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Exhibit 10.20
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
BY AND AMONG
THE PURCHASERS LISTED ON EXHIBIT A HERETO
AND
CELLOMICS, INC.
DATED AS OF SEPTEMBER 27, 2000
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TABLE OF CONTENTS
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SECTION 1 AUTHORIZATION, PURCHASE AND SALE OF SHARES AND WARRANTS................................................1
1.1 AUTHORIZATION OF THE SHARES.....................................................................1
1.2 SALE AND PURCHASE OF THE SHARES.................................................................1
1.3 CERTAIN DEFINED TERMS...........................................................................1
SECTION 2 CLOSING, PAYMENT AND DELIVERY..........................................................................2
2.1 CLOSING DATE....................................................................................2
2.2 PLACE OF CLOSING................................................................................2
2.3 CLOSING PAYMENT AND DELIVERY....................................................................2
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................2
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS.................................................2
3.2 CORPORATE POWER.................................................................................3
3.3 SUBSIDIARIES....................................................................................3
3.4 CAPITALIZATION..................................................................................3
3.5 AUTHORIZATION...................................................................................4
3.6 CONTRACTS; INSURANCE............................................................................4
3.7 FINANCIAL INFORMATION...........................................................................6
3.8 ABSENCE OF UNDISCLOSED LIABILITIES..............................................................6
3.9 ABSENCE OF CERTAIN CHANGES......................................................................6
3.10 TAXES...........................................................................................7
3.11 TRANSACTIONS WITH AFFILIATES....................................................................7
3.12 LITIGATION......................................................................................8
3.13 CONSENTS........................................................................................8
3.14 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES.....................................................8
3.15 LEASES..........................................................................................8
3.16 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS......................................9
3.17 ISSUANCE TAXES.................................................................................10
3.18 OFFERING.......................................................................................10
3.19 COMPLIANCE WITH OTHER INSTRUMENTS..............................................................10
3.20 EMPLOYEES......................................................................................10
3.21 BUSINESS OF THE COMPANY........................................................................12
3.22 USE OF PROCEEDS................................................................................12
3.23 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS..............................................12
3.24 INDEBTEDNESS...................................................................................14
3.25 CONDITION OF PROPERTIES........................................................................14
3.26 INSURANCE COVERAGE.............................................................................14
3.27 REGISTRATION RIGHTS............................................................................15
3.28 SEC REPORTS..........................................................ERROR! BOOKMARK NOT DEFINED.
3.29 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS......................................15
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3.30 QUALIFIED SMALL BUSINESS STOCK.................................................................15
3.31 EFFECTIVENESS OF MERGER........................................................................16
3.32 DISCLOSURE.....................................................................................16
SECTION 4 Representations and Warranties of Purchasers...........................................................16
4.1 REPRESENTATION AND WARRANTIES OF THE PURCHASERS................................................16
SECTION 5 CONDITIONS TO CLOSING OF PURCHASERS...................................................................18
5.1 REPRESENTATIONS AND WARRANTIES CORRECT.........................................................18
5.2 PERFORMANCE....................................................................................18
5.3 COMPLIANCE CERTIFICATE.........................................................................18
5.4 OPINION OF COMPANY'S COUNSEL...................................................................18
5.5 GOOD STANDING CERTIFICATES.....................................................................18
5.6 LEGAL INVESTMENT...............................................................................19
5.7 QUALIFICATIONS.................................................................................19
5.8 FILING OF AMENDED AND RESTATED CERTIFICATE.....................................................19
5.9 PROCEEDINGS AND DOCUMENTS......................................................................19
5.10 PROVISIONS OF BY-LAWS..........................................................................19
5.11 SHAREHOLDERS' AGREEMENT........................................................................19
5.12 MANAGEMENT RIGHTS LETTERS......................................................................20
5.13 BOARD OF DIRECTORS; INDEMNIFICATION............................................................20
5.14 APPROVAL OF COMPANY BOARD OF DIRECTORS AND STOCKHOLDERS........................................20
SECTION 6 CONDITIONS TO CLOSING OF COMPANY......................................................................20
6.1 REPRESENTATIONS................................................................................20
6.2 PERFORMANCE....................................................................................20
6.3 LEGAL INVESTMENT...............................................................................20
6.4 AMENDED AND RESTATED CERTIFICATE...............................................................21
6.5 SHAREHOLDERS' AGREEMENT........................................................................21
6.6 SECOND AMENDED AND RESTATED CERTIFICATE AND AMENDED AND RESTATED BYLAWS........................21
SECTION 7 COVENANTS OF THE COMPANY..............................................................................21
7.1 BASIC FINANCIAL INFORMATION....................................................................21
7.2 ADDITIONAL INFORMATION AND RIGHTS..............................................................23
7.3 PROMPT PAYMENT OF TAXES, ETC...................................................................23
7.4 MAINTENANCE OF PROPERTIES AND LEASES...........................................................23
7.5 INSURANCE......................................................................................24
7.6 ACCOUNTS AND RECORDS...........................................................................24
7.7 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES.......................................24
7.8 MAINTENANCE OF CORPORATE EXISTENCE, ETC........................................................25
7.9 AVAILABILITY OF COMMON STOCK FOR CONVERSION OF SERIES C PREFERRED..............................25
7.10 PROPRIETARY INFORMATION AGREEMENT AND KEY EMPLOYEE AGREEMENT...................................25
7.11 QUALIFIED SMALL BUSINESS STOCK.................................................................25
7.12 USE OF PROCEEDS................................................................................25
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7.13 SECURITIES LAW FILINGS.........................................................................26
7.14 COMPLIANCE BY SUBSIDIARIES.....................................................................26
SECTION 8 NEGATIVE COVENANTS....................................................................................26
8.1 CHANGES IN TYPE OF BUSINESS....................................................................26
8.2 CONFLICTING AGREEMENTS.........................................................................26
8.3 EMPLOYEE STOCK PLANS...........................................................................26
8.4 RELATED PARTY TRANSACTIONS.....................................................................27
SECTION 9 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS............................................27
9.1 RESTRICTIONS ON TRANSFERABILITY................................................................27
9.2 CERTAIN DEFINITIONS............................................................................27
9.3 RESTRICTIVE LEGEND.............................................................................28
9.4 NOTICE OF PROPOSED TRANSFERS AND SECURITIES ACT COMPLIANCE.....................................29
9.5 REQUESTED REGISTRATION.........................................................................30
9.6 COMPANY REGISTRATION...........................................................................32
9.7 REGISTRATION ON FORM S-3.......................................................................33
9.8 EXPENSES OF REGISTRATION.......................................................................34
9.9 REGISTRATION PROCEDURES........................................................................34
9.10 INDEMNIFICATION AND CONTRIBUTION...............................................................35
9.11 INFORMATION BY HOLDER..........................................................................37
9.12 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES............................................37
9.13 RULE 144 REPORTING.............................................................................38
9.14 TRANSFER OF REGISTRATION RIGHTS................................................................38
9.15 "MARKET STAND-OFF" AGREEMENT...................................................................38
SECTION 10 DEFINITIONS..........................................................................................39
SECTION 11 MISCELLANEOUS........................................................................................43
11.1 GOVERNING LAW..................................................................................43
11.2 SURVIVAL.......................................................................................43
11.3 SUCCESSORS AND ASSIGNS.........................................................................44
11.4 ENTIRE AGREEMENT...............................................................................44
11.5 NOTICES, ETC...................................................................................44
11.6 DELAYS OR OMISSIONS............................................................................45
11.7 RIGHTS; SEPARABILITY...........................................................................45
11.8 AGENT'S FEES AND SERVICES......................................................................45
11.9 LEGAL FEES AND EXPENSES........................................................................46
11.10 TITLES AND SUBTITLES...........................................................................46
11.11 COUNTERPARTS...................................................................................46
11.12 AGGREGATION OF STOCK...........................................................................46
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LIST OF EXHIBITS
EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Amended and Restated Certificate of Incorporation
EXHIBIT C - Schedule of Exceptions
EXHIBIT D - Form of Proprietary Information Agreement
EXHIBIT E - Form of Opinion of Counsel
EXHIBIT F - Amended and Restated Shareholders' Agreement
EXHIBIT G - Form of Management Rights Letter
EXHIBIT H - Form of Key Employee Agreement
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SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of the 27th day of September, 2000, by and among
CELLOMICS, INC. (the "Company"), a Delaware corporation having offices at 000
Xxxxxxx Xxxx Xxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000, and EACH OF THE PARTIES LISTED
ON THE SCHEDULE OF PURCHASERS ATTACHED HERETO AS EXHIBIT A (the "Schedule of
Purchasers"). The parties listed on the Schedule of Purchasers are hereinafter
referred to collectively as the "Purchasers."
WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the Purchasers,
severally and not jointly, hereby agree as follows:
SECTION 1
AUTHORIZATION, PURCHASE AND SALE OF SHARES AND WARRANTS
1.1 AUTHORIZATION OF THE SHARES.
The Company has, or before the Closing (as defined in Section 2.1
hereof) will have, authorized the issuance and sale of up to One Million Six
Hundred Forty-Five Thousand Six Hundred Thirty Nine (1,645,639) shares of Series
C Preferred Stock, par value $.01 per share of the Company (the "Series C
Preferred"), having the rights, restrictions, privileges and preferences as set
forth in the Amended and Restated Certificate of Incorporation of the Company
(the "Amended and Restated Certificate"), the form of which is attached to this
Agreement as Exhibit B.
1.2 SALE AND PURCHASE OF THE SHARES.
Upon and subject to the terms and conditions of this Agreement and in
reliance upon the representations, warranties and agreements contained herein,
at the Closing the Company will issue and sell to each Purchaser, and each
Purchaser will purchase from the Company at the Closing, that number of shares
of Series C Preferred set forth opposite such Purchaser's name on the Schedule
of Purchasers for the Closing (all such shares being collectively referred to as
the "Shares").
1.3 CERTAIN DEFINED TERMS.
Certain capitalized terms used in this Agreement shall have the
respective meanings ascribed to them in Section 10 hereof.
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SECTION 2
CLOSING, PAYMENT AND DELIVERY
2.1 CLOSING DATE.
Subject to the terms and provisions of this Agreement, the closing (the
"Closing") of the purchase and sale of Shares hereunder shall be in the amounts
set forth on the Schedule of Purchasers. The Closing shall be by and among the
Company and the Purchasers specified on the Schedule of Purchasers and shall be
held on the date (the "Closing Date") of, and immediately following, (a) the
final execution and delivery of at least one counterpart of this Agreement by
the Company and each of the Purchasers and (b) the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby, or such other date as shall have been agreed to by the
Company and the Purchasers.
2.2 PLACE OF CLOSING.
The place of the Closing (including the place of delivery to the
Purchasers by the Company of the certificates evidencing all Shares being
purchased at the Closing and the place of payment to the Company by the
Purchasers of the purchase price therefor) shall be at the offices of Xxxx
Xxxxxxxx & Xxxxx, L.L.C., Xxx Xxxxxxxxxxxx Xxxxxxxx - 00xx Xxxxx, 00 Xxxxxxx
Xxxxxx, Xxxxxxxxxx, XX 00000, or such other place as shall have been agreed to
by the Company and the Purchasers.
2.3 CLOSING PAYMENT AND DELIVERY.
At the Closing, each Purchaser will pay to the Company by wire transfer
as set forth on the Schedule of Purchasers, the amount set forth opposite such
Purchaser's name under the column labeled "Total Investment" on the Schedule of
Purchasers; and the Company will deliver to each Purchaser a certificate or
certificates registered in the Purchaser's name (or in such name or names as
otherwise designated by such Purchaser) representing the number of Shares to be
purchased at the Closing as set forth opposite such Purchaser's name under the
column labeled "Series C Preferred Shares" on the Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth (with reference to a paragraph in this
Section 3) on the Schedule of Exceptions attached hereto as Exhibit C (the
"Schedule of Exceptions"), the Company hereby represents and warrants to the
Purchasers as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is
qualified, licensed or domesticated as a foreign corporation in each
jurisdiction wherein the nature of its
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activities or properties owned or leased by it makes such
qualification, licensing or domestication necessary. The Schedule of
Exceptions sets forth the jurisdictions in which the Company is
qualified, licensed or domesticated as a foreign corporation. The
Company has all requisite power, governmental licenses, authorization,
consents and approvals to own the properties owned by it and to
conduct the business as it is being conducted by it and as
contemplated by the Company's Confidential Private Placement
Memorandum, dated June 2000 (the "Memorandum"), a true and correct
copy of which has been given to the Purchasers. The Schedule of
Exceptions sets forth all jurisdictions in which the Company owns or
leases property or engages in material activity.
