1
Exhibit 4.3
================================================================================
SERIES A PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
by and among
THE PURCHASERS LISTED ON EXHIBIT A HERETO
and
CELLOMICS, INC.
Dated as of January 21, 1998
================================================================================
2
TABLE OF CONTENTS
PAGE NO.
--------
SECTION 1 - AUTHORIZATION, PURCHASE AND SALE OF SHARES
AND WARRANTS
1.1 Authorization of the Shares .............................................. 1
1.2 Sale and Purchase of the Shares and Warrants.............................. 1
1.3 Certain Defined Terms .................................................... 2
SECTION 2 - CLOSINGS, PAYMENT AND DELIVERY
2.1 Closing Dates ............................................................ 2
2.2 Place of Closings ........................................................ 3
2.3 Closing Payment and Delivery ............................................. 4
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
3.1 Organization and Standing; Articles and By-Laws........................... 4
3.2 Corporate Power .......................................................... 5
3.3 Subsidiaries ............................................................. 5
3.4 Capitalization ........................................................... 5
3.5 Authorization ............................................................ 5
3.6 Contracts; Insurance ..................................................... 6
3.7 Financial Information .................................................... 7
3.8 Absence of Undisclosed Liabilities ....................................... 8
3.9 Absence of Certain Changes ............................................... 8
3.10 Taxes .................................................................... 9
3.11 Transactions with Affiliates ............................................. 9
3.12 Litigation ............................................................... 9
3.13 Consents ................................................................. 10
3.14 Title to Properties; Liens and Encumbrances .............................. 10
3.15 Leases ................................................................... 10
3.16 Franchises, Licenses, Trademarks, Patents and Other Rights................ 10
3.17 Issuance Taxes ........................................................... 11
3.18 Offering ................................................................. 11
3.19 Compliance with Other Instruments ........................................ 12
3.20 Employees ................................................................ 12
3
PAGE NO.
--------
3.21 Business of the Company .................................................. 13
3.22 Use of Proceeds .......................................................... 14
3.23 Applicability of, and Compliance With, Other Laws ........................ 14
3.24 Indebtedness ............................................................. 16
3.25 Condition of Properties .................................................. 16
3.26 Insurance Coverage ....................................................... 16
3.27 Registration Rights ...................................................... 17
3.28 SEC Reports .............................................................. 17
3.29 Illegal or Unauthorized Payments; Political Contributions ................ 17
3.30 Qualified Small Business Stock ........................................... 17
3.31 Effectiveness of Merger .................................................. 17
3.32 Disclosure ............................................................... 18
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASERS;
CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS
4.1 Representation and Warranties of the Purchasers .......................... 18
4.2 Certain Agreements of the Bridge Investors ............................... 19
SECTION 5 - CONDITIONS TO CLOSING OF PURCHASERS
5.1 Representations and Warranties Correct ................................... 20
5.2 Performance .............................................................. 20
5.3 Compliance Certificate ................................................... 20
5.4 Opinion of Company's Counsel ............................................. 21
5.5 Good Standing Certificates ............................................... 21
5.6 Legal Investment ......................................................... 21
5.7 Qualifications ........................................................... 21
5.8 Filing of Restated Certificate ........................................... 21
5.9 Proceedings and Documents ................................................ 21
5.10 Provisions of By-Laws .................................................... 21
5.11 Shareholders' Agreement .................................................. 21
5.12 Management Rights Letters ................................................ 22
5.13 Board of Directors; Indemnification ...................................... 22
5.14 Key Person Life Insurance ................................................ 22
5.15 Annual Plan .............................................................. 22
5.16 Merck Beta Site .......................................................... 22
5.17 Conversion of Bridge Notes ............................................... 22
5.18 Compensation of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., LLC and ▇▇▇▇▇ ▇▇▇▇▇......... 22
- ii -
4
PAGE NO.
--------
SECTION 6 - CONDITIONS TO CLOSING OF COMPANY
6.1 Representations .......................................................... 23
6.2 Legal Investment ......................................................... 23
6.3 Restated Certificate ..................................................... 23
6.4 Shareholders' Agreement .................................................. 23
SECTION 7 - COVENANTS OF THE COMPANY
7.1 Basic Financial Information .............................................. 23
7.2 Additional Information and Rights ........................................ 25
7.3 Prompt Payment of Taxes, etc ............................................. 26
7.4 Maintenance of Properties and Leases ..................................... 26
7.5 Insurance ................................................................ 27
7.6 Accounts and Records ..................................................... 27
7.7 Compliance with Requirements of Governmental Authorities ................. 27
7.8 Maintenance of Corporate Existence, etc .................................. 28
7.9 Availability of Common Stock for Conversion of Series A Preferred
and Exercise of Warrants ................................................ 28
7.10 Proprietary Information Agreement and Key Employee Agreement ............. 28
7.11 Officer and Director Indemnity ........................................... 28
7.12 Qualified Small Business Stock ........................................... 29
7.13 Chief Executive Officer .................................................. 29
7.14 Use of Proceeds .......................................................... 29
7.15 Expenses of Board Members ................................................ 29
7.16 Securities Law Filings ................................................... 29
7.17 Audited Financial Statements ............................................. 29
7.18 Compliance by Subsidiaries ............................................... 29
7.19 Stock Option Plan ........................................................ 30
SECTION 8 - NEGATIVE COVENANTS
8.1 Changes in Type of Business .............................................. 30
8.2 Conflicting Agreements ................................................... 30
8.3 Employee Stock Plans ..................................................... 30
8.4 Indebtedness ............................................................. 30
8.5 Capital Expenditure ...................................................... 30
8.6 Related Party Transactions ............................................... 31
- iii -
5
PAGE NO.
--------
SECTION 9 - RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS
9.1 Restrictions on Transferability .......................................... 31
9.2 Certain Definitions ...................................................... 31
9.3 Restrictive Legend ....................................................... 32
9.4 Notice of Proposed Transfers and Securities Act Compliance ............... 33
9.5 Requested Registration ................................................... 34
9.6 Company Registration ..................................................... 36
9.7 Registration on Form S-3 ................................................. 37
9.8 Expenses of Registration ................................................. 38
9.9 Registration Procedures .................................................. 39
9.10 Indemnification and Contribution ......................................... 39
9.11 Information by Holder .................................................... 41
9.12 Limitations on Registration of Issues of Securities ...................... 42
9.13 Rule 144 Reporting ....................................................... 42
9.14 Transfer of Registration Rights .......................................... 43
9.15 "Market Stand-Off" Agreement ............................................. 43
SECTION 10 - DEFINITIONS .......................................................... 43
SECTION 11 - MISCELLANEOUS
11.1 Governing Law ............................................................ 49
11.2 Survival ................................................................. 49
11.3 Successors and Assigns ................................................... 49
11.4 Entire Agreement ......................................................... 49
11.5 Notices, etc ............................................................. 50
11.6 Delays or Omissions ...................................................... 50
11.7 Rights; Separability ..................................................... 50
11.8 Agent's Fees and Services ................................................ 50
11.9 Legal Fees and Expenses .................................................. 51
11.10 Titles and Subtitles ..................................................... 51
11.11 Counterparts ............................................................. 51
- iv -
6
LIST OF EXHIBITS
Exhibit A - Schedule of Purchasers
Exhibit B - Restated Certificate of Incorporation (4)
Exhibit C - Form of Common Warrant (5)
Exhibit D - Form of Preferred Warrant (6)
Exhibit E - Milestones for Second Closing
Exhibit F - Schedule of Exceptions (2)
Exhibit G - Form of Proprietary Information Agreement (10)
Exhibit H - Form of Key Employee Agreement (11)
Exhibit I - Form of Opinion of Counsel (13)
Exhibit J - Shareholders' Agreement (7)
Exhibit K - Form of Management Rights Letter (8)
-v-
7
SERIES A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of the 21st day of January, 1998, by
and among CELLOMICS, INC. (the "Company"), a Delaware corporation having offices
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 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 First
Closing (as defined in Section 2.1 hereof) will have, authorized the issuance
and sale of (i) up to One Million Nine Hundred Sixty-Six Thousand Six Hundred
Eighteen (1,966,618) shares of Series A Preferred Stock, par value $.01 per
share of the Company (the "Series A Preferred"), having the rights,
restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company (he "Restated Certificate"), the
form of which is attached to this Agreement as Exhibit B, (ii) Common Stock
Subscription Warrants, substantially in the form of Exhibit C attached hereto
(each a "Common Warrant" and, collectively, the "Common Warrants") to purchase
up to an aggregate of One Hundred Seventy-Seven Thousand Nine Hundred Thirty-Six
(177,936) shares of Common Stock, par value $.01 per share of the Company (the
"Common Stock"), subject to adjustment as provided in the Common Warrants, and
(iii) Series A Preferred Stock Purchase Warrants, substantially in the form of
Exhibit D attached hereto (each a "Preferred Warrant" and, collectively, the
"Preferred Warrants"), to purchase up to an aggregate of Fifty-Seven Thousand
Eight Hundred Twenty-Nine (57,829) shares of Series A Preferred, subject to
adjustment as provided in the Preferred Warrants.
