
4.16 COMPLIANCE WITH ERISA; BENEFIT PLANS. Except as described
on Exhibit 4.16 hereof, the Company does not sponsor or maintain, and is not
required, either by law or by contract, to contribute to, any employee welfare
benefit plan, within the meaning of section 3(1) of ERISA, or any employee
pension benefit plan, within the meaning of section 3(2) of ERISA. The Company
has not contributed to and is not required to contribute to any multiemployer
plan within the meaning of section 3(37) of ERISA.
4.17 INVESTMENT COMPANY ACT. The Company is not an "investment
company" as that term is defined in, and is not otherwise subject to regulation
under, the Investment Company Act of 1940, as amended.
4.18 PATENTS, TRADEMARKS, ETC. The Company owns or possesses the
patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights listed on Exhibit
4.18(a) annexed hereto (collectively, the "Intellectual Property"), without any
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known conflict with the rights of others. Except as provided in Exhibit
4.18(b) annexed hereto, the Company knows of no additional Intellectual
Property required to conduct its business as now conducted without conflict
with the rights or claimed rights of others. The Company has not received
notice of any alleged infringement by it, nor is the Company aware of any
infringement or any basis for an alleged infringement by it, of any
third-party patent, trademark, service xxxx, trade name, copyright or
license. The Company has confidentiality agreements with all of its
employees substantially in the form of Exhibit 4.18(c) annexed hereto.
Except as set forth on Exhibit 4.18(d) annexed hereto, to the best knowledge
of the Company after due inquiry, none of the Company's employees are subject
to confidentiality or similar types of agreements which would hinder or
prevent them from fully and lawfully performing their responsibilities as
employees.
4.19 NO DEFAULTS. The Company has in all material respects
performed all obligations required to be performed by it, and is not in default
in any material respect, under any material contract, commitment or instrument,
and no event or condition has occurred which, with the giving of notice or
passage of time, or both, would constitute such a default. To the best
knowledge of the Company, all parties having material contracts or commitments
with the Company are in compliance therewith in all material respects. Exhibit
4.19 annexed hereto contains an accurate list of all material contracts or
commitments as of the date of this Agreement, oral or written.
4.20 EMPLOYEE MATTERS. Exhibit 4.20 annexed hereto sets forth a
true and correct list of all officers and key employees of the Company, together
with a statement describing any agreement or arrangement any such person has
with the Company with respect to such person's employment or otherwise.
4.21 BROKERS AND FINDERS. No person or firm has, or will have,
any right, interest or valid claim against the Company or any Investor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by the Company or anyone acting on
behalf of the Company in connection with any transaction contemplated by this
Agreement.
4.22 DISCLOSURE. Neither the representations and warranties made
by the Company in this Agreement or the Exhibits annexed hereto nor any writing
furnished to any Investor pursuant to this Agreement or in connection with this
Agreement by the Company or anyone acting on its behalf contains any untrue
statement of a material fact or omits to state any material fact required to
make the statements herein or therein not misleading in the light of the
circumstances under which those statements
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were made. There exists no fact or circumstance which, to the knowledge of the
Company or any officer or director of the Company, materially adversely affects
or could reasonably be anticipated to have a materially adverse effect on, the
existing or expected financial condition, operating results, assets or business
prospects of the Company.
4.23 FDA APPROVAL. The Company has no reason to believe that the
U.S. Food and Drug Administration will ultimately prohibit the marketing, sale,
license or use in the United States of any product currently under research and
development by the Company.
Section 5. REPRESENTATIONS AND WARRANTIES
OF INVESTORS.
Each Investor severally represents and warrants to the Company as
follows:
5.1 ORGANIZATION; CAPACITY. If such Investor is not an
individual, it is a partnership or corporation organized under the laws of the
jurisdiction as indicated under its name on the signature page of this
Agreement, with full authority (corporate or otherwise) to make and perform its
obligations under this Agreement. If such Investor is an individual, such
Investor is SUI JURIS and of full capacity to make and perform his or her
obligations under this Agreement.
5.2 AUTHORIZATION; NO BREACH. The execution, delivery and
performance by such Investor of this Agreement has been duly authorized and will
not violate any partnership agreement or articles of incorporation of such
Investor or constitute a breach of or default under any instrument to which such
Investor is a party or by which any of its, his or her properties are bound.
5.3 BINDING OBLIGATION. This Agreement constitutes a valid and
binding obligation of such Investor enforceable in accordance with its terms.
5.4 NO BROKER. No person or firm has, or will have, any right,
interest or valid claim against the Company or any other Investor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by such Investor or anyone acting on
behalf of such Investor in connection with any transaction contemplated by this
Agreement.
5.5 PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Shares for its, his or her own account for
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investment and not with a view to or for sale in connection with any
distribution of the Shares.
5.6 SUITABILITY. (a) Such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
risks and the merits of an investment in the Company; (b) such Investor can bear
the economic risk of its, his or her investment in the amount set forth opposite
its, his or her name on Exhibit 1.1 annexed hereto (i.e., at the time of the
investment such Investor can afford a complete loss of the investment and can
afford to hold the investment for an indefinite period of time), and (iii) such
Investor is an "Accredited Investor" as that term is defined in Regulation D
under the Securities Act or to the extent such Investor is not an "Accredited
Investor," such Investor is fully capable of making all of the representations
and warranties in this Section 5, including (a) and (b) above, and by its, his
or her execution hereof does so affirm.
5.7 REGISTRATION OR SALES. (a) Such Investor understands that
the Securities are not registered under the Securities Act nor any regulatory
authority of any state and must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state law or
an exemption from such registration is available; (b) such Investor is aware
that any routine sales of the Shares or any shares received upon conversion of
the Shares made under Rule 144 of the Commission (as hereinafter defined) under
the Securities Act may only be made in limited amounts and in accordance with
the terms and conditions of that Rule and that in cases where that Rule is not
applicable, compliance with Regulation A or some other disclosure exemption will
be required; and (c) such Investor understands that, except as otherwise
provided herein, the Company is under no obligation whatsoever and has no
intention to register the Shares or any shares that might be received upon
conversion of the Shares under the Securities Act, to comply with any such Rule
or exemption, or to supply such Investor with any information necessary to
enable such Investor to make routine sales of the Shares, or any shares received
upon conversion of the Shares, under Rule 144.
5.8 LEGENDED CERTIFICATES. Such Investor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to an
effective registration statement), will bear a legend substantially in the
following form until the Company's counsel determines that the legend is no
longer advisable:
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"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 (the "Act") and are "restricted
securities" as defined in Rule 144 promulgated under the Act. The
securities may not be sold or offered for sale or otherwise distributed
except (i) pursuant to an effective registration statement for the
securities under the Act; (ii) in compliance with Rule 144; or (iii) after
receipt of an opinion of counsel satisfactory to the company that such
registration or compliance is not required as to said sale, offer or
distribution."
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Shares so legended.
5.9 CONFIDENTIALITY. Such Investor shall hold in confidence any
confidential information about the Company that such Investor has received or
hereafter receives pursuant to any provision of this Agreement under
circumstances indicating the confidentiality of such information until the
Company shall have publicly disclosed such information, except information that
otherwise comes into the public domain or is disclosed by a third party having
the right to disclose it to the Investor without breach of this Agreement or any
other agreement by which the disclosing party is bound.
