Exhibit 4.7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of the 26th day of
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February, 1997 by and among OraPharma, Inc., a Delaware corporation (the
"Company"), and the persons listed on Schedule 1 attached hereto (the "Buyers").
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The Company and the Buyers are desirous of providing for the issuance of
shares of Series A Preferred Stock and Series B Preferred Stock (each as defined
herein), as more specifically set forth herein.
The parties, intending to be legally bound hereby, agree as follows:
1. Definitions.
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As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 1.
"Applicable Environmental Law" shall mean CERCLA, RCRA, the Federal Waste
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Pollution Control Act, 33 U.S.C. (S)(S) 1261 et seq., the Clean Air Act, 42
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U.S.C. (S)(S) 7401 et seq., any similar provisions of state or local law in the
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jurisdictions where the properties of the Company are located and the
regulations thereunder and any other local, state and/or federal laws or
regulations, whether currently in existence or hereafter enacted, that govern:
(a) the existence, cleanup and/or remedy of contamination on property;
(b) the protection of the environment from spilled, deposited or
otherwise emplaced contamination;
(c) the control of hazardous wastes; or
(d) the use, generation, transport, treatment, storage, disposal,
removal or recovery of Hazardous Materials, including building materials.
"Budget" shall have the meaning set forth in Section 6.3(c).
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"Business" shall have the meaning set forth in Section 4.17.
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"Business and Condition" shall mean the business, operations, properties,
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assets, prospects or condition (financial or otherwise) of the Company.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
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on which banks located in the State of New Jersey are authorized or required to
be closed.
"Buyers" shall have the meaning set forth in the first paragraph of this
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Agreement.
"By-Laws" shall mean the by-laws of the Company.
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"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
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and Liability Act, 42 U.S.C. (S)(S) 6901 et seq.
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"Certificate of Incorporation" shall mean the Amended and Restated
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Certificate of Incorporation of the Company, as amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Commission" shall mean the Securities and Exchange Commission.
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"Commitment" shall mean all obligations of the Company and its
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Subsidiaries, contingent or otherwise, pursuant to long-term leases (other than
leases for real property) or similar agreements.
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
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the Company.
"Company" shall have the meaning set forth in the first paragraph of this
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Agreement.
"Contemplated Transactions" shall have the meaning set forth in Section
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5.3.
"Cyanamid Agreement" shall mean the agreement dated as of the date hereof
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between the Company and American Cyanamid Company.
"Employment Agreement" shall mean the memo dated October 17, 1996 and
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attached letter agreement between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ relating to
▇▇. ▇▇▇▇▇▇▇▇▇'▇ employment by the Company.
"Encumbrance" shall mean any security interest, mortgage, lien, charge,
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adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Equity Stock" shall have the meaning set forth in Rule 3a-11-1 under the
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Securities Exchange Act of 1934.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
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amended.
"GAAP" shall mean generally accepted accounting principles of the United
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States.
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"Governmental Body" shall mean any domestic or foreign national, state or
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municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"Hazardous Materials" shall mean any substance which as of the date of this
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Agreement shall be identified as "hazardous" or "toxic" or otherwise regulated
under CERCLA or RCRA or which has been or shall be determined at any time by any
agency or court to be a hazardous or toxic substance under Applicable
Environmental Law. The term "Hazardous Material" shall also include, without
limitation, raw materials, building components, the products of any
manufacturing or other activities on the properties, wastes, petroleum, and
source, special nuclear or by-product material as defined by the Atomic Energy
Act of 1954, as amended (42 U.S.C. (S)(S) 3011 et seq., as amended).
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"Indebtedness" shall mean all liabilities for money borrowed by the Company
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and its Subsidiaries.
"Initial Public Offering" shall mean the Company's initial distribution of
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New Securities in a firm commitment underwritten public offering to the general
public pursuant to a registration statement filed with and declared effective by
the Commission pursuant to the Securities Act at a price per New Security of not
less than $4.00 (as adjusted for stock splits, stock combinations or similar
recapitalizations) and resulting in gross proceeds (before underwriting
commissions and offering expenses) to the Company of not less than $15 million.
"▇▇▇▇▇▇▇▇ Agreement" shall mean the Agreement dated as of December 24, 1996
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between the Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, DDS, MSD.
"Net Worth" shall have the meaning set forth in Section 7.6.
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"New Securities" shall mean any Equity Stock, including, but not limited
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to, shares of Common Stock of the Company, any security which is convertible
into or exercisable or exchangeable for Common Stock, or any right, option or
warrant to acquire any Common Stock of the Company.
"Person" shall mean any individual, corporation, partnership, limited
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liability company, joint venture, trust, association, unincorporated
organization, other entity, or
Governmental Body.
"Preferred Shares" shall mean the Series A Preferred Shares and the Series
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B Preferred Shares.
"Proprietary Rights" shall mean all patents, patent applications, patent
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licenses, trademarks, trademark applications, trade names, service marks,
service ▇▇▇▇ applications, brand marks, brand names, copyrights, trade secrets,
inventions, technologies, know-how, formulae, processes, names and likeness.
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"Public Offering" shall mean a distribution of New Securities in an
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underwritten public offering to the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
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(S)(S) 6901 et seq.
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"Registrable Securities" shall mean any shares of Common Stock issued or to
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be issued pursuant to conversion of the Preferred Shares (including any shares
issued as a dividend or distribution with respect to, or in exchange for, the
Preferred Shares).
"Related Party" shall mean (a) any individual who is a director or officer
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of the Company; (b) any person who is an affiliate of the Company, as such term
is defined in Rule 405 under the Securities Act, (c) any Person that owns five
percent or more of the outstanding Equity Stock of any class of the Company; (d)
any member of the family (as defined in Section 267(c)(4) of the Code) of, or
any individual who has the same home as, any individual (or the spouse of any
such individual) described in clause (a), (b) or (c) of this Section; or (e) any
trust, estate or partnership of which an individual described in clause (a),
(b), (c) or (d) of this Section is a grantor, fiduciary, beneficiary or partner.
"Restricted Stock Agreements" shall mean the Restricted Stock Purchase
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Agreements between the Company and each of ▇▇▇▇▇▇ Investment Holdings I, L.L.C.,
Oak Investment Partners VI, Limited Partnership, Oak VI Affiliates Fund, Limited
Partnership and American Cyanamid Company, all of which are dated the date
hereof except for the ▇▇▇▇▇▇ Restricted Stock Agreement, which was executed on
February 24, 1997.
"SBIA" shall have the meaning set forth in Section 4.17.
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"SBIC" shall mean Canaan S.B.I.C., L.P., a Delaware limited partnership,
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one of the Buyers hereunder.
"▇▇▇▇▇▇ Restricted Stock Agreement" shall mean the Restricted Stock
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Purchase Agreement by and between the Corporation and ▇▇▇▇▇▇ Investment Holdings
I, L.L.C. dated February 24, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Series A Closing" shall have the meaning set forth in Section 2.4.
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"Series B Closing" shall have the meaning set forth in Section 3.4.
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"Series A Closing Date" shall mean the date and time of the Series A
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Closing.
"Series B Closing Date" shall mean the date and time of the Series B
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Closing.
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"Series A Preferred Shares" shall mean the Series A Preferred Stock of the
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Company to be issued to the Buyers hereunder.
"Series B Preferred Shares" shall mean the Series B Preferred Stock of the
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Company to be issued to the Buyers hereunder.
"Series A Preferred Stock" shall mean the Series A Preferred Stock, par
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value $.001 per share, of the Company.
