Exhibit 10.12
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PREFERRED STOCK PURCHASE AGREEMENT
CONTROL DELIVERY SYSTEMS, INC.,
Dated as of August 8, 2000
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TABLE OF CONTENTS
1. DEFINITIONS............................................................. 5
2. SALE AND PURCHASE OF SECURITIES......................................... 8
2.1. Investor Securities............................................... 8
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2.2. Agreement to Sell and Purchase.................................... 9
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2.3. The Closing....................................................... 9
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2.4. Use of Proceeds................................................... 9
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 9
3.1. Organization...................................................... 9
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3.2. Corporate Power................................................... 9
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3.3. Subsidiaries...................................................... 10
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3.4. Capitalization.................................................... 10
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3.5. Authorization..................................................... 10
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3.6. Financial Statements and Other Documents.......................... 11
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3.7. Outstanding Debt; Absence of Liabilities.......................... 11
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3.8. Changes in Condition.............................................. 11
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3.9. Contractual Obligations........................................... 13
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3.10. Insurance........................................................ 14
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3.11. Transactions with Affiliates..................................... 14
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3.12. Conformity With Legal Requirements............................... 14
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3.13. Employee Benefit Plans........................................... 14
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3.14. Employees........................................................ 14
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3.15. Taxes............................................................ 15
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3.16. Litigation....................................................... 15
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3.17. Patents and Trademarks........................................... 15
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3.18. Consents......................................................... 16
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3.19. Filings, Broker's Fees, etc...................................... 16
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3.20. Books and Records................................................ 16
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3.21. Real Property Holding Corporation................................ 16
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3.22. Title to and Condition of Assets................................. 17
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3.23. No Conflict of Interest.......................................... 17
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3.25. Private Placement................................................ 17
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3.26. Environmental and Safety Laws.................................... 17
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3.27. Disclosure....................................................... 17
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4. REPRESENTATIONS AND WARRANTIES AND OTHER AGREEMENTS OF THE INVESTORS.... 18
4.1. Representations and Warranties of the Investors................... 18
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4.2. Legend............................................................ 18
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4.3. Restricted Securities............................................. 18
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4.4. FOR CANADIAN INVESTORS: Contractual Rights of Action............. 19
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5. CONDITIONS TO PURCHASE.................................................. 19
5.1. Representations and Warranties Correct........................... 19
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5.2. Performance...................................................... 19
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5.3. Compliance Certificate........................................... 19
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5.4. Filing of Certificate of Designation............................. 19
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5.5. Related Agreements............................................... 19
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5.6. Legal Opinion.................................................... 20
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5.7. Noncompetition Agreements........................................ 20
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5.8. Legality......................................................... 20
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5.9. Board of Directors............................................... 20
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5.10. General.......................................................... 20
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6. CONDITIONS TO SALE...................................................... 20
6.1. Representations and Warranties.................................... 20
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6.2. Payment of Purchase Price......................................... 20
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6.3. Performance....................................................... 20
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6.4. Legality.......................................................... 21
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7. MISCELLANEOUS........................................................... 21
7.1. Expenses.......................................................... 21
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7.2. Notices........................................................... 21
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7.3. Confidentiality................................................... 21
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7.4. Amendments and Waivers............................................ 22
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7.5. Survival and Termination of Covenants............................. 22
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7.6. General........................................................... 22
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PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
August 8, 2000, is by and among Control Delivery Systems, Inc., a Delaware
corporation (the "Company"), and the persons and entities listed on Schedule A
attached hereto (collectively, the "Investors").
The parties agree as follows:
1. DEFINITIONS.
Accounting terms used in this Agreement and not otherwise defined herein shall
have the meanings provided in GAAP. Certain capitalized terms are used in this
Agreement as specifically defined in this Section 1 as follows:
"Affiliate" means any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with the Company (or other
specified Person) and shall include (a) any Person who is an officer, director
or beneficial holder of at least 10% of the outstanding capital stock of the
Company (or other specified Person), (b) any Person of which the Company (or
other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Members of the Immediate Family of such Person; provided, however, that the
Investors shall not be Affiliates of the Company for purposes of this Agreement.
"Balance Sheet Date" is defined in Section 3.6(b).
"By-laws" means all written rules, regulations, procedures and by-laws and
all other similar documents, relating to the management, governance or internal
regulation of a Person other than an individual, each as from time to time
amended or modified.
"Certificate of Designations" is defined in Section 2.1.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
charter of any Person other than an individual, each as from time to time
amended or modified.
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Code" means the federal Internal Revenue Code of 1986 or any successor
statute, and the rules and regulations thereunder, as from time to time amended
and in effect.
"Common Stock" means the common stock, $0.01 par value, of the Company.
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"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act, the Exchange Act or
both.
"Company" is defined in the Preamble.
"Compensation" as applied to any Person means the aggregate of all
salaries, compensation, remuneration or bonuses of any character, retirement or
pension benefits of any kind, or other payments of any kind whatsoever (other
than health and medical benefits made available to employees generally and
advances and reimbursements of business expenses) made directly or indirectly by
the Company, any of its Subsidiaries or other specified Persons to such Person
and Affiliates of such Person.
"Consolidated," when used with reference to any term, means that term as
applied to the accounts of the Company or other indicated Person and each of its
respective Subsidiaries, consolidated or combined in accordance with GAAP after
eliminating all inter-company items and with appropriate deductions for minority
interests in Subsidiaries.