5.10 LOCK UP. Such Investor shall not, with respect to any
public offering of the Company's securities which occurs following the Closing
Date, effect any public sale or distribution of the Securities (as hereinafter
defined) during such period of time, if any, not to exceed 120 days, as any
underwriter shall reasonably require in connection with such public offering.
5.11 INVESTMENT COMPANY STATUS. Such Investor is not an
"investment company" within the meaning of the Investment Company Act of 1940.
Section 6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Investors as follows:
6.1 USE OF PROCEEDS. The cash proceeds of the sale of the
Shares to the Investors will be used for working capital and general corporate
purposes.
6.2 BOOKS AND ACCOUNTS. The Company will (a) make and keep
books, records and accounts, which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets; and (b) devise and
maintain a system
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of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and in accordance with the Company's past practices or
any other criteria applicable to such statements, and to maintain accountability
for assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
6.3 PERIODIC REPORTS; BUDGETS.
(a) The Company will furnish to each member of the
Company's Board of Directors (a "Director") as soon as practicable, and in
any event within 90 days after the end of each fiscal year of the Company,
an annual report of the Company, including a balance sheet as of the end of
such fiscal year and statements of operations, shareholders' equity and
cash flows for such fiscal year, together with the related notes thereto,
setting forth in each case in comparative form corresponding figures for
the preceding fiscal year, all of which will present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended. The
financial statements shall be accompanied by an unqualified report, in form
and substance reasonably satisfactory to 66 2/3% of the members of the
Company's Board of Directors then in office, of independent public
accountants of recognized national standing reasonably satisfactory to 66
2/3% of the members of the Company's Board of Directors then in office to
the effect that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with prior years (except as otherwise specified in such report), and
present fairly the financial position of the Company and the results of its
operations and changes in its financial position as of the time and for the
period then ended. The Company will conduct its business so that such
report of the independent public accountants will not contain any
qualifications as to the scope of the audit, the continuance of the
Company, or with respect to the Company's compliance with generally
accepted accounting principles, except for changes in methods of accounting
in which such accountants concur.
(b) The Company will furnish to each Director as soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter of the Company, a
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report of the Company consisting of an unaudited balance sheet as of the
end of such quarter, and unaudited statements of operations, shareholders'
equity and cash flows for such quarter, and for the fiscal year-to-date,
setting forth in each case in comparative form the corresponding figures for
the preceding year. All such reports shall be certified by the Treasurer of
the Company to present fairly the financial position of the Company and the
results of its operations and changes in its financial position as of the
time and for the period then ended and to have been prepared in accordance
with generally accepted accounting principles, subject to normal year-end
adjustments, which shall not be material in nature or amount.
(c) The Company will furnish to each Director as soon as
practicable and in any event at least 30 days prior to the end of each
fiscal year of the Company, an annual operating budget for the Company for
the first succeeding fiscal year containing statements of operations, cash
flows and ending balance sheets for each quarter of such fiscal year.
Promptly upon preparation thereof, the Company will furnish to each
Director any other budgets that the Company may prepare and any revisions
of such previously furnished budgets.
6.4 OTHER REPORTS AND INSPECTION. The Company will furnish to
each Director (a) as soon as practicable after issuance, copies of any financial
statements or reports prepared by the Company for, or otherwise furnished to,
its shareholders or the Commission and (b) promptly, such other documents,
reports and financial data as such Director may reasonably request. In addition
the Company will, upon reasonable prior notice, make available during regular
business hours to each Director or his representatives or designees (c) all
assets, properties and business records of the Company for inspection and
copying and (d) the officers and employees of the Company for interviews
concerning the business, affairs and finances of the Company.
6.5 RETENTION OF AUDITORS. The Company shall select as auditors
independent public accountants of recognized national standing, subject to the
approval of the Company's Board of Directors.
6.6 MERGER; SALE OF ASSETS; DISSOLUTION. So long as shares of
Series B Convertible Preferred Stock issued hereunder are outstanding, the
Company will not become a party to any merger or consolidation, or sell, lease
or otherwise dispose of substantially all of its assets, other than sales and
leases of assets in the ordinary course of business, or dissolve or liquidate
its assets without the prior approval of holders of
14
record of a majority of the shares of Series B Convertible Preferred Stock and
Series A Convertible Preferred Stock, voting as a class, outstanding as of a
record date between 10 and 90 days prior to the consummation of any such
transaction, except that (a) any subsequently formed Subsidiary may merge or
consolidate with the Company so long as the Company is the surviving entity of
such merger or consolidation, and (b) any subsequently formed Subsidiary may
lease, sell, transfer or otherwise dispose of all or any part of its properties
and assets to the Company.
6.7 ACQUISITION. So long as shares of Series B Convertible
Preferred Stock issued hereunder are outstanding, the Company will not acquire
any interest in any business from any person, firm or entity (whether by a
purchase of assets, purchase of stock, merger or otherwise) in which the
consideration to be paid, as of the date as of which any such agreement with
respect to such acquisition is entered into, represents more than 25% of the
total assets of the Company without the prior approval of holders of record of a
majority of the shares of Series B Convertible Preferred Stock and Series A
Convertible Preferred Stock, voting as a class, outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction, except
as otherwise specifically permitted pursuant to the provisions of this
Agreement.
6.8 DIVIDENDS; REPURCHASES. So long as shares of Series B
Convertible Preferred Stock issued hereunder are outstanding, the Company shall
not declare or pay any dividends on, and shall not purchase, redeem, retire or
otherwise acquire, any shares of its capital stock (other than the shares of
Series B Convertible Preferred Stock or Series A Convertible Preferred Stock),
whether now or hereafter outstanding, without obtaining the prior approval of
holders of record of a majority of the shares of Series B Convertible Preferred
Stock and Series A Convertible Preferred Stock, voting as a class, outstanding
as of a record date between 10 and 90 days prior to the declaration date or the
date of consummation of any such transaction, as applicable.
6.9 CONSENTS. Prior to Closing the Company shall obtain all
consents and shareholder approvals needed to enable it to perform all of its
obligations under this Agreement and the transactions contemplated hereby.
6.10 ISSUANCE OF ADDITIONAL SECURITIES. Except for the Common
Stock issued on conversion of the Series B Convertible Preferred Stock or any
other convertible securities of the Company and except for Common Stock or
convertible securities (including Common Stock issuable on conversion thereof)
issued or issuable to officers, directors, employees or
15
consultants or to prospective officers, directors, employees or consultants,
pursuant to stock option, stock incentive, stock appreciation, stock bonus,
stock award or compensation rights plans or arrangements or employment letters
presently in effect or hereafter adopted or entered into by the Company, the
Company will not issue or sell, or enter into any agreement providing for the
issuance or sale of, any equity or debt securities or options, warrants or other
rights to purchase or acquire any equity or debt securities, or any security
convertible into or exchangeable for any equity or debt security, without
obtaining the prior approval of holders of record of a majority of the shares of
Series B Convertible Preferred Stock and Series A Convertible Preferred Stock,
voting as a class, outstanding as of a record date between 10 and 90 days prior
to the consummation of any such transaction, which approval will not be
unreasonably withheld; provided, however, that the provisions of this Paragraph
6.10 shall not apply to the issuance or sale or an agreement for the issuance or
sale of up to a maximum of 4,000,000 additional shares of Series B Convertible
Preferred Stock which may be issued by the Company subsequent to the date
hereof, as contemplated by Section 9.1 hereof.