"Series B Preferred Stock" shall mean the Series B Preferred Stock, par
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value $.001 per share, of the Company.
"Stockholders Agreement" shall mean the Stockholders Agreement dated as of
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the date hereof between the Company and the stockholders of the Company named
therein.
"Subsidiary" shall mean with respect to any Person, any corporation of
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which securities having the power to elect a majority of that corporation's
Board of Directors (other than securities having that power only upon the
happening of a contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.
"Taxes" shall mean all taxes, duties, charges, fees, levies, interest,
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penalties, additions to tax or other assessments, including, but not limited to,
income, excise, employment, property, sales, use, value added and franchise
taxes and customs duties, imposed by any Governmental Body and any payments with
respect thereto required under any tax-sharing agreement.
2. The Series A Acquisition.
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2.1 Preferred Shares. The Series A Preferred Shares shall have the voting
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powers, liquidation rights, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof as set forth in the Certificate of
Incorporation.
2.2 Purchase and Sale. Subject to the terms and conditions of this
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Agreement, at the Series A Closing to be held as provided in Section 2.4 below,
the Company shall issue and sell to the Buyers an aggregate of 800,000 shares of
Series A Preferred Stock, which shall be issuable to each Buyer in the amount
set forth opposite the name of such Buyer listed on Schedule 2.2, free and clear
of all Encumbrances, and each of the Buyers agrees, severally and not jointly,
to purchase from the Company the shares of Series A Preferred Stock listed by
such Buyer's name on Schedule 2.2.
2.3 Purchase Price. The aggregate purchase price for the shares of Series
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A Preferred Stock to be issued at the Series A Closing shall be $800,000, and
each Buyer shall pay the amount of the purchase price set forth opposite the
name of such Buyer listed on Schedule 2.2. The purchase price shall be paid by
each of the Buyers to the Company at the Series A Closing
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(a) by cancellation of indebtedness, and/or (b) in immediately available funds
by wire transfer or by delivery of bank cashier's checks or certified checks.
2.4 Place and Time. The closing of the sale and purchase of the Series A
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Preferred Shares (the "Series A Closing") shall take place at the offices of
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▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on February 26, 1997 or at such other place, date
and time as the parties may agree in writing.
2.5 Deliveries by the Company. At the Series A Closing, the Company shall
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deliver the following to each of the Buyers:
(a) Certificates representing the Series A Preferred Shares, duly
registered in the names of the Buyers.
(b) The documents contemplated by Section 9.
(c) The Stockholders Agreement.
(d) A copy of the Cyanamid Agreement.
(e) A copy of the ▇▇▇▇▇▇▇▇ Agreement.
(f) A copy of the Employment Agreement.
(g) Copies of the Restricted Stock Agreements.
(h) All other documents, instruments and writings required by this
Agreement to be delivered by the Company at the Series A Closing.
(i) Completed and executed Small Business Administration Forms 480 and
652 and Section A of Form 1031.
2.6 Deliveries by the Buyers. At the Series A Closing, each of the Buyers
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shall deliver the following to the Company:
(a) A wire transfer or bank cashier's or certified check payable to
the order of the Company in the amount of the purchase price (less, in the event
that such Buyer surrenders one or more promissory notes made by the Company to
such Buyer for cancellation, the principal amount of such promissory note(s)
plus interest accrued but unpaid thereon), determined in accordance with Section
2.3.
(b) The Stockholders Agreement.
(c) All other documents, instruments and writings required by this
Agreement to be delivered by the Buyers at the Series A Closing.
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3. The Series B Acquisition.
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3.1 Preferred Shares. The Series B Preferred Shares shall have the voting
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powers, liquidation rights, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof as set forth in the Certificate of
Incorporation.
3.2 Purchase and Sale. Subject to the terms and conditions of this
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Agreement, at the Series B Closing to be held as provided in Section 3.4 below,
the Company shall issue and sell to the Buyers an aggregate of 6,593,408 shares
of Series B Preferred Stock, which shall be issuable to each Buyer in the amount
set forth opposite the name of such Buyer listed on Schedule 3.2, free and clear
of all Encumbrances, and each of the Buyers agrees, severally and not jointly,
to purchase from the Company the shares of Series B Preferred Stock listed by
such Buyer's name on Schedule 3.2.
3.3 Purchase Price. The aggregate purchase price for the shares of Series
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B Preferred Stock to be issued at the Series B Closing shall be $1.82 per share,
and each Buyer shall pay the amount of the purchase price set forth opposite the
name of such Buyer listed on Schedule 3.2. The purchase price shall be paid by
each of the Buyers to the Company at the Series B Closing in immediately
available funds by wire transfer or by delivery of bank cashier's checks or
certified checks.
3.4 Place and Time. The closing of the sale and purchase of the Series B
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Preferred Shares (the "Series B Closing") shall take place at the offices of
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▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on March 7, 1997 or at such other place, date and
time as the parties may agree in writing.
3.5 Deliveries by the Company. At the Series B Closing, the Company shall
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deliver the following to each of the Buyers:
(a) Certificates representing the Series B Preferred Shares, duly
registered in the names of the Buyers.
(b) The documents contemplated by Section 9.
(c) All other documents, instruments and writings required by this
Agreement to be delivered by the Company at the Series B Closing.
(d) Completed and executed Small Business Administration Forms 480 and
652 and Section A of Form 1031.
3.6 Deliveries by the Buyers. At the Series B Closing, each of the Buyers
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shall deliver the following to the Company:
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(a) A wire transfer or bank cashier's or certified check payable to
the order of the Company in the amount of the purchase price (less, in the event
that such Buyer surrenders one or more promissory notes made by the Company to
such Buyer for cancellation, the principal amount of such promissory note(s)
plus interest accrued but unpaid thereon), determined in accordance with Section
3.3.
(b) All other documents, instruments and writings required by this
Agreement to be delivered by the Buyers at the Series B Closing.
4. Representations and Warranties of the Company.
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The Company represents and warrants (both as of the date of this Agreement
and as of the Series A Closing Date and Series B Closing Date) to each of the
Buyers as follows:
4.1 Organization of the Company; Authorization. (a) The Company was
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incorporated under the laws of the State of Delaware on August 1, 1996, and
since such date the Company has not, directly or indirectly, (i) engaged in any
business, (ii) entered into any agreements, contracts, guaranties,
understandings or other commitments (written or oral), or (iii) incurred any
liabilities of any nature (matured or unmatured, fixed or contingent), except:
(A) the Company and certain of the Buyers have entered into a
written Loan Agreement dated December 2, 1996 (pursuant to which the
Company executed and delivered Promissory Notes and Series A Preferred
Stock Warrants to such Buyers) and an oral loan agreement dated
January 30, 1997 (pursuant to which the Company executed and delivered
Promissory Notes to such Buyers) pursuant to which the Company
borrowed an aggregate of $165,000 from such Buyers;
(B) the Company has negotiated, executed and delivered this
Agreement, the Stockholders Agreement, the Employment Agreement, the
Restricted Stock Agreements and the other agreements related hereto
and thereto;
(C) the Company has negotiated, executed and delivered the
Cyanamid Agreement, the ▇▇▇▇▇▇▇▇ Agreement and the other agreements
related to each of them; and
(D) the Company has engaged in those additional activities, has
negotiated, executed and delivered those additional agreements,
contracts or instruments and has incurred those liabilities set forth
on Schedule 4.1 attached hereto.
(b) The Company has never had, nor does it presently have, any
subsidiaries, nor has it owned, nor does it presently own, any capital stock or
other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity.