1.2 SALE AND PURCHASE OF THE SHARES AND WARRANTS. Upon and subject to
the terms and conditions of this Agreement and in reliance upon the
representations, warranties and agreements contained herein, at each Closing (as
defined in Section 2.1 hereof) the Company will issue and sell to each
Purchaser, and each Purchaser will purchase from the
8
Company at such Closing, (i) that number of shares of Series A Preferred set
forth opposite such Purchaser's name on the Schedule of Purchasers for such
Closing (all such shares being collectively referred to as the "Shares"), (ii)
Common Warrants to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on the Schedule of Purchasers for such Closing,
if any, and (iii) Preferred Warrants to purchase the number of shares of Series
A Preferred set forth opposite such Purchaser's name on the Schedule of
Purchasers for such Closing, if any.
1.3 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement shall have the respective meanings ascribed to them in Section 10
hereof.
SECTION 2
CLOSINGS, PAYMENT AND DELIVERY
2.1 CLOSING DATES.
(a) Subject to the terms and provisions of this Agreement, the initial
closing (the "First Closing") of the purchase and sale of Shares and Warrants
hereunder shall be in the amounts set forth under the columns entitled "First
Closing" on the Schedule of Purchasers. Warrants are issuable to the Purchasers
in connection with the First Closing, but not in connection with the Second
Closing (as defined below). The First 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 "First Closing Date") of, and immediately following, the final
execution and delivery of at least one counterpart of this Agreement by the
Company and the Purchasers, or such other date as shall have been agreed to by
the Company and the Purchasers.
(b) Subject to the terms and provisions of this Agreement, an
additional closing (the "Second Closing") of the purchase and sale of Shares
hereunder shall be in the amounts set forth under the column entitled "Second
Closing" on the Schedule of Purchasers, subject to the provisions of Sections
2.1(c). The Second Closing shall be by and to the Purchasers specified in the
Schedule of Purchasers and shall be held on such date (the "Second Closing
Date") as shall have been agreed to by the Company and such Purchasers after the
following conditions have been met; provided, however, that the Second Closing
shall occur no later than sixty (60) days after the conditions set forth below
are satisfied unless the Company and the Purchasers who are to participate in
the Second Closing mutually agree otherwise:
(i) The First Closing shall have been completed;
(ii) The directors of the Company elected by the Purchasers as
holders of the Series A Preferred shall have determined that the Company has
achieved milestones numbered 1, 2 and 3 on Exhibit E attached hereto and at
least two of the other three milestones set forth on Exhibit E attached hereto,
and written evidence of such
- 2 -
9
determination shall have been provided to the Purchasers who are to
participate in the Second Closing; and
(iii) The Company shall have satisfactorily complied with the
provisions of Section 5 hereof.
The First Closing and the Second Closing are sometimes hereinafter
referred to together as the "Closings" and each as a "Closing," and the First
Closing Date and the Second Closing Date are sometimes hereinafter referred to
together as the "Closing Dates" and each as a "Closing Date."
(c) Notwithstanding the provisions of Section 2.1(b) or any other
provision of this Agreement to the contrary:
(i) In the event that, prior to the satisfaction of the
conditions to the Second Closing set forth in Section 2.1(b), the
Company closes a Subsequent Financing, then the Company may, by written
notice delivered to the Purchasers within ten (10) days of the closing
of such Subsequent Financing, elect to reduce the number of Shares to
be purchased at the Second Closing by One Hundred Seventy-Seven
Thousand Nine Hundred Thirty-Six (177,936) Shares and the amount
payable by the Purchasers at the Second Closing shall thereupon be
reduced by $1,000,000. In such event, the reduction in the number of
Shares to be issued to the Purchasers at the Second Closing, and the
reduction in the amount to be paid by each Purchaser upon the Second
Closing, shall be allocated among the Purchasers participating in the
Second Closing pro rata based upon the number of Shares and the
purchase price originally allocated to such Purchaser with respect to
the Second Closing, as set forth on the Schedule of Purchasers; and
(ii) In the event that prior to the satisfaction of the
conditions to the Second Closing set forth in Section 2.1(b), the Board
approves the consummation of a Qualified Public Offering and authorizes
the officers of the Company to take actions in furtherance of such an
offering, then the Company may, by written notice delivered to the
Purchasers within three (3) days of such approval, elect to terminate
the Company's rights and obligations and the Purchasers' rights and
obligations with respect to the Second Closing, whereupon neither the
Company nor the Purchasers shall have any further right or obligation
to consummate the Second Closing.
2.2 PLACE OF CLOSINGS. The place of each Closing (including the place
of delivery to the Purchasers by the Company of the certificates evidencing all
Shares and Warrants, if any, being purchased at such Closing and the place of
payment to the Company by the Purchasers of the purchase price therefor) shall
be at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other place as shall have been agreed to by the
Company and the Purchasers.
- 3 -
10
2.3 CLOSING PAYMENT AND DELIVERY. Subject to Section 2.1(c), at each of
the First Closing and the Second Closing, each Purchaser will pay to the Company
by wire transfer or, in the case of the First Closing, by conversion of a Bridge
Note as set forth on the Schedule of Purchasers, the amount set forth opposite
such Purchaser's name under the appropriate column for such Closing in 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 and a Common Warrant or a Preferred
Warrant, as the case may be, for the number of shares of Common Stock or Series
A Preferred, as the case may be, to be purchased at such Closing, if any, in
each case, as set forth opposite such Purchaser's name under the appropriate
column for such Closing 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 F (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 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 business plan (the "Business Plan"), a
true and correct copy of which has been given to the Purchasers and special
counsel for the Purchasers. The Schedule of Exceptions sets forth all
jurisdictions in which the Company owns or leases property or engages in
material activity.