(b) Prior to the Closing, the Company shall have properly filed and
recorded the Amended and Restated Certificate with the Secretary of the
State of Delaware. The Company is not in breach of any of the
provisions of the Amended and Restated Certificate or its By-Laws.
3.2 CORPORATE POWER.
The Company has all requisite corporate power to enter into this
Agreement and each of the Financing Documents and will have on the Closing Date
all requisite corporate power to sell the Shares to be sold on the Closing Date
and to carry out and perform its obligations under the terms of this Agreement
and each of the Financing Documents.
3.3 SUBSIDIARIES.
The Company has no Subsidiaries and, except as set forth in the
Schedule of Exceptions, does not own of record or beneficially any capital stock
or equity interest or investment in any corporation, partnership, association or
business entity.
3.4 CAPITALIZATION.
The Schedule of Exceptions contains a true and correct list of all
securities of the Company (including the amounts thereof) outstanding
immediately prior to the Closing, and the holders of any interest in such
securities. Immediately prior to the Closing, the Company's authorized capital
stock will consist of (a) Eight Million (8,000,000) shares of Common Stock, par
value $.01 per share of the Company (the "Common Stock"), of which One Million
Three Hundred Thirty Eight Thousand Five Hundred Seventy Five (1,338,575) shares
will be issued and outstanding, (b) Two Million Twenty-Four Thousand Five
Hundred (2,024,500) shares of Series A Preferred Stock, par value $.01 per share
of the Company (the "Series A Preferred"), of which One Million Nine Hundred
Sixty-Six Thousand Six Hundred Eighteen (1,966,618) shares will be issued and
outstanding, (c) Seven Hundred Thousand (700,000) shares of Series B Preferred,
par value $.01 per share of the Company (the "Series B Preferred"), of which Six
Hundred Ninety-Three Thousand Six Hundred Seventy-Five (693,675) shares will be
issued and outstanding, and (d) One Million Six Hundred Fifty Thousand
(1,650,000) shares of Series C Preferred, none of which will be issued and
outstanding. Upon consummation of the Closing, all issued and outstanding shares
of capital stock of the Company will have been duly authorized and validly
issued, will be fully paid and nonassessable, will be owned of record and
beneficially by the shareholders and in the amounts set forth in the Schedule of
Exceptions, and will have
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been offered, issued, sold and delivered by the Company in compliance with
applicable federal and state securities laws. Except as set forth in the
Schedule of Exceptions, the Amended and Restated Certificate and the
Shareholders' Agreement, there are no outstanding pre-emptive or other
preferential rights, conversion rights or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for the purchase or
acquisition of any shares of its capital stock. No holder of Common Stock,
Series A Preferred or Series B Preferred has granted (to the best of the
Company's belief) any option or other right to purchase from such shareholder
any interest in any share of Common Stock, Series A Preferred or Series B
Preferred. The Company holds no shares of its capital stock in its treasury.
3.5 AUTHORIZATION.
All action on the part of the Company and its directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Company of this Agreement and each of the Financing Documents
and for the consummation of the transactions contemplated herein and therein,
and for the authorization, issuance and delivery of the Shares and the
Conversion Shares has been taken or will be taken prior to the Closing. This
Agreement and each of the Financing Documents is, or upon execution will be, a
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally. The execution and delivery
by the Company of this Agreement and each of the Financing Documents, and
compliance herewith and therewith, and the offer, issuance and sale of the
Shares and the Conversion Shares will not, with or without notice or the passage
of time or both, result in any violation of and will not conflict with, or
result in a breach of any of the terms of, or constitute a default under any
provision of, (i) any state or federal law to which the Company is subject, (ii)
the Amended and Restated Certificate or By-Laws, as amended, or (iii) any
mortgage, indenture, agreement, instrument, judgment, decree, order, rule or
regulation or other restriction to which the Company is a party or by which it
or any of its property is bound, or may be affected, or result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company pursuant to any such term or give any other person or
entity the right to accelerate the time for performance of any obligation of the
Company, except, with respect to clause (iii) only, for any such violations,
conflicts, breaches, defaults or other occurrences which would not have a
material adverse effect upon the condition, financial or otherwise, or the
operations of the Company. No shareholder has any pre-emptive rights or rights
of first refusal by reason of or in connection with the issuance of the Shares
or the Conversion Shares. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances. The Conversion
Shares have been duly and validly reserved (and are in addition to any other
shares reserved for any other purpose) and are not subject to any pre-emptive
rights or rights of first refusal and, upon issuance, will be validly issued,
fully paid and nonassessable.
3.6 CONTRACTS; INSURANCE.
The Schedule of Exceptions sets forth a true and correct list of all
contracts, obligations, commitments, agreements, plans and the like, whether
written or oral, and all administrative,
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judicial and similar orders to which the Company is a party or by which it or
any of its properties is bound, including, without limitation, the following:
(a) Any employment, bonus or consulting agreement, pension, profit
sharing, deferred compensation, stock bonus, retirement, stock option,
stock purchase, phantom stock or similar plan, or agreement evidencing
rights to purchase securities or phantom stock of the Company or any
agreement among shareholders of the Company;
(b) Any loan or other agreement, note, indenture or instrument
relating to, or evidencing, indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a lien or security
interest or other encumbrance on any property of the Company or any
agreement or instrument evidencing any guaranty by the Company of
payment or performance by any other party;
(c) Any agreement with any dealer, sales representative, broker or
other distributor, jobber, advertiser or sales agency;
(d) Any agreement with any labor union or collective bargaining
organization or any other labor agreement;
(e) Any contract for the furnishing, purchase or lease of
machinery, equipment, goods or services (including, without limitation,
any agreement with processors and subcontractors);
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the future sale or repurchase of
securities, excluding, however, this Agreement and the Financing
Documents;
(g) Any agreement to register under the Securities Act any of the
securities of the Company;
(h) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses;
(i) Any agreement (other than distributorship agreements or similar
agreements providing for the distribution of Company's products with
dealers, distributors and sales representatives of the Company)
limiting the freedom of the Company to compete in any line of business
or in any geographic area or with any party; and
(j) Any agreement providing for disposition of any line of
business, assets or securities of the Company, or any agreement with
respect to the acquisition of any line of business, assets or shares of
any other business, any agreement of merger or consolidation or letter
of intent with respect to the foregoing.
Notwithstanding anything to the contrary herein, the Schedule of
Exceptions may exclude any contract which (i) the Company and/or each Subsidiary
has entered into in the ordinary course of business and (ii) either (1)
obligates the Company and/or each Subsidiary to make
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payments only, which payments in the aggregate do not exceed $100,000 or (2)
relates only to the non-disclosure of confidential information. The Company has
complied with all material provisions of each such contract and commitment. No
event has occurred and no condition exists which with notice or the passage of
time or both would constitute a default by the Company or, to the Company's
knowledge, by any other party thereto, under any such contract or commitment. To
the Company's knowledge, no party to such contract or commitment has threatened
to terminate or has any intention of terminating its obligations thereunder.
3.7 FINANCIAL INFORMATION.
Copies of the audited balance sheets of the Company dated December 31,
1998, December 31, 1999 and March 31, 2000 contained in the Memorandum and
copies of the unaudited balance sheet of the Company dated June 30, 2000 (the
unaudited balance sheet dated June 30, 2000 being referred to herein as the
"Balance Sheet") and the related statements of operations and accumulated
deficit and cash flows for the periods then ended (collectively, the "Financial
Statements") present fairly, in all material respects, the financial position of
the Company as of such dates, have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, except for those
changes promulgated and required by accounting authority, and show all material
liabilities, absolute or contingent, of the Company required to be recorded
thereon in accordance with U.S. generally accepted accounting principles as of
the dates thereof.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have, and does not know of, any liabilities (fixed
or contingent, including without limitation any tax liabilities due or to become
due), which, either individually or in the aggregate, are material and not
disclosed on the Balance Sheet.
3.9 ABSENCE OF CERTAIN CHANGES.
Since the date of the Balance Sheet, there has not been:
(a) Any change in the condition, assets, liabilities, prospects or
business of the Company from that shown on the Balance Sheet or as
described in the Memorandum which, either individually or in the
aggregate, has been or is reasonably likely to be a material adverse
change;
(b) Any damage to, or destruction or loss of, any of the properties
or assets of the Company (whether or not covered by insurance)
materially adversely affecting the business or plans of the Company or
the Technology;
(c) Any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock
(or any warrant, option or other right with respect to such stock) by
the Company or any repayment of Company debt held by any Related Party
or by an Affiliate;
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(d) Any labor organizational activity, collective bargaining
activity, labor dispute or labor trouble;
(e) Any event or condition of any character, which, either
individually or in the aggregate, materially adversely affects the
business, operations or plans of the Company;
(f) Any action taken or entered into by the Company involving any
transaction other than in the usual and ordinary course of business,
except this Agreement;
(g) Any disclosure to any person of any material trade secrets,
except for disclosures made to persons subject to valid and enforceable
confidentiality agreements; or
(h) Any disposition of assets, except for sales of inventory in the
ordinary course of business.
3.10 TAXES.
The Company has filed or will file within the time prescribed by law
(including extensions of time approved by any appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service and with the Commonwealth of Pennsylvania, and (except to the
extent that the failure to file would not have a material adverse effect on the
condition or operations of the Company) with all other jurisdictions where such
filing is required by law; and the Company has paid, or made adequate provision
in the Balance Sheet for the payment of, all taxes, interest, penalties,
assessments or deficiencies due in connection therewith. The Company has never
had any tax deficiency proposed or assessed against it and the Company has
executed no waiver of any statute of limitations on the assessment or collection
of any tax or governmental charge. None of the Company's federal income tax
returns nor any state income, sales or franchise tax returns has ever been
audited by governmental authorities. No tax audit, action, suit, proceeding,
investigation or claim is now pending nor, to the best of the Company's
knowledge, threatened against the Company, and no issue or question has been
raised (and is currently pending) by any taxing authority in connection with any
of the Company's tax returns or reports.
The Company has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositories.
3.11 TRANSACTIONS WITH AFFILIATES.
Except as set forth in the Schedule of Exceptions, there is no loan,
lease or other continuing transaction between the Company, any Related Party
and/or any Affiliate.
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3.12 LITIGATION.
There is neither pending nor, to the Company's knowledge and belief,
threatened any action, suit, proceeding or claim, whether or not purportedly on
behalf of the Company, to which the Company or any employee of the Company, in
such capacity, is or may be named as a party or to which the Company's property
is or may be subject. To the best of the Company's knowledge and belief, there
is no basis for any such action, suit, proceeding or claim, in which an
unfavorable outcome, ruling or finding in any such matter or for all such
matters, taken as a whole, might have a material adverse effect on the
condition, financial or otherwise, operations or prospects of the Company or on
the Technology. The Company has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief which if
granted would have a material adverse effect on the condition, financial or
otherwise, operations or prospects of the Company.
3.13 CONSENTS.
Except as set forth in the Schedule of Exceptions, no consent, approval
or authorization of, or designation, declaration or filing with, any
governmental authority on the part of the Company, including qualification under
applicable state securities laws of the offer and sale of the Shares and of the
issuance of the Conversion Shares is required in connection with the valid
execution and delivery of this Agreement, the offer, sale or issuance of the
Shares, the conversion of the Shares into Common Stock or the issuance of the
Conversion Shares, or the consummation of any other transaction contemplated on
the Closing Date by this Agreement or any of the Financing Documents, except the
filing of the Amended and Restated Certificate with the Secretary of the State
of Delaware, which filing has been made and is effective as of the date hereof.