"Contractual Obligation" means, with respect to any Person, any contracts,
agreements, deeds, mortgages, leases, licenses, other instruments, commitments,
undertakings, arrangements or understandings, written or oral, or other
documents, including any document or instrument evidencing indebtedness, to
which any such Person is a party or otherwise subject to or bound by or to which
any asset of any such Person is subject.
"Employee Benefit Plan" means each and all "employee benefit plans" as
defined in section 3(3) of ERISA, maintained or contributed to by the Company,
any of its Affiliates or any of their respective predecessors, or in which the
Company, any of its Affiliates or any of their respective predecessors
participates or participated and which provides benefits to employees of the
Company or their spouses or covered dependents or with respect to which the
Company has or may have a material liability, including, (i) any such plans that
are "employee welfare plans" as defined in section 3(1) of ERISA and (ii) any
such plans that are "employee pension benefit plans" as defined in section 3(2)
of ERISA.
"Environmental Laws" means all applicable federal, state and local laws,
rules, regulations, common law, ordinances, decrees, orders, contracts and other
binding obligations relating to pollution (including the treatment, storage and
disposal of wastes and the cleanup of releases and threatened releases of
materials), the preservation of the environment or the exposure to materials in
the environment or workplace.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor statute and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any successor
section thereof, collectively and as from time to time amended and in effect.
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"ERISA Group," with respect to any entity, means any Person which is a
member of the same "controlled group" or under "common control," within the
meaning of section 414(b) or (c) of the Code or section 4001(b)(1) of ERISA,
with such entity.
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as from time to time amended and in effect.
"Financial Statements" is defined in Section 3.6.
"GAAP" means generally accepted accounting principles, as in effect from
time to time, applied on a basis consistent with that used in preparation of the
financial statements referred to in Section 4.8, consistently applied.
"Investor Securities" is defined in Section 2.1.
"Investors" means the holders of Investor Securities, the original holders
of which are listed in Exhibit A.
"June Balance Sheet" means the balance sheet referred to in Section 3.6(b).
"Legal Requirement" means any federal, state, local or foreign law,
statute, standard, ordinance, code, order, rule, regulation, resolution,
promulgation or any final order, judgment or decree of any court, arbitrator,
tribunal or governmental authority, or any license, franchise, permit or similar
right granted under any of the foregoing.
"Material Adverse Effect" means a material adverse effect upon the
business, assets, financial condition, income or prospects of the Company and
its Subsidiaries on a Consolidated basis.
"Members of the Immediate Family," as applied to any individual, means each
parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
"Pension Plan" means each pension plan (as defined in section 3(2) of
ERISA) established or maintained, or to which contributions are or were made, by
the Company or any of its Subsidiaries or former Subsidiaries, or any Person
which is a member of the same ERISA Group with any of the foregoing.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated organization or other
entity and any governmental department or agency or political subdivision.
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"Principal Holder" means each original holder of Series A Preferred Stock
set forth on Schedule A (and its Affiliates) so long as it holds Investor
Securities that had an aggregate original purchase price of at least $1,000,000.
"Qualified Public Offering" is defined in section 4.7.1 of the Certificate
of Designation.
"Registration Rights Agreement" is defined in Section 5.5.
"Related Agreements" means the Stockholders' Agreement and the Registration
Rights Agreement.
"Required Holders" means the holders at the relevant time (excluding the
Company or any of its Subsidiaries) of a majority or more of the voting power of
all Series A Preferred Stock, voting together as a single class.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be from time to time amended and in effect.
"Series A Preferred Stock" means the Series A Convertible Preferred Stock,
par value $0.01 per share, of the Company.
"Stockholders' Agreement" is defined in Section 5.5.
"Subsidiary" means any Person of which the Company or other specified
Person now or hereafter shall at the time (a) own directly or indirectly through
a Subsidiary at least 50% of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally or (b) constitute, directly or
indirectly through another Subsidiary, a general partner.
"Transaction Documents" is defined in Section 3.2.
"Welfare Plan" means each welfare plan (as defined in section 3(1) of
ERISA) established or maintained, or to which any contributions are or were
made, by the Company or any of its Subsidiaries or any Person which is a member
of the same ERISA Group with any of the foregoing.
2. SALE AND PURCHASE OF SECURITIES.
2.1. Investor Securities. The Company has authorized the issuance and sale
of up to 641,642 shares of its Series A Preferred Stock, $0.01 par value to be
issued under this Agreement. The Series A Preferred Stock being purchased by the
Investors hereunder, together with any securities issued with respect thereto,
upon exercise, conversion or transfer thereof or in exchange therefor, including
the Common Stock issuable upon conversion of the Series A Preferred Stock, are
collectively referred to as "Investor Securities"; provided, however, that once
any such securities have been sold in a public offering registered under the
Securities Act
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they shall cease to be Investor Securities for all purposes of this Agreement.
The rights, privileges and preferences of the Series A Preferred Stock are set
forth in the Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock, attached hereto as Exhibit B (the "Certificate of
Designations").
2.2. Agreement to Sell and Purchase. Subject to the terms and conditions of
this Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to sell to the Investors, and each such Investor,
severally and not jointly, agrees to purchase from the Company, the number of
shares of Series A Preferred Stock set forth opposite such Investor's name on
Exhibit A hereto for a purchase price of $53.74 per share of Series A Preferred
Stock.