(b) The Company has furnished special counsel for the Purchasers with
true, correct and complete copies of the Company's Certificate of Incorporation
and By-Laws, and all amendments thereto through and including the First Closing
Date or the Second Closing Date, as applicable, and copies of the minutes of all
Board of Directors, Committees of the Board of Directors and shareholders
meetings of the Company. Prior to the First Closing, the Company shall have
properly filed and recorded the Restated Certificate with the Secretary of the
State of Delaware. The Company is not in breach of any of the provisions of the
Restated Certificate or its By-Laws.
- 4 -
11
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
each Closing Date all requisite corporate power to sell the Shares and the
Warrants to be sold on such 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 First Closing, and the holders of any
interest in such securities. Immediately prior to the First Closing, the
Company's authorized capital stock will consist of (a) Five Million shares of
Common Stock, of which One Million One Hundred Twenty-Eight Thousand Six Hundred
Fifty (1,128,650) shares will be issued and outstanding, and (b) Two Million
Twenty-Four Thousand Five Hundred (2,024,500) shares of Series A Preferred, none
of which will be issued and outstanding. Upon consummation of each 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 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 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 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. 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, the
Warrants, the Conversion Shares and the Warrant Shares has been taken or will be
taken prior to the First 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 Document, and compliance herewith and therewith, and the offer,
issuance and sale of the Shares, the Warrants, the Conversion Shares and the
Warrant 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
- 5 -
12
constitute a default under any provision of, (i) any state or federal law to
which the Company is subject, (ii) the 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, the Warrants, the Conversion Shares or the Warrant
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 and the Warrant 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, 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 parry;
(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);
- 6 -
13
(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) obligates the
Company and/or each Subsidiary to make payments only, which payments in the
aggregate do not exceed $20,000. A copy of each contract and commitment listed
on the Schedule of Exceptions has been delivered to special counsel for the
Purchasers. 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 unaudited balance sheets of
the Company dated December 31, 1995 and December 31, 1996, respectively (the
unaudited balance sheet dated December 31, 1996 being referred to herein as the
"Balance Sheet") and the related statements of operations and accumulated
deficit and cash flows for the years then ended (collectively, the "Financial
Statements") have been delivered to the Purchasers and special counsel for the
Purchasers, 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. Copies of the unaudited balance sheet of the
- 7 -
14
Company dated November 30, 1997 and the related statements of operations and
accumulated deficit and cash flows for the eleven months then ended have been
delivered to the Purchasers and special counsel for the Purchasers, are accurate
and complete, and present fairly, in all material respects, the financial
position of the Company as of such date.
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 Business Plan 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;
(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 wage or salary increase made or granted, or entered
into by the Company involving any employment agreement;
- 8 -
15
(h) Any disclosure to any person of any material trade
secrets, except for disclosures made to persons subject to valid and
enforceable confidentiality agreements; or
(i) 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 depositaries.
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.
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
- 9 -
16
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 the Warrants and of the issuance of the Conversion Shares and the
Warrant Shares, is required in connection with the valid execution and delivery
of this Agreement, the offer, sale or issuance of the Shares and the Warrants,
the conversion of the Shares into Common Stock, the exercise of the Warrants or
the issuance of the Conversion Shares or the Warrant Shares, or the consummation
of any other transaction contemplated on any Closing Date by this Agreement or
any of the Financing Documents, except the filing of the 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 each 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 $2,500 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.
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, and a
copy thereof has been delivered to special counsel for the Purchasers.
- 10 -
17
(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) 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.
3.17 ISSUANCE TAXES. All taxes imposed by any state in connection with
the issuance, sale and delivery of the Shares and the Warrants shall have been
fully paid, and all laws imposing such taxes shall have been fully complied
with, prior to each Closing Date.
3.18 OFFERING. Within the past six (6) months, the Company has not,
either directly or through any agent, offered any of the Shares or the Warrants
or any security or securities similar to the Shares or the Warrants for sale to,
or solicited any offers to buy the Shares or the Warrants 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
- 11 -
18
or institutional or other sophisticated investors, each of which was offered all
or a portion of the Shares or the Warrants at private sale for investment. Each
offer described on the Schedule of Exceptions with respect to this Section 3.18
was an offer to an institutional or sophisticated investor 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, the
Warrants, the Conversion Shares and the Warrant Shares from the registration
requirements of the Securities Act and all state securities laws.
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, the Warrants, the Conversion Shares and the Warrant 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 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 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 Purchaser 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 G hereto (each a "Proprietary Information
Agreement"). The Schedule of Exceptions sets forth a complete list of
the name and position of each person who has executed 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
- 12 -
19
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) The Schedule of Exceptions sets forth the current
compensation of each officer, director or employee of the Company being
paid (or to whom the Company has agreed to pay) compensation at a rate
of $65,000 per year or more.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
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)
- 13 -
20
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 Business Plan (the "Business").
3.22 USE OF PROCEEDS. The Company will use the proceeds of the offering
for expenses incurred in connection with the transactions contemplated hereby,
capital expenditures, working capital, sales expenditures and product research
and development costs, as more fully set forth in the Statement of Sources and
Uses set forth in the Schedule of Exceptions. 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, the Warrants, the Warrant 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, the Warrants, the Warrant
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 federal or state governmental
unit, except, with respect to
- 14 -
21
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
- 15 -
22
Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law.
(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 the case
of corporations of established reputation engaged in the same or similar
business and similarly situated. The Schedule of
- 16 -
23
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,
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, the Company has not agreed to register under the
Securities Act any of its authorized or outstanding securities.
3.28 SEC REPORTS. The Company has never filed, has never been required
to file and is not currently required to file any reports, statements, forms or
documents with the Commission.
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 each 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).
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
- 17 -
24
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
Business Plan, and any other written statement furnished to the Purchasers or
their counsel in connection with the offer and sale of the Shares and the
Warrants (other than the Company's offering memorandum, as to which the Company
makes no representations and warranties and as to which the Company undertakes
no obligation to update or otherwise revise the information contained therein),
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 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 forecasts,
projections, estimates and other forward-looking matters furnished to the
Purchasers (including those set forth in the Business Plan) 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 forecasts, projections, estimates or other forward-
looking matters are unreasonable or false.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS;
CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS
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.
- 18 -
25
(b) Accredited Investor. It is an "accredited investor" within the
meaning of Commission Rule 501 of Regulation D, 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 and the Warrants 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, the
Conversion Shares, the Warrants and the Warrant 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, the
Conversion Shares, the Warrants and the Warrant 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).
(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) 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.
(i) 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.
4.2 CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS. By their execution of
this Agreement, the Bridge Investors acknowledge and confirm that at and upon
the First Closing,
- 19 -
26
the principal of and interest accrued on the Bridge Notes through the First
Closing Date will convert into Shares. In addition, the Bridge Investors agree
that effective upon such conversion of the Bridge Notes into Shares (a) the
Bridge Loan Financing Agreements shall terminate and be of no further force and
effect, (b) the Bridge Notes shall be deemed cancelled and shall be of no
further force and effect, (c) the Komasta Bridge Warrant shall be surrendered
for cancellation in exchange for a Preferred Warrant for the number of shares of
Series A Preferred set forth opposite Komasta's name on the Schedule of
Purchasers, (d) the Tycho Bridge Warrant shall be surrendered for cancellation
in exchange for a Preferred Warrant for the number of shares of Series A
Preferred set forth opposite Tycho's name on the Schedule of Purchasers, and (e)
neither the Bridge Investors nor the Company shall have any further rights,
obligations or liabilities under the Bridge Loan Financing Agreements, the
Bridge Notes or the Bridge Warrants. The Bridge Investors hereby waive any
rights to receive notice of, and any rights of first refusal, pre-emptive rights
and other similar rights that they may have under the Bridge Notes, the Bridge
Loan Financing Agreements or the Bridge Warrants with respect to, the issuance
of the Shares and the Warrants to the Purchasers pursuant to this Agreement. The
Company acknowledges and agrees to the provisions of this Section 4.2.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of the Purchasers to purchase the Shares and Warrants to
be purchased by them at each Closing is subject to the fulfillment to their
satisfaction on or prior to each 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 each
Closing Date (except on the Second Closing Date for changes contemplated by this
Agreement or incurred in the ordinary course of business which do not have a
material adverse effect, individually or in the aggregate, on the Company) and
with respect thereto, after giving effect to the sale and issuance of the Shares
and the Warrants at each Closing. Prior to the Second Closing Date, the Company
shall be permitted to make such revisions to the Schedule of Exceptions to
reflect changes contemplated by this Agreement or incurred in the ordinary
course of business since the date hereof which do not have a material adverse
effects, individually or in the aggregate, on the Company.