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(c) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware, with full corporate power and authority
to enter into this Agreement and the Stockholders Agreement and to perform all
of its obligations hereunder and thereunder, and to own its properties and to
engage in its business as presently conducted or contemplated. The Company is
duly qualified and in good standing as a foreign corporation under the laws of
the State of New Jersey and is not required to qualify as a foreign corporation
in any other jurisdiction except where the failure to be so qualified would not
have a material adverse affect on the condition (financial or otherwise) of the
Company. The Company has no subsidiaries, nor does it own any equity interest
in, or control directly or indirectly, any other entity. The Company is not a
party to any joint venture or partnership agreement.
(d) The execution, delivery and performance of this Agreement and the
Stockholders Agreement by the Company have been authorized by all necessary
action and constitute valid and binding obligations of the Company, enforceable
against it in accordance with their terms.
4.2 Capitalization. (a) The authorized Equity Stock of the Company
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consist of (i) 10,143,408 shares of Common Stock, 335,400 of which are issued
and outstanding immediately prior to consummation of this Agreement, the
Restricted Stock Agreements other than the ▇▇▇▇▇▇ Restricted Stock Agreement and
the Cyanamid Agreement, and (ii) 800,000 shares of Series A Preferred Stock and
6,593,408 shares of Series B Preferred Stock, none of which are issued and
outstanding immediately prior to the consummation of the transactions
contemplated by this Agreement, the Restricted Stock Agreements and the Cyanamid
Agreement. All of the issued and outstanding shares of the Company are fully
paid and non-assessable.
(b) A true and complete list of the holders of record of all issued
and outstanding Equity Stock of the Company, including all outstanding options,
warrants or other rights to purchase Equity Stock, as adjusted to reflect the
consummation of the transactions contemplated by this Agreement, the Restricted
Stock Agreements, the Cyanamid Agreement and the ▇▇▇▇▇▇▇▇ Agreement, including
the number of securities owned by each such holder, is set forth on Schedule
4.2(b) attached hereto.
(c) The issuance of the Preferred Shares hereunder and the shares of
Common Stock issuable upon conversion of the Preferred Shares have been duly and
validly authorized. No further approval or authorization of the shareholders or
the directors of the Company, of any Governmental Body or of any other Person is
required for the issuance and sale of the Preferred Shares, or the shares of
Common Stock issuable on conversion thereof. When paid for by, and issued to,
the Buyers, the Preferred Shares will be duly and validly issued, fully paid and
non-assessable and will be free and clear of any Encumbrances. The Preferred
Shares will have the designations, preferences and relative, participating,
optional and other special rights as set forth in the Certificate of
Incorporation. Assuming the truth of the Buyers' representations and warranties
contained in Section 5, the offer, sale and issuance of the Preferred Shares
(and any shares of Common Stock issuable on conversion thereof) are exempt from
the registration requirements of the Securities Act and state securities laws.
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(d) Except as contemplated by this Agreement or as set forth in
Schedule 4.2(b), there are no outstanding options, rights, conversion rights,
agreements or commitments of any kind relating to the issuance, sale, purchase,
redemption, voting or transfer of any Equity Stock or other securities of the
Company or any rights outstanding which permit or allow the holder thereof to
cause the Company to file a registration statement or which permit or allow the
holder thereof to include securities of the Company in a registration statement
filed by the Company. There are no preemptive or other similar rights with
respect to any Equity Stock of the Company, except rights granted under the
Stockholders Agreement. None of the outstanding Equity Stock of the Company was
issued in violation of the Securities Act or the securities laws of any state or
other jurisdiction except for the filing of certain notices that may be required
under applicable Federal or state securities laws, which filings shall be timely
made. The offer, sale and issuance of the Preferred Shares and the shares of
Common Stock issuable upon conversion of the Preferred Shares in conformity with
the terms of this Agreement constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940.
The Company has delivered to the Buyers copies of the Certificate of
Incorporation and By-Laws (or other governing instrument) of the Company, as
currently in effect.
4.3 No Conflict as to the Company. Neither the execution and delivery of
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this Agreement or the Stockholders Agreement nor the issuance of the Preferred
Shares or the Common Stock issuable on conversion thereof will (a) violate any
provision of the Certificate of Incorporation or By-Laws of the Company, or (b)
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any Person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of the
Company under, any material agreement or commitment to which the Company is a
party or by which any of its property or assets is bound, or to which any of the
property or assets of the Company is subject, or (c) violate any statute or law
or any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to the Company.
4.4 Title to Properties; Encumbrances; Condition. (a) The Company owns no
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interests in real properties. The Company has good and valid title to all other
properties (personal and mixed, tangible and intangible) that it purports to own
and a valid leasehold interest in all properties that it has leased.
(b) All properties and assets owned by the Company are owned free and
clear of all Encumbrances, except for security interests incurred in connection
with the purchase of property or assets (such security being limited to the
property or assets so acquired).
(c) The properties and assets of the Company include all rights,
properties and other assets necessary to permit the Company to conduct its
business in all material respects in the same manner as presently conducted or
contemplated and as it has been conducted prior to the date of this Agreement.
The equipment of the Company is in good operating condition and
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repair and is adequate for its present and contemplated uses to which it is
being, or is contemplated to be, used.
4.5 Litigation. (a) There is no action, suit, inquiry, proceeding or
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investigation by or before any court or Governmental Body pending or, to the
best of the Company's knowledge, threatened involving the Company, and (b) there
is no valid basis for any such action, suit, inquiry, proceeding or
investigation. The Company is not subject to any judgment, order or decree.
4.6 Proprietary Rights. The Company owns, or is licensed or otherwise has
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the full and exclusive rights to use, sell and license, all Proprietary Rights
used in or necessary for the conduct of its business as heretofore conducted,
and as presently contemplated to be conducted, all of which are listed on
Schedule 4.6 hereto (the "Requisite Rights"). To the Company's knowledge, each
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of the patents comprising the owned or licensed Requisite Rights is valid and
enforceable. Except as set forth in the Cyanamid Agreement, the ▇▇▇▇▇▇▇▇
Agreement and on Schedule 4.6, no royalties, honoraria, fees or other amounts
are payable by the Company to any third party be reason of the ownership, use,
sale or license of the Requisite Rights. Except as set forth on Schedule 4.6
hereto, no product, service or process currently or proposed to be manufactured,
marketed, sold or used by the Company violates any license or infringes any
Proprietary Rights of any third party. There is no pending or threatened claim
or litigation against the Company contesting the validity or right to use any of
the Requisite Rights, nor does there exist any basis therefor.
4.7 Contracts and Commitments. Schedule 4.7 contains a true and complete
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and accurate list of all contracts, agreements, understandings or other
obligations (whether written or oral) to which the Company is a party or by
which any of its assets or properties are bound.
4.8 Status of Agreements. All contracts, agreements, commitments,
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obligations, plans, leases, policies and licenses to which the Company is a
party are valid and binding agreements and are in full force and effect; there
are no existing defaults (or events which, with notice or lapse of time or both,
would constitute a default) by the Company or, to the best of the Company's
knowledge, any other party thereunder. The Company is not a party to any
contract, agreement, commitment or other obligation that has or may reasonably
be expected to have individually or in the aggregate with any other contracts,
agreements, commitments or other obligations a material adverse effect on the
Business and Condition of the Company.