2.3. The Closing. The closing of the purchase and sale of Series A
Preferred Stock (the "Closing") shall take place at the offices of Ropes & Gray,
One International Place, Boston, Massachusetts on August 8, 2000 (the "Closing
Date") or at such other place and time as the parties shall mutually agree. At
the Closing, the Company will deliver or cause to be delivered to each of the
Investors purchasing Series A Preferred Stock a certificate or certificates,
registered in such Investor's name, representing the number of shares of Series
A Preferred Stock to be acquired by such Investor pursuant to this Agreement
against payment of the purchase price thereof in lawful money of the United
States of America by wire transfer or by check payable to the Company.
2.4. Use of Proceeds. The Company covenants that it will apply the cash
proceeds of the Series A Preferred Stock solely for the following lawful
purposes: (1) research and development and (2) general corporate purposes,
including working capital and funding operational losses.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce the
Investors to enter into this Agreement and to purchase the Series A Preferred
Stock hereunder, the Company represents and warrants that except as set forth on
a Schedule of Exceptions attached hereto (the "Schedule of Exceptions"),
furnished to each Investor and specifically identifying the relevant section or
paragraph below, which exceptions shall be deemed to be representations and
warranties made hereunder:
3.1. Organization. The Company is a duly organized and validly existing
corporation in corporate good standing under the laws of the State of
Delaware. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which it does
business, except where the failure to be so qualified would not have a
Material Adverse Effect.
3.2. Corporate Power. The Company has all necessary corporate power and
authority to own its property, to enter into and perform this Agreement and the
Related Agreements (together, the "Transaction Documents"), to issue and sell
the Investor Securities hereunder, and to carry on its business as presently
conducted or proposed to be conducted. The Company has taken all corporate
action necessary to authorize the Transaction Documents and the issuance of
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the Investor Securities to be issued and sold hereunder. The copies of the
Charter and By-laws of the Company, as amended to date, which have been
furnished to counsel for the Investors by the Company, are correct and complete.
3.3. Subsidiaries. The Company does not own or control, directly or
indirectly, or have an interest in, any other corporation, partnership, limited
liability company, trust, joint venture association or other business entity.
3.4. Capitalization. The authorized capital stock of the Company is set
forth in the Schedule of Exceptions. On the Closing Date, after giving effect to
the issuance of the Series A Preferred Stock, the Company will have no
outstanding capital stock except for the shares of Common Stock and Series A
Preferred Stock owned as of record by the persons and in the amounts listed in
the Schedule of Exceptions. All of the shares of capital stock of the Company
are validly issued, fully paid, nonassessable and subject to no lien or
restriction on transfer, except restrictions on transfer imposed by the Related
Agreements and applicable securities laws or as otherwise set forth on the
Schedule of Exceptions. All of the outstanding shares of capital stock have been
offered and sold in compliance with applicable federal and state securities
laws. Other than as set forth on the Schedule of Exceptions, the Company does
not have outstanding (a) any rights (either preemptive or otherwise) or options
to subscribe for or purchase, or any warrants or other agreements providing for
or requiring the issuance of, any capital stock or any securities convertible
into or exchangeable for its capital stock, (b) any obligation to repurchase or
otherwise acquire or retire any of its capital stock, any securities convertible
into or exchangeable for its capital stock or any rights, options or warrants
with respect thereto, (c) any rights that require it to register the offering of
any of its securities under the Securities Act or (d) any restrictions on voting
any of its securities. The Series A Preferred Stock that is being issued to the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Related Agreements and
applicable federal and state securities laws and will be issued in compliance
with all applicable federal and state securities laws. The Common Stock issuable
upon conversion of the Series A Preferred Stock purchased hereunder has been
duly and validly reserved for issuance, and upon issuance in accordance with the
terms of the Certificate of Designations, shall be duly and validly issued,
fully paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Related Agreements and
applicable federal and state securities laws and will be issued in compliance
with all applicable federal and state securities laws.
3.5. Authorization. All corporate action on the part of the Company
necessary for the due authorization, execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated herein and
therein, and for the due authorization and issuance of the shares of Series A
Preferred Stock and of the Common Stock issuable upon conversion has been or
will be taken prior to the Closing. The Transaction Documents are legal, valid
and binding agreements of the Company, enforceable in accordance with their
terms. The execution, delivery and performance by the Company of the Transaction
Documents and the issuance and sale of the Investor Securities will not result
in any violation of or be in conflict with, or result in
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a breach of or constitute a default under, any term or provision of any Legal
Requirement to which the Company is subject, or the Company's Charter or By-
Laws, or any Contractual Obligation to which the Company is a party or by which
it is bound.
3.6. Financial Statements and Other Documents. The Investors have been
furnished with complete and correct copies of the following:
(a) Audited Balance sheet of the Company as of December 31, 1999,
together with the related audited statements of income, cash flows and
stockholders' equity for the year then ended;
(b) Unaudited balance sheet of the Company as of June 30, 2000 (the
"Balance Sheet Date"), together with the related unaudited statement of
income for the six-month period then ended; and
(c) Pro forma financial projections (the "Projections") included in
the Private Placement Memorandum.