6.11 TAXES AND LIENS. The Company will duly pay and discharge,
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company or its properties, or any part thereof or upon the income or
profits therefrom, in each case before the same become delinquent and before
penalties accrue thereon, as well as all claims for labor, materials or supplies
which if unpaid might by law become a lien upon any of its property, unless and
to the extent that the same are being contested in good faith and by appropriate
proceedings and the Company has set aside on its books adequate reserves with
respect thereto.
6.12 RESTRICTIVE AGREEMENT. Subsequent to Closing, the Company
will not be a party to any agreement or instrument which by its terms would
restrict the Company's performance of its obligations pursuant to this Agreement
or the terms of the Shares including any redemption or conversion thereof.
6.13 NOTIFICATION OF REGISTRATION UNDER THE EXCHANGE ACT. THE
Company will give each holder of record of the Shares prompt written notice of
the effectiveness of any registration statement filed pursuant to the
requirements of Section 12 of the Exchange Act (as hereinafter defined) or
pursuant to any equivalent provision of any similar federal law then in force (a
"1934 Act Registration Statement") relating to the Common Stock of the Company,
and the number of shares of such class of equity securities outstanding at the
time such registration statement becomes effective. If the Company has
16
filed a 1934 Act Registration Statement or a registration statement on any Form
other than Form S-8 (or any successor form) pursuant to the requirements of the
Securities Act, the Company further covenants that it will file all reports
required to be filed by it under the Securities Act or the Exchange Act and the
rules and regulations adopted by the Commission thereunder or, if the Company is
not required to file such reports, it will, upon the request of a holder of
Shares, make publicly available such information as will enable such holder to
sell such Shares without a registration statement (as described below), and will
take such further action as such holder may request, all to the extent required
from time to time to enable such holder to sell such Shares, without
registration within the limitations of the exemptions provided by (i) Rule 144
and Rule 144A adopted by the Commission under the Securities Act, as such rules
may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission.
6.14 SALE OR TRANSFER OF RESTRICTED SECURITIES. An opinion of
counsel will not be necessary for a transfer by an Investor which is a
partnership to a partner of such partnership or to a retired partner of such
partnership who retires after the date hereof, or to the estate of any partner
or retired partner, or to a trust for the benefit of an Investor or an
Investor's family members or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
6.15 RIGHT OF FIRST OFFER.
(a) Except in the case of Excluded Securities (as hereinafter
defined) the Company shall not issue, sell or exchange, agree to issue, sell or
exchange, or reserve or set aside for issuance, sale or exchange, any (A) shares
of Common Stock, (B) any other equity security of the Company, (C) any debt
security of the Company which, by its terms, is convertible into or exchangeable
for any equity security of the Company, (D) any security of the Company that is
a combination of debt and equity or (E) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Company, unless in each case the Company shall have first
offered to sell to the Investors and the Series A Investors such securities (the
"Offered Securities"), at a price and on such other terms as shall have been
specified by the Company in writing delivered to each of the Investors and the
Series A Investors (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of thirty (30) days from the date it is delivered by
the Company to the Investors and the Series A Investors.
17
(b) Each of the Investors shall have the right to purchase up to its
pro rata share (as defined below) of the Offered Securities. For the purposes
of this Section (b), each Investor's "pro rata share" shall be that amount of
the Offered Securities which would result in such Investor owning the same
percentage of the Company's issued and outstanding Common Stock after the
issuance of Offered Securities as such Investor owned immediately prior to the
issuance (assuming in each case the issuance of all Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock and of all shares issuable upon the conversion of the Offered
Securities).
(c) Notice of an Investor's intention to accept, in whole or in part,
an Offer shall be evidenced by a writing signed by the Investor and delivered to
the Company prior to the end of the 30-day period of such Offer, setting forth
such portion of the Offered Securities as the Investor elects to purchase (the
"Notice of Acceptance").
(d) In the event that the Investors and the Series A Investors do not
elect to purchase all of the Offered Securities which they are entitled to
purchase under Section 6.15(b) hereof and Paragraph 6(p)(ii) of the Series A
Agreement, the Company shall within 5 days of the earlier of (A) the receipt of
all of the Notices of Acceptances from the Investors pursuant to subsection (c)
above and from the Series A Investors pursuant to Section 6(p)(iii) of the
Series A Agreement or (B) the expiration of the 30-day period provided in
Section 6.15(a) provide each of the Investors who have delivered a Notice of
Acceptance with written notice of the number of Offered Securities which have
not been accepted by the Investors or the Series A Investors (the "Refused
Shares"), and each such Investor shall have 10 days to inform the Company in
writing of its intention to purchase its pro rata share of such Refused Shares.
For the purposes of this subsection (d), "pro rata share" shall mean the
percentage obtained by dividing the number of Securities, Series A Securities
and other shares of Common Stock owned and to be purchased by an Investor who
has delivered a Notice of Acceptance pursuant to subsection (c) above by the
total number of Securities, Series A Securities or other shares of Common Stock
owned and to be purchased by Investors who have delivered Notices of Acceptance
pursuant to subsection (c) above or by Series A Investors who have delivered
Notices of Acceptance pursuant to Paragraph 6(p)(iii) of the Series A
Agreement. Upon the expiration of such ten-day period, the Company shall have
90 days to sell all or any part of such Refused Shares as to which the Company
has not received a notice from the Investors pursuant to subsection 6.15(c) or
this subsection (d) or from the Series A Investors pursuant to Paragraphs
6(p)(iii) or 6(p)(iv) of the Series A Agreement to any other person or persons,
but only upon
18
terms and conditions in all material respects, including, without limitation,
unit price and interest rates (but excluding payment of legal fees of counsel
of the purchaser), which are no more favorable, in the aggregate, to such other
person or persons or less favorable to the Company that those set forth in the
Offer. Upon the closing of the sale to such other person or persons of all the
Refused Securities, which shall include payment of the purchase price to the
Company in accordance with the terms of the Offer, the Investors shall purchase
from the Company, and the Company shall sell to the Investors, the Offered
Securities in respect of which a Notice of Acceptance was delivered to the
Company by an Investor, at the terms specified in the Offer. The purchase by an
Investor of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Investor of a purchase agreement
relating to such Offered Securities satisfactory in form and substance to the
Investor and its counsel.
(e) In each case, any Offered Securities not purchased by the
Investors or other person or persons in accordance with subsections 6.15(b), (c)
and (d) hereof or by the Series A Investors in accordance with Paragraph 6(p) of
the Series A Agreement may not be sold or otherwise disposed of until they are
again offered to the Investors and the Series A Investors under the procedures
specified in subsections 6.15(a), (b), (c) and (d) hereof and in Paragraph 6(p)
of the Series A Agreement.