4.9 Labor Relations. Except as set forth in Schedule 4.9, the Company is
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not obligated under any employment contract, nor is it a party to any union,
collective bargaining or similar agreement, any profit-sharing, deferred
compensation, bonus, stock option, stock ownership, stock purchase, pension,
consulting, retirement, welfare or incentive plan or agreement, or any plan
providing for "fringe benefits" to its employees, including, but not limited to,
salary continuation, service awards, severance pay, welfare, medical,
hospitalization, disability, life insurance and other insurance plans or related
benefits with respect thereto. The Company is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
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hours, and the Company is not nor has it been engaged in any unfair labor
practice; there is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board; there is no labor strike,
dispute, slowdown or stoppage pending or threatened against or affecting the
Company or any attempt to organize employees of the Company for union
representation; no representation question exists respecting the employees of
the Company; and the Company's relations with its employees are satisfactory.
4.10 Employee Benefit Plans. The Company does not have, none of its
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current or former employees are covered by, and the Company has no obligation
with respect to, any employee benefit plan (as defined in Section 3(3) of
ERISA), whether formal or informal.
4.11 Compliance with Law. The operations of the Company have been
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conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of all Governmental Bodies having
jurisdiction over the Company. The Company has not received any notification of
any asserted present or past failure to comply with any such laws, rules or
regulations. The Company has all material licenses, permits, orders or approvals
from Governmental Bodies required for the conduct of its business and, to the
best of the Company's knowledge, it is not in violation of any such license,
permit, order or approval.
4.12 Environmental Protection. (a) The Company is in compliance in all
------------------------
material respects with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Applicable Environmental Laws, or in any plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. The
Company is not aware of, nor has the Company received notice of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste.
(b) To the best of the Company's knowledge, no Hazardous Material has
been incorporated in, used on, stored on or under, released from, treated on,
transported to or from, or disposed of on or from any real property leased by
the Company such that, under Applicable Environmental Laws, (i) any such
Hazardous Material would be required to be removed, cleaned-up or remediated
before the property could be altered, renovated, demolished or transferred, or
(ii) the lessee of the property could be subjected to liability for the removal,
clean-up or remediation of such Hazardous Material; and the Company has not
received any notification from any Governmental Bodies or other third parties
relating to Hazardous Material on or affecting any property owned or leased by
the Company or relating to any potential or known liability under Applicable
Environmental Laws arising from the ownership or leasing of any property.
-12-
4.13 Related Party Transactions. (a) Except as set forth in Schedule 4.13
--------------------------
and except for the transactions contemplated to occur at the Series A Closing
and the Series B Closing, (i) there have been no transactions between the
Company and any Related Party or any payment (however characterized) by the
Company to any Related Party or by any Related Party to the Company, and (ii)
there is no lease, agreement or commitment between the Company and any Related
Party. As used in the preceding sentence, the term "transaction" includes, but
is not limited to, any sale or other transfer of property of assets, the lease
or other use of property or assets, the provision of services and the furnishing
of personnel, whether or not for consideration.
(b) Except as set forth in Schedule 4.13, no Related Party has any
material interest in any property, real or personal, tangible or intangible,
including, without limitation, any Proprietary Rights, used in or pertaining to
the business of the Company, no Related Party is indebted to the Company and the
Company is not indebted to any Related Party.
4.14 No Brokers or Finders. Neither the Company, nor any of its officers,
---------------------
directors or employees, has employed any broker or finder or incurred any
liability for any brokerage or finder's fees or commissions or similar payments
in connection with this Agreement or the transactions contemplated hereby.
4.15 Insurance. The Company has obtained insurance for its benefit in such
---------
amounts and covering such risks as are customary for businesses comparable to
the business conducted by the Company under policies in effect and issued by
insurers of recognized responsibility.
4.16 Disclosure. No representations or warranties by the Company in this
----------
Agreement and no statement contained in any document (including, without
limitation, financial statements, certificates, projections, business plans or
other writings furnished or to be furnished to the Buyers or any of their
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby), contains any untrue statement of material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. Documents delivered to the Buyers pursuant to this
Agreement are true and complete copies of what they purport to be.
4.17 Small Business Matters. (a) The Company, together with its
----------------------
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
(S)121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended (the "SBIA"), and the regulations
----
thereunder, including Title 13, Code of Federal Regulations, (S)121.301(c). The
information set forth in the Small Business Administration Forms 480, 652 and
Part A of Form 1031 regarding the Company and its affiliates, when delivered to
Canaan, will be accurate and complete. Copies of such forms shall be completed
and executed by the Company and delivered to Canaan at the Series A Closing and
Series B Closing.
(b) The proceeds from the sale of the Preferred Shares will be used by
the Company to (i) finance working capital and other general corporate needs
(including amounts to be paid by the Company pursuant to the Cyanamid
Agreement), and (ii) pay expenses related to the transactions contemplated by
this Agreement, the Stockholders Agreement, the Cyanamid
-13-
Agreement, the ▇▇▇▇▇▇▇▇ Agreement, the Restricted Stock Agreements and the other
transactions and documents related hereto and thereto. No portion of such
proceeds (i) will be used to provide capital to a corporation licensed under the
SBIA, (ii) will be used to acquire farm land, (iii) will be used to fund
production of a single item or defined limited number of items, generally over a
defined production period, that constitute the majority of the activities of the
Company (examples include motion pictures and electric generating plants), or
(iv) will be used for any purpose contrary to the public interest (including,
but not limited to, activities which are in violation of law or inconsistent
with free competitive enterprise), in each case, within the meaning of 13 C.F.R.
(S)107.720.
(c) The primary business activity of the Company does not involve,
directly or indirectly, providing funds to others, purchasing or discounting
debt obligations or factoring or long-term leasing of equipment with no
provision for maintenance or repair. The Company is not classified under Major
Group 65 (Real Estate) of the SIC Manual. The assets of the business of the
Company (the "Business") will not be reduced or consumed, generally without
--------
replacement, as the life of the Business progresses, and the nature of the
Business does not require that a stream of cash payments be made to the
Company's financing sources on a basis associated with the continuing sale of
assets (examples include real estate development projects and oil and gas
▇▇▇▇▇). (See 13 C.F.R. (S)107.720.)
---
(d) The proceeds from the sale of the Series A Preferred Shares will
not be used substantially for a foreign operation and at the Series A Closing or
within one year thereafter no more than 49 percent of the employees or tangible
assets of the Company and its subsidiaries will be located outside the United
States. The proceeds from the sale of the Series B Preferred Shares will not be
used substantially for a foreign operation and at the Series B Closing or within
one year thereafter no more than 49 percent of the employees or tangible assets
of the Company and its subsidiaries will be located outside the United States.
This subsection (d) does not prohibit such proceeds from being used to acquire
foreign materials and equipment or foreign property rights for use or sale in
the United States (unless such use or sale is for a specific domestic purpose) .
5. Representations and Warranties of the Buyers.
--------------------------------------------
Each Buyer, severally and not jointly, represents and warrants (both as of
the date of this Agreement and as of the Series A Closing Date and Series B
Closing Date) to the Company as follows:
5.1 Authorization. Such Buyer has the full power and authority to enter
-------------
into this Agreement and the Stockholders Agreement and to perform all of its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Stockholders Agreement by it have been duly authorized by
all necessary action, and this Agreement and the Stockholders Agreement
constitute valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms. The execution, delivery and
performance of this Agreement and the Stockholders Agreement by such Buyer does
not violate any provision of the governing instrument of Buyer, conflict with or
constitute a default under
-14-
any material agreement, indenture or instrument to which such Buyer is a party
or by which it is bound or violate any statute or order of any court or
Governmental Body applicable to such Buyer.