The financial statements referred to in clauses (a) and (b) above (the
"Financial Statements") (i) are in accordance with the books and records of the
Company, (ii) have been prepared in accordance with GAAP consistently applied
and (iii) fairly present the financial condition of the Company at the dates
thereof and the results of its operations for the periods covered thereby,
except that the financial statements referred to in clause (b) above do not
contain footnotes and are subject to normal year-end adjustments. The
Projections were based on (i) assumptions and accounting methods consistent with
the Financial Statements described in paragraph (a) above and (ii) on the
financing contemplated hereby. Actual results may vary materially from the
Projections and the Corporation represents only that the Projections were
prepared in good faith and are based on a set of assumptions believed by the
Company to be reasonable as of the date hereof.
3.7. Outstanding Debt; Absence of Liabilities. The Company (i) has no
outstanding indebtedness for borrowed money except as reflected in the Financial
Statements or the Schedule of Exceptions and (ii) is not a guarantor or
otherwise contingently liable on such indebtedness of any other Person. Except
as set forth in the Schedule of Exceptions, the Company has no material
liabilities, contingent or otherwise, which are not reflected or provided for in
the Financial Statements.
3.8. Changes in Condition. Since the Balance Sheet Date, there have
occurred no event or events that, individually or in the aggregate, have caused
or are reasonably likely to cause a Material Adverse Effect. Except as set forth
on the Schedule of Exceptions, since the Balance Sheet Date, the Company has not
(a) made any payment (other than Compensation to its directors, officers and
employees at rates in effect prior to the Balance Sheet Date or for bonuses
accrued in accordance with normal practice prior to the Balance Sheet Date) to
any of its Affiliates, (b) increased the Compensation, including bonuses,
payable or to be payable to any of its directors, officers, employees or
Affiliates, by more than 10%, or (c) entered into any
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Contractual Obligation, or entered into or performed any other transaction, not
in the ordinary and usual course of business and consistent with past practice,
other than as specifically contemplated by this Agreement. Except as set forth
on the Schedule of Exceptions, since the Balance Sheet Date there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that would not, in
the aggregate, cause a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, financial condition,
operating results, assets, properties or prospects of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that would not reasonably be expected to have a Material Adverse
Effect;
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Company;
(g) any resignation or termination of employment of any officer or
key employee of the Company; and the Company, to the best of its knowledge, does
not know of any impending resignation or termination of employment of any such
officer or key employee;
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its properties or assets,
except liens for taxes not yet due or payable;
(i) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business;
(j) any declaration, setting aside or payment or other distribution
in respect to any of the capital stock of the Company, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
or
(k) any arrangement or commitment by the Company to do anything
described in this Section 3.8.
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3.9. Contractual Obligations. The Schedule of Exceptions contains, together
with a reference to the paragraph pursuant to which each item is being
disclosed, a correct and complete list of all Contractual Obligations of the
Company of the types described below :
(a) All collective bargaining agreements, all employment, bonus or
consulting agreements, all pension, profit sharing, deferred compensation, stock
option, stock purchase, retirement, welfare or incentive plans or agreements.
(b) All Contractual Obligations under which the Company is restricted
from carrying on any business or venture anywhere in the world.
(c) All Contractual Obligations to sell or lease (as lessor) any of
the properties or assets of the Company, except in the ordinary course of
business, or to purchase or lease (as lessee) any real property.
(d) All Contractual Obligations pursuant to which the Company
guarantees any liability of any Person, or pursuant to which any Person
guarantees any liability of the Company.
(e) All Contractual Obligations pursuant to which the Company
provides goods or services involving payments to the Company of more than
$25,000 annually, which Contractual Obligation is not terminable by the Company
without penalty upon notice of 30 days or less.
(f) All Contractual Obligations with any Affiliate of the Company
involving more than $10,000 (other than the Related Agreements).
(g) All Contractual Obligations providing for the disposition of the
business, assets or shares of the Company or the merger or consolidation or sale
of purchase of all or substantially all of the assets or business of any Person,
and any letters of intent relating to the foregoing.
(h) All Contractual Obligations of the Company relating to the
borrowing of money or to the mortgaging or pledging of, or otherwise placing a
lien on, any asset of the Company involving indebtedness of more than $25,000
(except liens imposed by operation of law).
All of the Contractual Obligations of the Company are enforceable against
the Company and, to its knowledge, the other parties thereto in accordance with
their terms, except for Contractual Obligations the failure of which to be so
enforceable does not and will not result in a Material Adverse Effect. The
Company is not presently in default under, nor, to the best of the Company's
knowledge, are there any liabilities arising from any breach or default by any
Person prior to the date of this Agreement of, any provision of any such
Contractual Obligation. The Company has made available to counsel for the
Investors true and correct copies of all Contractual Obligations listed on the
Schedule of Exceptions.
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3.10. Insurance. The Company maintains in full force and effect such
types and amounts of insurance issued by insurers of recognized responsibility
insuring the Company with respect to its business and properties, in such
amounts and against such losses and risks which are usual and customary in the
Company's business as to amount and scope and as are listed in the Schedule of
Exceptions.
3.11. Transactions with Affiliates. Other than as set forth in the
Schedule of Exceptions, no Affiliate of the Company is a customer or supplier of
the Company.