(f) The rights of the Investors and the Series A Investors under this
Section 6.15 shall not apply to the following securities (the "Excluded
Securities"):
(A) Common Stock issued to officers, employees or
directors of, or consultants to, the Company, pursuant to any
agreement, plan or arrangement approved by the Board of Directors of
the Company or a committee thereof, or options to purchase or rights
to subscribe for such Common Stock, securities by their terms
convertible into or exchangeable for such Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities;
(B) Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of shares of
Common Stock;
(C) Common Stock issued upon conversion of any of the
Series B Preferred Stock;
(D) Common Stock issued upon conversion of any other
shares of convertible stock of the Company;
19
(E) securities issued in connection with any
acquisition by the Company if the issuance of such securities has been
approved by at least 66 2/3% of the Directors;
(F) securities issued by the Company in connection
with the redemption of the Series B Convertible Preferred Stock or any
other shares of convertible stock of the Company as provided in the
Articles of Incorporation, as amended, of the Company; and
(G) securities issued by the Company in connection
with any public offering of any securities of the Company pursuant to
a registration statement filed by the Company under the Securities Act
on any Form other than Form S-8.
(H) additional shares of Series B Convertible
Preferred Stock issued by the Company as contemplated by Section 9.1
hereof.
(g) Notwithstanding the provisions of Section 9.4 hereof, the rights
under this Section 6.15 shall not be assignable except (A) to a partner of any
of the Investors or retired partner of any of the Investors who retires after
the date hereof or the estate of any such partner or retired partner, or (B) to
an Affiliate (as such term is defined in Rule 501(b) of the Securities Act) of
an Investor. An Investor shall provide the Company with notice of any
assignment under this subsection (g) within 10 days after its occurrence.
6.16 DEBT. Without the prior approval of not less than 66 2/3%
of the Directors then in office, the Company shall not enter into any
commitments to incur or guarantee any debt for borrowed money (which for
purposes hereof shall include leases which are capitalized or financed) or incur
any indebtedness which by its terms is convertible into equity or issued in
connection with any options or warrants of the Company in the aggregate in
excess of $100,000.
6.17 BOARD REPRESENTATION. The Company shall use its best
efforts to limit the number of persons constituting the Board of Directors to
nine. So long as the Investors shall continue to own collectively at least 20%
of the issued and outstanding Common Stock, assuming conversion of all
outstanding convertible securities, they shall collectively have the right to
nominate one person to the Company's Board of Directors.
6.18 INSURANCE. The Company shall keep its insurable properties
insured at all times to such extent and
20
against such risks, including fire, business interruption, and other risks
insured against by extended coverage, as is customary with companies of
comparable size and financial condition in the same or similar businesses;
maintain in full force and effect product liability insurance and public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by the Company, in such amount as the Company
shall reasonably deem necessary; and maintain workers' compensation insurance
and such other insurance as may be required by law.
6.19 OFFICER COMPENSATION. All compensation paid to the
president, treasurer, controller, secretary and all vice-presidents of the
Company, whether as salary, fringe benefits, stock bonuses or otherwise, as
currently in effect is hereby approved by the Investors. After the Closing
Date, all such compensation shall be determined by the Compensation Committee of
the Board of Directors.
6.20 NON-DISCLOSURE AND PATENT AND INVENTION ASSIGNMENT
AGREEMENTS. The Company shall cause each person who becomes an employee of the
Company subsequent to the date hereof, and who shall have or be proposed to have
access to confidential or proprietary information of the Company, to execute an
agreement relating to matters of non-disclosure, proprietary information and
patent assignment substantially in the form attached hereto as Exhibit 4.18(c)
(which reflects the current Apollon form of Agreement relating thereto) and such
executed agreements shall not be modified or amended in any respect without the
prior written consent of a majority of the holders of Shares.
6.21 MEETINGS OF THE BOARD OF DIRECTORS. The Company shall call,
and use its best efforts to have, regular meetings of the Board of Directors not
less often than quarterly. The Company shall pay all reasonable travel expenses
and other out-of-pocket disbursements incurred by a Director in connection with
his attending such meeting.
6.22 REGISTRATION RIGHTS. In the event the Company makes an
offering of its securities subsequent to the Closing, including any offering of
additional shares of Series B Convertible Preferred Stock as contemplated by
Section 9.1 hereof, it shall not grant registration rights that are senior in
any respect to the registration rights granted to the Investors pursuant to
Section 7 hereof; provided, however, that the Company shall have the right to
grant registration rights on a PARI PASSU basis to the registration rights
granted in Section 7 hereof.
21
6.23 ADDITIONAL NEGATIVE COVENANTS. Without the approval by
majority vote of the Directors, the Company will not directly or indirectly:
(a) RELATED TRANSACTIONS. Except for employment
arrangements with its officers, enter into any agreement or understanding,
whether written or oral, with an officer, director or shareholder of the
Company or any entity in which such officer, director or shareholder has a
ten percent (10%) ownership interest or is otherwise deemed to be an
affiliate pursuant to Rule 501(b) of the Securities Act for the provision
of services or the purchase of products. All such Related Transactions
shall be conducted only on an arm's length basis and on terms no less
favorable to the Company than could be obtained from non-related persons.
(b) AMENDMENTS TO ARTICLES OF INCORPORATION. Take any
action or to cause any amendment, alteration or repeal of any provisions of
the Amended Articles or Bylaws.
(c) DISSOLUTION OR LIQUIDATION. Voluntarily dissolve,
liquidate or wind-up or carry out any partial liquidation or distribution.
Section 7. REGISTRATION OF COMMON STOCK.