Any such consent, approval, authorization, declaration or filing set forth in
the Schedule of Exceptions has been obtained or made and is effective as of the
Closing Date.
3.14 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES.
The Company has good and marketable title to all its properties and
assets, free from all mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges.
3.15 LEASES.
Set forth on the Schedule of Exceptions is a correct and complete list
of all leases (including, with respect to each lease, the material provisions of
such lease, including the term, the amount of rent called for and a description
of the leased property) under which the Company is a lessee, other than personal
property requiring rental payments of less than $25,000 per year. The Company
enjoys peaceful and undisturbed possession under all such leases, all of such
leases are valid and subsisting and none of them is in default in any respect,
and no event has occurred and no condition exists which with notice or the
passage of time or both would constitute such a default.
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3.16 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
(a) All (i) franchises, permits, licenses and other similar
authority, (ii) patents, patent applications, patent rights, service
marks, trademarks, trademark applications, trademark rights, trade
names, trade name rights and copyrights (whether registered or not),
and (iii) know-how, technology and trade secrets, which are or may be
usable now or in the future for the conduct of the Company's business
as now conducted or as planned to be conducted are owned by the Company
or the Company has all rights to use such technology set forth in (i),
(ii) or (iii) above. The documents and instruments evidencing such
ownership and rights are listed in the Schedule of Exceptions.
(b) The Company has all franchises, permits, licenses and other
similar authority, necessary for the conduct of its business as now
being conducted by it and believes it can obtain any similar authority
necessary for the conduct of its business as planned to be conducted,
and it is not in violation, nor will the transactions contemplated by
this Agreement cause a violation of the terms or provisions of any such
franchise, permit, license or other similar authority.
(c) Section 3.16(c) of the Schedule of Exceptions lists all
patents, patent applications, patent rights, trademarks, trademark
applications, trademark rights, trade names, trade name rights, service
marks and copyrights (whether registered or not) owned or possessed by
the Company (collectively, the "Listed Rights"). The Listed Rights
comprise all the patents, patent applications, patent rights,
trademarks, trademark applications, trademark rights, trade names,
trade name rights, service marks and copyrights (whether registered or
not) necessary to the conduct of the Company's business as now being
conducted, and the Company believes that the Company can obtain any
such rights necessary for the conduct of its business as planned to be
conducted. The Company has and possesses the know-how, technology and
trade secrets not included in the Listed Rights (such know-how,
technology and trade secrets being collectively called the
"Intellectual Property") which they believe to be necessary (i) to
conduct the Company's business as now being conducted and (ii) with
additional know-how, technology and trade secrets which the Company
plans to develop, for the conduct of its business as planned to be
conducted. (The Listed Rights and the Intellectual Property
collectively constitute the "Technology".) There is neither pending,
nor, to the best of the Company's knowledge and belief, threatened, any
claim or litigation against the Company contesting the validity or
right to use any of the Listed Rights or any of the Intellectual
Property, nor is the Company aware of any basis therefor, and the
Company has not received any notice of infringement upon or conflict
with any asserted right of others. To the best of the Company's
knowledge and belief, no person, corporation or other entity is
infringing or violating the Listed Rights or any of the Intellectual
Property. Except as described in the Schedule of Exceptions, the
Company does not have any obligation to compensate others for the use
of any Listed Right or any Intellectual Property, nor has the Company
granted any license or other right to use, in any manner, any of the
Listed Rights or Intellectual Property, whether or not requiring the
payment of royalties.
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3.17 ISSUANCE TAXES.
All taxes imposed by any state in connection with the issuance, sale
and delivery of the Shares shall have been fully paid, and all laws imposing
such taxes shall have been fully complied with, prior to the Closing Date.
3.18 OFFERING.
Other than in connection with the sale of the Series C Preferred and as
set forth on the Schedule of Exceptions, within the past six (6) months, the
Company has not, either directly or through any agent, offered any of the Shares
or any security or securities similar to the Shares for sale to, or solicited
any offers to buy the Shares or any part thereof or any such similar security or
securities from, or otherwise approached or negotiated in respect thereof with,
any party or parties other than the Purchasers Each offer described on the
Schedule of Exceptions with respect to this Section 3.18 was an offer relating
to a private sale for investment, and such offers do not, individually or
collectively, affect the exemption of the offer, sale and issuance of the Shares
and the Conversion Shares from the registration requirements of the Securities
Act and all state securities laws. Although the Company filed a registration
statement on Form S-1 with the Commission in connection with a proposed initial
public offering of its Common Stock during the past six (6) months, the Company
has not solicited any offers to buy Common Stock of the Company with or without
the prospectus underlying such registration statement, and the Company may
terminate the registration statement.
Subject in part to the truth and accuracy of the Purchasers'
representations set forth in this Agreement, the offer, sale and issuance of the
Shares and the Conversion Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act, and all applicable
state securities laws, and neither the Company nor anyone acting on its behalf
will take any action hereafter that would cause the loss of such exemption.
3.19 COMPLIANCE WITH OTHER INSTRUMENTS.
The Company is not in violation of any term of the Amended and Restated
Certificate or By-Laws. Neither the Company nor any of its property is in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company or any of such property is subject, a violation of which would
materially adversely affect the Company's condition, financial or otherwise, or
operations or the Technology.
3.20 EMPLOYEES.
(a) No employee of the Company and no Related Party is, or is now
expected to be, in violation of any term of any employment contract,
patent disclosure agreement, non-competition agreement, or any other
contract or agreement with any prior employer or any other person,
corporation, or other entity or any restrictive covenant in such an
agreement, or any obligation imposed by common law or otherwise,
relating to the right of any such employee or Related Party to be
employed by the Company because of the nature of the business conducted
or to be conducted by the Company or relating to the use of trade
secrets or proprietary information of others because of the nature of
the
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business conducted or to be conducted by the Company, and the
continued employment of the Company's employees and/or Related Parties
does not subject the Company or the Purchasers to any liability for
any such violation.
(b) Each of the Company's present or former employees who has had
access to proprietary information of the Company has executed a
Proprietary Information and Property Agreement substantially in the
form attached as Exhibit D hereto (each a "Proprietary Information
Agreement"). To the best of the Company's knowledge and belief, no
employee or former employee of the Company is, or to the best of the
Company's knowledge and belief now is expected to be, in violation of
the terms of the Proprietary Information Agreement entered into by such
employee or former employee, or of any other obligation relating to the
use of confidential or proprietary information of the Company. Each of
such Proprietary Information Agreements remains in full force and
effect.
(c) Section 3.20(c) of the Schedule of Exceptions describes all
employment agreements to which the Company is a party. Each of such
employment agreements remains in full force and effect.
(d) To the best knowledge of the Company, no officer or key
employee of the Company has any present intent of terminating such
officer's or key employee's employment with the Company.
(e) The Company is in material compliance with all laws regarding
employment, wages, hours, equal opportunity, collective bargaining and
payment of Social Security and other taxes. The Company is in material
compliance with all applicable foreign, federal, state and local laws
and regulations regarding occupational safety and health standards and
has received no complaints from any foreign, federal, state or local
agency or regulatory body alleging violations of any such laws and
regulations.
(f) Except as set forth on the Schedule of Exceptions hereto, the
employment of all persons and officers employed by the Company is
terminable at will without any penalty or severance obligation of any
kind on the part of the employer. All sums due for employee
compensation and benefits and all vacation time owing to any employees
of the Company have been duly and adequately accrued on the accounting
records of the Company. All employees of the Company are either United
States citizens or resident aliens specifically authorized to engage in
employment in the United States in accordance with all applicable laws.
(g) The Company has not experienced, nor does it know of any basis
for, any strike, labor troubles or strife, work stoppages or slow
downs. The Company has not experienced, nor does it know or have
reasonable grounds to know of, any union or collective bargaining
organization efforts or negotiations, or requests for negotiations, for
any representation or any labor contract relating to any employees of
the Company.
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3.21 BUSINESS OF THE COMPANY.
The Company has no knowledge and does not believe that (i) there is
pending or threatened any claim or litigation against or affecting the Company
contesting its right to manufacture, sell or use any product or service
presently manufactured, sold or used or planned to be manufactured, sold or used
by the Company, (ii) there exists, or there is pending or planned, any statute,
rule, law, regulation, standard or code which would materially adversely affect
the condition, financial or otherwise, or the operations of the Company, or
(iii) there is any other existing fact which in the future could reasonably be
expected to materially adversely affect the Company's condition, financial or
otherwise, or operations. The Company currently intends to engage in the
business of the general type described in the Memorandum (the "Business").
3.22 USE OF PROCEEDS.
The Company will use the proceeds of the offering as set forth in the
Memorandum. The Company will not use the proceeds of the offering for any other
purpose. None of the transactions contemplated in this Agreement (including,
without limitation, the use of the proceeds from the sale of the Shares or the
Conversion Shares) will violate or result in a violation of Section 7 of the
Exchange Act, including, without limitation, Regulations G, T and X of the Board
of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. The Company
does not own or intend to carry or purchase any "margin security" within the
meaning of said Regulation G, including margin securities originally issued by
it. None of the proceeds from the sale of the Shares or the Conversion Shares
will be used to purchase or carry (or refinance any borrowing the proceeds of
which were used to purchase or carry) any "security" within the meaning of the
Securities Act.
3.23 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS.
(a) The Company does not have or make contributions to any pension
plans, defined benefit plans or defined contribution plans for its
employees which are subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). With respect to such plans, if any,
listed on the Schedule of Exceptions, the Company is in compliance with
the applicable provisions of ERISA. The Company has not incurred any
unremedied accumulated funding deficiency within the meaning of ERISA
or any unsatisfied liability to the Pension Benefit Guaranty
Corporation established under ERISA in connection with any employee
pension plan established or maintained by the Company under the
jurisdiction of ERISA. No Reportable Event or Prohibited Transaction
(as defined in Section 4043 of ERISA) has occurred with respect to any
plan administered by the Company.
(b) The Company's employment practices and policies are in full
compliance with (i) all applicable laws of the United States and each
applicable jurisdiction relating to equal employment opportunity, and
any rules, regulations, administrative orders and Executive Orders
relating thereto; and (ii) the applicable terms, relating to equal
opportunity, of any contract, agreement or grant the Company has with,
from or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any
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federal or state governmental unit, except, with respect to each of
clause (i) and (ii), for any failures to be in compliance which would
not have a material adverse effect on the condition, financial or
otherwise, or the operations of the Company. The Company has not been
the subject of any charge of unfair labor practices, employment
discrimination made against it by the National Labor Relations Board,
the United States Equal Employment Opportunity Commission or any other
governmental unit, nor is it presently subject to any formal or
informal proceedings before, or investigations by, such Commission or
governmental unit. To the Company's knowledge, neither the Company, nor
any employees of the Company, nor any Related Parties are presently
under investigation by any commission or governmental agency for
purposes of security clearance or otherwise.
(c) Neither the Company nor any property owned or occupied by the
Company is in violation of any Federal or State Environmental Law of
any sort or in violation of any Federal or State "OSHA" law, except for
such violations which, either individually or in the aggregate, would
not have a material adverse effect on the condition, financial or
otherwise, or the operations of the Company. The Schedule of Exceptions
contains a list of all environmental permits held by the Company.
Without limiting the generality of the foregoing:
(i) ENVIRONMENTAL PERMITS. The Company has obtained all
environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits")
necessary for the construction of their facilities or the
conduct of their operations, and all such Environmental
Permits are in good standing and the Company is in
compliance with all terms and conditions of the
Environmental Permits, except for such failures to be in
compliance which, either individually or in the aggregate,
would not have a material adverse effect on the condition,
financial or otherwise, or the operations of the Company. No
notice to, approval of or authorization or consent from any
governmental or regulatory authority is necessary for the
transfer of or modification to any Environmental Permit and
the consummation of the transactions contemplated by this
Agreement will not violate, alter, impair or invalidate, in
any respect, any Environmental Permit.
(ii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim
pending, threatened or, to the best of the Company's
knowledge, likely to be threatened (i) against the Company,
(ii) against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law, or
(iii) against any real or personal property or operations
which are now or have been previously owned, leased,
operated or managed, in whole or in part, by the Company.