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 each Closing Date shall have been so performed or
complied with in all material respects.
- 20 -
27
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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Company,
addressed to them, dated the Closing Date, to the effect and in substantially
the form set forth in Exhibit I.
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
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 and the Warrants 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 and the Warrants pursuant to this
Agreement, the conversion of the Shares and the Preferred Warrant Shares into
Common Stock and the issuance of such Common Stock upon such conversion, the
exercise of the Warrants and the issuance of Warrant Shares upon such exercise
shall have been duly obtained and shall be effective on and as of each Closing
Date, including, if necessary, permits from applicable state securities
authorities, qualifying the offer and sale of the Shares, the Conversion Shares,
the Warrants and the Warrant Shares.
5.8 FILING OF RESTATED CERTIFICATE. The 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.
- 21 -
28
5.11 SHAREHOLDERS' AGREEMENT. The Company, the Purchasers, the Common
Shareholders and the other parties named therein shall have executed and
delivered a Shareholders' Agreement (as amended from time to time, the
"Shareholders' Agreement") to the effect and in substantially the form set forth
in Exhibit J hereto.
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 K hereto .
5.13 BOARD OF DIRECTORS; INDEMNIFICATION. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall have been elected
to the Board of Directors, and the Company shall have agreed and obligated
itself, either in the Restated Certificate or in the Company's Bylaws, to
indemnify its officers and directors to the fullest extent permitted by Delaware
law.
5.14 KEY PERSON LIFE INSURANCE. The Company shall have delivered to the
Purchasers evidence of insurance on the life of Lans ▇▇▇▇▇▇ in the amount of
$2,000,000; naming the Company as the owner and beneficiary thereof.
5.15 ANNUAL PLAN. The Company and the Purchasers shall have agreed to a
final budget and operating plan for the Company for the twelve (12) month period
following the First Closing.
5.16 MERCK BETA SITE. The Purchasers shall have received confirmation
from Merck & Co., Inc. that the Company is a current beta site for Arrayscan
testing and that the Arrayscan system installed at the Company is functional.
5.17 CONVERSION OF BRIDGE NOTES. The Bridge Notes shall have been
surrendered to the Company for conversion into Shares at the First Closing, the
Komasta Bridge Warrant and the Tycho Bridge Warrant shall have been surrendered
to the Company for cancellation upon the First Closing, and the Company shall
have issued to Tycho, simultaneous with the First Closing, the New Tycho
Warrant, in form satisfactory to the Purchasers and their counsel, all as
further described in Section 4.2.
5.18 COMPENSATION OF ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO., LLC AND ▇▇▇▇▇ ▇▇▇▇▇.
At or prior to the First Closing, the Company shall have (a) paid to ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., LLC ("GKM") up to $250,000 for services rendered in
connection with the transactions contemplated by this Agreement (b) issued to
such entity warrants to purchase up to 83,968 shares of Common Stock at an
exercise price of $5.62 per share and having a term of five (5) years, and (c)
issued to ▇▇▇▇▇ ▇▇▇▇▇ ("▇▇. ▇▇▇▇▇") warrants to purchase up to 5,000 shares of
Common Stock at an exercise price of $5.62 per share and having a term of five
(5) years.
- 22 -
29
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares and the Warrants to be
purchased at each Closing is subject to the fulfillment to its satisfaction on
or prior to each 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 each Closing Date.
6.2 LEGAL INVESTMENT. At the time of each Closing, the conditions set
forth in Sections 5.6 and 5.7 shall have occurred and the purchase of the Shares
and Warrants 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.
6.3 RESTATED CERTIFICATE. The Restated Certificate shall have been
accepted for filing by the Secretary of State of the State of Delaware.
6.4 SHAREHOLDERS' AGREEMENT. The Company, the Purchasers, the Common
Shareholders and the other parties named therein shall have executed and
delivered the Shareholders' Agreement.
SECTION 7
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Shares, any
Conversion Shares, any Warrants or any Warrant Shares remain outstanding, or as
otherwise provided in this Article 7:
7.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to the Purchasers:
(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
- 23 -
30
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 (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) From the date the Company becomes subject to the reporting
requirements of the Exchange Act, and in lieu of the financial
information required pursuant to Sections 7.1(a) and (b), but within
the time periods required for the furnishing thereof, copies of its
reports filed on Form 10-K, Form 10-Q, Form 8-K or any successor form
or forms.
(d) Each set of financial statements delivered to the
Purchasers pursuant to this Section 7.1 will be accompanied by a
certificate of the Chairman, President or a Vice President and the
Treasurer or an Assistant Treasurer 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 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.
- 24 -
31
(e) As soon as available (but in any event sixty (60) 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.
7.2 ADDITIONAL INFORMATION AND RIGHTS.
The Company will, for any Purchaser who (together with members of such
Purchaser's Group) agrees pursuant to this Agreement to purchase in the
aggregate, at the First Closing and the Second Closing (and whether or not the
Second Closing is actually consummated), 177,936 or more Shares (such amount to
be adjusted for stock splits, combinations and other similar events affecting
the Series A Preferred):
(a) 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) Deliver the reports and data described below to such
Purchaser:
(i) 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 principles 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;
(ii) As soon as available, information and data on any
material adverse changes in or any event or condition
which materially
- 25 -
32
adversely affects or could materially adversely
affect the business, operations, properties or plans
of the Company;
(iii) Immediately upon becoming aware of any condition or
event which constitutes a breach or violation of this
Agreement, the Restated Certificate, the Financing
Documents or any agreement contemplated hereby or
thereby, written notice specifying the nature and
period of existence thereof and what action the
Company is taking or proposes to take with respect
thereto; and
(iv) With reasonable promptness, such other information
and data with respect to the Company as any such
party may from time to time reasonably request.
(c) Hold meetings of its Directors at least quarterly and, if
such Purchaser does not have a representative on the Board of
Directors, permit such Purchaser to send a representative (without
voting rights) to each meeting of the Board of Directors of the Company
and all committees of such Board; provided, however, that the
Purchasers shall receive notice no less favorable than notice given to
outside directors and the presence of any of the Purchasers'
representatives shall not be necessary to conduct any meeting of the
Board. The Company shall give such Purchaser notice of each such
meeting in the form and manner such notice is given to the Company's
directors.
(d) The Company's obligations under 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,
- 26 -
33
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.
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.
Promptly after the First Closing Date, the Company will use its best efforts to
obtain directors' and officers' liability insurance in the amount of at least
$1,000,000, if such coverage is available at commercially reasonable rates, and
thereafter the Company shall use its best efforts to maintain such insurance in
full force and effect at all times. If any such policy of insurance shall be an
occurrence policy, it shall include "tail coverage" respecting any prior "claims
made" policies. 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; and
(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.