5.2 Investment Representations. Such Buyer has knowledge and experience
--------------------------
in financial and business matters sufficient to enable it to evaluate the merits
and risks of an investment in the Company. Such Buyer has assets sufficient to
enable it to bear the economic risk of its investment in the Preferred Shares
and is an "accredited investor", as defined in Rule 501 under the Securities
Act. Such Buyer is acquiring the Preferred Shares for its own account, and not
with a present view to, or for sale in connection with, any distribution
thereof. Such Buyer understands that the Preferred Shares and the Common Stock
issuable upon conversion thereof have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to the exemption provided in Section
4(2) thereof, that the Preferred Shares and the Common Stock issuable upon
conversion thereof have not been registered under applicable state securities
laws by reason of their issuance in a transaction exempt from such registration
requirements, and that the Preferred Shares and the Common Stock issuable upon
conversion thereof may not be sold or otherwise disposed of unless registered
under the Securities Act and applicable state securities laws (the Company being
under no obligation so to register such Preferred Shares or the Common Stock
issuable on conversion thereof, except as set forth in Section 8 of the
Stockholders Agreement) or exempted from registration. Such Buyer further
understands that the exemption from registration afforded by Rule 144
promulgated under the Securities Act is not presently available with respect to
the Preferred Shares or the Common Stock issuable on conversion thereof.
5.3 Buyers' Acknowledgment as to Information. Such Buyer or
----------------------------------------
representatives of such Buyer have received from the Company such information
(including the Schedules and Exhibits to this Agreement and of such documents
referred to herein and therein as they have requested) with respect to the
Company as such Buyer has deemed necessary and relevant in connection with the
transactions contemplated by this Agreement (the "Contemplated Transactions"),
-------------------------
and such Buyer has had the opportunity, directly or through such
representatives, to ask questions of and receive answers from persons acting on
behalf of the Company necessary to verify the information so obtained; provided,
--------
however, that such receipt of information and such opportunity shall not affect
-------
or otherwise diminish or obviate the representations and warranties of the
Company set forth in this Agreement or such Buyer's reliance thereon.
5.4 No Brokers or Finders. No Buyer nor any of its officers, directors or
---------------------
employees has employed any broker or finder or incurred any liability for any
brokerage or finder's fees or commissions or similar payments in connection with
any of the Contemplated Transactions.
6. Affirmative Covenants of the Company.
------------------------------------
Subject to Section 13, the Company agrees that so long as any shares of
Series A Preferred Stock or Series B Preferred Stock are outstanding:
-15-
6.1 Use of Proceeds. The proceeds of the sale of the Preferred Shares
---------------
shall be used by the Company for working capital, research and development and
other general corporate purposes (including amounts to be paid by the Company
pursuant to the Cyanamid Agreement).
6.2 Consent as to Issuance of Common Stock. The Company will obtain any
--------------------------------------
authorization, consent, approval or other action by or make any filing with any
court or Governmental Body that may be required under applicable state
securities laws in connection with the issuance of any shares of Common Stock
upon conversion of the Preferred Shares.
6.3 Financial Information. (a) Until the consummation of an Initial
---------------------
Public Offering, the Company will deliver to each holder of the Preferred
Shares: (a) as soon as practicable and in any event within 90 days after the
close of each fiscal year of the Company, copies of (i) the audited balance
sheet of the Company as of the end of such fiscal year, (ii) audited statements
of operations of the Company for such fiscal year, and (iii) audited statements
of cash flow of the Company for such fiscal year, setting forth in each case in
comparative form the corresponding figures of the previous annual period and the
most recent annual operating budget for the Company, containing a budget of
profit and loss and cash flow (the "Budget"), all in reasonable detail, prepared
------
in accordance with GAAP consistently applied throughout the periods involved
and, except for the comparison to the most recent Budget, together with the
report of a firm of independent certified public accountants of recognized
national standing;
(b) as soon as practicable, and in any event within 45 days after the
end of each of the first three fiscal quarters of the Company, an unaudited
balance sheet of the Company as at the end of each such fiscal quarter and
unaudited statements of operations, shareholders' equity and cash flow for such
fiscal quarter, setting forth in each case in comparative form corresponding
figures for the preceding year's respective fiscal quarter and the most recent
Budget, all in reasonable detail, prepared in accordance with GAAP consistently
applied throughout the periods involved and certified as being correct and
complete and fairly presenting the results of operations of the Company for the
quarter indicated (subject to normal year-end audit adjustments and the absence
of footnotes), by the principal financial officer of the Company;
(c) for each calendar month, as soon as practicable and in any event
within 25 days after the close of such month, copies of (i) the balance sheet of
the Company as of the end of such month, (ii) statements of operations of the
Company for such month, and (iii) statements of cash flow of the Company for
such month, all in reasonable detail, prepared in accordance with GAAP
consistently applied throughout the periods involved and certified as being
correct and complete and fairly presenting the results of operations of the
Company for the month indicated, subject to normal recurring year-end audit
adjustments, by the principal financial officer of the Company;
(d) as soon as practicable and in any event not less than 30 days
prior to the end of each fiscal year of the Company, a Budget; and
-16-
(e) such other reports and financial and other information as any
holder of at least 5% of the Preferred Shares shall reasonably request; and
(f) concurrently with the furnishing of the report pursuant to Section
6.3(a) and (b) hereof, an officer's certificate stating that the Company is not
in default under, and has not breached, any material agreements or obligations,
including, without limitation, this Agreement, or if any such default or breach
exists, specifying the nature thereof and what actions the Company has taken and
proposes to take with respect thereto. If for any period the Company shall have
any Subsidiary or Subsidiaries whose accounts are consolidated with those of the
Company, then the financial statements delivered for such period pursuant to the
foregoing clauses (a), (b) and (c) of this Section 6.3 shall be the consolidated
and consolidating financial statements of the Company and all such consolidated
Subsidiaries and, if such Subsidiary or Subsidiaries are not consolidated with
those of the Company, separate financial statements for such Subsidiary or
Subsidiaries shall be provided.
6.4 Other Reports and Inspection. The Company will, upon reasonable prior
----------------------------
notice, make available to each holder of at least 5% of the Preferred Shares or
its representatives or designees during normal business hours (a) all assets,
properties and business records of the Company for inspection and copying and
(b) the directors, officers, employees and public accountants (and by this
provision the Company hereby authorizes and instructs said accountants to
discuss with such holder and such representatives and designees its affairs,
finances and accounts and the responses of attorneys representing the Company to
inquiries made by the Company on behalf of said accountants in connection with
their audit of the financial affairs of the Company), of the Company for
interviews concerning the business, affairs and finances of the Company.
6.5 Corporate Existence; Properties. The Company will, and will cause
-------------------------------
each of its Subsidiaries to, maintain, preserve and renew its corporate
existence and all material licenses, authorizations and permits necessary to the
conduct of its business and take all action reasonably necessary to obtain,
preserve, defend, renew and extend all material licenses and Proprietary Rights
(including, without limitation, the Requisite Rights) which are necessary to the
conduct of its business.
6.6 Insurance. The Company will maintain policies of insurance,
---------
including, but not limited to, fire, liability and workmen's compensation, in
such amounts and covering such risks as are customarily carried by businesses
comparable to the business conducted by the Company, subject to availability at
commercially reasonable cost.
6.7 Maintenance of Properties. The Company will, and will cause each of
-------------------------
its Subsidiaries to, maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times.