3.12. Conformity With Legal Requirements. The operations of the Company
as presently conducted are not in violation of, nor is the Company in default
under, any Legal Requirements presently in effect, except for such violations
and defaults as do not and will not, in the aggregate, have a Material Adverse
Effect. The Company has all franchises, licenses, permits or other authority
presently necessary for the conduct of its business as now conducted. Based on
the facts presently known to the Company, all future expenditures on the part of
the Company that will be reasonably required for the business as presently
conducted to meet the provisions of any presently existing Legal Requirement
(including Legal Requirements relating to employment practices or to
occupational or health standards or to environmental considerations) will not,
in the aggregate, have a Material Adverse Effect.
3.13. Employee Benefit Plans. The Schedule of Exceptions sets forth a
complete list of all Employee Benefit Plans and all Welfare Plans applicable to
the employees of the Company. Each Employee Benefit Plan and Welfare Plan has
been administered in substantial compliance with its terms and all applicable
laws, including the Code and ERISA, except where the failure to comply would not
have a Material Adverse Effect. The Company has no obligation under any Welfare
Plan to provide for the continuation of benefits (other than disability payments
and medical benefits incurred for illness arising in the course of employment)
for more than one year after retirement or other termination of employment. No
"reportable events" within the meaning of section 4043 of ERISA have occurred
with respect to any Employee Benefit Plan. No Pension Plan is a "multiemployer
plan" as defined in ERISA. The present value of benefits liabilities as
described in Title IV of ERISA of Employee Benefit Plans does not exceed the
current value of such Employee Benefit Plans' assets allocable to such benefits
liabilities by more than $100,000.
3.14. Employees. None of the employees of the Company is presently
represented by a labor union, and no petition has been filed or proceedings
instituted by any employee or group of employees with any labor relations board
seeking recognition of a bargaining representative. No controversies or disputes
are pending between the Company and any of its employees, except for such
controversies and disputes as do not and will not, in the aggregate, have a
Material Adverse Effect. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any Contractual Obligation with a
former employer relating to the right of any such employee to be employed by the
Company because of the nature of the Company's business or the use of any trade
secrets or proprietary information. The Company has furnished to the Investors a
list setting forth the names and salaries of the employees of the Company with
annual salaries in excess of $50,000. Except as set forth in the Schedule of
Exceptions, each employee
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of the Company is an "employee at will" and may be terminated by the Company
without payment of any amounts other than accrued wages. Each current and former
employee and officer of the Company has executed an Employee Confidentiality and
Invention Agreement substantially in the form or forms which have been delivered
to counsel for the Investors. The Company is not aware of the pending
resignation or termination of any employee.
3.15. Taxes. The Company has filed all material tax and information
returns which are required to be filed by it and has paid, or made adequate
provision for the payment of, all taxes which have or may become due. The
Company has no knowledge of any material additional assessments or any basis
therefor. The Company reasonably believes that the charges, accruals and
reserves on the June Balance Sheet in respect of taxes or other governmental
charges are adequate. The Company has withheld or collected from each payment
made to its employees the amount of all taxes required to be withheld or
collected therefrom and has paid over such amounts to the appropriate taxing
authorities.
3.16. Litigation. No litigation or proceeding before, or investigation
by, any foreign, federal, state or municipal board or other governmental or
administrative agency or any arbitrator is pending or, to the knowledge of the
Company, threatened (nor to the knowledge of the Company, does any basis exist
therefor) against the Company or, to the Company's knowledge, any officer or key
employee of the Company, which in the aggregate could result in any material
liability or which may otherwise result in a Material Adverse Effect, or which
seeks rescission of, seeks to enjoin the consummation of, or which questions the
validity of, the Transaction Documents, the terms of the Series A Preferred
Stock or any of the transactions contemplated hereby or thereby. The Company is
not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or governmental agency or instrumentality.
3.17. Patents and Trademarks. The Company owns or possesses sufficient
legal right to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without, to the best of the Company's knowledge, any conflict with, or
infringement of the rights of, others. The Schedule of Exceptions contains a
complete list of patents and pending applications of the Company. Except as set
forth in the Schedule of Exceptions, and except for agreements with its own
employees or consultants, substantially in the form referenced in Section 3.14,
and standard end-user license agreements, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes of
any other person or entity. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights, trade secrets, or other proprietary rights or processes of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants, or commitments
of any nature) or other agreement, or subject to any judgment, decree, or order
of any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
-11-
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. Except as set forth on the Schedule of
Exceptions, the Company does not believe it is or will be necessary to use any
inventions of its employees (or persons it currently intends to hire) made prior
to their employment by the Company.
3.18. Consents. No consent, approval, qualification, order or
authorization of, or filing with any governmental authority is required in
connection with the Company's valid execution, delivery or performance of the
Transaction Documents, or the offer, issue or sale of the Investor Securities by
the Company, the conversion of the Series A Preferred Stock, or the issuance of
Common Stock upon conversion of the Series A Preferred Stock, or the
consummation of any other transaction contemplated on the part of the Company
hereby, except the filing of the Amended and Restated Charter and the filing of
a Form D and post-sale filings required under state securities laws with respect
to the offering.
3.19. Filings, Broker's Fees, etc. Except for placement agent fees
payable to Deutsche Banc Alex. Brown, the Company is not obligated to pay any
broker's fee, finder's fee, investment banker's fee or other similar transaction
fee in connection with the transactions contemplated hereby.