(iii) RELEASES. There have been no Releases of any Hazardous
Materials that would be likely to form the basis of any
Environmental Claim against the Company or against any
person or entity whose liability for any Environmental Claim
the Company has or may have retained or assumed either
contractually or by operation of law.
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(iv) ENVIRONMENTAL ASSESSMENTS. There are no environmental
reports, audits, investigations or assessments of the
Company, or any real or personal property or operations
which are now or have been previously owned, leased,
operated or managed, in whole or in part, by the Company.
(v) ENVIRONMENTAL DISCLOSURE. To the best knowledge of the
Company upon diligent review, the Company has disclosed to
the Purchasers all relevant facts with respect to potential
or actual environmental liabilities of the Company.
(d) The Company has not violated any law or any governmental law,
rule, order or regulation or requirement which violation through the
date hereof has had or would reasonably be expected to have a material
adverse effect upon the financial condition, operating results, assets,
operations or business prospects of the Company or the Technology and
the Company has not received notice of any such violation.
3.24 INDEBTEDNESS.
The Schedule of Exceptions contains a true and complete list, including
the names of the parties thereto and summary description of the terms thereof,
of all debt instruments, loan agreements, indentures or guaranties, whether
written or oral, other than obligations which may be terminated without payment
or penalty by the Company upon not more than thirty (30) days' notice and
obligations which are otherwise disclosed in this Agreement. All of the
aforesaid items were entered into in the ordinary course of business, are valid
and binding, in full force and effect and are enforceable in accordance with
their respective terms and there exists no breach or default, or any event which
with notice or lapse of time or both, would constitute a breach or default by
any party thereto, except for such breaches or defaults which, either
individually or in the aggregate, would not have a material adverse effect on
the condition, financial or otherwise, or the operations of the Company. All of
the Company's Indebtedness is disclosed on the Balance Sheet.
3.25 CONDITION OF PROPERTIES.
All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are in good operating condition
and repair, are reasonably fit and usable for the purposes for which they are
being used, are adequate and sufficient for the Company's business and conform
in all material respects with all applicable ordinances, regulations and laws.
3.26 INSURANCE COVERAGE.
The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will be unable to
obtain one or more policies of insurance issued by insurers of recognized
responsibility, insuring the Company and its properties and business against
such losses and risks, and in such amounts, as are customary in
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the case of corporations of established reputation engaged in the same or
similar business and similarly situated. The Schedule of Exceptions sets forth
each insurance policy (specifying the insurer, the amount of coverage, the type
of insurance, the policy number, the expiration date, the annual premium, loss
payees and any pending claims thereunder) maintained by the Company relating to
its respective properties, assets, business or personnel (which policies include
directors' and officers' liability insurance in the amount of at least
$1,000,000), and each inspection report or recommendation, if any, during the
last three years as to the conditions of the properties and assets owned,
leased, occupied or operated by it or the conduct of its business. The Company
is not in default with respect to any provision contained in any insurance
policy, and the Company has not failed to give any notice or present any
presently existing claims under any insurance policy in due and timely fashion,
except for such defaults or failures to give notice as would not result in
termination or denial of coverage under such policy.
3.27 REGISTRATION RIGHTS.
Other than under this Agreement or as listed in the Schedule of
Exceptions or described in the Memorandum, the Company has not agreed to
register under the Securities Act any of its authorized or outstanding
securities.
3.28 [INTENTIONALLY OMITTED]
3.29 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS.
Neither the Company, nor, to the best knowledge and belief of the
Company, any of its respective officers, directors, employees, agents or other
representatives of the Company or any other business entity or enterprise with
which the Company is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any person or (b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office except for
personal political contributions not involving the direct or indirect use of
funds of the Company.
3.30 QUALIFIED SMALL BUSINESS STOCK.
The Company qualifies as a "Qualified Small Business" within the
meaning of Section 1202(d) of Internal Revenue Code of 1986, as amended (the
"Code"). Upon issuance, the Shares will qualify as "qualified small business
stock" within the meaning of Section 1202 of the Code. Without limiting the
generality of the foregoing: (i) the Company is a domestic C corporation, (ii)
the Company has not made any purchases of its own stock described in Code
Section 1202(c)(3)(B), and (iii) the Company's (or any predecessor's) aggregate
gross assets, as defined by Code Section 1202(d)(2), at no time between August
10, 1993 and through the Closing have exceeded or will exceed $50,000,000,
taking into account the assets of any corporation required to be aggregated with
the Company in accordance with Code Section 1202(d)(3).
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3.31 EFFECTIVENESS OF MERGER.
The merger of BioDx, Inc., a Pennsylvania corporation and the
predecessor-in-interest to the Company ("BioDx"), with and into the Company (the
"Reincorporation Merger") was duly and validly authorized by all requisite
corporate action and has been validly effected in accordance with applicable
law. The Company has succeeded to all of BioDx's rights and obligations pursuant
to the provisions of applicable law as a result of the Reincorporation Merger.
Without limiting the generality of the foregoing, the Company has succeeded to
all of BioDx's rights as against third parties under the contracts to which
BioDx was a party at the time of the Reincorporation Merger, and the
Reincorporation Merger has not, and will not, with or without notice or the
passage of time or both, result in any violation of, conflict with, breach any
terms of, constitute a default under, or give any third party any right to
terminate or modify, any such contract.
3.32 DISCLOSURE.
This Agreement, the Schedule of Exceptions, the Balance Sheet, the
Financial Statements, the factual statements contained in the Memorandum, and
any other written statement furnished to the Purchasers or their counsel in
connection with the offer and sale of the Shares, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein or herein not
misleading in the light of the circumstances under which they were made. There
is no fact which the Company has not disclosed to the Purchasers in writing that
materially adversely affects or, so far as the Company can now reasonably
foresee, will materially adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company or the ability of
the Company to perform this Agreement and the Financing Documents or the other
actions contemplated hereby. The forward-looking matters furnished to the
Purchasers (including those set forth in the Memorandum) were prepared on the
basis of the Company's best estimates, which include certain assumptions. The
Company does not have any reason to believe that any assumptions or statements
of opinion contained in such forward-looking matters are unreasonable or false.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 REPRESENTATION AND WARRANTIES OF THE PURCHASERS.
Each of the Purchasers represents and warrants to the Company, as to
itself only, as follows:
(a) AUTHORIZATION. It has full power and authority to enter into
this Agreement, the Financing Documents and all other documents and
instruments executed by it in connection with the transactions
contemplated hereby and thereby, and each such agreement, document or
instrument constitutes its valid and legally binding obligation,
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting enforcement of
creditors' rights generally.
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(b) QUALIFIED INSTITUTIONAL BUYER. It is a "Qualified Institutional
Buyer" within the meaning of Commission Rule 144A, as presently in
effect.
(c) EXPERIENCE. It is experienced in evaluating and investing in
companies such as the Company.
(d) INVESTMENT. It is acquiring the Shares for investment for its
own account and not with the view to, or for resale in connection with,
any distribution thereof. It understands that the Shares and the
Conversion Shares have not been registered under the Securities Act by
reason of an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide
nature of its investment intent as expressed herein.
(e) RULE 144. It understands that the Shares it is purchasing are
characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited
circumstances. It acknowledges that the Shares and the Conversion
Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions (which conditions
cannot presently be satisfied). The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section
3 of this Agreement or the right of Purchasers to rely thereon.
(f) ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, and it has been furnished with copies of documents which it
has requested.
(g) NO RELIANCE ON CERTAIN TYPES OF ADVICE. It is not relying on
the Company for advice with respect to tax considerations, the
suitability of his, her or its investment in the Company or legal or
economic considerations.
(h) NO REVIEW OF REGISTRATION STATEMENT. It has not seen, reviewed
or relied upon the registration statement filed under the Securities
Act by the Company on March 3, 2000, or amendment no. 1 to such
registration statement, with respect to its proposed initial public
offering.
(i) MARKETABILITY. It understands that the Company is closely held
and that there is no public market for resale of the Shares. It
understands that it is possible that a market for the Shares will not
ever develop. As a consequence, it understands that it may not be able
to liquidate its investment in the Shares, even in the event of an
emergency. It also understands that, for the foregoing reasons, the
Shares may not be readily accepted as collateral for a loan.
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(j) ADDRESSES. The address set forth in Exhibit A attached hereto
is the Purchaser's true and correct residence and/or principal place of
business as of the date hereof.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of the Purchasers to purchase the Shares to be purchased
by them at the Closing is subject to the fulfillment to their satisfaction on or
prior to the Closing Date of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT.
The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all respects when made, and shall be true
and correct in all respects on the Closing Date and with respect thereto, after
giving effect to the sale and issuance of the Shares at the Closing.
5.2 PERFORMANCE.
All covenants, agreements and conditions contained in this Agreement
(including those in Section 2.1) to be performed or complied with by the Company
on or prior to the Closing Date shall have been so performed or complied with in
all material respects.
5.3 COMPLIANCE CERTIFICATE.
The Company shall have executed and delivered to the Purchasers a
certificate of the President of the Company, dated the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement and such other matters as the Purchasers may reasonably request.
5.4 OPINION OF COMPANY'S COUNSEL.
The Purchasers shall have received an opinion of counsel from Xxxxxxxx
Xxxxxxxxx Professional Corporation, special counsel to the Company, and a
supplementary opinion from Xxxx, Xxxxxxxx & Xxxxx L.L.C., counsel to the
Company, addressed to them, dated the Closing Date, to the effect and in
substantially the form set forth in Exhibit E.
5.5 GOOD STANDING CERTIFICATES.
The Company shall have delivered to the Purchasers a certificate of
recent date from the Secretary of State of the State of Delaware with respect to
the Company's due incorporation, good standing, legal corporate existence, due
authorization to conduct business and the payment
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of all franchise taxes, and, certificates from the Secretary of State in each
jurisdiction in which the Company is required to be qualified to do business
with respect to the Company's good standing and due authorization to conduct
business therein and payment of all qualification fees.
5.6 LEGAL INVESTMENT.
At the time of the Closing, the purchase of the Shares to be purchased
by the Purchasers hereunder shall be legally permitted by all laws and
regulations to which it and the Company are subject.
5.7 QUALIFICATIONS.
All authorizations, approvals, or permits of any governmental authority
or regulatory body that are required in connection with the lawful issuance and
sale of the Shares pursuant to this Agreement, the conversion of the Shares into
Common Stock and the issuance of such Common Stock upon such conversion shall
have been duly obtained and shall be effective on and as of the Closing Date,
including, if necessary, permits from applicable state securities authorities,
qualifying the offer and sale of the Shares and the Conversion Shares.
5.8 FILING OF AMENDED AND RESTATED CERTIFICATE.
The Amended and Restated Certificate shall have been filed with the
Secretary of the State of Delaware, duly amending the Certificate of
Incorporation of the Company.
5.9 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and special counsel for the Purchasers.
5.10 PROVISIONS OF BY-LAWS.
The By-Laws of the Company shall provide that (a) a majority of the
Directors constituting the Board shall constitute a quorum for the transaction
of any business at a meeting of the Board, and (b) the Board of Directors shall
meet at least four (4) times per year.
5.11 SHAREHOLDERS' AGREEMENT.
The Company, the Purchasers, the holders of a majority of the Company's
shares of Common Stock (the "Common Shareholders"), the holders of the Company's
shares of Series A Preferred (the "Series A Preferred Shareholders"), the
holders of the Company's shares of Series B Preferred (the "Series B Preferred
Shareholders") and the other parties named therein shall have executed and
delivered an Amended and Restated Shareholders' Agreement (as further amended
from time to time, the "Shareholders' Agreement") to the effect and in
substantially the form set forth in Exhibit F hereto.
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5.12 MANAGEMENT RIGHTS LETTERS.
The Company shall have executed and delivered to each Purchaser who
requests the same a Management Rights Letter (collectively, the "Management
Rights Letters") to the effect and in substantially the form set forth in
Exhibit G hereto.