7.1 DEMAND REGISTRATION. Upon the written request of one or
more record holders of Securities, which request will state the intended method
of disposition by such holders and will request that the Company effect the
registration under the Securities Act of all or part of the Registerable Common
Stock (as hereinafter defined) of such holders, the Company will, within 10 days
after receipt of such request, give written notice of such requested
registration to all registered holders of Securities and Series A Securities,
and thereupon (except as expressly provided herein) will use its best efforts to
effect the registration ("Demand Registration") under the Securities Act of (x)
the shares of Registerable Common Stock included in the initial request for
registration (for disposition in accordance with the intended method of
disposition stated in such request) and (y) all other shares of Registerable
Common Stock and shares of Series A Registerable Common Stock the holders of
which have made written request to the Company for registration thereof within
30 days after the receipt of such written notice from the Company, provided
that:
22
(a) the Company shall be required to effect only two Demand
Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Securities outstanding at
the time of the request; PROVIDED that the Company shall not be required to
effect more than one registration during any one year period pursuant to
this Section 7.1 or paragraph 7(a) of the Series A Agreement (except that,
upon request of any holder of Securities (regardless of the number of
Securities held by such holder), the Company, if it is then qualified to do
so, shall be required to effect up to four registrations on Form S-3, or a
similar short form registration statement, which registrations (hereinafter
referred to as "Short Form Registrations") shall not be counted for
purposes of this Section 7.1(a) as the Demand Registration which the
Company is required to effect);
(b) if the holders of Registerable Common Stock who
initiated the request for registration intend to sell their Registerable
Common Stock by means of an underwriting (whether on a "best efforts" or a
"firm commitment" basis), they shall so advise the Company as part of their
request, and the Company shall include such information in the notice to
the other holders of Securities and Series A Securities. In that event,
the other holders of Securities and Series A Securities shall have the
right to include their shares of Registerable Common Stock or Series A
Registerable Common Stock in the underwriting (unless otherwise mutually
agreed by a majority in interest of the holders of the Securities and
Series A Securities). The managing underwriter for such offering shall be
selected by the Board of Directors of the Company. Each such holder
agrees, with respect to an underwritten public offering which occurs
following the Closing Date, by its acquisition of Securities not to effect
any public sale or distribution of such Securities or Registerable Common
Stock (other than as part of such underwritten public offering) during such
period, if any, not to exceed 120 days, as shall reasonably be requested by
any underwriter;
(c) the Company shall not include and shall not permit
third parties other than the holders of Series A Securities to include
additional securities in a Demand Registration without the consent of the
holders of a majority of the shares of Registerable Common Stock and Series
A Registerable Common Stock included in such Demand Registration;
(d) if a Demand Registration under this Section 7.1 is in
connection with an underwritten public offering, and if the managing
underwriters advise the
23
Company in writing that in their opinion the amount of Registerable Common
Stock and Series A Registerable Common Stock requested to be included in
such registration exceeds the amount of such Registerable Common Stock and
Series A Registerable Common Stock which can be successfully sold in such
offering, the Company will nevertheless include in such registration, prior
to the inclusion of any securities which are not Registerable Common Stock
or Series A Registerable Common Stock (notwithstanding any consent obtained
in accordance with paragraph 7.1(c) hereof), the amount of Registerable
Common Stock and Series A Registerable Common Stock requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
holders of Registerable Common Stock and Series A Registerable Common Stock
requesting inclusion on the basis of the number of shares of Registrable
Common Stock and Series A Registerable Common Stock then owned by such
holders; provided, however, that if the holders of Registerable Common Stock
are unable to include in such offering at least fifty percent (50%) of the
Registerable Common Stock sought to be registered in a Demand Registration
under this Section 7.1, the holders of Securities will be entitled to an
additional Demand Registration under this paragraph;
(e) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 7 a certificate signed by the
President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for a registration statement to be filed as requested, the Company
shall have the right to defer such filing for a period of not more than 120
days after receipt of the initial request for registration under this
Section 7.1; provided, however, that the Company may not utilize this right
more than once in any one-year period;
(f) registrations under this Section 7.1 will be on a form
permitted by the rules and regulations of the Commission selected by the
underwriters if the Demand Registration is in connection with an
underwritten public offering or otherwise by the Company; and
(g) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand Registration pursuant to
this Section 7.1 unless the aggregate number of shares of Common Stock to
be registered exceeds 20% of the shares of Common Stock then held by the
holders of the Securities or issuable to such holders upon conversion of
the Shares.
24
7.2 INCIDENTAL REGISTRATIONS.
(a) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to Section 7.1
hereof or Paragraph 7(a) of the Series A Agreement), whether of its own
accord or at the demand of any holder of such securities pursuant to an
agreement with respect to the registration thereof (provided such agreement
does not prohibit third parties from including additional securities in
such registration), and if the form of registration statement proposed to
be used may be used for the registration of Registerable Common Stock, the
Company will give notice to all holders of record of Securities not less
than 5 days nor more than 30 days prior to the filing of such registration
statement of its intention to proceed with the proposed registration (the
"Incidental Registration"), and, upon the written request of any such
holder made within 5 days after the receipt of any such notice (which
request will specify the Registerable Common Stock intended to be disposed
of by such holder and state the intended method of disposition thereof),
the Company will use its best efforts to cause all Registerable Common
Stock as to which registration has been requested to be registered under
the Securities Act, provided that if such registration is in connection
with an underwritten public offering, such holder's Registerable Common
Stock to be included in such registration shall be offered upon the same
terms and conditions as apply to any other securities included in such
registration. Notwithstanding anything contained in this Section 7.2 to
the contrary, the Company shall have no obligation to cause Registerable
Common Stock to be registered with respect to any Investor whose
Registerable Common Stock shall be eligible for resale under Rule 144(k) of
the Securities Act.
(b) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in
such registration (whether by the Company, the holders of registration
rights pursuant to Section 7.2(a) or other holders of its securities
pursuant to any other rights granted by the Company to demand inclusion of
any such securities in such registration) exceeds the amount of such
securities which can be successfully sold in such offering, the Company
will include in such registration the amount of securities requested to be
included which in the opinion of such underwriters can be sold, in the
following order (i) first, all of the securities the Company proposes to
sell, (ii) second, all of the Registerable Common Stock and
25
Series A Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number
of shares of Registrable Common Stock or Series A Registerable Common Stock
then owned by such holders, and (iii) third, any other securities requested
to be included in such registration, pro rata among the holders thereof on
the basis of the amount of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of securities requested to be included in such registration (whether by
such holders, by holders of registration rights pursuant to Section 7.2(a)
or by holders of its securities pursuant to any other rights granted by the
Company to demand inclusion of securities in such registration) exceeds the
amount of such securities which can be sold in such offering, the Company
will include in such registration the amount of securities requested to be
included which in the opinion of such underwriters can be sold, in the
following order (i) first, all of the securities requested to be included
by holders demanding or requesting such registration, (ii) second, all of
the Registerable Common Stock and Series A Registerable Common Stock
requested to be included in such registration, pro rata among the holders
thereof on the basis of the number of shares of Registrable Common Stock
and Series A Registerable Common Stock then owned by such holders, and
(iii) third, any other securities requested to be included in such
registration, pro rata among the holders thereof on the basis of the amount
of such securities then owned by such holders.
7.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registerable Common Stock under the Securities Act as provided in this
Section 7, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registerable Common Stock and use its best
efforts (which shall not, in any case, require the Company to incur any
unreasonable expense) to cause such registration statement to become
effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as
26
may be necessary to keep such registration statement effective for a period
of not less than six months or such shorter period in which the disposition
of all securities in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement shall
be completed, and to comply with the provisions of the Securities Act (to
the extent applicable to the Company) with respect to such dispositions;
(c) furnish to each seller of such Registerable Common
Stock such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request, in order to facilitate the disposition of
the Registerable Common Stock owned by such seller;
(d) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or
qualify such Registerable Common Stock covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests, and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registerable Common Stock owned by such seller, except that the Company
will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not,
but for the requirements of this Section 7.3(d) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for all such
Registerable Common Stock covered by such registration statement not later
than the effective date of such registration statement;
(f) notify each seller of such Registerable Common Stock at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as
27
thereafter delivered to the purchasers of such Registerable Common Stock,
such prospectus will not contain an untrue statement of a material fact or
omit to state any fact required to be stated therein or necessary
to make the statements therein not misleading;
(g) use its best efforts to cause all such Registerable
Common Stock to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort
letters in such transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as reasonably required in order to expedite or facilitate the disposition
of such Registerable Common Stock; and
(j) make available for inspection by any seller of
Registerable Common Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by any such seller and/or representative of such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
7.4 REGISTRATION AND SELLING EXPENSES.
(a) All expenses incurred by the Company in connection with
the Company's performance of or compliance with this Section 7, including,
without limitation (A) all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers, Inc.), (B) blue sky fees and expenses, (C) all printing expenses
and (D) all fees and disbursements of counsel and accountants for the
Company (including the expenses of any audit of financial statements),
retained by the Company (all such expenses being herein called
"Registration Expenses"), will be paid by the Company except as otherwise
expressly provided in this Section 7.4.