3.20. Books and Records. The copy of the minute books of the Company
provided to the Investors' counsel contains minutes of all meetings of directors
and all actions by written consent without a meeting by the directors and
stockholders since the date of incorporation and accurately reflects all actions
by the directors (and any committee of directors) and stockholders with respect
to all transactions referred to in such minutes in all material respects.
3.21. Real Property Holding Corporation. The Company is not a "United
States real property holding corporation," as defined in section 897(c)(2) of
the Code and Treasury Regulation section 1.897-2(b).
3.22. Title to and Condition of Assets. The Company has good title to
all of its material properties and assets, free and clear of all liens, charges
and encumbrances except as disclosed herein or in the Schedule of Exceptions.
All such properties and assets are in good condition or order and are reasonably
suitable for use in conformity with their intended purposes. With respect to the
material property and assets it leases, the Company is in compliance with the
material terms of such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
3.23. No Conflict of Interest. Except as specified in the Schedule of
Exceptions, the Company is not indebted, directly or indirectly, to any of its
officers or directors or to their respective spouses or children, in any amount
whatsoever other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or relocation expenses of employees.
-12-
None of the Company's officers or directors, or any Members of their Immediate
Families, are, directly or indirectly, indebted to the Company (other than in
connection with purchases of stock of the Company) or, to the best knowledge of
the Company, have any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
material business relationship, or any firm or corporation which competes with
the Company except that officers, directors and/or stockholders of the Company
may own stock in (but not exceeding two percent of the outstanding capital stock
of) any publicly traded companies that may compete with the Company. To the best
knowledge of the Company, none of the Company's officers or directors or any
Members of their Immediate Families are, directly or indirectly, interested in
any material contract with the Company.
3.25. Private Placement. Subject in part to the truth and accuracy of
the Investors' representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will offer to sell all or
any part of the Series A Preferred Stock to any person or persons so as to bring
the sale of such shares by the Company within the registration provisions of the
Securities Act or any state securities laws.
3.26. Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety where such violation, either individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect,
and, to its knowledge, no material expenditures are required in order to comply
with any such existing statute, law or regulation.
3.27. Disclosure. Neither this Agreement nor the Private Placement
Memorandum, contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in any material respect (except that no representation or
warranty is made here as to the Projections).
4. REPRESENTATIONS AND WARRANTIES AND OTHER AGREEMENTS OF THE INVESTORS
4.1. Representations and Warranties of the Investors. Each of the
Investors severally and not jointly represents and warrants to the Company that:
(a) It is an "accredited investor" for purposes of Regulation D under
the Securities Act and that it has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company and it is able financially to bear the risks thereof.
(b) It is acquiring the Series A Preferred Stock at the Closing for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof;
-13-
provided, however, that the disposition of the Investors' property shall at all
times remain in the Investors' control.
(c) It has had an opportunity to discuss the Company, business,
management and financial affairs with the Company's management and has received
(or had made available to it) any financial and business documents requested by
it.
(d) It understands that the shares of Series A Preferred Stock to be
purchased by it have not been registered under the Securities Act and must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration.
(e) It has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
4.2. Legend. Except as otherwise permitted by Section 4.3, each
certificate representing shares of Investor Securities shall bear a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state, and may not be sold, or otherwise transferred, in
the absence of an effective registration statement under such Act or
an opinion of counsel reasonably satisfactory to the Company that such
sale or transfer may be effected without such registration or that
such sale or transfer is made pursuant to an exemption therefrom under
such Act and under any such applicable state laws."
4.3. Restricted Securities. Each Investor understands that the Series
A Preferred Stock (and any Common Stock issued on conversion thereof) may not be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Series A Preferred Stock (or the
Common Stock issued on conversion thereof) or an available exemption from
registration under the Securities Act, the Series A Preferred Stock (and any
Common Stock issued on conversion thereof) must be held indefinitely. In
particular, each Investor is aware that the Series A Preferred Stock (and any
Common Stock issued on conversion thereof) may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Among the conditions for use of Rule 144 may be the availability of
current information to the public about the Company. Such information is not now
available and the Company has no present plans to make such information
available.
4.4. FOR CANADIAN INVESTORS: Contractual Rights of Action. The parties
agree that those Investors who are residents of Ontario, Canada shall have the
contractual rights of action set forth in the Private Placement Memorandum under
the heading "Certain Rights of Action" as if such rights were fully set forth in
this Agreement, and that such rights are hereby incorporated by reference.
-14-
5. CONDITIONS TO PURCHASE. The Investors' several obligations to purchase the
Series A Preferred Stock pursuant to this Agreement on the Closing Date are
subject to the satisfaction, on or prior to such Closing Date, of the following
conditions:
5.1. Representations and Warranties Correct. The representations and
warranties made by the Company herein shall have been true and correct in all
respects when made and shall be true and correct on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
5.2. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects and
the Company shall not be in default in the performance of or compliance with any
provisions of this Agreement.
5.3. Compliance Certificate. The Company shall have delivered to the
Investors a certificate of the chief executive officer or chief financial
officer of the Company, dated as of the Closing Date, certifying to the matters
stated in Sections 5.1 and 5.2 and such other matters as the Investors
reasonably request.
5.4. Filing of Certificate of Designation. The Company shall have filed
with the Secretary of State of Delaware the Certificate of Designation in the
form attached hereto as Exhibit B and the Certificate of Designation shall have
become effective.