5.13 BOARD OF DIRECTORS; INDEMNIFICATION.
Xxxx Xxxxxxxxx, Xx. Xxxxxx Xxxxxxx, Xx. Xxxxxxx Xxxxxx, Xxxx Xxxxx,
Xxxxxxx X. Xxxxxxxx and Xxxxx Xxxxx shall have been elected to the Board of
Directors, and the Company shall have agreed and obligated itself, either in the
Amended and Restated Certificate or in the Company's Bylaws, to indemnify its
officers and directors to the fullest extent permitted by Delaware law.
5.14 APPROVAL OF COMPANY BOARD OF DIRECTORS AND STOCKHOLDERS.
The Company shall have delivered to the Purchaser certified copies of
the resolutions of the Common Shareholders, Series A Preferred Shareholders and
Series B Preferred Shareholders and the Company's Board of Directors approving
the transactions contemplated by this Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 REPRESENTATIONS.
The representations made by the Purchasers pursuant to Section 4.1
hereof shall be true and correct when made and shall be true and correct on the
Closing Date.
6.2 PERFORMANCE.
All covenants, agreements and conditions contained in this Agreement to
be performed or complied with by each and every Purchaser on or prior to the
Closing Date shall have been so performed or complied with in all material
respects.
6.3 LEGAL INVESTMENT.
At the time of the Closing, the conditions set forth in Sections 5.6
and 5.7 shall have occurred and the purchase of the Shares to be purchased by
the Purchasers hereunder shall be legally permitted by all laws and regulations
to which the Purchasers and the Company are subject.
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6.4 AMENDED AND RESTATED CERTIFICATE.
The Amended and Restated Certificate shall have been accepted for
filing by the Secretary of State of the State of Delaware.
6.5 SHAREHOLDERS' AGREEMENT.
The Company, the Purchasers, the Common Shareholders, the Series A
Preferred Shareholders, the Series B Preferred Shareholders and the other
parties named therein shall have executed and delivered the Shareholders'
Agreement.
6.6 SECOND AMENDED AND RESTATED CERTIFICATE AND AMENDED AND RESTATED
BYLAWS.
The Company shall have received, in form and substance acceptable to
the Company, the consent of those Shareholders necessary to approve, adopt and
authorize the filing of the Amended and Restated Certificate of Incorporation
and the Amended and Restated Bylaws of the Company in the forms attached hereto
as Exhibits 6.6(a) and 6.6(b) respectively, upon the closing of a firm
commitment underwritten public offering of the Company's Common Stock.
SECTION 7
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Shares or any
Conversion Shares remain outstanding, or as otherwise provided in this Article
7:
7.1 BASIC FINANCIAL INFORMATION.
The Company will furnish the following reports to each Purchaser who
holds at least 200,000 Shares or Conversion Shares:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
Subsidiaries, if any, as at the end of such fiscal year, and
consolidated (and consolidating) statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for such year, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all
in reasonable detail audited (without scope limitations imposed by the
Company) and certified by independent public accountants of recognized
national standing selected by the Company and satisfactory to the
Purchasers.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company,
and in any event within forty-five (45) days thereafter, a consolidated
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(and consolidating) balance sheet of the Company and its Subsidiaries,
if any, as of the end of each such quarterly period, and consolidated
(and consolidating) statements of operations, accumulated earnings and
cash flows of the Company and its Subsidiaries, if any, for such period
and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and
setting forth in comparative form the figures for the corresponding
periods of the previous fiscal year, subject to changes resulting from
year-end audit adjustments, and setting forth any events which could
reasonably be expected to have an adverse effect upon the Company's or
any Subsidiary's finances or the results of its operations, all in
reasonable detail and certified by the principal financial or
accounting officer of the Company.
(c) As soon as practicable after the end of each fiscal month and
in any event within thirty (30) days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries, if any, as at the end of
such month, and consolidated statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for each month, prepared in accordance with generally accepted
accounting principals consistently applied, together with comparison of
such statements to the Annual Plan then in effect and to the financial
statements for the comparable period in the prior fiscal year, and
certified, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the
Company;
(d) Each set of financial statements delivered to the Purchasers
pursuant to this Section 7.1 will be accompanied by a certificate of
the Chief Financial Officer of the Company setting forth:
(i) Covenant Compliance - any information required in order to
establish whether the Company and its Subsidiaries were in
compliance with the requirements of this Section 7 during
the period covered by the income statement then being
furnished; and
(ii) Event of Default - that the signers have reviewed the
relevant terms of this Agreement and have made, or caused to
be made, under their supervision, a review of the
transactions and conditions of the Company and its
Subsidiaries, if any, from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate and that such
review has not disclosed the existence during such period of
any condition or event which constitutes a breach or default
under this Agreement, the Amended and Restated Certificate
or any of the Financing Documents or, if any such condition
or event existed or exists, specifying the nature and period
of existence thereof and what action the Company has taken
or proposes to take with respect thereto.
(e) As soon as available (but in any event thirty (30) days or more
before the commencement of each fiscal year) the Company's budget and
its operating plan for such fiscal year (the "Annual Plan") as approved
by the Board indicating, among other things, quarterly income
statements, balance sheets and cash flow statements for the next fiscal
year, plans for incurring indebtedness and projections regarding other
sources of funds; any material changes in such financial plan shall be
submitted as promptly as practicable after such changes have been
approved by the Board.
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7.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company, for any Purchaser who (together with members of
such Purchaser's Group) holds 200,000 or more Shares (such amount to be
adjusted for stock splits, combinations and other similar events
affecting the Series C Preferred), will Permit such Purchaser (or its
designated representative), at its own expense, to visit and inspect
any of the properties of the Company, including its books of account,
and to discuss its affairs, finances and accounts with the Company's
officers and its independent public accountants, all at such reasonable
times and as often as any such party may reasonably request. Any such
Purchaser shall give not less than two (2) business days' notice of any
such visitation or inspection and such visitation or inspection shall
be performed in a reasonable manner and with due regard to the
proprietary and confidential nature of any information received by it.
(b) The Company's obligations under Section 7.1 and this Section
7.2 shall terminate at such time as a Qualified Public Offering has
closed and any agreement of the type described in Section 9.15 hereof
is no longer in effect with respect to any Purchaser or when the
Company first becomes subject to the periodic reporting requirements of
the Exchange Act, whichever event shall first occur.
7.3 PROMPT PAYMENT OF TAXES, ETC.
The Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company, provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall at the time be contested in good faith
by appropriate proceedings, and provided, further, that unless otherwise
approved by the Board, the Company will pay all such taxes, assessments, charges
or levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. Unless otherwise approved by the
Board, the Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other obligations incident to its
operations.
7.4 MAINTENANCE OF PROPERTIES AND LEASES.
The Company will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper, or legally required, repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies, or has possession of, property if the breach of such provision might
have a material adverse effect on the condition, financial or otherwise, or
operations of the Company.
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7.5 INSURANCE.
The Company will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against loss or damage by
fire, extended coverage and explosion in amounts sufficient to prevent the
Company from becoming a co-insurer and not in any event less than 80% of the
insurable value of the property insured. The Company will maintain for itself,
with financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated. After the
Closing Date, the Company will continue to maintain directors' and officers'
liability insurance in the amount of at least $1,000,000, if such coverage is
available at commercially reasonable rates, at all times after the Closing Date.
After the Closing Date, the Company will continue to maintain insurance on the
life of Xx. Xxxxxxx Xxxxxx in the amount of $2,000,000, naming the Company as
the owner and beneficiary thereof, at all times after the Closing Date. The
Company shall give immediate written notice to insurers of loss or damage to the
property and shall promptly file proof of loss with insurers.
7.6 ACCOUNTS AND RECORDS.
The Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
7.7 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES.
The Company shall duly observe and conform to all valid requirements of
governmental authorities relating to the conduct of its businesses or to its
property or assets. Without limiting the generality of the foregoing, the
Company will:
(a) Comply with all minimum funding requirements applicable to any
pension plans, employee benefit plans or employee contribution plans
which are subject to ERISA or to the Code, and comply in all other
respects with the provisions of ERISA and the provisions of the Code
applicable to such plans;
(b) Comply with all applicable material laws of the United States
and of each applicable jurisdiction relating to equal employment
opportunity, any rules, regulations, administrative orders and
Executive Orders relating thereto and the applicable material terms,
relating to equal employment opportunity, of any contract, agreement or
grant the Company has with, from or relating (by way of subcontract or
otherwise) to any other contract, agreement or grant of, any federal or
state governmental unit; and keep all records required to be kept, and
file all reports, affirmative action plans and forms required to be
filed, pursuant to any such applicable law or the terms of any such
government contract; and
(c) So conduct its business that neither the Company nor any
property owned or occupied by the Company is in violation of any
Federal or State Environmental Law of any sort or in violation of any
Federal or State "OSHA" Law.
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7.8 MAINTENANCE OF CORPORATE EXISTENCE, ETC.
The Company shall maintain in full force and effect its corporate
existence, rights, government approvals and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names or
copyrights owned or possessed by it and deemed by the Company to be necessary to
the conduct of its business.
7.9 AVAILABILITY OF COMMON STOCK FOR CONVERSION OF SERIES C PREFERRED.
The Company will, from time to time, in accordance with the laws of the
state of its incorporation, increase the authorized amount of Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall be insufficient to permit the payment of dividends on the
Series C Preferred for a period of five (5) years in the form of Common Stock
and the conversion to Common Stock of all the then outstanding Shares.
7.10 PROPRIETARY INFORMATION AGREEMENT AND KEY EMPLOYEE AGREEMENT.
(a) The Company and each person hereafter employed by it with
access to confidential information will enter into a Proprietary
Information Agreement to the effect and in substantially the form of
Exhibit D hereto or as otherwise approved by the Board.
(b) The Company will require all persons now or hereafter employed
by the Company and designated as a "key person" by the Company's Board
of Directors to execute an Employment Agreement in favor of the Company
to the effect and in substantially the form of Exhibit H hereto or as
otherwise approved by the Board, as a condition precedent to the
employment of such individuals.
(c) The Company will cause all technological developments,
inventions, discoveries or improvements made by employees of the
Company to be fully documented in engineering notebooks in accordance
with the prevailing industrial professional standards, and where
possible and appropriate, cause all employees to file and prosecute
United States and foreign patent applications relating to and
protecting such developments.
7.11 QUALIFIED SMALL BUSINESS STOCK.
So long as any Shares or Conversion Shares are held by any Purchaser or
any transferee who is not a corporation, the Company will use its best efforts
to cause the Shares and, upon issuance, the Conversion Shares to qualify as
qualified small business stock within the meaning of Section 1202 of the Code,
provided that this Section 7.11 shall not require the Company to limit its gross
assets (within the meanings of Code Section 1202(d)(3)) to an amount that does
not exceed $50,000,000.
7.12 USE OF PROCEEDS.
The Company will use the proceeds from the sale of the Shares and the
Conversion Shares for the purposes described in Section 3.22 hereof.
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7.13 SECURITIES LAW FILINGS.
The Company will make any filings necessary to perfect in a timely
fashion exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act and (ii) the registration or qualification
requirements of all applicable securities or blue sky laws of any state or other
jurisdiction, for the issuance of the Shares and the Conversion Shares to the
Purchasers.
7.14 COMPLIANCE BY SUBSIDIARIES.
The Company will cause any Subsidiary which it may now have and/or
which it may organize or acquire in the future and which the Company controls to
comply fully with all the terms and provisions of Sections 7.3, 7.4, 7.6,
7.7,and 7.10 to the same extent as if such Subsidiary or Subsidiaries were the
"Company" herein.
SECTION 8
NEGATIVE COVENANTS
The Company agrees that, so long as any Shares remain outstanding, the
Company (and each of its Subsidiaries, if any, unless the context otherwise
requires) will not do any of the following after the Closing Date without the
approval of a majority of the Board the approval of the holders of a majority of
the Series C Preferred outstanding):
8.1 CHANGES IN TYPE OF BUSINESS.
Make any substantial change in the character of its business.
8.2 CONFLICTING AGREEMENTS.
Become subject to, or permit any of its Subsidiaries which it controls
to become subject to, any agreement or instrument, which by its terms would
(under any circumstances) restrict the Company's right to perform any of its
obligations pursuant to the terms of this Agreement or any agreement
contemplated hereby, the Amended and Restated Certificate, the Financing
Documents, or the Company's By-laws (including, without limitation, all
obligations relating to payment of dividends on and making redemptions of the
Series C Preferred and conversions of the Series C Preferred).