- 27 -
34
(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.
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 A PREFERRED
AND EXERCISE OF WARRANTS. 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 A Preferred for a period of five (5) years in the
form of Common Stock, the conversion to Common Stock of all the then outstanding
Shares and the exercise of all other outstanding Warrants.
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 G 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 OFFICER AND DIRECTOR INDEMNITY. So long as the holders of the
Series A Preferred retain the right to elect one or more directors to the Board,
the Company will maintain and preserve in full force and effect the
indemnification provisions described in Section 5.13.
- 28 -
35
7.12 QUALIFIED SMALL BUSINESS STOCK. So long as any Shares, Warrants,
Conversion Shares or Warrant 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 and the Warrant Shares to
qualify as qualified small business stock within the meaning of Section 1202 of
the Code, provided that this Section 7.12 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.
7.13 CHIEF EXECUTIVE OFFICER. The Company will diligently and in good
faith after the First Closing conduct an executive search for and recruit a
Chief Executive Officer, the hiring of such person to be subject to approval of
the Board.
7.14 USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Shares, the Warrants, the Conversion Shares and the Warrant Shares for
the purposes described in Section 3.22 hereof.
7.15 EXPENSES OF BOARD MEMBERS. The Company agrees to reimburse each of
the directors elected to the Company's Board of Directors for their reasonable
out-of-pocket travel and lodging expenses in connection with attending Board of
Directors' meetings and performing their respective obligations and
responsibilities as directors of the Company.
7.16 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, the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers.
7.17 AUDITED FINANCIAL STATEMENTS. Not later than ten (10) days after
the First Closing Date, the Company will deliver to the Purchasers audited
balance sheets of the Company dated December 31, 1995 and December 31, 1996,
respectively, and the related statements of operations and accumulated deficit
and cash flows for the years then ended, together with the unqualified report
thereon of Coopers & ▇▇▇▇▇▇▇. Such financial statements shall (i) present
fairly, in all material respects, the financial position of the Company as of
such dates, (ii) have been prepared in accordance with U.S. generally accepted
accounting principles, consistently-applied, except for those changes
promulgated by accounting authority, and (iii) 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.
7.18 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, 7.5, 7.6, 7.7, 7.8 and 7.10 to the same extent as if such
Subsidiary or Subsidiaries were the "Company" herein.
- 29 -
36
7.19 STOCK OPTION PLAN. Promptly after the First Closing Date, the
Company will use its best efforts to cause the Board and the Company's
stockholders to adopt a stock option plan that is acceptable to the Board, a
majority of the holders of the Series A Preferred and a majority of the holders
of Common Stock and that provides for the granting of options to purchase up to
150,000 shares of Common Stock.
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 First Closing Date without
the approval of a majority of the Board, which approval must include the
approval of each director elected to the Board by the holders of Series A
Preferred:
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 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 A Preferred and conversions of the Series A 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)(4)(C) of Article III, Part B of the Restated Certificate.
8.4 INDEBTEDNESS. Create, incur, issue, assume, guarantee or otherwise
become or remain directly or indirectly liable for, or permit any Subsidiary to
create, incur, issue, assume, guarantee or otherwise become or remain directly
or indirectly liable for, any Indebtedness for borrowed money in excess of
$200,000 in any one fiscal year.
8.5 CAPITAL EXPENDITURE. Make capital expenditures in excess of
$400,000 in any one fiscal year.
- 30 -
37
8.6 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, the Warrants,
the Conversion Shares nor the Warrant 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,
Warrants, Conversion Shares or Warrant 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 and the Common Warrant Shares, less any Conversion Shares and
Common Warrant 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).
- 31 -
38
"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).
"HOLDER" shall mean any holder of outstanding Shares, Warrants, Warrant
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 Warrants, or (iii) the Warrant Shares, or (iv) the Conversion
Shares, or (v) any other securities issued in respect of the Shares, the
Warrants, the Conversion Shares or the Warrant 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 1933, 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.
- 32 -
39
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.
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 ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP 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.
- 33 -
40
(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 Section 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.
- 34 -
41
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 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)(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 whose securities would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be
allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities or any
other
- 35 -
42
securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such
registration.
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.
(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.
- 36 -
43
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
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:
- 37 -
44
(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.
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
- 38 -
45
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 in accordance with the provisions of
Section 9.15 hereof;
(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
- 39 -
46
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 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 proceeds to each
such Holder or Other Shareholder of securities sold as contemplated
herein.
(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
- 40 -
47
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 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.
(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 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
- 41 -
48
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
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 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 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.
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
- 42 -
49
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 177,000 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 the one hundred eighty
(180) day period following the effective date of a registration statement of the
Company filed under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf
to the public in an underwritten offering; and
(b) all Holders, Other Shareholders and officers and directors
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 securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
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:
- 43 -
50
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.
ANNUAL PLAN - SECTION 7.1(E).
BALANCE SHEET - SECTION 3.7.
BRIDGE INVESTORS shall mean Komasta and Tycho, together. Each of the
Bridge Investors is also a Purchaser for purposes of this Agreement.
BRIDGE LOAN FINANCING AGREEMENTS shall mean that certain Bridge Loan
Financing Agreement dated as of June 18, 1997 between the Company and Tycho and
that certain Bridge Loan Financing Agreement dated as of August 1, 1997 between
the Company and Komasta, as the same may have been amended from time to time.
BRIDGE NOTES shall mean, collectively, (i) that certain convertible
promissory note dated June 18, 1997, in the original principal amount of
$50,000, from the Company to Tycho and (ii) that certain convertible promissory
note dated August 1, 1997, in the original principal amount of $450,000, from
the Company to Komasta.
BRIDGE WARRANTS shall mean the Komasta Bridge Warrant and the Tycho
Bridge Warrant, together.
BUSINESS - Section 3.21.
BUSINESS PLAN - Section 3.1.
BOARD shall mean the entire Board of Directors of the Company.
CLOSING DATE and CLOSING DATES - 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 STOCK - Section 1.1.
- 44 -
51
COMMON WARRANT SHARES shall mean, at any time, shares of Common Stock
(i) issued and then outstanding upon exercise of the Common Warrants, (ii)
issuable upon exercise of the Common Warrants, and (iii) issued and then
outstanding or issuable in respect of the Common Stock referred to in clauses
(i) and (ii) of this definition upon any stock split, stock dividend,
recapitalization or similar event.
CONVERSION SHARES shall mean at any time, shares of Common Stock (i)
issued and then outstanding upon the conversion of the Series A Preferred
purchased under this Agreement or upon the conversion of the Series A Preferred
issued upon the exercise of the Preferred Warrants, (ii) issuable upon the
conversion of the Series A Preferred purchased under this Agreement or upon the
conversion of the Series A Preferred issuable upon the exercise of the Preferred
Warrants, 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 environmental
(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 our without consideration, into any stock or
- 45 -
52
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.
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, the Warrants, and all other documents
set forth in any other schedules or exhibits hereto, under which, upon its
execution thereof, the Company, any Subsidiary, or any Related Party shall have
an obligation to any Purchaser, all in the respective forms thereof as executed
and as amended from time to time.
FINANCIAL STATEMENTS - Section 3.7.
FIRST CLOSING - Section 2.1.
First Closing Date - Section 2.1.
GKM - Section 5.18.
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
- 46 -
53
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.
KOMASTA shall mean Komasta Properties, Ltd., having a business address
at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇.
KOMASTA BRIDGE WARRANT shall mean that certain Series A Preferred Stock
Purchase Warrant dated August 1, 1997 and issued by the Company to Komasta.