5.5. Related Agreements. The Company and the other parties thereto shall
have duly authorized, executed and delivered to the Investors the following
agreements:
(a) Stockholders' Agreement, in the form of Exhibit C, among the
Company, the Investors and certain other stockholders of the Company (as
from time to time in effect, the "Stockholders' Agreement").
(b) Registration Rights Agreement, in the form of Exhibit D, among
the Company, the Investors and certain other stockholders of the Company
(as from time to time in effect, the "Registration Rights Agreement").
5.6. Legal Opinion. On the Closing Date, the Investors shall have received
from Ropes & Gray, counsel to the Company, an opinion in substantially the form
of Exhibit E.
5.7. Noncompetition Agreements. Drs. Ashton and Smith shall have entered
into a Noncompetition Agreement in a form reasonably acceptable to the
Investors.
5.8. Legality. 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 Series A Preferred Stock pursuant to this Agreement
shall have been duly obtained and shall be in full force and effect.
-15-
5.9. Board of Directors. The Company shall have taken steps necessary
to cause the Essex Director (as defined in the Stockholders' Agreement) to be
elected to the Company's Board of Directors immediately after the Closing.
5.10. General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Investors, and the
Investors shall have received copies of all documents, including records of
corporate proceedings and officers certificates, which they may have reasonably
requested in connection therewi
6. CONDITIONS TO SALE. The Company's obligations to each Investor under this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective unless
consented to in writing by the Company:
6.1. Representations and Warranties. The representations and warranties
made by the Investors herein shall have been true and correct in all respects
when made and shall be true and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
6.2. Payment of Purchase Price. The Investors shall have delivered the
applicable purchase price specified in Section 2.
6.3. Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Investors on or prior
to the Closing Date shall have been performed or complied with in all respects
and the Investors shall not be in default in the performance of or compliance
with any provisions of this Agreement.
6.4. Legality. 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 Series A Preferred Stock pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
7. MISCELLANEOUS.
7.1. Expenses. The Company will bear its own expenses and legal fees
incurred on its behalf with respect to the Transaction Documents, and the
Company hereby agrees to reimburse the Investors for the Investors' reasonable
expenses incurred in connection with their due diligence review of the Company
and the reasonable fees and expenses of Testa Hurwitz & Thibeault, LLP and Baker
Botts LLP, counsel for the Investors, in connection with the negotiation and
closing of the transaction, up to an aggregate of $40,000.
7.2. Notices. All notices and other communication required in connection
with this Agreement or the Investor Securities must be in writing and shall be
deemed to be delivered if addressed as provided below and if either (a) actually
delivered at said address, (b) in the case of a letter, seven business days
shall have elapsed after the same shall have been deposited in the
-16-
United States mails, postage prepaid and registered or certified, return receipt
requested or (c) transmitted to any address outside of the United States, by
telecopy and confirmed by overnight or two-day courier:
If to the Company, to it at 313 Pleasant Street, Watertown, MA 02427,
attention: President, telecopy: (617) 926-2313, telephone: (617) 926-5000, with
a copy to Ropes & Gray, One International Place, Boston, MA 02110, attention:
Mary E. Weber, Esq., telecopy: (617) 951-7050, telephone: (617) 951-7000 or at
such other address as the Company shall have specified by notice to the
Principal Holders.
If to the Investors, to the Investors' respective addresses set forth on
Exhibit A, or at such other address as the Investors shall have specified by
notice to the Company, with a copy to Testa, Hurwitz & Thibeault, LLP, 125 High
Street, Boston, MA 02110, attention: Andrew E. Taylor, Esq., telecopy: (617)
248-7100, telephone: (617) 248-7000.
If to any other holder of record of any Investor Security, to it at its
address set forth in the stock register of the Company.
7.3. Confidentiality. Each Investor will maintain the confidential nature
of information obtained from the Company concerning the Company; provided,
however, that such Investor shall not be precluded from making disclosure
regarding such information: (a) to counsel for any such Investor, accountants or
other professional advisors on a need-to-know basis, (b) to any other Investor,
(c) as required by law or applicable regulation, (d) to any participant in or
assignee of any Investor Securities after notice to the Company so long as such
participant or assignee has agreed to be bound by this Section 7.3, or (e) to
the extent such information has become publicly available other than as a result
of the violation of this Section 7.3.
7.4. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of the Required Holders. Any amendment or waiver effected in
accordance with this Section 7.4 shall be binding upon each holder of any
Investor Securities and the Company and each of its Subsidiaries. Written notice
of the amendment or waiver of any term of this Agreement (or the observance
thereof) shall be given to all Principal Holders who did not consent in writing
to such amendment or waiver.
7.5. Survival and Termination of Covenants. All covenants, agreements,
representations and warranties made herein or in any closing certificate or
other certificate or written report delivered to the Investors pursuant to an
express requirement hereof shall be deemed to have been material and relied on
by the Investors, notwithstanding any investigation made by the Investors or on
the Investors behalf, shall survive the execution and delivery to the Investors
hereof and of the Investor Securities.
-17-
7.6. General. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. This
Agreement, the Related Agreements and the other items referred to herein or
therein constitute the entire understanding of the parties hereto with respect
to the subject matter hereof and thereof and supersede all present and prior
agreements, whether written or oral, except for the confidentiality agreement
entered into between the Company and each of the Investors. This Agreement is
intended to take effect as a sealed instrument and may be executed in any number
of counterparts which together shall constitute one instrument and shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of The Commonwealth of Massachusetts, and shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
Whether or not any express assignment has been made in this Agreement,
provisions of this Agreement that are for the Investors' benefit as the holder
of any Investor Securities are also for the benefit of, and enforceable by, all
subsequent holders of Investor Securities.