6.8 Compliance with Obligations. The Company will, and will cause each of
---------------------------
its Subsidiaries to, comply with all material obligations which it incurs
pursuant to any contract or
-17-
agreement, whether oral or written, express or implied, as such obligations
become due to the extent to which the failure to so comply could reasonably be
expected to have a material adverse effect upon the Business and Condition of
the Company and its Subsidiaries taken as a whole, unless and to the extent that
the same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with GAAP consistently applied)
have been established on its books with respect thereto.
6.9 Taxes. The Company will, and will cause each of its Subsidiaries to,
-----
pay when due (a) all Taxes imposed upon it or any of its properties or income,
other than Taxes which are being contested in good faith and which Taxes in the
aggregate do not involve material amounts, and (b) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which, if unpaid, might result in the creation of a lien upon any of its
properties, other than claims or demands which are being contested in good
faith.
6.10 Compliance with Law. The Company will, and will cause each of its
-------------------
Subsidiaries to, comply, in all material respects, with all applicable statutes,
rules, regulations and orders of all Governmental Bodies with respect to the
conduct of its business and the ownership of its properties; provided, that the
--------
Company shall not be deemed to be in violation of this Section 6.10 as a result
of any failure to comply with any provisions of such statutes, rules,
regulations and orders, the noncompliance with which would not result in fines,
penalties, injunctive relief or other civil or criminal liabilities which, in
the aggregate, would materially and adversely affect the Business and Condition
of the Company and its Subsidiaries taken as a whole.
6.11 Environmental Matters. The Company shall promptly advise the Buyers
---------------------
and each holder of at least 5% of the Preferred Shares in writing of any pending
or threatened claim, demand or action by any governmental authority or third
party relating to any Hazardous Materials affecting any properties owned or
leased by the Company of which it has knowledge. The Company shall not
discharge, place, release, spill or dispose of any Hazardous Materials or any
other pollutants or effluents upon any properties owned or leased by the Company
or elsewhere (including, but not limited to, underground injection of such
substances) other than in compliance with Applicable Environmental Laws and the
Company shall not discharge into the air any emission which would require a
permit under the Clean Air Act or its state counterparts or any other
Environmental Laws without obtaining such permit. The stockholders of the
Company shall have no control over, or authority with respect to, the waste
disposal operations of the Company.
6.12 Accounting System. The Company will maintain a system of accounting
-----------------
and proper books of record and account, in accordance with GAAP, and will set
aside on its books reserves for depreciation, depletion, obsolescence,
amortization, pending and threatened litigation and otherwise as may be
appropriate in conformance with procedures and recommendations of the Company's
independent public accountants.
6.13 Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the Series A
Preferred Stock and Series B
-18-
Preferred Stock (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Series A Preferred Stock and Series B Preferred Stock).
6.14 Proprietary Information and Confidentiality Agreements with Employees
---------------------------------------------------------------------
and Consultants. The Company will enter into proprietary information and
---------------
confidentiality agreements in a form approved by its Board of Directors with all
key employees and consultants of the Company. The Company will avail itself of
all rights and remedies under all existing and future proprietary information
and confidentiality agreements.
6.15 Board of Directors Meetings. The Company shall call, and use its best
---------------------------
efforts to have, regular meetings of the Board of Directors on at least a
quarterly basis. The Company shall pay all reasonable travel expenses and other
out-of-pocket expenses incurred by Directors in connection with attending
meetings of the Board or any committee thereof.
6.16 SBIC Compliance. (a) Within 75 days after each of the Series A
---------------
Closing Date and the Series B Closing Date, the Company shall provide Canaan
with a certificate of the Company's chief financial officer (i) verifying (and
describing in reasonable detail) the use of the proceeds of the sale of the
Preferred Shares, and (ii) certifying compliance by the Company with the
provisions of this Agreement. In addition to any other rights granted
hereunder, the Company shall provide Canaan and the United States Small Business
Administration access to its books and records for the purpose of verifying the
use of the proceeds of the sale of the Preferred Shares and for all other
purposes required by the United States Small Business Administration. Canaan
may exercise such right of access only through an independent accountant that
will agree to hold all information disclosed or observed in confidence and to
disclose to Canaan only whether the Company is in compliance with its
obligations under this Section 6.16(a).
(b) Promptly after the end of each fiscal year (but in any event prior
to March 31 of each year), the Company shall provide to Canaan a written
assessment, in form and substance satisfactory to Canaan, of the economic impact
of the sale of the Preferred Shares on the Company, specifying the full-time
equivalent jobs created or retained, the impact of the financing on the
consolidated revenues and profits of the Business and on taxes paid by the
Company and its employees. (See 13 C.F.R. (S)107.630(e)) .
---
(c) Upon the request of Canaan, the Company will (i) provide to Canaan
such financial statements and other information available to the Company as such
person or entity may from time to time reasonably request for the purpose of
assessing the Company's financial condition, and (ii) furnish to Canaan all
information reasonably requested by Canaan in order for Canaan to prepare and
file SBA Form 468 and any other similar information requested or required by any
governmental regulatory agency asserting jurisdiction over Canaan.
(d) For a period of one year following each of the Series A Closing
Date and the Series B Closing Date, the Company will not, and will cause its
subsidiaries not to, change its
-19-
business activity if such change would render the Company ineligible to receive
financial assistance from Canaan under the SBIA and the regulations thereunder.
(e) The Company will, and will cause its subsidiaries to, at all times
comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and
117.
7. Negative Covenants of the Company.
---------------------------------
Subject to Section 13, the Company covenants and agrees with each of the
Buyers and its transferees that, without the affirmative approval of the holders
of at least a majority of the Preferred Shares:
7.1 Related Party Transactions. Other than in the ordinary course of
--------------------------
business of the Company on an arms-length basis or in connection with
transactions involving obtaining additional financing for the Company, neither
the Company nor any Subsidiary will engage in any transaction with, nor enter
into any contract, agreement or other arrangement providing for, the employment
of, furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any Related Party without the affirmative vote
of a majority of the directors who are not affiliated (as defined by Rule 405
promulgated under the Securities Act) with such persons or entities.
7.2 Business. The Company will only engage in the business of the
--------
research, development, manufacturing, marketing and sale of medical products and
the performance of services related or incidental thereto, and any and all
activities related or incidental thereto.
7.3 Indebtedness; Commitments. The Company will not incur (a)
-------------------------
Indebtedness in excess of $100,000, or (b) Commitments in excess of $50,000 per
individual item or $250,000 in the aggregate other than in connection with (i)
leasing lines of credit, and (ii) loans from any of the holders of the Series A
Preferred Stock and/or Series B Preferred Stock which are approved by vote of
the Board of Directors.
7.4 Guarantees. The Company will not incur any guarantee or similar
----------
contingent obligation in respect of the indebtedness of others, whether or not
classified on the Company's balance sheet as a liability (a "Guarantee"), except
---------
for Guarantees in respect of indebtedness of any wholly-owned Subsidiary of the
Company.
7.5 Conflicting Agreements. The Company will not enter into any agreement
----------------------
which by its terms might restrict the performance of the Company's obligations
pursuant to the terms of this Agreement, the Stockholders Agreement or the
provisions relating to the Preferred Stock included in the Certificate of
Incorporation, including, but not limited to, the redemption, voting or
conversion of the Preferred Stock.
7.6 No Acquisitions. The Company shall not, nor shall it permit any of
---------------
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any
-20-
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire, or
permit any of its Subsidiaries to acquire or agree to acquire, any assets for a
purchase price which is in excess of 10% of the Company's net worth in
accordance with GAAP, based on the Company's most recent regularly prepared
quarterly or annual financial statements ("Net Worth").