MANAGEMENT RIGHTS LETTERS - Section 5.12.
▇▇. ▇▇▇▇▇ - Section 5.18.
PERSON shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
PREFERRED WARRANTS - Section 1.1.
PREFERRED WARRANT SHARES shall mean, at any time, shares of Series A
Preferred (i) issued and then outstanding upon exercise of the Preferred
Warrants, (ii) issuable upon exercise of the Preferred Warrants, and (iii)
issued and then outstanding or issuable in respect of the Series A Preferred
referred to in clauses (i) and (ii) of this definition upon any stock split,
stock dividend, recapitalization or similar event.
PROPRIETARY INFORMATION AGREEMENT - Section 3.20.
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 Fifteen Million Dollars
($15,000,000), and (ii) the public offering price equals or exceeds an
- 47 -
54
amount equal to three (3) times the initial Conversion Price (as defined in the
Restated Certificate) of the Series A Preferred.
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.
RESTATED CERTIFICATE - Section 1.1.
RESTRICTED SECURITIES - Section 9.2.
SECOND CLOSING - Section 2.1.
SECOND CLOSING DATE - Section 2.1.
SECURITIES ACT shall mean the Securities Act of 1933, as amended, and
regulations issued pursuant thereto.
SERIES A PREFERRED - Section 1.1
SHAREHOLDERS' AGREEMENT - Section 5.11.
SHARES - Section 1.2.
SUBSEQUENT FINANCING shall mean the closing by the Company of a sale of
Equity Securities to a third party who is not a Related Party, resulting in
gross proceeds to the Company of at least $1,000,000 and at a price per share
that is more than $5.62, on an as-converted to Common Stock basis.
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.
- 48 -
55
TYCHO shall mean Tycho Investors LP, having a business address at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.
TYCHO BRIDGE WARRANT shall mean that certain Series A Preferred Stock
Purchase Warrant dated June 18, 1997 and issued by the Company to Tycho.
WARRANTS shall mean the Common Warrants and the Preferred Warrants,
together.
WARRANT SHARES shall mean the Common Warrant Shares and the Preferred
Warrant Shares, together.
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 each Closing.
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, the Conversion Shares, the Warrants or the Warrant 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,
Warrants, Warrants Shares or Conversion Shares be amended without the approval
of the percentage of Purchasers or holders specified in such provision, or the
- 49 -
56
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, any Warrants, any Conversion Shares or
any Warrant 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, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
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 when so
mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
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.
- 50 -
57
11.8 AGENT'S FEES AND SERVICES.
(a) The Company represents and warrants that it has retained
no finder or broker or other person or firm in connection with the
transactions contemplated by this Agreement, other than GKM as
contemplated by Section 5.18. The Company agrees to pay compensation to
GKM and ▇▇. ▇▇▇▇▇ as contemplated by Section 5.18, and accepts sole
responsibility for and agrees to pay all agent's fees to 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 5.18 and
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 5.18 and Section 11.8(a).
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. On each Closing Date (or if no closing shall
take place, within thirty (30) days of receiving any statement or invoice
therefor), the Company will pay the reasonable legal fees and out-of-pocket
expenses of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ LLP, special counsel to the Purchasers, up to an
aggregate of $25,000. 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
- 51 -
58
when making proof of this Agreement or any counterpart thereof to account for
any other counterpart.
[The remainder of this page is intentionally left blank;
signature page follows.]
- 52 -
59
Exhibit A
SCHEDULE OF PURCHASERS
Name and Address First Closing Second Closing
---------------- ------------- --------------
Total Series A Common Preferred Total Series A
Investment Preferred Shares Warrants Warrants Investment Preferred Shares
---------- ---------------- -------- -------- ---------- ----------------
Axiom Venture Partners II $1,375,000 244,662 48,932 None $1,375,000 244,662
Limited Partnership
CityPlace II - ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
InterWest Partners VI, LP $1,818,000 323,488 64,698 None $1,818,000 323,488
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
InterWest Investors VI, LP $57,000 10,142 2,028 None $57,000 10,142
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Delphi Ventures III, L.P. $1,227,891.32 218,486 43,697 None $1,227,891 218,486
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Delphi BioInvestments III, L.P. $22,109.08 3,934 787 None $22,109 3,934
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Oxford Bioscience Partners II, L.P. $285,810 50,856 10,171 None $285,810 50,856
▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
60
SCHEDULE OF PURCHASERS (cont.)
Name and Address First Closing Second Closing
---------------- ------------- --------------
Total Series A Common Preferred Total Series A
Investment Preferred Shares Warrants Warrants Investment Preferred Shares
---------- ---------------- -------- -------- ---------- ----------------
Oxford Bioscience Partners $214,190 38,112 7,623 None $214,190 38,112
(Bermuda) II Limited
Partnership
▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Tycho Investors, LP $52,389.04* 9,322 None 4,448 None None
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Komasta Properties, Ltd. $1,000,000** 177,936 None 53,381 None None
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
TOTALS $6,052,389.04 1,076,938 177,936 57,829 $5,000,000 889,680
* By conversion of Bridge Note.
** $467,161.64 by conversion of Bridge Note and $532,838.36 in cash.
61
EXHIBIT C
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, 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 LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO. __
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
CELLOMICS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: JANUARY __, 1998
THIS CERTIFIES THAT for value received, [PURCHASER] or its registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company, at any time during the Term of this Warrant, ________________________
(_________) shares of common stock, $.01 par value, of the Company (the "Common
Stock"), at the Warrant Price, payable in lawful money of the United States of
America to be paid upon the exercise hereof. The exercise of this Warrant shall
be subject to the provisions, limitations and restrictions herein contained, and
may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $.01 par value, as constituted at the date hereof, and shall also include
any capital stock of any class or series of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage of par value or of the
purchase price of such stock in respect of the rights of the holders thereof to
participate in dividends and/or in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Company.
Notwithstanding the foregoing, for purposes of determining the class or series
of the Company's capital stock which the Holder is entitled to purchase pursuant
hereto, the term
62
"common stock" shall mean the Company's authorized Common Stock, $.01 par value,
as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended from time to
time.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the Termination Date.
TERMINATION DATE - shall mean the earlier of (i) January ___, 2002 and
(ii) the date on which a Qualified Public Offering, as defined in the Purchase
Agreement, closes, if the managing underwriter certifies to the Company in
writing that it has determined that marketing factors make it advisable for the
Warrants to expire upon the closing of such offering if not exercised prior to
or upon the closing of such offering, provided that the Holder is given written
notice of such determination at least thirty (30) days prior to the closing of
such Offering.
WARRANT PRICE - $6.60 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to the Series A Preferred Stock and Warrant Purchase Agreement among
the Company and the Purchasers named therein dated January ___, 1998 (the
"Purchase Agreement") to such Purchasers, or to any transferees of such
Purchasers.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 13
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant.
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights
- 2 -
63
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder hereof within
such time. The person in whose name any certificate for shares of Common Stock
is issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that it
will pay when due and payable any and all federal and state taxes which may be
payable in respect of the issue of this Warrant or any Common Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company
- 3 -
64
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the
Term of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
(y) the consideration received by the Company upon such
issuance, by
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to
this clause (i), the following provisions shall be applicable:
1. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any
- 4 -
65
discounts, commissions or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
2. In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors
of the Company, irrespective of any accounting treatment;
provided, however, that such fair market value as determined
by the Board of Directors, together with any cash
consideration being paid, shall not exceed the aggregate
Current Market Price (as hereinafter defined) of the shares of
Common Stock being issued.