8.3 EMPLOYEE STOCK PLANS.
Hereafter issue, sell, grant or award any Equity Security or any option
to acquire any Equity Security to directors, officers, employees, consultants or
advisors to the Company, except for Equity Securities which are "Reserved
Employee Shares" within the meaning of Section 3(d)(i)(5)(C) of Article III,
Part B of the Amended and Restated Certificate.
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8.4 RELATED PARTY TRANSACTIONS.
Enter into, or permit any Subsidiary which it controls to enter into,
any transaction with any Related Party or any of its or any Subsidiary's
Affiliates, except as otherwise expressly contemplated by this Agreement or
referred to in Section 3.11 hereto.
SECTION 9
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
9.1 RESTRICTIONS ON TRANSFERABILITY.
Neither the Shares nor the Conversion Shares shall be transferable,
except upon the conditions specified in this Section 9, which conditions are
intended to insure compliance with the provisions of the Securities Act or, in
the case of Section 9.15 hereof, to assist in an orderly distribution of the
Company's securities. Each Purchaser will cause any proposed transferee of
Shares or Conversion Shares held by such Purchaser to agree to take and hold
those securities subject to the provisions and upon the conditions specified in
this Section 9.
9.2 CERTAIN DEFINITIONS.
As used in this Section 9, the following terms shall have the following
respective meanings:
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 9.3 hereof.
"REGISTRABLE SECURITIES" shall mean, from time to time, (i) the
Conversion Shares, less any Conversion Shares theretofore sold to the public,
and (ii) any shares of Common Stock issued as dividends on the Shares.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in compliance with Sections 9.5, 9.6 and 9.7 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses (not to exceed
$20,000) of one special counsel for all Holders chosen by the Holders of a
majority of the securities included in such registration, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and all fees and
disbursements of counsel for any Holder (other than the fees and expenses of one
special counsel for all Holders included within the definition of Registration
Expenses).
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"HOLDER" shall mean any holder of outstanding Shares, Conversion Shares
or Registrable Securities which have not been sold to the public.
"INITIATING HOLDERS" shall mean any Purchaser (or their assignees under
Section 9.14 hereof) who in the aggregate are Holders of more than fifty percent
(50%) of the Registrable Securities, and, after any other Holder or Holders have
joined in a request by Initiating Holders, shall include such other Holder or
Holders.
"TERMINATION DATE" shall mean, as to all Holders, the date that is five
(5) years after the closing of an Initial Public Offering, provided that as of
such date the Company is subject to and is in compliance with the periodic
reporting requirements of the Exchange Act and shares of the Common Stock are
actively traded on the Nasdaq National Market or other national securities
exchange. In addition, "Termination Date" as to a particular Holder shall mean
such date as of which (i) the Company is subject to and in compliance with the
periodic reporting requirements of the Exchange Act, (ii) shares of the Common
Stock are traded as described above, and (iii) such Holder is able, within the
ninety (90) day period immediately following such date, to transfer all of such
Holder's Registrable Securities in compliance with Rule 144 promulgated by the
Commission under the Securities Act.
"OTHER SHAREHOLDERS" shall have the meaning set forth in Section
9.5(b).
9.3 RESTRICTIVE LEGEND.
Each certificate representing (i) the Shares, or (ii) the Conversion
Shares, or (iii) any other securities issued in respect of the Shares or the
Conversion Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted or
unless the securities evidenced by such certificate shall have been registered
under the Securities Act) be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
l933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if with such request, the
Company shall have received either the opinion referred to in Section 9.4(a)(i)
or the "no-action" letter referred to in Section 9.4(a)(ii), to the effect that
any transfer by such holder of the securities evidenced by such certificate will
not violate the Securities Act and applicable state securities laws.
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9.4 NOTICE OF PROPOSED TRANSFERS AND SECURITIES ACT COMPLIANCE.
(a) The holder of Restricted Securities by acceptance thereof
agrees to comply in all respects with the provisions of this Section
9.4. Prior to any proposed transfer of any Restricted Securities (other
than under circumstances described in Sections 9.5, 9.6 and 9.7 hereof
and other than to a member of such holder's Group, as defined below),
the holder thereof shall give written notice (or oral notice in the
case of transactions in compliance with Rule 144) to the Company of
such holder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either:
(i) a written opinion of Xxxxxxxx Xxxxxxxxx Professional
Corporation or other legal counsel (including counsel for
the holder who also may be an employee of the holder) who
shall be reasonably satisfactory to the Company, addressed
to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the
proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act and
applicable state securities laws, or
(ii) a "no-action" letter from the Commission to the effect that
the distribution of such securities without registration
will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto,
provided, that in the case of a transfer of Restricted
Securities to a member of a holder's Group (as such term is
defined in the Shareholders' Agreement), no such opinion of
counsel or no-action letter shall be necessary, provided
that the transferee agrees in writing to be subject to the
restrictions on transfer of the Restricted Securities to the
same extent as if such transferee were originally a party
signatory to this Agreement. Upon receipt by the Company of
such notices and accompanying opinion or "no-action" letter,
if required, the holder of such Restricted Securities shall
be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by the
holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall
bear the appropriate restrictive legend set forth in Section
9.3 above, except that such certificate need not bear such
restrictive legend if such legend is no longer required if
the opinion of counsel or "no-action" letter referred to
above is to the further effect that such legend is not
required in order to establish compliance with any
provisions of the Securities Act or applicable state
securities laws or if the transaction is made, to the
Company's reasonable satisfaction, in compliance with Rule
144. Notwithstanding anything to the contrary contained in
this Section (a), no holder of Restricted Securities will
transfer any of such Restricted Securities to any member of
such holder's Group that is not a Qualified Institutional
Buyer at the time of such transfer, except under the
circumstances described in Sections 9.5, 9.6 and 9.7 hereof
and except in transactions in compliance with Rule 144.
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(b) With a view to making available the benefits of certain rules
and regulations of the Commission and applicable state securities laws
which may permit the sale of the Restricted Securities without
registration, the Company agrees to (i) make available to the holder of
Restricted Securities and any proposed transferee current financial and
other information about the Company and an adequate opportunity for the
proposed transferee to visit the Company's offices and discuss its
affairs with management and (ii) use its best efforts to otherwise
cooperate with such holder and such transferee, all as may be
reasonably required by such holder or proposed transferee.
9.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If at any time after January 1, 2001,
the Company shall receive from Initiating Holders a written request
that the Company effect a registration with respect to all or a part of
the Registrable Securities, the Company will, without limiting any
other rights under this Section 9:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the
execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate
compliance with applicable regulations issued under the
Securities Act) as may be so requested and as would permit
or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request given by
such Holder or Holders within fifteen (15) days after
receipt of such written notice from the Company; provided
that the Company shall not be obligated to effect, or to
take any action to effect, any such registration pursuant to
this 9.5:
(A) after the Company has effected one (1) such
registration pursuant to this Section 9.5(a) and such
registration has been declared or ordered effective and the
sales of such Registrable Securities shall have closed; or
(B) if the request for registration does not
request the registration of Registrable Securities with a
proposed public offering price of $10,000,000 or more.
Subject to Section 9.5(a)(ii), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 9.5(b) below,
include other securities of the Company which
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are held by officers or directors of the Company or which are held by parties
who, by virtue of agreements with the Company, are entitled to include their
securities in any such registration.
(b) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 9.5 and the Company shall include
such information in the written notice referred to in subsection 9.5
(a)(a)(i) above. The right of any Holder to registration pursuant to
this Section 9.5 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) to the
extent provided herein.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to
this Section 9.5, or if holders of securities of the Company who are
entitled, by contract with the Company, to have securities included in
such registration (the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to
include the securities of such officers, directors and Other
Shareholders in the underwriting and may condition such offer on their
acceptance of all applicable provisions of this Section 9. The Company
shall (together with all Holders, officers, directors and Other
Shareholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form
with the representative of the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders
and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 9.5, if the
representative of the underwriter or underwriters advises the
Initiating Holders in writing that marketing factors make it advisable
to impose a limitation on the number of shares to be underwritten, the
securities of the Company (other than Registrable Securities) held by
officers or directors of the Company and by Other Shareholders shall be
excluded from such registration to the extent so required by such
limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all Holders of
Registrable Securities requesting registration, and the number of
shares of Registrable Securities that may be included in the
registration and underwriting on behalf of such Holders shall be
reduced as required, such reduction to be allocated among such Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such persons at the time of filing the
Registration Statement.
If any Holder of Registrable Securities, officer, director or Other
Shareholder above disapproves of the terms of the underwriting, such
party may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. The securities so withdrawn
shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may
include its securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
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(c) TERMINATION. The Company's obligations under this Section 9.5
shall terminate, as to any Holder, on the first Termination Date
applicable to such Holder.
9.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If the Company shall determine to
register any of its securities either for its own account or the
account of a security holder or holders exercising their respective
demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration
form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
by any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i)
above, except as set forth in subsection 9.6(b) below.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the written notice
given pursuant to subsection 9.6(a)(i). In such event, the right of any
Holder to registration pursuant to Section 9.6 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion
of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company.
Notwithstanding any other provision of this Section 9.6, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: (i) securities (other than Registrable Securities) held
by officers or directors of the Company and by Other Shareholders shall be
excluded from such registration to the extent so required by such
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limitation, and (ii) if a limitation of the number of shares to be underwritten
is still required, the Company shall so advise all Holders of Registrable
Securities requesting registration, and the number of shares of Registrable
Securities that may be included in the registration and underwriting on behalf
of such Holders shall be reduced as required, such reduction to be allocated
among such Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such persons at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, such party
may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) TERMINATION. The Company's obligations under this Section 9.6
shall terminate, as to any Holder, on the first Termination Date
applicable to such Holder.
9.7 REGISTRATION ON FORM S-3.
The Company shall use its reasonable best efforts to qualify for the
use of Form S-3 or any comparable or successor form or forms of the Commission;
and to that end the Company shall register (whether or not required by law to do
so) the Common Stock under the Exchange Act, in accordance with the provisions
of the Exchange Act following the effective date of the first registration, if
any, of any securities of the Company on Form S-1. After the Company has
qualified for the use of Form S-3, in addition to the rights contained in the
foregoing provisions of this Section 9, the Holders of Registrable Securities
shall have the right to request registrations on Form S-3 (by written request
stating the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by such Holder or Holders),
subject only to the following:
(i) No request made under this Section 9.7 shall require a
registration statement requested therein to become effective
(a) prior to ninety (90) days after the effective date of a
registration statement filed by the Company covering a firm
commitment underwritten public offering of Common Stock or
(b) prior to the effective date of a registration statement
referred to in (a) above if the Company shall theretofore
have given written notice of such registration statement to
the Holders of Registrable Securities pursuant to subsection
9.5(a) or 9.6(a) and shall have thereafter pursued the
preparation, filing and effectiveness of such registration
statement with diligence;
(ii) The Company shall not be required to effect a registration
pursuant to this Section 9.7 unless the Registrable
Securities requested to be registered pursuant to this
Section 9.7 have a proposed public offering price of
$500,000 or more; and
(iii) The Company shall not be required to effect more than two
(2) registrations pursuant to this Section 9.7.
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The Company shall give notice to all Holders of Registrable Securities
of the receipt of a request for registration pursuant to this Section 9.7 and
shall provide a reasonable opportunity for other Holders to participate in the
registration, and, if the intended method of disposition specified as aforesaid
is an underwritten public offering, participation by the Company and other
holders of Common Stock shall be on the basis set forth in Section 9.5(b) above.
Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the extent requested by the Holder or Holders thereof for purposes of
disposition.
The Company's Obligations under this Section 9.7 shall terminate, as to
any Holder, on the first Termination Date applicable to such Holder.