-18-
The undersigned have executed this Agreement under seal as of the date
first above written.
CONTROL DELIVERY SYSTEMS, INC.
By: /s/ Paul Ashton
--------------------------
Name: Paul Ashton
Title: President
By: /s/ Thomas J. Smith
--------------------------
Name: Thomas J. Smith
Title: Chairman
-19-
ESSEX WOODLANDS HEALTH VENTURES FUND V, L.P.
By: Essex Woodlands Health Ventures V, L.L.C.
By: /s/ James L. Currie
----------------------------------
Name: James L. Currie
Title: Managing Director
ESSEX WOODLANDS HEALTH VENTURES FUND IV, L.P.
By: Essex Woodlands Health Ventures IV, L.L.C.
By: /s/ James L. Currie
----------------------------------
Name: James L. Currie
Title: Managing Director
CAPITAL RESEARCH AND MANAGEMENT COMPANY,
On behalf of
SMALLCAP WORLD FUND, INC.
By: /s/ Catherine M. Ward
----------------------------------
Name: Catherine M. Ward
Title: Senior Vice President
BROOKSIDE CAPITAL PARTNERS FUND, L.P.
By: /s/ Ed Brakeman
----------------------------------
Name: Ed Brakeman
Title: Managing Director
ESSEX PRIVATE PLACEMENT FUND III - A
ESSEX PRIVATE PLACEMENT FUND III - B
By: Essex Investment Management Company, LLC
its General Partner
By: /s/ Susan P. Stickells
----------------------------------
Name: Susan P. Stickells
Title: Principal
T. ROWE PRICE NEW HORIZONS FUND, INC.
By: /s/ John H. Laporte
----------------------------------
Name: John H. Laporte
Title: Director
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
By: /s/ John H. Laporte
----------------------------------
Name: John H. Laporte
Title: Director
ANVIL INVESTMENT ASSOCIATES, LP
By: Anvil Management Company, LLC
its General Partner
Anvil Investment Associates L.P.
By: /s/ Theodore H. Ashford
----------------------------------
Theodore H. Ashford, Member
MORGAN STANLEY DEAN WITTER EQUITY
FUNDING, INC.
By: /s/ Thomas A. Clayton
----------------------------------
Name: Thomas A. Clayton
Title: Vice President
MORGAN STANLEY DEAN WITTER VENTURE
PARTNERS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE
INVESTORS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE
OFFSHORE INVESTORS IV, L.P.
By: MSDW Venture Partners IV, L.L.C.,
as General Partner of each of the limited
partnerships named above
By: MSDW Venture Partners IV, Inc., as Member
By: /s/ Debra Abramovitz
----------------------------------
Name: Debra Abramovitz
Title: Principal
RGIP, LLC
/s/ Douglas N. Ellis
----------------------------------
Name: Douglas N. Ellis
Title: Managing Member
/s/ Peter Liley
----------------------------------
Peter Liley
/s/ Leann Reitzig
----------------------------------
Leann Reitzig
/s/ Steve Silverman
----------------------------------
Steve Silverman
/s/ John Bierly
----------------------------------
John Bierly
/s/ Doug Gaeth
----------------------------------
Doug Gaeth
/s/ Bob Baker
----------------------------------
Bob Baker
/s/ Phil McCarthy
----------------------------------
Phil McCarthy
/s/ John Reitter
----------------------------------
John Reitter
/s/ John Slattery, Jr.
----------------------------------
John Slattery, Jr.
/s/ John Slattery, Sr.
----------------------------------
John Slattery, Sr.
/s/ Joseph Cannistraro
----------------------------------
Joseph Cannistraro
/s/ Dean Elliott
----------------------------------
Dean Elliott
/s/ Abdul R. Piracha
----------------------------------
Abdul R. Piracha
/s/ John Willadsen
----------------------------------
John Willadsen
/s/ Alan Perry
----------------------------------
Alan Perry
/s/ Dr. Edward Wilk
----------------------------------
Dr. Edward Wilk
/s/ Thomas DeRosa
----------------------------------
Thomas DeRosa
/s/ Christina Takoudes Morrison
----------------------------------
Christina Takoudes Morrison
/s/ Stanley B. Blaylock
----------------------------------
Stanley B. Blaylock
/s/ Brent B. Milner
----------------------------------
Brent B. Milner
/s/ David Steinberg
----------------------------------
David Steinberg
/s/ James P. Scopa
----------------------------------
James P. Scopa
/s/ Michael H. Cohen
----------------------------------
Michael H. Cohen
/s/ Greg Parekh
----------------------------------
Greg Parekh
/s/ Dallas Miller
----------------------------------
Dallas Miller
/s/ Richard T. Broglino
----------------------------------
Richard T. Broglino
/s/ Patricia Rupnow
----------------------------------
Patricia Rupnow
/s/ Karen Boyd
----------------------------------
Karen Boyd
/s/ James A. Smith
----------------------------------
James A. Smith
/s/ Jeff Blum aka Jeffrey A. Blum
----------------------------------
Jeff Blum