3. In the case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock, (ii) securities by their
terms convertible into or exchangeable for Common Stock or
(iii) options to purchase or rights to subscribe for such
convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such
options or rights were issued and for a consideration
equal to the consideration (determined in the manner
provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon
such exercise), if any, received by the Company upon
the issuance of such options or rights plus the
minimum purchase price provided in such options or
rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable
securities and subsequent conversions or exchanges
thereof shall be deemed to have been issued at the
time such securities were issued or such options or
rights were issued and for a consideration equal to
the consideration received by the Company for any
such securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in subdivisions (1) and (2) above
with the proviso in subdivision (2) being applied to
the number of shares of Common Stock deliverable upon
such conversion, exchange or exercise);
- 5 -
66
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or
rights or conversion of or exchange for such
convertible or exchangeable securities, other than a
change resulting from the antidilution provisions
thereof, the Warrant Price shall forthwith be
readjusted to such Warrant Price as would have
obtained had the adjustment made upon the issuance of
such options, rights or securities not converted
prior to such change or options or rights related to
such securities not converted prior to such change
being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange
or the expiration of any options or rights related to
such convertible or exchangeable securities, the
Warrant Price shall forthwith be readjusted to such
Warrant Price as would have obtained had the
adjustment made upon the issuance of such options,
rights, securities or options or rights related to
such securities being made upon the basis of the
issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of
such securities or upon the exercise of the options
or rights related to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock excluded from
the definition of "Additional Shares of Common Stock" set forth in Article III,
Part B, Section 3(d)(i)(4) of the Company's Restated Certificate of
Incorporation as in effect on January __, 1998.
(iii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued
- 6 -
67
by the Company or other persons, assets (excluding cash dividends and
distributions) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Company convertible into
or exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of Common
Stock entitled to receive such dividend or distribution, the Warrant Price in
effect thereafter shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be an amount equal to the difference of (x) the Current Market Price of one
share of Common Stock minus (y) the fair market value (as determined by the
Board of Directors of the Company, whose determination shall be conclusive) of
the stock, securities, evidences of indebtedness, assets, options or rights so
distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5,
the Current Market Price at any date of one (1) share of Common Stock shall be
deemed to be the average of the daily closing prices for the thirty (30)
consecutive business days ending no more than fifteen (15) business days before
the day in question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such thirty (30) business day period).
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sales took place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or as reported by Nasdaq (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange or if prices of the
Common Stock are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Common Stock is not traded
in such manner that the quotations referred to in this clause (vii) are
available for the period required hereunder, the Current Market Price shall be
determined in good faith by the Board of Directors of the Company or, if such
determination cannot be made, by a nationally recognized independent investment
banking firm selected by the Board of Directors of the Company (or if such
selection cannot be made, by a nationally recognized independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (x) of this Section 5.
- 7 -
68
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the
types described in clauses (iii), (iv), or (v) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(xi) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due ▇▇▇▇ or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore
held in the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such
- 8 -
69
an instrumentality or institutional holder an irrevocable agreement of indemnity
by such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
he promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof shall thereafter be applicable as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect any
such consolidation, merger or sale unless (i) either (A) the Holder shall have
given its written consent thereto, or (B) the other party to the consolidation,
merger or sale is not controlled by, does not control, and is not under common
control with, the Company and the transaction is not being undertaken with the
purpose of diminishing, defeating or avoiding the Holder's rights hereunder, and
(ii) prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the Holder is entitled
to receive.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of
- 9 -
70
earned surplus or by way of a stock dividend payable in shares of its Common
Stock, the Company shall mail notice thereof to the Holder hereof not less than
thirty (30) days prior to the record date fixed for determining shareholders
entitled to participate in such dividend or other distribution, and the Holder
hereof shall not participate in such dividend or other distribution unless this
Warrant is exercised prior to such record date. The provisions of this Section 9
shall not apply to distributions made in connection with transactions covered by
Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. REGISTRATION RIGHTS; ETC. The holder of the Warrant Shares is
entitled to certain registration rights with respect to the Warrant Shares, as
set forth in the Purchase Agreement.
SECTION 13. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at ______________________ or to such other
address as shall have been furnished to the Company in writing by the Holder.
Any notice or other document required or permitted to be given or delivered to
the Company shall be delivered at, or sent by certified or registered mail to,
the Company at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
President or to such other address as shall have been furnished in writing to
the Holder by the Company. Any notice so addressed and mailed by registered or
certified mail shall be deemed to be given
- 10 -
71
when so mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
SECTION 14. NO RIGHTS AS STOCKHOLDER: LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 15. LAW GOVERNING. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
[The remainder of this page is intentionally left blank;
signature page follows.]
- 11 -
72
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this _______ day of January, 1998.
CELLOMICS, INC.
By:
--------------------------------
Name:
Title:
73
EXHIBIT D
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER.
CELLOMICS, INC. SERIES A PREFERRED STOCK PURCHASE WARRANT
CELLOMICS, INC. (the "Company"), a Pennsylvania corporation, with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
hereby certifies that for value received KOMASTA PROPERTIES LTD ("KOMASTA")
having its business address at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ (the
"Holder") is entitled at any time and from time to time beginning on the date of
this Warrant and ending at 5:00 P.M. Eastern Standard Time on the 31st day of
July, 2002, to purchase 53,381 shares of the Company's Series A Preferred Stock
at the Warrant Price Per Share, each as adjusted pursuant to the terms of this
Warrant. The exercise of this Warrant shall be subject to the terms, conditions
and limitations set forth herein.
1. DEFINITIONS.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
A. SERIES A PREFERRED STOCK means and includes the Company's authorized
Series A Preferred Stock, as constituted at the date hereof.
B. COMPANY means and includes any corporation which shall succeed to or
assume the obligations of the Company hereunder, by assignment or merger or
consolidation or otherwise.
C. CURRENT VALUE means such value as shall be determined in good faith
by the Board of Directors of the Company.
D. TERMINATION DATE means July 31, 2002.
E. WARRANT PRICE PER SHARE means Eight Dollars and Forty-Three Cents
($8.43) per share, subject to adjustment in accordance with Section 4 hereof.
F. WARRANT RIGHTS means the Holder's right to purchase that 53,381
shares of Series A Preferred Stock as adjusted at the Warrant Price Per Share in
accordance with the terms and conditions of this Warrant.
G. WARRANT SHARES means shares of Series A Preferred Stock purchased or
purchasable by the Holder upon exercise hereof.
74
H. TERMINATION DATE means June 18, 2002.
2. WARRANTIES AND REPRESENTATIONS OF HOLDER. Holder represents,
warrants and acknowledges that: (i) the Holder has adequate means of providing
for its current needs and possible contingencies, and anticipates no need now or
in the foreseeable future to sell its shares of Series A Preferred Stock, (ii)
the Holder has had an opportunity to ask questions of and receive answers from
the Company concerning its investment in the Company, and all such questions
have been answered to its full satisfaction, (iii) the Holder intends to hold
shares of the Series A Preferred Stock for its own account for investment, and
not with a view toward any resale or other distribution of such Series A
Preferred Stock, (iv) investment in the Company involves a high degree of risk,
no tax advantages will result from an investment in the Company, and the Holder
must be able to bear the economic risk of complete loss of its investment in the
Company, (v) the Holder has received no representations and warranties from
Company other than those otherwise set forth herein, (vi) the Holder has the
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of this investment, provided, however, if the
Holder does not have such knowledge and experience, the Holder has consulted
with an attorney, accountant or other financial consultant or advisor, as its
purchaser representative, and such person is capable of evaluating the risk of
this investment and of so advising the Holder thereof, and (vii) the Holder
acknowledges that the Company's Series A Preferred Stock has not been registered
under the Securities Act of 1933, the Pennsylvania Securities Act or any other
state securities act, and agrees that any shares of Series A Preferred Stock in
the Company acquired by the Holder may not be transferred during the period
ending twelve months from the date of acquisition.