9.8 EXPENSES OF REGISTRATION.
The Company shall bear all Registration Expenses incurred in connection
with any registration, qualification and compliance by the Company pursuant to
Sections 9.5, 9.6 and 9.7 hereof. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 9.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating holders shall bear
such expenses pro rata on the basis of the number of their shares so
registered); provided, however, that (i) the Company shall be required to pay
for any expenses of any registration proceeding begun pursuant to Section 9.5 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, if at or prior to
the time of such withdrawal, the Holders shall have learned of a material
adverse change in the condition, business, or prospects of the Company that was
not known to the Holders at the time of their request and have withdrawn the
request with reasonable promptness following disclosure to the Holders by the
Company of such material adverse change, and (ii) in addition to its obligations
under clause (i) of this provision, the Company shall be required to pay for the
expenses of not more than one additional registration proceeding begun pursuant
to Section 9.5 if the registration request is subsequently withdrawn, at the
request of the Holders of a majority of the Registrable Securities to be
registered, for any other reason. All Selling Expenses shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
their shares so registered.
9.9 REGISTRATION PROCEDURES.
In the case of each registration effected by the Company pursuant to
this Section 9, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. Except as
provided in Section 9.7, at its expense, the Company will:
(a) keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs, provided, however, that such one hundred twenty
(120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration or otherwise at the request of the Company;
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(b) furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(c) use its best efforts to register or qualify the Registrable
Securities under the securities or blue-sky laws of such jurisdictions
as any Holder may request; provided, however, that the Company shall
not be obligated to register or qualify such Registrable Securities in
any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in order to effect such
registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or regulations
thereunder; and
(d) use its best efforts to cause the Common Stock to be listed on
a national securities exchange or the Nasdaq National Market.
9.10 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, with respect to each registration, qualification
and compliance effected pursuant to this Section 9, will indemnify and
hold harmless each Holder, each of its officers, directors and
partners, and each party controlling such Holder, and each underwriter,
if any, and each party who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action
or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party
controlling such Holder, each such underwriter and each party who
controls any such underwriter, for any legal and any other expenses
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished
to the Company by such Holder or underwriter, as the case may be, and
stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by such party are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities
covered by such a registration statement, each party who controls the
Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and
partners, and each party controlling such Holder or Other
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Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and
such Holders, Other Shareholders, directors, officers, partners,
parties, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written
information furnished to the Company by such Holder or Other
Shareholder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Shareholders
hereunder shall be limited to an amount equal to the net proceeds to
each such Holder or Other Shareholder of securities sold as
contemplated herein, provided further that the indemnification
obligations of each Holder and Other Shareholders hereunder who are
affiliated entities or persons shall be joint and several.
(c) Each party entitled to indemnification under this Section 9.10
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or
potential differing interests or defenses exist or may exist between
the Indemnifying Party and the Indemnified Party, in which case such
expense shall be paid by the Indemnifying Party), and provided further
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Section 9. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which (i) does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation, (ii)
includes equitable or other non-monetary relief, (iii) involves
admission of criminal or quasi-criminal activity, or (iv) any admission
or implication of bad faith, unfair dealing, self-dealing, dishonesty
or any similar claim which could reasonably be expected to be
detrimental to or injure such Indemnified Party's reputation or future
business prospects.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either
(i) any holder of Restricted Securities exercising rights under this
Agreement, or any controlling person of any such holder, makes a claim
for indemnification pursuant to this Section 9.10 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent
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jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 9.10 provides for
indemnification in such case, or (ii) contribution under the Securities
Act may be required on the part of any such selling holder or any such
controlling person in circumstances for which indemnification is
provided under this Section 9.10; then, and in each such case, the
Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the
public offering price of its Restricted Securities offered by the
registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any
such case, (A) no such holder will be required to contribute any amount
in excess of the public offering price of all such Restricted
Securities offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
9.11 INFORMATION BY HOLDER.
Each Holder of Registrable Securities, and each Other Shareholder
holding securities included in any registration, shall furnish to the Company
such information regarding such Holder or Other Shareholder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
9.
9.12 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES.
From and after the date of this Agreement, the Company shall not enter
into any agreement, or amend any existing agreement, with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company to initiate any registration
of any securities of the Company; provided that this Section 9.12 shall not
limit the right of the Company to enter into any agreements, or amend any
existing agreement, with any holder or prospective holder of any securities of
the Company giving such holder or prospective holder the right to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder and provided further that the Board may waive the requirement that the
Company not enter into any agreement, or amend any existing agreement, giving a
holder of any securities of the Company the right to require the Company to
initiate registration of any securities of the Company, provided that, if such
registration rights are more favorable than those granted to the Holders
pursuant to this Section 9, then the terms of this Section 9 shall
simultaneously be amended so as to include herein for the benefit of the Holders
such more favorable terms. In addition, any right given by the Company to any
holder or prospective holder of the Company's securities in connection with the
registration of securities shall be conditioned such that it shall be (i)
consistent with the provisions of this Section 9 and with the rights of the
Holders provided in this Agreement, and (ii) require the inclusion of
Registrable Securities (within the meaning of this Agreement) in any
registration required by any such holder or prospective holder on the same basis
as securities of Other Shareholders are required to be included in registrations
effected pursuant to Sections 9.5 and 9.6 of this Agreement.
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9.13 RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the Restricted
Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of
the first registration under the Securities Act filed by the Company
for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at any time after it has become
subject to such reporting requirements; and
(c) So long as a Purchaser owns any Restricted Securities, furnish
to the Purchasers forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule
144 (at any time from and after ninety (90) days following the
effective date of the first registration statement in connection with
an offering of its Securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
9.14 TRANSFER OF REGISTRATION RIGHTS.
The rights to cause the Company to register securities granted by the
Company under this Section 9 may be assigned by any Holder to a transferee or
assignee of at least 50,000 shares of Registrable Securities (as adjusted for
stock splits, combinations and other similar events affecting the Registrable
Securities), provided that the Company is given written notice at the time of or
within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, and provided further that the
transferee or assignee of such rights agrees to be bound by the provision of
this Section 9. No Holder of Registrable Securities shall have any rights under
this Section 9 unless such Holder shall have executed this Agreement or an
instrument in which it agrees to be bound by the terms of this Section 9.
9.15 "MARKET STAND-OFF" AGREEMENT.
Each Purchaser agrees, if requested by the Company and an underwriter
of the Company's Common Stock (or other securities), not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by it during such period as the Company specifies in its request not to
exceed one hundred eighty (180) days with respect to
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only the Company's firm commitment initial public offering; such agreement not
to sell or otherwise dispose of the Common Stock (or other securities of the
Company) shall not apply to any securities of the Company acquired in the
Company's initial public offering or on the open market thereafter. Each
Purchaser further agrees, if requested by the Company and an underwriter of the
Company's Common Stock (or other securities), to enter into a "lock-up"
agreement if all directors, officers and Holders of at least 1% of the Company's
outstanding capital stock of the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or other securities) held by the Purchaser subject
to the foregoing restriction until the end of said periods.
SECTION 10
DEFINITIONS
As used in this Agreement or in the Financing Documents, capitalized
terms shall have the respective meanings set forth in this Agreement (including,
without limitation, in Section 9.2 hereof) or set forth below or in the Section
of this Agreement referred to below:
AFFILIATE shall mean, as to any entity or person, any natural person,
corporation, business trust, association, company, partnership, joint venture or
other entity or government agency or political subdivision which directly or
indirectly controls, is controlled by or is under common control with such
entity or person.
AMENDED AND RESTATED CERTIFICATE - Section 1.1.
ANNUAL PLAN - Section 7.1(e).
BALANCE SHEET - Section 3.7.
BUSINESS - Section 3.21.
BOARD shall mean the entire Board of Directors of the Company.
CLOSING - Section 2.1.
CLOSING DATE - Section 2.1.
CODE - Section 3.30.
COMMISSION shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
COMMON SHAREHOLDERS - Section 5.11.
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COMMON STOCK - Section 3.4.
CONVERSION SHARES shall mean at any time, shares of Common Stock (i)
issued and then outstanding upon the conversion of the Series C Preferred
purchased under this Agreement, (ii) issuable upon the conversion of the Series
C Preferred purchased under this Agreement, and (iii) issued and then
outstanding or issuable in respect of the Common Stock referred to in clause (i)
of this definition upon any stock split, stock dividend, recapitalization or
similar event.
EMPLOYMENT AGREEMENT - Section 3.20.
ENVIRONMENTAL CLAIM shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of compliance or violation (written or
oral) by any person or entity (including any governmental authority) alleging
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Material at any location, whether owned, operated, leased or managed
by the Company or its Subsidiaries; or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law; or (c) any and
all claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
ENVIRONMENTAL LAWS shall mean all laws or orders relating to the
regulation or protection of human health, safety or the environment (including,
without limitation, ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling or handling of Hazardous Materials.
ENVIRONMENTAL PERMITS - Section 3.23.
EQUITY SECURITIES shall mean any stock or similar security, including
without limitation securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with or without consideration, into any stock or similar security,
or any security carrying any warrant or right to subscribe to or purchase any
stock or similar security, or any such warrant or right.
ERISA - Section 3.23.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended, and any regulations issued pursuant thereto.
FINANCING DOCUMENTS shall mean collectively, the Shareholders'
Agreement, the Management Rights Letters and all other documents set forth in
any other schedules or exhibits hereto, under which, upon its execution thereof,
the Company or any Subsidiary shall have an obligation to any Purchaser, all in
the respective forms thereof as executed and as amended from time to time.
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FINANCIAL STATEMENTS - Section 3.7.
GROUP shall mean:
(i) in the case of any Purchaser who is an individual, such
Purchaser or any Affiliate of such Purchaser;
(ii) in the case of any Purchaser which is a pass-through entity,
(A) such pass-through entity and any of its partners,
members or other equity owners, (B) any corporation or other
business organization to which such pass-through entity
shall sell all or substantially all of its assets or with
which it shall be merged or consolidated and (C) any
Affiliate of such pass-through entity; and
(iii) in the case of any Purchaser which is a corporation, (A) any
such corporation, its parent and any of such corporation's
or parent's subsidiaries, (B) any corporation or other
business organization to which such corporation shall sell
all or substantially all of its assets or with which it
shall be merged, and (C) any Affiliate of such corporation.
HAZARDOUS MATERIALS shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
above ground or underground storage tanks and compressors or other equipment
that contain polychlorinated biphenyls ("PCBs"); and (b) any chemicals,
materials or substances which are now defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants" or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
HOLDER - Section 9.2.
INDEBTEDNESS shall mean any obligation of the Company, contingent or
otherwise, which under generally accepted accounting principles is required to
be shown on the balance sheet of the Company as a liability. Any obligation
secured by a lien or security interest on, or payable out of the proceeds of or
production from, property of the Company shall be deemed to be Indebtedness even
though such obligation is not assumed by the Company.
INITIAL PUBLIC OFFERING shall mean the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act covering the offering and sale of Common Stock for the account of the
Company, on a firm commitment basis.
MANAGEMENT RIGHTS LETTERS - Section 5.12.
MEMORANDUM - Section 3.1.
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PERSON shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
PROPRIETARY INFORMATION AGREEMENT - Section 3.20.
QUALIFIED INSTITUTIONAL BUYER - A "qualified institutional buyer" as
defined in Commission Rule 144A.
QUALIFIED PUBLIC OFFERING - shall mean the first underwritten public
offering following the date hereof pursuant to an effective registration
statement under the Securities Act covering the offering and sale of Common
Stock for the account of the Company, on a firm commitment basis in which (i)
the aggregate gross proceeds to Company equal or exceed Twenty Million Dollars
($20,000,000), and (ii) the public offering price per share of Common Stock
equals or exceeds an amount equal to $36.46.
PLACEMENT AGENT - shall mean Prudential Vector Healthcare Group.
REINCORPORATION MERGER - Section 3.31.
RELATED PARTY shall mean any officer, director, employee or consultant
of the Company or any Subsidiary or any holder of 5% or more of any class of
capital stock of the Company or any Subsidiary or any member of the immediate
family of any such officer, director, employee, consultant or shareholder or any
entity controlled by any such officer, director, employee, consultant or
shareholder or a member of the immediate family of any such officer, director,
employee, consultant or shareholder.
RELEASE shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, ground water or property.
RESTRICTED SECURITIES - Section 9.2.
SECURITIES ACT shall mean the Securities Act of 1933, as amended, and
regulations issued pursuant thereto.