28
(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees
performing legal, accounting or other duties in connection therewith and
expenses of audits of year-end financial statements), and the expenses and
fees for listing the securities to be registered on one or more securities
exchanges on which similar securities issued by the Company are then
listed.
(c) The Company shall bear the Registration Expenses of
each Demand Registration, each Incidental Registration and each Short Form
Registration hereunder.
(d) Notwithstanding any of the foregoing, all underwriting
discounts, selling commissions and stock transfer taxes applicable to sales
of Registerable Common Stock in connection with any Demand Registration,
Incidental Registration or Short Form Registration shall be borne by all
persons who are selling Registerable Common Stock pursuant to such
Registration Statement in proportion to the dollar value of the securities
being sold by each such person.
(e) All fees and expenses required to be paid by the
holders of Registerable Common Stock pursuant to Section 7.4(d) in
connection with any Incidental Registration hereunder shall be borne by
said holders in proportion to the dollar value of the securities of such
holder covered by such Incidental Registration.
7.5 OTHER CONDITIONS RELATING TO REGISTRATIONS. The Company
shall not be required to furnish any audited financial statements at the request
of any holder of Registerable Common Stock other than those statements
customarily prepared at the end of its fiscal year, unless (a) the requesting
holder of Registerable Common Stock shall agree to reimburse the Company for the
out-of-pocket costs incurred by the Company in the preparation of such other
audited financial statements or (b) such other audited financial statements
shall be required by the Commission as a condition to declaring a Demand
Registration effective under the Securities Act.
7.6 OTHER PUBLIC SALES AND REGISTRATIONS. The Company agrees
(a) that if it has previously filed a registration statement with respect to
Registerable Common Stock in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the Securities Act or otherwise
effect a public sale or distribution
29
of its securities (except pursuant to registration on Form S-8 or any successor
form relating to a special offering to the employees or security holders of the
Company or any Subsidiary hereafter formed or acquired), whether on its own
behalf or at the request of any holder of such securities, until at least 60
days have elapsed after the effective date of such previous registration; and
(ii) to cause each holder of securities purchased from the Company any time
after the date of this Agreement (other than in a registered public offering)
to agree not to effect any such public sale or distribution during such 60 day
period of any such securities or any securities issuable on the conversion
thereof or in redemption or exchange therefor. The foregoing 60-day limitation,
however, shall not preclude the Company from proceeding with a registration
statement requested by a holder of securities with "demand" registration rights
who requests registration prior to the time a registered holder of Securities
requests a registration pursuant to Section 7.1.
7.7 TRANSFEREES OF SECURITIES. Notwithstanding anything else
set forth in this Section 7, no person to whom Securities are transferred shall
have any rights under this Section 7 as a holder of such Securities unless (a)
such person (i) is a partner of any Investor which is a partnership or a retired
partner of such partnership who retires after the date hereof, (ii) is a family
member of or trust for the benefit of any Investor, or (iii) acquires at least
100,000 shares of Registerable Common Stock, (b) such person agrees to be bound
by the terms and conditions of this Agreement and (c) the Company is given
prompt written notice of such transfer.
7.8 INDEMNIFICATION.
(a) The Company hereby agrees to indemnify, to the extent
permitted by law, each holder of Registerable Common Stock, its officers
and directors, if any, and each person, if any, who controls such holder
within the meaning of the Securities Act, against all losses, claims,
damages, liabilities and expenses under the Securities Act, applicable
state securities laws, common law or otherwise (including, as incurred,
legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by Section 7.8(c) below) caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
or prospectus (and as amended or supplemented if the Company has furnished
any amendments or supplements thereto) or any preliminary prospectus, which
registration statement, prospectus or preliminary prospectus shall be
prepared in connection with a Demand Registration or Incidental
Registration, or caused by any omission or alleged omission to state
therein a material fact required
30
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information
furnished in writing to the Company by such holder in connection with a
Demand Registration or Incidental Registration, provided the Company will
not be liable pursuant to this Section 7.8 if such losses, claims, damages,
liabilities or expenses have been caused by any selling security holder's
failure to deliver a copy of the registration statement or prospectus, or
any amendments or supplements thereto, after the Company has furnished such
holder with a sufficient amount of copies of the same.
(b) In connection with any registration statement in which
a holder of Registerable Common Stock is participating, each such holder
shall furnish to the Company in writing such information as is reasonably
requested by the Company for use in any such registration statement or
prospectus and shall indemnify, to the extent permitted by law, the
Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses under the Securities Act,
applicable state securities laws, common law or otherwise (including, as
incurred, legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by Section 7.8(c) below) caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of
a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the extent such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or
alleged omission from information so furnished in writing by such holder in
connection with the Demand Registration or Incidental Registration. If the
offering pursuant to any such registration is made through underwriters,
each such holder agrees to enter into an underwriting agreement in
customary form with such underwriters and to indemnify such underwriters,
their officers and directors, if any, and each person who controls such
underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such holder of the
Company. Notwithstanding the foregoing, no such holder of Registerable
Common Stock shall be liable under this Section 7.8(b) for any amounts
exceeding the product of (i)
31
the offering price per share of Registerable Common Stock pursuant to the
registration statement in which such holder is participating (less any
underwriting discounts or commissions which reduce the amount such holder
receives), multiplied by (ii) the number of shares of Registerable Common
Stock being sold by such holder pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party under
Section 7.8(a) or Section 7.8(b) of notice of the commencement of any
action or proceeding, such indemnified party will, if a claim in respect
thereof is or is to be made against the indemnifying party under such
Section, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under such Section. In case any such action or proceeding
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under such Section for any legal or any
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof (other than reasonable costs of
investigation) unless incurred at the written request of the indemnifying
party. Notwithstanding the above, the indemnified party will have the
right to employ one counsel (exclusive of local counsel) of its own choice
in any such action or proceeding if the indemnified party has reasonably
concluded that there may be defenses available to it which are different
from or additional to those of the indemnifying party, or counsel to the
indemnified party is of the opinion that it would not be desirable for the
same counsel to represent both the indemnifying party and the indemnified
party because such representation might result in a conflict of interest
(in either of which cases the indemnifying party will not have the right to
assume the defense of any such action or proceeding on behalf of the
indemnified party or parties and such legal and other expenses will be
borne by the indemnifying party). An indemnifying party will not be liable
to any indemnified party for any settlement of any such action or
proceeding effected without the consent of such indemnifying party.