---------
7.7 No Dispositions. Other than in the ordinary course of business and
---------------
other than dispositions of obsolete assets, the Company will not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of
or agree to sell, lease, encumber or otherwise dispose of, in any transaction or
series or related transactions, assets having an aggregate book value in excess
of 10% of the Company's Net Worth.
8. Confidentiality.
---------------
(a) The Buyers agree to keep the information heretofore or hereafter
furnished to the Buyers by the Company or on the Company's behalf (the
"Confidential Material") confidential. Notwithstanding the foregoing, the term
----------------------
Confidential Material does not include information that (i) is or becomes
publicly available other than through breach of this Agreement by the Buyers;
(ii) is already known to the Buyers at the time of disclosure; (iii) is received
by the Buyers from a third party not under an obligation of confidentiality to
the Company; or (iv) is independently developed by the Buyers without reference
to the Confidential Material. The Buyers agree to take reasonable precautions
to safeguard the Confidential Material from disclosure to anyone other than
appropriate employees, officers, directors, partners and representatives,
including auditors and attorneys, of the Buyers, which persons shall agree to
treat such information as confidential. Any holder of Series A Preferred Stock
or Series B Preferred Stock who is entitled to receive information concerning
the Company pursuant to Sections 6.3 and 6.4 shall, as a condition to receipt of
such confidential information, agree to be bound by this Section 8.
(b) A Buyer may provide to any member of its Group (as defined in the
Stockholders Agreement), and each of the Buyers which is acting as a general
partner of a venture capital limited partnership, a trustee, an investment
manager, an investment advisor or in any other similar fiduciary capacity may
furnish to any limited partner, plan sponsor, investment committee or investment
advisory board of or associated with such Buyer, only (i) information about the
Company which falls within the exceptions described in Section 8(a) above, and
(ii) information relating to summary, year-to-date, or annual financial and
other information necessary to describe the general condition of the Company if
concurrently therewith such Buyer informs such member of its Group, limited
partner, plan sponsor, investment committee or investment advisory board in
writing of the confidential nature of such information.
9. Conditions to the Buyers' Obligations.
-------------------------------------
The obligations of the Buyers to effect the Series A Closing shall be
subject to the satisfaction at or prior to the Series A Closing of the
conditions contained in Sections 9.1 through 9.15 below, inclusive, any one or
more of which may be waived by the Buyers. The obligations
-21-
of the Buyers to effect the Series B Closing shall be subject to the
satisfaction at or prior to the Series B Closing of the conditions contained in
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.14 and 9.15 below, any
one or more of which may be waived by the Buyers.
9.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays
consummation of any or all of the Contemplated Transactions, and the Buyers
shall have received a certificate to that effect signed by the President of the
Company.
9.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Series A Closing Date or Series B Closing Date, as the case may be, with the
same force and effect as though made at such time (such representations and
warranties not being affected by any updating information furnished pursuant to
any provision of this Agreement), (b) the Company shall have performed and
complied in all material respects with the agreements contained in this
Agreement required to be performed and complied with by it at or prior to the
Series A Closing or Series B Closing, as the case may be, and (c) the Buyers
shall have received a certificate to that effect signed by the President of the
Company.
9.3 Legal Opinion. The Buyers shall have received an opinion from ▇▇▇▇▇
-------------
Cummis ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., counsel to the Company,
dated the Series A Closing Date and in substantially the form of Exhibit 9.3.
9.4 Litigation. No action or proceeding shall be pending or threatened by
----------
or before any Person, court or other Governmental Body to restrain or prohibit
or to recover damages in respect of the consummation of any or all of the
Contemplated Transactions, nor shall there be any other action or proceeding
pending or threatened which action, or other proceeding may, in the reasonable
opinion of the Buyers, result in a decision, ruling or finding that individually
or in the aggregate has or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, on the ability of
the Company to perform its obligations under this Agreement or on the Business
and Condition of the Company.
9.5 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of Governmental Bodies necessary in the good faith
judgment of the Buyers for the consummation of any or all of the Contemplated
Transactions shall have been obtained on terms reasonably satisfactory to the
Buyers and shall be in full force and effect.
9.6 Other Consents. Consents or waivers from parties other than
--------------
Governmental Bodies that are required in connection with the consummation of any
or all of the Contemplated Transactions shall have been obtained on terms
satisfactory to the Buyers and shall be in full force and effect and signed
copies thereof shall have been delivered to the Buyers.
9.7 Secretary of State Certificates. The Buyers shall have received
-------------------------------
Certificates of the Secretaries of State of the States of Delaware and New
Jersey with respect to the Company, as of
-22-
a recent date, showing the Company to be validly existing or qualified as a
foreign corporation, as the case may be, and in good standing, and with respect
to the Certificate of the Secretary of State of the State of Delaware, listing
all documents filed.
9.8 Secretary's Certificate of the Company. The Buyers shall have
--------------------------------------
received a Certificate of the Secretary of the Company stating that (i) no
document has been filed relating to or affecting the Certificate of
Incorporation of the Company after the date of the Certificate of the Secretary
of State of the State of Delaware furnished pursuant to Section 9.8, and (ii)
attached to the Certificate is a true and complete copy of By-Laws of the
Company, as in full force and effect at the date of Series A Closing Date or
Series B Closing Date, as the case may be, and an incumbency certificate.
9.9 Resolutions. The Buyers shall have received certified copies of
-----------
resolutions duly adopted by the Company's Board of Directors (and shareholders,
if necessary) authorizing the execution and delivery of this Agreement and the
Stockholders Agreement, the issuance and sale of the Series A Preferred Stock
and Series B Preferred Stock and the issuance and sale of the Common Stock
issuable upon conversion thereof, and the performance of the transactions
contemplated hereby and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Series A Closing Date or Series B
Closing Date, as the case may be.
9.10 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
9.11 Employment Agreement. The Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have
--------------------
executed the Employment Agreement.
9.12 Cyanamid Agreement. The Company and American Cyanamid Company shall
------------------
have executed the Cyanamid Agreement.
9.13 ▇▇▇▇▇▇▇▇ Agreement. The Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, DDS, MSD, shall
------------------
have executed the ▇▇▇▇▇▇▇▇ Agreement.
9.14 Compliance Evidence. The Buyers shall have received such certificates,
-------------------
opinions, documents and information as it may reasonably request in order to
establish satisfaction of the conditions set forth in this Section 9.
9.15 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Company and all other matters to be
accomplished prior to or at the Series A Closing Date or Series B Closing Date,
as the case may be, shall be satisfactory in the reasonable judgment of the
Buyers and their counsel.
10. Conditions to the Company's Obligations.
---------------------------------------
The obligations of the Company to effect the Series A Closing shall be
subject to the satisfaction at or prior to the Series A Closing of the
conditions contained in Sections 10.1
-23-
through 10.8 below, inclusive, any one or more of which may be waived by the
Company. The obligations of the Company to effect the Series B Closing shall be
subject to the satisfaction at or prior to the Series B Closing of the
conditions contained in Sections 10.1, 10.2, 10.7 and 10.8 below, inclusive, any
one or more of which may be waived by the Company.
10.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits or delays the sale of
the Preferred Shares to the Buyers.
10.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Buyers set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Series A Closing Date or Series B Closing Date, as the case may be, as though
made at such time, and (b) the Buyers shall have performed and complied in all
material respects with the agreements contained in this Agreement required to be
performed and complied with by them prior to the Series A Closing Date or Series
B Closing Date, as the case may be.
10.3 Stockholders Agreement. The Company, the Buyers and the holders of
----------------------
Shares (as defined therein) shall have executed the Stockholders Agreement.