SERIES A PREFERRED - Section 3.4.
SERIES A PREFERRED SHAREHOLDERS - Section 5.11.
SERIES A PURCHASE AGREEMENT shall mean the Series A Preferred Stock and
Warrant Purchase Agreement dated as of January 21, 1998 by and among the Company
and each of the parties listed on the Schedule of Purchasers attached thereto.
SERIES B PREFERRED - Section 3.4.
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SERIES B PURCHASE AGREEMENT shall mean the Series B Preferred Stock
Purchase Agreement dated as of February 23, 2000 by and among the Company and
each of the parties listed on the Schedule of Purchasers attached thereto.
SERIES C PREFERRED - Section 1.1.
SHAREHOLDERS' AGREEMENT - Section 5.11.
SHARES - Section 1.2.
SUBSIDIARY shall mean any corporation, partnership, joint venture,
association or other business entity at least 50% of the outstanding voting
stock or voting interests of which is at the time owned or controlled, directly
or indirectly, by the Company or by one or more of such Subsidiary entities or
both.
TECHNOLOGY - Section 3.16.
SECTION 11
MISCELLANEOUS
11.1 GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
11.2 SURVIVAL.
The representations, warranties, covenants and agreements made herein
shall survive any investigation made by any Purchaser and shall survive the
Closing for the periods set forth in this Section 11.2. The covenants and
agreements made herein and all claims and causes of actions with respect thereto
shall survive forever. The representations and warranties made herein and all
claims and causes of action with respect thereto shall terminate upon the
earlier to occur of (a) the three (3) year anniversary of the Closing Date and
(b) the one (1) year anniversary of the date the Company completes a Qualified
Public Offering; provided that the representations and warranties of the Company
set forth in Section 3.1 (Organization and Standing; Articles and By-Laws),
Section 3.23.2 (Corporate Power), Section 3.4 (Capitalization), Section 3.5
(Authorization), Section 3.18 (Offering), 3.19 (Compliance with other
Instruments), Section 3.27 (Registration Rights) and Section 11.8 and the
representations and warranties of each Purchaser set forth in Section 4.1 shall
survive forever; it being understood that in the event notice of any claim for
breach of any representation or warranty shall have been given within the
applicable survival period, the representations and warranties that are the
subject of such claim shall survive until the time as such claim is finally
resolved.
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11.3 SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto; provided, however,
that the Company may not assign its rights hereunder. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of the Shares or the Conversion Shares.
11.4 ENTIRE AGREEMENT.
This Agreement (including the Schedules and Exhibits hereto, which are
an integral part of this Agreement) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Except as otherwise
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the holders of greater than fifty percent (50%) of the
Conversion Shares which have not been sold to the public, but in no event shall
this paragraph be amended without the approval of the holders of at least
seventy-five percent (75%) of such Conversion Shares, nor shall any other
provision of this Agreement that specifies a requirement for a consent, vote or
approval of the Purchasers or of the holders of Shares or Conversion Shares be
amended without the approval of the percentage of Purchasers or holders
specified in such provision, or the obligation of any Purchaser hereunder
increased except upon the written consent of such Purchaser.
11.5 NOTICES, ETC.
(a) All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class,
registered or certified mail, postage prepaid, or delivered either by
hand or by messenger, or sent via telex, telecopier, computer mail or
other electronic means, addressed (a) if to a Purchaser, at the address
shown on the Schedule of Purchasers, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to
any other holder of any Shares or any Conversion Shares at such address
as such holder shall have furnished to the Company in writing, or,
until any such holder so furnishes an address to the Company, then to
and at the address of the last holder thereof who has so furnished an
address to the Company, or (c) if to the Company, 000 Xxxxxxx Xxxx Xxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000, Attn: President or at such other
address as the Company shall have furnished to the Purchasers and each
such other holder in writing.
(b) Any notice or other communications so addressed and mailed,
postage prepaid, by registered or certified mail (in each case, with
return receipt requested) shall be deemed to be given four (4) business
days after so mailed. Any notice so addressed and otherwise delivered
shall be deemed to be given when actually received by the addressee.
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11.6 DELAYS OR OMISSIONS.
No delay or omission to exercise any right, power or remedy accruing to
any of the parties hereto, upon any breach or default of any of the other
parties hereto under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party hereto of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party hereto, shall be
cumulative and not alternative.
11.7 RIGHTS; SEPARABILITY.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
11.8 AGENT'S FEES AND SERVICES.
(a) The Company represents and warrants that, except for the
Placement Agents, it has retained no finder or broker or other person
or firm in connection with the transactions contemplated by this
Agreement. The Company accepts sole responsibility for and agrees to
pay all agent's fees to the Placement Agents and any broker, finder or
other person or firm in connection with the transactions contemplated
herein, other than those which a Purchaser has agreed to pay pursuant
to Section 11.8(b). In addition, the Company hereby agrees to indemnify
and to hold the Purchasers harmless of and from any liability for any
commission or compensation in the nature of an agent's fee to any
broker, finder or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) arising from
any act by the Company or any of its employees or representatives.
(b) Each Purchaser represents and warrants as to itself only that
it has retained no finder or broker in connection with the transactions
contemplated by this Agreement. Each Purchaser accepts sole
responsibility for and agrees to pay all agent's fees to any broker,
finder or other person or firm hired by such Purchaser in connection
with the transactions contemplated herein, other than those which the
Company has agreed to pay pursuant to Section 11.8(a). In addition,
each Purchaser hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation
in the nature of an agent's fee to any broker, finder or other person
or firm (and the costs and expenses of defending against such liability
or asserted liability) arising from any act by such Purchaser or any of
its employees or representatives, other than those which the Company
has agreed to pay pursuant to Section 11.8(a).
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11.9 LEGAL FEES AND EXPENSES.
The Company shall bear its own expenses and legal fees incurred on its
behalf with respect to this Agreement and the transactions contemplated hereby.
The Purchasers shall bear their own expenses and legal fees incurred on their
behalf with respect to this Agreement and the transactions contemplated hereby;
notwithstanding the foregoing the Company shall pay on behalf of the Purchasers
up to $25,000 of the actual legal fees and expenses of one (1) counsel,
Buchalter, Nemer, Fields & Younger, with respect to this Agreement and the
transactions contemplated hereby.
11.10 TITLES AND SUBTITLES.
The titles of the Sections and subsections of this Agreement are for
convenience or reference only and are not to be considered in construing this
Agreement.
11.11 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall constitute a complete and original instrument but
all of which together shall constitute one and the same agreement, and it shall
not be necessary when making proof of this Agreement or any counterpart thereof
to account for any other counterpart.
11.12 AGGREGATION OF STOCK.
All shares of Series C Preferred Stock held or acquired by affiliated
entities or persons shall be aggregated for purposes of determining any rights
under Sections 7.1 or 7.2 of this Agreement.
[The remainder of this page is intentionally left blank;
signature page follows.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
CELLOMICS, INC.
By: /s/ D. LANSING XXXXXX
----------------------------------
Name: D. Lansing Xxxxxx
Title:
AMERINDO INTERNET FUND PLC
BY: AMERINDO INVESTMENT ADVISORS, INC.,
ITS MANAGER
By: /s/ GARY DANAKA
-----------------------------------
Name: Gary Danaka
Title: Executive Vice President
AMERINDO TECHNOLOGY GROWTH FUND II INC.
By: /s/ GARY DANAKA
-----------------------------------
Name: Gary Danaka
Title: Director
EMERGING TECHNOLOGY PORTFOLIO
By: /s/ GARY DANAKA
-----------------------------------
Name: Gary Danaka
Title: Attorney-in-Fact
XXXXXX MASTER TRUST
By: /s/ GARY DANAKA
-----------------------------------
Name: Gary Danaka
Title: Attorney-in-Fact
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VECTOR LATER-STAGE EQUITY FUND II, LP
By: Vector Fund Management II, LLC
General Partner
By: /s/ XXXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title Managing Director
VECTOR LATER-STAGE EQUITY FUND II (QP), LP
By: Vector Fund Management II, LLC
General Partner
By: /s/ XXXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title Managing Director
INTERWEST PARTNERS, VI, LP
By: Interwest Management Partners VI, LLC
By: /s/ XXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title Managing Director
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INVESCO GLOBAL HEALTH SCIENCES FUND
By: [ILLEGIBLE]
---------------------------------
Name:
Title:
ALTA CALIFORNIA PARTNERS II, L.P.
BY: ALTA CALIFORNIA MANAGEMENT
PARTNERS II, LLC, Its GENERAL
PARTNER
By: [ILLEGIBLE]
---------------------------------
Name:
Title: Member
ALTA EMBARCADERO PARTNERS II, LLC
BY: /s/ XXXXXX XXXXXX
---------------------------------
Name: Xxxxxx Xxxxxx
Title: Under Power of Attorney
BAYSTAR CAPITAL, LP
By:_____________________________
Name:
Title:
BAYSTAR INTERNATIONAL LIMITED
By:_____________________________
Name:
Title:
XXXXXXX BIOTECHNOLOGY CAPITAL FUND LP
By:_____________________________
Name:
Title:
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ARIANE HEALTH LIMITED, LDC
By: /s/ XXX XXXXXXXX
--------------------------------
Name: Xxx Xxxxxxxx, Ph.D.
Title: Director, Portfolio Management
XXXXX GESTION (BIOSPHERE)
By: /s/ XXXXXX XXXXXXXXXX
--------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title Fund Manager
LCF ROTHSCHILD ASSET MANAGEMENT
(FCPR CROISSANCE DISCOVERY)
By: /s/ [ILLEGIBLE]
-------------------------------
Name: [Illegible]
Title Director
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EXHIBIT A
SCHEDULE OF PURCHASERS
TOTAL SERIES C
NAME AND ADDRESS INVESTMENT PREFERRED SHARES
---------------- ---------- ----------------
Alta California Partners II, L.P. 4,999,996.79 274,273
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Amerindo Internet Fund PLC 1,833,336.41 100,567
c/o Amerindo Investment Advisors, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Amerindo Technology Growth Fund II Inc. 1,833,354.64 100,568
c/o Amerindo Investment Advisors, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Ariane Health Limited, LDC 1,000,006.65 54,855
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
BayStar Capital, LP 1,333,342.20 73,140
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
BayStar International Limited 666,671.10 36,570
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Xxxxxxx Biotechnology Capital Fund LP 3,000,001.72 164,564
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Xxxxx Gestion (Biosphere) 99,991.55 5,485
0 Xxx xxx Xxxxxxxx
00000 Xxxxx, Xxxxxx
Emerging Technology Portfolio 1,833,336.41 100,567
c/o Amerindo Investment Advisors Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Interwest Partners, VI, LP 1,500,000.86 82,282
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
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TOTAL SERIES C
NAME AND ADDRESS INVESTMENT PREFERRED SHARES
---------------- ---------- ----------------
Invesco Global Health Sciences Fund 6,999,991.86 383,982
0000 X-Xxxxx Xxxxxx
Mail Stop 1102
Xxxxxx, XX 00000
LCF Rothschild Asset Management 400,002.66 21,942
(FCPR Croissance Discovery)
00 Xxx xx Xxxxxxxx Xxxxx Xxxxxx
00000 Xxxxx, Xxxxxx
Xxxxxx Master Trust 1,499,964.40 82,280
c/o Amerindo Investment Advisors Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Vector Later-Stage Equity Fund II (QP), LP 2,250,001.29 123,423
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Vector Later-Stage Equity Fund II, LP 750,000.43 41,141
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
TOTAL 29,999,998.87 1,645,639
58
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
59
EXHIBIT C
SCHEDULE OF EXCEPTIONS
The Section references in this Schedule are to Sections in the Series C
Preferred Stock Purchase Agreement to which this Schedule is attached.
60
EXHIBIT D
FORM OF PROPRIETARY INFORMATION AGREEMENT
61
EXHIBIT E
FORM OF OPINION OF COUNSEL
62
EXHIBIT F
FORM OF AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
63
EXHIBIT G
FORM OF MANAGEMENT RIGHTS LETTER
64
EXHIBIT H
FORM OF KEY EMPLOYEE AGREEMENT