32
(d) If the indemnification provided for in Section 7.8(a)
or Section 7.8(b) is unavailable under applicable law to an indemnified
party in respect of any losses, claims, damages or liabilities referred to
therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the holders of Registerable
Common Stock on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as
any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the holders of Registerable Common Stock on
the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the Company or
by the holders of Registerable Common Stock and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7.8(c), any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or
claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(e) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of any action or proceeding, such
party will, if a claim for contribution in respect thereof is to be made
against another party (the "contributing party"), notify the contributing
party of the commencement thereof; but the omission so to notify the
contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit, or proceeding is brought against any party, and such party
notifies a contributing party of the commencement thereof, the contributing
party will be entitled to participate therein with the notifying party and
any other contributing party similarly notified. No party shall be liable
for contribution with regard to the settlement of any action or proceeding
effected without its consent.
33
7.9 CONVERSION OF PREFERRED STOCK. Any request for a Demand
Registration or Incidental Registration with respect to Registerable Common
Stock issuable upon the conversion of Shares will provide in the intended method
of disposition accompanying such request that conversion of Shares into Common
Stock in accordance with the terms thereof will be undertaken promptly after a
registration statement has become effective or the sale thereof to underwriters
has been consummated so that no Shares will be distributed to the public under
such registration statement.
7.10 AMENDMENT OF SECTION 7. Any provision of this Section 7 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and holders of record of a majority of the
Securities and the Series A Securities, voting as a class, outstanding as of a
record date between 10 and 90 days prior to the effective date of such amendment
or waiver. Any amendment or waiver effected in accordance with this Paragraph
7.10 shall be binding upon each holder of Securities and Series A Securities at
the time outstanding (including securities into which such Securities and Series
A Securities are convertible), each future holder of all such Securities or such
Series A Securities, and the Company.
Section 8. CERTAIN DEFINITIONS.
For the purposes of this Agreement the following terms have the
respective meanings set forth below:
8.1 "BUSINESS PLAN" means the Business Plan of the Company
dated May, 1993.
8.2 "COMMISSION" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
8.3 "COMMON STOCK" means the Company's Common Stock, par value
$.01 per share.
8.4 "ERISA" means, as of any given time, the Employee Retirement
Income Security Act of 1974, as amended.
8.5 "EXCHANGE ACT" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
8.6 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles, consistently applied; and any accounting
determination or calculation required
34
to be made under this Agreement shall be made (unless otherwise provided) in
accordance with generally accepted accounting principles, consistently applied.
8.7 "REGISTERABLE COMMON STOCK" means any Common Stock issued or
issuable upon conversion of the Shares.
8.8 "SECURITIES" means the Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not include
any such Shares or Common Stock sold in any public offering or in any sale
pursuant to Rule 144 under the Securities Act. For purposes of computing at any
date any percentage of Securities required in connection with any action taken
or to be taken under this Agreement, the Shares shall be deemed to equal the
number of shares of Common Stock issuable at such date upon conversion thereof.
8.9 "SECURITIES ACT" means, as of any given time, the Securities
Act of 1933, as amended, or any similar federal law then in force.
8.10 "SERIES A AGREEMENT" means the Stock Purchase Agreement,
dated as of June 25, 1992, by and among the Company and the Investors listed on
Exhibit 1(a) thereto.
8.11 "SERIES A CONVERTIBLE PREFERRED STOCK" means the 3,900,000
shares of Series A Convertible Preferred Stock issued pursuant to the Series A
Agreement.
8.12 "SERIES A INVESTORS" means Investors as defined in the
Series A Agreement.
8.13 "SERIES A REGISTERABLE COMMON STOCK" means Registerable
Common Stock as defined in the Series A Agreement.
8.14 "SERIES A SECURITIES" means Securities as defined in the
Series A Agreement.
8.15 "SUBSIDIARY" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of which
are, at the time as of which any determination is being made, owned of record or
beneficially by the Company, directly or indirectly, through any Subsidiary or
otherwise.
8.16 "TERMINATING PUBLIC OFFERING" means an underwritten public
offering (whether on a "best efforts" or a "firm commitment" basis) for the
account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock, where the aggregate sales price of the
securities included in such sale (after deduction of any
35
underwriting commissions, discounts and concessions) is at least $12,500,000 and
the price per share of such securities is at least $3.33.
Section 9. MISCELLANEOUS.
9.1 ISSUANCE OF ADDITIONAL SHARES OF SERIES B CONVERTIBLE
PREFERRED STOCK. Within ninety days following the date hereof, the Company
intends to offer and sell up to 4,000,000 additional shares of Series B
Convertible Preferred Stock pursuant to one or more stock purchase agreements in
substantially the form as this Agreement (each, an "Additional Stock Purchase
Agreement"). The rights of the investors under any Additional Stock Purchase
Agreement shall be PARI PASSU with the rights of the Investors under this
Agreement. To the extent applicable, the term "Investors" as used in Sections
6.15 and 9.15 of this Agreement shall include the investors acquiring shares of
Series B Convertible Preferred Stock pursuant to, and the term "Shares" as used
in Sections 6.20, 9.15 and 9.16 of this Agreement shall include the shares of
Series B Convertible Preferred Stock issued under, any Additional Stock Purchase
Agreement. In addition, to the extent applicable, the term "Securities" as used
in Section 7 of this Agreement shall include any shares of Series B Convertible
Preferred Stock (and any Common Stock issued upon conversion thereof) issued
under any Additional Stock Purchase Agreements and the term "Registerable Common
Stock" as used in Section 7 of this Agreement shall include any shares of Common
Stock issued or issuable upon conversion of any shares of Series B Convertible
Preferred Stock issued under any Additional Stock Purchase Agreement.
9.2 EXHIBITS. The Exhibits attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by reference
and shall have the same force and effect as if set forth in full in the main
body of this Agreement.
9.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any other
writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the date of Closing and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investors or on their behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for the
obligations of the Company under Section 7 hereof), including the obligations of
the Company under Section 6 hereof, will cease and be of no further
36
force and effect upon the closing of a Terminating Public Offering.
9.4 ASSIGNS; PARTIES IN INTEREST. This Agreement shall bind and
inure to the benefit of the Company, the Investors, each other person who shall
become a registered holder of any certificate representing the Securities and
the respective successors and assigns of the Company, the Investors and each
such other person. The parties hereto understand and agree that (i) DSV
Partners IV ("DSV") is a limited partnership formed under the laws of the State
of New Jersey, (ii) the limited partners of DSV will not be liable for any
liabilities of DSV, and will not be required to perform any of the obligations
of DSV, pursuant to this Agreement, and (iii) neither the Company, nor the
shareholders or officers of the Company, will seek to enforce such liabilities
and/or obligations or otherwise seek relief with respect thereto against such
limited partners.
9.5 GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced in accordance with the internal laws of
said Commonwealth, and without giving effect to conflicts of laws.
9.6 INDEMNIFICATION. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and each Investor shall, with respect to the representations,
warranties, covenants and agreements made by such Investor, indemnify, defend
and hold the Investors or the Company, as the case may be, harmless against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including legal and accounting fees and expenses), arising from
the untruth, inaccuracy or breach of any such representations, warranties,
covenants or agreements of the Company or such Investor, as the case may be.