10.4 Employment Agreement. The Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have
--------------------
executed the Employment Agreement.
10.5 Cyanamid Agreement. The Company and American Cyanamid Company shall
------------------
have executed the Cyanamid Agreement.
10.6 ▇▇▇▇▇▇▇▇ Agreement. The Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, DDS, MSD, shall
------------------
have executed the ▇▇▇▇▇▇▇▇ Agreement.
10.7 Compliance Evidence. The Company shall have received such
-------------------
certificates, opinions, documents and information as it may reasonably request
in order to establish satisfaction of the conditions set forth in this Section
10.
10.8 Proceedings Satisfactory. All certificates, opinions and other
------------------------
documents to be delivered by the Buyers and all other matters to be accomplished
prior to or at the Series A Closing or Series B Closing, as the case may be,
shall be satisfactory in the reasonable judgment of the Company and its counsel.
11. Expenses. The Company agrees, in the event the transactions
--------
contemplated hereby are consummated, to pay, and save the Buyers harmless
against liability for the payment of, (a) its reasonable out-of-pocket costs,
including those of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, counsel for the Buyers,
arising in connection with the negotiation, execution and consummation of this
Agreement and the transactions contemplated hereby, including, without
limitation, the Buyers' due diligence investigation with respect to the
transactions contemplated hereby, in an aggregate amount not to exceed $25,000.
-24-
12. Survival of Representations. Except for the warranty contained in
---------------------------
Section 6.16 of this Agreement, all representations and warranties contained in
this Agreement or in any exhibit, schedule or certificate delivered in
connection herewith shall survive the execution, delivery and closing of this
Agreement and any investigation at any time made by the Buyers or on their
behalf for a period of five years from the date hereof.
13. Duration of Covenants. The Company's obligation to perform the
---------------------
covenants and agreements contained in Section 6 and Section 7 shall terminate
upon the consummation of an Initial Public Offering.
14. Miscellaneous.
-------------
14.1 Notices. All notices, consents and other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one (1) day after sent by the sender, if sent by Express Mail, Federal
Express or other express delivery service (receipt requested), in each case to
the appropriate addresses, telex numbers and telecopier numbers set forth below
(or to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
(a) If to Oak Investment Partners VI, Limited Partnership and/or Oak
VI Affiliates Fund, Limited Partnership:
Oak Investment Partners
One ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. More
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Canaan S.B.I.C., L.P., Canaan Capital Limited Partnership
or Canaan Capital Offshore Limited Partnership C.V.:
Canaan Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
-25-
Attention: ▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(c) If to ▇▇▇▇▇▇▇ Healthcare II, ▇.▇.
▇▇▇▇▇▇▇ & Company
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(d) If to TL Ventures III L.P.:
TL Ventures
800 The Safeguard Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D.
with a copy to:
TL Ventures
800 The Safeguard Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
-26-
(e) If to the Company:
OraPharma, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 908-725-0296
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tischman ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
14.2 Service of Process. Process in any action or proceeding seeking to
------------------
enforce any provision of, or based on any right arising out of, this Agreement
against any of the parties, may be served on any party anywhere in the world,
whether within or without the State of New Jersey, and may also be served upon
any party in the manner provided for giving of notices to it in Section 14.1.
14.3 Expenses. Except as set forth in Section 11, each party shall bear
--------
its own expenses incident to the preparation, negotiation, execution and
delivery of this Agreement and the performance of its obligations hereunder.
14.4 Payment. A wire transfer of other than immediately available funds or
-------
delivery of a check shall not operate to discharge any obligation of payment
under this Agreement and is accepted subject to collection.
14.5 Captions. The captions in this Agreement are for convenience of
--------
reference only and shall not be given any effect in the interpretation of this
Agreement.
14.6 Attorneys' Fees. In any action or proceeding brought by a party to
---------------
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover the reasonable costs and expenses incurred by it in connection with
that action or proceeding (including, but not limited to, attorneys' fees).
14.7 No Waiver. The failure of a party to insist upon strict adherence to
---------
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
-27-
14.8 Exclusive Agreement; Amendment. This Agreement supersedes all prior
------------------------------
agreements among the parties with respect to its subject matter, is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed, terminated or any of the provisions hereof waived, except by a written
instrument executed by a duly authorized representative of the Company and
holders in interest of not less than a majority of the aggregate of the
Preferred Shares (treated as if converted into Common Stock and including any
Common Stock then held by such holders into which the Preferred Shares have been
converted).
14.9 Parties in Interest; Limitation on Assignment. The terms,
---------------------------------------------
representations, warranties and covenants contained in Sections 6 and 7 hereof
shall be binding upon and shall inure to the benefit of and be enforceable by,
the Buyers and their respective successors, transferees and assignees; provided,
--------
that the rights granted to the Buyers by Sections 6.3 and 6.4 may not be
transferred or assigned to, and shall not inure to the benefit of, any such
successor, transferee or assignee of the Buyers that is engaged in any business
which directly competes with the Company in any line of business engaged in, or
planned to be engaged in, by the Company. It is understood and agreed among the
parties hereto that this Agreement and the representations, warranties, and
covenants made herein are made expressly and solely for the benefit of the other
party or parties hereto (or their respective successors or permitted assigns),
and that no other person shall be entitled or be deemed to be a third-party
beneficiary of any party's rights under this Agreement. Notwithstanding
anything contained herein to the contrary, the parties hereto hereby acknowledge
and agree that (a) TL Ventures III L.P. shall be permitted to transfer all or
any portion of its Preferred Shares to its affiliates (either already existing
or to be formed), TL Ventures III Offshore L.P. and TL Ventures III Interfund
L.P., and (b) any of the Buyers may assign any or all of their right to purchase
Series B Preferred Stock hereunder to any of its members, partners or
shareholders, provided that such assignee agrees to purchase such Series B
Preferred Stock having an aggregate purchase price of at least $50,000 and
further agrees to be bound by the provisions of this Agreement and the
Stockholders Agreement
14.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
14.11 Governing Law. This Agreement and (unless otherwise provided) all
-------------
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of New Jersey, without regard to the conflicts of law
principles thereof.
-28-
IN WITNESS WHEREOF, the undersigned have signed this Stock Purchase
Agreement as of the day and year first written above.
Witness/Attest: ORAPHARMA, INC.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------- ----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.
By:/s/ ▇▇▇▇▇▇ ▇. More
---------------------- ----------------------------
▇▇▇▇▇▇ ▇. More, Managing
Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VI Affiliates, L.L.C.
By:/s/ ▇▇▇▇▇▇ ▇. More
---------------------- ----------------------------
▇▇▇▇▇▇ ▇. More, Managing
Member
CANAAN S.B.I.C., L.P.
By: Canaan S.B.I.C. Partners, L.P.,
General Partner
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------- ----------------------------
CANAAN CAPITAL LIMITED PARTNERSHIP
By: Canaan Capital Management, L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------- -----------------------------
-29-
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP C.V.
By: Canaan Capital Management L.P.,
General Partner
By: Canaan Capital Partners L.P.,
General Partner
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------- -----------------------------
▇▇▇▇▇▇▇ HEALTHCARE II, L.P.
By: FHM, L.L.C., General Partner
By: ▇▇▇▇▇▇▇ Management, L.L.C.,
Member
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------- --------------------------------
▇▇▇ ▇▇▇▇▇▇▇, Member
TL VENTURES III L.P.
By: TL Ventures III Management L.P.,
General Partner
By: TL Ventures III LLC,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------- ---------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D.
-30-