3. EXERCISE OF WARRANT.
A. CONDITIONS OF EXERCISE. The Holder is entitled to exercise this
Warrant on only one occasion. In the event this Warrant is exercised as to less
than all the Warrant Shares purchasable hereunder, the Holder shall be deemed to
have forfeited the Holder's rights to such unexercised shares. To exercise this
Warrant, the Holder shall deliver to the Company at its office referred to
herein, or at such office as the Company may from time to time so designate, at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company, wire transfer of funds to the
Company's account, or evidence of any indebtedness of the Company to the Holder
(or any combination of any of the foregoing) in the amount of the Warrant Price
Per Share for each share of Series A Preferred Stock covered by such Notice of
Exercise, and (iii) this Warrant.
B. TRANSFER RESTRICTION LEGEND. The certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
2
75
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be sold or transferred in the
absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
4. ADJUSTMENTS TO WARRANT PRICE PER SHARE.
(i) In the case of any proposed consolidation or merger of the Company
with another entity, or the proposed sale of all or substantially all of its
assets to another person or entity or any proposed reorganization or
reclassification of the capital stock of the Company, then, as a condition of
such consolidation, merger, sale, reorganization or reclassification, lawful and
adequate provision shall be made whereby the Holder of this Warrant shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein, in lieu of the shares of Series A Preferred Stock
immediately theretofore purchasable hereunder, such shares of stock, securities
or assets as may (by virtue of such consolidation, merger, sale, reorganization
or reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Series A Preferred Stock purchasable hereunder
immediately before such consolidation, merger, sale, reorganization or
reclassification. In any such case, appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof shall thereafter be applicable as nearly as may be,
in relation to any shares to stock, securities or assets thereafter deliverable
upon the exercise of this Warrant.
(ii) If, at any time during the term of this Warrant, the number of
shares of Series A Preferred Stock outstanding is increased by a stock dividend
payable in shares of Series A Preferred Stock or by a subdivision or split-up of
shares of Series A Preferred Stock, then, following the record date fixed for
the determination of holders of Series A Preferred Stock entitled to receive
such stock dividend, subdivision or split-up, the Warrant Price Per Share shall
be proportionately decreased and the number of shares of Series A Preferred
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iii) If, at any time during the term of this Warrant, the number of
shares of Series A Preferred Stock outstanding is decreased by a combination of
the outstanding shares of Series A Preferred Stock, then, following the record
date for such combination, the Warrant Price Per Share shall be proportionately
increased and the number of shares of Series A Preferred Stock issuable upon the
exercise hereof shall be decreased in proportion to such decrease in outstanding
shares.
(iv) In case, at any time during the term of this Warrant, the Company
shall declare a cash dividend upon its Series A Preferred Stock payable
otherwise than out of earnings or earned surplus or shall distribute to holders
of its Series A Preferred Stock shares of its capital stock (other than Series A
Preferred Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends and
3
76
for Series A Preferred Stock), then, in each such case, immediately following
the record date fixed for the determination of the holders of Series A Preferred
Stock entitled to receive such dividend or distribution, the Warrant Price Per
Share in effect thereafter shall be determined by multiplying the Warrant Price
Per Share in effect immediately prior to such record date by a fraction of which
the numerator shall be an amount equal to the difference of (x) the Current
Value of one share of Series A Preferred Stock minus (y) the fair market value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the stock, securities, evidences of indebtedness,
assets, options or rights so distributed in respect of one share of Series A
Preferred Stock, and of which the denominator shall be such Current Value. Upon
each adjustment of the Warrant Price Per Share as provided in this Section
4(iv), the Holder shall thereafter be entitled to purchase, at the Warrant Price
Per Share resulting from such adjustment, the number of shares (calculated to
the nearest tenth of a share), obtained by multiplying the Warrant Price Per
Share in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Warrant Price Per Share resulting from such
adjustment.
5. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
assets of the Company in dissolution or liquidation (except under circumstances
when the foregoing Section 4 shall be applicable), the Company shall give notice
thereof to the Holder hereof and shall make no distribution to shareholders
until the expiration of fifteen (15) days from the date of mailing of the
aforesaid notice and, in any case, the Holder hereof may exercise the Warrant
Rights within fifteen (15) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such fifteen-day period shall
thereafter become null and void.
6. FURTHER ASSURANCES. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of this Warrant
from time to time outstanding.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve and keep available, solely for issuance and delivery
upon the exercise of this Warrant, all shares of Series A Preferred Stock (or
other Securities) from time to time issuable upon the exercise of this Warrant.
8. NOTICES. All Notices required or permitted to be given hereunder
shall be given in writing and shall be deemed to be sufficiently given when
either (a) personally delivered or (b) when deposited in the U.S. mail with
postage prepaid and duly addressed to the party at its address set forth above,
provided that such notice shall also be sent by mail return receipt requested or
by overnight mail by a nationally recognized carrier or by telecopier or
facsimile.
9. WARRANT RIGHTS; ETC. The holder of the Warrant Shares is entitled to
those rights that are set forth in the Company's Restated Certificate of
Incorporation, as amended form time to time, and in that certain Series A
Preferred Stock and Warrant Purchase Agreement dated January 20, 1998 by and
between the Company and certain Purchasers, including but not limited to
registration rights, liquidation rights, conversion rights and redemption
rights.
4
77
10. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY AND RIGHTS. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Series A Preferred Stock, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the Warrant Price hereunder or as a shareholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company. Nothing in this Warrant shall be construed to give any person or
corporation other than the Company and the Holder any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and the Holder.
11. MISCELLANEOUS. This Warrant and any term hereof may be changed.
waived, discharged or terminated by agreement between the Company and the
Holder. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Pennsylvania. The headings in this
Warrant are for reference only, and shall not limit or otherwise affect any of
the terms hereof. For the purposes of this Warrant terms appearing in the
singular include the plural and terms appearing in the masculine gender include
the feminine gender.
12. AUTOMATIC CONVERSION. If, at any time during the term of this
Warrant, all of the outstanding shares of Series A Preferred Stock are
automatically converted into Common Stock pursuant to Article III-B, Section
3(b) of the Company's Restated Certificate of Incorporation, then, upon the
exercise of this Warrant, the Company shall issue to the Holder, in lieu of
shares of Series A Preferred Stock, shares of Common Stock in an amount equal to
the number of shares of Common Stock into which the shares of Series A Preferred
Stock would have been converted upon such automatic conversion of all
outstanding Series A Preferred Stock.
5
78
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 21 day of January, 1998.
Dated:
WITNESS/ATTEST: CELLOMICS, INC., Issuer
By:
----------------------------- ------------------------------
President
6
79
FORM OF NOTICE OF EXERCISE
(To be signed only upon exercise of Warrant).
TO: Cellomics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, 53,381 shares of Cellomics, Inc.'s Series A Preferred Stock
and herewith makes payment of the Warrant Price Per Share for each share of
Series A Preferred Stock and requests that the certificates for such shares be
issued in the name of, and delivered to, Komasta Properties Ltd, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇.
Dated:
Komasta Properties, Ltd.
By:
-------------------------------
Title:
----------------------------