Without limiting the generality of the foregoing, the Investors or the Company,
as the case may be, shall be deemed to have suffered liability, loss or damage
as a result of the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements if such liability, loss or damage shall be
suffered by the Company as a result of, or in connection with, such untruth,
inaccuracy or breach of any facts or circumstances constituting such untruth,
inaccuracy or breach.
9.7 LIABILITY AND INDEMNIFICATION. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business Corporation
Law of 1988 of the Commonwealth of Pennsylvania, as amended from time to time,
indemnify all persons whom it may indemnify thereunder. To the fullest extent
permitted by the Business Corporation Law of the Commonwealth of Pennsylvania,
as amended from time to time, a director of the
37
Company shall not be liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director.
9.8 REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or an Investor, an Investor or the Company, as the case may be, may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Agreement. An Investor or the Company acting
pursuant to this Section 9.8 shall be indemnified against all liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses) in accordance with Section
9.6.
9.9 EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon
surrender by an Investor to the Company of any certificate representing shares
of Series B Convertible Preferred Stock (or Common Stock issuable upon
conversion thereof) purchased or acquired hereunder, the Company at its expense
will issue in exchange therefor, and deliver to such Investor, a new certificate
or certificates representing such shares, in such denominations as may be
requested by the Investor. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any certificate representing
any Securities purchased or acquired by the Investors hereunder, and in case of
such loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon surrender
and cancellation of such certificate, the Company at its expense will issue and
deliver to the Investors a new certificate for such Series B Preferred Stock (or
Common Stock issuable upon conversion thereof) of like tenor, in lieu of such
lost, stolen or mutilated certificate.
9.10 NOTICES. All communications provided for in this Agreement
shall be in writing and shall be sent to each party as follows:
TO THE COMPANY TO INVESTORS
Xxxxxxx X. Xxxxxxxx, Xx., Ph.D. At the addresses set
Apollon, Inc. forth below their
One Great Valley Parkway respective names on
Xxxxxxx, XX 00000 Exhibit 1.1 hereto.
FAX: (000) 000-0000
38
With a Copy To:
Xxxxxx Xxxxxxx, Xx. Esq.
Xxxxxxx Xxxxx Xxxxxxx
& Ingersoll
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
FAX: (000) 000-0000
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (a) physical delivery, (b) if given by
facsimile transmission, when such facsimile is transmitted to the telephone
number specified in this Agreement and telephone confirmation of receipt thereof
is received, (c) three days after mailing by prepaid first class mail and (d)
two days after mailing by prepaid overnight or express mail.
9.11 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties regarding the transactions contemplated herein and
may not be modified or amended except by written agreement of all parties
hereto.
9.12 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the interpretation of
this Agreement.
9.13 PRONOUNS. If any Investor is an individual, neuter pronouns
used in reference to Investors shall be deemed to refer to individuals as well
as corporations or partnerships.
9.14 EFFECT OF STOCK SPLITS, ETC. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares or price per share is involved, such number shall be
appropriately adjusted to reflect any stock split, stock dividend, combination
of securities into a smaller number of securities or reclassification of stock.
9.15 AMENDMENTS. This Agreement may be amended only by an
instrument in writing, signed by the Company and by Investors holding, on the
date of such amendment, a majority of the Securities held of record on such date
by all of the Investors.
9.16 SHARES HELD BY AFFILIATES. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares is involved, each Investor shall be deemed to own any
Securities that are owned by any of the partners of such Investor or any
retired partners of such Investor who retire after the date hereof or the
39
estate of any such partner or retired partner or the spouse, lineal
descendants, ancestors or any Affiliates of such Investor or any such partner
or retired partner.
9.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be one and the same instrument.
9.18 DISCLOSURES ELSEWHERE. No representation or warranty
contained in this Agreement or in any exhibit, schedule, certificate or other
document delivered pursuant hereto shall be considered to be breached due to the
omission of matters required to be disclosed pursuant to the terms of this
Agreement if the matter or matters giving rise to any such breach or omission is
or are disclosed anywhere in this Agreement or in any of the exhibits,
schedules, certificates or other documents delivered pursuant hereto.
40
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /S/ XXXXXXX X. ZUZRAWSKI, JR.
______________________________
Xxxxxxx X. Xxxxxxxx, Xx.
President
INVESTORS
DSV PARTNERS IV, a New Jersey
Limited Partnership
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /s/ Xxxxxx Xxxxxxx
---------------------
Xxxxxx Xxxxxxx,
General Partner
Address: 000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
CENTOCOR DELAWARE, INC., a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Address: 0000 X. Xxxxxx Xxxxxx
Xxxxx 0000
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Fax: c/o Centocor, Inc.
(000) 000-0000
41
TECHNOLOGY LEADERS, L.P., a Delaware
limited partnership
By: TECHNOLOGY LEADERS MANAGEMENT, L.P.,
General Partner
By: TECHNOLOGY LEADERS MANAGEMENT,
INC., General Partner
By: /S/ XXXXXXXXXXX XXXXXX
___________________________
Address: 800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
TECHNOLOGY LEADERS OFFSHORE C.V., a
Netherland Antilles limited partnership
By: TECHNOLOGY LEADERS MANAGEMENT, L.P.,
General Partner
By: TECHNOLOGY LEADERS MANAGEMENT,
INC., General Partner
By: /S/ XXXXXXXXXXX XXXXXX
______________________________
Address: 800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
42
EXHIBITS
Exhibit 1.1 - Investors, Shares to be Purchased and Consideration
Exhibit 2.1 - Form of Opinion of Xxxxxxx Xxxxx Xxxxxxx & Ingersoll
Exhibit 2.4(a) - Amended Articles
Exhibit 2.4(b) - Statement Affecting Class or Series of Shares
Exhibit 2.7 - Shareholders' Agreement
Exhibit 4.2(a) - Authorized Capital Stock
Exhibit 4.2(b) - Shareholders of the Company
Exhibit 4.2(c) - Warrants, Options or Agreements
Exhibit 4.8(a) - Consents
Exhibit 4.8(b) - Offers of Securities
Exhibit 4.14 - Related Transactions
Exhibit 4.15 - Registration Rights
Exhibit 4.16 - Benefit Plans
Exhibit 4.18(a) - Intellectual Property
Exhibit 4.18(b) - Additional Intellectual Property Required
Exhibit 4.18(c) - Form of Confidentiality Agreement
Exhibit 4.18(d) - Confidentiality Agreements Restricting Employees
Exhibit 4.19 - Material Contracts
Exhibit 4.20 - Officers and Employees; Compensation Matters
D118481.A(BF) EXHIBIT 1.1
SCHEDULE OF INVESTORS
NUMBER OF AGGREGATE
NAME SHARES PURCHASED PURCHASE PRICE
Centocor Delaware, Inc. 800,000 $2,000,000
0000 X. Xxxxxx Xxxxxx
Xxxxx 0000
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
DSV Partners IV, L.P. 400,000 $1,000,000
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Technology Leaders, L.P. 373,520 $ 933,800
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Technology Leaders 426,480 $1,066,200
Offshore C.V.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
